SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use
[ ] Definitive Proxy Statement of the Commission only
[ ] Definitive Additional Materials (as permitted by Rule
[ ] Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
Innkeepers USA Trust
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Name of Registrant as Specified in Its charter)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
INNKEEPERS USA TRUST
_________________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1998
_________________________________________________________
The annual meeting of the shareholders (the "Annual
Meeting") of Innkeepers USA Trust (the "Company") will be held at
the Hampton Inn, 1505 Belvedere Road, West Palm Beach, Florida,
on Wednesday, May 6, 1998 at 9:00 a.m., local time, for the
following purposes:
1. To elect (a) two Class I trustees to serve on the
Board of Trustees until the annual meeting of
shareholders in 2001 or until their successors have
been duly elected and qualified and (b) one Class III
trustee to serve on the Board of Trustees until the
annual meeting of shareholders in 2000 or until his
successor has been duly elected and qualified
("Proposal One");
2. To consider and vote upon a proposal to amend the
Company's Declaration of Trust to provide, in effect,
that nothing contained therein will prohibit the
settlement of any transaction entered into through
the facilities of any national securities exchange
registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or on the national
market system of a national securities association
registered under the Exchange Act ("Proposal Two");
and
3. To transact such other business as may properly come
before the Annual Meeting and any adjournments
thereof.
Only shareholders of the Company of record as of the close
of business on March 13, 1998 will be entitled to notice of, and
to vote at, the Annual Meeting and any adjournments thereof.
There is enclosed, as a part of this Notice, a Proxy
Statement which contains further information regarding the Annual
Meeting.
BY ORDER OF THE BOARD OF TRUSTEES:
MARK A. MURPHY
General Counsel and Secretary
Palm Beach, Florida
April __, 1998
IMPORTANT
Management seeks to have your shares represented
at the Annual Meeting regardless of the number
of shares you may hold. Shareholders who do not
expect to attend the Annual Meeting are requested
to complete, date, sign and return the
accompanying proxy in the enclosed envelope as
promptly as possible. Shareholders who attend
the Annual Meeting may vote in person even if
they have already sent in a proxy.
<PAGE>
INNKEEPERS USA TRUST
PROXY STATEMENT
GENERAL INFORMATION
INTRODUCTION
This Proxy Statement and the accompanying proxy card and
Notice of Annual Meeting are provided in connection with the
solicitation of proxies by the Board of Trustees of Innkeepers
USA Trust, a Maryland real estate investment trust (the
"Company"), for use at the annual meeting of shareholders to be
held at the Hampton Inn, 1505 Belvedere Road, West Palm Beach,
Florida, on Wednesday May 6, 1998 at 9:00 a.m. local time (the
"Annual Meeting") and any adjournments thereof. The mailing
address of the principal executive offices of the Company is 306
Royal Poinciana Way, Palm Beach, Florida 33480. This Proxy
Statement and the accompanying proxy card and Notice of Annual
Meeting, all enclosed herewith, are first being mailed on or
about April __, 1998 to shareholders of record at the close of
business on March 13, 1998 (the "Record Date").
THE COMPANY
The Company is a Maryland real estate investment trust which
was formed in 1994 for the purpose of acquiring equity interests
in hotel properties and has elected to be taxed as a real estate
investment trust ("REIT") under the Internal Revenue Code of
1986, as amended (the "Code"). The Company, through Innkeepers
USA Limited (with its subsidiary partnerships, the
"Partnership"), owned a total of 56 hotels (the "Hotels") with an
aggregate of 6,703 rooms in 22 states at December 31, 1997. In
order to qualify as a REIT, neither the Company nor the
Partnership can operate hotels. Forty seven of the Hotels are
leased to JF Hotel, Inc. (or other entities under common
ownership, collectively, the "JF Lessee") and nine of the Hotels
are leased to affiliates of Summerfield Hotel Corporation
(collectively, the "Summerfield Lessee" and, collectively with
the JF Lessee, the "Lessee"), in each case pursuant to
percentage leases (the "Percentage Leases"). The Percentage
Leases provide for rent payments based, in substantial part, on
the room revenues of the Hotels. At December 31, 1997, the JF
Lessee operated 25 of the Hotels, affiliates of the Summerfield
Lessee operate nine of Hotels, 20 of the Hotels are managed by
Residence Inn by Marriott, Inc., a wholly-owned subsidiary of
Marriott International, Inc., and two of the Hotels are managed
by another independent operator.
THE PROXY
The proxy will be voted as specified by the shareholder of
record in the spaces provided on the Proxy Card or, if no
specification is made, it will be voted in favor of the proposals
set forth on the first page hereof. The solicitation of proxies
is being made primarily by the use of the mails. The shareholder
of record giving the proxy has the power to revoke it either by
delivering written notice of such revocation to the Secretary of
the Company prior to the Annual Meeting or by attending the
Annual Meeting and voting in person. Management respectfully
requests that each shareholder promptly mark, sign and return a
proxy card as soon as possible. Management is recommending a
vote FOR the proposals discussed in this Proxy Statement.
Beneficial owners of the Company's Common Shares held of record
in the name of a broker or other intermediary may vote and revoke
a previous vote only through, and in accordance with procedures
established by, the record holder(s) or their agent(s).
No person is authorized to give any information or to make
any representation not contained in this Proxy Statement and, if
given or made, such information or representation should not be
relied upon as having been authorized. This Proxy Statement does
not constitute the solicitation of a proxy in any jurisdiction
from any person
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to whom it is unlawful to make such proxy solicitation in such
jurisdiction. The delivery of this Proxy Statement shall not,
under any circumstances, imply that there has not been any change
in the information set forth herein since the date of the Proxy
Statement.
Each Common Share is entitled to one vote in person or by
proxy. Cumulative voting is not permitted. Only shareholders of
record at the close of business on the Record Date (the
"Shareholders") will be entitled to notice of, and to vote at,
the Annual Meeting and at any adjournments thereof. At the close
of business on March 31, 1998, the Company had outstanding
33,113,211 Common Shares.
The solicitation of the proxy is being made by the Company.
The cost of preparing and mailing this Proxy Statement and the
accompanying material, and the cost of any supplementary
solicitations which may be made by mail, telephone, telegraph or
personally by officers and employees of the Company, will be
borne by the Company. The Company may reimburse brokers,
custodians and nominees for their expenses in sending proxies and
proxy material to beneficial owners. The Company has retained
Harris Trust and Savings Bank to aid in the solicitation of
proxies and to verify certain records related to the solicitation
for a cost not expected to exceed $3,000, plus expenses. To the
extent necessary in order to ensure sufficient representation at
the meeting, the Company may request by telephone or otherwise
the return of proxies. The extent to which this will be
necessary will depend on the rate at which proxies are returned.
Shareholders are urged to return their proxies without delay.
REQUIRED VOTE
Under Maryland law and the Company's Declaration of Trust
and Bylaws, if a majority of the votes entitled to be cast are
present at the Annual Meeting, in person or by proxy, so as to
constitute a quorum, (1) with respect to Proposal One concerning
the election of two Class I and one Class III trustees, an
affirmative vote of a plurality of all the votes cast will elect
each nominee for trustee and, (2) with respect to Proposal Two,
the affirmative vote of the holders of a majority of the Common
Shares present and entitled to vote at the meeting is required
for approval of Proposal Two. For purposes of the election of
trustees, abstentions will not be counted as votes cast and will
have no effect on the result of the vote, although they will
count toward the presence of a quorum.
No specific provisions of the Maryland General Corporation
Law, as applicable to Maryland real estate investment trusts, or
the Company's Declaration of Trust or Bylaws, address the issue
of abstentions or "broker non-votes" (defined below). Abstentions
and "broker non-votes" will be counted for the purpose of
determining the existence of a quorum. For purposes of the
election of trustees (i.e., Proposal One), abstentions will not
be counted as votes cast and will have no effect on the result of
the vote. For purposes of proposals requiring approval by a
certain percentage of votes cast, abstentions will not be counted
as votes cast and will have no effect on the result of the vote.
