<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
OR
[ ] TRANSITION PERIOD REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------ -----
COMMISSION FILE NUMBER: 1-7790
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LA QUINTA INNS, INC.
(Exact name of registrant as specified in its charter)
TEXAS #74-1724417
(State of Incorporation) (I.R.S. Employer Identification No.)
WESTON CENTRE
112 E. PECAN STREET
P.O. BOX 2636
SAN ANTONIO, TEXAS 78299-2636
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (210) 302-6000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
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Number of shares of Common Stock, $.10 par value, outstanding at June 30, 1997:
77,785,265
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<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LA QUINTA INNS, INC.
CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................. $ 1,421 $ 1,508
Receivables:
Trade and other (net of allowance of $229 and $108) ..................... 22,431 12,302
Income taxes ............................................................ -- 3,835
Supplies and prepayments .................................................. 16,140 10,811
Deferred income taxes ..................................................... 9,660 9,277
-------------- --------------
Total current assets .................................................... 49,652 37,733
-------------- --------------
Notes receivable, excluding current installments
(net of allowance of $957 and $1,793) ....................................... 1,924 3,700
Property and equipment, net .................................................. 1,288,539 1,148,190
Deferred charges and other assets, at cost less applicable amortization ...... 10,395 10,177
-------------- --------------
Total assets ............................................................ $ 1,350,510 $ 1,199,800
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt .................................... $ 11,154 $ 33,299
Accounts payable .......................................................... 47,079 55,088
Accrued expenses .......................................................... 49,868 53,584
-------------- --------------
Total current liabilities ............................................... 108,101 141,971
-------------- --------------
Long-term debt, excluding current installments ............................... 797,561 659,369
Deferred income taxes, pension and other ..................................... 34,998 29,591
Partners' capital ............................................................ 2,603 3,293
Shareholders' equity:
Common stock ($.10 par value per share; 200,000 and 100,000 shares
authorized; 84,540 and 84,274 shares issued) ............................ 8,454 8,427
Additional paid-in capital ................................................ 243,585 240,453
Retained earnings ......................................................... 228,177 188,610
Treasury stock, at cost (6,754 and 6,704 shares) .......................... (72,969) (71,914)
-------------- --------------
Total shareholders' equity .............................................. 407,247 365,576
-------------- --------------
Total liabilities and shareholders' equity .............................. $ 1,350,510 $ 1,199,800
============== ==============
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE> 3
ITEM 1 - FINANCIAL STATEMENTS (continued)
LA QUINTA INNS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Inn ............................................................. $ 133,660 $ 113,727 $ 245,042 $ 214,561
Restaurant rental and other ..................................... 2,006 2,295 3,977 4,219
---------- ---------- ---------- ----------
Total revenues ............................................... 135,666 116,022 249,019 218,780
---------- ---------- ---------- ----------
Operating costs and expenses:
Direct .......................................................... 62,473 54,744 119,819 107,635
Corporate ....................................................... 4,905 4,141 9,187 8,791
Depreciation, amortization and asset retirements ................ 14,786 12,034 28,479 22,759
Provision for premature retirement of assets .................... -- 2,427 -- 9,062
---------- ---------- ---------- ----------
Total operating costs and expenses ........................... 82,164 73,346 157,485 148,247
---------- ---------- ---------- ----------
Operating income ............................................. 53,502 42,676 91,534 70,533
---------- ---------- ---------- ----------
Other expense:
Interest, net ................................................... 12,567 10,195 23,940 20,360
Partners' equity in earnings .................................... 243 485 476 928
---------- ---------- ---------- ----------
Earnings before income taxes and extraordinary items ......... 40,692 31,996 67,118 49,245
Income taxes ....................................................... 15,056 11,839 24,834 18,221
---------- ---------- ---------- ----------
Earnings before extraordinary items .......................... 25,636 20,157 42,284 31,024
Extraordinary items, net of income taxes .......................... -- (244) -- (244)
---------- ---------- ---------- ----------
Net earnings.................................................. $ 25,636 $ 19,913 $ 42,284 $ 30,780
========== ========== ========== ==========
Earnings per common and common equivalent share:
Earnings before extraordinary items .......................... $ .32 $ .25 $ .53 $ .38
Extraordinary items, net of income taxes ..................... -- -- -- --
---------- ---------- ---------- ----------
Net earnings.................................................. $ .32 $ .25 $ .53 $ .38
========== ========== ========== ==========
Weighted average number of common and common equivalent
shares outstanding ............................................. 80,612 81,093 80,455 80,876
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
ITEM I - FINANCIAL STATEMENTS (continued)
LA QUINTA INNS, INC.
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock Treasury Stock Additional
--------------------- ------------------------ Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
-------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 .............. 54,883 $ 5,488 (2,849) $ (29,741) $ 222,221 $ 133,745 $ 331,713
Effect of stock split at July 15, 1996 ... 27,678 2,768 (1,735) -- (2,768) -- --
Stock options ............................ 1,713 171 (3) (79) 21,000 -- 21,092
Purchase of treasury stock ............... -- -- (2,117) (42,094) -- -- (42,094)
Dividends paid ........................... -- -- -- -- -- (5,330) (5,330)
Net earnings ............................. -- -- -- -- -- 60,195 60,195
-------- ---------- ---------- ---------- ---------- ---------- ----------
Balances at December 31, 1996 .............. 84,274 8,427 (6,704) (71,914) 240,453 188,610 365,576
Stock options ............................ 266 27 (4) (98) 3,132 -- 3,061
Purchase of treasury stock ............... -- -- (46) (957) -- -- (957)
Dividends paid ........................... -- -- -- -- -- (2,717) (2,717)
Net earnings ............................. -- -- -- -- -- 42,284 42,284
-------- ---------- ---------- ---------- ---------- ---------- ----------
Balances at June 30, 1997, unaudited ....... 84,540 $ 8,454 (6,754) $ (72,969) $ 243,585 $ 228,177 $ 407,247
======== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
ITEM 1 - FINANCIAL STATEMENTS (continued)
LA QUINTA INNS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ..................................................... $ 42,284 $ 30,780
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Non-cash items:
Depreciation, amortization and asset retirements ......... 28,479 22,759
Provision for premature retirement of assets ............. -- 9,062
Partners' equity in earnings ............................. 476 928
Changes in operating assets and liabilities:
Receivables ................................................ (9,284) (3,611)
Income taxes ............................................... 13,168 5,596
Supplies and prepayments ................................... (5,975) (1,711)
Accounts payable and accrued expenses ...................... 3,122 4,602
Deferred charges and other assets .......................... (98) 753
Deferred credits and other ................................. 5,407 229
------------ ------------
Net cash provided by operating activities .............. 77,579 69,387
------------ ------------
Cash flows from investing activities:
Construction, purchase and conversion of inns .................... (100,114) (57,942)
Other capital expenditures ....................................... (84,377) (69,434)
Proceeds from property transactions .............................. 4,830 186
Purchase of partners' equity interests ........................... (81) (8,578)
Other ............................................................ 931 38
------------ ------------
Net cash used by investing activities .................. (178,811) (135,730)
------------ ------------
Cash flows from financing activities:
Proceeds from line of credit and long-term borrowings ............ 613,073 363,783
Principal payments on line of credit and long-term borrowings .... (502,723) (284,887)
Capital distributions to partners ................................ (402) (710)
Dividends to shareholders ........................................ (2,717) (2,584)
Purchase of treasury stock ....................................... (7,371) (14,447)
Net proceeds from stock transactions ............................. 1,285 4,807
------------ ------------
Net cash provided by financing activities .............. 101,145 65,962
------------ ------------
Decrease in cash and cash equivalents ............................... (87) (381)
Cash and cash equivalents at beginning of period .................... 1,508 2,590
------------ ------------
Cash and cash equivalents at end of period .......................... $ 1,421 $ 2,209
============ ============
Supplemental disclosure of cash flow information:
Interest paid ....................................................... $ 26,995 $ 20,344
Income tax paid ..................................................... 8,536 13,538
Income tax refunds .................................................. 2,567 5
Supplemental schedule of non-cash investing and financing activities:
Note issued in purchase of partners' equity interest ................ $ 2,500 $ 2,510
Tax benefit from stock options exercised ............................ 1,776 3,871
Accrual for purchase of treasury stock .............................. 168 --
Effect of stock split ............................................... -- 2,768
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE> 6
ITEM 1 - FINANCIAL STATEMENTS (continued)
LA QUINTA INNS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, which are necessary for a fair presentation of financial
position and results of operations have been made. The condensed financial
statements should be read in conjunction with the financial statements and
notes thereto included in the December 31, 1996 Annual Report on Form 10-K.
(2) Property and Equipment
At June 30, 1997 and December 31, 1996, property and equipment
consisted of the following:
<TABLE>
<CAPTION>
(in thousands)
June 30, 1997 December 31, 1996
------------ -----------------
(Unaudited)
<S> <C> <C>
Buildings .................................... $ 1,093,099 $ 988,711
Furniture, fixtures and equipment ............ 179,797 148,691
Land and leasehold improvements .............. 197,168 183,207
Construction in progress ..................... 128,487 120,286
------------ ------------
Total property and equipment ............... 1,598,551 1,440,895
Less accumulated depreciation and amortization 310,012 292,705
------------ ------------
Net property and equipment ................. $ 1,288,539 $ 1,148,190
============ ============
</TABLE>
(3) Earnings per Common and Common Equivalent Share
Fully diluted earnings per share is not materially different than
primary earnings per share.
(4) Accounts Payable and Accrued Expenses
At June 30, 1997 and December 31, 1996, accounts payable and accrued
expenses consisted of the following:
<TABLE>
<CAPTION>
(in thousands)
June 30, 1997 December 31, 1996
------------- -----------------
(Unaudited)
<S> <C> <C>
Accounts payable:
Construction ....................... $ 16,968 $ 30,920
Trade .............................. 16,625 16,125
Income taxes ....................... 7,940 --
Other .............................. 5,546 8,043
-------------- --------------
$ 47,079 $ 55,088
============== ==============
Accrued expenses:
Payroll and employee benefits ...... $ 26,804 $ 25,570
Property taxes ..................... 10,160 10,607
Interest ........................... 9,605 8,241
Other .............................. 3,131 2,584
Treasury stock purchase ............ 168 6,582
-------------- --------------
$ 49,868 $ 53,584
============== ==============
</TABLE>
6
<PAGE> 7
(5) Long-Term Debt
On February 7, 1997, the Company completed negotiations to amend and
restate its existing credit facilities. The amended credit facility provides
the Company with a $325,000,000 Unsecured Line of Credit with a consortium of
banks which will mature in February 2002. The Unsecured Line of Credit bears
interest at the prime rate or LIBOR, adjusted for an applicable margin, as
defined in the related credit agreement. The applicable margin is determined
quarterly based upon predetermined levels of indebtedness to cash flow or
ratings received by specified credit rating agencies, as defined in the related
credit agreement. The Unsecured Line of Credit requires a facility fee of 18.75
basis points on the average amount of the commitment.
On February 24, 1997, the Company issued $50,000,000 in 7.27%
Medium-Term Notes due 2007, with an effective interest rate of 7.33%. The
proceeds of the note issuance were used to repay indebtedness under the
Company's Unsecured Line of Credit.
(6) Provision for Premature Retirement of Assets
The Company launched its Gold Medal(TM) rooms program during the third
quarter of 1995 and completed the program during the second quarter of 1997.
During this program, the Company replaced certain furniture and fixtures before
the end of their normal useful life and therefore made an adjustment to reflect
shorter remaining lives. As a result, the Company recorded a non-cash provision
for premature retirement of assets of approximately $2.4 million as a separate
line item entitled provision for premature retirement of assets on the
Statement of Operations for the second quarter of 1996 and approximately $9.1
million during the six months ended June 30, 1996.
(7) Contingencies
The Company is party to various lawsuits and claims generally
incidental to its business. The ultimate disposition of these lawsuits and
claims is not expected to have a material adverse effect on the Company's
financial position or results of operations.
