<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Starwood Lodging Trust
Starwood Lodging Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
[STARWOOD LODGING TRUST LOGO]
November 25, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Starwood Lodging Trust scheduled to be held on Monday, December 30, 1996 at
10:00 A.M., local time, at the Westin Atlanta North Perimeter (known as the
Doubletree Hotel at Concourse until December 16, 1996), 7 Concourse Parkway,
Atlanta, Georgia. Your Board of Trustees and management look forward to greeting
personally those shareholders able to attend.
At the meeting, shareholders will be asked to elect two Trustees to the
Board of Trustees of the Trust and to consider and act upon a proposal to
approve the amendment and restatement of the 1995 Share Option Plan of the
Trust. Information regarding these matters is set forth in the accompanying
Notice of 1996 Annual Meeting of Shareholders and Joint Proxy Statement to which
you are urged to give your prompt attention.
It is important that your shares be represented and voted at the meeting.
Whether or not you plan to attend, please take a moment to sign, date and
promptly mail your proxy in the enclosed prepaid envelope. This will not limit
your right to vote in person should you wish to attend the meeting.
On behalf of your Board of Trustees, thank you for your continued support
and interest in Starwood Lodging.
Sincerely,
BARRY S. STERNLICHT
---------------------------
Barry S. Sternlicht
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
[STARWOOD LODGING CORPORATION LOGO]
November 25, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Starwood Lodging Corporation scheduled to be held on Monday, December 30, 1996
at 10:30 A.M., local time, at the Westin Atlanta North Perimeter (known as the
Doubletree Hotel at Concourse until December 16, 1996), 7 Concourse Parkway,
Atlanta, Georgia. Your Board of Directors and management look forward to
greeting personally those stockholders able to attend.
At the meeting, stockholders will be asked to elect three Directors to the
Board of Directors of the Corporation and to consider and act upon a proposal to
approve the amendment and restatement of the 1995 Share Option Plan of the
Corporation. Information regarding these matters is set forth in the
accompanying Notice of 1996 Annual Meeting of Stockholders and Joint Proxy
Statement to which you are urged to give your prompt attention.
It is important that your shares be represented and voted at the meeting.
Whether or not you plan to attend, please take a moment to sign, date and
promptly mail your proxy in the enclosed prepaid envelope. This will not limit
your right to vote in person should you wish to attend the meeting.
On behalf of your Board of Directors, thank you for your continued support
and interest in Starwood Lodging.
Sincerely,
ERIC A. DANZIGER
--------------------------------
Eric A. Danziger
President and
Chief Executive Officer
<PAGE> 4
[LOGO]
STARWOOD LODGING TRUST
------------------------
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Starwood Lodging Trust:
Notice is hereby given that the 1996 Annual Meeting of Shareholders of
Starwood Lodging Trust, a Maryland real estate investment trust (the "Trust"),
will be held at the Westin Atlanta North Perimeter (known as the Doubletree
Hotel at Concourse until December 16, 1996), 7 Concourse Parkway, Atlanta,
Georgia, on December 30, 1996 at 10:00 A.M., local time, for the following
purposes:
1. To elect two Trustees to the Board of Trustees of the Trust.
2. To consider and vote upon the approval of the amendment and
restatement of the 1995 Share Option Plan of the Trust.
3. To transact such other business as may properly come before the
meeting.
Only holders of record of Trust Shares at the close of business on November
21, 1996 are entitled to receive notice of, and to vote at, the 1996 Annual
Meeting or at any adjournment or postponement thereof.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE URGED TO READ THE
ACCOMPANYING JOINT PROXY STATEMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, AND YOUR PROMPTNESS
WILL ASSIST US IN AVOIDING ADDITIONAL SOLICITATION COSTS. IF YOU RECEIVE MORE
THAN ONE PROXY CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR AT
DIFFERENT ADDRESSES, EACH CARD SHOULD BE SIGNED AND RETURNED.
By Order of the Board of Trustees
SHERWIN L. SAMUELS
---------------------------------
Sherwin L. Samuels
Secretary
November 25, 1996
Phoenix, Arizona
<PAGE> 5
[LOGO]
STARWOOD LODGING CORPORATION
------------------------
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Starwood Lodging Corporation:
Notice is hereby given that the 1996 Annual Meeting of Stockholders of
Starwood Lodging Corporation, a Maryland corporation (the "Corporation"), will
be held at the Westin Atlanta North Perimeter (known as the Doubletree Hotel at
Concourse until December 16, 1996), 7 Concourse Parkway, Atlanta, Georgia, on
December 30, 1996 at 10:30 A.M., local time, for the following purposes:
1. To elect three directors to the Board of Directors of the
Corporation.
2. To consider and vote upon the approval of the amendment and
restatement of the 1995 Share Option Plan of the Corporation.
3. To transact such other business as may properly come before the
meeting.
Only holders of record of Corporation Shares at the close of business on
November 21, 1996 are entitled to receive notice of, and to vote at, the 1996
Annual Meeting or at any adjournment or postponement thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE URGED TO READ THE
ACCOMPANYING JOINT PROXY STATEMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, AND YOUR PROMPTNESS
WILL ASSIST US IN AVOIDING ADDITIONAL SOLICITATION COSTS. IF YOU RECEIVE MORE
THAN ONE PROXY CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT NAMES OR AT
DIFFERENT ADDRESSES, EACH CARD SHOULD BE SIGNED AND RETURNED.
By Order of the Board of Directors
NIR E. MARGALIT
----------------------
Nir E. Margalit
Secretary
November 25, 1996
Phoenix, Arizona
<PAGE> 6
<TABLE>
<S> <C>
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
2231 E. CAMELBACK ROAD 2231 E. CAMELBACK ROAD
SUITE 410 SUITE 400
PHOENIX, ARIZONA 85016 PHOENIX, ARIZONA 85016
</TABLE>
------------------------------
JOINT PROXY STATEMENT
------------------------------
ANNUAL MEETINGS OF SHAREHOLDERS AND STOCKHOLDERS
TO BE HELD ON DECEMBER 30, 1996
This Joint Proxy Statement is being furnished to shareholders of Starwood
Lodging Trust, a Maryland real estate investment trust (the "Trust"), and
stockholders of Starwood Lodging Corporation, a Maryland corporation (the
"Corporation" and together with the Trust, "Starwood Lodging"), in connection
with the solicitation of proxies by the Trust's Board of Trustees (the "Board of
Trustees") and the Corporation's Board of Directors (the "Board of Directors")
for use at the Trust's 1996 Annual Meeting of Shareholders and at any and all
adjournments or postponements thereof (the "Trust Meeting") and the
Corporation's 1996 Annual Meeting of Stockholders and at any and all
adjournments or postponements thereof (the "Corporation Meeting" and, together
with the Trust Meeting, the "Annual Meetings"), respectively, to be held on
December 30, 1996, at the times and place and for the purposes specified in the
accompanying Notices.
The shares of Beneficial Interest, par value $.01 per share, of the Trust
("Trust Shares") and the shares of Common Stock, par value $.01 per share, of
the Corporation ("Corporation Shares") are "paired" and may only be held and
transferred in units consisting of one Trust Share and one Corporation Share (a
"Paired Share").
This Joint Proxy Statement and the related form of proxy are first being
mailed to shareholders of the Trust and stockholders of the Corporation on or
about November 25, 1996.
THE DATE OF THIS JOINT PROXY STATEMENT IS NOVEMBER 25, 1996.
1
<PAGE> 7
INTRODUCTION AND VOTING RIGHTS
MATTERS TO BE CONSIDERED
The Trust Meeting. At the Trust Meeting, the shareholders of the Trust will
consider and vote upon (i) the election of two Trustees to the Board of
Trustees, (ii) the approval of the amendment and restatement of the 1995 Share
Option Plan of the Trust as the Starwood Lodging Trust 1995 Long Term Incentive
Plan (as so amended and restated, the "Trust LTIP") and (iii) such other
business as may properly come before the Trust Meeting.
The Board of Trustees is not aware of any matter that will be presented at
the Trust Meeting other than as described above. If any other matter is
presented at the Trust Meeting, the persons named as proxies on the enclosed
proxy card will, in the absence of shareholder instructions to the contrary,
vote the Trust Shares for which such persons have voting authority in accordance
with their best judgment on such matter.
The Corporation Meeting. At the Corporation Meeting, the stockholders of
the Corporation will consider and vote upon (i) the election of three Directors
to the Board of Directors, (ii) the approval of the amendment and restatement of
the 1995 Share Option Plan of the Corporation as the Starwood Lodging
Corporation 1995 Long Term Incentive Plan (as so amended and restated, the
"Corporation LTIP" and, together with the Trust LTIP, the "LTIPs") and (iii)
such other business as may properly come before the Corporation Meeting.
The Board of Directors is not aware of any matter that will be presented at
the Corporation Meeting other than as described above. If any other matter is
presented at the Corporation Meeting, the persons named as proxies on the
enclosed proxy card will, in the absence of stockholder instructions to the
contrary, vote the Corporation Shares for which such persons have voting
authority in accordance with their best judgment on such matter.
VOTING RIGHTS
The Trust. The Board of Trustees has fixed the close of business on
November 21, 1996 as the record date (the "Trust Record Date") for determining
the shareholders entitled to notice of, and to vote at, the Trust Meeting. On
the Trust Record Date there were outstanding and entitled to vote 26,681,578
Trust Shares held of record by approximately 2,350 persons (does not include
5,964,000 outstanding limited partnership Units of SLT Realty Limited
Partnership, which together with an equivalent number of outstanding limited
partnership Units (as hereinafter defined) of SLC Operating Limited Partnership,
are exchangeable for Paired Shares of the Trust and the Corporation.) The Trust
Shares are the only outstanding class of voting securities of the Trust, and
each shareholder of the Trust will be entitled to one vote for each Trust Share
held of record by such shareholder on the Trust Record Date on each matter that
may be properly submitted to a vote at the Trust Meeting. Shareholders of the
Trust do not have the right to cumulate votes in the election of Trustees.
A majority of the outstanding Trust Shares entitled to vote must be
present, either in person or by duly executed proxy, at the Trust Meeting in
order to constitute a quorum for the transaction of business. Abstentions and
broker non-votes are counted for purposes of determining the presence or absence
of a quorum at the Trust Meeting.
As of the Trust Record Date, Trustees and officers of the Trust as a group
had the right to vote an aggregate of 96,964 Trust Shares. All such Trustees and
officers have indicated that they intend to vote all such shares held by them in
favor of the election of the nominees for Trustee named herein and the approval
of the Trust LTIP.
The Corporation. The Board of Directors has fixed the close of business on
November 21, 1996 as the record date (the "Corporation Record Date") for
determining the stockholders entitled to notice of, and to vote at, the
Corporation Meeting. On the Corporation Record Date there were outstanding and
entitled to vote 26,681,578 Corporation Shares held of record by approximately
2,350 persons (does not include 5,964,000 outstanding limited partnership Units
of SLC Operating Limited Partnership, which together with an
2
<PAGE> 8
equivalent number of outstanding limited partnership Units of SLT Realty Limited
Partnership, are exchangeable for Paired Shares of the Trust and the
Corporation.) The Corporation Shares are the only outstanding class of voting
securities of the Corporation, and each stockholder of the Corporation will be
entitled to one vote for each Corporation Share held of record by such
stockholder on the Corporation Record Date on each matter that may be properly
submitted to a vote at the Corporation Meeting. Stockholders of the Corporation
do not have the right to cumulate votes in the election of Directors.
A majority of the outstanding Corporation Shares entitled to vote must be
present, either in person or by duly executed proxy, at the Corporation Meeting
in order to constitute a quorum for the transaction of business. Abstentions and
broker non-votes are counted for purposes of determining the presence or absence
of a quorum at the Corporation Meeting.
As of the Corporation Record Date, Directors and officers of the
Corporation as a group had the right to vote an aggregate of 88,773 Corporation
Shares. All such Directors and officers have indicated that they intend to vote
all such shares held by them in favor of the election of the nominees for
Director named herein and the approval of the Corporation LTIP.
PROXIES
The Trust. Each Trust Share represented at the Trust Meeting by a duly
executed proxy solicited by the Board of Trustees will, unless such proxy
previously has been revoked, be voted at the Trust Meeting in accordance with
the shareholder instructions specified thereon. If no instructions are
specified, such Trust Shares will be voted FOR the election of the nominees for
Trustee named herein and FOR the approval of the Trust LTIP.
If a quorum is not present at the time the Trust Meeting is convened, or if
for any other reason the Board of Trustees believes that the Trust Meeting
should be adjourned or postponed, the Trust Meeting may be adjourned or
postponed with or without a vote of the shareholders. If the Board of Trustees
proposes to adjourn or postpone the Trust Meeting by a vote of the shareholders,
the persons named as proxies on the enclosed proxy card will vote all Trust
Shares for which such persons have voting authority in favor of such adjournment
or postponement.
A shareholder of the Trust may revoke a proxy at any time prior to exercise
of such proxy by (i) filing with the Secretary of the Trust an instrument of
revocation bearing a date later than the date of the proxy, (ii) duly executing
a subsequent proxy relating to the same Trust Shares and delivering such proxy
to the Secretary of the Trust, or (iii) attending the Trust Meeting and voting
in person (although attendance at the Trust Meeting will not in and of itself
constitute a revocation of a proxy). Any instrument of revocation should be sent
to Starwood Lodging Trust, 2231 E. Camelback Road, Suite 410, Phoenix, Arizona
85016, Attention: Ronald C. Brown.
The Corporation. Each Corporation Share represented at the Corporation
Meeting by a duly executed proxy solicited by the Board of Directors will,
unless such proxy previously has been revoked, be voted at the Corporation
Meeting in accordance with the stockholder instructions specified thereon. If no
instructions are specified, such Corporation Shares will be voted FOR the
election of the nominees for Director named herein, and FOR the approval of the
Corporation LTIP.
If a quorum is not present at the time the Corporation Meeting is convened,
or if for any other reason the Board of Directors believes that the Corporation
Meeting should be adjourned or postponed, the Corporation Meeting may be
adjourned or postponed with or without a vote of the stockholders. If the Board
of Directors proposes to adjourn or postpone the Corporation Meeting by a vote
of the stockholders, the persons named as proxies on the enclosed proxy card
will vote all Corporation Shares for which those persons have voting authority
in favor of such adjournment or postponement.
A stockholder of the Corporation may revoke a proxy at any time prior to
exercise of such proxy by (i) filing with the Secretary of the Corporation an
instrument of revocation bearing a date later than the date of the proxy, (ii)
duly executing a subsequent proxy relating to the same Corporation Shares and
delivering such proxy to the Secretary of the Corporation, or (iii) attending
the Corporation Meeting and voting in
3
<PAGE> 9
person (although attendance at the Corporation Meeting will not in and of itself
constitute a revocation of a proxy). Any instrument of revocation should be sent
to: Starwood Lodging Corporation, 2231 E. Camelback Road, Suite 400, Phoenix,
Arizona 85016, Attention: Nir E. Margalit.
SOLICITATION OF PROXIES
The expenses of this solicitation of proxies by the Board of Trustees and
the Board of Directors, including the costs of preparing and mailing this Joint
Proxy Statement, will be borne by the Trust and the Corporation. In addition to
solicitation by use of the mails, proxies may be solicited in person or by
telephone, telegram or other appropriate means of communication by Trustees,
Directors, officers and employees of the Trust or the Corporation. Such
individuals will receive no additional compensation for, but may be reimbursed
for their out-of-pocket expenses incurred in connection with, such solicitation.
The Trust and the Corporation have engaged the services of D.F. King & Co., Inc.
to solicit proxies and to assist in the distribution of proxy materials for a
fee of $15,000, plus reimbursement of reasonable out-of-pocket expenses. The
Trust and the Corporation will reimburse persons holding Paired Shares in their
names or the names of their nominees but not owning such shares beneficially
(such as brokerage houses, banks and other fiduciaries) for out-of-pocket
expenses incurred in forwarding soliciting materials to the beneficial owners of
such shares. All of the foregoing fees and expenses will be paid or reimbursed
in equal parts by the Trust and the Corporation.
ELECTION OF TRUSTEES OF THE TRUST
The Board of Trustees is divided into three classes. The terms of two
Trustees expire at the Trust Meeting, the terms of three Trustees expire at the
1997 Annual Meeting and the terms of two Trustees expire at the 1998 Annual
Meeting. At the Trust Meeting, two Trustees will be elected to the Board of
Trustees for a term expiring at the 1999 Annual Meeting.
NOMINEES FOR TRUSTEES
The following sets forth information as to each of the Board's nominees for
election as Trustee at the Trust Meeting. If, for any reason, any of the Board's
nominees listed below should cease to be a candidate for election, it is
intended that all properly signed proxies in the form enclosed will be voted for
a substitute nominee designated by the Board of Trustees. Each of the nominees
listed below has consented to serve as a Trustee, and the Board of Trustees has
no reason to believe that any nominee will be unwilling or unable to serve, if
elected.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
- ----------------------- ----------------------------------------------------- --------------
<S> <C> <C>
Stephen R. Quazzo (36) Managing Director and co-founder of Transwestern August 1995
Investment Company, L.L.C., a real estate principal
investment firm, since March 1996. From April 1991 to
March 1996, President of Equity Institutional
Investors, Inc. a subsidiary of Equity Group
Investments, Inc., a Chicago based holding company
controlled by Samuel Zell. Prior to that time, Mr.
Quazzo was a Vice President of Goldman, Sachs & Co.,
responsible for the firm's real estate investment
banking activities in the Midwest. Mr. Quazzo is a
member of the Urban Land Institute and is on the
advisory board of City Year Chicago.
</TABLE>
4
<PAGE> 10
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
- ----------------------- ----------------------------------------------------- --------------
<S> <C> <C>
Steven R. Goldman (35) Senior Vice President of the Trust since September September 1996
1996. Mr. Goldman served as Senior Vice President of
the Corporation from March 1995 to September 1996 and
as a member of the Management Committee of SLC
Operating Limited Partnership from December 1994 to
September 1996. Mr. Goldman was a Vice President of
Starwood Capital Group, L.P. (predecessor of Starwood
Capital Group, L.L.C.), specializing in hotel
acquisitions and hotel asset management, from August
1993 to February 1995. From 1990 to 1993, he was
Senior Development Manager of Disney Development
Company, the real estate investment development and
management division of the Walt Disney Company. From
1986 to 1990, Mr. Goldman was Director of Development
of The Hyatt Development Corporation, a hotel
development company.
</TABLE>
The Board of Trustees of the Trust recommends that shareholders of the Trust
vote FOR the election of such nominees.
TRUSTEES CONTINUING IN OFFICE
The following sets forth information as to each of the incumbent Trustees
on the Board of Trustees with terms expiring at either the 1997 Annual Meeting
or the 1998 Annual Meeting.
TRUSTEES WHOSE TERMS EXPIRE AT THE 1997 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
- ----------------------- ----------------------------------------------------- --------------
<S> <C> <C>
Bruce W. Duncan (45) President and Chief Executive Officer of The Cadillac August 1995
Fairview Corporation Limited since January 1996. From
October 1994 to December 1995, President of Blakely
Capital, Inc., a private firm focusing on investments
in real estate and telecommunications. From 1992 to
October 1994, Mr. Duncan was President and Co-Chief
Executive Officer of JMB Institutional Realty
Corporation and from 1984 to 1991 Executive Vice
President of JMB Realty Corporation. Mr. Duncan holds
an MBA from the University of Chicago. He is on the
Board of Trustees of Kenyon College.
Daniel H. Stern (35) Co-founder and President of Ziff Brothers August 1995
Investments, L.L.C., a diversified New York based
investment management firm. Prior to co-founding Ziff
Brothers Investments in December 1992, Mr. Stern was
Co-Managing Director of William A.M. Burden & Co., a
private investment management firm where he was
responsible for asset allocation and investment
policy. Mr. Stern is a member of the Board of
Directors of each of Commodore Media, Inc. and Westin
Hotel Company.
</TABLE>
5
<PAGE> 11
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
- ----------------------- ----------------------------------------------------- --------------
<S> <C> <C>
Barry S. Sternlicht Chairman and Chief Executive Officer of the Trust. He December 1994
(36) is founder and General Manager of Starwood Capital
Group, L.L.C., a real estate investment firm (and
co-founder of its predecessor entities), and has been
the President and CEO of Starwood Capital Group,
L.L.C. since its formation. Prior to forming Starwood
Capital, he was Vice President and then Senior Vice
President (from 1989 to 1991) of JMB Realty
Corporation, a real estate investment firm. Mr.
Sternlicht is currently a member of the Management
Committee of SLC Operating Limited Partnership and,
upon receipt of Gaming Approval (as hereinafter
defined), a director of the Corporation, is a Trustee
of each of Equity Residential Properties Trust, a
multi-family REIT, and Angeles Participating Mortgage
Trust, a REIT, and is a director of each of Westin
Hotel Company and U.S. Franchise Systems. Mr.
Sternlicht is on the Board of Governors of NAREIT and
is a member of the Urban Land Institute and of the
National Multi-Family Housing Council. Mr. Sternlicht
is a member of the Board of Directors of the Council
for Christian and Jewish Understanding, is a member
of the Young Presidents Organization and is on the
Board of Directors of Junior Achievement for
Fairfield County, Connecticut.
</TABLE>
TRUSTEES WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
- ----------------------- ----------------------------------------------------- --------------
<S> <C> <C>
Madison F. Grose (43) Managing Director and General Counsel of Starwood December 1994
Capital Group, L.L.C. (and a senior executive of its
predecessor entities) since July 1992. From November
1983 through June 1992, he was a partner in the law
firm of Pircher, Nichols & Meeks. Mr. Grose is a
Trustee of Angeles Participating Mortgage Trust.
William E. Simms (52) President of the Risk Management Product Services August 1995
Group, Transamerica Life Companies and a member of
its board of directors. Over the past 24 years, he
has held various other management positions with that
company. He is active in civic organizations; he is
Chairman of the Charlotte-Mecklenburg Urban League
and the Charlotte-Mecklenburg Arts and Science
Council, and he is a member of the board of directors
of the Mecklenburg County United Way and the
Mecklenburg Hospital Authority. He is a part owner of
the Carolina Panthers National Football League team.
Mr. Simms is a director of NationsBank N.A.
</TABLE>
VOTES REQUIRED
Each shareholder of the Trust (or such shareholder's proxy) entitled to
vote upon the election of Trustees shall be entitled to cast one vote for each
Trust Share held of record on the Trust Record Date and Trustees shall be
elected by a plurality of the votes cast. Consequently, votes that are withheld
in the election of Trustees and broker non-votes will not affect the outcome of
the election of Trustees of the Trust.
6
<PAGE> 12
ELECTION OF DIRECTORS OF THE CORPORATION
The Board of Directors is divided into three classes. The terms of three
Directors expire at the Corporation Meeting, the terms of two Directors expire
at the 1997 Annual Meeting and the terms of four Directors expire at the 1998
Annual Meeting. At the Corporation Meeting, three Directors will be elected to
the Board of Directors for a term expiring at the 1999 Annual Meeting. As
described below, if elected, the three nominees named herein would take office
upon receipt of Gaming Approval.
Because a subsidiary of the Corporation conducts gaming operations and
operates gaming assets in the State of Nevada ("Gaming Assets"), Directors of
the Corporation are subject to certain licensing, suitability or regulatory
approval requirements of Nevada state and county liquor and gaming regulatory
authorities ("Gaming Approval"), prior to taking office as Directors. The
Directors of the Corporation who were Directors prior to the formation of SLC
Operating Limited Partnership (the "Operating Partnership") effective as of
January 1, 1995 are not subject to Gaming Approval requirements (currently
Messrs. Earle F. Jones, Bruce M. Ford and Graeme W. Henderson), and currently
constitute the Board of Directors. Six additional persons named below have been
elected to the Board of Directors to take office upon receipt of any required
Gaming Approval. Pending receipt of any required Gaming Approval, the Operating
Partnership is being managed by a management committee (the "Management
Committee"), consisting of such Directors who have received any required Gaming
Approval and such persons who have been elected to the Board to take office upon
receipt of any required Gaming Approval. While awaiting any required Gaming
Approval, the Corporation's existing management and Board of Directors will be
responsible for the operation and control of the Gaming Assets, and the
Management Committee will be prohibited from any influence or control of the
Gaming Assets. Starwood Lodging has sold both its gaming properties; however, it
continues to operate the Gaming Assets at the King 8 Hotel & Gambling Hall
pursuant to a lease pending the buyer's receipt of the necessary regulatory
approvals. A complete discussion of Nevada gaming regulatory requirements is
contained in the Corporation's Annual Report for the year ended December 31,
1995 on Form 10-K (the "Form 10-K Report"), as filed with the United States
Securities and Exchange Commission. See Form 10-K Report -- Item 2.
PROPERTIES -- The Corporation and the Operating Partnership -- Regulation and
Licensing.
NOMINEES FOR DIRECTOR
The following sets forth information as to each of the Board's nominees for
election as Director at the Corporation Meeting. If, for any reason, any of the
Board's nominees listed below should cease to be a candidate for election, it is
intended that all properly signed proxies in the form enclosed will be voted for
a substitute nominee designated by the Board of Directors. Each of the nominees
listed below has consented to serve as a Director, and the Board of Directors
has no reason to believe that any nominee will be unwilling or unable to serve,
if elected.
<TABLE>
<CAPTION>
DIRECTOR/MANAGEMENT
COMMITTEE MEMBER
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE SINCE
- ----------------------- --------------------------------------------------- -------------------
<S> <C> <C>
Jean-Marc Chapus (37) Managing Director and Portfolio Manager of Trust August 1995
Company of the West since March 1995. Prior to that
time he was a Managing Director and Principal of
Crescent Capital Corporation with primary
responsibility for the firm's private lending and
private placement activities. From 1986 to 1991,
Mr. Chapus served as First Vice President at Drexel
Burnham Lambert Incorporated. From 1982 to 1984,
Mr. Chapus was a member of the mergers and
acquisitions department at Lehman Brothers Kuhn
Loeb Incorporated.
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
DIRECTOR/MANAGEMENT
COMMITTEE MEMBER
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE SINCE
- ----------------------- --------------------------------------------------- -------------------
<S> <C> <C>
Eric A. Danziger (42) President and Chief Executive Officer of the September 1996
Corporation since July 1996. Mr. Danziger has been
in the hotel industry for over 26 years. Prior to
joining the Corporation, he served as the Executive
Vice President of Wyndham Hotel Corporation and
President of Wyndham Hotels and Resorts Division
from August 1990 to June 1996. Prior thereto, from
1979 to 1990, Mr. Danziger served Doubletree Hotels
Corporation in a variety of positions, including
Senior Vice President.
Michael A. Leven (59) President and Chief Executive Officer of U.S. August 1995
Franchise Systems, a hotel franchising and
development company, since October 1995. From
November 1990 to September 1995, Mr. Leven was
President and Chief Operating Officer of Holiday
Inn Worldwide. Prior to that time he was President
of Days Inn (from 1985 to 1990), a senior
executive, including President and Chief Operating
Officer, of Americana Hotels (from 1976 to 1985)
and an executive at Dunfey Family Hotels (1973 to
1976) and Sonesta Hotels (1961 to 1973). Mr. Leven
is a director of U.S. Franchise Systems. Mr. Leven
is also a member of the Board of Governors of the
American Red Cross and a trustee of National Realty
Trust.
</TABLE>
The Board of Directors of the Corporation recommends that stockholders of
the Corporation vote FOR the election of such nominees.
As described above, Messrs. Chapus, Danziger and Leven have not received
Gaming Approval and, if elected to the Board at the Corporation Meeting, will
serve on the Management Committee and will take office as Directors of the
Corporation upon receipt of any required Gaming Approval.