For proposals requiring approval by a certain percentage of the
shares outstanding or entitled to be cast, the effect of an
abstention would be the same as a vote against the proposal.
Therefore, for purposes of the votes on the amendment of the
Company's Declaration of Trust described in Proposal Two,
abstentions will not be counted as votes cast and will have no
effect on the result of the vote, although they will count toward
the presence of a quorum.
Brokers holding shares for beneficial owners are required to
provide proxy material to the beneficial owners and to seek
instructions with respect to the voting of the securities and
must vote those shares according to the specific instructions
they receive from the owners. If brokers do not receive specific
instructions from the owners, they may vote the shares at their
discretion on all but certain non-routine matters. In the case
of a non-routine matter for which the broker has received no
voting instructions, the broker may not vote on the proposals.
This results in what is known as a "broker non-vote." "Broker
non-votes" will be counted for the purpose of determining the
existence of a quorum for the Annual Meeting. Because the
election of trustees (Proposal One) and the proposed amendment of
the Declaration of Trust (Proposal Two) are routine matters for
which specific instructions from beneficial owners will not be
required, no "broker non-votes" will arise in the contexts of
Proposals One or Two.
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BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's trustees and
executive officers, and any persons beneficially owning more than
ten percent (10%) of a registered class of the Company's equity
securities, are required to report their ownership of the Common
Shares and any changes in that ownership to the Securities and
Exchange Commission (the "SEC"). These persons are also required
by SEC regulations to furnish the Company with copies of these
reports. Specific due dates for these reports have been
established, and the Company is required to report in the Proxy
Statement any failure to timely file such reports by those due
dates during the 1997 fiscal year. 1997 filings for each of the
Company's executive officers and trustees were filed late,
including filings with respect to the acquisition of an aggregate
of 98,050 shares acquired from time to time in various open
market purchases by the executive officers and the JF Lessee,
which is owned by Mr. Fisher (80%) and Mr. Shaw (20%). Based on
information available to the Company, the Company believes that
all required filings for executive officers and trustees,
including late filings, have now been made.
OWNERSHIP OF THE COMPANY'S COMMON SHARES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of December
31, 1997, regarding (a) each person known to the Company to be
the beneficial owner of more than five percent (5%) of its Common
Shares, (b) each trustee, (c) each executive officer and (d) all
trustees and executive officers as a group. Unless otherwise
indicated, such shares are owned directly and the indicated
person has sole voting and investment power.
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AMOUNT AND
NATURE
OF
BENEFICIAL PERCENT OF
OWNERSHIP(1) CLASS(1)
Jeffrey H. Fisher. . . . . . . 1,229,878(2) 3.6%
Frederic M. Shaw . . . . . . . 444,841(3) 1.3%
David Bulger . . . . . . . . . 80,271(4) *
Gregory M. Fay . . . . . . . . 70,792(5) *
Mark A. Murphy . . . . . . . . 70,192(6) *
Miles Berger . . . . . . . . . 17,500(7) *
Thomas J. Crocker. . . . . . . 7,660(8) *
Jack P. DeBoer . . . . . . . . 2,529,808(9) 7.2%
9342 East Central
Wichita, Kansas 67206
C. Gerald Goldsmith. . . . . . 17,500(7) *
Rolf P. Ruhfus . . . . . . . . 858,987(10) 2.5%
Bruce Zenkel . . . . . . . . . 22,500(7) *
Franklin Resources, Inc. . . . 3,485,510(11) 10.6%
777 Mariners Island Boulevard
San Mateo, CA 94404
The Equitable Companies
Incorporated . . . . . . . . 1,991,600(12) 6.1%
1290 Avenue of the Americas
New York, NY 10104
All trustees and . . . . . . . 5,347,743(2)-(10) 14.2%
executive officers as a
group (11 persons)
______________________________
* Represents less than 1% of the outstanding Common Shares.
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(1) For each named person, assumes that (a) all units of
limited partnership interest in the Partnership ("Units")
held by the named person are redeemed for Common Shares,
(b) that the named person exercised all options held by him
which are currently exercisable or which become exercisable
on or before July 1, 1998 and(c)) that the named person
receives restricted shares on account of any performance
shares earned on or before July 1, 1998. The total number
of Common Shares used in calculating the percent of class
owned by each named person assumes that none of the Units
held by other persons are redeemed for Common Shares and
that none of the options held by other persons are
exercised. Outstanding Units are redeemable by the limited
partners (in some cases after a specified holding period
which has not yet expired) on a one-for-one basis for
Common Shares or, if the redeeming limited partner would
then be deemed to own in excess of 9.8% of the outstanding
Common Shares or otherwise at the election of the Company,
an equivalent amount of cash ("Redemption Rights").
Holders of restricted shares have the power to vote, and
receive distributions on, their restricted shares prior to
vesting. Any Common Shares or options described herein
which have not vested when a trustee ceases to be a trustee
or when an employee ceases to be an officer generally will
be forfeited.
(2) Includes 55,000 shares owned by Mr. Fisher directly, which
were acquired from time to time in the open market. Also
includes 113,950 shares owned by the JF Lessee, in which
Mr. Fisher owns 80% of the capital stock. Mr. Fisher
disclaims beneficial ownership of 22,790 (20%) of the
Common Shares owned by the JF Lessee. Also includes (A)
75,000 restricted shares, 8,571 of which vested in February
1998, 11,071 of which will vest in February of each of
1999-2003 and 11,074 of which will vest in February 2004,
(B) Common Shares issuable to Mr. Fisher and his affiliates
upon exercise of Redemption Rights - Mr. Fisher owns
348,289 Units directly and affiliates of Mr. Fisher own
65,306 Units - and (c) 572,333 Common Shares issuable to
Mr. Fisher upon the exercise of options granted to Mr.
Fisher under the 1994 Plan. Does not include (I) 536,167
Common Shares issuable to Mr. Fisher upon the exercise of
additional options granted under the 1994 Plan, (x) 140,000
of which vest at the rate of 70,000 shares in September of
each of 1998 and 1999, (y) 50,000 of which will vest at the
rate of 10,000 shares per year in September of each of
2000-2003 and on January 1, 2004 and (z) 346,167 of which
will vest at the rate of 125,083 in February 1999, 125,084
in February 2000 and 48,000 in February of each of 2001 and
2002, and (II) 45,000 restricted shares under a performance
share award made to Mr. Fisher in February 1997, which will
be issued only if certain total shareholder return targets
are met for 1997 and/or 1998. Any such shares issued under
the performance share award would vest in equal
installments on the first five anniversaries of the date
the shares are issued. In February 1997, the JF Lessee
granted approximately 300,000 share appreciation rights to
various employees of the JF Lessee, each of which rights
entitle the holder (subject to the satisfaction of certain
vesting requirements) to a cash payment equal to any excess
of the fair market value of a Common Share on the date of
exercise over the fair market value on the date of grant.
As noted above, Mr. Fisher owns 80% of the JF Lessee.