(8) Subsequent Event
On July 18, 1997, the Company issued $50,000,000 in 7.33% Medium-Term
Notes due 2008, with an effective interest rate of 7.39%. The proceeds of the
note issuance will be used to repay indebtedness under the Company's Unsecured
Line of Credit.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis addresses the results of
operations for the three month periods ended June 30, 1997 (the "1997 Three
Months") and June 30, 1996 (the "1996 Three Months") and the six month periods
ended June 30, 1997 (the "1997 Six Months") and June 30, 1996 (the "1996 Six
Months").
The Company's financial statements include the accounts of the
Company's wholly-owned subsidiaries and unincorporated partnerships and joint
ventures in which the Company has at least a 50% interest, and over which it
exercises substantial legal, financial and operational control.
The Company's growth program is based primarily on the construction of
new Inn & Suites hotels. During the 1997 Six Months, the Company opened 12 new
Inn & Suites hotels. The Company anticipates having a total of 36 new Inn &
Suites hotels open by the end of December 1997, including the 11 which were
opened during 1996. At June 30, 1997, the Company owned and operated 235 inns
and 23 Inn & Suites hotels with a combined total of over 33,000 rooms.
During 1995, the Company launched its Gold Medal(TM) rooms program
designed to strengthen the Company's ability to gain additional market share
and pricing advantage relative to its competitors. The program improved the
quality, functionality and value of guest rooms by enhancing the decor package,
including fresh, new colors, rich wood furniture, contemporary bathrooms,
built-in closets, oversized desks, 25 inch televisions and new draperies and
bedspreads. Service enhancements included movies-on-demand, interactive video
games from Nintendo, dataport telephones for computer connections and greatly
expanded free television channel choices. The program required 20-30 rooms at a
time to be taken out of available supply at an inn during the typical 10-12
week construction period. The Company did not adjust its available rooms or
occupancy percentage for rooms unavailable due to construction as a result of
this program. The Company completed the program during the second quarter of
1997.
7
<PAGE> 8
During January 1997, the Company acquired the limited partners'
interest in one of its combined unincorporated partnerships, which owned one
inn. As a result, the Company has two remaining unincorporated partnerships and
joint ventures, each owning one inn.
THE 1997 THREE MONTHS COMPARED TO THE 1996 THREE MONTHS
TOTAL REVENUES increased to $135,666,000 in the 1997 Three Months from
$116,022,000 in the 1996 Three Months, an increase of $19,644,000, or 16.9%. Of
the total revenues reported in the 1997 Three Months, 98.5% were revenues from
inns and 1.5% were revenues from restaurant rentals and other revenues.
INN REVENUES are derived from room rentals and other sources such as
charges to guests for long-distance telephone service, fax machine use, vending
and movie commissions, banquet revenues and laundry services. Inn revenues
improved to $133,660,000 in the 1997 Three Months from $113,727,000 in the 1996
Three Months, an increase of $19,933,000, or 17.5%. The improvement in inn
revenues reflects an increase in the average daily room rate ("ADR") and
occupancy percentage, along with the revenues associated with the opening of
new Inn & Suites hotels. ADR increased to $57.23 in the 1997 Three Months from
$53.57 in the 1996 Three Months, an increase of $3.66, or 6.8%. Occupancy
percentage increased to 74.5% in the 1997 Three Months from 73.5% in the 1996
Three Months. The increase in ADR and occupancy percentage primarily resulted
from the favorable impact of the Gold Medal rooms program which was completed
during the second quarter of 1997.
RESTAURANT RENTAL AND OTHER REVENUES primarily include rental payments
from restaurant buildings owned by La Quinta and leased to and operated by
third parties. Restaurant rental and other revenues decreased to $2,006,000 in
the 1997 Three Months from $2,295,000 in the 1996 Three Months, a decrease of
$289,000.
DIRECT EXPENSES include costs directly associated with the operation
of inns. In the 1997 Three Months approximately 40.2% of direct expenses were
represented by salaries, wages and related costs. Other major categories of
direct expenses include utilities, property taxes, repairs and maintenance,
credit card commissions and room supplies. Direct expenses increased to
$62,473,000 in the 1997 Three Months from $54,744,000 in the 1996 Three Months,
an increase of $7,729,000, or 14.1%. The increase in direct expenses period
over period is primarily attributable to growth in the number of inns. As a
percentage of total revenues, direct expenses decreased to 46.0% in the 1997
Three Months from 47.2% in the 1996 Three Months.
CORPORATE EXPENSES include the costs of general management, office
rent, training and field supervision of inn managers and other marketing and
administrative expenses. Corporate expenses increased to $4,905,000 in the 1997
Three Months from $4,141,000 in the 1996 Three Months.
DEPRECIATION, AMORTIZATION AND ASSET RETIREMENTS increased to
$14,786,000 in the 1997 Three Months from $12,034,000 in the 1996 Three Months,
an increase of $2,752,000, or 22.9%. This increase is primarily attributable to
the opening of new Inn & Suites hotels and increased depreciation for inns due
to the completion of the Gold Medal rooms program.
A PROVISION FOR PREMATURE RETIREMENT OF ASSETS totaling $2,427,000 was
recorded during the 1996 Three Months. This non-cash charge is directly
attributable to the Company's Gold Medal rooms program. During the program, the
Company replaced certain furniture and fixtures before the end of their normal
useful lives and therefore made adjustments to reflect shorter remaining lives.
As a result of the above, OPERATING INCOME increased to $53,502,000 in
the 1997 Three Months from $42,676,000 in the 1996 Three Months, an increase of
$10,826,000, or 25.4%.
INTEREST, NET increased to $12,567,000 in the 1997 Three Months
compared to $10,195,000 in the 1996 Three Months, an increase of $2,372,000, or
23.3%. The increase in interest, net is primarily attributable to an increase
in long-term borrowings and is partially offset by an increase in capitalized
interest. Interest, net reflects a reduction in interest expense for
capitalized interest of $1,913,000 in the 1997 Three Months compared to
$1,412,000 in the 1996 Three Months. The increase in capitalized interest
period over period is primarily due to the construction of new Inn & Suites
hotels.
8
<PAGE> 9
PARTNERS' EQUITY IN EARNINGS reflects the interest of partners in the
earnings of the combined unincorporated partnerships and joint ventures which
are owned at least 50% and controlled by the Company. Partners' equity in
earnings decreased to $243,000 in the 1997 Three Months from $485,000 in the
1996 Three Months, a decrease of $242,000. The decrease reflects the Company's
acquisition of the limited partners' interest in five of its combined
unincorporated partnerships and joint ventures since March 1996.
INCOME TAXES for the 1997 and 1996 Three Months were calculated using
an effective income tax rate of 37.0%.
EXTRAORDINARY ITEMS, NET OF TAX, of ($244,000) were recorded during
the 1996 Three Months and resulted primarily from prepayment fees related to
the early extinguishment of approximately $9,336,000 of long-term mortgage debt
and industrial development revenue bonds.
For the reasons discussed above, NET EARNINGS increased to
$25,636,000 in the 1997 Three Months from $19,913,000 in the 1996 Three Months,
an increase of $5,723,000, or 28.7%.
THE 1997 SIX MONTHS COMPARED TO THE 1996 SIX MONTHS
TOTAL REVENUES increased to $249,019,000 in the 1997 Six Months from
$218,780,000 in the 1996 Six Months, an increase of $30,239,000, or 13.8%. Of
the total revenues reported in the 1997 Six Months, 98.4% were revenues from
inns and 1.6% were revenues from restaurant rentals and other revenues.
INN REVENUES improved to $245,042,000 in the 1997 Six Months from
$214,561,000 in the 1996 Six Months, an increase of $30,481,000, or 14.2%. The
improvement in inn revenues reflects an increase in ADR, along with the
revenues associated with the opening of new Inn & Suites hotels. ADR increased
to $56.97 in the 1997 Six Months from $53.49 in the 1996 Six Months, an
increase of $3.48, or 6.5%. Occupancy percentage increased to 70.0% in the 1997
Six Months from 69.8% in the 1996 Six Months. The increase in ADR and occupancy
percentage primarily resulted from the favorable impact of the Gold Medal rooms
program which was completed during the second quarter of 1997.
RESTAURANT RENTAL AND OTHER REVENUES decreased to $3,977,000 in the
1997 Six Months from $4,219,000 in the 1996 Six Months, a decrease of $242,000.
DIRECT EXPENSES increased to $119,819,000 in the 1997 Six Months from
$107,635,000 in the 1996 Six Months. The increase in direct expenses period
over period is primarily attributable to growth in the number of inns. As a
percentage of total revenues, direct expenses decreased to 48.1% in the 1997
Six Months from 49.2% in the 1996 Six Months.
CORPORATE EXPENSES increased to $9,187,000 in the 1997 Six Months from
$8,791,000 in the 1996 Six Months.
DEPRECIATION, AMORTIZATION AND ASSET RETIREMENTS increased to
$28,479,000 in the 1997 Six Months from $22,759,000 in the 1996 Six Months, an
increase of $5,720,000, or 25.1%. This increase is primarily attributable to
the opening of new Inn & Suites hotels and increased depreciation for inns due
to the completion of the Gold Medal rooms program.
A PROVISION FOR PREMATURE RETIREMENT OF ASSETS totaling $9,062,000 was
recorded during the 1996 Six Months. This non-cash charge is directly
attributable to the Company's Gold Medal rooms program. During the program, the
Company replaced certain furniture and fixtures before the end of their normal
useful lives and therefore made adjustments to reflect shorter remaining lives.
As a result of the above, OPERATING INCOME increased to $91,534,000
in the 1997 Six Months from $70,533,000 in the 1996 Six Months, an increase of
$21,001,000, or 29.8%.
INTEREST, NET increased to $23,940,000 in the 1997 Six Months compared
to $20,360,000 in the 1996 Six Months, an increase of $3,580,000, or 17.6%.
Interest, net reflects a reduction in interest expense for capitalized interest
of $4,033,000 in the 1997 Six Months compared to $2,227,000 in the 1996 Six
Months. The increase in capitalized interest period over period is primarily
due to the construction of new Inn & Suites hotels.
PARTNERS' EQUITY IN EARNINGS decreased to $476,000 in the 1997 Six
Months from $928,000 in the 1996 Six Months, a decrease of $452,000. The
decrease reflects the Company's acquisition of the limited partners' interest
in five of its combined unincorporated partnerships and joint ventures since
March 1996.
9
<PAGE> 10
INCOME TAXES for the 1997 and 1996 Six Months were calculated using an
effective income tax rate of 37.0%.
EXTRAORDINARY ITEMS, NET OF TAX, of ($244,000) were recorded during
the 1996 Six Months and resulted primarily from prepayment fees related to the
early extinguishment of approximately $9,336,000 of long-term mortgage debt and
industrial development revenue bonds.
For the reasons discussed above, NET EARNINGS increased to
$42,284,000 in the 1997 Six Months from $30,780,000 in the 1996 Six Months,
an increase of $11,504,000, or 37.4%.
ANALYSIS OF CASH FLOWS
On February 7, 1997, the Company completed negotiations to amend and
restate its existing credit facilities. The amended credit facility provides
the Company with a $325,000,000 Unsecured Line of Credit with a consortium of
banks which will mature in February 2002. At June 30, 1997, the Company had
$36,311,000 available on its Unsecured Line of Credit, net of $7,489,000 of
letters of credit collateralizing its insurance programs and certain mortgages.
The Unsecured Line of Credit bears interest at the prime rate or LIBOR,
adjusted for an applicable margin, as defined in the related credit agreement.
The applicable margin is determined quarterly based upon predetermined levels
of indebtedness to cash flow or credit ratings received by specified credit
rating agencies, as defined in the related credit agreement. At June 30, 1997,
borrowings under the Unsecured Line of Credit bear interest at LIBOR plus 33.75
basis points on $280,000,000 of outstanding borrowings and the prime rate less
50 basis points on $1,200,000 of outstanding borrowings. The Unsecured Line of
Credit requires a facility fee of 18.75 basis points on the average amount of
the commitment.
On February 24, 1997, the Company issued $50,000,000 in 7.27%
Medium-Term Notes due 2007, with an effective interest rate of 7.33%. The
proceeds of the note issuance were used to repay indebtedness under the
Company's Unsecured Line of Credit.