DIRECTORS CONTINUING IN OFFICE
The following sets forth information as to each of the persons who have
been elected to the Board of Directors (each of whom serves either on the Board
of Directors or the Management Committee of the Operating Partnership) for terms
expiring at either the 1997 Annual Meeting or the 1998 Annual Meeting, each such
person to take office as a Director upon receipt of any required Gaming
Approval.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1997 ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR/MANAGEMENT
COMMITTEE MEMBER
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE SINCE
- -------------------------- ---------------------------------------------- -------------------
<S> <C> <C>
Jonathan D. Eilian (28) Managing Director of Starwood Capital Group, August 1995
L.L.C. (and a senior executive of its
predecessor entities) since its formation in
September, 1991. Prior to being a founding
member of Starwood Capital, Mr. Eilian served
as an associate for JMB Realty Corporation, a
real estate investment firm, and for The
Palmer Group, L.P., a private investment firm
specializing in corporate acquisitions.
</TABLE>
8
<PAGE> 14
<TABLE>
<CAPTION>
DIRECTOR/MANAGEMENT
COMMITTEE MEMBER
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE SINCE
- -------------------------- ---------------------------------------------- -------------------
<S> <C> <C>
Barry S. Sternlicht (36) Chairman and Chief Executive Officer of the December 1994
Trust. He is founder and General Manager of
Starwood Capital Group, L.L.C. (and co-founder
of its predecessor entities) and has been the
President and CEO of Starwood Capital Group,
L.L.C. since its formation. Prior to forming
Starwood Capital, he was Vice President and
then Senior Vice President (from 1989 to 1991)
of JMB Realty Corporation, a real estate
investment firm. Mr. Sternlicht is currently a
Trustee of the Trust, a Trustee of each of
Equity Residential Properties Trust, a
multi-family REIT, and Angeles Participating
Mortgage Trust, a REIT, and is a director of
each of Westin Hotel Company and U.S.
Franchise Systems. Mr. Sternlicht is on the
Board of Governors of NAREIT and is a member
of the Urban Land Institute and of the
National Multi- Family Housing Council. Mr.
Sternlicht is a member of the Board of
Directors of the Council for Christian and
Jewish Understanding, is a member of the Young
Presidents Organization and is on the Board of
Directors of Junior Achievement for Fairfield
County, Connecticut.
Bruce M. Ford (57) President of FST Management Corporation and September 1983
President and Managing Partner of F.K.B.
Management Corporation, hotel and restaurant
management companies, since January 1988, and
a member of Gibson 25 Associates, LLC., a
hotel developer, since March 1995. President
of Ford Management Corporation, a hotel/motel
management and development company, since June
1988. Prior to that time, Mr. Ford was Senior
Vice President of Operations of Ramada Inns.
Earle F. Jones (70) Chairman of the Board of Directors of the September 1985
Corporation since February 1989. Co-Chairman
since 1988 of MMI Hotel Group, a hotel
company. From 1967 to 1968, Mr. Jones was
President of the International Association of
Holiday Inns and served two terms as a
director. Mr. Jones is a Trustee and Chairman
of Communications Improvement Trust, whose
beneficiaries are public broadcasting and
Tougaloo College Trust, a member of the Board
of Trustees for Millsaps College and the
Catholic Foundation and Co-Chairman of the
Mississippi Olympic Committee. Mr. Jones is a
general partner of Orlando Plaza Suite Hotel,
Ltd-A which filed a petition under Chapter 11
of the U.S. Bankruptcy Code in May 1996.
</TABLE>
9
<PAGE> 15
<TABLE>
<CAPTION>
DIRECTOR/MANAGEMENT
COMMITTEE MEMBER
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE SINCE
- -------------------------- ---------------------------------------------- -------------------
<S> <C> <C>
Graeme W. Henderson (63) Chairman of the Trust from July 1989 to Decem- September 1986
ber 1994 and Trustee of the Trust from Septem-
ber 1986 to December 1994. He has been a
private investor since January 1990. Prior to
January 1990, Mr. Henderson was President of
Henderson Consulting, Inc., a private
financial consulting firm. Mr. Henderson has
been President of Capstan, Inc. (formerly
Seymour, Inc.), a manufacturer of machine tool
controls, since 1982. Mr. Henderson is
currently a director of Capital Southwest
Corporation.
Daniel W. Yih (38) A general partner of Chilmark Partners, L.P. August 1995
since June 1995. Mr. Yih served as interim
Chief Financial Officer of Midway Airlines
(from September 1995 to December 1995),
President of Merco-Savory, Inc., a
manufacturer of food preparation equipment
(from March 1995 to June 1995) and as a senior
executive of Welbilt Corporation (from
September 1993 to March 1995). Prior to that
time, Mr. Yih served as an associate of
Kohlberg & Co.
</TABLE>
Messrs. Ford and Henderson have indicated that upon the receipt of Gaming
Approval by the six Directors who have not yet received Gaming Approval, they
intend to resign as Directors. At such time the Board of Directors intends to
fix the size of the Board at seven.
VOTES REQUIRED
Each stockholder of the Corporation (or such stockholder's proxy) entitled
to vote upon the election of Directors is entitled to cast one vote for each
Corporation Share held of record on the Corporation Record Date and Directors
shall be elected by a plurality of votes cast. Consequently, votes that are
withheld in the election of Directors and broker non-votes will not affect the
outcome of the election of Directors of the Corporation.
BOARD COMMITTEES
The Board of Trustees and the Board of Directors have each established
Executive, Audit, Compensation and Option Committees, the principal functions of
which are described below.
To the extent permitted by law, the Executive Committee is authorized to
exercise the power of the applicable Board with respect to the management of the
business and affairs of the Trust and the Corporation, as the case may be,
between meetings of the Board, except that the Executive Committee of the
Corporation may not declare dividends or distributions on stock, issue stock,
recommend to the stockholders any action which requires stockholder approval,
adopt, amend or repeal the Corporation's By-laws, or approve any merger or share
exchange which does not require shareholder approval. During 1995, the Executive
Committees of the Trust and the Corporation met one time each. The Executive
Committee of the Board of Trustees is currently comprised of Messrs. Sternlicht
and Grose and the Executive Committee of the Management Committee is currently
comprised of Messrs. Sternlicht and Eilian.
The Audit Committee has the following powers, duties and functions: (i) to
select the firm of independent public accountants to audit the financial
statements of the Trust and of the Corporation and its subsidiaries, subject to
the approval of the applicable Board, (ii) to discuss with such independent
accountants the scope and results of their audit, (iii) to discuss with such
independent public accountants, and with management, the financial accounting
and reporting principles, policies and practices and the adequacy of the
10
<PAGE> 16
accounting, financial and operating controls and (iv) to report to the
applicable Board with respect to the foregoing, at such times and in such manner
as such Board shall determine. During 1995, the Audit Committees of the Trust
and the Corporation met four times each. The Audit Committee of the Board of
Trustees is currently comprised of Messrs. Quazzo, Stern and Simms, who serves
as chairman, and the Audit Committee of the Management Committee is currently
comprised of Messrs. Leven, Jones and Yih, who serves as chairman.
The Compensation Committee has the authority to make recommendations to the
applicable Board with respect to the salaries and other compensation to be paid
to the executive officers and administers the employee benefit plans other than
the option plans. During 1995, the Compensation Committees of the Trust and the
Corporation met two times each. The Compensation Committee of the Board of
Trustees is currently comprised of Messrs. Sternlicht, Grose and Simms, who
serves as chairman, and the Compensation Committee of the Management Committee
is currently comprised of Messrs. Sternlicht, Chapus and Jones, who serves as
chairman.
The Option Committee administers the option plan of the Trust or the
Corporation, as the case may be, and, if the Trust LTIP and the Corporation LTIP
are approved by shareholders of the Trust and stockholders of the Corporation,
the respective Option Committees of the Boards of the Trust and the Corporation
would administer the LTIPs. See "Approval of Long Term Incentive Plans." During
1995, the Option Committees of the Trust and the Corporation met two times each.
The Option Committee of the Board of Trustees is currently comprised of Messrs.
Duncan, Stern and Quazzo, who serves as chairman, and the Option Committee of
the Management Committee is currently comprised of Messrs. Chapus, Leven and
Yih, who serves as chairman.
In connection with the settlement in 1994 of certain shareholder
litigation, the Board of Trustees and the Board of Directors have established a
joint transaction committee of independent Trustees and Directors to make
recommendations to those Boards with respect to any transaction proposed by
management having a fair market value of $20 million or more.
During 1995, the Board of Trustees held 18 meetings and the Board of
Directors held 18 meetings. No Trustee or Director attended fewer than 75
percent of the total meetings of the Board and all committees thereof on which
such Trustee or Director served, except for Messrs. Simms, Duncan, Stern, and
Chapus.
COMPENSATION OF TRUSTEES AND DIRECTORS
Each Trustee or Director who is not also an employee of either the Trust or
the Corporation is entitled to annual trustee's or director's fees of $25,000
per annum (the "Annual Fee") and is reimbursed for any out-of-pocket expenses
incurred in attending meetings of the Board of Trustees or the Board of
Directors. Subject to obtaining shareholder approval of the Trust LTIP and the
Corporation LTIP, at least 50% of the Annual Fee will be payable in Paired
Shares (or a greater percentage at the election of the Trustee or Director) and
the number of options awarded on June 30 of each year will be reduced from 6,000
Paired Shares to 3,000 Paired Shares. The Chairman of each Board receives an
additional fee of $2,500 per year. In addition, each non-employee Trustee or
Director receives a fee of $750 for each meeting in which he participates (or,
in the case of telephonic meetings, $500) and a fee of $500 for each committee
meeting in which he participates ($1,000 per meeting for committee chairmen).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Starwood Lodging's Trustees, Directors and executive officers, and persons who
own more than ten percent of a registered class of Starwood Lodging's equity
securities, to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of Paired Shares and other
equity securities of Starwood Lodging. Trustees, Directors, officers and greater
than ten percent shareholders are required to furnish Starwood Lodging with
copies of all Section 16(a) forms they file.
11
<PAGE> 17
To Starwood Lodging's knowledge, based solely on a review of the copies of
such reports furnished to Starwood Lodging and written representations that no
other reports were required, during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its Trustees, Directors,
officers and greater than ten percent beneficial owners were complied with;
except that one report, covering one transaction involving the purchase of
Paired Shares, was filed late by Mr. Goldman, an officer and Trustee of the
Trust.
APPROVAL OF LONG TERM INCENTIVE PLANS
GENERAL
The Board of Trustees is proposing for approval by shareholders of the
Trust the amendment and restatement of the existing 1995 Share Option Plan of
the Trust as the Starwood Lodging Trust 1995 Long Term Incentive Plan (as so
amended and restated, the "Trust LTIP") and the Board of Directors is proposing
for approval by the stockholders of the Corporation the amendment and
restatement of the existing 1995 Share Option Plan of the Corporation as the
Starwood Lodging Corporation 1995 Long Term Incentive Plan (as so amended and
restated, the "Corporation LTIP"). The Trust LTIP and the Corporation LTIP
(together, the "LTIPs") are separate plans under which separate grants of awards
("Awards") may be granted. Reference is made to Exhibits A and B to this Joint
Proxy Statement for the complete text of each of the LTIPs, which are summarized
below.
The purposes of each LTIP are (i) to align the interests of the
shareholders of the Trust or the stockholders of the Corporation, as the case
may be, and recipients of Awards under such LTIP by increasing the proprietary
interest of such recipients in the growth and success of the Trust and the
Corporation and (ii) to advance the interests of the Trust and the Corporation
by attracting and retaining officers, key employees, consultants and advisers,
as well as qualified persons for service as Trustees or Directors, as the case
may be. Under each LTIP, non-qualified stock options, "incentive stock options"
(within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code")), restricted stock awards and performance awards may be
granted.
The primary objective of the Board of Trustees of the Trust and the Board
of Directors of the Corporation with respect to executive compensation is to
establish programs which attract and retain key managers and align the
compensation received by executive officers and other employees with the overall
business strategies, values, performance and financial condition of Starwood
Lodging and to the achievement of individual performance goals. To this end, the
Board of Trustees of the Trust and the Board of Directors of the Corporation
have each endorsed an executive compensation philosophy which includes the
following considerations:
- A "pay-for-performance" orientation that differentiates compensation
results based upon corporate and individual performance;
- An emphasis on stock incentives which vest over time as a significant
component of total compensation in order to more closely align the
interests of Starwood Lodging executives and other employees with the
long-term interests of the shareholders;
- An emphasis on total compensation vs. cash compensation, which motivates
and rewards Starwood Lodging executives and other employees with total
compensation (including incentive programs) at or above competitive
levels if performance is superior;
- Recognition that as an executive's level of responsibility increases, a
greater portion of the total compensation opportunity should be based
upon stock and other performance incentives and less on salary and
employee benefits. (In this regard, the Board of Trustees of the Trust
believes that the cash compensation for the Trust's Chief Executive
Officer is significantly below the cash compensation received by CEOs of
other comparable REITs and hotel companies);
12
<PAGE> 18
- An appropriate mix of short-term and long-term compensation which
facilitates retention of talented executives who may have other
opportunities and encourages stock ownership and capital accumulation by
executives and other employees;
- An appropriate distribution of Awards to senior executives and other
members of Starwood Lodging's management team, and the expansion of the
distribution of Awards to include property level executives and other
personnel;
- Recognition that since the 1995 Share Option Plans were adopted, Starwood
Lodging's hotel portfolio has expanded from interests in 47 hotels with
9,400 rooms to 75 hotels with 19,400 rooms and its employee base has
grown from approximately 2,300 employees to approximately 10,000
employees and the Corporation has heavily recruited important new
executives with significant industry experience;
- The unique paired share structure of Starwood Lodging requires comparison
to executive compensation levels at hotel operating companies as well as
other hotel REITs; and
- During the period since January 1995, when Barry S. Sternlicht became the
Chief Executive Officer of the Trust, Starwood Lodging has been the
highest performing REIT in terms of total shareholder return and has
grown from a market equity capitalization of $36 million to approximately
$1.5 billion (See "Shareholder Return Performance").
Accordingly, the Board of Trustees and the Compensation and Option
Committees of the Trust, and the Board of Directors and the Compensation and
Option Committees of the Corporation are currently proposing amendments of their
respective stock option programs for senior management to provide incentive
compensation for the creation of long-term shareholder value. The proposed
programs involve, in addition to annual salary and bonuses, long-term
incentives, including Paired Options to purchase Paired Shares and, upon
shareholder approval of the LTIPs, will include awards of Paired Shares, which
may be vested over time or based on performance criteria and cash awards in
tandem with certain Paired Options in an amount equivalent to dividends paid on
the Paired Shares during the applicable award period and based on performance
criteria.
The Board of Trustees of the Trust and the Board of Directors of the
Corporation each believe that the proposed amendments to the existing option
plans will enable the Trust and the Corporation to provide compensation packages
including long-term incentive awards to their respective officers, key
employees, trustees and directors that will better serve the goals of aligning
the interests of such persons with those of the shareholders and advancing the
interest of the Trust and the Corporation by attracting and retaining qualified
persons to serve as officers, key employees, trustees and directors.
The proposed amendments provide for some important changes to the existing
plans, including the following revisions:
- Expanding the aggregate number of Paired Shares available under the LTIPs
from 8% of the total number of Paired Shares outstanding from time to
time, after giving effect to the exchange of all Units for Paired Shares,
to 11.5% of the total number of outstanding Paired Shares on November 21,
1996, after giving effect to the exchange of all Units for Paired Shares
and the issuance of Paired Shares underlying all Paired Options and
Restricted Stock Awards (each, as defined below) which may be granted
under the LTIPs.
- Removing the existing "evergreen" maximum for the option plans which
provides for the automatic increase in the number of Paired Shares
available under the plans in connection with the increase in the number
of Paired Shares outstanding from time to time.
- Providing for the grant of the following additional types of awards:
Paired Shares that are subject to performance measures or restriction
periods; and performance awards in tandem with certain Paired Options to
be paid in cash subject to performance measures; each of which is
described in more detail below.
13
<PAGE> 19
- Reducing the automatic annual grant of Paired Options to Trustees and
Directors from 6,000 to 3,000 Paired Shares and providing for the Annual
Fee of Trustees and Directors to be paid in Paired Shares, subject to
each Trustee's and Director's option to receive up to half in cash.
Neither the Trust nor the Corporation currently has an incentive plan that
provides for the grant of Paired Shares or stock-based performance awards. The
Trust and the Corporation each believes that it is important for it to have the
ability to grant Paired Shares and performance awards in connection with the
recruitment of well qualified senior management as well as in connection with
the compensation of existing officers, key employees, consultants and advisers.
Seven Trustees and three key employees, including officers of the Trust are
eligible to participate in the Trust LTIP, and nine Directors and approximately
100 key employees, including officers, property level executives and other
personnel of the Corporation are eligible to participate in the Corporation
LTIP.
The Board of Trustees recommends a vote FOR approval of the Trust LTIP and
the Board of Directors recommends a vote FOR approval of the Corporation LTIP.
DESCRIPTION OF THE PLANS
Administration. Each LTIP will be administered by a committee of the
applicable Board (the "Committee") consisting of two or more trustees or
directors who are not eligible to receive discretionary awards under such LTIP
or any other plan of the Trust or the Corporation, as the case may be, or any of
its affiliates, and at the election of the Board, are "outside directors" within
the meaning of Section 162(m) of the Code. The Committee for the Trust is
currently comprised of Messrs. Duncan, Quazzo and Stern and the Committee for
the Corporation is currently comprised of Messrs. Chapus, Leven and Yih.
Section 162(m) of the Code generally limits to $1 million the amount that a
publicly held corporation is allowed each year to deduct for the compensation
paid to each of the corporation's chief executive officer and its four most
highly compensated executive officers other than the chief executive officer.
However, certain types of compensation paid to such executives are not subject
to the $1 million deduction limit. One such type is "performance-based
compensation." To qualify as performance-based compensation, the following
requirements must be satisfied: (i) the performance goals are determined by a
committee consisting solely of two or more "outside directors," (ii) the
material terms under which the compensation is to be paid, including the
performance goals, are approved by a majority of the corporation's stockholders,
and (iii) the committee certifies that the applicable performance goals were
satisfied before payment of any performance-based compensation is made. Based on
regulations issued by the United States Department of the Treasury which explain
these requirements, certain compensation under the LTIPs, such as Paired Options
exercisable at fair market value on the date of grant, is not expected to be
subject to the $1 million deduction limit under Section 162(m) of the Code, but
other compensation payable under the LTIPs is expected to be subject to such
limit.
Subject to the express provisions of the LTIPs, and except for Awards
automatically granted to Trustees or Directors, each respective Committee will
have the authority to select eligible officers, key employees, consultants,
advisers and Trustees or Directors (as the case may be) who will receive Awards
and determine all of the terms and conditions of each Award. Each Award will be
evidenced by a written agreement containing such provisions not inconsistent
with the applicable LTIP as the applicable Committee shall approve. Such
agreements need not be identical. Each Committee will also have authority to
establish rules and regulations for administering the applicable LTIP and to
decide questions of interpretation or application of any provision of such LTIP.
Subject to certain restrictions, each Committee may delegate some or all of its
power and authority to administer the applicable LTIP to the Chief Executive
Officer, Chief Operating Officer or other executive officer of the Trust or the
Corporation, as the case may be.
Available Shares. Under LTIPs, the aggregate number of Paired Shares
available for grants of Awards shall (subject to adjustment in the event of a
stock split, stock dividend, recapitalization, reorganization, merger, spin-off
or other similar event or change in capitalization) be 4,250,000 (eleven and
one-half percent (11.5%) of the total number of issued and outstanding Paired
Shares as of November 21, 1996, after giving effect to the issuance of Paired
Shares upon the exchange of all outstanding limited partnership units
14
<PAGE> 20
("Units") of the Realty Partnership (as defined below) and the Operating
Partnership and the issuance of Paired Shares underlying all Paired Options and
Restricted Stock Awards which may be granted under the LTIPs).
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of Paired Shares with respect to
which Awards may be granted to any person during 1996 is 1,250,000, and during
any calendar year commencing with 1997 is 600,000, in each case subject to
adjustment as described above.
Effective Date, Termination and Amendment. If approved by shareholders of
the Trust, the Trust LTIP will become effective as of August 12, 1996 and if
approved by stockholders of the Corporation, the Corporation LTIP will become
effective as of August 12, 1996 (August 12, 1996 was the closing date of the
most recent public offering of Paired Shares by the Trust and the Corporation).
Each LTIP will terminate on June 29, 2005 (ten years after its original
effective date), unless terminated earlier by the applicable Board. The
applicable Board may amend the LTIP at any time, subject to any requirement of
stockholder approval required by applicable law, rule or regulation and provided
that no amendment may be made without stockholder approval if such amendment
would, among other things, (i) change the persons eligible to participate in
such LTIP or (ii) change the maximum number of Paired Shares available under
such LTIP.
Stock Options -- General. Pursuant to an Agreement dated June 25, 1980, as
amended, between the Corporation and the Trust, all outstanding Corporation
Shares and Trust Shares are paired on a one-for-one basis and trade together as
Paired Shares. Accordingly, each option to Purchase Corporation Shares shall be
paired with an option to purchase an equal number of Trust Shares (together, a
"Paired Option"). Each Committee will determine the conditions to the
exercisability of a Paired Option granted under the LTIP which such Committee
administers. Upon exercise of a Paired Option, including a Paired Option which
is comprised in part of an incentive stock option (an "Incentive Paired
Option"), the purchase price may be paid in cash or by delivery of previously
owned Paired Shares. Certain terms of a Paired Option (including certain terms
relating to the exercisability of a Paired Option described below under
"NonQualified Paired Options" and "Incentive Paired Options") may be modified in
the agreement entered into in connection with the grant of such Paired Options.
Without the approval by the shareholders of the Trust and the stockholders of
the Corporation, outstanding Paired Options may not be amended to reduce their
exercise price (a "Repricing") to the extent that such Repricing, when added
together with all prior Repricings respecting Paired Options previously
exercised or then outstanding, would affect more than 212,500 Paired Shares
(which is 5% of the total number of Paired Shares initially available for grants
of Awards under the LTIPs).
Non-Qualified Paired Options. The number of Paired Shares subject to a
Paired Option, the exercise price per Paired Share which may not be less than
the fair market value on the date of grant and the period for the exercise of a
non-qualified Paired Option will be determined by the applicable Committee.
In the event of a termination of employment or service by reason of death
or disability, or involuntary termination by Starwood Lodging without cause,
each non-qualified Paired Option will become fully vested and will be
exercisable for a period of no more than one year after the date of such
termination, but in no event after the expiration of such Paired Option. In the
event of a termination of employment or service for "cause" (which is defined as
embezzlement or misappropriation of funds or other assets, other acts of
dishonesty, significant activities harmful to the reputation of the Corporation
or the Trust, willful refusal to perform or substantial disregard of the duties
properly assigned to the holder (other than as a result of disability),
significant violation of any statutory or common law duty of loyalty to the
Corporation or the Trust or a material breach by the holder of the holder's
employment agreement, if any) each non-qualified Paired Option will terminate on
the date of such termination. In the event of a termination of employment or
service for any other reason each non-qualified Paired Option to the extent
vested on that date may thereafter be exercised for a period of three months
after the date of such termination but in no event after the expiration of such
Paired Option. If a holder dies during the one-year period following termination
of employment or service by reason of disability, or involuntary termination by
Starwood Lodging without cause, each non-qualified Paired Option may thereafter
be exercised for a period of no less than three months from the date of death
but in no event after the expiration of such Paired Option.
15
<PAGE> 21
Incentive Paired Options. The number of Paired Shares subject to a Paired
Option, the exercise price per Paired Share and the period for the exercise of
an incentive Paired Option will be determined by the applicable Committee;
provided that no incentive Paired Option will be exercisable more than ten years
after its date of grant, except that if the recipient of the incentive Paired
Option owns greater than ten percent of the voting power of all shares of
capital stock of the Trust and the Corporation, as the case may be (a "ten
percent holder"), in which case the Paired Option will be exercisable for no
more than five years after its date of grant; and provided further that the
exercise price of an incentive Paired Option will not be less than the fair
market value of a Trust Share or Corporation Share, as the case may be, on the
date of grant of such Paired Option, except that if the recipient of the
incentive Paired Option is a ten percent holder, in which case the exercise
price will be the price required by the Code, currently 110% of fair market
value.
In the event of a termination of employment by reason of death, permanent
and total disability (as defined in Section 22(e)(3) of the Code) or involuntary
termination by Starwood Lodging without cause, incentive Paired Options will
become fully exercisable for a period of no more than one year after such
termination, but in no event after the expiration of the incentive Paired
Option. In the event of a termination of employment for "cause", each incentive
Paired Option will terminate on the date of such termination. In the event of a
termination of employment for any other reason, each incentive Paired Option
will be exercisable to the extent vested on the date of termination for a period
of three months after such termination, but in no event after the expiration of
such incentive Paired Option. If the holder of an incentive Paired Option dies
during the one-year period following termination of employment by reason of
permanent and total disability, or during the three-month period following
termination of employment for any reason other than permanent and total
disability or "cause", each incentive Paired Option will be vested to the extent
that such incentive Paired Option was exercisable on the date of the holder's
death, and may thereafter be exercised for a period of three months from the
date of death, but in no event after the expiration of such incentive Paired
Option.
Paired Share Awards. Each Committee will determine the conditions, if any,
to which an Award of Paired Shares shall be subject. The terms of each such
Award, including whether the Award is an award of Paired Shares that are subject
to a restriction period and/or performance measures (a "Restricted Stock Award")
will be set forth in the agreement relating to such Award. Unless otherwise set
forth in the Agreement relating to a Restricted Stock Award, the holder of such
award shall have all rights of a stockholder of the Corporation and Trust,
including, but not limited to, voting rights, the right to receive dividends and
the right to participate in any capital adjustment applicable to all holders of
Paired Shares.
Unless otherwise set forth in the Agreement relating to a Restricted Stock
Award, in the event of termination of employment or service by reason of death,
disability or involuntary termination without "cause", the restriction period
terminates and the performance measures, if any, are to be computed through the
date of such termination. Unless otherwise set forth in the Agreement relating
to a Restricted Stock Award, in the event of termination of employment or
service for any reason other than death, disability or involuntary termination
without "cause", the portion of such award that is subject to a restriction
period or performance measure on the date of such termination shall be
forfeited.
In connection with the acquisition of a portfolio of eight upscale and
luxury full-service hotels containing 3,141 total rooms from an institutional
seller (the "Institutional Portfolio") in August 1996, the Trust made a one-time
grant to Starwood Capital Group, L.L.C. of a Restricted Stock Award of 167,247
Paired Shares. In doing so, the Board of Trustees took into account the efforts
of Starwood Capital personnel in evaluating and pursuing strategic opportunities
for the Trust and the significant value and importance of Starwood Capital to
the success of Starwood Lodging; and the Board believes that the acquisition of
the Institutional Portfolio was quite beneficial to the Trust. In connection
with the granting of such Award the Board of Trustees and the Board of Directors
indicated that no acquisition fees would be paid to Starwood Capital in the
future. In connection with the grant of such Restricted Stock Award and upon
shareholder approval of the LTIPs, effective August 12, 1996, Starwood Lodging's
reimbursement arrangement with Starwood Capital would be changed so as to
eliminate reimbursement for internal costs of Starwood Capital for any services
of senior management of Starwood Capital (subject to the existing annual
limitation of $250,000 for services of employees of Starwood Capital other than
such senior management) and after one year, for any services of
16
<PAGE> 22
any employee of Starwood Capital. In addition, the Trust and the Corporation
have granted Restricted Stock Awards of 167,004 Paired Shares to certain senior
executives of the Trust and the Corporation. See "-- Awards Granted Under the
Long Term Incentive Plans." All such Restricted Stock Awards are subject to
shareholder approval of the LTIPs.