(3) Includes 9,000 shares owned by Mr. Shaw directly, which
were acquired from time to time in the open market. Also
includes 113,950 shares owned by the JF Lessee, in which
Mr. Shaw owns 20% of the capital stock. Mr. Shaw disclaims
beneficial ownership of 91,160 (80%) of the Common Shares
owned by the JF Lessee. Also includes (A) 62,500
restricted shares, 7,142 of which vested in February 1998,
9,225 of which will vest in February of each of 1999-2003
and 9,233 of which will vest in February 2004, (B) 80,725
Common Shares issuable to Mr. Shaw upon exercise of
Redemption Rights and (c) 178,666 Common Shares issuable to
Mr. Shaw upon the exercise of options granted to Mr. Shaw
under the 1994 Plan. Does not include (I) 131,334 Common
Shares issuable to Mr. Shaw upon the exercise of additional
options granted under the 1994 Plan, which will vest at the
rate of 53,666 in February 1999, 53,668 in February 2000
and 12,000 in each of February 2001 and 2002, and (II)
37,500 restricted shares under a performance share award
made to Mr. Shaw in February 1997, which will be issued
only if certain shareholder return targets are met for 1997
and/or 1998. Any such shares issued under the performance
share award would vest in equal installments on the first
five anniversaries of the date the shares are issued. In
February 1997, the JF Lessee granted approximately 300,000
share appreciation rights to various employees of the JF
Lessee, each of which rights entitle the holder (subject to
the satisfaction of certain vesting requirements) to a cash
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<PAGE>
payment equal to any excess of the fair market value of a
Common Share on the date of exercise over the fair market
value on the date of grant. As noted above, Mr. Shaw owns
20% of the JF Lessee.
(4) Includes (A) 4,688 restricted shares, 536 of which vested
in February 1998 and 692 of which will vest in February in
each of 1999-2004 and 694 of which will vest in February
2004, and (B) 73,333 Common Shares issuable upon the
exercise of options granted under the 1994 Plan. Does not
include (I) 26,667 Common Shares issuable upon the
exercise of additional options granted under the 1994 Plan,
which will vest at the rate of 13,333 in February 1999 and
13,334 in February 2000, or (II) 2,812 restricted shares
under a performance share award made to Mr. Bulger in
February 1997, which will be issued only if certain
shareholder return targets are met for 1997 and/or 1998.
Any such shares issued under the performance share award
would vest in equal installments on the first five
anniversaries of the date the shares are issued.
(5) Includes (A) 3,125 restricted shares, 357 of which vested
in February 1998, 461 of which will vest in February of
each of 1999-2003 and 463 of which will vest in February
2004, and (B) 66,667 Common Shares issuable upon the
exercise of options granted under the 1994 Plan. Does not
include (I) 33,333 Common Shares issuable upon the exercise
of additional options granted under the 1994 Plan, which
will vest at the rate of 16,666 in February 1999 and 16,667
in February 2000, or (II) 1,875 restricted shares under a
performance share award made to Mr. Fay in August 1997,
which will be issued only if certain total shareholder
return targets are met for 1997 and/or 1998. Any such
shares issued under the performance share award would vest
in equal installments on the first five anniversaries of
the date the shares are issued.
(6) Includes (A) 3,125 restricted Common Shares, 357 of which
vested in February 1998, 461 of which will vest in February
of each of 1999-2003 and 463 of which will vest in February
2004, and (B) 66,667 Common Shares issuable upon the
exercise of options granted under the 1994 Plan. Does not
include (I) 33,333 Common Shares issuable upon the exercise
of additional options granted under the 1994 Plan, which
will vest at the rate of 16,666 in February 1999 and 16,667
in February 2000, or (II) 1,875 restricted shares under a
performance share award made to Mr. Murphy in March 1997,
which will be issued only if certain total shareholder
return targets are met for 1997 and/or 1998. Any such
shares issued under the performance share award would vest
in equal installments on the first five anniversaries of
the date the shares are issued.
(7) Includes (A) 12,500 restricted shares, all of which will be
fully vested as of the Annual Meeting except for 1,668
Common Shares that will vest on the date of the annual
meeting in 1999, and (B) 5,000 Common Shares issuable upon
the exercise of options granted under the Trustees' Plan.
Does not include (I) 1,000 Common Shares issuable upon the
exercise of options granted under the Trustees' Plan, which
vest on the date of the annual meeting in 1999, or (II)
Common Shares issuable upon the exercise of additional
options that will be granted and immediately vested on the
date of each annual meeting, which will cover 1,000 Common
Shares in 1999 and 2,000 Common Shares in each subsequent
year.
(8) Includes (A) 5,660 restricted shares, 1,132 of which vested
in February of each of 1997 and 1998 and 1,132 of which
will vest in February of each of 1999-2001, and (B) 2,000
Common Shares issuable upon the exercise of options granted
under the Trustees' Plan. Does not include (I) 1,000
Common Shares issuable upon the exercise of options
granted under the Trustees' Plan, which will vest in
February 1999, or (II) Common Shares issuable upon the
exercise of additional options that will be granted and
immediately vested in February of each year, which will
cover 1,000 Common Shares in 1999 and 2,000 Common Shares
in each subsequent year.
(9) Includes an aggregate of 2,521,426 Common Shares issuable
upon the exercise of Redemption Rights, to Mr. DeBoer,
Mr. DeBoer's wife and children and a corporation controlled
by Mr. DeBoer. Also includes (A) 6,382 restricted shares
issued to Mr. DeBoer under the Trustees Plan, 1,276 of
which vested in November of each of 1996 and 1997, 1,276 of
which will vest in November of each of 1998 and 1999 and
1,278 of which will vest in November 2000, and (B) 2,000
Common Shares issuable upon the exercise of options granted
under the Trustees' Plan. Does not include (I) 2,000
Common Shares issuable upon the exercise of additional
options granted under the Trustees' Plan, 1,000 of which
will vest in November of each of 1998 and 1999, or (II)
Common Shares issuable upon the exercise of additional
options that will be granted and immediately vested in
November of each year, which will cover 1,000 Common Shares
in each of 1998 and 1999 and 2,000 Common Shares in each
subsequent year.
(10) Includes (A) 5,172 restricted shares, 1,034 of which vested
in June 1997, 1,034 of which will vest in June in each of
1998-2000 and 1,036 of which will vest in June 2001, (B)
851,815 Common Shares issuable to
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Mr. Ruhfus, or a trust of which he is the sole trustee and
beneficiary, upon the exercise of Redemption Rights and (c)
1,000 Common Shares issuable upon the exercise of options
granted under the Trustees' Plan. Does not include (I)
2,000 Common Shares issuable upon the exercise of options
granted under the Trustees' Plan, which will vest in June
1999, or (II) Common Shares issuable upon the exercise of
additional options that will be granted and immediately
vested in June of each year, which will cover 1,000 Common
Shares in 1999 and 2,000 Common Shares in each subsequent
year.
(11) Based on information contained in a Schedule 13-G dated
January 30, 1988, and jointly filed with the Securities
and Exchange Commission ("SEC") by Franklin Resources,
Inc., Franklin Advisers, Inc., Charles B. Johnson and
Rupert H. Johnson, with respect to shares owned by one or
more open or closed-end investment companies or other
managed accounts which are advised by direct and indirect
subsidiaries of Franklin Resources, Inc. Each of the
filers has disclaimed beneficial ownership of any of the
shares covered by the Schedule 13-G.
(12) Based on information contained in a Schedule 13-G dated
February 10, 1998, and jointly filed with the SEC by The
Equitable Companies Incorporated, Alpha Assurances Vie
Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances
Vie Mutuelle, AXA Courage Assurance Mutuelle and AXA-UAP,
with respect to shares owned by client discretionary
investment advisory accounts advised by Alliance Capital
Management L.P. and shares held for investment purposes by
Donaldson, Lufkin and Jenrette.
8
<PAGE>
PROPOSAL ONE - ELECTION OF TRUSTEES
NOMINEES FOR CLASS I AND III TRUSTEES
The Company's Declaration of Trust divides the Board of
Trustees into three classes as nearly equal in number as possible
and requires that a majority of the Company's trustees must not
be officers or employees of the Company or affiliates of any
advisor to the Company under an advisory agreement, any lessee of
the Company's property, any subsidiary of the Company or any
partnership which is an affiliate of the Company ("Independent
Trustees"). The term of the current Class I trustees, Mr. Bruce
Zenkel and Mr. Jack P. DeBoer, expires at the Annual Meeting.