On July 18, 1997, the Company issued $50,000,000 in 7.33% Medium-Term
Notes due 2008, with an effective interest rate of 7.39%. The proceeds of the
note issuance will be used to repay indebtedness under the Company's Unsecured
Line of Credit.
At June 30, 1997, the Company had $1,421,000 of cash and cash
equivalents compared with $2,209,000 at June 30, 1996.
Net cash provided by operating activities increased by $8,192,000, or
11.8%, to $77,579,000 at June 30, 1997 from $69,387,000 at June 30, 1996. This
increase is primarily the result of a $30,239,000 increase in revenues, which
is due in large part to the addition of 23 Inn & Suites hotels, as well as a
140 basis point improvement in EBITDA margin.
Net cash used by investing activities increased by $43,081,000 from
June 30, 1996 to June 30, 1997, primarily as a result of capital expenditures
for the Company's new Inn & Suites hotel construction projects and expenditures
for the Gold Medal rooms program. Net cash used by investing activities for the
1996 Six Months also includes $8,578,000 of cash used in the purchase of
partners' equity interests.
Net cash provided by financing activities increased by $35,183,000 to
$101,145,000 at June 30, 1997. Net borrowings increased to $110,350,000 for the
1997 Six Months compared to $78,896,000 for the 1996 Six Months. The net
increase is primarily the result of borrowings used for the new Inn & Suites
hotel construction projects and the Gold Medal rooms program. Net cash provided
by financing activities also includes $7,371,000 in the 1997 Six Months and
$14,447,000 in the 1996 Six Months used for the purchase of treasury stock.
EBITDA increased to $120,013,000 during the 1997 Six Months, an
increase of 17.3% over the 1996 Six Months. EBITDA is defined as earnings
before net interest expense, income taxes, depreciation, amortization and
asset retirements, provision for premature retirement of assets, partners'
equity in earnings and extraordinary items. The Company believes this
definition of EBITDA provides a meaningful measure of its ability to service
debt.
Capital expenditures planned by La Quinta for the remainder of 1997
and 1998 focus on the construction of new Inn & Suites hotels. The capital
requirements of the program are being funded from internally generated cash
flows and amounts available on the Company's Unsecured Line of Credit and are
not anticipated to have an adverse effect on the Company's ability to fund its
operations. The estimated cost to complete these projects for which commitments
had been made and construction had commenced at June 30, 1997 was approximately
$119.3 million.
10
<PAGE> 11
Funds on hand, internally generated future cash flows and funds
available on the Company's Unsecured Line of Credit are expected to be
sufficient to meet capital requirements, as well as operating expenses and debt
service requirements through at least the second quarter of 1998. From time to
time, the Company will continue to evaluate the necessity of other financing
alternatives.
ACCOUNTING PRONOUNCEMENT
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (Statement 128), "Earnings
per Share", which is effective for periods ending after December 15, 1997,
including interim periods. Statement 128 establishes new standards for
computing and presenting earnings per share and applies to all entities with
publicly held common stock or potential common stock. The Company will
implement the statement in the required period. Adoption of the statement is
not expected to have a material adverse effect on the Company's reported
earnings per share.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 (Statement 130), "Reporting
Comprehensive Income", which is effective for periods beginning after December
15, 1997, including interim periods. Statement 130 established new standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. The Company will implement the
statement in the required period. Adoption of the statement is not expected to
have a material adverse effect on the Company's financial position or results
of operations.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Quarterly Report on Form 10-Q contains information that is forward-looking,
such as the timing and cost of the new Inn & Suites hotel construction
projects, anticipated capital requirements and the results of legal
proceedings. Such forward-looking information involves risks and uncertainties
that could significantly affect expected results. These risks and uncertainties
include, but are not limited to, uncertainties relating to economic conditions,
the pricing and availability of construction materials, changes in the
competitive environment in which the Company operates and the outcome of
pending legal proceedings. Further discussion of these and additional factors
which may cause expected results to differ from actual results are included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
filed with the Securities and Exchange Commission dated February 28, 1997.
11
<PAGE> 12
Independent Accountants' Review Report
The Board of Directors
La Quinta Inns, Inc.:
We have reviewed the condensed balance sheet of La Quinta Inns, Inc. as of June
30, 1997, and the related condensed statements of operations for the
three-month and six-month periods ended June 30, 1997 and 1996, shareholders'
equity for the six-month period ended June 30, 1997 and cash flows for the
six-month periods ended June 30, 1997 and 1996. These condensed financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of La Quinta Inns, Inc. as of December 31, 1996
and the related statements of operations, shareholders' equity, and cash flows
for the year then ended (not presented herein); and in our report dated January
31, 1997, except for note 16, which is as of February 26, 1997, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet as of
December 31, 1996 and accompanying condensed statement of shareholders' equity
for the year then ended, are fairly stated, in all material respects, in
relation to the respective financial statements from which they have been
derived.
KPMG Peat Marwick LLP
San Antonio, Texas
August 1, 1997
12
<PAGE> 13
Part II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Actions for negligence or other tort claims occur routinely as an
ordinary incident to the Company's business. Several lawsuits are pending
against the Company which have arisen in the ordinary course of the business,
but none of these proceedings involves a claim for damages (in excess of
applicable excess umbrella insurance coverages) involving more than 10% of
current assets of the Company. The Company does not anticipate any amounts
which it may be required to pay as a result of an adverse determination of such
legal proceedings, individually or in the aggregate, or any other relief
granted by reason thereof, will have a material adverse effect on the Company's
financial position or results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual Shareholders' Meeting on May 22, 1997, the Company
submitted to a vote and its shareholders approved the following items:
a) Election of Directors to serve the Company until the 1998 Shareholders'
Meeting
<TABLE>
<CAPTION>
NUMBER OF VOTES
---------------
Name of Nominee For Withheld
--------------- --- --------
<S> <C> <C>
William H. Cunningham 69,444,720 122,410
Gary L. Mead 69,448,511 118,619
William J. Razzouk 69,364,752 202,378
Peter Sterling 69,448,511 118,619
Kenneth Stevens 69,446,613 120,517
Thomas M. Taylor 69,440,074 127,056
</TABLE>
b) Amendment to the 1984 Stock Option Plan
Amendments to the 1984 Stock Option Plan that would: (1) set the limit on
the number of shares subject to options which may be granted to any
individual employee in any one year at 525,000 shares, and (2)
automatically increase the number of shares for which stock options may be
granted annually to individual employees to reflect adjustments for future
stock splits effected in the form of stock dividends or otherwise by a
vote of 68,377,346 "For", 1,084,642 "Against", 105,141 "Abstain" and 1
"Non-Voting".
c) Amendment to Articles of Incorporation
Amendment to the Articles of Incorporation to increase the authorized
common stock shares from 100 million shares to 200 million shares by a
vote of 65,425,790 "For", 4,002,481 "Against", 138,858 "Abstain" and 1
"Non-Voting".
d) Proposal to Adopt the 1997 Equity Participation Plan
The adoption of the 1997 Equity Participation Plan that would replace and
terminate the Amended and Restated 1984 Stock Option Plan and continue to
provide stock-based incentive compensation to certain employees,
consultants and directors by a vote of 50,210,459 "For", 14,394,298
"Against", 174,556 "Abstain" and 4,787,817 "Non-Voting".
e) Approval of Independent Public Accountants
The appointment of KPMG Peat Marwick LLP as the Company's Independent
Public Accountants by a vote of 69,486,586 "For", 13,371 "Against" and
67,173 "Abstain".
13
<PAGE> 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
A list of all exhibits filed or included as part of this Quarterly
Report on Form 10-Q is as follows:
Exhibit Description
- ------- -----------
3(a) Restated Articles of Incorporation of La Quinta Inns, Inc. dated
as of May 23, 1997, previously filed as an exhibit to the
Registrant's Registration Statement on Form S-8 and incorporated
herein by reference.
10(a)* First Amendment to La Quinta Inns, Inc. Amended and Restated 1984
Stock Option Plan filed herewith.
10(b)* Second Amendment to La Quinta Inns, Inc. Amended and Restated 1984
Stock Option Plan filed herewith.
10(c)* Third Amendment to La Quinta Inns, Inc. Amended and Restated 1984
Stock Option Plan filed herewith.
10(d)* The 1997 Equity Participation Plan of La Quinta Inns, Inc. filed
herewith.
10(e)* First Amendment to The 1997 Equity Participation Plan of La Quinta
Inns, Inc. filed herewith.
10(f)* Second Amendment to The 1997 Equity Participation Plan of
La Quinta Inns, Inc. filed herewith.
12 Computation of Ratio of Earnings to Fixed Charges filed herewith.
15 Letter from KPMG Peat Marwick LLP dated August 1, 1997 filed
herewith.
27 Financial Data Schedule filed herewith.
- ---------------------------------
* Indicates management compensation agreement.
(b) REPORTS ON FORM 8-K
No Current Reports on Form 8-K have been filed during the period for which
this Quarterly Report on Form 10-Q is filed.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LA QUINTA INNS, INC.
(Registrant)
August 11, 1997 By: /s/ William C. Hammett, Jr.
--------------------------------
William C. Hammett, Jr.
Senior Vice President
Chief Financial Officer
August 11, 1997 By: /s/ Irene C. Primera
--------------------------------
Irene C. Primera
Vice President - Controller
15
<PAGE> 16
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
3(a) Restated Articles of Incorporation of La Quinta Inns, Inc. dated
as of May 23, 1997, previously filed as an exhibit to the
Registrant's Registration Statement on Form S-8 and incorporated
herein by reference.
10(a)* First Amendment to La Quinta Inns, Inc. Amended and Restated 1984
Stock Option Plan filed herewith.
10(b)* Second Amendment to La Quinta Inns, Inc. Amended and Restated 1984
Stock Option Plan filed herewith.
10(c)* Third Amendment to La Quinta Inns, Inc. Amended and Restated 1984
Stock Option Plan filed herewith.
10(d)* The 1997 Equity Participation Plan of La Quinta Inns, Inc. filed
herewith.
10(e)* First Amendment to The 1997 Equity Participation Plan of La Quinta
Inns, Inc. filed herewith.
10(f)* Second Amendment to The 1997 Equity Participation Plan of
La Quinta Inns, Inc. filed herewith.
12 Computation of Ratio of Earnings to Fixed Charges filed herewith.
15 Letter from KPMG Peat Marwick LLP dated August 1, 1997 filed
herewith.
27 Financial Data Schedule filed herewith.
- ---------------------------------
* Indicates management compensation agreement.
<PAGE> 1
EXHIBIT 10(a)
FIRST AMENDMENT TO LA QUINTA INNS, INC.
AMENDED AND RESTATED 1984 STOCK OPTION PLAN
WHEREAS, La Quinta Inns, Inc. (hereinafter the "Company"), a Texas
corporation, maintains the La Quinta Inns, Inc. Amended and Restated 1984 Stock
Option Plan (the "Plan");
WHEREAS, pursuant to Section 9.1 of the Plan, the Company may amend the
Plan from time to time;
NOW THEREFORE, BE IT RESOLVED, that the Plan is hereby amended as follows
effective May 26, 1994:
1. Section 3.3 shall be amended and restated in its entirety as
follows:
"3.3. Subject to the provisions of the Plan, the Committee shall
in its discretion, determine which employees of the Company shall be
granted Options, the number of shares subject to option under any
such Options, the dates after which Options may be exercised, in
whole or in part, whether Options shall be ISOs, and the terms and
conditions of the Options. In no event shall the number of shares
subject to options granted to any one employee exceed 350,000 in any
one year."