Performance Awards. Each Committee will determine the terms and conditions,
if any, to which an award of a right, contingent upon the attainment of
specified performance measures within a specified performance period, to receive
a payment in cash (a "Performance Award") shall be subject. Performance Awards
may be granted only in tandem with Paired Options concurrently or previously
granted under the applicable LTIP and will apply to all or such portion of the
Paired Shares subject to such Paired Options as designated by the Committee. The
performance period and performance measure applicable to any Performance Award
will be designated by the applicable Committee, but in the absence of such
designation, the performance period will be the five-year period commencing on
August 12, 1996 (the effective date of the LTIP if approved by the shareholders
of the Trust and stockholders of the Corporation) and the performance measure
will be a 15% per annum compounded increase in the fair market value of an
investment in Paired Shares on August 12, 1996 at the then fair market value per
Paired Share plus all dividends and distributions paid with respect to Paired
Shares subsequent to such date and assuming reinvestment in additional Paired
Shares of all such dividends and distributions (the "Base Performance Measure").
Performance Awards will vest upon satisfaction of the performance measures for
the specified performance period and will be settled in cash to the extent that
both the applicable Paired Option has been exercised and the performance period
has expired. The cash amount will be the sum (without interest or compounding)
of all dividends and distributions per Paired Share during the performance
period and thereafter through the date of any subsequent exercise of the
applicable Paired Options multiplied by the number of Paired Shares purchased
upon exercise of the applicable Paired Option.
In the event of termination of employment or service by reason of death,
disability or involuntary termination without "cause", then the performance
period will be deemed to expire on the date of such termination and the
performance measures will be computed for the performance period through such
date and the Performance Award settled as and when the applicable Paired Options
are exercised if the performance measures for such shortened performance period
have been satisfied. In the event of termination of employment or service for
any reason other than death, disability or involuntary termination without
"cause", then the Performance Award shall be cancelled. Performance Awards have
been granted to certain senior executives of the Trust and the Corporation. See
"-- Awards Granted Under the Long Term Incentive Plans."
In the event of a change of control (which includes the acquisition by a
person of 51% or more of the then outstanding Paired Shares (after giving effect
to the exchange of limited partnership Units of the Realty Partnership and
Operating Partnership for Paired Shares); a change in the composition of a
majority of the members of the Board of Trustees of the Trust or the Board of
Directors of the Corporation, as the case may be, from that in effect on January
1, 1997, unless such change is with the approval of the majority of the then
existing Board and is not in connection with a material transaction affecting
the Trust or the Corporation; consummation of a reorganization, merger or
consolidation, sale or other similar corporate transaction; or approval by the
shareholders of the Trust or the stockholders of the Corporation of a plan of
complete liquidation or dissolution), Paired Options will immediately become
fully exercisable for their remaining term and Restricted Stock Awards under the
LTIPs will immediately vest in full. In addition, in the event of a change of
control, the performance period for Performance Awards will expire and the
performance measures will be computed through the date of such change of control
and the applicable Performance Award will be settled on the date of such change
in control or if later, upon exercise of the applicable Paired Options.
The Board of Trustees of the Trust and the Board of Directors of the
Corporation have awarded Performance Awards relating to an aggregate of
1,367,000 Paired Shares underlying Paired Options. The Performance Measure of
each such Performance Award is the Base Performance Measure. In the event the
required increase is achieved, then the holders of the applicable Paired Options
would receive upon their exercise after the end of the measuring period an
amount in cash equal to the dividends and distributions per Paired Share
subsequent to August 12, 1996. The Board of Trustees of the Trust and the Board
of Directors of
17
<PAGE> 23
the Corporation believe that the five year "cliff" vesting nature of these
Performance Awards should help Starwood Lodging retain important executive
personnel.
Trustee and Director Options and Paired Share Awards. Under the existing
option plans, on June 30 of each year, each non-employee Trustee and Director is
automatically granted non-qualified Paired Options to purchase 6,000 Paired
Shares at an exercise price per Paired Share equal to the fair market value of a
Paired Share on the date of grant. Such Paired Options are fully exercisable on
the date of grant and expire ten years after the date of grant (notwithstanding
termination of service as a Trustee or Director, as the case may be, for any
reason prior to ten years after the date of grant). If a Trustee or Director
dies while a Paired Option granted to such Trustee or Director is outstanding,
such Paired Option may be exercised until and including the expiration of the
Paired Option. Pursuant to the Trust LTIP and the Corporation LTIP, upon
approval of the LTIPs by the shareholders, automatic annual grants will be
reduced to nonqualified Paired Options to purchase 3,000 Paired Shares.
Subject to the approval by the shareholders of the Trust of the Trust LTIP
and the approval by the stockholders of the Corporation of the Corporation LTIP,
during each calendar year commencing with 1997, each Trustee and Director who is
not an employee of the Trust or the Corporation or any of their subsidiaries on
the last day of March, July, September and December will be awarded, on a
current or deferred basis at the election of each Trustee and Director, a number
of Paired Shares equal to one-quarter of the Annual Fee divided by the fair
market value of a Paired Share on the immediately preceding December 31;
provided that the number of Paired Shares issued in payment of such Annual Fee
may be reduced, to the extent that such Trustee or Director indicates in advance
his or her election to receive cash (of no more than $12,500) in lieu of Paired
Shares.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the U.S. federal income tax
consequences of awards made under each LTIP.
Paired Options. A participant will not recognize any income upon the grant
of a Paired Option. A participant will recognize compensation taxable as
ordinary income (and subject to income tax withholding) upon exercise of a
non-qualified Paired Option equal to the excess of the fair market value of the
shares purchased over exercise price, and the Corporation or Trust, as the case
may be, will be entitled to a corresponding deduction. A participant will not
recognize income (except for purposes of the alternative minimum tax) upon
exercise of an incentive Paired Option to the extent such option is an option to
purchase shares of the participant's employer. If such shares acquired by
exercise of an incentive Paired Option are held for the longer of two years from
the date the option was granted and one year from the date it was exercised, any
gain or loss arising from a subsequent disposition of such shares will be taxed
as long-term capital gain or loss, and the Corporation or Trust, as the case may
be, will not be entitled to any deduction. If, however, such shares are disposed
of within the above-described period, then in the year of such disposition the
participant will recognize compensation taxable as ordinary income equal to the
excess of the lesser of (i) the amount realized upon such disposition and (ii)
the fair market value of such shares on the date of exercise over the exercise
price, and the Corporation or Trust, as the case may be, will be entitled to a
corresponding deduction.
Restricted Stock Awards. A participant will not recognize taxable income at
the time of the grant of a Restricted Stock Award, and the Corporation or Trust,
as the case may be, will not be entitled to a tax deduction at such time, unless
the participant makes an election to be taxed at the time such Restricted Stock
Award is granted. If such election is not made, the participant will recognize
taxable income at the time the restrictions lapse in an amount equal to the
excess of the fair market value of the Paired Shares at such time over the
amount, if any, paid for such shares. The amount of ordinary income recognized
by a participant by making the above-described election or upon the lapse of the
restrictions is deductible by the Corporation or Trust, as the case may be, as
compensation expense, except to the extent the limit of section 162(m) of the
Code applies. In addition, a participant receiving dividends with respect to
Paired Shares subject to a Restricted Stock Award for which the above-described
election has not been made and prior to the time the restrictions lapse will
recognize taxable compensation (subject to income tax withholding), rather than
18
<PAGE> 24
dividend income, in an amount equal to the dividends paid and the Corporation or
Trust, as the case may be, will be entitled to a corresponding deduction, except
to the extent the limit of section 162(m) of the Code applies.
Performance Awards. A participant will not recognize taxable income upon
the grant of a Performance Award, and the Corporation or Trust, as the case may
be, will not be entitled to a tax deduction at such time. Upon the settlement of
a Performance Award, the participant will recognize compensation taxable as
ordinary income (and subject to income tax withholding) in an amount equal to
the cash paid to the participant, and the Corporation or Trust, as the case may
be, will be entitled to a corresponding deduction, except to the extent the
limit of section 162(m) of the Code applies.
AWARDS GRANTED UNDER THE LONG TERM INCENTIVE PLANS
Restricted Stocks Awards of 343,056 Paired Shares and Paired Options to
purchase 1,225,000 Paired Shares, were granted as of August 12, 1996 (the
effective date of each LTIP if approved by the shareholders of the Trust and
stockholders of the Corporation, respectively) and thereafter through November
17, 1996. The following table sets forth the number of Paired Shares underlying
Awards which have been granted under the LTIPs to Trustees, Directors and
officers of the Trust and the Corporation as of November 17, 1996. All Awards of
Paired Options with Performance Awards, Restricted Stock Awards and Performance
Awards relating to outstanding Paired Options were granted subject to the
approval of the Trust LTIP by the shareholders of the Trust and the approval of
the Corporation LTIP by the stockholders of the Corporation.
<TABLE>
<CAPTION>
NUMBER OF PAIRED
SHARES UNDERLYING NUMBER OF PAIRED
PAIRED SHARES UNDERLYING
NAME AND POSITION OPTIONS(13) OTHER AWARDS
- ------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
AWARDS GRANTED UNDER TRUST LTIP:
Barry S. Sternlicht....................................... 650,000(1)(12) 30,000(3)
300,000(2)(12)
Steven R. Goldman......................................... 60,000(4) 25,000(5)
Ronald C. Brown........................................... 57,000(6) 15,000(5)
All Current Executive Officers of the Trust, as a Group... 1,067,000 70,000
All Current Trustees who are not Executive Officers of the
Trust, as a group......................................
All Employees of the Trust, including all Current Officers
who are not Executive Officers of the Trust, as a
Group..................................................
Starwood Capital Group, L.L.C............................. 167,247(7)
AWARDS GRANTED UNDER CORPORATION LTIP:
Eric A. Danziger.......................................... 200,000(8) 66,815(9)
Theodore W. Darnall....................................... 100,000(10) 30,189(11)
All Current Executive Officers of the Corporation, as a
Group.................................................. 300,000 97,004
All Current Directors who are not Executive Officers of
the Corporation, as a Group............................
All Employees of the Corporation, including all Current
Officers who are not Executive Officers of the
Corporation, as a Group................................ 100,000 8,805
</TABLE>
- ---------------
(1) Includes Paired Options for 650,000 Paired Shares that will become
exercisable as to one-third of such amount on August 12, 1997, as to an
additional one-third of the amount on August 12, 1998 and as to the
remaining amount on August 12, 1999. Performance Awards were also granted
relating to the 650,000 Paired Shares subject to such Paired Options.
19
<PAGE> 25
(2) Includes Paired Options for 300,000 Paired Shares that will become
exercisable over five years as follows: as to one-fourth of such amount on
August 12, 1998, as to an additional one-fourth of the amount on each of
August 12, 1999 and August 12, 2000 and as to the remaining amount on
August 12, 2001. Performance Awards were also granted relating to the
300,000 Paired Shares subject to such Paired Options.
(3) Includes two Restricted Stock Awards in the form of warrants to purchase
15,000 Paired Shares each, granted February 21, 1996, at an exercise price
of $1.00 per Paired Share. One warrant was exercisable immediately (the
"1996 Warrant") and one is exercisable only after January 1, 1997 (the
("1997 Warrant"). Any Paired Shares purchased upon exercise of such a
warrant will vest ratably over the balance of the year in which that
warrant first became exercisable, to the extent Mr. Sternlicht has not
theretofore resigned or been discharged for "cause." Exercise of the 1997
Warrant is also subject to the condition that Mr. Sternlicht not have
previously resigned or been discharged for "cause." All Paired Shares
purchased upon exercise of either the 1996 Warrant or the 1997 Warrant are
non-transferable prior to February 21, 1998.
(4) Includes Paired Options for 25,000 Paired Shares that will become
exercisable over five years as follows: as to one-fourth of such amount on
August 12, 1998, as to an additional one-fourth of the amount on each of
August 12, 1999 and August 12, 2000 and as to the remaining amount on
August 12, 2001; and Paired Options for 35,000 Paired Shares with an
exercise price of $33 per Paired Share (the fair market value on the date
of grant) that will become exercisable as to one-third of such amount on
April 30, 1997, as to an additional one-third of such amount on April 30,
1998 and as to the remaining amount on April 30, 1999. Performance Awards
were also granted relating to the 25,000 Paired Shares subject to Paired
Options granted under the Trust LTIP and the 35,000 Paired Shares subject
to Paired Options granted during 1996 under the existing share option
plans.
(5) Includes a Restricted Stock Award of 25,000 Paired Shares as to Mr. Goldman
and 15,000 Paired Shares as to Mr. Brown that vests as to one-third of such
amount on August 12, 1997, as to an additional one-third of such amount on
August 12, 1998, and as to the remaining amount on August 12, 1999.
(6) Includes Paired Options for 25,000 Paired Shares that will become
exercisable over five years as follows: as to one-fourth of such amount on
August 12, 1998, as to an additional one-fourth of the amount on each of
August 12, 1999 and August 12, 2000 and as to the remaining amount on
August 12, 2001; and Paired Options for 32,000 Paired Shares with an
exercise price of $33 per Paired Share (the fair market value on the date
of grant) that will become exercisable as to one-third of such amount on
April 30, 1997, as to an additional one-third of such amount on April 30,
1998 and as to the remaining amount on April 30, 1999. Performance Awards
were also granted relating to the 25,000 Paired Shares subject to Paired
Options granted under the Trust LTIP and the 32,000 Paired Shares subject
to Paired Options granted during 1996 under the existing share option
plans.
(7) Includes a one-time Restricted Stock Award of 167,247 Paired Shares granted
in connection with the acquisition of the Institutional Portfolio in August
1996 that vests as to two-thirds of such amount on August 12, 1997 and as
to the remaining amount on August 12, 1998 (See "Description of the
Plans -- Paired Share Awards").
20
<PAGE> 26
(8) Includes Paired Options for 75,000 Paired Shares that will become
exercisable over five years as follows: as to one-fourth of such amount on
August 12, 1998, as to an additional one-fourth of the amount on each of
August 12, 1999 and August 12, 2000 and as to the remaining amount on
August 12, 2001, and Paired Options for 125,000 Paired Shares with an
exercise price of $36.75 per Paired Share (the fair market value on the
date of grant) that will become exercisable as to one-third of such amount
on June 27, 1997, as to an additional one-third of such amount on June 27,
1998 and as to the remaining amount on June 27, 1999. Performance Awards
were also granted relating to the above 75,000 Paired Shares subject to
Paired Options granted under the Corporation LTIP and the 125,000 Paired
Shares subject to Paired Options granted during 1996 under the existing
share option plans.
(9) Includes a Restricted Stock Award pursuant to an employment agreement of
66,815 Paired Shares, that vests as to one-third of such amount on July 8,
1997, as to an additional one-third of such amount on July 8, 1998, and as
to the remaining amount on July 8, 1999.
(10) Includes Paired Options for 50,000 Paired Shares that will become
exercisable as to one-forth of such amount on August 12, 1998, as to an
additional one-fourth of the amount on each of August 12, 1999 and August
12, 2000 and as to the remaining amount on August 12, 2001; and Paired
Options for 50,000 Paired Shares with an exercise price of $33.125 per
Paired Share (the fair market value on the date of grant) that will become
exercisable as to one-third of such amount on April 26, 1997, as to an
additional one-third of such amount on April 26, 1998 and as to the
remaining amount on April 26, 1999. Performance Awards were also granted
relating to the 50,000 Paired Shares subject to Paired Options granted
under the Corporation LTIP and the 50,000 Paired Shares subject to Paired
Options granted during 1996 under the existing share option plans.
(11) Includes a Restricted Stock Award pursuant to an employment agreement of
30,189 Paired Shares, which Paired Shares vest as to one-third of such
amount on May 9, 1997, as to an additional one-third of such amount on May
9, 1998, and as to the remaining amount on May 9, 1999.
(12) Mr. Sternlicht has indicated that he intends to share the economic benefit
of a portion of the Paired Shares underlying these Paired Options with
employees of Starwood Capital.
(13) Unless otherwise noted, all Paired Options were granted as of August 12,
1996 at an exercise price $35 7/8 per Paired Share (the fair market value
of a Paired Share on that date).
VOTES REQUIRED
Each shareholder of the Trust (or such shareholder's proxy) entitled to
vote upon the approval of the Trust LTIP shall be entitled to cast one vote for
each Trust Share held of record on the Trust Record Date and each stockholder of
the Corporation (or such stockholder's proxy) entitled to vote upon the approval
of the Corporation LTIP shall be entitled to cast one vote for each Corporation
Share held of record on the Corporation Record Date. Approval of the Trust LTIP
requires the affirmative vote of the holders of a majority of the Trust Shares
cast (in person or by proxy) at the Trust Meeting and approval of the
Corporation LTIP requires the affirmative vote of the holders of a majority of
the Corporation shares cast (in person or by proxy) at the Corporation Meeting.
Consequently, shares which are voted to abstain from voting on the approval of
either of the LTIPs and broker non-votes will not affect the outcome of the vote
upon the approval of such LTIP.
21
<PAGE> 27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of November 7, 1996,
regarding the beneficial ownership of the Paired Shares by (i) each person known
by the Trust and the Corporation to be the beneficial owner of more than five
percent of the Paired Shares, (ii) each director and executive officer of the
Corporation and (iii) each trustee and executive officer of the Trust. Each
beneficial owner has sole voting and investment power with respect to all Paired
Shares beneficially owned, except as otherwise set forth in the notes to the
table.
<TABLE>
<CAPTION>
PAIRED SHARES
BENEFICIALLY OWNED(1)
------------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(16) AMOUNT(17) CLASS(1)
------------------------------------------------------- --------- ----------
<S> <C> <C>
FMR Corp............................................... 1,795,255(2) 6.7%(2)
Starwood Capital Group, L.L.C., its affiliated entities
and Barry S. Sternlicht.............................. 2,320,137(3) 8.0%
Eric A. Danziger....................................... 66,815(4) (5)
Theodore W. Darnall.................................... 31,189(6) (5)
Jeffrey C. Lapin....................................... 41,444(7) (5)
Ronald C. Brown........................................ 34,333(8) (5)
Kevin E. Mallory....................................... 1,000(9) (5)
Graeme W. Henderson.................................... 13,462(10) (5)
Bruce M. Ford.......................................... 13,222(11) (5)
Earle F. Jones......................................... 17,165(12) (5)
Bruce W. Duncan........................................ 20,666(12) (5)
Stephen R. Quazzo...................................... 12,965(12) (5)
Madison F. Grose....................................... 31,067(13) (5)
William E. Simms....................................... 12,100(12) (5)
Daniel H. Stern........................................ 12,000(12) (5)
Daniel W. Yih.......................................... 14,074(12) (5)
Jean-Marc Chapus....................................... 13,000(12) (5)
Steven R. Goldman...................................... 46,333(14) (5)
Michael A. Leven....................................... 12,000(12) (5)
Jonathan D. Eilian..................................... 30,667(13) (5)
All Trustees, Directors and Officers as a Group........ 2,743,639(15) (5)
</TABLE>
- ---------------
(1) Based on the number of Paired Shares outstanding on November 7, 1996.
(2) The business address for FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109. Based on information contained in Amendment No. 1 to
Schedule 13G dated February 14, 1996, 1,472,389 Paired Shares are held by
Fidelity Management & Research Company (a wholly owned subsidiary of FMR
Corp.) and 322,866 Paired Shares are held by Fidelity Management Trust
Company (a wholly owned subsidiary of FMR Corp.). FMR Corp. has sole voting
power with respect to 316,266 Paired Shares and dispositive power with
respect to all of these Paired Shares.
(3) The business address for Starwood Capital and Mr. Sternlicht is c/o
Starwood Capital Group, L.P., Three Pickwick Plaza, Suite 250, Greenwich,
Connecticut 06830. Based on information contained in Amendment No. 1 to
Schedule 13D dated January 23, 1996, filed by Starwood Capital, Barry S.
Sternlicht and the following Starwood Capital entities: Berl Holdings,
L.P., Starwood Apollo Hotel Partners VIII, L.P., Starwood-Apollo Hotel
Partners IX, L.P., Starwood-Nomura Hotel Investors, L.P., Starwood/Wichita
Investors, L.P., Starwood-Huntington Partners, L.P., Woodstar Partners I,
L.P., Firebird Consolidated Partners, L.P. Starwood Opportunity Fund II,
L.P. ("SOFI-II"), Berl Holdings I, Inc., SAHI, Inc., SNHI, Inc., BSS
Capital Partners, L.P., Sternlicht Holdings II, Inc., and SRL
22
<PAGE> 28
Holdings, Inc. Mr. Sternlicht has sole power to vote and dispose of 30,000
Paired Shares held by him. SOFI II beneficially owns 49,933 Paired Shares.
SOFI-II and Mr. Sternlicht have the power to vote and dispose of such
Paired Shares. Starwood Capital entities hold units in the Realty
Partnership and the Operating Partnership which are, subject to the 8.0%
Paired Share ownership limit exchangeable for an
aggregate of 5,943,576 Paired Shares (approximately 18.2% of the
outstanding Paired Shares after such exchange). Mr. Sternlicht also owns
15,000 Paired Shares, which are subject to the terms of a Restricted Stock
Award in the form of a warrant that he exercised in February 1996, and may
not be transferred prior to February 1998, an additional 15,000 Paired
Shares, which are subject to the terms of a second Restricted Stock Award
in the form of a warrant that becomes exercisable on January 1, 1997 and
may not be transferred prior to February 1998, and 149,000 Paired Shares
subject to presently exercisable Paired Options. Such Amendment No. 1 to
Schedule 13D reports that because of the 8.0% ownership limit, the Starwood
Capital entities cannot beneficially own more than 8.0% of the outstanding
Paired Shares. The amount beneficially owned and the percent of class
assumes that Starwood Capital entities exchange units for Paired Shares to
the maximum extent permitted within the ownership limit provision;
provided, however, that prior to receipt of any required Gaming Approval,
Starwood Capital's ownership of Paired Shares may not exceed 4.9% of the
outstanding Paired Shares.
(4) Includes 66,815 Paired Shares subject to a Restricted Stock Award.
(5) Less than 1%.
(6) Includes 30,189 Paired Shares subject to a Restricted Stock Award.
(7) Mr. Lapin's business address is 8439 Sunset Blvd., West Hollywood,
California 90069. Includes 39,277 Paired Shares subject to presently
exercisable options and 2,166 Paired Shares owned in a pension plan of
which Mr. Lapin is sole trustee and beneficiary.
(8) Includes 15,000 Paired Shares subject to a Restricted Stock Award and
18,333 Paired Shares subject to presently exercisable options.
(9) Includes 1,000 Paired Shares subject to presently exercisable options.
(10) Includes 850 Paired Shares owned in a Keogh Plan and 12,000 Paired Shares
subject to presently exercisable options.
(11) Includes 57 Paired Shares owned by Mr. Ford's wife and 12,000 Paired Shares
subject to presently exercisable options.
(12) Includes 12,000 Paired Shares subject to presently exercisable options.
(13) Includes 28,667 Paired Shares subject to presently exercisable options.
(14) Includes 25,000 Paired Shares subject to a Restricted Stock Award and
19,333 Paired Shares subject to presently exercisable options.
(15) Includes 404,277 Paired Shares that may be acquired upon the exercise of
presently exercisable options, and 167,004 Paired Shares subject to
Restricted Stock Awards.
(16) Except as otherwise noted, the business address of all persons listed is
c/o Starwood Lodging, 2231 East Camelback Road, 4th Floor, Phoenix, Arizona
85016.
(17) Includes Paired Shares subject to Restricted Stock Awards under the Trust
LTIP and the Corporation LTIP.
23
<PAGE> 29
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Trust. The following table provides certain summary information
concerning the compensation paid for the fiscal years ended December 31, 1995,
1994 and 1993 to the Trust's Chief Executive Officer and each other executive
officer of the Trust whose total compensation for 1995 exceeded $100,000 for
services rendered in all capacities to the Trust.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
------------------ OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS(#) COMPENSATION
- ---------------------------------------- ---- ------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Barry S. Sternlicht..................... 1995 $91,667 $150,000 417,000(1)(8)
Chairman and Chief Executive Officer
Jeffrey C. Lapin(2)..................... 1995 199,167 75,000 73,667(1)
President and Chief Operating 1994 190,000 75,000 2,000(1)(3)
Officer 1993 170,834 20,000
Steven R. Goldman(4)
Senior Vice President
Ronald C. Brown(5)...................... 1995 66,666 65,000 55,000(1)
Senior Vice President and Chief
Financial Officer
Michael W. Mooney(6).................... 1995 50,000 $ 75,000(7)
Vice President and Chief 1994 150,000 20,000 1,500(1)(3)
Financial Officer 1993 140,416 11,667
</TABLE>
- ---------------
(1) For information with respect to these options, see "Aggregated Option/SAR
Exercises in 1995 and December 31, 1995 Option Values" below.
(2) Mr. Lapin resigned as an officer of the Trust in June 1996.
(3) Adjusted for one-for-six reverse stock split which occurred in June 1995.
(4) Mr. Goldman became an officer of the Trust in September 1996.
(5) Mr. Brown became an officer of the Trust in July 1995.
(6) Mr. Mooney resigned as an officer of the Trust in July 1995.
(7) Amount shown reflects cash paid for severance.
(8) Mr. Sternlicht has indicated that he shares the economic benefit related to
160,000 Paired Shares underlying these options with certain employees of
Starwood Capital.
The Corporation. The following table provides certain summary information
concerning the compensation paid for the fiscal years ended December 31, 1995,
1994 and 1993 to each executive officer of the
24
<PAGE> 30
Corporation whose total compensation for 1995 exceeded $100,000 for services
rendered in all capacities to the Corporation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS COMPENSATION
------------------------- ------------ ------------
OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS(#)
- -------------------------------------------- ----- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Eric A. Danziger(1)
President and Chief Executive Officer
Theodore W. Darnall(2)
Executive Vice President and Chief
Operating Officer
Kevin E. Mallory 1995 $156,244 $50,000 30,000(3)
Executive Vice President 1994 150,000 37,500 1,500(3)(4)
1993 140,416 11,667
Steven R. Goldman 1995 114,583 75,000 46,000(3) $ 19,800(5)
Senior Vice President
</TABLE>
- ---------------
(1) Mr. Danziger became an officer of the Corporation in July 1996.
(2) Mr. Darnall became an officer of the Corporation in May 1996.
(3) For information with respect to these options, see "Aggregated Option/SAR
Exercises in 1995 and December 31, 1995 Option Values" below.
(4) Adjusted for one-for-six reverse stock split which occurred in June 1995.
(5) Amount shown reflects cash paid for housing allowance.
STOCK OPTIONS
As of December 31, 1995, employee stock options issued by the Trust to
purchase 642,278 Paired Shares were outstanding and employee stock options
issued by the Corporation to purchase 359,362 Paired Shares were outstanding.
The following table provides information with respect to the options
exercised during 1995 and the options held as of December 31, 1995 by the
executive officers of the Trust and the executive officers of the Corporation
named in the Summary Compensation Tables above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE
NUMBER OF OPTIONS/ VALUE AT ASSUMED
SECURITIES SARS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS/ EMPLOYEES FOR OPTION TERM
SARS IN LAST EXERCISE ---------------------
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE 5%($) 10%($)
- ----------------- ----------- ------------ ------------ ----------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barry S. 417,000(1)(2) 43.1 $ 23.00(8) June 29, 2005 5,656,241 14,130,989
Sternlicht
Jeffrey C. Lapin 36,667(3)(4) 3.8 $ 16.50(3)(8) January 31, 2000 133,535 288,216
31,000(5) 3.8 $ 23.00(8) June 29, 2005 420,488 1,050,505
Ronald C. Brown 55,000(6) 5.7 $ 24.38(8) July 10, 2005 793,762 1,984,760
Kevin E. Mallory 30,000(7) 3.0 $ 23.00(8) June 29, 2005 406,924 1,016,618
Steven R. Goldman 46,000(1) 4.8 $ 23.00(8) June 29, 2005 623,950 1,558,814
</TABLE>
25
<PAGE> 31
- ---------------
(1) Except for options for 6,000 shares which were exercisable upon granting,
options became exercisable as to one-third of the amount granted on June 29,
1996, and will become exercisable as to an additional one-third of the
amount on June 29, 1997 and as to the remaining amount granted on June 29,
1998.