Also, a Class III trustee, Mr. Rolf P. Ruhfus, who was appointed
to the Board in 1997, will stand for election by the shareholders
for the remainder of his Class term, which will expire in 2000.
The terms of the two current Class II trustees, Mr. Miles Berger
and Mr. C. Gerald Goldsmith, expire in 1999. The term of the two
current Class III trustees, Mr. Jeffrey H. Fisher and Mr. Thomas
J. Crocker, expire in 2000. At each annual meeting of
shareholders, the successors to the class of trustees whose term
expires will be elected for a three-year term. The Board of
Trustees has set at seven the number of directors constituting
the current Board of Trustees, three of whom will be elected at
the Annual Meeting.
The Company has no Nominating Committee of its Board of
Trustees, with the entire Board of Trustees acting in such
capacity. The Board of Trustees has nominated the present Class
I trustees, Messrs. DeBoer and Zenkel, to serve as Class I
trustees for three-year terms expiring at the Company's annual
meeting in 2001 or until their successors are elected and
qualified. The Board of Trustees has also nominated Mr. Ruhfus to
continue to serve as Class III trustee for the remainder of a
three-year term expiring at the Company's annual meeting in 2000
or until his successor is elected and qualified. The remaining
members of the Board of Trustees will continue as members thereof
until their respective terms expire.
Unless a shareholder specifies otherwise, each shareholder's
shares represented by the enclosed proxy will be voted FOR the
election of (I) the Class I nominees to serve as trustees until
the 2001 annual meeting or until their successors are elected and
qualify and (ii) the Class III nominee to serve as trustee until
the 2000 annual meeting or until his successor is elected and
qualifies. The nominees have indicated their willingness to
serve if elected. While not anticipated, if any nominee shall
become unavailable or unwilling to serve the Company as a trustee
for any reason, the persons named as proxies in the Proxy Form
may vote for any substitute nominee proposed by the Board of
Trustees.
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THE BOARD OF TRUSTEES RECOMMENDS A VOTE
FOR EACH OF THE NOMINEES FOR CLASS I AND III TRUSTEES
The following table sets forth information as of March 1,
1998 with respect to the nominees and each other trustee whose
term of office will continue after the Annual Meeting.
_________________________________________________________________
NOMINEES FOR ELECTION AS CLASS I TRUSTEES
(TERMS EXPIRING 2001)
JACK P. DEBOER, age 67, has served as Chairman of the Board,
President and Chief Executive Officer of Candlewood Hotel
Company, Inc. since its inception. From October 1993 to
September 1995, Mr. DeBoer was self-employed and was engaged in
the development of the Candlewood extended-stay hotel concept.
From 1988 to 1993, Mr. DeBoer co-founded and developed
Summerfield Hotel Corporation, an upscale extended-stay hotel
chain. Mr. DeBoer founded and developed the Residence Inn
franchise prior to selling the franchise to Marriott
International, Inc. in 1987.
BRUCE ZENKEL, age 67, is a partner of Zenkel Schoenfeld, an
investment banking firm he co-founded in 1990. From 1986 to
1990, he was director of merchant banking for McKinley Allsopp.
He served as a director of Jonathan Logan, Inc. and Mr. Coffee,
Inc. and currently serves on the boards of several philanthropic
organizations. He holds a B.B.A. from the University of
Michigan.
Committees: Compensation
_________________________________________________________________
NOMINEE FOR ELECTION AS CLASS III TRUSTEE
(TERM EXPIRING 2000)
ROLF E. RUHFUS, age 53, has served as Chairman and Chief
Executive Officer of Summerfield Hotel Corporation since its
founding in 1988. Mr. Ruhfus served as President of the
Residence Inn Company from February 1983 through July 1987
(Residence Inn was acquired by Marriott in July 1987). Mr.
Ruhfus joined the Residence Inn Company after spending four years
as Director of Marketing for VARTA Battery, Europe's largest
battery manufacturer. Prior to this position, he was a
management consultant for McKinsey and Company in its Dusseldorf,
Germany office. Mr. Ruhfus is a German Air Force Lieutenant, and
received a bachelor's degree from Western Michigan University in
1968. His graduate degrees include a M.B.A. from the Wharton
School in 1971 and a Ph.D. in marketing from the University of
Muenster in 1974. Mr. Ruhfus is a member of the international
chapter of The Young Presidents Organization and serves on the
board of several European companies.
_________________________________________________________________
10
<PAGE>
INCUMBENT TRUSTEES - CLASS II
(TERMS EXPIRING 1999)
MILES BERGER, age 67, has been engaged in various real
estate and banking activities since 1950. He currently serves as
Vice Chairman of the Board of Heitman Financial Ltd., a real
estate investment management firm with approximately $10 billion
under management, with which Mr. Berger has been employed for
more than five years. He is Chairman of the Board of Mid-Town
Bank and Trust Company of Chicago and serves on the Board of
Directors of Franklin Holding Company, an American Stock
Exchange-listed company. He has served on the boards of numerous
real estate and banking organizations and philanthropic
organizations.
Committees: Audit, Compensation
C. GERALD GOLDSMITH, age 69, has been an independent
investor and financial advisor since 1976. He is currently a
director of Meditrust, Palm Beach National Bank and Trust, U.S.
Banknote and Nine West Group, Inc. and is Chairman of Property
Corp. International, a private real estate investment company.
He has served as a director of several banks and New York Stock
Exchange-listed companies. He holds an A.B. from the University
of Michigan and an M.B.A. from Harvard Business School.
Committees: Audit, Compensation
_________________________________________________________________
INCUMBENT TRUSTEES - CLASS III
(TERMS EXPIRING 2000)
JEFFREY H. FISHER, age 42, is Chairman of the Board, Chief
Executive Officer and President of the Company, positions he has
held since the Company's formation in 1994. Between 1986 and
1994 he served as President and Chief Operating Officer of JF
Hotel Management, Inc., an affiliate of the Lessee, which leases
and operates all of the Company's hotels. Mr. Fisher holds a B.S.
degree in Business Administration from Syracuse University, a
J.D. degree from Nova University, and an L.L.M in Taxation from
the University of Miami.
THOMAS J. CROCKER, age 44, was Chairman of the Board of
Crocker Realty Trust, Inc., one of the largest office-based real
estate investment trusts in the southeast U.S., from that
company's inception until June 30, 1996. Crocker Realty Trust,
Inc. owned approximately 5.7 million square feet in 70 buildings
in seven states, plus more than 200 acres of developable land.
Prior to forming Crocker Realty Trust, Inc., Mr. Crocker headed
Crocker & Co., a privately-held firm responsible for development,
leasing and property management services to approximately 1.71
million square feet of commercial property and 272 residential
units. Prior to 1984, Mr. Crocker was a real estate lending
officer at Chemical Bank. Mr. Crocker is a Board Member of the
National Conference of Christians and Jews and a Member-Elect of
the National Board thereof. He is the recipient of the 1992
Ernst & Young and South Florida Business Journal's Best Overall
Real Estate Deal of the Year Honors; 1991 Sun-Centennial
Excalibur Award for Palm Beach County; 1991 NAIOP Developer of
the Year; 1989 Boca Raton, Florida Chamber of Commerce
Industrialist of the Year; 1989 Anti-Defamation League Torch of
Liberty Award; 1988 Junior Achievement Business Hall of Fame
Laureat; past Chairman of the Boca Raton, Florida Chamber of
Commerce; and a Member of the National Association of Industrial
and Office Parks.