2. Section 6.13 shall be amended and restated in its entirety as
follows:
"6.13. Special Terms, Conditions and Rules for Options to
Non-Employee Directors. Non-employee directors of the Company shall
be granted Non-ISO Options under the Plan in lieu of annual monetary
retainers and regular and special Board and committee attendance fees
previously paid to non-employee directors by the Company prior to May
21, 1992. The grant of such Options shall occur annually on the date
that, and immediately after, each non-employee director is elected to
the Board at each annual meeting of shareholders, and the total
number of shares subject to each annual Option grant to each
non-employee director shall be 13,500 shares, subject to adjustment
in accordance with Article VIII of the Plan. In the case where a
non-employee director is first elected to the Board to fill a vacancy
or a newly created position on the Board, either (i) by the
shareholders at a special meeting of shareholders duly called for
such purpose or (ii) by action of the Board as may be permitted under
the Articles or Certificate of Incorporation, the By-Laws and the
governing corporate law of the Company, such non-employee director
shall be eligible at such election upon resolution of the Board to
receive an initial Option for 13,500 shares (subject to adjustment in
accordance with Article VIII of the Plan), and thereafter shall
receive annual Options as provided for in the preceding sentence
above. Options granted to non-employee directors pursuant to this
section shall be fully vested on the day following the date an Option
is granted
<PAGE> 2
and shall be subject to the provisions of Articles II, III, IV, V,
VIII, IX, X, XI and XII of the Plan and to the specific provisions of
sections 6.1, 6.2, 6.5, 6.8, and 6.11 of this Article VI of the Plan
to the extent that any such provisions are not inconsistent with this
section 6.13. Article VII of the Plan and sections 6.3, 6.4, 6.6,
6.7, 6.9, 6.10 and 6.12 of this Article VI shall not apply to Options
granted to non-employee directors under this section 6.13. No Option
or portion thereof granted pursuant to this section 6.13 shall be
exercisable prior to the first anniversary of the date the Option is
granted or after the Termination Date. Moreover, upon any
non-employee director ceasing to be a director of the Company for any
reason, including death, disability, removal or resignation, each
Option held by such non-employee director, whether or not exercisable
at that time, together with all rights hereunder, shall terminate on
the earlier of the Termination Date or the first anniversary of the
date that such non-employee director ceased to be a director of the
Company. This section 6.13 shall not be amended more than once every
six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act, or the rules thereunder."
3. Section 8.1 shall be amended and restated in its entirety as
follows:
"8.1. If (a) the Company shall at any time be involved in a
transaction to which section 424(a) of the Code is applicable; (b)
the Company shall declare a dividend payable in, or shall subdivide,
split or combine, its Common Stock; or (c) any other event shall
occur which in the judgment of the Committee necessitates action by
way of adjusting the terms of the outstanding Options,
(i) the Committee shall forthwith take any such action as in its
judgment shall be necessary to preserve the Optionees' rights
substantially proportionate to the rights existing prior to such
event and, to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock
subject to outstanding Options, the number of shares available
under Article IV above shall be increased or decreased, as the
case may be, proportionately; and
(ii) the number of shares specified as subject to the annual and
initial Options thereafter to be granted to non-employee
directors of the Company in lieu of annual monetary retainers
and regular and special Board and committee attendance fees
pursuant to Section 6.13 above shall be increased or decreased,
as the case may be, proportionately.
The judgment of the Committee with respect to any matter referred to
in this Article shall be conclusive and binding upon each Optionee."
<PAGE> 1
EXHIBIT 10(b)
SECOND AMENDMENT TO THE LA QUINTA INNS, INC. AMENDED
AND RESTATED 1984 STOCK OPTION PLAN.
WHEREAS, the Board of Directors (the "Board") of La Quinta Inns, Inc. (the
"Company") approved the adoption of the La Quinta Inns, Inc. Amended and
Restated 1984 Stock Option Plan (the "Plan") effective May 21, 1992;
WHEREAS, the Plan requires that the Compensation and Stock Option
Committee (the "Committee") of the Board consist of not less than three members
of the Board, each of whom shall be Disinterested Persons within the meaning of
Rule 16b-3(c)(2)(i) of the Rules and Regulations of the Securities and Exchange
Commission promulgated under the Securities Exchange Act of 1934, as amended;
WHEREAS, the Company reserved the right in Article 9 of the Plan to amend
the Plan by action of its Board; and
WHEREAS, the Company wishes to amend the Plan to reduce the required
number of members of the Committee and the Board has approved such amendment.
NOW, THEREFORE, BE IT RESOLVED that the Plan is hereby amended as follows
effective March 31, 1995:
Section 3.2 of the Plan is amended and restated to read as follows:
"3.2. The Committee shall consist of not less than two members of the
Board, all of whom shall be Disinterested Persons within the meaning
of Rule 16b-(3)(c)(2)(i) of the Rules and Regulations of the
Securities and Exchange Commission promulgated under the Securities
Exchange Act of 1934, as amended."
<PAGE> 1
EXHIBIT 10(c)
THIRD AMENDMENT TO LA QUINTA INNS, INC. AMENDED AND
RESTATED 1984 STOCK OPTION PLAN.
WHEREAS: La Quinta Inns, Inc. (hereinafter the "Company"), a Texas
corporation, maintains the La Quinta Inns, Inc. Amended and Restated 1984 Stock
Option Plan (the "Plan").
WHEREAS: Section 3.3 of Article III of the Plan, as amended, currently
limits the number of shares subject to options granted to any one employee to
350,000 in any one year.
WHEREAS: This limitation on the maximum option grant does not contain a
provision allowing for adjustments in said number to take into account certain
events, including stock splits (in the form of stock dividends and otherwise).
NOW THEREFORE, BE IT RESOLVED, that Section 3.3 of Article III of the
Plan, as amended, be further amended as follows, effective June 24, 1996:
"3.3 Subject to the provisions of the Plan, the Committee
shall in its discretion, determine which employees of the Company
shall be granted Options, the number of shares subject to option under
any such Options, the dates after which Options may be exercised, in
whole or in part, whether Options shall be ISOs, and the terms and
conditions of the Options. In no event shall the number of shares
subject to options granted to any one employee exceed 525,000 in any
one fiscal year of the Company; provided however, that this number
shall be automatically adjusted in the event the Company shall declare
a dividend payable in, or shall subdivide or combine, its Common
Stock.
<PAGE> 1
EXHIBIT 10(d)
THE 1997 EQUITY PARTICIPATION PLAN
OF
LA QUINTA INNS, INC.
La Quinta Inns, Inc., a Texas corporation, has adopted The 1997
Equity Participation Plan of La Quinta Inns, Inc. (the "Plan"),
effective as of May 22, 1997, for the benefit of its eligible
employees, consultants and directors. The Plan consists of two plans,
one for the benefit of key Employees (as such term is defined below)
and consultants and one for the benefit of Independent Directors (as
such term is defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key
Employees and consultants to further the growth, development and
financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development and financial success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the
long range success of the Company by offering them an opportunity to
own stock in the Company and/or rights which will reflect the growth,
development and financial success of the Company.
ARTICLE I
DEFINITIONS
1.1 GENERAL. Wherever the following terms are used in this Plan
they shall have the meanings specified below, unless the context
clearly indicates otherwise.
1.2 AWARD LIMIT. "Award Limit" shall mean five hundred thousand
(500,000) shares of Common Stock (subject to adjustment pursuant to
Section 10.3).
1.3 BOARD. "Board" shall mean the Board of Directors of the
Company.
1.4 CHANGE IN CONTROL. A "Change in Control" shall be deemed to
occur if:
(a) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of
securities of the Company representing forty percent (40%) or more
of the combined voting power of the Company's then outstanding
securities. For purposes of this Plan, (A) the term "Person" is
used as such term is used in Sections 13(d) and 14(d) of the
Exchange Act; PROVIDED, HOWEVER, that the term shall not include
the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, and (B) the term
"Beneficial Owner" shall have the meaning given to such term in
Rule 13d-3 under the Exchange Act;
<PAGE> 2
(b) during any period of two (2) consecutive years (not
including any period prior to the adoption of this Plan),
individuals who at the beginning of such period constitute the
Board, and any new director whose election by the Board or
nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved (hereinafter referred to as "Continuing Directors"),
cease for any reason to constitute at least a majority thereof;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other
entity), other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; PROVIDED, HOWEVER, that a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than forty
percent (40%) of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control;
or
(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets.
1.5 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6 COMMITTEE. "Committee" shall mean the Compensation and Stock
Option Committee of the Board, or another committee of the Board,
appointed as provided in Section 9.1.
1.7 COMMON STOCK. "Common Stock" shall mean the common stock of
the Company, par value $.10 per share, and any equity security of the
Company issued or authorized to be issued in the future, but excluding
any preferred stock and any warrants, options or other rights to
purchase Common Stock. Debt securities of the Company convertible into
Common Stock shall be deemed equity securities of the Company.
1.8 COMPANY. "Company" shall mean La Quinta Inns, Inc., a Texas
corporation.
1.9 CORPORATE TRANSACTION. "Corporate Transaction" shall mean any
merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this
Plan and all Options are assumed by the successor entity, which does
not qualify as a Change in Control.
1.10 DEFERRED STOCK. "Deferred Stock" shall mean Common Stock
awarded under Article VII of this Plan.
1.11 DIRECTOR. "Director" shall mean a member of the Board.
2
<PAGE> 3
1.12 DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a
right to receive the equivalent value (in cash or Common Stock) of
dividends paid on Common Stock, awarded under Article VII of this Plan.
1.13 EMPLOYEE. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of
the Company, or of any corporation which is a Subsidiary.
1.14 EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.15 FAIR MARKET VALUE. "Fair Market Value" of a share of Common
Stock as of a given date shall be (i) the mean between the high and low
reported sales price of a share of Common Stock on the principal
exchange on which shares of Common Stock are then trading, if any (or
as reported on any composite index which includes such principal
exchange), on such date, or if shares were not traded on such date, on
the immediately preceding date on which trading occurred previous to
such date, or (ii) if Common Stock is not traded on an exchange but is
quoted on Nasdaq or a successor quotation system, the mean between the
closing representative bid and asked prices for the Common Stock on
such date, or if shares were not traded on such date, on the
immediately preceding date on which trading occurred previous to such
date, as reported by Nasdaq or such successor quotation system; or
(iii) if Common Stock is not publicly traded on an exchange and not
quoted on Nasdaq or a successor quotation system, the Fair Market Value
of a share of Common Stock as established by the Committee (or the
Board, in the case of Options granted to Independent Directors) acting
in good faith.
1.16 GRANTEE. "Grantee" shall mean an Employee or consultant
granted a Performance Award, Dividend Equivalent, Stock Payment or
Stock Appreciation Right, or an award of Deferred Stock, under this
Plan.
1.17 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean
an option which conforms to the applicable provisions of Section 422 of
the Code and which is designated as an Incentive Stock Option by the
Committee.
1.18 INDEPENDENT DIRECTOR. "Independent Director" shall mean a
member of the Board who is not an Employee of the Company.
1.19 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock
Option by the Committee.
1.20 OPTION. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as
determined by the Committee, be either a Non-Qualified Stock Option or
an Incentive Stock Option; PROVIDED, HOWEVER, that Options granted to
Independent Directors and consultants shall be Non-Qualified Stock
Options.
1.21 OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.
1.22 PERFORMANCE AWARD. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that is paid
in cash, Common Stock or a combination of both, awarded under Article
VII of this Plan.
3
<PAGE> 4
1.23 PLAN. "Plan" shall mean The 1997 Equity Participation Plan
of La Quinta Inns, Inc.
1.24 QDRO. "QDRO" shall mean a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
1.25 RESTRICTED STOCK. "Restricted Stock" shall mean Common Stock
awarded under Article VI of this Plan.
1.26 RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean
an Employee or consultant granted an award of Restricted Stock under
Article VI of this Plan.
1.27 RULE 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.
1.28 SECTION 16 OFFICER. "Section 16 Officer" shall mean an
officer of the Company within the meaning of such term under Rule
16a-1(f) of the Rules and Regulations of the Securities and Exchange
Commission, as promulgated under the Exchange Act, as such Rule may be
amended from time to time.
1.29 SECTION 162(m) PARTICIPANT. "Section 162(m) Participant"
shall mean any key Employee designated by the Committee as a key
Employee whose compensation for the fiscal year in which the key
Employee is so designated or a future fiscal year may be subject to the
limit on deductible compensation imposed by Section 162(m) of the Code.
1.30 STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article VIII of this
Plan.
1.31 STOCK PAYMENT. "Stock Payment" shall mean (i) a payment in
the form of shares of Common Stock, or (ii) an option or other right to
purchase shares of Common Stock, as part of a deferred compensation
arrangement, made in lieu of all or any portion of the compensation,
including without limitation, salary, bonuses and commissions, that
would otherwise become payable to a key Employee or consultant in cash,
awarded under Article VII of this Plan.