(2) Mr. Sternlicht has indicated that he shares the economic benefit related to
160,000 of these options with certain employees of Starwood Capital. For
information with respect to these options, see "Aggregated Option/SAR
Exercises in 1995 and December 31, 1995 Option Values" below.
(3) Adjusted for one-for-six reverse stock split which occurred in June 1995.
(4) Options became exercisable as to one-third of the amount granted on January
31, 1995, as to an additional one-third of the amount granted on January 31,
1996 and will become exercisable as to the remaining amount granted on
January 31, 1997.
(5) Except for options for 6,000 shares which were exercisable upon granting,
options became exercisable as to one-half of the amount granted on June 18,
1996, and will become exercisable as to the remaining amount granted on June
18, 1997.
(6) Options became exercisable as to one-third of the amount granted on July 10,
1996, and will become exercisable as to an additional one-third of the
amount granted on July 10, 1997 and as to the remaining amount granted on
July 10, 1998.
(7) Options became exercisable as to one-third of the amount granted on June 29,
1996, and will become exercisable as to an additional one-third of the
amount granted on June 29, 1997 and as to the remaining amount granted on
June 29, 1998.
(8) The per Paired Share exercise prices are equal to the fair market value of a
Paired Share on the day the options were granted.
Option Exercises and Holdings
The following table provides information with respect to the options held
as of December 31, 1995 by the executive officers of the Trust and the executive
officers of the Corporation named in the Summary Compensation Tables above.
AGGREGATED OPTION/SAR EXERCISES IN 1995
AND DECEMBER 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE OPTIONS/SARS AT FISCAL
EXERCISE(#) REALIZED($) YEAR-END(#) AT FISCAL YEAR-END($)(1)
------------ ----------- --------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Barry S. Sternlicht 6,000 411,000 39,000 2,671,500
Jeffrey C. Lapin 8,333 194,784 20,556 54,111 228,228 540,930
Ronald C. Brown 0 55,000 0 281,875
Michael W. Mooney 4,667 1,000 110,675 13,000
Kevin E. Mallory 4,667 31,000 110,675 208,000
Steven R. Goldman 6,000 40,000 39,000 260,000
</TABLE>
- ---------------
(1) Value is defined as the market price of the Paired Shares at December 31,
1995 less the exercise price of the option. The average of the high and low
market prices of the Paired Shares at December 31, 1995 was $29.50.
AGREEMENTS WITH EXECUTIVE OFFICERS
Eric A. Danziger and the Corporation entered into an employment agreement
dated as of June 27, 1996, pursuant to which Mr. Danziger was employed as
President and Chief Executive Officer of the Corporation at an annual salary of
$365,000 and was guaranteed a minimum bonus of $150,000 for 1996. Mr. Danziger
also
26
<PAGE> 32
received Paired Options to purchase 125,000 Paired Shares exercisable at $36.75
per Paired Share (the fair market value on the date of grant), which vest in
three equal annual increments from the date of grant, and, subject to
shareholder approval of the Corporation LTIP, a Restricted Stock Award of 66,815
Paired Shares which also vests in three equal annual increments. Mr. Danziger
also received relocation expenses in connection with moving his residence from
Dallas, Texas to Phoenix, Arizona, and in connection therewith also received a
one-year non-interest bearing loan from the Corporation for $150,000 secured by
a second mortgage on his new residence in Phoenix, Arizona. Mr. Danziger's
employment is terminable by the Corporation or Mr. Danziger with or without
cause. In the event his employment is terminated by the Corporation without
cause or by Mr. Danziger in the event the Corporation assigns to him duties
inappropriate for his position or reduces his responsibilities, then Mr.
Danziger is entitled to a severance package of one year's base salary, the
immediate vesting of all outstanding Paired Options and Paired Shares subject to
Restricted Stock Awards and company-paid medical benefits for 12 months.
Theodore W. Darnall and the Corporation entered into an employment
agreement dated as of April 19, 1996, pursuant to which Mr. Darnall was employed
as Executive Vice President and Chief Operating Officer of the Corporation at an
annual salary of $275,000 and was guaranteed a minimum bonus of $137,500 for
1996. Mr. Darnall also received Paired Options to purchase 50,000 Paired Shares
exercisable at $33.125 per Paired Share (the fair market value on the date of
grant), which vest in three equal annual increments and, subject to shareholder
approval of the Corporation LTIP, a Restricted Stock Award of 30,189 Paired
Shares which also vests in three equal annual increments. Mr. Darnall also
received relocation expenses in connection with moving his residence from
Pittsburgh, Pennsylvania to Phoenix, Arizona, and in connection therewith
received a non-interest bearing bridge loan of up to $250,000 secured by a
second mortgage on his new residence to be purchased in Phoenix, Arizona. The
bridge loan will mature as to $100,000 upon the sale of Mr. Darnall's home in
Pittsburgh, and the balance upon termination of his employment with the
Corporation. Mr. Darnall's employment is terminable by the Corporation with or
without cause. In the event his employment is terminated by the Corporation
without cause or by Mr. Darnall due to breach by the Corporation, then Mr.
Darnall is entitled to a severance package of one year's base salary, the
immediate vesting of all outstanding Paired Options and Paired Shares subject to
Restricted Stock Awards and company-paid medical benefits for 12 months.
The Trust had an employment agreement with Mr. Lapin and the Corporation
had an employment agreement with Mr. Mallory which agreements provided that the
executives would receive annual salaries in 1995 of $200,000 and $150,000,
respectively, and such annual bonuses, if any, as the Boards of the Trust and
the Corporation, respectively, may determine. Mr. Lapin's employment agreement
was terminated in connection with the Separation Agreement and Mr. Mallory's
employment agreement expired June, 1995. Under the terms of his employment
agreement Mr. Lapin was entitled to an annual bonus of not less than $75,000 and
was granted Paired Options to purchase 41,667 Paired Shares at an exercise price
equal to $16.50 per Paired Share (the fair market value of the Paired Shares on
the date of grant) which will vest at a rate no longer than the most rapid rate
of vesting of Paired Options granted to any other executive during the term of
his employment agreement. Mr. Lapin's annual salary increased to $225,000 in
1996. Mr. Lapin also was eligible to participate in all employee benefit plans
and fringe benefits, if any, the Trust made available to its other executive
officers. Mr. Lapin could terminate his employment for "Good Reason" as defined
in his employment agreement including an assignment of duties inconsistent with
his position, a substantial alteration of his responsibilities, a breach of the
agreement by the Trust, removal from office without cause (as defined),
relocation of the Trust's principal executive offices, a change in the
composition of 51% of the Trustees, a decision by the Board of Trustees that the
Trust shall merge, sell or dispose of all or substantially all of its assets,
dissolve or liquidate, or the failure of Mr. Lapin to be a member of the Board
of Trustees other than for cause (as defined). If Mr. Lapin terminated his
employment, he was entitled to receive a lump sum payment equal to the base
salary and bonuses that would have been payable had he continued to be employed
for the remainder of the term of the employment agreement, and all fringe
benefits to which he would have been entitled through the remainder of the term
of the employment agreement (other than Paired Options or stock loans not
granted prior to the date of termination).
27
<PAGE> 33
Pursuant to Mr. Lapin's employment agreement, the Trust loaned $250,000 to
Mr. Lapin in 1995. The loan has a term of 10 years, bears interest at the lowest
applicable rate prescribed by section 1274(d) of the Code and is unsecured. Mr.
Lapin will have the right at any time to repay up to 50% of the loan (plus 50%
of accrued interest and any collection costs) by delivering Paired Shares for
credit at the rate of $11.50 per Paired Share (which is one-half of the price to
the public per Paired Share in the June 1995 public offering of Paired Shares by
the Trust and the Corporation).
The Trust entered into a Separation Agreement dated as of June 18, 1996
(the "Separation Agreement") with Jeffrey C. Lapin in connection with Mr.
Lapin's resignation as President and Chief Operating Officer of the Trust. The
Trust agreed to conditionally forgive, after one year, $150,000 of the $250,000
loan from the Trust described above. The Trust also agreed to immediately vest,
in part, the Paired Options held by Mr. Lapin and to grant him an additional
Paired Option to purchase 5,000 Paired Shares exercisable at $37 7/8, which
vested as to two-thirds of such amount on his termination date and as to the
remaining amount on January 31, 1997, and upon exercise of the Paired Option, to
pay to Mr. Lapin the difference between $16.50 and the lower of the exercise
price and the then market value of a Paired Share. All Paired Options held by
Mr. Lapin were amended to the extent required to permit them to be exercised for
their full maximum term. Mr. Lapin agreed to render consulting services for 18
months for which he will be paid $235,000, and the Trust also agreed to pay Mr.
Lapin a fee of up to $250,000 in connection with the sale within 18 months of
the King 8 Hotel and Gambling Hall owned by the Trust in Las Vegas, Nevada. Mr.
Lapin agreed that for 3 years he would not participate or be involved with
others in any tender or exchange offer, proxy contest or solicitation or
purchase or be part of a group which purchases in excess of 4.9% of the
outstanding Paired Shares.
REPORT ON EXECUTIVE COMPENSATION
During 1995, the Board of Trustees of the Trust and the Management
Committee and Board of Directors of the Corporation made decisions with respect
to executive compensation for executive officers of the Trust and the
Corporation, respectively, based on the recommendations of the respective
Compensation Committees and have furnished the following report on executive
compensation. Although the Board of Trustees of the Trust and the Management
Committee and Board of Directors of the Corporation make independent
compensation decisions with respect to their respective executive officers, as
described herein they follow similar compensation policies and typically measure
the performance of their respective executive officers based in large part on
the performance of Starwood Lodging as a whole.
The primary objective of the Board of Trustees of the Trust and the
Management Committee and Board of Directors of the Corporation with respect to
executive compensation is to establish programs which attract and retain key
managers and align the compensation received by executive officers with the
overall business strategies, values, performance and financial condition of
Starwood Lodging and to the achievement of individual performance goals. To this
end, the Board of Directors of the Corporation and the Board of Trustees of the
Trust have each endorsed an executive compensation philosophy which includes the
following considerations:
- A "pay-for-performance" orientation that differentiates compensation
results based upon corporate and individual performance;
- An emphasis on stock incentives as a significant component of total
compensation in order to more closely align the interests of Starwood
Lodging executives with the long-term interests of the shareholders;
- An emphasis on total compensation vs. cash compensation, which motivates
and rewards Starwood Lodging executives with total compensation
(including incentive programs) at or above competitive levels if
performance is superior;
- Recognition that as an executive's level of responsibility increases, a
greater portion of the total compensation opportunity should be based
upon stock and other performance incentives and less on salary and
employee benefits; and
28
<PAGE> 34
- An appropriate mix of short-term and long-term compensation which
facilitates retention of talented executives and encourages stock
ownership and capital accumulation.
The primary components of the program are: (a) base salaries; (b) annual
cash incentive opportunities; and (c) long-term incentive opportunities in the
form of Paired Options.
Individual compensation is subject to variation based on financial,
strategic and individual performance. The Board of Trustees of the Trust and the
Management Committee and Board of Directors of the Corporation consider the
total compensation (earned or potentially earned) in establishing each element
of compensation.
The base salary levels of executive officers are determined periodically by
evaluating the performance of the executive officers and their contributions to
the Trust and the Corporation, their responsibilities, experience and potential;
and compensation practices for comparable positions at other companies. The
annual bonuses are determined in the discretion of the respective Boards of the
Trust and the Corporation, based on individual financial performance and the
recommendations of the respective Compensation Committees.
During 1995 the long-term incentive compensation of executive officers
consisted exclusively of grants of Paired Options to purchase Paired Shares.
Such Paired Option grants are designed to develop and encourage stock ownership
by executive officers, to reward long-term business success and to develop a
parallel interest between executive officers and holders of Paired Shares.
Paired Option grants only have value if the market price of the Paired Shares
exceeds the exercise price of the Paired Options or increases from the date of
grant and, in general, vest and become exercisable over time, in order to
encourage retention of the executive officer. In determining the amounts and
terms of grants of Paired Options to individual officers, the respective Boards
of the Trust and the Corporation take into account the responsibilities,
performance and anticipated contributions of the officers, as well as the
compensation practices for comparable positions at other companies.
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
AND BOARD OF TRUSTEES
MANAGEMENT COMMITTEE OF THE TRUST
(AS OF DECEMBER 1995) (AS OF DECEMBER 1995)
- --------------------- ---------------------
<S> <C>
Bruce M. Ford Bruce W. Duncan
Graeme W. Henderson Madison F. Grose
Earle F. Jones Jeffrey C. Lapin
Jean-Marc Chapus Stephen R. Quazzo
Jonathan D. Eilian William E. Simms
Steven R. Goldman Daniel H. Stern
Michael A. Leven Barry S. Sternlicht
Barry S. Sternlicht
Daniel W. Yih
</TABLE>
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During 1995 and early 1996, the compensation committee of the Trust (the
"Trust Compensation Committee") was comprised of Messrs. Sternlicht, Grose and
Simms. Based on informal discussions, the Trust Compensation Committee made
recommendations to the Trust's Board of Trustees regarding the compensation of
the Trust's executive officers (other than with respect to Mr. Sternlicht, as to
which Messrs. Sternlicht and Grose recused themselves.) Based in part on the
recommendations of the Trust Compensation Committee, the Board of Trustees of
the Trust and the executive committee of the Board of Trustees (Messrs.
Sternlicht, Lapin and Grose) made decisions with respect to the compensation of
the Trust's executive officers. Messrs. Sternlicht and Lapin, who were executive
officers of the Trust and members of the Board of Trustees of the Trust, did not
participate at the meetings related to their own compensation.
29
<PAGE> 35
During 1995 and early 1996, the compensation committee of the Management
Committee (the "Corporation Compensation Committee") was made up of Messrs.
Sternlicht, Jones and Chapus. The Corporation Compensation Committee met
informally during 1995 and early 1996 to discuss the compensation of the
Corporation's executive officers. Based in part on the recommendations of the
Corporation Compensation Committee, the executive committee of the Management
Committee comprised of Messrs. Sternlicht, Eilian and Goldman, made decisions
with respect to the compensation of the Corporation's executive officers (except
that Mr. Goldman recused himself with respect to his own compensation).
SHAREHOLDER RETURN PERFORMANCE
Set forth below is a line graph comparing the cumulative total shareholder
return on the Paired Shares against the cumulative total return on the Standard
and Poor's Corporation Composite -- 500 Stock Index (the "S&P 500 Index") and
the Standard & Poor's Corporation Hotel/Motel Composite Index (the "S&P
Hotel/Motel Index") for the five fiscal years beginning January 1, 1991 and
ending December 31, 1995 and the nine-month period beginning January 1, 1996 and
ending September 30, 1996. The graph assumes that the value of the investments
was 100 on December 31, 1990 and that all dividends and other distributions were
reinvested.
<TABLE>
<CAPTION>
Measurement Period Starwood Lodging
(Fiscal Year Covered) Trust S&P 500 S&P Hotel-Motel
<S> <C> <C> <C>
12/31/90 100 100 100
12/31/91 77.774 130.335 131.95
12/31/92 88.887 140.251 185.57
12/31/93 233.323 154.324 345.73
12/30/94 255.549 156.419 307.85
12/29/95 455.493 214.99 363.4
9/30/96 657.003 243.91 430.76
</TABLE>
30
<PAGE> 36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reorganization. Pursuant to a reorganization of the Trust and the
Corporation consummated as of January 1, 1995 (the "Reorganization") the Trust
contributed to SLT Realty Limited Partnership (the "Realty Partnership")
substantially all of the Trust's properties and assets, subject to all of its
liabilities, in exchange for a general partner interest in the Realty
Partnership and Starwood Capital contributed to the Realty Partnership cash,
certain hotel properties, first mortgage notes and senior debt of the Realty
Partnership in exchange for a limited partner interest in the Realty
Partnership. In addition, the Corporation and its subsidiaries contributed to
the Operating Partnership substantially all of their assets, excluding the
Gaming Assets, subject to certain liabilities, in exchange for general partner
interests in the Operating Partnership and Starwood Capital contributed to the
Operating Partnership cash, furnishings, equipment other hotel operating assets
in exchange for a limited partner interest in the Operating Partnership. The
Reorganization was approved by the shareholders of the Trust and the Corporation
at meetings held on December 15, 1994. The limited partnership interests of the
Realty Partnership and the Operating Partnership held by Starwood Capital are
exchangeable on a one-for-one basis for Paired Shares. See "Security Ownership
of Certain Beneficial Owners and Management."
Barry S. Sternlicht, the founder, President and Chief Executive Officer and
General Manager of Starwood Capital is also the Chairman and Chief Executive
Officer of the Trust and is a Trustee of the Trust, is a member of the
Management Committee of the Operating Partnership and has been elected as a
Director of the Corporation to take office upon the receipt of any required
Gaming Approval. In addition, Mr. Grose, a Trustee of the Trust, is a Managing
Director and the General Counsel of Starwood Capital and Mr. Eilian, who is a
member of the Management Committee of the Operating Partnership and has been
elected as a Director of the Corporation to take office upon the receipt of any
required Gaming Approval, is a founding member and Managing Director of Starwood
Capital.
Certain Reimbursements and Payments to Starwood Capital. Starwood Capital
and Starwood Lodging have agreed that, subject to approval by the independent
Trustees or Directors, as appropriate, Starwood Capital will be reimbursed for
out-of-pocket costs and expenses for any services provided to Starwood Lodging.
Starwood Capital will also be reimbursed for its internal cost (including
allocation of overhead) for services provided to Starwood Lodging, provided
that, where such costs are currently expensed by Starwood Lodging, such
reimbursement may not exceed $250,000 for the twelve months ending June 30,
1996. Subject to shareholder approval of the Trust LTIP, in connection with the
acquisition of the Institutional Portfolio in August 1996 the Trust granted
Starwood Capital a one-time Restricted Stock Award of 167,247 Paired Shares.
During 1996, in addition to the one-time Restricted Stock Award, Starwood
Lodging reimbursed Starwood Capital for $414,000 of internal costs, of which
$226,000 related to 1995. If the respective LTIPs, including the Restricted
Stock Award granted to Starwood Capital in connection with the acquisition of
the Institutional Portfolio, are approved by the shareholders of the Trust and
the stockholders of the Corporation, effective August 12, 1996, Starwood
Lodging's reimbursement arrangement with Starwood Capital would be changed so as
to eliminate reimbursement for internal costs of Starwood Capital for any
services of senior management of Starwood Capital (subject to the same annual
limitation of $250,000 as set forth above for services of employees of Starwood
Capital other than such senior management) and after one year, for any services
of any employee of Starwood Capital.
During 1995, the Trust reimbursed Starwood Capital approximately $1.6
million, the majority of which represented a deposit made by Starwood Capital
for the benefit of Starwood Lodging in connection with the acquisition of an
interest in the Boston Park Plaza Hotel. Aside from Starwood Capital's internal
cost (as referred to above), during 1995 Starwood Capital incurred approximately
$1.2 million of additional costs which were paid directly by Starwood Lodging to
third party vendors for services provided to Starwood Lodging, representing
costs associated with the Reorganization, the June 1995 offering of Paired
Shares and hotel acquisitions.
In April 1995, Starwood Capital provided to the Trust a $9.6 million loan,
all of which has been repaid, in order to enable the Trust to acquire the Omni
Hotel in Chapel Hill, North Carolina. This loan bore interest at 12% per annum
and was repaid in July 1995.
31
<PAGE> 37
In May, 1995, the Trust also received a $5 million unsecured loan from
Starwood Capital to fund the deposit for the acquisition of the Sheraton Colony
Square Hotel in Atlanta, Georgia. This loan bore interest at 12% per annum and
was repaid in July 1995.
As part of the consideration to Starwood Capital in connection with the
Reorganization, the Partnerships agreed to pay an amount to Starwood Capital
only if the Trust and the Corporation consummated a public offering of Paired
Shares prior to June 30, 1996, which offering results in the receipt by the
Trust and the Corporation of gross proceeds of not less than $150 million. Upon
the consummation of the public offering of Paired Shares in July 1995, the Trust
and the Corporation paid $3.7 million to Starwood Capital pursuant to such
agreement.
Westin Agreement. Starwood Capital owns an interest in the Westin Hotel
Company and certain affiliates ("Westin"), which own equity interests in
domestic and international hotels and which manage, franchise or represent
hotels worldwide. The Trust and the Corporation have entered into an agreement
with Westin pursuant to which Westin has agreed that during the period in which
an officer, director, general partner or employee of Starwood Capital is on
either the Board of Trustees or the Board of Directors, and Starwood Capital
co-controls Westin, Westin will not acquire or seek to acquire United States
hotel equity interests, other than certain specified acquisitions, including,
without limitation, minority equity investments made in connection with Westin's
acquisition of a management company. The Trust and the Corporation have agreed
that under certain circumstances if Westin is prohibited from consummating an
opportunity which was not being independently pursued by the Trust and the
Corporation prior to such prohibition, the Trust and the Corporation will not
pursue such opportunity for 270 days after such prohibition.
Management Obligations of Western Host. In connection with the settlement
of shareholder litigation, Messrs. Ronald A. Young and John F. Rothman caused
each of the Western Host Partnerships (other than Western Host Santa Maria
Partners) to terminate management obligations with the Corporation's subsidiary,
Western Host, Inc., ("Western Host"), with respect to that partnership's hotel,
indemnified the Corporation and Western Host against all claims that might be
made against Western Host in connection with its status as a general partner of
Western Host Santa Maria Partners, Western Host Pasadena Partners and Western
Host San Francisco Partners or in connection with any fact or circumstance
occurring since January 1, 1993 with respect to any of the Western Host hotels,
and delivered to the Corporation an irrevocable letter of credit in the amount
of $800,000. Western Host has agreed to accept the termination of its management
obligations with respect to the Western Host hotels and has drawn on the letter
of credit for the full $800,000. In addition, $120,000 of the management fees
and all costs and amounts advanced to the partnerships which were payable to
Western Host were paid in full settlement of such amounts due at December 31,
1993.
Messrs. Young and Rothman also agreed to be responsible for a percentage of
any retroactive adjustments in worker's compensation insurance premiums.
Starwood Lodging has paid $167,041 for retroactive worker's compensation
insurance premiums and has sought reimbursement from Messrs. Young and Rothman
of their share of that amount (approximately an aggregate of $56,000). In
October 1995, the Corporation commenced litigation against Messrs. Young and
Rothman to collect such amounts (Starwood Lodging Corp. v. Ronald A. Young, et
al., San Diego Superior Court Case No. 693822). In April 1996, the Corporation
settled such litigation and released Messrs. Young and Rothman and their
respective affiliates with respect to premiums paid in 1995 in exchange for the
payment of $40,655, including $5,000 in attorneys' fees.
Ross Agreement. In November, 1994, Starwood Capital entered into an
agreement (the "Ross Agreement") with Leonard Ross and his affiliates ("Ross").
At that time, Ross held approximately 9.8% of the outstanding Paired Shares of
the Trust and the Corporation (approximately 1.4% as of December 31, 1995) and
had opted out of the settlement by the Trust and the Corporation of certain
shareholder litigation unrelated to the Reorganization or Starwood Capital. In
addition to preserving his rights to institute an action against the Trust and
the Corporation with respect to the matters covered by such settlement, Ross had
threatened to assert other alleged causes of action against the Trust and the
Corporation.
The Ross Agreement was entered into in settlement of the threatened
litigation by Ross and provided for an assignment to Starwood Capital of Ross's
claims. In connection with such assignment, Starwood Capital
32
<PAGE> 38
agreed to purchase all of Ross's Paired Shares at Ross's election during a
60-day period beginning in December 1995, at a price of $33.75 per Paired Share
subject to certain adjustments. Starwood Capital, as the assignee of Ross's
claims against the Trust and the Corporation, agreed that the maximum amount
Starwood Capital may recover under such claims would not exceed an aggregate of
$1.8 million and the Trust and the Corporation agreed to toll the statute of
limitations respecting such claims until January 31, 1996. The Trust and
Corporation also agreed that under certain circumstances they may be obligated
severally to indemnify Starwood Capital with respect to Starwood Capital's
obligations to Ross, up to a maximum of $1.8 million, upon receipt of a full
releases from Starwood Capital of all of the claims assigned by Ross.
Ross elected to sell his Paired Shares, and in January 1996 those Paired
Shares were sold to a third party through Merrill Lynch. The Paired Shares were
sold at a price of $29.625 per Paired Share; the Trust and Corporation paid
$1,375,743 in the aggregate pursuant to their indemnity obligations, and
Starwood Capital released the Trust and the Corporation from all the claims
assigned to it by Ross.
Senior Debt Related Transactions. In May 1994, Starwood Capital purchased
(at a discount) approximately $21 million of the Trust's senior debt at a public
auction by the institutional holder of such debt. In August 1994, an affiliate
of Merrill Lynch (the "New Lender") purchased $74 million of the Trust's senior
debt, including the senior debt previously held by Starwood Capital, pursuant to
a privately negotiated transaction and at a discount. In conjunction with such
purchase by the New Lender, it entered into an agreement (the "Swap Agreement")
providing that (i) Starwood Capital could acquire such senior debt within a
specified period at the New Lender's cost basis and (ii) the excess of debt
service payments made on such senior debt over the New Lender's cost basis,
together with a specified return thereon, would be payable to Starwood Capital.
In March 1995, the senior debt was refinanced by the New Lender and the Swap
Agreement was terminated with Starwood Capital receiving (a) the return of $13.1
million of cash collateral which it had deposited as security for its
obligations in respect of the Swap Agreement, (b) additional cash of $2.7
million, (c) $12 million of the senior debt and (d) certain warrants attendant
to the senior debt. Starwood Capital contributed such senior debt to the
Partnerships in exchange for 813,880 Units of the Partnerships. The Trust and
the Corporation paid $786,000 to Starwood Capital to cancel certain warrants
relating to the senior debt in accordance with the requirements of such senior
debt.
Share Purchase Agreements. Prior to December 1989, the Trust and the
Corporation maintained share purchase plans pursuant to which Trustees,
Directors, officers and employees of the Trust and the Corporation were granted
rights to purchase Paired Shares from the Trust and the Corporation at prices
based upon the then fair market value of the Paired Shares. A purchaser of
Paired Shares under a share purchase plan made a cash down payment equal to 10%
of the purchase price and executed a promissory note in favor of the Trust and
the Corporation for the balance. Certificates evidencing Paired Shares purchased
under a share purchase plan were pledged to the Trust or the Corporation as
collateral to secure payment of the promissory note. Prior to the satisfaction
of the obligations represented by the note, the purchaser was entitled to vote
the Paired Shares held in pledge, but not to transfer the purchaser's interest
in those shares. In 1995, the only share purchase agreements remaining in effect
were those between the Trust and each of Mr. Henderson, a former trustee of the
Trust and a director of the Corporation, and Sherwin L. Samuels, a former
trustee of the Trust, and between the Corporation and each of Messrs. Jones and
Ford. Upon the effectiveness of the Reorganization, the share purchase
agreements with Messrs. Henderson, Samuels and Ford were terminated and the
nonrecourse indebtedness thereunder was canceled (an aggregate of $56,250 with
respect to Mr. Henderson, $82,391 with respect to Mr. Samuels, and $108,784 with
respect to Mr. Ford). In addition, the Paired Shares pledged in respect of such
indebtedness were either released from such pledge, to the extent that such
Paired Shares had been paid for (an aggregate of 223 Paired Shares for which
$20,625 was paid with respect to Mr. Henderson, 356 Paired Shares for which
$32,922 was paid with respect to Mr. Samuels, and 465 Paired Shares for which
$45,279 was paid with respect to Mr. Ford) or were forfeited by the individual,
to the extent such Paired Shares had not been paid for.