_________________________________________________________________
11
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF TRUSTEES
Trustee Meetings. The business of the Company is conducted
under the general management of its Board of Trustees as required
by the Company's Bylaws and the laws of Maryland, the Company's
state of organization. The Company's Declaration of Trust
requires that a majority of its trustees must not be officers or
employees of the Company or any lessee of any property of the
Company, any subsidiary of the Company or any partnership which
is an affiliate of the Company (the "Independent Trustees"). The
Board of Trustees holds regular quarterly meetings and special
meetings as necessary. The Board of Trustees held seven meetings
during 1997. All incumbent trustees attended more than 75% of
the aggregate number of meetings of the Board of Trustees and its
committees on which they serve, except for Mr. Ruhfus, who
attended two of the four Board meetings held in 1997 after he
joined the Board.
The Company presently has an Audit Committee and a
Compensation Committee of its Board of Trustees. The Company has
no Nominating Committee of its Board of Trustees, with the entire
Board of Trustees acting in such a capacity. The Company may,
from time to time, form other committees as circumstances
warrant. Such committees have authority and responsibility as
delegated by the Board of Trustees.
Audit Committee. The Board of Trustees has established an
Audit Committee, which currently consists of Messrs. Goldsmith
and Berger, who are neither officers nor employees of the Company
or any of its subsidiaries. The Audit Committee makes
recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the
plans and results of the audit engagement, approves professional
services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers
the range of audit and non-audit fees and reviews the adequacy of
the Company's internal accounting controls. The Audit Committee
met two times in 1997, and each member attended both of those
meetings.
Compensation Committee. The Board of Trustees has
established a Compensation Committee, which currently consists of
Messrs. Berger, Goldsmith and Zenkel, who are neither officers
nor employees of the Company or any of its subsidiaries. The
Compensation Committee determines compensation for the Company's
executive officers and administers the 1994 Plan. The
Compensation Committee met three times in 1997, and each member
attended all of those meetings.
COMPENSATION OF TRUSTEES
Each non-employee Trustee is paid a cash fee of $5,000 per
year, plus $1,000 for each Board meeting attended and $500 for
each committee meeting attended. Each trustee also receives
reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board or committees thereof.
In addition, under the Trustees' Plan, each non-employee
trustee who was a member of the Board of Trustees at the time of
the IPO received 7,500 Common Shares. Such Common Shares vest at
the rate of 1,500 shares per year of service, with 1,500 shares
having vested on the date they received the shares and 1,500
shares vesting on the "Award Date" in each of 1995 - 1998. For
any year, an "Award Date" is the date of the first meeting of the
Board of Trustees following the annual meeting of shareholders
held in such year. Currently, each future non-employee trustee
will receive, on the first Award Date at which he is or becomes a
member of the Board, Common Shares with a fair market value of
$75,000, 20% of which will vest immediately and 20% of which will
vest on each of the next four Award Dates if the trustee is a
member of the Board on the applicable vesting date. Messrs.
DeBoer, Crocker and Ruhfus each received shares pursuant to the
foregoing provisions on the dates that they joined the Board,
except that their awards, like awards for other non-employee
trustees who join the Board other than at an annual meeting, vest
on the date of grant and the first four anniversaries of the date
of grant if they are members of the Board on the applicable
vesting date. Each trustee is entitled to receive dividends paid
on, and to vote, all such shares,
12
<PAGE>
notwithstanding that all such shares may not have vested. Any
trustee who ceases to be a trustee will forfeit any shares not
previously vested.
Under the Trustees' Plan, each non-employee trustee who was
a member of the Board of Trustees at the time of the IPO was also
granted options to purchase 5,000 Common Shares. Options were
granted to the other non-employee trustees on the first Award
Date after they become trustees (or on the date they were
appointed or elected other than at an annual meeting), as
follows: Mr. DeBoer received an option for 3,000 Common Shares
on his appointment to the Board in November 1996, Mr. Crocker
received an option for 2,000 Common Shares on his appointment to
the Board in February 1997 and Mr. Ruhfus received an option for
2,000 Common Shares on his appointment to the Board in June 1997,
all of which become exercisable as described below. The price
per Common Share purchased on the exercise of an option is the
fair market value of a Common Share on the date the option is
granted. The exercise price may be paid in cash, a cash
equivalent acceptable to the Compensation Committee, Common
Shares, or a combination thereof.
Options issued under the Trustees' Plan become exercisable
at a rate of 1,000 Common Shares on each Award Date after the
date of the grant (or on each anniversary of the date of grant
for trustees first appointed or elected other than at an annual
meeting), in each case only if the trustee is still a member of
the Board on the applicable Award Date (or applicable anniversary
of the date of grant). Options under the Trustees' Plan are
exercisable for ten years from the date of grant. To the extent
that an option has become exercisable, it can be exercised
whether or not the holder is a Trustee on the date of exercise.
No options for Common Shares may be granted and no Common Shares
will be awarded under the Trustees' Plan after the Award Date in
2007. The share authorization, the terms of outstanding options
and the number of shares for which options will thereafter be
awarded shall be subject to adjustment in the event of a share
dividend, share split, combination, reclassification,
recapitalization or other similar event.
In addition to the awards described above, (a) Messrs.
Berger, Goldsmith and Zenkel, who have served on the Board since
the IPO, each received an award of 5,000 restricted Common
Shares, which vested for 1,666 shares on the Award Date in 1997
and will vest for 1,666 shares on the Award Date in 1998 and for
1,668 shares on the Award Date in 1999, if the trustee is a Board
member on the applicable vesting date, and (b) each non-employee
trustee receives a fully exercisable option to acquire Common
Shares on the date that his other options under the Trustees'
Plan become vested, if the trustee is a Board member on the
applicable grant date. For 1998 and 1999, these awards cover
1,000 Common Shares and for the year 2000 and thereafter, the
awards will cover 2,000 Common Shares. All options and share
awards will become fully exercisable and vested on a change of
control (as defined in the Trustee's Plan) of the Company, and in
the event a trustee ceases to serve on the Board on account of
death or disability.
13
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or
accrued by the Company from January 1, 1995 to December 31, 1997.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- -----------------------------------
Awards Payouts
---------------------- ---------
Securities
Name and Other Annual Restricted Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Share Awards Options/SARs Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey H. Fisher
Chairman of the
Board, Chief 1997 $150,000 $150,000 0 60,000(1) 702,500(2 - --
Executive Officer 1996 $150,000 $150,000 0 -- 156,000(3 - --
and President 1995 $60,000 0 0 -- 250,000(4) - --
Frederic M. Shaw 1997 $94,902(5) $105,000(5) 50,000(6) 310,000(7) -- -- --
Executive Vice 1996 (8) -- -- -- -- -- --
President and 1995 (8) -- -- -- -- -- --
Chief Operating
Officer
David Bulger 1997 $110,200(8) $26,488 0 3,750(9) 80,000(10) -- --
Chief Financial 1996 $80,000 $20,000 0 -- -- -- --
Officer and 1995 $80,000 $6,000 -- -- 20,000(11) -- --
Treasurer
Gregory M. Fay 1997 $45,660(8) $10,014(8) 0 2,500(12) 100,000(13) -- --
Vice President 1996 (8) -- -- -- -- -- --
of Accounting 1995 (8) -- -- -- -- -- --
Mark A. Murphy 1997 $92,416(8) $26,488 0 2,500(14) 100,000(15) -- --
General Counsel 1996 (8) -- -- -- -- -- --
and Secretary 1995 (8) -- -- -- -- -- --
</TABLE>
____________________________
(1) These shares vest in equal installments on each of the
first seven anniversaries of the date of grant (February
1997). Mr. Fisher also received in February 1997 a grant
of 60,000 performance shares, pursuant to which restricted
shares will be issued if certain total shareholder return
targets are met for 1997 and/or 1998. In January 1998,
15,000 restricted shares were issued under the performance
share award, based on a total shareholder return target met
in 1997. Any such shares issued under the performance
share award, based on a total shareholder return target met
in 1997. Any such shares issued under the performance
share award will vest in equal installments on the first
six (if issued for 1997) or five (if issued for 1998)
anniversaries of the date the shares are issued.