1.32 SUBSIDIARY. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of
the corporations other than the last corporation in the unbroken chain
then owns stock possessing fifty percent (50%) percent or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
1.33 TEN PERCENT BENEFICIAL OWNER. "Ten Percent Beneficial Owner"
shall mean the beneficial owner, directly or indirectly, of more than
ten percent (10%) of the Common Stock or any other class of equity
securities of the Company within the meaning of the term and according
to the provisions of Rule 16a-1(a) and Rule 16a-2 of the Rules and
Regulations of the Securities and Exchange Commission under the
Exchange Act, as such Rules may be amended from time to time.
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1.34 TERMINATION OF CONSULTANCY. "Termination of Consultancy"
shall mean the time when the engagement of an Optionee, Grantee or
Restricted Stockholder as a consultant to the Company or a Subsidiary
is terminated for any reason, with or without cause, including, but not
by way of limitation, by resignation, discharge, death or retirement;
but excluding terminations where there is a simultaneous commencement
of employment with the Company or any Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Consultancy, including, but not by
way of limitation, the question of whether a Termination of Consultancy
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or
without cause, except to the extent expressly provided otherwise in
writing.
1.35 TERMINATION OF DIRECTORSHIP. "Termination of Directorship"
shall mean the time when an Optionee who is an Independent Director
ceases to be a Director for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death
or retirement. The Board, in its sole and absolute discretion, shall
determine the effect of all matters and questions relating to
Termination of Directorship with respect to Independent Directors.
1.36 TERMINATION OF EMPLOYMENT. "Termination of Employment" shall
mean the final day of active employment before or after the time when
the employee-employer relationship between an Optionee, Grantee or
Restricted Stockholder and the Company or any Subsidiary is terminated
for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death, disability
or retirement; but excluding (i) terminations where there is a
simultaneous reemployment or continuing employment of an Optionee,
Grantee or Restricted Stockholder by the Company or any Subsidiary,
(ii) at the discretion of the Committee, terminations which result in a
temporary severance of the employee-employer relationship, and (iii) at
the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company
or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Employment, including, but not by
way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment;
PROVIDED, HOWEVER, that, unless otherwise determined by the Committee
in its discretion, a leave of absence, change in status from an
employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in
status or other change interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable regulations and
revenue rulings under said Section. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any
time for any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 SHARES SUBJECT TO PLAN.
(a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred
Stock, Stock Payments or Stock
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Appreciation Rights shall be Common Stock, initially shares of the
Company's Common Stock, par value $ .10 per share. The aggregate
number of such shares which may be issued upon exercise of such options
or rights or upon any such awards under the Plan shall not exceed four
million (4,000,000) plus the remaining shares available pursuant to the
Company's Amended and Restated 1984 Stock Option Plan. The shares of
Common Stock issuable upon exercise of such options or rights or upon
any such awards may be either previously authorized but unissued shares
or treasury shares.
(b) The maximum number of shares which may be subject to Options,
awards of Restricted Stock, Performance Awards, Dividend Equivalents,
awards of Deferred Stock, Stock Payments or Stock Appreciation Rights
granted under the Plan to any individual in any fiscal year shall not
exceed the Award Limit (subject to adjustment pursuant to Section
10.3). To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against
the Award Limit (subject to adjustment pursuant to Section 10.3).
Furthermore, to the extent required by Section 162(m) of the Code, if,
after grant of a Stock Appreciation Right, the base amount on which
stock appreciation is calculated is reduced to reflect a reduction in
the Fair Market Value of the Company's Common Stock, the transaction is
treated as a cancellation of the Stock Appreciation Right and a grant
of a new Stock Appreciation Right and both the Stock Appreciation Right
deemed to be canceled and the Stock Appreciation Right deemed to be
granted are counted against the Award Limit (subject to adjustment
pursuant to Section 10.3).
2.2 ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or other
right to acquire shares of Common Stock under any other award under
this Plan, expires or is canceled without having been fully exercised,
or is exercised in whole or in part for cash as permitted by this Plan,
the number of shares subject to such Option or other right but as to
which such Option or other right was not exercised prior to its
expiration, cancellation or exercise may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1.
Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 10.3 and become exercisable with respect
to shares of stock of another corporation shall be considered cancelled
and may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1. Shares of Common Stock which are delivered
by the Optionee or Grantee or withheld by the Company upon the exercise
of any Option or other award under this Plan, in payment of the
exercise price thereof, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any share of
Restricted Stock is forfeited by the Grantee or repurchased by the
Company pursuant to Section 6.6 hereof, such share may again be
optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Notwithstanding the provisions of this Section 2.2, no
shares of Common Stock may again be optioned, granted or awarded if
such action would cause an Incentive Stock Option to fail to qualify as
an incentive stock option under Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 ELIGIBILITY. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted
an Option. Each Independent Director of the Company shall be eligible
to be granted Options at the times and in the manner set forth in
Section 3.4(d).
3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be
granted an Incentive Stock Option under this Plan if such person, at
the time the Incentive Stock Option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the
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Company or any then existing Subsidiary or parent corporation (within
the meaning of Section 422 of the Code) unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of the
Code.
3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option shall be granted to any person who is not an Employee.
3.4 GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select
from among the key Employees or consultants (including Employees
or consultants who have previously received Options or other
awards under this Plan) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit (subject to adjustment
pursuant to Section 10.3), determine the number of shares to be
subject to such Options granted to the selected key Employees or
consultants;
(iii) Subject to Section 3.3, determine whether such Options
are to be Incentive Stock Options or Non-Qualified Stock Options
and whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options,
consistent with this Plan; PROVIDED, HOWEVER, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code
shall include, but not be limited to, such terms and conditions as
may be necessary to meet the applicable provisions of Section
162(m) of the Code.
(b) Upon the selection of a key Employee or consultant to be
granted an Option, the Committee shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the grant
of the Option as it deems appropriate. Without limiting the generality
of the preceding sentence, the Committee may, in its discretion and on
such terms as it deems appropriate, require as a condition on the grant
of an Option to an Employee or consultant that the Employee or
consultant surrender for cancellation some or all of the unexercised
Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments or other rights which have been previously granted to him
under this Plan or otherwise. An Option, the grant of which is
conditioned upon such surrender, may cover the same (or a lesser or
greater) number of shares as such surrendered Option or other award,
may contain such other terms as the Committee deems appropriate, and
shall be exercisable in accordance with its terms, without regard to
the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as
an "incentive stock option" under Section 422 of the Code.
(d) During the term of this Plan, each person who is an
Independent Director as of
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the effective date of this Plan shall automatically be granted an
Option to purchase thirty thousand, three hundred and seventy five
(30,375) shares of Common Stock (subject to adjustment as provided in
Section 10.3) on the date of each annual meeting of stockholders after
the effective date of this Plan at which the Independent Director is
reelected to the Board. During the term of the Plan, a person who is
initially elected to the Board after the effective date of this Plan
and who is an Independent Director at the time of such initial election
automatically shall be granted an Option to purchase thirty thousand,
three hundred and seventy five (30,375) shares of Common Stock (subject
to adjustment as provided in Section 10.3) on the date of each annual
meeting of stockholders after such initial election at which the
Independent Director is reelected to the Board. In addition, the Board
shall have discretion to make grants to Independent Directors who take
office between annual meetings of stockholders. Members of the Board
who are employees of the Company who subsequently retire from the
Company and remain on the Board, to the extent that they are otherwise
eligible, will receive after retirement from employment with the
Company, Options on the same terms as Independent Directors. All the
foregoing Option grants authorized by this Section 3.4(d) are subject
to stockholder approval of the Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 OPTION AGREEMENT. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms
and conditions as the Committee (or the Board, in the case of Options
granted to Independent Directors) shall determine, consistent with this
Plan. Stock Option Agreements evidencing Options intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C)
of the Code shall contain such terms and conditions as may be necessary
to meet the applicable provisions of Section 162(m) of the Code. Stock
Option Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code.
4.2 OPTION PRICE. The price per share of the shares subject to
each Option shall be set by the Committee; PROVIDED, HOWEVER, that such
price shall not be less than the lesser of the par value of a share of
Common Stock, unless otherwise permitted by applicable state law, or
85% of the Fair Market Value of a share of Common Stock on the date the
Option is granted; and, PROVIDED, FURTHER, that, (i) in the case of
Incentive Stock Options and Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code, such price shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted;
(ii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code) such price shall not be less than
110% of the Fair Market Value of a share of Common Stock on the date
the Option is granted; and (iii) in the case of Options granted to
Independent Directors, such price shall equal 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted.
4.3 OPTION TERM. The term of an Option shall be set by the
Committee in its discretion; PROVIDED, HOWEVER, that, (i) in the case
of Options granted to Independent Directors, the term shall be ten (10)
years from the date the Option is granted, without variation or
acceleration hereunder, but subject to Section 4.4 and Section 10.3(e),
and (ii) in the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is
granted, or five (5) years from such
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date if the Incentive Stock Option is granted to an individual then
owning (within the meaning of Section 424(d) of the Code) more than 10%
of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements
of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend the
term of any outstanding Option in connection with any Termination of
Employment or Termination of Consultancy of the Optionee, or amend any
other term or condition of such Option relating to such a termination.
4.4 OPTION VESTING
(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee
and the Committee may determine that an Option may not be exercised in
whole or in part for a specified period after it is granted; provided,
however, that, (i) no Option granted to an Independent Director may be
exercised to any extent by anyone prior to the expiration of one year
from the date the Option is granted, subject to Section 10.3(e); and
(ii) unless the Committee otherwise provides in the terms of the Option
or otherwise, no Option shall be exercisable by any Optionee who is
then subject to Section 16 of the Exchange Act within the period ending
six (6) months and one day after the date the Option is granted. At
any time after grant of an Option, the Committee may, in its sole and
absolute discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option (except an Option
granted to an Independent Director) vests.
(b) No portion of an Option which is unexercisable at Termination
of Employment or Termination of Consultancy, as applicable, shall
thereafter become exercisable, except as may be otherwise provided by
the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the
Committee following the grant of the Option. Options granted to
Independent Directors shall continue to be exercisable after such
Independent Director's Termination of Directorship, PROVIDED, HOWEVER,
that no Option granted to an Independent Director may be exercised to
any extent by anyone after the expiration of one year from the date of
such Independent Director's Termination of Directorship.
(c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the
Code) are exercisable for the first time by an Optionee during any
calendar year (under the Plan and all other incentive stock option
plans of the Company and any Subsidiary) exceeds $100,000, such Options
shall be treated as Non-Qualified Options to the extent required by
Section 422 of the Code. The rule set forth in the preceding sentence
shall be applied by taking Options into account in the order in which
they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the Option
with respect to such stock is granted.
ARTICLE V
EXERCISE OF OPTIONS
5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with
respect to fractional shares and the Committee (or the Board, in the
case of Options granted to Independent Directors) may require that, by
the terms of the Option, a partial exercise be with respect to a
minimum number of shares.
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5.2 MANNER OF EXERCISE. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Committee (or the Board, in the case of Options
granted to Independent Directors) stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Optionee or
other person then entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its
absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933, as
amended, and any other federal or state securities laws or regulations.
The Committee or Board may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise
the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is
exercised. However, the Committee (or the Board, in the case of
Options granted to Independent Directors), may in its discretion (i)
allow a delay in payment up to thirty (30) days from the date the
Option, or portion thereof, is exercised; (ii) allow payment, in whole
or in part, through the delivery of shares of Common Stock owned by the
Optionee, duly endorsed for transfer to the Company with a Fair Market
Value on the date of delivery equal to the aggregate exercise price of
the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the
date of Option exercise equal to the aggregate exercise price of the
Option or exercised portion thereof; (iv) allow payment, in whole or in
part, through the delivery of property of any kind which constitutes
good and valuable consideration; (v) allow payment, in whole or in
part, through the delivery of a full recourse promissory note bearing
interest (at no less than such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms as
may be prescribed by the Committee or the Board; (vi) allow payment, in
whole or in part, through the delivery of a notice that the Optionee
has placed a market sell order with a broker with respect to shares of
Common Stock then issuable upon exercise of the Option, and that the
broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option
exercise price; or (vii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii), (iii),
(iv), (v) and (vi). In the case of a promissory note, the Committee
(or the Board, in the case of Options granted to Independent Directors)
may also prescribe the form of such note and the security to be given
for such note. The Option may not be exercised, however, by delivery
of a promissory note or by a loan from the Company when or where such
loan or other extension of credit is prohibited by law.