33
<PAGE> 39
Other Relationships.
Sherwin L. Samuels, the General Counsel and Secretary of the Trust, is a
partner through a professional corporation of the law firm of Sidley & Austin.
Sidley & Austin provides legal services to the Trust, the Corporation and
Starwood Capital and certain of its affiliates.
On March 24, 1995, the Realty Partnership and the Trust entered into an
Amended and Restated Credit Agreement pursuant to which the Realty Partnership
borrowed $131.75 million which was used primarily to refinance all outstanding
senior indebtedness (after the exchange by a Starwood Capital entity of $12
million of senior indebtedness for units of the Realty Partnership and the
Operating Partnership) and approximately $27 million of first mortgage debt. In
connection with the refinancing under the such credit agreement, the Realty
Partnership paid $514,000 to one of its senior lenders and agreed that a portion
of the lender warrants issued in connection with an existing credit agreement
could be canceled upon the payment to a Starwood Capital entity of a $786,000
cancellation fee. Effective March 31, 1995, the Realty Partnership issued an
unsecured note payable to the Starwood Capital entity and the remaining such
lender warrants were canceled. The transactions relating to the cancellation of
lender warrants were recorded as a reduction in paid-in capital.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETINGS
Shareholder proposals to be considered for inclusion in the proxy
soliciting material for the 1997 Annual Meeting of Shareholders of the Trust or
the 1997 Annual Meeting of Stockholders of the Corporation must be received by
the Corporation not later than July 28, 1997.
Pursuant to Section 4A of Article I and Section 13 of Article III of the
Trustees' Regulations and Section 7 of Article II and Section 1A of Article III
of the Corporation's Bylaws, a shareholder of the Trust or a stockholder of the
Corporation who intends at an annual meeting of shareholders or stockholders to
nominate one or more individuals for election at such meeting as a Trustee or
Director, or to present to a meeting of shareholders or stockholders one or more
other items of business, must notify the Trust or the Corporation of the same
not more than 75 days nor less than 50 days before the date of the meeting (or,
if less than 60 days' advance notice or prior public disclosure of the meeting
date is provided, within 10 days after such notice is mailed or such prior
public disclosure of the meeting date is provided, whichever occurs first). A
copy of the Trustees' Regulations or the Corporation's Bylaws, as the case may
be, which documents set forth the information that must be included in any such
notice, will be furnished without charge to any owner of Paired Shares upon
written or oral request made to Shareholder Relations, Starwood Lodging Trust,
2231 E. Camelback Road, Suite 410, Phoenix, Arizona 85016, telephone number:
(602) 852-3900, or Stockholder Relations, Starwood Lodging Corporation, 2231 E.
Camelback Road, Suite 400, Phoenix, Arizona 85016, telephone number: (602)
852-3900.
34
<PAGE> 40
INDEPENDENT PUBLIC ACCOUNTANTS
A member of Coopers & Lybrand, L.L.P., the independent public accountants
for 1995 for the Trust and the Corporation, is expected to be present at the
Trust Meeting and the Corporation Meeting, will have an opportunity to make a
statement if so desired, and will be available to respond to appropriate
questions.
------------------------------
The name "Starwood Lodging Trust" is the designation of Starwood Lodging
Trust and its Trustees (as Trustees but not personally) under a Declaration of
Trust dated August 25, 1969, as amended and restated, and all persons dealing
with Starwood Lodging Trust must look solely to Starwood Lodging Trust's
property for the enforcement of any claims against Starwood Lodging Trust, as
the Trustees, officers, agents and security holders of Starwood Lodging Trust
assume no personal obligations of Starwood Lodging Trust, and their respective
properties shall not be subject to claims of any person relating to such
obligation.
------------------------------
By Order of the Board of Trustees
STARWOOD LODGING TRUST
November 25, 1996 Sherwin L. Samuels
Secretary
By Order of the Board of Directors
STARWOOD LODGING CORPORATION
November 25, 1996 Nir E. Margalit
Secretary
No person is authorized to give any information or to make any
representations with respect to the matters described in this Joint Proxy
Statement other than those contained herein. Any information or representations
with respect to such matters not contained herein must not be relied upon as
having been authorized by the Trust or the Corporation. This Joint Proxy
Statement does not constitute the solicitation of a proxy in any jurisdiction to
or from any person to whom it is unlawful to make such solicitation in such
jurisdiction. The delivery of this Joint Proxy Statement shall not, under any
circumstances, create any implication that there has been no change in the
affairs of the Trust or the Corporation since the date hereof or that the
information in this Joint Proxy Statement is correct as of any time subsequent
to the date hereof.
35
<PAGE> 41
EXHIBIT A
STARWOOD LODGING TRUST
1995 LONG-TERM INCENTIVE PLAN
(AMENDED AND RESTATED AS OF AUGUST 12, 1996)
I. INTRODUCTION
1.1 PURPOSES AND GENERAL. The purposes of the 1995 Long-Term Incentive
Plan (the "Plan") of Starwood Lodging Trust (the "Trust"), as amended and
restated as of August 12, 1996, are to align the interests of the Trust's
shareholders and the recipients of awards under this Plan by increasing the
proprietary interest of such recipients in the Trust's growth and success and to
advance the interests of the Trust by attracting and retaining officers, key
employees, consultants and advisers, as well as qualified persons for service as
trustees of the Trust ("Trustees"). For purposes of this Plan, references to
employment by or service as an officer, employee, consultant, adviser or Trustee
of the Trust shall also mean employment by or service as an officer, employee,
consultant, adviser, trustee or director of a subsidiary of the Trust. In
addition, references to Trustees include persons elected as Trustees who will
begin to serve as Trustees at a future date.
This Plan seeks to accomplish the foregoing purposes by providing a means
whereby (i) options to purchase from the Trust shares of beneficial interest,
par value $.01 per share ("Trust Shares") and options to purchase from the Trust
shares of common stock, par value $.01 per share, of the Corporation
("Corporation Shares") may be granted in accordance with Section II to Eligible
Persons and shall be granted, in accordance with Section V, to Trustees, (ii)
Trust Shares and Corporation Shares may be granted in accordance with Section
III to Eligible Persons, and shall be granted in accordance with Section V to
Trustees, and (iii) Performance Awards may be granted in accordance with Section
IV to Eligible Persons. Pursuant to an Agreement dated June 25, 1980, as
amended, between the Trust and Starwood Lodging Corporation (the "Corporation"),
all outstanding Trust Shares and Corporation Shares are paired on a one-for-one
basis and trade as units consisting of one Trust Share and one Corporation Share
("Paired Shares"). Accordingly, each option to purchase Trust Shares (a "Trust
Share Option") shall be paired with an option to purchase an equal number of
Corporation Shares (a "Corporation Share Option" and each such paired Trust
Share Option and Corporation Share Option is herein referred to as a "Paired
Option"); similarly, each award of Trust Shares shall be paired with an award of
an equal number of Corporation Shares.
Each Paired Option or Stock Award may be exercised, terminated, cancelled,
forfeited, transferred or otherwise disposed of only in units consisting of
Paired Shares. Accordingly, a Trust Share Option, or portion thereof, or a Trust
Share, or portion thereof, may be exercised, terminated, cancelled, forfeited,
transferred or otherwise disposed of only in connection with, and to the same
extent as, the exercise, termination, cancellation, forfeiture, transfer or
other disposition of a Corporation Share Option or Corporation Share, as the
case may be. The Committee may designate that a Trust Share Option constituting
part of a Paired Option is intended to be an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor provision (an "incentive share option"). No
Corporation Share Option constituting part of a Paired Option hereunder may be
an "incentive stock option" within the meaning of Section 422 of the Code.
1.2 CERTAIN DEFINITIONS. As used herein, the words set forth in the
Glossary contained in Section 7.13 shall have the meanings therein indicated.
1.3 ADMINISTRATION. This Plan shall be administered by the Committee. Any
one or a combination of the following Awards may be made under this Plan to
Eligible Persons: (i) Paired Options; (ii) Restricted Stock Awards; (iii)
Performance Awards. The Committee may, subject to the terms of this Plan, select
Eligible Persons for participation in the Plan and shall determine the form,
amount and timing of each Award and, if applicable, the number of Paired
Options, Paired Shares or Performance Awards subject to such an Award, the
exercise price or base price associated with the Award, including the portion
that is attributable to the Trust Share or Trust Share Option and the
Corporation Share or the Corporation Share Option, respectively, the time and
conditions of exercise or settlement of the Award and all other terms and
conditions
<PAGE> 42
of the Award, including without limitation the form of the Agreement relating to
the Award. The Committee may, in its sole discretion and for any reason at any
time, subject to the requirements imposed by Section 162(m) of the Code and
regulations promulgated thereunder in the case of an Award intended to be
qualified performance-based compensation, take action such that (i) any or all
outstanding Paired Options shall become exercisable in part or in full, (ii) all
or a portion of the Restriction Period applicable to any outstanding Restricted
Stock Award shall lapse, (iii) all or a portion of the Performance Period
applicable to any outstanding Performance Award shall lapse, (iv) the
Performance Measures applicable to any outstanding Paired Option or Restricted
Stock Award and to any outstanding Performance Award shall be deemed to be
satisfied in whole or in part.
The Committee shall, subject to the terms of this Plan, interpret this Plan
and the application thereof, establish rules and regulations it deems necessary
or desirable for the administration of this Plan and may impose, incidental to
the grant of an Award, conditions with respect to the Award, such as limiting
competitive employment or other activities. All such interpretations, rules,
regulations and conditions shall be conclusive and binding on all parties. Each
Award shall be evidenced by a written Agreement between the Trust and the holder
setting forth the terms and conditions applicable to such Award.
Subject to the express provisions of this Plan, the Committee shall have
the authority:
(1) to determine from among those persons eligible to receive an Award
the particular Eligible Persons who will receive any Awards;
(2) to grant Awards to Eligible Persons, determine the price at which
Awards will be offered or awarded and the amount of Awards to any of such
Persons, and determine the other specific terms and conditions of such
Awards consistent with the express limits of this Plan, and establish the
installments (if any) in which such Awards shall become exercisable or
shall vest, or determine that no delayed exercisability or vesting is
required, and establish the events of termination or reversion (if any) of
such Awards;
(3) to approve the forms and terms of Agreements, which need not be
identical either as to type of Award or among Eligible Persons;
(4) to construe and interpret this Plan and any Agreements, further
define the terms used in this Plan and prescribe, amend and rescind rules
and regulations relating to the administration of this Plan;
(5) to cancel, modify or waive the Trust's rights with respect to, any
or all outstanding Awards;
(6) to accelerate the exercisability or vesting or extend the term of
any or all such outstanding Awards within the maximum term permitted under
this Plan; and
(7) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
Any action taken by, or inaction of, the Trust, the Board or the Committee
relating or pursuant to this Plan shall be within the absolute discretion of
that entity or body and shall be conclusive and binding upon all persons. No
member of the Board or Committee, or officer of the Trust or any subsidiary,
shall be liable for any such action or inaction of the entity or body, of
another person or, except in circumstances involving bad faith, of himself or
herself. Subject only to compliance with the express provisions hereof, each of
the Board and the Committee may act in its absolute discretion in matters within
its authority related to this Plan.
In making any determination or in taking or not taking any action under
this Plan, the Committee or the Board, as the case may be, may obtain and rely
upon the advice of experts, including professional advisors to the Trust. No
trustee, officer or agent of the Trust shall be liable for any such action or
determination taken or made or omitted in good faith.
The Committee may delegate ministerial, non-discretionary functions to
individuals who are officers or employees of the Trust.
-2-
<PAGE> 43
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or Chief Operating Officer or other executive
officer of the Trust as the Committee deems appropriate; provided, however, that
the Committee may not delegate its power and authority with regard to (i) the
grant of an Award to any person who is a "covered employee" within the meaning
of Section 162(m) of the Code or who, in the Committee's judgment, is likely to
be a covered employee at any time during the period an Award hereunder to such
employee would be outstanding, if the Committee intends that compensation
payable pursuant to such an Award be qualified performance-based compensation,
or (ii) the selection for participation in this Plan of an officer or other
person subject to Section 16 of the Exchange Act or decisions concerning the
timing, pricing or amount of an Award to such an officer or other person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.4 ELIGIBILITY. Participants in this Plan shall consist of such officers,
key employees, consultants, advisers and Trustees of the Trust and its
subsidiaries as the Committee in its sole discretion may select from time to
time ("Eligible Persons"), provided that only employees of the Trust (or a
subsidiary of the Trust) will be Eligible Persons to whom may be granted a
Paired Option which includes a Trust Share Option designated as an incentive
share option. The Committee's selection of a person to participate in this Plan
at any time shall not require the Committee to select such person to participate
in this Plan at any other time. Trustees shall also participate in this Plan in
accordance with Section V.
1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 7.7,
the aggregate number of Paired Shares available from time to time for all Awards
of Paired Options or Stock Awards under this Plan and the Corporation's 1995
Long-Term Incentive Plan (the "Corporation Plan") (with respect to Paired
Options, including all Paired Options whether or not they include Trust Share
Options that are designated as incentive share options) shall be 4,250,000
Paired Shares, reduced by the aggregate number of Paired Shares subject to
outstanding Paired Options and outstanding Stock Awards under the Plan and the
Corporation Plan. Subject to adjustment as provided in Section 7.7, the number
of Paired Shares available for grants of Paired Options that include Trust Share
Options that are designated as incentive share options shall be 4,250,000,
reduced by the aggregate number of Paired Shares which become subject to (x)
outstanding Paired Options under this Plan, including each Paired Option that
does not include a Trust Share Option that is designated as an incentive share
option and (y) outstanding options to purchase Paired Shares under the
Corporation Plan.
To the extent that Paired Shares subject to (i) an outstanding Paired
Option, (ii) an outstanding option to purchase Paired Shares under the Trust
Plan or (iii) a Stock Award, are not issued or delivered or are cancelled or
forfeited by reason of the expiration, termination, cancellation or forfeiture
of any such Award or by reason of the delivery or withholding of Paired Shares
to pay all or a portion of the exercise price of an Award, if any, or to satisfy
all or a portion of the tax withholding obligations relating to an Award, then
such Paired Shares shall again be available under this Plan.
Paired Shares to be delivered under this Plan shall be made available (i)
(A) by the Trust from authorized and unissued Trust Shares issued by the Trust
directly to the holder and (B) by the Trust from authorized and unissued
Corporation Shares issued by the Corporation directly to the Trust for delivery
to the holder, (ii) from authorized and issued Paired Shares acquired and held
by the Trust or (iii) a combination thereof.
The maximum number of Paired Shares with respect to which Paired Options or
Stock Awards or a combination thereof may be granted during calendar year
beginning on January 1, 1996 to any person shall be 1,250,000 and during any
calendar year beginning on or after January 1, 1997 shall be 600,000, in each
case subject to adjustment as provided in Section 7.7.
-3-
<PAGE> 44
II. PAIRED OPTIONS
2.1 AWARDS OF PAIRED OPTIONS. The Committee may, in its discretion, grant
Paired Options to such Eligible Persons as may be selected by the Committee.
Each Trust Share Option, or portion thereof, that is not an incentive share
option, shall be a non-qualified share option. Each Paired Option that includes
a Trust Share Option that is designated as an incentive share option shall be
granted within ten years of the original effective date of this Plan (June 29,
1995). To the extent that the aggregate fair market value (determined as of the
date of grant) of Trust Shares with respect to which Trust Share Options
designated as incentive share options are exercisable for the first time by a
holder during any calendar year (under this Plan or any other plan of the Trust
or any parent or subsidiary) exceeds the amount (currently $100,000) established
by the Code, such Trust Share Options shall constitute non-qualified share
options. The "fair market value" of a Trust Share shall be that portion of the
Fair Market Value of a Paired Share which the Committee determines to be
attributable to the Trust Share by applying in good faith a method of valuation
permissible under Section 422 of the Code.
2.2 TERMS OF PAIRED OPTIONS. Paired Options shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:
(a) Number of Paired Shares and Purchase Price. The number of Paired
Shares subject to a Paired Option and the purchase price per Paired Share
purchasable upon exercise of the Paired Option, including the portions of
the purchase price of a Paired Share that are attributable to a Trust Share
and a Corporation Share, respectively, shall be determined by the
Committee; provided, however, that (i) the purchase price per Paired Share
shall not be less than 100% of the Fair Market Value of a Paired Share on
the date of grant of such Paired Option, (ii) the portion of the purchase
price of a Paired Share which the Committee determines to be attributable
to a Trust Share shall not be less than 100% of the fair market value of a
Trust Share on the date of grant of such Paired Option, and (iii) the
portion of the purchase price of a Paired Share which the Committee
determines to be attributable to a Corporation Share (including the portion
of the purchase price, if any, of any such option attributable to a
Corporation Share) shall not be less than 100% of the fair market value of
a Corporation Share on the date of grant of such Paired Option; provided
further, that if a Trust Share Option designated as an incentive share
option shall be granted to any person who, at the time such incentive share
option is granted, owns shares of beneficial interest possessing more than
ten percent (10%) of the total combined voting power of all classes of
shares of beneficial interest of the Trust (or of any parent or subsidiary)
(a "Ten Percent Holder"), the purchase price per Trust Share shall be the
price (currently 110% of fair market value of a Trust Share) required by
the Code in order to constitute an incentive share option. The fair market
value of a Corporation Share shall be that portion of the Fair Market Value
of a Paired Share which the Committee determines to be attributable to the
Corporation Share.
(b) Option Period and Exercisability. The period during which a Paired
Option may be exercised shall be determined by the Committee; provided,
however, that no Paired Option which includes a Trust Share Option
designated as an incentive share option shall be exercised later than ten
years after its date of grant; provided further, that if a Paired Option
which includes a Trust Share Option designated as an incentive share option
shall be granted to a Ten Percent Holder, such Paired Option shall not be
exercised later than five years after its date of grant. The Committee
shall determine whether a Paired Option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any
time. An exercisable Paired Option, or portion thereof, may be exercised
only with respect to whole Paired Shares. Except to the extent otherwise
specified in the Agreement relating to a Paired Option, in the event of a
Change of Control, such Paired Option shall become immediately exercisable
for the full amount of Paired Shares subject thereto and shall be
exercisable until expiration of the term of such Paired Option.
(c) Method of Exercise. A Paired Option may be exercised (i) by giving
written notice to the Trust specifying the number of whole Paired Shares to
be purchased and accompanied by payment therefor in full (or arrangement
made for such payment to the Trust's satisfaction) either (A) in cash,
-4-
<PAGE> 45
(B) by delivery of previously owned whole Paired Shares (which the holder
has held for at least six months prior to the delivery of such Paired
Shares or which the holder purchased on the open market and for which the
holder has good title, free and clear of all liens and encumbrances) having
a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) in cash by
a broker-dealer acceptable to the Trust to whom the holder has submitted an
irrevocable notice of exercise or (D) a combination of (A) and (B), in each
case to the extent set forth in the Agreement relating to the Paired Option
and (ii) by executing such documents as the Trust may reasonably request.
The Committee shall have sole discretion to disapprove of an election
pursuant to either clause (B) or (C). Any fraction of a Paired Share which
would be required to pay such purchase price shall be disregarded and the
remaining amount due shall be paid in cash by the holder. No certificate
representing a Paired Share shall be delivered until the full purchase
price therefor has been paid.
2.3 (Omitted)
2.4 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability and Death. Subject to paragraph (e) below and unless
otherwise specified in the Agreement relating to a Paired Option, if the
optionee's employment with the Trust or service as a consultant, adviser or
Trustee terminates by reason of Disability, death, or involuntary
termination by the Trust without Cause, each Paired Option held by such
optionee shall be fully exercisable and may thereafter be exercised by such
optionee (or such optionee's executor, administrator, legal representative,
beneficiary or similar person, as the case may be) until and including the
earliest to occur of (i) the date which is one year (or such other period
as set forth in the Agreement relating to such Paired Option) after the
effective date of such optionee's termination of employment or service or
date of death, as the case may be, and (ii) the expiration date of the term
of such Paired Option.
(b) Termination for Cause. Subject to paragraph (e) below and unless
otherwise specified in the Agreement relating to a Paired Option, if the
optionee's employment with the Trust or service as a consultant, adviser or
Trustee terminates for Cause, each Paired Option held by such optionee,
whether or not then exercisable, shall terminate automatically on the
effective date of such optionee's termination of employment or service.
(c) Other Termination. Subject to paragraph (e) below and unless
otherwise specified in the Agreement relating to a Paired Option, if the
optionee's employment with the Trust or service as a consultant, adviser or
Trustee terminates for any reason other than Disability, death, involuntary
termination by the Trust without Cause or Cause, each Paired Option held by
such optionee shall be exercisable only to the extent that such Paired
Option is exercisable on the effective date of such optionee's termination
of employment or service and may thereafter be exercised by such optionee
(or such optionee's legal representative or similar person) until and
including the earliest to occur of (i) the date which is three months (or
such other period as set forth in the Agreement relating to such Paired
Option) after the effective date of such optionee's termination of
employment or service and (ii) the expiration date of the term of such
Paired Option.
(d) Death Following Termination of Employment or Service. Subject to
paragraph (e) below and unless otherwise specified in the Agreement
relating to a Paired Option, if an optionee dies during the one-year period
following termination of employment or service by reason of Disability or
involuntary termination by the Trust without Cause, or if an optionee dies
during the three-month period following termination of employment or
service for any reason other than involuntary termination by the Trust
without Cause, Disability or Cause (or, in each case, such other period as
the Committee may specify in the Agreement relating to a Paired Option),
each Paired Option held by such optionee may thereafter be exercised by
such optionee's executor, administrator, legal representative, beneficiary
or similar person, as the case may be, until and including the earliest to
occur of (i) the date which is three months (or such other period as set
forth in the Agreement relating to such Paired Option) after the date of
death (but in the case of death following termination of employment or
service by reason of Disability or involuntary termination by the Trust
without Cause, no less than one year (or such other period as set forth in
the
-5-
<PAGE> 46
Agreement relating to such paired Option) after the date of death), and
(ii) the expiration date of the term of such Paired Option.
(e) Termination of Employment -- Incentive Share Options. Unless
otherwise specified in the Agreement relating to a Paired Option which
includes a Trust Share Option designated as an incentive share option, if
the employment with the Trust of an optionee of such a Paired Option
terminates by reason of Permanent and Total Disability (as defined in
Section 22(e)(3) of the Code) or death or involuntary termination without
Cause, each such Paired Option shall be fully exercisable and may
thereafter be exercised by such optionee (or such optionee's executor,
administrator, legal representative, beneficiary or similar person, as the
case may be) until and including the earliest to occur of (i) the date
which is one year (or such shorter period as set forth in the Agreement
relating to such Paired Option) after the effective date of such optionee's
termination of employment by reason of Permanent and Total Disability or
date of death or involuntary termination without Cause, as the case may be,
and (ii) the expiration date of the term of such Paired Option.
Unless otherwise specified in the Agreement relating to a Paired Option
which includes a Trust Share Option designated as an incentive share option, if
the employment with the Trust of an optionee of such a Paired Option terminates
for Cause, each such Paired Option, whether or not then exercisable, shall
terminate automatically on the effective date of such optionee's termination of
employment.
If the employment with the Trust of an optionee of a Paired Option which
includes a Trust Share Option designated as an incentive share option terminates
for any reason other than Permanent and Total Disability, death, Cause or
involuntary termination without Cause, each such Paired Option shall be
exercisable only to the extent such Paired Option is exercisable on the
effective date of such optionee's termination of employment and may thereafter
be exercised by such optionee (or such optionee's legal representative or
similar person) until and including the earliest to occur of (i) the date which
is three months after the effective date of such optionee's termination of
employment and (ii) the expiration date of the term of such Paired Option.
If the optionee of a Paired Option which includes a Trust Share Option
designated as an incentive share option dies during the one-year period
following termination of employment by reason of Permanent and Total Disability
(or such shorter period as set forth in the Agreement relating to such Paired
Option), or if the optionee of such a Paired Option dies during the three-month
period following termination of employment for any reason other than Permanent
and Total Disability or Cause, each such Paired Option held by such optionee may
thereafter be exercised by the optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is three months after the date of death and (ii)
the expiration date of the term of such Paired Option.
III. STOCK AWARDS
3.1 STOCK AWARDS. The Committee may, in its discretion, grant Restricted
Stock Awards to such Eligible Persons as may be selected by the Committee.
3.2 TERMS OF STOCK AWARDS. Restricted Stock Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee in
its discretion shall deem advisable.
(a) Number of Shares and Other Terms. The number of Paired Shares
subject to a Restricted Stock Award and the Performance Measures (if any)
and Restriction Period applicable to a Restricted Stock Award shall be
determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee in its
discretion and subject to the provisions of this Plan, for the vesting of
the Paired Shares subject to such Award either (i) in accordance with the
attainment or satisfaction of specified Performance Measures during the
specified Restriction Period or (ii) over a period of years of employment
by, service to or compliance with agreements with the Trust during the
-6-
<PAGE> 47
specified Restriction Period (or both), and for the forfeiture of the
Paired Shares subject to such Award (x) if specified Performance Measures
are not satisfied or met during the specified Restriction Period or (y) if
the holder of such Award does not remain in the employment of or service to
the Trust or in compliance with such agreements with the Trust during the
specified Restriction Period. Except to the extent otherwise specified in
the Agreement relating to a Restricted Stock Award, all Paired Shares
subject to such an Award shall immediately vest in full in the event of a
Change of Control.
(c) Share Certificates. During the Restriction Period, a certificate
or certificates evidencing Paired Shares issued as a Restricted Stock Award
may be registered in the holder's name and may bear a legend, in addition
to any legend which may be required pursuant to Section 7.6, indicating
that the ownership of the Paired Shares represented by such certificate is
subject to the restrictions, terms and conditions of this Plan and the
Agreement relating to the Restricted Stock Award. All such certificates
shall be deposited with the Trust, together with stock powers or other
instruments of assignment (including a power of attorney), each endorsed in
blank with a guarantee of signature if deemed necessary or appropriate by
the Trust, which would permit transfer to the Trust of all or a portion of
the Trust Shares and to the Corporation all or a portion of the Corporation
Shares subject to the Restricted Stock Award in the event such award is
forfeited in whole or in part. Upon termination of any applicable
Restriction Period (and the satisfaction or attainment of any applicable
Performance Measures), subject to the Trust's right to require payment of
any taxes in accordance with Section 7.5, a certificate or certificates
evidencing ownership of the requisite number of Paired Shares shall be
delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and
subject to the terms and conditions of a Restricted Stock Award, the holder
of such award shall have all rights as a stockholder of the Trust and the
Corporation, including, but not limited to, voting rights, the right to
receive dividends and the right to participate in any capital adjustment
applicable to all holders of Paired Shares.
3.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability, Death and Involuntary Termination Without
Cause. Unless otherwise set forth in the Agreement relating to a Restricted
Stock Award, if the holder's employment with the Trust or service as a
consultant, adviser or Trustee terminates by reason of Disability, death or
involuntary termination by the Trust without Cause, the Restriction Period
shall terminate as of the effective date of such holder's termination of
employment or service, and any applicable Performance Measures shall be
computed through such date.
(b) Other Termination. Unless otherwise set forth in the Agreement
relating to a Restricted Stock Award, if the holder's employment with the
Trust or service as a consultant, adviser or Trustee terminates for any
reason other than Disability, death or involuntary termination without
Cause, the portion of such Award which is subject to a Restriction Period
on the effective date of such holder's termination of employment or service
shall be forfeited by such holder and such portion shall be cancelled by
the Trust.