(2) Represents the grant of options in February 1997 covering
(a) 240,000 Common Shares, 20% of which becomes exercisable
on each of the first five anniversaries of the date of
grant, and (b) 462,500 Common Shares, 50% of which vested
on the date of grant and 16.66% of which will vest on each
of the first three anniversaries of the date of grant. In
February 1997, the JF Lessee granted approximately 300,000
share appreciation rights to various employees of the JF
Lessee, each of which rights entitle the holder (subject to
the satisfaction of certain vesting requirements) to a cash
payment equal to any excess of the fair market value of a
Common Share on the date of exercise over $13.25, the fair
market value on the date of grant. Mr. Fisher owns 80% of
the JF Lessee.
(3) Represents the grant of an option in February 1996. The
option became exercisable for 32,000 Common Shares in
September of each of 1996 and 1997, and will become
exercisable for 32,000 Common Shares in September 1998 and
for 60,000 Common Shares in September 1999.
14
<PAGE>
(4) Represents the grant in September 1994 of options covering
(a) 110,000 Common Shares, 10,000 of which became
exercisable on each of the date of grant and the first
three anniversaries of the date of grant, and 10,000 of
which will become exercisable on each anniversary of the
date of grant through 2004, and (b) 140,000 Common Shares,
20% of which (i.e., covering 28,000 Common Shares) became
exercisable on each of the date of grant and the first
three anniversaries of the date of grant, and 20% of which
will become exercisable on the anniversary of the date of
grant in 1998, so long as Mr. Fisher remains employed by
the Company.
(5) Mr. Shaw also receives a salary and bonus from the JF
Lessee, of which he serves as President.
(6) These shares vest in equal installments on each of the
first seven anniversaries of the date of grant (February
1997). Mr. Shaw also received in February 1997 a grant of
50,000 performance shares, pursuant to which restricted
shares will be issued if certain total shareholder return
targets are met for 1997 and/or 1998. In January 1998,
12,500 restricted shares were issued pursuant to the
performance share award, based on a total shareholder
return target met in 1997. Any shares issued under the
performance share award will vest in equal installments on
the first six (if issued for 1997) or five (if issued for
1998) anniversaries of the date the shares are issued.
(7) Represents the grant in February 1997 of (a) an option
covering 60,000 Common Shares, 20% of which becomes
exercisable on each of the first five anniversaries of the
date of grant, and (b) an option covering 250,000 Common
Shares, 50% of which vested on the date of grant and 16.66%
of which will vest on each of the first three anniversaries
of the date of grant. In February 1997, the JF Lessee
granted approximately 300,000 share appreciation rights to
various employees of the JF Lessee, each of which rights
entitle the holder (subject to the satisfaction of certain
vesting requirements) to a cash payment equal to any excess
of the fair market value of a Common Share on the date of
exercise over $13.25, the fair market value on the date of
grant. Mr. Shaw owns 20% of the JF Lessee.
(8) Messrs. Shaw, Fay and Murphy each first became officers and
employees of the Company in 1997. Salary shown for 1997
represents the pro-rata share of annual salary provided for
in the employee's employment contract. Mr. Fay's bonus is
a pro-rated portion of the annual bonus that would have
been payable for the full year under his employment
contract.
(9) These shares vest in equal installments on each of the
first seven anniversaries of the date of grant (February
1997). Mr. Bulger also received in February 1997 a grant
of 3,750 performance shares, pursuant to which restricted
shares will be issued if certain total shareholder return
targets are met for 1997 and/or 1998. In January 1998, 938
restricted shares were issued pursuant to the performance
share award, based on a total shareholder return target met
in 1997. Any such shares issued under the performance
share award will vest in equal installments on the first
six (if issued for 1997) or five (if issued for 1998)
anniversaries of the date the shares are issued.
(10) Represents the grant of an option in February 1997, 50% of
which vested on the date of grant and 16.66% of which
vest on each of the first three anniversaries of the date
of grant.
(11) Represents a grant of an option in April 1995. The option
becomes exercisable annually with respect to 5,000 Common
Shares beginning on the date of grant, so long as Mr.
Bulger remains employed by the Company.
(12) These shares vest in equal installments on each of the
first seven anniversaries of the date of grant (August
1997). Mr. Fay also received in August 1997 a grant of
2,500 performance shares, pursuant to which restricted
shares will be issued if certain total shareholder return
targets are met for 1997 and/or 1998. In January 1998, 625
restricted shares were issued pursuant to the performance
share award based on a total shareholder return target met
in 1997. Any such shares issued under the performance
share award will vest in equal installments on the first
six (if issued for 1997) or five (if issued for 1998)
anniversaries of the date the shares are issued.
(13) Represents the grant of an option in April 1997, 50% of
which vested on the date of grant and 16.66% of which vest
on each of the first three anniversaries of the date of
grant.
(14) These shares vest in equal installments on each of the
first seven anniversaries of the date of grant (March
1997). Mr. Murphy also received in March 1997 a grant of
2,500 performance shares, pursuant to which restricted
shares will be issued if certain total shareholder return
targets are met for 1997 and/or 1998. In January 1998,
625 restricted shares were issued pursuant to the
performance share award, based on a total
15
<PAGE>
shareholder return target met in 1997. Any such shares
issued under the performance share award will vest in equal
installments on the first six (if issued for 1997) or five
(if issued for 1998) anniversaries of the date the shares
are issued.
(15) Represents the grant of an option in April 1997, 50% of
which vested on the date of grant and 16.66% of which vest
on each of the first three anniversaries of the date of
grant.
OPTION GRANTS
The following table sets forth information regarding grants
of share options during the 1997 fiscal year. The options were
granted pursuant to the 1994 Plan. No separate share
appreciation rights were granted during the 1997 fiscal year.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------
Percentage
of Total Potential Realized
Number of Options Value at Assumed
Shares Granted to Annual Rates of Share
Underlying Employees Exercise Price Appreciation
Options in Fiscal Price Expiration for Option Term(2)
Name Granted Year ($/Share) Date 5% 10%
<S> <C> <C> <C> <C> <C>
Jeffrey H. Fisher 702,500(1) 54.4% $13.25 February 2007 $5,851,825 $14,836,800
Frederic M. Shaw 310,000(2) 24.0% $13.25 February 2007 $2,582,300 $6,547,200
David Bulger 80,000(3) 6.2% $13.25 February 2007 $666,400 $1,689,600
Gregory M. Fay 100,000(4) 7.7% $14.0625 August 2007 $884,750 $2,240,750
Mark A. Murphy 100,000(5) 7.7% $13.25 April 2007 $833,000 $2,112,000
</TABLE>
_________________________
(1) For further details regarding the options issued, please
see note 2 to the Summary Compensation Table.
(2) For further details regarding the options issued, please
see note 7 to the Summary Compensation Table.
(3) For further details regarding the options issued, please
see note 10 to the Summary Compensation Table.
(4) For further details regarding the options issued, please
see note 13 to the Summary Compensation Table.
(5) For further details regarding the options issued, please
see note 15 to the Summary Compensation Table.
(6) The fair market value of the Common Shares on the date
the options were granted was equal to the respective
exercise prices listed in the table. The indicated 5%
and 10% rates of appreciation are provided to comply with
SEC regulations and do not necessarily reflect the views
of the Company as to the likely trend in the Company's
share price. Actual gains, if any, on share option
exercises will be dependent on, among other things, the
future performance of the Common Shares and overall stock
market conditions. There can be no assurance that the
amounts reflected in the table will be achieved.
Additionally, these values do not take into consideration
the provisions of the options providing for limits on
transferability, delayed exercisability or termination of
the options in certain circumstances.
16
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END
OPTION VALUES
The following table sets forth information regarding the
exercise of options during the Company's 1997 fiscal year by its
executive officers and regarding unexercised options at December
31, 1997. No separate share appreciation rights were granted
during the Company's 1997 fiscal year.