5.3 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company
shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any
Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
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(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in its
absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee (or Board, in
the case of Options granted to Independent Directors) shall, in its
absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of
Options granted to Independent Directors) may establish from time to
time for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
5.4 RIGHTS AS STOCKHOLDERS. The holders of Options shall not be,
nor have any of the rights or privileges of, stockholders of the
Company in respect of any shares purchasable upon the exercise of any
part of an Option unless and until certificates representing such
shares have been issued by the Company to such holders.
5.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee (or Board,
in the case of Options granted to Independent Directors), in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such restriction shall be set
forth in the respective Stock Option Agreement and may be referred to
on the certificates evidencing such shares. The Committee may require
the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock
Option within (i) two (2) years from the date of granting such Option
to such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Option refer to such
requirement to give prompt notice of disposition.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 AWARD OF RESTRICTED STOCK
(a) The Committee may from time to time, in its absolute
discretion:
(i) Select from among the key Employees or consultants
(including Employees or consultants who have previously received
other awards under this Plan) such of them as in its opinion
should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent
with this Plan.
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(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; PROVIDED, HOWEVER, that such
purchase price shall be no less than the par value of the Common Stock
to be purchased, unless otherwise permitted by applicable state law.
(c) Upon the selection of a key Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of
the Company to issue such Restricted Stock and may impose such
conditions on the issuance of such Restricted Stock as it deems
appropriate.
(d) The maximum number of shares which may be subject to awards of
Restricted Stock under the Plan shall not exceed one million,
five-hundred thousand (1,500,000) subject to adjustment pursuant to
Sections 2.2 and 10.3.
6.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be issued
only pursuant to a written Restricted Stock Agreement, which shall be
executed by the selected key Employee or consultant and an authorized
officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
6.3 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 6.7, the
Restricted Stockholder shall have, unless otherwise provided by the
Committee, all the rights of a stockholder with respect to said shares,
subject to the restrictions in his Restricted Stock Agreement,
including the right to receive all dividends and other distributions
paid or made with respect to the shares; PROVIDED, HOWEVER, that, in
the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set
forth in Section 6.5.
6.4 RESTRICTION. All shares of Restricted Stock issued under this
Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits
or any other form of recapitalization) shall, in the terms of each
individual Restricted Stock Agreement, be subject to such restrictions
as the Committee shall provide, which restrictions may include, without
limitation, restrictions concerning voting rights and transferability
and restrictions based on duration of employment with the Company,
Company performance and individual performance; PROVIDED, HOWEVER,
that, unless the Committee otherwise provides in the terms of the
Restricted Stock Agreement or otherwise, no share of Restricted Stock
granted to a person subject to Section 16 of the Exchange Act shall be
sold, assigned or otherwise transferred until at least six (6) months
and one day have elapsed from the date on which the Restricted Stock
was issued, and PROVIDED, FURTHER, that, by action taken after the
Restricted Stock is issued, the Committee may, on such terms and
conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Restricted Stock
Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. Unless provided otherwise by
the Committee, if no consideration was paid by the Restricted
Stockholder upon issuance, a Restricted Stockholder's rights in
unvested Restricted Stock shall lapse upon Termination of Employment
or, if applicable, upon Termination of Consultancy with the Company.
6.5 REPURCHASE OF RESTRICTED STOCK. The Committee shall provide
in the terms of each individual Restricted Stock Agreement that the
Company shall have the right to repurchase from the Restricted
Stockholder the Restricted Stock then subject to restrictions under the
Restricted Stock Agreement immediately upon a Termination of Employment
or, if applicable, upon a Termination of Consultancy between the
Restricted Stockholder and the Company, at a cash price per share equal
to the price paid by the Restricted Stockholder for such Restricted
Stock; PROVIDED, HOWEVER, that provision may be made that no such right
of repurchase shall exist in the event of a Termination of Employment
or
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Termination of Consultancy without cause, or following a Change in
Control of the Company or because of the Restricted Stockholder's
retirement, death or disability, or otherwise.
6.6 ESCROW. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of
each certificate representing Restricted Stock until all of the
restrictions imposed under the Restricted Stock Agreement with respect
to the shares evidenced by such certificate expire or shall have been
removed.
6.7 LEGEND. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a
legend or legends to be placed on certificates representing all shares
of Restricted Stock that are still subject to restrictions under
Restricted Stock Agreements, which legend or legends shall make
appropriate reference to the conditions imposed thereby.
6.8 PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant Restricted Stock awards to a Section 162(m)
Participant that vest upon the attainment of performance targets for
the Company which are related to one or more of the following
performance goals: (i) pre-tax income, (ii) operating income, (iii)
cash flow, (iv) earnings per share, (v) earnings before interest,
taxes, depreciation and amortization, (vi) return on equity, (vii)
return on invested capital or assets, (viii) cost reductions or savings
and (ix) the market price of a share of Common Stock.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with
respect to Restricted Stock which may be granted to one or more Section
162(m) Participants, no later than ninety (90) days following the
commencement of any fiscal year in question or any other designated
fiscal period (or such other time as may be required or permitted by
Section 162(m) of the Code), the Committee shall, in writing, (i)
designate one or more Section 162(m) Participants, (ii) select the
performance goal or goals applicable to the fiscal year or other
designated fiscal period, (iii) establish the various targets and bonus
amounts which may be earned for such fiscal year or other designated
fiscal period and (iv) specify the relationship between performance
goals and targets and the amounts to be earned by each Section 162(m)
Participant for such fiscal year or other designated fiscal period.
Following the completion of each fiscal year or other designated fiscal
period, the Committee shall certify in writing whether the applicable
performance targets have been achieved for such fiscal year or other
designated fiscal period. In determining the amount earned by a
Section 162(m) Participant, the Committee shall have the right to
reduce (but not to increase) the amount payable at a given level of
performance to take into account additional factors that the Committee
may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 PERFORMANCE AWARDS. Any key Employee or consultant selected
by the Committee may be granted one or more Performance Awards. The value of
such Performance Awards may be linked to the market value, book value, net
profits or other measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee, or may be based upon the appreciation in
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the market value, book value, net profits or other measure of the value of
a specified number of shares of Common Stock over a fixed period or periods
determined by the Committee. In making such determinations, the Committee shall
consider (among such other factors as it deems relevant in light of the specific
type of award) the contributions, responsibilities and other compensation of the
particular key Employee or consultant.
7.2 DIVIDEND EQUIVALENTS. Any key Employee or consultant selected
by the Committee may be granted Dividend Equivalents based on the
dividends declared on Common Stock, to be credited as of dividend
payment dates, during the period between the date an Option, Stock
Appreciation Right, Deferred Stock or Performance Award is granted, and
the date such Option, Stock Appreciation Right, Deferred Stock or
Performance Award is exercised, vests or expires, as determined by the
Committee. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.
With respect to Dividend Equivalents granted with respect to Options
intended to be qualified performance-based compensation for purposes of
Section 162(m) of the Code, such Dividend Equivalents shall be payable
regardless of whether such Option is exercised.
7.3 STOCK PAYMENTS. Any key Employee or consultant selected by
the Committee may receive Stock Payments in the manner determined from
time to time by the Committee. The number of shares shall be
determined by the Committee and may be based upon the Fair Market
Value, book value, net profits or other measure of the value of Common
Stock or other specific performance criteria determined appropriate by
the Committee, determined on the date such Stock Payment is made or on
any date thereafter.
7.4 DEFERRED STOCK. Any key Employee or consultant selected by
the Committee may be granted an award of Deferred Stock in the manner
determined from time to time by the Committee. The number of shares of
Deferred Stock shall be determined by the Committee and may be linked
to the market value, book value, net profits or other measure of the
value of Common Stock or other specific performance criteria determined
to be appropriate by the Committee, in each case on a specified date or
dates or over any period or periods determined by the Committee.
Common Stock underlying a Deferred Stock award will not be issued until
the Deferred Stock award has vested, pursuant to a vesting schedule or
performance criteria set by the Committee. Unless otherwise provided
by the Committee, a Grantee of Deferred Stock shall have no rights as a
Company stockholder with respect to such Deferred Stock until such time
as the award has vested and the Common Stock underlying the award has
been issued.
7.5 PERFORMANCE AWARD AGREEMENT, DIVIDEND EQUIVALENT AGREEMENT,
DEFERRED STOCK AGREEMENT, STOCK PAYMENT AGREEMENT. Each Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment shall be evidenced by a written agreement, which shall be
executed by the Grantee and an authorized Officer of the Company and
which shall contain such terms and conditions as the Committee shall
determine, consistent with this Plan.
7.6 TERM. The term of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment shall be set by the
Committee in its discretion.
7.7 EXERCISE UPON TERMINATION OF EMPLOYMENT. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
exercisable or payable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the
Performance Award, Dividend Equivalent, award of Deferred Stock and/or
Stock Payment may be exercised or paid
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subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company, or
because of the Grantee's retirement, death or disability, or otherwise.
7.8 PAYMENT ON EXERCISE. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under
this Article VII is effected in Common Stock, it shall be made subject
to satisfaction of all provisions of Section 5.3.
7.9 PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.
(a) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any performance or incentive awards described in
Article VII to a Section 162(m) Participant that vest or become
exercisable upon the attainment of performance targets for the Company
which are related to one or more of the following performance goals:
(i) pre-tax income, (ii) operating income, (iii) cash flow, (iv)
earnings per share, (v) earnings before interest, taxes, depreciation
and amortization, (vi) return on equity, (vii) return on invested
capital or assets, (viii) cost reductions or savings and (ix) the
market price of a share of Common Stock.
(b) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with
respect to performance or incentive awards described in Article VII
which may be granted to one or more Section 162(m) Participants, no
later than ninety (90) days following the commencement of any fiscal
year in question or any other designated fiscal period (or such other
time as may be required or permitted by Section 162(m) of the Code),
the Committee shall, in writing, (i) designate one or more Section
162(m) Participants, (ii) select the performance goal or goals
applicable to the fiscal year or other designated fiscal period, (iii)
establish the various targets and bonus amounts which may be earned for
such fiscal year or other designated fiscal period and (iv) specify the
relationship between performance goals and targets and the amounts to
be earned by each Section 162(m) Participant for such fiscal year or
other designated fiscal period. Following the completion of each
fiscal year or other designated fiscal period, the Committee shall
certify in writing whether the applicable performance targets have been
achieved for such fiscal year or other designated fiscal period. In
determining the amount earned by a Section 162(m) Participant, the
Committee shall have the right to reduce (but not to increase) the
amount payable at a given level of performance to take into account
additional factors that the Committee may deem relevant to the
assessment of individual or corporate performance for the fiscal year
or other designated fiscal period.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation
Right may be granted to any key Employee or consultant selected by the
Committee. A Stock Appreciation Right may be granted (i) in connection
and simultaneously with the grant of an Option, (ii) with respect to a
previously granted Option, or (iii) independent of an Option. A Stock
Appreciation Right shall be subject to such terms and conditions not
inconsistent with this Plan as the Committee shall impose and shall be
evidenced by a written Stock Appreciation Right Agreement, which shall
be executed by the Grantee and an authorized officer of the Company.
The Committee, in its discretion, may determine whether a Stock
Appreciation Right is to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code and Stock Appreciation
Right Agreements evidencing Stock Appreciation Rights intended to so
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qualify shall contain such terms and conditions as may be necessary to
meet the applicable provisions of Section 162(m) of the Code. Without
limiting the generality of the foregoing, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a
condition of the grant of a Stock Appreciation Right to an Employee or
consultant that the Employee or consultant surrender for cancellation
some or all of the unexercised Options, awards of Restricted Stock or
Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, or other rights which have been
previously granted to him under this Plan or otherwise. A Stock
Appreciation Right, the grant of which is conditioned upon such
surrender, may cover the same (or a lesser or greater) number of shares
as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares,
price, exercise period or any other term or condition of such
surrendered Option or other award.