IV. PERFORMANCE AWARDS
4.1 PERFORMANCE AWARDS. The Committee may, in its discretion, grant
Performance Awards to such Eligible Persons as may be selected by the Committee.
4.2 TERMS OF PERFORMANCE AWARDS. Performance Awards shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
in its discretion deem advisable.
(a) Grant of Performance Awards. A Performance Award may be granted
only in tandem with a Paired Option which is being or was granted under
Section II and shall apply to all or such portion of the Paired Shares
subject to such Paired Option as the Committee may designate. The
Performance Period and Performance Measure of a Performance Award shall be
as designated by the Committee.
-7-
<PAGE> 48
(b) Vesting and Forfeiture. The Agreement relating to a Performance
Award shall provide, in the manner determined by the Committee in its
discretion and subject to the provisions of this Plan, for the vesting of
such award if specified Performance Measure(s) are satisfied or met during
the specified Performance Period, and for the forfeiture of such award if
specified Performance Measure(s) are not satisfied or met during the
specified Performance Period. To the extent not otherwise provided in such
Agreement, such vesting and forfeiture provisions shall be as provided in
this Plan.
(c) Settlement of Vested Performance Awards. Vested Performance Awards
shall be settled in cash to the extent that both (i) the applicable Paired
Option has been exercised (whether before or after expiration of the
Performance Period) with respect to Paired Shares subject to the
Performance Award and (ii) the Performance Period has expired. The amount
shall be the sum (without interest or compounding) of all dividends and
distributions per Paired Share (subject to adjustment as provided in
Section 7.7) during the Performance Period and thereafter through any
subsequent exercise of Paired Options, multiplied by the number of such
Paired Shares purchased upon such exercise. Except to the extent otherwise
provided in the Agreement relating to a Performance Award, in the event of
a Change of Control the Performance Period shall expire and the Performance
Measure shall be computed through such date and the applicable Performance
Award shall forthwith be settled on the date of such Change of Control or
if later upon exercise of the applicable Paired Options. Notwithstanding
the foregoing, if the Committee in good faith determines that a payment in
settlement of a Performance Award will or is likely to render the Trust
insolvent, the Committee may elect to defer such payment for a reasonable
period of time and to pay at a later date with interest at such reasonable
rate as the Committee may determine.
4.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability, Death and Involuntary Termination Without
Cause. Except to the extent otherwise set forth in the Agreement relating
to a Performance Award, if the employment of the holder of a Performance
Award or his or her service as a consultant, adviser or Trustee of the
Trust is terminated by reason of Disability, death or involuntary
termination by the Trust without Cause, the Performance Period with respect
to such Performance Award shall terminate and the Performance Measure shall
be computed through such date and the applicable Performance Award shall be
settled as described in Section 4.2(c) as soon as practicable within 10
days thereafter, or if later, upon exercise of the applicable Paired
Option.
(b) Other Termination. Except to the extent otherwise set forth in the
Agreement relating to a Performance Award, if the holder's employment with
the Trust or service as a consultant, adviser or Trustee terminates for any
reason other than Disability, death, or involuntary termination by the
Trust without Cause, then the Performance Period for such Performance Award
shall be deemed to end on the date of such termination, no Performance
Measure shall be recognized or deemed attained, satisfied or met, and the
holder's Performance Award shall be forfeited to and cancelled by the
Trust.
V. CERTAIN PROVISIONS RELATING TO TRUSTEES
5.1 ELIGIBILITY. Each Trustee who is not an employee of the Trust or the
Corporation or a subsidiary of either ("Eligible Trustee") shall be granted
Paired Options and Paired Shares in accordance with this Section V. All Trust
Share Options and Corporation Share Options included in the Paired Options
granted under this Section V shall constitute non-qualified share options.
5.2 GRANTS OF PAIRED OPTIONS. Each Eligible Trustee shall be granted
Paired Options as follows:
(a) Time of Grant. On June 30 of each calendar year beginning in 1997
(or, if later than June 30, on the date on which a person is first elected
as a Trustee), each Eligible Trustee on such date shall be granted a Paired
Option to purchase 3,000 Paired Shares (6,000 Paired Shares if such person
is a Trustee of a subsidiary only and does not receive grants of Paired
Shares or any cash in lieu thereof under Section 5.3) which amount shall be
pro-rated if such person is first elected to serve as a Trustee on a date
other than June 30 of a calendar year, at a purchase price per Paired Share
equal to 100% of the Fair
-8-
<PAGE> 49
Market Value of a Paired Share on the date of grant of such Paired Option;
provided, however, that the portion of the purchase price of a Paired Share
which is attributable to a Trust Share shall be 100% of the fair market
value of a Trust Share on the date of grant of such Paired Option and the
portion of the purchase price of a Paired Share which is attributable to a
Corporation Share shall be 100% of the fair market value of a Corporation
Share on the date of grant of such Paired Option.
(b) Option Period and Exercisability. Each Paired Option granted under
this Article V shall be fully exercisable on and after its date of grant,
shall expire ten years after its date of grant (notwithstanding termination
of service as a Trustee for any reason prior to such ten-year anniversary
date) and may be exercised in whole or in part (only with respect to whole
Paired Shares). Paired Options granted under this Article V shall be
exercisable in accordance with Section 2.2(c).
(c) Death. If a Trustee dies while a Paired Option is outstanding,
such Paired Option may thereafter be exercised by such Trustee's executor,
administrator, legal representative, beneficiary or similar person, as the
case may be, until and including the expiration date of the term of such
Paired Option.
5.3 GRANTS OF PAIRED SHARES. During each calendar year commencing with
1997, each person who is an Eligible Trustee (except for Trustees of
subsidiaries) on the last day of March, July, September and December shall be
awarded, on a current basis or at the prior election of the Eligible Trustee
under Section 5.4 on a deferred basis, a number of Paired Shares (rounded to the
nearest whole share) equal to one-quarter of $25,000 divided by the Fair Market
Value of a Paired Share on the immediately preceding December 31; provided that
the foregoing $25,000 shall be reduced, but not below $12,500, to the extent an
Eligible Trustee elects (prior to such immediately preceding December 31, or
with respect to any person who became an Eligible Trustee subsequent to such
date, within 10 days of becoming an Eligible Trustee) to receive cash in lieu of
paired Shares under this Section 5.3 (a "Cash Election"). The Paired Shares
awarded pursuant to this Section 5.3 shall not be Restricted Stock.
5.4 DEFERRAL ELECTION. On or before December 31, 1996 and on or before
each subsequent December 31 (or in the case of a person who first becomes an
Eligible Trustee subsequent to December 31, within 10 days of becoming an
Eligible Trustee), an Eligible Trustee may, by written notice to the Trust,
elect to defer receipt (a "Deferral Election") of any or all of the Paired
Shares provided in Section 5.3 (or cash to the extent of his or her Cash
Election under Section 5.3) which would otherwise be thereafter payable to him
or her in the manner prescribed by the Trust for such deferrals.
VI. SPECIAL
This Plan includes, or shall be deemed to include, without limitation, the
following Awards of Paired Options, Performance Awards (all of which include
Base Performance Measures) and Restricted Stock (unless otherwise indicated, all
Awards are as of August 12, 1996 and all Paired Options are exercisable at
$35.875, the Fair Market Value per Paired Share on that date):
1. BARRY S. STERNLICHT
(i) Award as of February 21, 1996 of 30,000 Paired Shares in the
form of warrants vesting over a one year period;
(ii) Paired Option to purchase 650,000 Paired Shares vesting over
the three year period August 12, 1996 to August 12, 1999;
(iii) Paired Option to purchase 300,000 Paired Shares vesting over
the five year period August 12, 1996 to August 12, 2001;
(iv) Performance Awards relating to all Paired Shares underlying
the above Paired Options granted to Barry S. Sternlicht.
-9-
<PAGE> 50
2. STARWOOD CAPITAL GROUP L.L.C.
Award of 167,247 Paired Shares to Starwood Capital Group L.L.C.
vesting over the two year period August 12, 1996 to August 12, 1998.
3. RONALD C. BROWN
(i) Paired Option to purchase 25,000 Paired Shares vesting over
the five year period August 12, 1996 to August 12, 2001.
(ii) Performance Awards relating to all Paired Shares underlying
the above Paired Option granted to Ronald C. Brown.
(iii) Performance Awards relating to all Paired Shares underlying
Paired Option granted April 30, 1996 to purchase 32,000 Paired Shares
exercisable at $33 per Paired Share vesting over the three year period
April 30, 1996 to April 30, 1999.
(iv) Award of 15,000 Paired Shares vesting over the three year
period August 12, 1996 to August 12, 1999.
4. STEVEN R. GOLDMAN
(i) Paired Option to purchase 25,000 Paired Shares vesting over
the five year period August 12, 1996 to August 12, 2001.
(ii) Performance Awards relating to all Paired Shares underlying
the above Paired Option granted to Steven R. Goldman.
(iii) Performance Awards relating to all Paired Shares underlying
Paired Option granted April 30, 1996 to purchase 35,000 Paired Shares
exercisable at $33 per Paired Share vesting over the three year period
April 30, 1996 to April 30, 1999.
(iv) Award of 25,000 Paired Shares vesting over the three year
period August 12, 1996 to August 12, 1999.
VII. GENERAL
7.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan, as amended and restated as
of August 12, 1996, shall be submitted to the shareholders of the Trust for
approval within one year after the date of approval of such amendment and
restatement by the Board and, if approved by a majority of all the votes cast at
a meeting of shareholders at which a quorum is present, shall become effective
as of August 12, 1996 and shall apply, without limitation, to all Awards then or
theretofore made or granted under this Plan. This Plan shall terminate on June
29, 2005 (ten years after its original effective date) unless terminated earlier
by the Board. Termination of this Plan shall not affect the terms or conditions
of any Award granted prior to termination.
Awards may be granted hereunder at any time prior to the termination of
this Plan, provided that no Award may be granted later than ten years after the
original effective date of this Plan. In the event that this Plan, as amended
and restated as of August 12, 1996, is not approved by the shareholders of the
Trust within one year after the date of approval by the Board, the amendments
made as of August 12, 1996 and any Awards granted pursuant to the Plan as so
amended and restated shall be null and void; provided that such failure to
obtain shareholder approval shall have no effect on the Plan, as amended and
restated as of August 17, 1995, or any Paired Options awarded thereunder.
7.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of shareholder approval required by applicable law,
rule or regulation including Rule 16b-3 under the Exchange Act and Sections 422
and 856 of the Code; provided, however, that any amendment with respect to the
persons eligible to participate in this Plan or the number of Paired Shares
available for Awards under this Plan shall not be effective without shareholder
approval of such amendment within 12 months before or after the date such
amendment is approved by the Board. No amendment may impair the rights of a
holder of an outstanding Award without the consent of such holder.
-10-
<PAGE> 51
Notwithstanding any other provision hereunder, without the approval by the
shareholders of the Trust, outstanding Paired Options may not be amended to
reduce their exercise price (a "Repricing") to the extent that such Repricing,
when added together with all prior Repricings respecting Paired Options
previously exercised or then outstanding, would affect more than 212,500 Paired
Shares.
7.3 AGREEMENT. No Paired Option may be exercised and no other Award shall
be valid until confirmed in writing by the Trust, and, upon such confirmation,
the Award shall be effective as of the effective date set forth in such writing.
7.4 NON-TRANSFERABILITY. No Paired Option or Performance Award shall be
transferable other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Trust. Except to
the extent permitted by the foregoing sentence, each Paired Option or
Performance Award may be exercised or settled during the optionee's lifetime
only by the optionee or the optionee's legal representative or similar person.
Except as permitted by the second preceding sentence, no Paired Option or
Performance Award shall be sold, transferred, assigned, pledged, hypothecated,
voluntarily encumbered or otherwise disposed of (whether by operation of law or
otherwise) or be subject to execution, attachment or similar process. Upon any
attempt to so sell, transfer, assign, pledge, hypothecate, voluntarily encumber
or otherwise dispose of any Paired Option or Performance Award, such Paired
Option or Performance Award and all rights thereunder shall, to the extent of
any such attempt, immediately become null and void.
Restricted Stock granted under this Plan shall be transferable, subject to
the transferee's receiving such Restricted Stock subject to the same
restrictions as those applicable to the transferor. Upon any such transfer, the
transferee shall execute such appropriate documents that may be requested by the
Trust to evidence the transferee's acceptance of the restrictions applicable to
such Restricted Stock.
7.5 TAX WITHHOLDING. The Trust shall have the right to require, prior to
the delivery of any Paired Shares or the payment of any cash pursuant to an
Award made hereunder, payment by the holder of such Award of any federal, state,
local or other taxes which may be required to be withheld or paid in connection
with such Award. An Agreement may provide that the holder of an Award may
satisfy any such obligation by any of the following means: (A) a cash payment to
the Trust, (B) delivery to the Trust of previously owned whole Paired Shares
(which such holder has held for at least six months prior to the delivery of
such Paired Shares or which such holder purchased on the open market and for
which such holder has good title, free and clear of all liens and encumbrances)
having an aggregate Fair Market Value, determined as of the date the obligation
to withhold or pay taxes arises in connection with an Award (the "Tax Date"),
equal to the amount necessary to satisfy any such obligation, (C) in the case of
the exercise of a Paired Option, a cash payment by a brokerdealer acceptable to
the Trust to whom the holder has submitted an irrevocable notice of exercise or
(D) any combination of (A) and (B), in each case to the extent set forth in the
Agreement relating to the Award; provided, however, that the Committee shall
have sole discretion to disapprove of an election pursuant to any of the
foregoing clauses (B) through (D). An Agreement may provide for Paired Shares to
be delivered having a Fair Market Value in excess of the minimum amount required
to be withheld, but not in excess of the amount determined by applying the
holder's maximum marginal tax rate. Any fraction of a Paired Share which would
be required to satisfy such an obligation shall be disregarded and the remaining
amount due shall be paid in cash by the holder.
7.6 RESTRICTIONS ON PAIRED SHARES. Each Award hereunder shall be subject
to the requirement that if at any time the Trust determines that the listing,
registration or qualification of the Paired Shares subject to such Award upon
any securities exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of Paired Shares
thereunder, such Paired Shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Trust. The
Trust may require that certificates evidencing Paired Shares delivered pursuant
to any Award made hereunder bear a legend indicating that the sale, transfer or
other disposition thereof by the holder is prohibited except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
-11-
<PAGE> 52
Notwithstanding any other provision hereunder, no Award hereunder shall be
exercisable or eligible for settlement if, as a result of either the ability to
exercise or settle, or the exercise or settlement of such Award, the Trust would
not satisfy the REIT Requirements in any respect. For purposes of the preceding
sentence, "REIT Requirements" shall mean the requirements for the Trust to (i)
qualify as a real estate investment trust under the Code and the rules and
regulations promulgated thereunder, (ii) retain its status as grandfathered
pursuant to Section 132(c)(3) of the Deficit Reduction Act of 1984 and (iii)
retain the benefits of that certain private letter ruling issued by the Internal
Revenue Service to the Trust dated as of January 4, 1980.
7.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Paired Shares other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding Paired Option, the
purchase price per security, and the number of securities subject to each Paired
Option and the number of Paired Shares to be granted to Trustees pursuant to
Article V, the number and class of securities subject to each outstanding Stock
Award and the terms of each outstanding Performance Award shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding Paired Options without an increase in the aggregate purchase price
or base price. The decision of the Committee regarding any such adjustment shall
be final, binding and conclusive. If any adjustment would result in a fractional
security being (i) available under this Plan, such fractional security shall be
disregarded, or (ii) subject to an Award under this Plan, the Trust shall pay
the holder of such Award, in connection with the first vesting, exercise or
settlement of such Award in whole or in part, occurring after such adjustment,
an amount in cash determined by multiplying (A) the fraction of such security
(rounded to the nearest hundredth) by (B) the excess, if any, of (x) the Fair
Market Value of a Paired Share on the vesting, exercise or settlement date over
(y) the exercise price or base price, if any, of such Award.
With respect to any holder who is subject to Section 16 of the Exchange Act
and notwithstanding the exercise periods set forth in paragraphs (a), (c) and
(d) of Section 2.4, paragraph (b) of Section 5.2 or as set forth pursuant to
such paragraphs in any Agreement to which such holder is a party (or as may be
set forth in any Agreement pursuant to paragraph (b) of Section 2.4), and
notwithstanding the expiration date of the term of a Paired Option (other than a
Paired Option which includes a Trust Share Option designated as an incentive
share option), in the event the Trust is involved in a business combination
which is intended to be treated as a pooling of interests for financial
accounting purposes (a "Pooling Transaction") or pursuant to which such holder
receives a substitute option to purchase securities of any entity, including an
entity directly or indirectly acquiring the Trust, then each Paired Option (or
option in substitution thereof) held by such holder shall be exercisable to the
extent set forth in the Agreement evidencing such option until and including the
latest of (x) the date set forth pursuant to the then applicable paragraph of
Section 2.4 or 5.2, or the expiration date of the term of the Paired Option, as
the case may be, (y) the date which is six months and one day after the
consummation of such business combination and (z) the date which is ten business
days after the date of expiration of any period during which such holder may not
dispose of a security issued in the Pooling Transaction in order for the Pooling
Transaction to be accounted for as a pooling of interests.
7.8 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any
right to participate in this Plan. Neither this Plan nor any Award made
hereunder shall confer upon any person any right to continued employment by, or
service to, the Trust, any subsidiary or any affiliate of the Trust or affect in
any manner the right of the Trust, any subsidiary or any affiliate of the Trust
to terminate the employment of, or service by, any person at any time without
liability hereunder. For purposes of Sections 2.4(a) through (c), Sections
3.3(a) and (b), Sections 4.3(a) and (b) and Section 5.4, employment with the
Trust or service as a consultant, adviser or Trustee includes such employment or
service with or for a subsidiary or affiliate of the Trust. It does not,
however, include such employment or service with or for Starwood Capital Group,
L.L.C. or its successors.
7.9 RIGHTS AS SHAREHOLDER. No person shall have any rights as a
shareholder of the Trust or Trust with respect to any Trust Shares or
Corporation Shares which are subject to an Award hereunder until such person
becomes a shareholder of record with respect to such Trust Shares and
Corporation Shares.
-12-
<PAGE> 53
7.10 DESIGNATION OF BENEFICIARY. If permitted by the Trust, an Eligible
Person who is granted an Award hereunder may file with the Committee a written
designation of one or more persons as such Eligible Person's beneficiary or
beneficiaries (both primary and contingent) in the event of the person's death.
Each beneficiary designation shall become effective only when filed in
writing with the Committee during such Eligible Person's lifetime on a form
prescribed by the Committee. Such person's spouse who is domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
other than such spouse. The filing with the Committee of a new beneficiary
designation shall cancel all previously filed beneficiary designations.
To the extent an outstanding Paired Option granted hereunder is exercisable
or an outstanding Performance Award may be settled in accordance with the terms
of this Plan and the Agreement relating to such Award, such beneficiary or
beneficiaries shall be entitled to exercise such Paired Option or settle such
Performance Award.
If such an Eligible Person fails to designate a beneficiary, or if all
designated beneficiaries predecease him, then each outstanding Award hereunder
held by such Eligible Person to the extent vested, exercisable or eligible for
settlement, may be exercised or settled by such Eligible Person's executor,
administrator, legal representative or similar person.
7.11 GOVERNING LAW. This Plan, each Award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Maryland and construed in
accordance therewith without giving effect to principles of conflicts of laws.
7.12 TERMINATION OF PAIRING AGREEMENT. Notwithstanding anything in this
Plan to the contrary, if at any time the Agreement dated June 25, 1980, as
amended, by and between the Trust and the Corporation, pursuant to which Trust
Shares and Corporation Shares are paired on a share-for-share basis, is
terminated for any reason and as a result of such termination Trust Shares and
Corporation Shares no longer are required to be transferred together, then
concurrently with such termination (i) Paired Options will no longer be granted
hereunder; (ii) Stock Awards and Performance Awards will no longer be made with
respect to Paired Shares; (iii) only Trust Share Options, Stock Awards and
Performance Awards relating to the Trust Shares may thereafter be granted or
made hereunder; (iv) each then outstanding Award shall constitute a wholly
separate and independent Trust Share Award and Corporation Share Award and the
Trust, in its discretion, may require that each Agreement evidencing such an
Award be returned to the Trust for cancellation in exchange for separate
agreements evidencing the Trust Share Award and Corporation Share Award subject
to such Award; (v) Trust Share Awards and Corporation Share Awards shall no
longer be required to be exercised, terminated, cancelled, forfeited,
transferred or otherwise disposed of together; and (vi) the fair market value
and the "closing price" of the Trust Shares and Corporation Shares as used
herein shall thereafter be deemed to refer, respectively, to the fair market
value and the closing price of a Trust Share and a Corporation Share.
7.13 GLOSSARY. As used herein, the following words shall have the meanings
indicated.
"AGREEMENT" shall mean the written agreement evidencing an Award hereunder
between the Trust and the recipient of such Award.
"AWARD" shall include a grant of Paired Options, an award of Restricted
Stock and an award of a Performance Award under this Plan.
"BASE PERFORMANCE MEASURE" shall mean a 15% Shareholder Return over the
Performance Period of five years commencing August 12, 1996.
"BOARD" shall mean the Board of Trustees of the Trust.
"CAUSE" shall mean embezzlement or misappropriation of the Trust's funds or
other assets, other act deemed by the Committee in the good faith exercise of
its sole discretion to be an act of dishonesty in respect to the Trust,
significant activities materially harmful to the reputation of the Trust,
willful and repeated refusal to perform or substantial disregard of the duties
properly assigned to the holder by the Trust (other than as a
-13-
<PAGE> 54
result of Disability), material violation of any statutory or common law duty of
loyalty to the Trust or a material breach by the holder of the holder's
employment agreement with the Trust, if any (subject to any cure period therein
provided).
"CHANGE OF CONTROL" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13 (d)(3) or 14(d)(2)
of the Exchange Act, of beneficial ownership within the meaning of Rule
13d-3 promulgated under the Exchange Act, of 51% or more of either (i) the
then outstanding Paired Shares, including for this purpose Partnership
Units of SLT Realty Limited Partnership and SLC Operating Limited
Partnership exchangeable for Paired Shares (collectively, the "Outstanding
Paired Shares") or (ii) the combined voting power of the then outstanding
securities of the Trust entitled to vote generally in the election of
trustees (the "Outstanding Voting Securities"); excluding, however, the
following: (A) any acquisition by the Trust, (B) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the
Trust or any corporation or trust controlled by the Trust or (C) any
acquisition by any corporation or trust pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (3) of this
definition.
(2) individuals who, as of January 1, 1997 constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of such Board; provided that any individual who becomes a trustee of the
Trust subsequent to January 1, 1997 whose election or nomination for
election by the Trust's shareholders was approved (other than in connection
with a material transaction relating to the Trust or the Corporation or
their assets or the Paired Shares or Partnership Units) by the vote of at
least majority of the Trustees then comprising the Incumbent Board shall be
deemed a member of the Incumbent Board; and provided further, that any
individual who was initially elected as a Trustee of the Trust as a result
of an actual or threatened election contest, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, or any other
actual or threatened solicitation of proxies or consent by or on behalf of
any Person other than the Board shall not be deemed a member of the
Incumbent Board;
(3) consummation by the Trust of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Trust (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Paired Shares and the Outstanding Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 66 2/3% of, respectively, the outstanding shares of
beneficial interest or common stock, and the combined voting power of the
outstanding securities of such trust or corporation entitled to vote
generally in the election of trustees or directors, as the case may be, of
the trust or corporation resulting from such Corporate Transaction
(including, without limitation, an entity which as a result of such
transaction owns the Trust or all or substantially all of the Trust's
assets either directly or indirectly in substantially the same proportions
relative to each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Paired Shares and the Outstanding
Voting Securities as the case may be), (ii) no Person (other than: the
Trust; any employee benefit plan (or related trust) sponsored or maintained
by the Trust or any trust or corporation controlled by the Trust; the trust
or corporation resulting from such Corporate Transaction; and any Person
which beneficially owned, immediately prior to such Corporate Transaction,
directly or indirectly, 33 1/3% or more of the Outstanding Paired Shares or
the Outstanding Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 33 1/3% or more of, respectively, the
outstanding shares of beneficial interest or common stock of the trust or
corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such trust or corporation
entitled to vote generally in the election of trustees or directors and
(iii) individuals who were members of the incumbent Board will constitute
at least a majority of the members of the board of trustees or directors of
the trust or corporation resulting from such Corporate Transaction; or
-14-
<PAGE> 55
(4) approval by the shareholders of the Trust of a plan of complete
liquidation or dissolution of the Trust.
"COMMITTEE" shall mean the Committee designated by the Board, consisting of
two or more members of the Board, each of whom shall be (i) a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Exchange Act, and (ii) at
the election of the Board, an "outside director" within the meaning of Section
162(m) of the Code (subject to any transition rules applicable to the definition
of outside director).
"DISABILITY" shall mean the inability of the holder of an Award
substantially to perform such holder's duties and responsibilities for a
continuous period of at least six months.
"ELIGIBLE PERSONS" shall have the meaning set forth in Section 1.4.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the closing transaction price of a Paired
Share as reported in the New York Stock Exchange Composite Transactions on the
first business day immediately preceding the date as of which such value is
being determined, or, if there shall be no reported transaction on such day, on
the next preceding business day for which a transaction was reported; provided
that if the Fair Market Value of a Paired Share for any date cannot be
determined as above provided, Fair Market Value of a Paired Share shall be
determined by the Committee by whatever means or method as the Committee, in the
good faith exercise of its discretion, shall at such time deem appropriate.
"PERFORMANCE MEASURES" shall mean the criteria and objectives, established
by the Committee, which shall be satisfied or met (i) as a condition to the
exercisability of all or a portion of a Paired Option, or (ii) during the
applicable Restriction Period or Performance Period as a condition to the
holder's receipt or retention, in the case of a Restricted Stock Award, of the
Paired Shares subject to such award, or, in the case of a Performance Award, of
payment with respect to such award. Such criteria and objectives may include,
without limitation, one or more of the following: the attainment by a Paired
Share of a specified Fair Market Value for a specified period of time, earnings
per share, return to stockholders (including dividends), return on equity,
earnings of the Trust, revenues, market share, funds from operations, cash flow
or cost reduction goals, or any combination of the foregoing. The Committee may,
in its sole discretion, amend or adjust the Performance Measures or other terms
and conditions of an outstanding award in recognition of unusual or nonrecurring
events affecting the Trust or its financial statements or changes in law or
accounting principles. If the Committee consists solely of "outside directors"
(within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder) and the Committee desires that compensation payable
pursuant to any award subject to Performance Measures shall be "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code, the Performance Measures (i) shall be established by the Committee no
later than the end of the first quarter of the Performance Period or Restriction
Period, as applicable (or such other time permitted pursuant to Treasury
Regulations promulgated under Section 162(m) of the Code or otherwise permitted
by the Internal Revenue Service) and (ii) shall satisfy all other applicable
requirements imposed under Treasury Regulations promulgated under Section 162(m)
of the Code, including the requirement that such Performance Measures be stated
in terms of an objective formula or standard. Unless otherwise designated by the
Committee, the Performance Measure shall be the Base Performance Measure.
"PERFORMANCE PERIOD" shall mean any period designated by the Committee for
which the Performance Measures shall be calculated. The Performance Period shall
be the five year period commencing August 12, 1996 unless otherwise designated
by the Committee.
"PERFORMANCE AWARD" shall mean a right, contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to receive
a payment in cash.
"PERMANENT AND TOTAL DISABILITY" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.
-15-
<PAGE> 56
"RESTRICTED STOCK" shall mean Paired Shares that are subject to a
Restriction Period.