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1997 December 31, 1997
Shares Acquired Exercisable/ Exercisable/
Name On Exercise Value Realized Unexercisable Unexercisable(1)
<S> <C> <C> <C> <C>
Jeffrey H. Fisher -- -- 447,250/661,250 $1,724,313/$2,128,313
Frederic M. Shaw -- -- 125,000/185,000 $281,250/$416,250
David Bulger -- -- 55,000/45,000 $181,875/$120,625
Gregory M. Fay -- -- 50,000/50,000 $71,875/$71,875
Mark A. Murphy -- -- 50,000/50,000 $112,500/$112,500
</TABLE>
(1) The exercise prices of the options held by Mr. Fisher as
of December 31, 1997 is (a) $10.00, with respect to
250,000 of the options, (b) $9.75, with respect to
156,000 of the options, and (c) $13.25, with respect to
702,500 of the options. The exercise prices of the
options held by Mr. Bulger as of December 31, 1997 is (a)
$8.875, with respect to 20,000 of the options, and (b)
$13.25, with respect to 80,000 of the options. The
exercise prices of the options held by Messrs. Shaw and
Murphy at December 31, 1997 is $13.25. The exercise
price of the options held by Mr. Fay at December 31, 1997
is $14.0625. The closing price of the Common Shares on
December 31, 1997 was $15.50.
EMPLOYMENT AND RELATED CONTRACTS
The Company recently replaced Messrs. Fisher's and Bulger's
existing employment agreements effective February 1, 1997 and
entered into employment agreements with Messrs. Shaw, Fay and
Murphy as of their dates of employment by the Company - February
1, 1997, August 14, 1997 and March 31, 1997, respectively. Each
agreement sets forth the officer's position and responsibilities,
as follows:
- Mr. Fisher serves as Chief Executive Officer and
President;
- Mr. Shaw serves as Executive Vice President and Chief
Operating Officer;
- Mr. Bulger serves as Chief Financial Officer and
Treasurer;
- Mr. Fay serves as Vice President of Accounting; and
- Mr. Murphy serves as General Counsel and Secretary.
Each employment agreement sets forth an annual base salary
for the officer, with Mr. Fisher's base salary set at $150,000,
Mr. Shaw's base salary set at $105,000 and Messrs. Bulger's,
Fay's and Murphy's base salaries set at $125,000 each. Each
officer's salary is subject to increase on January 1 of each year
by a percentage of the base salary in effect for the previous
year, which percentage is equal to the sum of (a) the percentage
increase in the CPI in such prior year plus (b) five.
Each employment agreement sets forth an annual cash bonus
formula. Mr. Fisher's agreement provides for an annual cash
bonus equal to 7.5% of the increase, if any, in the Company's
"Funds From Operations" (net income (loss) computed in accordance
with generally accepted accounting principles, excluding gains
(or losses) from debt restructuring and sales of property, plus
depreciation and real estate amortization, and after adjustment for
unconsolidated partnerships and joint ventures) over the previous
year, up to a maximum of his then-current annual salary. Mr.
Shaw's agreement provides for an annual cash bonus equal to 4.9%
of the increase, if any, in the Company's Funds
17
<PAGE>
From Operations over the previous year, up to a maximum of his
then-current annual salary. Messrs. Bulger's, Fay's and Murphy's
agreements each provide for annual cash bonuses equal to the
officer's then-current annual salary multiplied by the percentage
increase in the Company's Funds From Operations per share in the
previous year.
The term of each employment agreement extends until December
31, 2002. Each agreement entitles the officer to customary
fringe benefits, including vacation, life, medical and hospital
insurance, as well as the right to participate in any other
benefits or plans established for any management-level employees.
Each employment agreement provides for certain severance
payments in the event of death or disability or upon termination
by the Company in breach of the agreement (which includes,
without limitation, a material modification of duties without
consent, preventing the officer from carrying out
responsibilities consistent with the officer's position or a
requirement to relocate outside of a 50-mile radius). In any
such event, the Company is responsible for three times the
officer's then-current annual salary and bonus, plus any other
accrued or deferred compensation. In addition, upon the
occurrence of a "change of control," the Company is also
obligated to pay the officer the amounts referred to in the
immediately preceding sentence. The Company is also responsible
for any excise tax on "excess parachute payments" that may
result from such payments. Each agreement defines a "change of
control" as (a) a person (together with his affiliates) becoming,
or entering into an agreement to become, the owner of 30% of more
of the Company's voting shares (other than as a result of a
Company share buy-back or share consolidation), (b) the Company
entering into an agreement involving the transfer of 50% or more
of the Company's total assets, (c) the Company entering into an
agreement to merge or consolidate, regardless of whether the
Company would be the survivor, (d) the date that current members
of the board of Trustees cease to constitute a majority of the
board for any reason or (e) a complete liquidation or dissolution
of the Company.
Mr. Shaw serves as President of, and along with Mr. Fisher
is the owner of, the JF Lessee. Mr. Shaw has entered into an
employment agreement with the JF Lessee, which includes terms
that are substantially similar to the terms of his employment
agreement with the Company. The significant difference between
the agreements is in the salary and bonus provided for in each
agreement, which reflects the relative time commitments Mr. Shaw
has with the respective employers. Under the JF Lessee
employment agreement Mr. Shaw receives an annual salary of
$45,000, subject to increase on January 1 of each year by a
percentage of the base salary in effect for the previous year,
which percentage is equal to the sum of (a) the percentage
increase in the CPI in the previous year plus (b) 5. The JF
Lessee agreement also provides that Mr. Shaw will receive an
annual cash bonus from the JF Lessee equal to 2.1% of the
increase, if any, in the Company's Funds From Operations over the
previous year, subject to a maximum amount equal to his then-
current annual salary from the JF Lessee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Berger, Goldsmith and Zenkel comprise the
Compensation Committee. None of the members of the Compensation
Committee are or have been employees of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee is responsible for setting and
administering compensation policies, fixing salaries of and
awarding performance bonuses to executive officers and
determining awards of restricted shares, performance share
awards, share options, and other equity-based compensation. The
Compensation Committee is composed of Messrs. Berger, Goldsmith
and Zenkel, none of whom is an employee or officer of the
Company. The Compensation Committee's policy is to devise and
implement compensation for the Company's officers and employees
which shall be commensurate with their position and determined
with reference to compensation paid to similarly situated
employees and officers of companies which are deemed by the
Compensation Committee to be comparable to the Company. There
are three components of the Company's executive compensation:
base salary, discretionary bonuses and incentive compensation.
The primary object with respect to executive compensation is to
establish
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programs which emphasize competitive salaries and long-term and
short-term incentive compensation to attract and retain
qualified, professional management. The Compensation Committee
believes that these programs will align the compensation of the
Company's key employees to the performance of the Company and the
creation of shareholder value.
In 1997, the Compensation Committee approved new employment
agreements for Messrs. Fisher and Bulger, as well as employment
agreements for Messrs. Shaw, Fay and Murphy, each of whom became
employees of the Company during 1997. See "Executive
Compensation - Employment and Related Contracts." The
Compensation Committee approved replacing Messrs. Fisher's and
Bulger's employment agreements because the replaced agreements
were outdated and did not include provisions deemed important by
the Compensation Committee in retaining key employees.
The Summary Compensation Table above sets forth the salaries
paid to the officers in 1997. In establishing the base salaries
of the executives, the Compensation Committee considered the
responsibilities of each officer and the officer's experience.