8.2 COUPLED STOCK APPRECIATION RIGHTS
(a) A Coupled Stock Appreciation Right ("CSAR") shall be related
to a particular Option and shall be exercisable only when and to the
extent the related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted
Option to which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the
extent then exercisable pursuant to its terms) and to receive from the
Company in exchange therefor an amount determined by multiplying the
difference obtained by subtracting the Option exercise price from the
Fair Market Value of a share of Common Stock on the date of exercise of
the CSAR by the number of shares of Common Stock with respect to which
the CSAR shall have been exercised, subject to any limitations the
Committee may impose.
8.3 INDEPENDENT STOCK APPRECIATION RIGHTS
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An
ISAR shall be exercisable in such installments as the Committee may
determine. An ISAR shall cover such number of shares of Common Stock
as the Committee may determine; provided, however, that, unless the
Committee otherwise provides in the terms of the ISAR or otherwise, no
ISAR granted to a person subject to Section 16 of the Exchange Act
shall be exercisable until at least six (6) months have elapsed from
(but excluding) the date on which the Option was granted. The exercise
price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable only while the Grantee is an
Employee or consultant; provided that the Committee may determine that
the ISAR may be exercised subsequent to Termination of Employment or
Termination of Consultancy without cause, or following a change in
control of the Company, or because of the Grantee's retirement, death
or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its
terms) and to receive from the Company an amount determined by
multiplying the difference obtained by subtracting the exercise price
per share of the ISAR from the Fair Market Value of a share of Common
Stock on the date of exercise of the ISAR by the number of shares of
Common Stock with respect to which the ISAR shall have been exercised,
subject to any limitations the Committee may impose.
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8.4 PAYMENT AND LIMITATIONS ON EXERCISE
(a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is exercised)
or a combination of both, as determined by the Committee. To the
extent such payment is effected in Common Stock it shall be made
subject to satisfaction of all provisions of Section 5.3 above
pertaining to Options.
(b) Grantees of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the
settlement or exercise of a Stock Appreciation Right, including a
window-period limitation, as may be imposed in the discretion of the
Board or Committee.
ARTICLE IX
ADMINISTRATION
9.1 COMPENSATION COMMITTEE. The Compensation and Stock Option
Committee (or another committee of the Board assuming the functions of
the Committee under this Plan) shall consist solely of two (2) or more
Independent Directors appointed by and holding office at the pleasure
of the Board, each of whom is both a "non-employee director" as defined
by Rule 16b-3 and an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.
9.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in
accordance with its provisions. The Committee shall have the power to
interpret this Plan and the agreements pursuant to which Options,
awards of Restricted Stock or Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments are granted
or awarded, and to adopt such rules for the administration,
interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of
its members in office, shall conduct the general administration of the
Plan with respect to Options granted to Independent Directors. Any
such grant or award under this Plan need not be the same with respect
to each Optionee, Grantee or Restricted Stockholder. Any such
interpretations and rules with respect to Incentive Stock Options shall
be consistent with the provisions of Section 422 of the Code. In its
absolute discretion, the Board may at any time and from time to time
exercise any and all rights and duties of the Committee under this Plan
except with respect to matters which under Rule 16b-3 or Section 162(m)
of the Code, or any regulations or rules issued thereunder, are
required to be determined in the sole discretion of the Committee.
9.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee shall
act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed
by all members of the Committee.
9.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS.
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses
and liabilities which members of the Committee incur in connection with
the administration of this Plan shall be borne by the Company. The
Committee may, with the approval of the Board, employ attorneys,
consultants, accountants, appraisers, brokers, or other persons. The
Committee,
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the Company and the Company's officers and Directors shall be entitled
to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding
upon all Optionees, Grantees, Restricted Stockholders, the Company and
all other interested persons. No members of the Committee or Board
shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, Options,
awards of Restricted Stock or Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments, and all
members of the Committee and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 NOT TRANSFERABLE. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws
of descent and distribution or pursuant to a QDRO, unless and until
such rights or awards have been exercised, or the shares underlying
such rights or awards have been issued, and all restrictions applicable
to such shares have lapsed. No Option, Restricted Stock award,
Deferred Stock award, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment or interest or right therein shall
be liable for the debts, contracts or engagements of the Optionee,
Grantee or Restricted Stockholder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the extent
that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may
exercise an Option or other right or award (or any portion thereof)
granted to him under the Plan, unless it has been disposed of pursuant
to a QDRO. After the death of the Optionee or Grantee, any exercisable
portion of an Option or other right or award may, prior to the time
when such portion becomes unexercisable under the Plan or the
applicable Stock Option Agreement or other agreement, be exercised by
his personal representative or by any person empowered to do so under
the deceased Optionee's or Grantee's will or under the then applicable
laws of descent and distribution.
10.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except as
otherwise provided in this Section 10.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any
time or from time to time by the Board or the Committee. However,
without approval of the Company's stockholders given within twelve (12)
months before or after the action by the Board or the Committee, no
action of the Board or the Committee may, except as provided in Section
10.3, increase the limits imposed in Section 2.1 on the maximum number
of shares which may be issued under this Plan or modify the Award Limit
(subject to adjustment pursuant to Section 10.3), and no action of the
Board or the Committee may be taken that would otherwise require
stockholder approval as a matter of applicable law, regulation or rule.
No amendment, suspension or termination of this Plan shall, without
the consent of the holder of Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, alter or impair any rights or
obligations under any Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments theretofore granted or awarded, unless
the award itself otherwise expressly so provides. No Options,
Restricted Stock, Deferred
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Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event
may any Incentive Stock Option be granted under this Plan after the
first to occur of the following events:
(a) The expiration of ten (10) years from the date the Plan is
adopted by the Board;
or
(b) The expiration of ten (10) years from the date the Plan is
approved by the Company's stockholders under Section 10.4.
10.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, Acquisition
or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 10.3(d), in the event that the Committee
(or the Board, in the case of Options granted to Independent Directors)
determines that any (i) dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or (ii) sale, transfer, exchange
or other disposition of all or substantially all of the assets of the
Company (including, but not limited to, a Corporate Transaction), or
(iii) exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or (iv) other similar corporate transaction
or event affects the benefits or potential benefits intended to be made
available under the Plan or with respect to an Option, Restricted Stock
award, Performance Award, Stock Appreciation Right, Dividend
Equivalent, Deferred Stock award or Stock Payment, then the Committee
(or the Board, in the case of Options granted to Independent Directors)
shall adjust such Option, Restricted Stock award, Performance Award,
Stock Appreciation Right, Dividend Equivalent, Deferred Stock award or
Stock Payment in order to prevent the dilution or enlargement of their
benefits or potential benefits in an equitable manner, including by
adjusting any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments may be granted under the Plan, or which may be granted as
Restricted Stock or Deferred Stock (including, but not limited to,
adjustments of the limitations in Section 2.1 on the maximum
number and kind of shares which may be issued and adjustments of
the Award Limit (subject to adjustment pursuant to Section 10.3)),
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, or Stock Payments, and in the number and kind of
shares of outstanding Restricted Stock or Deferred Stock, and
(iii) the grant or exercise price with respect to any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent
or Stock Payment.
(b) Subject to Sections 10.3(b)(vii) and 10.3(d), in the event of
any Corporate Transaction or other transaction or event described in
Section 10.3(a) or any unusual or nonrecurring transactions or events
affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable
laws, regulations, or accounting principles, the
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Committee (or the Board, in the case of Options granted to Independent
Directors) shall take any one or more of the following actions whenever
the Committee (or the Board, in the case of Options granted to
Independent Directors) determines that such action is appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with respect
to any option, right or other award under this Plan, to facilitate such
transactions or events or to give effect to such changes in laws,
regulations or principles:
(i) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the
Board, in the case of Options granted to Independent Directors)
may provide, either by the terms of the agreement or by action
taken prior to the occurrence of such transaction or event and
either automatically or upon the optionee's request, for either
the purchase of any such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or any
Restricted Stock or Deferred Stock for an amount of cash equal to
the amount that could have been attained upon the exercise of such
option, right or award or realization of the optionee's rights had
such option, right or award been currently exercisable or payable
or fully vested or the replacement of such option, right or award
with other rights or property selected by the Committee (or the
Board, in the case of Options granted to Independent Directors) in
its sole discretion;
(ii) In its sole and absolute discretion, the Committee (or
the Board, in the case of Options granted to Independent
Directors) may provide, either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent,
or Stock Payment, or Restricted Stock or Deferred Stock or by
action taken prior to the occurrence of such transaction or event
that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the
Board, in the case of Options granted to Independent Directors)
may provide, either by the terms of such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock or by action taken
prior to the occurrence of such transaction or event, that, for a
specified period of time prior to such transaction or event, such
option, right or award shall be exercisable as to all shares
covered thereby, notwithstanding anything to the contrary in (i)
Section 4.4 or (ii) the provisions of such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock;
(iv) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the
Board, in the case of Options granted to Independent Directors)
may provide, either by the terms of such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock or by action taken
prior to the occurrence of such transaction or event, that, upon
such event, such option, right or award be assumed by the
successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor
corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and
(v) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the
Board, in the case of Options granted to Independent Directors)
may make adjustments in the number and type of shares of Common
Stock (or other
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securities or property) subject to outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, or Stock Payments, and in the number and kind of
outstanding Restricted Stock or Deferred Stock and/or in the terms
and conditions of (including the grant or exercise price), and the
criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future.
(vi) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee may provide
either by the terms of a Restricted Stock award or Deferred Stock
award or by action taken prior to the occurrence of such event
that, for a specified period of time prior to such event, the
restrictions imposed under a Restricted Stock Agreement or a
Deferred Stock Agreement upon some or all shares of Restricted
Stock or Deferred Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted Stock may
cease to be subject to repurchase under Section 6.6 or forfeiture
under Section 6.5 after such event.
(vii) None of the foregoing discretionary actions taken
under this Section 10.3(b) shall be permitted with respect to
Options granted under Section 3.4(d) to Independent Directors to
the extent that such discretion would be inconsistent with the
applicable exemptive conditions of Rule 16b-3. In the event of a
Change in Control or a Corporate Transaction, to the extent that
the Board does not have the ability under Rule 16b-3 to take or to
refrain from taking the discretionary actions set forth in Section
10.3(b)(iii) above, each Option granted to an Independent Director
shall be exercisable as to all shares covered thereby upon such
Change in Control or during the five (5) days immediately
preceding the consummation of such Corporate Transaction and
subject to such consummation, notwithstanding anything to the
contrary in Section 4.4 or the vesting schedule of such Options.
In the event of a Corporate Transaction, to the extent that the
Board does not have the ability under Rule 16b-3 to take or to
refrain from taking the discretionary actions set forth in Section
10.3(b)(ii) above, no Option granted to an Independent Director
may be exercised following such Corporate Transaction unless such
Option is, in connection with such Corporate Transaction, either
assumed by the successor or survivor corporation (or parent or
subsidiary thereof) or replaced with a comparable right with
respect to shares of the capital stock of the successor or
survivor corporation (or parent or subsidiary thereof).
(c) Subject to Section 10.3(d) and 10.8, the Committee (or the
Board, in the case of Options granted to Independent Directors) may, in
its discretion, include such further provisions and limitations in any
Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock
agreement or certificate, as it may deem equitable and in the best
interests of the Company.
(d) With respect to Options, Stock Appreciation Rights and
performance or incentive awards described in Article VII which are
granted to Section 162(m) Participants and are intended to qualify as
performance-based compensation under Section 162(m)(4)(C), no
adjustment or action described in this Section 10.3 or in any other
provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1)
of the Code or would cause such option or stock appreciation right to
fail to so qualify under Section 162(m)(4)(C), as the case may be, or
any successor provisions thereto. Furthermore, no such adjustment or
action shall be authorized to the extent such adjustment or action
would result in short-swing profits liability under Section 16 or
violate the exemptive conditions of Rule 16b-3 unless the Committee (or
the Board, in the case of Options granted to Independent Directors)
determines that the option or other award is not to comply with such
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exemptive conditions. The number of shares of Common Stock subject to
any option, right or award shall always be rounded to the next whole
number.