"RESTRICTION PERIOD" shall mean any period designated by the Committee
during which the Paired Shares subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise voluntarily
encumbered or disposed of, except as provided in this Plan or the Agreement
relating to such award.
"SHAREHOLDER RETURN" shall mean the per annum compounded rate of increase
in the Fair Market Value of an investment in Paired Shares on the first day of
the Performance Period (assuming purchase of Paired Shares at their Fair Market
Value on such day) through the last day of the Performance Period, plus all
dividends or distributions paid with respect to such Paired Shares during the
Performance Period, and assuming reinvestment in Paired Shares of all such
dividends and distributions, adjusted to give effect to Section 7.7 of this
Plan.
"STOCK AWARD" or "Restricted Stock Award" shall mean an award of Restricted
Stock.
-16-
<PAGE> 57
EXHIBIT B
STARWOOD LODGING CORPORATION
1995 LONG-TERM INCENTIVE PLAN
(AMENDED AND RESTATED AS OF AUGUST 12, 1996)
I. INTRODUCTION
1.1 PURPOSES AND GENERAL. The purposes of the 1995 Long-Term Incentive
Plan (the "Plan") of Starwood Lodging Corporation (the "Corporation"), as
amended and restated as of August 12, 1996, are to align the interests of the
Corporation's shareholders and the recipients of awards under this Plan by
increasing the proprietary interest of such recipients in the Corporation's
growth and success and to advance the interests of the Corporation by attracting
and retaining officers, key employees, consultants and advisers, as well as
qualified persons for service as directors of the Corporation ("Directors"). For
purposes of this Plan, references to employment by or service as an officer,
employee, consultant, adviser or Director of the Corporation shall also mean
employment by or service as an officer, employee, consultant, adviser or
director of a subsidiary of the Corporation. In addition, references to
Directors include persons elected as Directors who will begin to serve as
Directors at a future date.
This Plan seeks to accomplish the foregoing purposes by providing a means
whereby (i) options to purchase from the Corporation shares of common stock, par
value $.01 per share, of the Corporation ("Corporation Shares") and options to
purchase from the Corporation shares of beneficial interest, par value $.01 per
share, of Starwood Lodging Trust ("Trust Shares") may be granted in accordance
with Section II to Eligible Persons and shall be granted, in accordance with
Section V, to Directors, (ii) Corporation Shares and Trust Shares may be granted
in accordance with Section III to Eligible Persons, and shall be granted in
accordance with Section V to Directors, and (iii) Performance Awards may be
granted in accordance with Section IV to Eligible Persons. Pursuant to an
Agreement dated June 25, 1980, as amended, between the Corporation and Starwood
Lodging Trust (the "Trust"), all outstanding Corporation Shares and Trust Shares
are paired on a one-for-one basis and trade as units consisting of one
Corporation Share and one Trust Share ("Paired Shares"). Accordingly, each
option to purchase Corporation Shares (a "Corporation Share Option") shall be
paired with an option to purchase an equal number of Trust Shares (a "Trust
Share Option" and each such paired Corporation Share Option and Trust Share
Option is herein referred to as a "Paired Option"); similarly, each award of
Corporation Shares shall be paired with an award of an equal number of Trust
Shares.
Each Paired Option or Stock Award may be exercised, terminated, cancelled,
forfeited, transferred or otherwise disposed of only in units consisting of
Paired Shares. Accordingly, a Corporation Share Option, or portion thereof, or a
Corporation Share, or portion thereof, may be exercised, terminated, cancelled,
forfeited, transferred or otherwise disposed of only in connection with, and to
the same extent as, the exercise, termination, cancellation, forfeiture,
transfer or other disposition of a Trust Share Option or Trust Share, as the
case may be. The Committee may designate that a Corporation Share Option
constituting part of a Paired Option is intended to be an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any successor provision (an "incentive share
option"). No Trust Share Option constituting part of a Paired Option hereunder
may be an "incentive stock option" within the meaning of Section 422 of the
Code.
1.2 CERTAIN DEFINITIONS. As used herein, the words set forth in the
Glossary contained in Section 7.13 shall have the meanings therein indicated.
1.3 ADMINISTRATION. This Plan shall be administered by the Committee. Any
one or a combination of the following Awards may be made under this Plan to
Eligible Persons: (i) Paired Options; (ii) Restricted Stock Awards; (iii)
Performance Awards. The Committee may, subject to the terms of this Plan, select
Eligible Persons for participation in the Plan and shall determine the form,
amount and timing of each Award and, if applicable, the number of Paired
Options, Paired Shares or Performance Awards subject to such an Award, the
exercise price or base price associated with the Award, including the portion
that is attributable to
<PAGE> 58
the Corporation Share or Corporation Share Option and the Trust Share or the
Trust Share Option, respectively, the time and conditions of exercise or
settlement of the Award and all other terms and conditions of the Award,
including without limitation the form of the Agreement relating to the Award.
The Committee may, in its sole discretion and for any reason at any time,
subject to the requirements imposed by Section 162(m) of the Code and
regulations promulgated thereunder in the case of an Award intended to be
qualified performance-based compensation, take action such that (i) any or all
outstanding Paired Options shall become exercisable in part or in full, (ii) all
or a portion of the Restriction Period applicable to any outstanding Restricted
Stock Award shall lapse, (iii) all or a portion of the Performance Period
applicable to any outstanding Performance Award shall lapse, (iv) the
Performance Measures applicable to any outstanding Paired Option or Restricted
Stock Award and to any outstanding Performance Award shall be deemed to be
satisfied in whole or in part.
The Committee shall, subject to the terms of this Plan, interpret this Plan
and the application thereof, establish rules and regulations it deems necessary
or desirable for the administration of this Plan and may impose, incidental to
the grant of an Award, conditions with respect to the Award, such as limiting
competitive employment or other activities. All such interpretations, rules,
regulations and conditions shall be conclusive and binding on all parties. Each
Award shall be evidenced by a written Agreement between the Corporation and the
holder setting forth the terms and conditions applicable to such Award.
Subject to the express provisions of this Plan, the Committee shall have
the authority:
(1) to determine from among those persons eligible to receive an Award
the particular Eligible Persons who will receive any Awards;
(2) to grant Awards to Eligible Persons, determine the price at which
Awards will be offered or awarded and the amount of Awards to any of such
Persons, and determine the other specific terms and conditions of such
Awards consistent with the express limits of this Plan, and establish the
installments (if any) in which such Awards shall become exercisable or
shall vest, or determine that no delayed exercisability or vesting is
required, and establish the events of termination or reversion (if any) of
such Awards;
(3) to approve the forms and terms of Agreements, which need not be
identical either as to type of Award or among Eligible Persons;
(4) to construe and interpret this Plan and any Agreements, further
define the terms used in this Plan and prescribe, amend and rescind rules
and regulations relating to the administration of this Plan;
(5) to cancel, modify or waive the Corporation's rights with respect
to, any or all outstanding Awards;
(6) to accelerate the exercisability or vesting or extend the term of
any or all such outstanding Awards within the maximum term permitted under
this Plan; and
(7) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
Any action taken by, or inaction of, the Corporation, the Board or the
Committee relating or pursuant to this Plan shall be within the absolute
discretion of that entity or body and shall be conclusive and binding upon all
persons. No member of the Board or Committee, or officer of the Corporation or
any subsidiary, shall be liable for any such action or inaction of the entity or
body, of another person or, except in circumstances involving bad faith, of
himself or herself. Subject only to compliance with the express provisions
hereof, each of the Board and the Committee may act in its absolute discretion
in matters within its authority related to this
Plan.
In making any determination or in taking or not taking any action under
this Plan, the Committee or the Board, as the case may be, may obtain and rely
upon the advice of experts, including professional advisors to the Corporation.
No director, officer or agent of the Corporation shall be liable for any such
action or determination taken or made or omitted in good faith.
(2)
<PAGE> 59
The Committee may delegate ministerial, non-discretionary functions to
individuals who are officers or employees of the Corporation.
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or Chief Operating Officer or other executive
officer of the Corporation as the Committee deems appropriate; provided,
however, that the Committee may not delegate its power and authority with regard
to (i) the grant of an Award to any person who is a "covered employee" within
the meaning of Section 162(m) of the Code or who, in the Committee's judgment,
is likely to be a covered employee at any time during the period an Award
hereunder to such employee would be outstanding, if the Committee intends that
compensation payable pursuant to such an Award be qualified performance-based
compensation, or (ii) the selection for participation in this Plan of an officer
or other person subject to Section 16 of the Exchange Act or decisions
concerning the timing, pricing or amount of an Award to such an officer or other
person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.4 ELIGIBILITY. Participants in this Plan shall consist of such officers,
key employees, consultants, advisers and Directors of the Corporation and its
subsidiaries as the Committee in its sole discretion may select from time to
time ("Eligible Persons"), provided that only employees of the Corporation (or a
subsidiary of the Corporation) will be Eligible Persons to whom may be granted a
Paired Option which includes a Corporation Share Option designated as an
incentive share option. The Committee's selection of a person to participate in
this Plan at any time shall not require the Committee to select such person to
participate in this Plan at any other time. Directors shall also participate in
this Plan in accordance with Section V.
1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 7.7,
the aggregate number of Paired Shares available from time to time for all Awards
of Paired Options or Stock Awards under this Plan and the Trust's 1995 LongTerm
Incentive Plan (the "Trust Plan") (with respect to Paired Options, including all
Paired Options whether or not they include Corporation Share Options that are
designated as incentive share options) shall be 4,250,000 Paired Shares, reduced
by the aggregate number of Paired Shares subject to outstanding Paired Options
and outstanding Stock Awards under this Plan and the Trust Plan. Subject to
adjustment as provided in Section 7.7, the number of Paired Shares available for
grants of Paired Options that include Corporation Share Options that are
designated as incentive share options shall be 4,250,000, reduced by the
aggregate number of Paired Shares which become subject to (x) outstanding Paired
Options under this Plan, including each Paired Option that does not include a
Corporation Share Option that is designated as an incentive share option and (y)
outstanding options to purchase Paired Shares under the Trust Plan.
To the extent that Paired Shares subject to (i) an outstanding Paired
Option, (ii) an outstanding option to purchase Paired Shares under the Trust
Plan or (iii) a Stock Award, are not issued or delivered or are cancelled or
forfeited by reason of the expiration, termination, cancellation or forfeiture
of any such Award or by reason of the delivery or withholding of Paired Shares
to pay all or a portion of the exercise price of an Award, if any, or to satisfy
all or a portion of the tax withholding obligations relating to an Award, then
such Paired Shares shall again be available under this Plan.
Paired Shares to be delivered under this Plan shall be made available (i)
(A) by the Corporation from authorized and unissued Corporation Shares issued by
the Corporation directly to the holder and (B) by the Trust from authorized and
unissued Trust Shares issued by the Trust directly to the Corporation for
delivery to the holder, (ii) from authorized and issued Paired Shares acquired
and held by the Corporation or (iii) a combination thereof.
The maximum number of Paired Shares with respect to which Paired Options or
Stock Awards or a combination thereof may be granted during calendar year
beginning on January 1, 1996 to any person shall be 1,250,000 and during any
calendar year beginning on or after January 1, 1997 shall be 600,000, in each
case subject to adjustment as provided in Section 7.7.
(3)
<PAGE> 60
II. PAIRED OPTIONS
2.1 AWARDS OF PAIRED OPTIONS. The Committee may, in its discretion, grant
Paired Options to such Eligible Persons as may be selected by the Committee.
Each Corporation Share Option, or portion thereof, that is not an incentive
share option, shall be a non-qualified share option. Each Paired Option that
includes a Corporation Share Option that is designated as an incentive share
option shall be granted within ten years of the original effective date of this
Plan (June 29, 1995). To the extent that the aggregate fair market value
(determined as of the date of grant) of Corporation Shares with respect to which
Corporation Share Options designated as incentive share options are exercisable
for the first time by a holder during any calendar year (under this Plan or any
other plan of the Corporation or any parent or subsidiary) exceeds the amount
(currently $100,000) established by the Code, such Corporation Share Options
shall constitute non-qualified share options. The "fair market value" of a
Corporation Share shall be that portion of the Fair Market Value of a Paired
Share which the Committee determines to be attributable to the Corporation Share
by applying in good faith a method of valuation permissible under Section 422 of
the Code.
2.2 TERMS OF PAIRED OPTIONS. Paired Options shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:
(a) Number of Paired Shares and Purchase Price. The number of Paired
Shares subject to a Paired Option and the purchase price per Paired Share
purchasable upon exercise of the Paired Option, including the portions of
the purchase price of a Paired Share that are attributable to a Corporation
Share and a Trust Share, respectively, shall be determined by the
Committee; provided, however, that (i) the purchase price per Paired Share
shall not be less than 100% of the Fair Market Value of a Paired Share on
the date of grant of such Paired Option, (ii) the portion of the purchase
price of a Paired Share which the Committee determines to be attributable
to a Corporation Share shall not be less than 100% of the fair market value
of a Corporation Share on the date of grant of such Paired Option, and
(iii) the portion of the purchase price of a Paired Share which the
Committee determines to be attributable to a Trust Share (including the
portion of the purchase price, if any, of any such option attributable to a
Trust Share) shall not be less than 100% of the fair market value of a
Trust Share on the date of grant of such Paired Option; provided further,
that if a Corporation Share Option designated as an incentive share option
shall be granted to any person who, at the time such incentive share option
is granted, owns capital stock possessing more than ten percent (10%) of
the total combined voting power of all classes of capital stock of the
Corporation (or of any parent or subsidiary) (a "Ten Percent Holder"), the
purchase price per Corporation Share shall be the price (currently 110% of
fair market value of a Corporation Share) required by the Code in order to
constitute an incentive share option. The fair market value of a Trust
Share shall be that portion of the Fair Market Value of a Paired Share
which the Committee determines to be attributable to the Trust Share.
(b) Option Period and Exercisability. The period during which a Paired
Option may be exercised shall be determined by the Committee; provided,
however, that no Paired Option which includes a Corporation Share Option
designated as an incentive share option shall be exercised later than ten
years after its date of grant; provided further, that if a Paired Option
which includes a Corporation Share Option designated as an incentive share
option shall be granted to a Ten Percent Holder, such Paired Option shall
not be exercised later than five years after its date of grant. The
Committee shall determine whether a Paired Option shall become exercisable
in cumulative or non-cumulative installments and in part or in full at any
time. An exercisable Paired Option, or portion thereof, may be exercised
only with respect to whole Paired Shares. Except to the extent otherwise
specified in the Agreement relating to a Paired Option, in the event of a
Change of Control, such Paired Option shall become immediately exercisable
for the full amount of Paired Shares subject thereto and shall be
exercisable until expiration of the term of such Paired Option.
(c) Method of Exercise. A Paired Option may be exercised (i) by giving
written notice to the Corporation specifying the number of whole Paired
Shares to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Corporation's satisfaction) either
(A) in
(4)
<PAGE> 61
cash, (B) by delivery of previously owned whole Paired Shares (which the
holder has held for at least six months prior to the delivery of such
Paired Shares or which the holder purchased on the open market and for
which the holder has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of such
exercise, (C) in cash by a broker-dealer acceptable to the Corporation to
whom the holder has submitted an irrevocable notice of exercise or (D) a
combination of (A) and (B), in each case to the extent set forth in the
Agreement relating to the Paired Option and (ii) by executing such
documents as the Corporation may reasonably request. The Committee shall
have sole discretion to disapprove of an election pursuant to either clause
(B) or (C). Any fraction of a Paired Share which would be required to pay
such purchase price shall be disregarded and the remaining amount due shall
be paid in cash by the holder. No certificate representing a Paired Share
shall be delivered until the full purchase price therefor has been paid.
2.3 (Omitted)
2.4 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability and Death. Subject to paragraph (e) below and unless
otherwise specified in the Agreement relating to a Paired Option, if the
optionee's employment with the Corporation or service as a consultant,
adviser or Director terminates by reason of Disability, death, or
involuntary termination by the Corporation without Cause, each Paired
Option held by such optionee shall be fully exercisable and may thereafter
be exercised by such optionee (or such optionee's executor, administrator,
legal representative, beneficiary or similar person, as the case may be)
until and including the earliest to occur of (i) the date which is one year
(or such other period as set forth in the Agreement relating to such Paired
Option) after the effective date of such optionee's termination of
employment or service or date of death, as the case may be, and (ii) the
expiration date of the term of such Paired Option.
(b) Termination for Cause. Subject to paragraph (e) below and unless
otherwise specified in the Agreement relating to a Paired Option, if the
optionee's employment with the Corporation or service as a consultant,
adviser or Director terminates for Cause, each Paired Option held by such
optionee, whether or not then exercisable, shall terminate automatically on
the effective date of such optionee's termination of employment or service.
(c) Other Termination. Subject to paragraph (e) below and unless
otherwise specified in the Agreement relating to a Paired Option, if the
optionee's employment with the Corporation or service as a consultant,
adviser or Director terminates for any reason other than Disability, death,
involuntary termination by the Corporation without Cause or Cause, each
Paired Option held by such optionee shall be exercisable only to the extent
that such Paired Option is exercisable on the effective date of such
optionee's termination of employment or service and may thereafter be
exercised by such optionee (or such optionee's legal representative or
similar person) until and including the earliest to occur of (i) the date
which is three months (or such other period as set forth in the Agreement
relating to such Paired Option) after the effective date of such optionee's
termination of employment or service and (ii) the expiration date of the
term of such Paired Option.
(d) Death Following Termination of Employment or Service. Subject to
paragraph (e) below and unless otherwise specified in the Agreement
relating to a Paired Option, if an optionee dies during the one-year period
following termination of employment or service by reason of Disability or
involuntary termination by the Corporation without Cause, or if an optionee
dies during the three-month period following termination of employment or
service for any reason other than involuntary termination by the
Corporation without Cause, Disability or Cause (or, in each case, such
other period as the Committee may specify in the Agreement relating to a
Paired Option), each Paired Option held by such optionee may thereafter be
exercised by such optionee's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until and including the
earliest to occur of (i) the date which is three months (or such other
period as set forth in the Agreement relating to such Paired Option) after
the date of death (but in the case of death following termination of
employment or service by reason of Disability or involuntary termination by
the Corporation without Cause, no less than one year (or such
(5)
<PAGE> 62
other period as set forth in the Agreement relating to such paired Option)
after the date of death, and (ii) the expiration date of the term of such
Paired Option.
(e) Termination of Employment -- Incentive Share Options. Unless
otherwise specified in the Agreement relating to a Paired Option which
includes a Corporation Share Option designated as an incentive share
option, if the employment with the Corporation of an optionee of such a
Paired Option terminates by reason of Permanent and Total Disability (as
defined in Section 22(e)(3) of the Code) or death or involuntary
termination without Cause, each such Paired Option shall be fully
exercisable and may thereafter be exercised by such optionee (or such
optionee's executor, administrator, legal representative, beneficiary or
similar person, as the case may be) until and including the earliest to
occur of (i) the date which is one year (or such shorter period as set
forth in the Agreement relating to such Paired Option) after the effective
date of such optionee's termination of employment by reason of Permanent
and Total Disability or date of death or involuntary termination without
Cause, as the case may be, and (ii) the expiration date of the term of such
Paired Option.
Unless otherwise specified in the Agreement relating to a Paired Option
which includes a Corporation Share Option designated as an incentive share
option, if the employment with the Corporation of an optionee of such a Paired
Option terminates for Cause, each such Paired Option, whether or not then
exercisable, shall terminate automatically on the effective date of such
optionee's termination of employment.
If the employment with the Corporation of an optionee of a Paired Option
which includes a Corporation Share Option designated as an incentive share
option terminates for any reason other than Permanent and Total Disability,
death, Cause or involuntary termination without Cause, each such Paired Option
shall be exercisable only to the extent such Paired Option is exercisable on the
effective date of such optionee's termination of employment and may thereafter
be exercised by such optionee (or such optionee's legal representative or
similar person) until and including the earliest to occur of (i) the date which
is three months after the effective date of such optionee's termination of
employment and (ii) the expiration date of the term of such Paired Option.
If the optionee of a Paired Option which includes a Corporation Share
Option designated as an incentive share option dies during the one-year period
following termination of employment by reason of Permanent and Total Disability
(or such shorter period as set forth in the Agreement relating to such Paired
Option), or if the optionee of such a Paired Option dies during the three-month
period following termination of employment for any reason other than Permanent
and Total Disability or Cause, each such Paired Option held by such optionee may
thereafter be exercised by the optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is three months after the date of death and (ii)
the expiration date of the term of such Paired Option.
III. STOCK AWARDS
3.1 STOCK AWARDS. The Committee may, in its discretion, grant Restricted
Stock Awards to such Eligible Persons as may be selected by the Committee.
3.2 TERMS OF STOCK AWARDS. Restricted Stock Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee in
its discretion shall deem advisable.
(a) Number of Shares and Other Terms. The number of Paired Shares
subject to a Restricted Stock Award and the Performance Measures (if any)
and Restriction Period applicable to a Restricted Stock Award shall be
determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee in its
discretion and subject to the provisions of this Plan, for the vesting of
the Paired Shares subject to such Award either (i) in accordance with the
attainment or satisfaction of specified Performance Measures during the
specified Restriction Period or (ii) over a period of years of employment
by, service to or compliance with agreements with the Corporation during
(6)
<PAGE> 63
the specified Restriction Period (or both), and for the forfeiture of the
Paired Shares subject to such Award (x) if specified Performance Measures
are not satisfied or met during the specified Restriction Period or (y) if
the holder of such Award does not remain in the employment of or service to
the Corporation or in compliance with such agreements with the Corporation
during the specified Restriction Period. Except to the extent otherwise
specified in the Agreement relating to a Restricted Stock Award, all Paired
Shares subject to such an Award shall immediately vest in full in the event
of a Change of Control.
(c) Share Certificates. During the Restriction Period, a certificate
or certificates evidencing Paired Shares issued as a Restricted Stock Award
may be registered in the holder's name and may bear a legend, in addition
to any legend which may be required pursuant to Section 7.6, indicating
that the ownership of the Paired Shares represented by such certificate is
subject to the restrictions, terms and conditions of this Plan and the
Agreement relating to the Restricted Stock Award. All such certificates
shall be deposited with the Corporation, together with stock powers or
other instruments of assignment (including a power of attorney), each
endorsed in blank with a guarantee of signature if deemed necessary or
appropriate by the Corporation, which would permit transfer to the
Corporation of all or a portion of the Corporation Shares and to the Trust
all or a portion of the Trust Shares subject to the Restricted Stock Award
in the event such award is forfeited in whole or in part. Upon termination
of any applicable Restriction Period (and the satisfaction or attainment of
any applicable Performance Measures), subject to the Corporation's right to
require payment of any taxes in accordance with Section 7.5, a certificate
or certificates evidencing ownership of the requisite number of Paired
Shares shall be delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and
subject to the terms and conditions of a Restricted Stock Award, the holder
of such award shall have all rights as a stockholder of the Corporation and
the Trust, including, but not limited to, voting rights, the right to
receive dividends and the right to participate in any capital adjustment
applicable to all holders of Paired Shares.
3.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability, Death and Involuntary Termination Without
Cause. Unless otherwise set forth in the Agreement relating to a Restricted
Stock Award, if the holder's employment with the Corporation or service as
a consultant, adviser or Director terminates by reason of Disability, death
or involuntary termination by the Corporation without Cause, the
Restriction Period shall terminate as of the effective date of such
holder's termination of employment or service, and any applicable
Performance Measures shall be computed through such date.
(b) Other Termination. Unless otherwise set forth in the Agreement
relating to a Restricted Stock Award, if the holder's employment with the
Corporation or service as a consultant, adviser or Director terminates for
any reason other than Disability, death or involuntary termination without
Cause, the portion of such Award which is subject to a Restriction Period
on the effective date of such holder's termination of employment or service
shall be forfeited by such holder and such portion shall be cancelled by
the Corporation.
IV. PERFORMANCE AWARDS
4.1 PERFORMANCE AWARDS. The Committee may, in its discretion, grant
Performance Awards to such Eligible Persons as may be selected by the Committee.
4.2 TERMS OF PERFORMANCE AWARDS. Performance Awards shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
in its discretion deem advisable.
(a) Grant of Performance Awards. A Performance Award may be granted
only in tandem with a Paired Option which is being or was granted under
Section II and shall apply to all or such portion of the
(7)
<PAGE> 64
Paired Shares subject to such Paired Option as the Committee may designate.
The Performance Period and Performance Measure of a Performance Award shall
be as designated by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance
Award shall provide, in the manner determined by the Committee in its
discretion and subject to the provisions of this Plan, for the vesting of
such award if specified Performance Measure(s) are satisfied or met during
the specified Performance Period, and for the forfeiture of such award if
specified Performance Measure(s) are not satisfied or met during the
specified Performance Period. To the extent not otherwise provided in such
Agreement, such vesting and forfeiture provisions shall be as provided in
this Plan.
(c) Settlement of Vested Performance Awards. Vested Performance Awards
shall be settled in cash to the extent that both (i) the applicable Paired
Option has been exercised (whether before or after expiration of the
Performance Period) with respect to Paired Shares subject to the
Performance Award and (ii) the Performance Period has expired. The amount
shall be the sum (without interest or compounding) of all dividends and
distributions per Paired Share (subject to adjustment as provided in
Section 7.7) during the Performance Period and thereafter through any
subsequent exercise of Paired Options, multiplied by the number of such
Paired Shares purchased upon such exercise. Except to the extent otherwise
provided in the Agreement relating to a Performance Award, in the event of
a Change of Control the Performance Period shall expire and the Performance
Measure shall be computed through such date and the applicable Performance
Award shall forthwith be settled on the date of such Change of Control or
if later upon exercise of the applicable Paired Options. Notwithstanding
the foregoing, if the Committee in good faith determines that a payment in
settlement of a Performance Award will or is likely to render the
Corporation insolvent, the Committee may elect to defer such payment for a
reasonable period of time and to pay at a later date with interest at such
reasonable rate as the Committee may determine.
4.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability, Death and Involuntary Termination Without
Cause. Except to the extent otherwise set forth in the Agreement relating
to a Performance Award, if the employment of the holder of a Performance
Award or his or her service as a consultant, adviser or Director of the
Corporation is terminated by reason of Disability, death or involuntary
termination by the Corporation without Cause, the Performance Period with
respect to such Performance Award shall terminate and the Performance
Measure shall be computed through such date and the applicable Performance
Award shall be settled as described in Section 4.2(c) as soon as
practicable within 10 days thereafter, or if later, upon exercise of the
applicable Paired Option.
(b) Other Termination. Except to the extent otherwise set forth in the
Agreement relating to a Performance Award, if the holder's employment with
the Corporation or service as a consultant, adviser or Director terminates
for any reason other than Disability, death, or involuntary termination by
the Corporation without Cause, then the Performance Period for such
Performance Award shall be deemed to end on the date of such termination,
no Performance Measure shall be recognized or deemed attained, satisfied or
met, and the holder's Performance Award shall be forfeited to and cancelled
by the Corporation.
V. CERTAIN PROVISIONS RELATING TO DIRECTORS
5.1 ELIGIBILITY. Each Director who is not an employee of the Corporation
or the Trust or a subsidiary of either ("Eligible Director") shall be granted
Paired Options and Paired Shares in accordance with this Section V. All
Corporation Share Options and Trust Share Options included in the Paired Options
granted under this Section V shall constitute non-qualified share options.