(e) Notwithstanding anything to the contrary in this Plan, in the
event of a Change in Control, each outstanding Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, Stock Payment,
Restricted Stock, or Deferred Stock award shall, immediately prior to
the effective date of the Change in Control, automatically become fully
exercisable for all of the shares of Common Stock at the time subject
to such rights or fully vested, as applicable, and may be exercised for
any or all of those shares as fully-vested shares of Common Stock.
10.4 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be
submitted for the approval of the Company's stockholders within twelve
(12) months after the date of the Board's initial adoption of this
Plan. Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments may be granted and Restricted Stock or
Deferred Stock may be awarded prior to such stockholder approval,
provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable
and such Restricted Stock or Deferred Stock shall not vest prior to the
time when this Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said
twelve (12) month period, all Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments previously
granted and all Restricted Stock or Deferred Stock previously awarded
under this Plan shall thereupon be canceled and become null and void.
10.5 TAX WITHHOLDING. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each
Optionee, Grantee or Restricted Stockholder of any sums required by
federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option, Restricted Stock, Deferred
Stock, Performance Award, Stock Appreciation Right, Dividend Equivalent
or Stock Payment. The Committee (or the Board, in the case of Options
granted to Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee, Grantee
or Restricted Stockholder to elect to have the Company withhold shares
of Common Stock otherwise issuable under such Option or other award (or
allow the return of shares of Common Stock) having a Fair Market Value
equal to the sums required to be withheld. If the Optionee is either
at the date of grant or exercise a Ten Percent Beneficial Owner,
director or Section 16 Officer of the Company, any such election
further shall be subject to the conditions applicable to cash
settlements of Common Stock to satisfy the tax withholding consequences
related to exercise of Options set forth in Rule 16b-3 under the
Exchange Act. Where the exercise of an Option does not give rise to an
obligation to withhold federal, state or local income or other taxes on
the date of exercise, the Company may, in its discretion, require an
Optionee to place shares of Common Stock purchased under the Option in
escrow for the benefit of the Company until such time as federal, state
or local income or other tax withholding is required on amounts
included in the gross income of the Optionee as a result of the
exercise of an Option or the disposition of shares of Common Stock
acquired pursuant thereto. At such time, the Company, in its
discretion, may require an Optionee to pay to the Company the amount
that the Company deems necessary to satisfy its obligation to withhold
federal, state or local income or other taxes incurred by reason of the
exercise of the Option or the disposition of shares of Common Stock, in
which case the shares of Common Stock will be released from escrow to
the Optionee. Alternatively, subject to acceptance by the Committee,
in its sole discretion, an Optionee may make a written election to have
shares of Common Stock held in escrow applied toward the Company's
obligation to withhold federal, state or local income or other taxes
incurred by reason of the exercise of the Option or the disposition of
shares of Common Stock, based on the Fair Market Value of the shares on
the date of the termination of the escrow arrangement. Upon
22
<PAGE> 23
application of such shares toward the Company's withholding obligation,
any shares of Common Stock held in escrow and not, in the judgment of
the Committee, necessary to satisfy such obligation shall be released
from escrow to the Optionee.
10.6 LOANS. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or receipt
of an Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment granted under this Plan, or the issuance of
Restricted Stock or Deferred Stock awarded under this Plan. The terms
and conditions of any such loan shall be set by the Committee.
10.7 FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan,
the Committee (or the Board, in the case of Options granted to
Independent Directors) shall have the right (to the extent consistent
with the applicable exemptive conditions of Rule 16b-3) to provide, in
the terms of Options or other awards made under the Plan, or to require
the recipient to agree by separate written instrument, that, (i) any
proceeds, gains or other economic benefit actually or constructively
received by the recipient upon any receipt or exercise of the award, or
upon the receipt or resale of any Common Stock underlying such award,
must be paid to the Company, and (ii) the award shall terminate and any
unexercised portion of such award (whether or not vested) shall be
forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified
date, or within a specified time period following receipt or exercise
of the award, or (b) the recipient at any time, or during a specified
time period, engages in any activity in competition with the Company,
or which is inimical, contrary or harmful to the interests of the
Company, as further defined by the Committee (or the Board, as
applicable).
10.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of
this Plan, this Plan, and any Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment granted, or
Restricted Stock or Deferred Stock awarded, to any individual who is
then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3
of the Exchange Act) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan,
Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, Stock Payments, Restricted Stock and Deferred Stock
granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option, Stock
Appreciation Right or performance or incentive award described in
Article VII which is granted to a Section 162(m) Participant and is
intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of
the Code, and this Plan shall be deemed amended to the extent necessary
to conform to such requirements.
10.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing
in this Plan shall be construed to limit the right of the Company (i)
to establish any other forms of incentives or compensation for
Employees, Directors or Consultants of the Company or any Subsidiary or
(ii) to grant or assume options or other rights otherwise than under
this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of
23
<PAGE> 24
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or
association.
10.10 COMPLIANCE WITH LAWS. This Plan, the granting and vesting
of Options, Restricted Stock awards, Deferred Stock awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments under this Plan and the issuance and delivery of shares of
Common Stock and the payment of money under this Plan or under Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments granted or Restricted Stock or Deferred Stock awarded
hereunder are subject to compliance with all applicable federal and
state laws, rules and regulations (including but not limited to state
and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall
be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances
and representations to the Company as the Company may deem necessary or
desirable to assure compliance with all applicable legal requirements.
To the extent permitted by applicable law, the Plan, Options,
Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments
granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
10.11 TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this
Plan.
10.12 GOVERNING LAW. This Plan and any agreements hereunder shall
be administered, interpreted and enforced under the internal laws of
the State of Texas without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of La Quinta Inns, Inc. on February 26, 1997.
Executed on this 1st day of August, 1997.
/s/ JOHN F. SCHMUTZ
--------------------------
John F. Schmutz, Secretary
24
<PAGE> 1
EXHIBIT 10(e)
FIRST AMENDMENT TO
THE 1997 EQUITY PARTICIPATION PLAN
OF
LA QUINTA INNS, INC.
WHEREAS, La Quinta Inns, Inc. (hereinafter the "Company"), a Texas
corporation, maintains The 1997 Equity Participation Plan of La Quinta Inns,
Inc., effective as of May 22, 1997 (hereinafter the "Plan"); and
WHEREAS, pursuant to Section 10.2 of the Plan, the Board of Directors of
the Company (hereinafter the "Board") may amend the Plan from time to time.
NOW THEREFORE, BE IT RESOLVED, that the Plan be amended as follows
effective May 22, 1997:
1. Section 4.4(b) shall be amended and restated in its entirety as
follows:
No portion of an Option which is unexercisable at Termination of
Employment, Termination of Consultancy or Termination of Directorship, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee (or the Board, in the case of Options granted to
Independent Directors) either in the Stock Option Agreement or by action of the
Committee (or the Board, in the case of Options granted to Independent
Directors) following the grant of the Option, PROVIDED, HOWEVER, that no Option
granted to an Independent Director may be exercised to any extent by anyone
after the expiration of three (3) years from the date of such Independent
Director's Termination of Directorship.
* * *
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of La Quinta Inns, Inc. on May 22, 1997.
Executed on this 1st day of August, 1997.
/s/ JOHN F. SCHMUTZ
---------------------------------------
John F. Schmutz, Secretary
<PAGE> 1
EXHIBIT 10(f)
SECOND AMENDMENT TO
THE 1997 EQUITY PARTICIPATION PLAN
OF
LA QUINTA INNS, INC.
WHEREAS, La Quinta Inns, Inc. (hereinafter the "Company"), a Texas
corporation, maintains The 1997 Equity Participation Plan of La Quinta Inns,
Inc., effective as of May 22, 1997 (hereinafter the "Plan"); and
WHEREAS, pursuant to Section 10.2 of the Plan, the Board of Directors of
the Company (hereinafter the "Board") may amend the Plan from time to time.
NOW THEREFORE, BE IT RESOLVED, that the Plan be amended as follows
effective May 22, 1997:
1. Section 6.1(d) is hereby deleted in its entirety.
2. Section 2.1(a) is hereby amended and restated in its entirety as
follows:
(a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock,
Stock Payments or Stock Appreciation Rights shall be Common Stock, initially
shares of the Company's Common Stock, par value $0.10 per share. The aggregate
number of such shares which may be issued upon exercise of such options or
rights or upon any such awards under the Plan shall not exceed four million
(4,000,000) plus the remaining shares available pursuant to the Company's
Amended and Restated 1984 Stock Option Plan; PROVIDED, HOWEVER, that the
maximum number of shares which may be subject to awards of Restricted Stock,
Performance Awards and Stock Payments under the Plan shall not exceed one
million (1,000,000) in the aggregate. The shares of Common Stock issuable upon
exercise of such options or rights or upon any such awards may be either
previously authorized but unissued shares or treasury shares.
* * *
I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of La Quinta Inns, Inc. on May 22, 1997.
Executed on this 1st day of August, 1997.
/s/ JOHN F. SCHMUTZ
---------------------------------------
John F. Schmutz, Secretary
<PAGE> 1
EXHIBIT 12
LA QUINTA INNS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
Six Months
Ended June 30 Years Ended December 31
---------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income
taxes, extraordinary items
and cumulative effect of
accounting change (1) ........... $ 67,118 $ 49,245 $ 96,379 $ 82,994 $ 61,991 $ 31,836 $ (7,270)
Partners' equity in earnings ....... 476 928 1,499 10,227 11,406 12,965 15,081
Partners' equity in earnings
of combined unincorporated
ventures that do not have
fixed charges ................... -- (563) (770) (1,854) (1,577) (1,652) (1,504)
Fixed charges ...................... 28,962 23,469 48,983 42,797 40,814 32,477 34,270
Interest capitalized ............... (4,033) (2,227) (5,429) (1,313) (889) -- (50)
Amortization of capitalized
interest ........................ 491 422 893 803 772 799 799
--------- --------- --------- --------- --------- --------- ---------
Earnings as adjusted ........... $ 93,014 $ 71,274 $ 141,555 $ 133,654 $ 112,517 $ 76,425 $ 41,326
========= ========= ========= ========= ========= ========= =========
Fixed charges:
Interest on long-term debt
(before capitalized
interest) ..................... $ 28,359 $ 22,951 $ 47,897 $ 41,734 $ 39,749 $ 31,366 $ 33,137
Portion of rental expense
allocated to interest ......... 603 518 1,086 1,063 1,065 1,111 1,133
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges .......... $ 28,962 $ 23,469 $ 48,983 $ 42,797 $ 40,814 $ 32,477 $ 34,270
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to fixed
charges ......................... 3.2x 3.0x 2.9x 3.1x 2.8x 2.4x 1.2x
========= ========= ========= ========= ========= ========= =========
</TABLE>
(1) The Six Months Ended June 30, 1996 and Years Ended December 31, 1996 and
1995, include a non-cash provision for premature retirement of assets
totaling $9,062, $18,076 and $12,630, respectively.
<PAGE> 1
EXHIBIT 15
La Quinta Inns, Inc.
San Antonio, Texas
Gentlemen:
Re: Registration Statements Nos. 33-26470, 2-97266, 2-67606, 33-55102,
33-58866 and 333-00309.
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated August 1, 1997, related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
KPMG Peat Marwick LLP
San Antonio, Texas
August 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,421
<SECURITIES> 0
<RECEIVABLES> 25,541
<ALLOWANCES> 1,186
<INVENTORY> 0
<CURRENT-ASSETS> 49,652
<PP&E> 1,598,551
<DEPRECIATION> 310,012
<TOTAL-ASSETS> 1,350,510
<CURRENT-LIABILITIES> 108,101
<BONDS> 797,561
0
0
<COMMON> 8,454
<OTHER-SE> 398,793
<TOTAL-LIABILITY-AND-EQUITY> 1,350,510
<SALES> 0
<TOTAL-REVENUES> 249,019
<CGS> 0
<TOTAL-COSTS> 119,819
<OTHER-EXPENSES> 28,479
<LOSS-PROVISION> (21)
<INTEREST-EXPENSE> 23,940
<INCOME-PRETAX> 67,118
<INCOME-TAX> 24,834
<INCOME-CONTINUING> 42,284
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,284
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