5.2 GRANTS OF PAIRED OPTIONS. Each Eligible Director shall be granted
Paired Options as follows:
(a) Time of Grant. On June 30 of each calendar year beginning in 1997
(or, if later than June 30, on the date on which a person is first elected
as a Director), each Eligible Director on such date shall be
(8)
<PAGE> 65
granted a Paired Option to purchase 3,000 Paired Shares (6,000 Paired
Shares if such person is a Director of a subsidiary only and does not
receive grants of Paired Shares or any cash in lieu thereof under Section
5.3) which amount shall be pro-rated if such person is first elected to
serve as a Director on a date other than June 30 of a calendar year, at a
purchase price per Paired Share equal to 100% of the Fair Market Value of a
Paired Share on the date of grant of such Paired Option; provided, however,
that the portion of the purchase price of a Paired Share which is
attributable to a Corporation Share shall be 100% of the fair market value
of a Corporation Share on the date of grant of such Paired Option and the
portion of the purchase price of a Paired Share which is attributable to a
Trust Share shall be 100% of the fair market value of a Trust Share on the
date of grant of such Paired Option.
(b) Option Period and Exercisability. Each Paired Option granted under
this Article V shall be fully exercisable on and after its date of grant,
shall expire ten years after its date of grant (notwithstanding termination
of service as a Director for any reason prior to such ten-year anniversary
date) and may be exercised in whole or in part (only with respect to whole
Paired Shares). Paired Options granted under this Article V shall be
exercisable in accordance with Section 2.2(c).
(c) Death. If a Director dies while a Paired Option is outstanding,
such Paired Option may thereafter be exercised by such Director's executor,
administrator, legal representative, beneficiary or similar person, as the
case may be, until and including the expiration date of the term of such
Paired Option.
5.3 GRANTS OF PAIRED SHARES. During each calendar year commencing with
1997, each person who is an Eligible Director (except for Directors of
subsidiaries on the last day of March, July, September and December shall be
awarded, on a current basis or at the prior election of the Eligible Director
under Section 5.4 on a deferred basis, a number of Paired Shares (rounded to the
nearest whole share) equal to one-quarter of $25,000 divided by the Fair Market
Value of a Paired Share on the immediately preceding December 31; provided that
the foregoing $25,000 shall be reduced, but not below $12,500, to the extent an
Eligible Director elects (prior to such immediately preceding December 31, or
with respect to any person who became an Eligible Director subsequent to such
date, within 10 days of becoming an Eligible Director) to receive cash in lieu
of paired Shares under this Section 5.3 (a "Cash Election"). The Paired Shares
awarded pursuant to this Section 5.3 shall not be Restricted Stock.
5.4 DEFERRAL ELECTION. On or before December 31, 1996 and on or before
each subsequent December 31 (or in the case of a person who first becomes an
Eligible Director subsequent to December 31, within 10 days of becoming an
Eligible Director), an Eligible Director may, by written notice to the
Corporation, elect to defer receipt (a "Deferral Election") of any or all of the
Paired Shares provided in Section 5.3 (or cash to the extent of his or her Cash
Election under Section 5.3) which would otherwise be thereafter payable to him
or her in the manner prescribed by the Corporation for such deferrals.
VI. SPECIAL
This Plan includes, or shall be deemed to include, without limitation, the
following Awards of Paired Options, Performance Awards (all of which include
Base Performance Measures) and Restricted Stock (unless otherwise indicated, all
Awards are as of August 12, 1996 and all Paired Options are exercisable at
35.875, the Fair Market Value per Paired Share on that date):
1. ERIC A. DANZIGER
(i) Paired Option to purchase 75,000 Paired Shares vesting over
the five year period August 12, 1996 to August 12, 2001.
(ii) Performance Awards relating to all Paired Shares underlying
the above Paired Options granted to Eric A. Danziger.
(iii) Performance Awards relating to all Paired Shares underlying
Paired Option granted to Eric A. Danziger to purchase 125,000 Paired
Shares at an exercise price of $36 3/4 per Paired Share
(9)
<PAGE> 66
vesting over the three year period June 27, 1996 to June 27, 1999
granted June 27, 1996 in connection with Mr. Danziger's employment
agreement dated June 27, 1996.
(iv) Award of 66,815 Paired Shares on June 27, 1996 vesting over
the three year period June 27, 1996 to June 27, 1999 in connection with
Mr. Danziger's employment agreement dated June 27, 1996.
2. THEODORE DARNALL
(i) Paired Option to purchase 50,000 Paired Shares vesting over
the five year period August 12, 1996 to August 12, 2000.
(ii) Performance Awards relating to all Paired Shares underlying
the above Paired Option granted to Theodore Darnall.
(iii) Performance Awards relating to all Paired Shares underlying
Paired Option to purchase 50,000 Paired Shares at an exercise price of
$33 1/8 per Paired Share vesting over the three year period April 26,
1996 to April 26, 1999 granted April 26, 1996 in connection with Mr.
Darnall's employment agreement dated April 19, 1996.
(iv) Award of 30,189 Paired Shares on April 26, 1996 vesting over
the three year period April 26, 1996 to April 26, 1999 in connection
with Mr. Darnall's employment agreement dated April 19, 1996.
3. SUSAN R. BOLGER
(i) Paired Option to purchase 30,000 paired shares at an exercise
price of $39 3/4 per share vesting over the three year period September
9, 1996 to September 9, 1999 granted September 9, 1996 in connection
with Ms. Bolger's employment agreement dated August 15, 1996.
(ii) Award of 8,805 Paired Shares on September 9, 1996, vesting
over the three year period September 9, 1996 to September 9, 1999 in
connection with Ms. Bolger's employment agreement dated August 15, 1996.
VII. GENERAL
7.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan, as amended and restated as
of August 12, 1996, shall be submitted to the stockholders of the Corporation
for approval within one year after the date of approval of such amendment and
restatement by the Board and, if approved by a majority of all the votes cast at
a meeting of stockholders at which a quorum is present, shall become effective
as of August 12, 1996 (and shall apply, without limitation, to all Awards then
or theretofore made or granted under this Plan). This Plan shall terminate on
June 29, 2005 (ten years after its original effective date) unless terminated
earlier by the Board. Termination of this Plan shall not affect the terms or
conditions of any Award granted prior to termination.
Awards may be granted hereunder at any time prior to the termination of
this Plan, provided that no Award may be granted later than ten years after the
original effective date of this Plan. In the event that this Plan, as amended
and restated as of August 12, 1996, is not approved by the stockholders of the
Corporation within one year after the date of approval by the Board, the
amendments made as of August 12, 1996 and any Awards granted pursuant to the
Plan as so amended and restated shall be null and void; provided that such
failure to obtain stockholder approval shall have no effect on the Plan, as
amended and restated as of August 17, 1995, or any Paired Options awarded
thereunder.
7.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation including Rule 16b-3 under the Exchange Act and Sections 422
and 856 of the Code; provided, however, that any amendment with respect to the
persons eligible to participate in this Plan or the number of Paired Shares
available for Awards under this Plan shall not be effective without stockholder
approval of such amendment within 12 months before or after the date such
amendment is approved by the Board. No amendment may impair the rights of a
holder of an outstanding Award without the consent of such holder.
(10)
<PAGE> 67
Notwithstanding any other provision hereunder, without the approval by the
stockholders of the Corporation, outstanding Paired Options may not be amended
to reduce their exercise price (a "Repricing") to the extent that such
Repricing, when added together with all prior Repricings respecting Paired
Options previously exercised or then outstanding, would affect more that 212,500
Paired Shares.
7.3 AGREEMENT. No Paired Option may be exercised and no other Award shall
be valid until confirmed in writing by the Corporation, and, upon such
confirmation, the Award shall be effective as of the effective date set forth in
such writing.
7.4 NON-TRANSFERABILITY. No Paired Option or Performance Award shall be
transferable other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Corporation.
Except to the extent permitted by the foregoing sentence, each Paired Option or
Performance Award may be exercised or settled during the optionee's lifetime
only by the optionee or the optionee's legal representative or similar person.
Except as permitted by the second preceding sentence, no Paired Option or
Performance Award shall be sold, transferred, assigned, pledged, hypothecated,
voluntarily encumbered or otherwise disposed of (whether by operation of law or
otherwise) or be subject to execution, attachment or similar process. Upon any
attempt to so sell, transfer, assign, pledge, hypothecate, voluntarily encumber
or otherwise dispose of any Paired Option or Performance Award, such Paired
Option or Performance Award and all rights thereunder shall, to the extent of
any such attempt, immediately become null and void.
Restricted Stock granted under this Plan shall be transferable, subject to
the transferee's receiving such Restricted Stock subject to the same
restrictions as those applicable to the transferor. Upon any such transfer, the
transferee shall execute such appropriate documents that may be requested by the
Corporation to evidence the transferee's acceptance of the restrictions
applicable to such Restricted Stock.
7.5 TAX WITHHOLDING. The Corporation shall have the right to require,
prior to the delivery of any Paired Shares or the payment of any cash pursuant
to an Award made hereunder, payment by the holder of such Award of any federal,
state, local or other taxes which may be required to be withheld or paid in
connection with such Award. An Agreement may provide that the holder of an Award
may satisfy any such obligation by any of the following means: (A) a cash
payment to the Corporation, (B) delivery to the Corporation of previously owned
whole Paired Shares (which such holder has held for at least six months prior to
the delivery of such Paired Shares or which such holder purchased on the open
market and for which such holder has good title, free and clear of all liens and
encumbrances) having an aggregate Fair Market Value, determined as of the date
the obligation to withhold or pay taxes arises in connection with an Award (the
"Tax Date"), equal to the amount necessary to satisfy any such obligation, (C)
in the case of the exercise of a Paired Option, a cash payment by a
broker-dealer acceptable to the Corporation to whom the holder has submitted an
irrevocable notice of exercise or (D) any combination of (A) and (B), in each
case to the extent set forth in the Agreement relating to the Award; provided,
however, that the Committee shall have sole discretion to disapprove of an
election pursuant to any of the foregoing clauses (B) through (D). An Agreement
may provide for Paired Shares to be delivered having a Fair Market Value in
excess of the minimum amount required to be withheld, but not in excess of the
amount determined by applying the holder's maximum marginal tax rate. Any
fraction of a Paired Share which would be required to satisfy such an obligation
shall be disregarded and the remaining amount due shall be paid in cash by the
holder.
7.6 RESTRICTIONS ON PAIRED SHARES. Each Award hereunder shall be subject
to the requirement that if at any time the Corporation determines that the
listing, registration or qualification of the Paired Shares subject to such
Award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of Paired
Shares thereunder, such Paired Shares shall not be delivered unless such
listing, registration, qualification, consent, approval or other action shall
have been effected or obtained, free of any conditions not acceptable to the
Corporation. The Corporation may require that certificates evidencing Paired
Shares delivered pursuant to any Award made hereunder bear a legend indicating
that the sale, transfer or other disposition thereof by the holder is prohibited
except in compliance with the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
(11)
<PAGE> 68
Notwithstanding any other provision hereunder, no Award hereunder shall be
exercisable or eligible for settlement if, as a result of either the ability to
exercise or settle, or the exercise or settlement of such Award, the Trust would
not satisfy the REIT Requirements in any respect. For purposes of the preceding
sentence, "REIT Requirements" shall mean the requirements for the Trust to (i)
qualify as a real estate investment trust under the Code and the rules and
regulations promulgated thereunder, (ii) retain its status as grandfathered
pursuant to Section 132(c)(3) of the Deficit Reduction Act of 1984 and (iii)
retain the benefits of that certain private letter ruling issued by the Internal
Revenue Service to the Trust dated as of January 4, 1980.
7.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Paired Shares other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding Paired Option, the
purchase price per security, and the number of securities subject to each Paired
Option and the number of Paired Shares to be granted to Directors pursuant to
Article V, the number and class of securities subject to each outstanding Stock
Award and the terms of each outstanding Performance Award shall be appropriately
adjusted by the Committee, such adjustments to be made in the case of
outstanding Paired Options without an increase in the aggregate purchase price
or base price. The decision of the Committee regarding any such adjustment shall
be final, binding and conclusive. If any adjustment would result in a fractional
security being (i) available under this Plan, such fractional security shall be
disregarded, or (ii) subject to an Award under this Plan, the Corporation shall
pay the holder of such Award, in connection with the first vesting, exercise or
settlement of such Award in whole or in part, occurring after such adjustment,
an amount in cash determined by multiplying (A) the fraction of such security
(rounded to the nearest hundredth) by (B) the excess, if any, of (x) the Fair
Market Value of a Paired Share on the vesting, exercise or settlement date over
(y) the exercise price or base price, if any, of such Award.
With respect to any holder who is subject to Section 16 of the Exchange Act
and notwithstanding the exercise periods set forth in paragraphs (a), (c) and
(d) of Section 2.4, paragraph (b) of Section 5.2 or as set forth pursuant to
such paragraphs in any Agreement to which such holder is a party (or as may be
set forth in any Agreement pursuant to paragraph (b) of Section 2.4), and
notwithstanding the expiration date of the term of a Paired Option (other than a
Paired Option which includes a Corporation Share Option designated as an
incentive share option), in the event the Corporation is involved in a business
combination which is intended to be treated as a pooling of interests for
financial accounting purposes (a "Pooling Transaction") or pursuant to which
such holder receives a substitute option to purchase securities of any entity,
including an entity directly or indirectly acquiring the Corporation, then each
Paired Option (or option in substitution thereof) held by such holder shall be
exercisable to the extent set forth in the Agreement evidencing such option
until and including the latest of (x) the date set forth pursuant to the then
applicable paragraph of Section 2.4 or 5.2, or the expiration date of the term
of the Paired Option, as the case may be, (y) the date which is six months and
one day after the consummation of such business combination and (z) the date
which is ten business days after the date of expiration of any period during
which such holder may not dispose of a security issued in the Pooling
Transaction in order for the Pooling Transaction to be accounted for as a
pooling of interests.
7.8 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any
right to participate in this Plan. Neither this Plan nor any Award made
hereunder shall confer upon any person any right to continued employment by, or
service to, the Corporation, any subsidiary or any affiliate of the Corporation
or affect in any manner the right of the Corporation, any subsidiary or any
affiliate of the Corporation to terminate the employment of, or service by, any
person at any time without liability hereunder. For purposes of Sections 2.4(a)
through (c), Sections 3.3(a) and (b), Sections 4.3(a) and (b) and Section 5.4,
employment with the Corporation or service as a consultant, adviser or Director
includes such employment or service with or for a subsidiary or affiliate of the
Corporation. It does not, however, include such employment or service with or
for Starwood Capital Group, L.L.C. or its successors.
(12)
<PAGE> 69
7.9 RIGHTS AS SHAREHOLDER. No person shall have any rights as a
shareholder of the Corporation or Trust with respect to any Corporation Shares
or Trust Shares which are subject to an Award hereunder until such person
becomes a shareholder of record with respect to such Corporation Shares and
Trust Shares.
7.10 DESIGNATION OF BENEFICIARY. If permitted by the Corporation, an
Eligible Person who is granted an Award hereunder may file with the Committee a
written designation of one or more persons as such Eligible Person's beneficiary
or beneficiaries (both primary and contingent) in the event of the person's
death.
Each beneficiary designation shall become effective only when filed in
writing with the Committee during such Eligible Person's lifetime on a form
prescribed by the Committee. Such person's spouse who is domiciled in a
community property jurisdiction shall join in any designation of a beneficiary
other than such spouse. The filing with the Committee of a new beneficiary
designation shall cancel all previously filed beneficiary designations.
To the extent an outstanding Paired Option granted hereunder is exercisable
or an outstanding Performance Award may be settled in accordance with the terms
of this Plan and the Agreement relating to such Award, such beneficiary or
beneficiaries shall be entitled to exercise such Paired Option or settle such
Performance Award.
If such an Eligible Person fails to designate a beneficiary, or if all
designated beneficiaries predecease him, then each outstanding Award hereunder
held by such Eligible Person to the extent vested, exercisable or eligible for
settlement, may be exercised or settled by such Eligible Person's executor,
administrator, legal representative or similar person.
7.11 GOVERNING LAW. This Plan, each Award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Maryland and construed in
accordance therewith without giving effect to principles of conflicts of laws.
7.12 TERMINATION OF PAIRING AGREEMENT. Notwithstanding anything in this
Plan to the contrary, if at any time the Agreement dated June 25, 1980, as
amended, by and between the Corporation and the Trust, pursuant to which
Corporation Shares and Trust Shares are paired on a share-for-share basis, is
terminated for any reason and as a result of such termination Corporation Shares
and Trust Shares no longer are required to be transferred together, then
concurrently with such termination (i) Paired Options will no longer be granted
hereunder; (ii) Stock Awards and Performance Awards will no longer be made with
respect to Paired Shares; (iii) only Corporation Share Options, Stock Awards and
Performance Awards relating to the Corporation Shares may thereafter be granted
or made hereunder; (iv) each then outstanding Award shall constitute a wholly
separate and independent Corporation Share Award and Trust Share Award and the
Corporation, in its discretion, may require that each Agreement evidencing such
an Award be returned to the Corporation for cancellation in exchange for
separate agreements evidencing the Corporation Share Award and Trust Share Award
subject to such Award; (v) Corporation Share Awards and Trust Share Awards shall
no longer be required to be exercised, terminated, cancelled, forfeited,
transferred or otherwise disposed of together; and (vi) the fair market value
and the "closing price" of the Corporation Shares and Trust Shares as used
herein shall thereafter be deemed to refer, respectively, to the fair market
value and the closing price of a Corporation Share and a Trust Share.
7-13 GLOSSARY. As used herein, the following words shall have the meanings
indicated.
"AGREEMENT" shall mean the written agreement evidencing an Award hereunder
between the Corporation and the recipient of such Award.
"AWARD" shall include a grant of Paired Options, an award of Restricted
Stock and an award of a Performance Award under this Plan.
"BASE PERFORMANCE MEASURE" shall mean a 15% Shareholder Return over the
Performance Period of five years commencing August 12, 1996.
"BOARD" shall mean the Board of Directors of the Corporation.
(13)
<PAGE> 70
"CAUSE" shall mean embezzlement or misappropriation of the Corporation's
funds or other assets, other act deemed by the Committee in the good faith
exercise of its sole discretion to be an act of dishonesty in respect to the
Corporation, significant activities materially harmful to the reputation of the
Corporation, willful and repeated refusal to perform or substantial disregard of
the duties properly assigned to the holder by the Corporation (other than as a
result of Disability), material violation of any statutory or common law duty of
loyalty to the Corporation or a material breach by the holder of the holder's
employment agreement with the Corporation, if any (subject to any cure period
therein provided).
"CHANGE OF CONTROL" shall mean:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13 (d)(3) or 14(d)(2)
of the Exchange Act, of beneficial ownership within the meaning of Rule
13d3 promulgated under the Exchange Act, of 51% or more of either (i) the
then outstanding Paired Shares, including for this purpose Partnership
Units of SLT Realty Limited Partnership and SLC Operating Limited
Partnership exchangeable for Paired Shares (collectively, the "Outstanding
Paired Shares") or (ii) the combined voting power of the then outstanding
securities of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); excluding, however, the
following: (A) any acquisition by the Corporation, (B) any acquisition by
an employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (C) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this definition.
(2) individuals who, as of January 1, 1997 constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of such Board; provided that any individual who becomes a director of the
Corporation subsequent to January 1, 1997 whose election or nomination for
election by the Corporation's stockholders was approved (other than in
connection with a material transaction relating to the Trust or the
Corporation or their assets or Paired Shares or Partnership Units) by the
vote of at least majority of the Directors then comprising the Incumbent
Board shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a Director of the
Corporation as a result of an actual or threatened election contest, as
such terms are used in Rule 14a11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation of proxies or
consent by or on behalf of any Person other than the Board shall not be
deemed a member of the Incumbent Board;
(3) consummation by the Corporation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Corporation (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which (i) all or substantially
all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Paired Shares and the Outstanding Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 66 2/3% of,
respectively, the outstanding shares of common stock, and the combined
voting power of the outstanding securities of such corporation entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, an entity which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's assets either
directly or indirectly in substantially the same proportions relative to
each other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Paired Shares and the Outstanding Voting
Securities as the case may be), (ii) no Person (other than: the
Corporation; any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the
Corporation; the corporation resulting from such Corporate Transaction; and
any Person which beneficially owned, immediately prior to such Corporation
Transaction, directly or indirectly, 33 1/3% or more of the Outstanding
Paired Shares or the Outstanding Voting Securities, as the case may be)
will beneficially own, directly or indirectly, 33 1/3% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of
the outstanding securities of such corporation entitled to vote generally
in the election of directors and (iii) individuals who were members of the
incumbent Board
(14)
<PAGE> 71
will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the Corporation of a plan of
complete liquidation or dissolution of the Corporation.
"COMMITTEE" shall mean the Committee designated by the Board, consisting of
two or more members of the Board, each of whom shall be (i) a "Non-Employee
Director" within the meaning of Rule 16b-3 under the Exchange Act, and (ii) at
the election of the Board, an "outside director" within the meaning of Section
162(m) of the Code (subject to any transition rules applicable to the definition
of outside director).
"DISABILITY" shall mean the inability of the holder of an Award
substantially to perform such holder's duties and responsibilities for a
continuous period of at least six months.
"ELIGIBLE PERSONS" shall have the meaning set forth in Section 1.4.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the closing transaction price of a Paired
Share as reported in the New York Stock Exchange Composite Transactions on the
first business day immediately preceding the date as of which such value is
being determined, or, if there shall be no reported transaction on such day, on
the next preceding business day for which a transaction was reported; provided
that if the Fair Market Value of a Paired Share for any date cannot be
determined as above provided, Fair Market Value of a Paired Share shall be
determined by the Committee by whatever means or method as the Committee, in the
good faith exercise of its discretion, shall at such time deem appropriate.
"PERFORMANCE MEASURES" shall mean the criteria and objectives, established
by the Committee, which shall be satisfied or met (i) as a condition to the
exercisability of all or a portion of a Paired Option, or (ii) during the
applicable Restriction Period or Performance Period as a condition to the
holder's receipt or retention, in the case of a Restricted Stock Award, of the
Paired Shares subject to such award, or, in the case of a Performance Award, of
payment with respect to such award. Such criteria and objectives may include,
without limitation, one or more of the following: the attainment by a Paired
Share of a specified Fair Market Value for a specified period of time, earnings
per share, return to stockholders (including dividends), return on equity,
earnings of the Corporation, revenues, market share, funds from operations, cash
flow or cost reduction goals, or any combination of the foregoing. The Committee
may, in its sole discretion, amend or adjust the Performance Measures or other
terms and conditions of an outstanding award in recognition of unusual or
nonrecurring events affecting the Corporation or its financial statements or
changes in law or accounting principles. If the Committee consists solely of
"outside directors" (within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder) and the Committee desires that compensation
payable pursuant to any award subject to Performance Measures shall be
"qualified performance-based compensation" within the meaning of Section 162(m)
of the Code, the Performance Measures (i) shall be established by the Committee
no later than the end of the first quarter of the Performance Period or
Restriction Period, as applicable (or such other time permitted pursuant to
Treasury Regulations promulgated under Section 162(m) of the Code or otherwise
permitted by the Internal Revenue Service) and (ii) shall satisfy all other
applicable requirements imposed under Treasury Regulations promulgated under
Section 162(m) of the Code, including the requirement that such Performance
Measures be stated in terms of an objective formula or standard. Unless
otherwise designated by the Committee, the Performance Measure shall be the Base
Performance Measure.
"PERFORMANCE PERIOD" shall mean any period designated by the Committee for
which the Performance Measures shall be calculated. The Performance Period shall
be the five year period commencing August 12, 1996 unless otherwise designated
by the Committee.
"PERFORMANCE AWARD" shall mean a right, contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to receive
a payment in cash.
(15)
<PAGE> 72
"PERMANENT AND TOTAL DISABILITY" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.
"RESTRICTED STOCK" shall mean Paired Shares that are subject to a
Restriction Period.
"RESTRICTION PERIOD" shall mean any period designated by the Committee
during which the Paired Shares subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise voluntarily
encumbered or disposed of, except as provided in this Plan or the Agreement
relating to such award.
"SHAREHOLDER RETURN" shall mean the per annum compounded rate of increase
in the Fair Market Value of a Paired Share on the first day of the Performance
Period (assuming purchase of Paired Shares at their Fair Market Value on such
day) to the last day of the Performance Period, plus all dividends or
distributions paid with respect to such Paired Share during the Performance
Period, and assuming reinvestment of all such dividends and distributions,
adjusted to give effect to Section 7.7 of this Plan.
"STOCK AWARD" or "RESTRICTED STOCK AWARD" shall mean an award of Restricted
Stock.
(16)
<PAGE> 73
Please mark
your votes as [x]
indicated in
this example.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS A VOTE "FOR" PROPOSALS 1 and 2.
1. To elect each of the following nominees as Trustees of the Trust:
Stephen R. Quazzo and Steven R. Goldman.
FOR
all nominees WITHHOLD
[ ] [ ]
Instruction: To withhold authority to vote for any nominee, write that nominee's
name in the space provided:
2. Approval by shareholders of the Trust of the Trust LTIP (as defined in the
Joint Proxy Statement).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE "FOR" PROPOSALS 3
and 4.
3. To elect each of the following nominees as Directors of the Corporation:
Jean-Marc Chapus, Eric A. Danziger and Michael A. Leven.
FOR
all nominees WITHHOLD
[ ] [ ]
Instruction: To withhold authority to vote for any nominee,
write that nominee's name in the space provided:
4. Approval by stockholders of the Corporation of the Corporation LTIP
(as defined in the Joint Proxy Statement).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion, the proxies are authorized to vote on such other matters
as may come before either of the Annual Meetings.
This proxy is solicited by the Board of Trustees of the Trust and the Board of
Directors of the Corporation and when properly executed, the shares represented
hereby will be voted in the manner directed herein by the undersigned. If no
direction is made, this proxy will be voted FOR the election of all nominees
named above as Trustees of the Trust, FOR the approval of the Trust LTIP, FOR
the election of all nominees named above as Directors of the Corporation and FOR
the approval of the Corporation LTIP.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED SELF-ADDRESSED,
POSTAGE PREPAID ENVELOPE
(Signature)_____________________(Signature if held jointly)____________________
Dated:______________, 1996
Note: Please date and sign exactly as your name(s) appear on this proxy card.
If shares are registered in more than one name, all such persons should sign. A
corporation should sign in its full corporate name by a duly authorized officer,
stating his title. When signing as attorney, executor, administrator, trustee or
guardian, please sign in your official capacity and give your full title as
such. If a partnership, please sign in the partnership name by an authorized
person.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 74
PROXY
STARWOOD LODGING TRUST
STARWOOD LODGING CORPORATION
PROXY FOR ANNUAL MEETINGS OF SHAREHOLDERS AND STOCKHOLDERS
TO BE HELD DECEMBER 30, 1996
The undersigned shareholder of Starwood Lodging Trust (the "Trust") and
stockholder of Starwood Lodging Corporation (the "Corporation") hereby
acknowledges receipt of the Notice of 1996 Annual Meeting of Shareholders of the
Trust and the Notice of 1996 Annual Meeting of Stockholders of the Corporation
(the "Annual Meetings") and the accompanying Joint Proxy Statement relating to
the above-referenced Annual Meetings, and hereby appoints, with full power of
substitution in each, each of the following persons as attorneys and proxies of
the undersigned: (a) with respect to the undersigned's shares of the Trust,
Ronald C. Brown and Madison F. Grose and (b) with respect to the undersigned's
shares of the Corporation, Eric A. Danziger and Jonathan D. Eilian.
Said proxies are hereby given authority, as appropriate, to represent and
to vote all shares of beneficial interest of the Trust and all shares of common
stock of the Corporation held of record by the undersigned and which the
undersigned may be entitled to vote at the Annual Meetings to be held on
December 30, 1996 at the Westin Atlanta North Perimeter, 7 Concourse Parkway,
Atlanta, Georgia, at 10:00 am and 10:30 am, respectively, and at any and all
adjournments or postponements thereof, on behalf of the undersigned on the
following matters and in the manner designated below:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