The Committee reviewed the salaries of officers with similar
responsibilities at real estate companies, other REITs in general
and other REITs that acquire hotels, specifically. The
Committee considered the responsibilities of each officer in
light of the size, scope and geographic dispersion of the
Company's asset base, the likelihood of continued rapid
expansion, the increasing sophistication of the Company's systems
and the corresponding increase in the time requirements. Each of
the executive officers has been performing services for the
Company for a number of years. In setting base salaries,
therefore, the Compensation Committee also considered the
performance of each officer as it relates to the Company.
Messrs. Fisher and Bulger have been employed by the Company since
its inception, in the case of Mr. Fisher, and April 1995, in the
case of Mr. Bulger. Mr. Shaw has been president of the JF
Lessee, the primary operator of the Company's hotels, since the
inception of the Company. Messrs. Fay and Murphy were the
primary outside accountant and attorney, respectively, for the
Company since before its IPO in September 1994. In considering
Mr. Shaw's compensation, the Compensation Committee also
considered the relative amounts of time Mr. Shaw spends in
connection with his respective duties with the Company and the JF
Lessee.
Each employment agreement establishes a bonus for the
officers. Other bonuses are payable in the discretion of the
Compensation Committee, although to date no such discretionary
bonuses have been paid. The Summary Compensation Table above
sets forth the bonuses paid to the officers in 1997. In
considering such bonuses, the Compensation Committee intends to
consider the officer's annual base salary, the performance of the
Company, the performance of the individual, the performance of
the Company's peer group, the overall economy, and any other
relevant factors.
The Compensation Committee believes that it is essential, in
an industry characterized by rapid change and intense
competition, for the Company's compensation program to maintain
the flexibility to reward contributions which may not be
immediately reflected in quantitative performance measures, but
which are important to the Company's long-term success. In
crafting the awards made to the Company's executive officers, and
particularly those awards made in 1997 (including restricted
shares, performance share awards and options), the Company
considered the incentive plans of the Company's REIT peers (as
reflected in various studies, including the annual survey
compiled by the National Association of Real Estate Investment
Trusts). The Compensation Committee sought to make non-cash
compensation a significant part of the total compensation
package. The Compensation Committee believes that the awards
made to date encourage and reward performance by tying the value
of those awards directly to the creation of shareholder value as
reflected in increasing share prices. The tables in "Executive
Compensation" above set forth details regarding the outstanding
awards. In approving such awards, the Compensation Committee
considered, among other factors, (I) the rapid growth of the
Company, (ii) the scope of the officers' responsibilities, and
(iii) awards made to the executive officers of other REITs, and
specifically other REITs which invest in hotel properties. The
Compensation Committee contemplates that significant percentages
of most awards will vest in the recipient over time, if the
employee remains an employee at the time of vesting, to further
its goal of providing the employee with long-term incentives. At
the same time, the Compensation Committee also recognizes that
short-term incentive compensation can be an important factor in
attracting and retaining key employees and encouraging share
19
<PAGE>
ownership. The Compensation Committee expects that this
principle will be reflected in share awards from time to time
with shorter or no vesting periods.
The Compensation Committee, which also serves as the
Administrator for purposes of the 1994 Plan, has exercised and
will exercise its collective, subjective judgment as to the
performance of the Company's executive officers in granting
additional share options, restricted shares, performance share
awards and other incentive awards, based upon such qualitative
factors (without assignment of relative weights) as leadership,
response to changes in the Company and the hotel industry,
ability to creatively satisfy changing market demands,
significant increases in the officer's responsibilities and
attainment of Company and individual performance goals. The
Compensation Committee also has and will consider any evaluation
by the Chairman of the Company (Mr. Fisher) as to each officer's
responsibilities, contributions and performance.
Although none of the Company's executive officers receives
annual compensation in excess of $1 million, the Company
continues to evaluate the limit on tax deductibility of
compensation in excess of that amount established under the
Omnibus Budget Reconciliation Act of 1993. The 1994 Plan allows
for the grant of options and certain cash and share incentive
awards that qualify as performance-based compensation exempt from
the limit.
The foregoing has been furnished by the members of the
Compensation Committee.
COMPENSATION COMMITTEE
Miles Berger
C. Gerald Goldsmith
Bruce Zenkel
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PERFORMANCE GRAPH
The following graph compares the change in the Company's
total shareholder return on Common Shares for the period January
1,1995 through December 31, 1997, with the changes in the
Standard & Poor's 500 Stock Index (the "S&P 500 Index") and the
SNL Securities Hotel REIT Index ("Hotel REIT Index") for the same
period, assuming a base share price of $100 for the Common Shares
and the Hotel REIT Index for comparative purposes. The Hotel
REIT Index is comprised of fifteen publicly traded REITs which
focus on investments in hotel properties. Total shareholder
return equals appreciation in stock price plus dividends paid and
assumes that all dividends are reinvested. The performance graph
is not necessarily indicative of future investment performance.
[INNKEEPERS USA TRUST GRAPH]
Period Ending
-----------------------------------------------
Index 9/23/94 12/31/94 12/31/95 12/31/96 12/31/97
-----------------------------------------------
Innkeepers USA Trust 100.00 74.44 102.64 169.61 202.79
S&P 500 100.00 100.73 138.58 170.26 227.09
SNL Hotel REITs 100.00 94.83 124.83 190.74 250.07
21
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS WITH MANAGEMENT
The JF Lessee. The Partnership and the JF Lessee, which is
owned by Mr. Fisher (80%) and Mr. Shaw (20%), are parties to
Percentage Leases with respect to 47 of the hotel properties
owned by the Partnership at December 31, 1997, with each such
lease having an initial term of at least 10 years. Pursuant to
the terms of the Percentage Leases, the JF Lessee is required to
pay the greater of (a) a fixed base rent or (b) percentage rent
based on the revenues of the hotels, and certain other additional
charges, and is entitled to all profits from the operation of the
hotels after the payment of rent, operating expenses and other
expenses (including management fees). Payments of rent under the
Percentage Leases constitute substantially all of the
Partnership's and the Company's revenues. For the year ended
December 31, 1997, the JF Lessee incurred or paid the Partnership
an aggregate of approximately $57.49 million in lease payments
under the Percentage Leases for those 47 Hotels and had combined
net income of approximately $3.49 million from the operation of
the Company's hotels leased by the JF Lessee. In addition to his
ownership of the JF Lessee, Mr. Shaw serves as President of, and
derives a salary and bonus from, the JF Lessee.
Franchise Licenses. The JF Lessee, which is owned by
Messrs. Fisher and Shaw, hold all of the franchise licenses for
the Hotels leased by the JF Lessee (to the extent such hotels
have franchise agreements) and are expected to hold any franchise
licenses required for subsequently acquired hotel properties that
are leased to the JF Lessee. The JF Lessee pays the franchise
fees for all of the Company's Hotels which are leased to the JF
Lessee and are subject to franchise fees, except for franchise
license application and transfer fees, which are paid by the
Partnership. During 1997, the Partnership incurred or paid
franchise license application, transfer and related fees for the
Hotels in the aggregate amount of approximately $165,600. In
addition, in 1996 and 1997, the Partnership loaned to the JF Lessee
an aggregate of approximately $530,250, which the JF Lessee was
required to make available to Residence Inn by Marriott, Inc.
("Marriott") for initial working capital at the 20 Residence Inn
Hotels that are managed by Marriott under management contracts
with the JF Lessee. The Partnership's loans to the JF Lessee for
working capital at the Marriott-managed Hotels bear no interest
and are payable on demand.
Jack P. DeBoer. In November 1996, the Company acquired
seven Residence Inn hotels (the "DeBoer Hotels") from affiliates
of Jack P. DeBoer (the "DeBoer Group"), including Rolf E. Ruhfus.
Due to the potential adverse tax consequences to members of the
DeBoer Group that may result from a sale of the DeBoer Hotels,
the Company has agreed with the DeBoer Group that for a period of
up to ten years following the closing of the acquisition of the
DeBoer Hotels, (I) any taxable sale of a DeBoer Hotel will
require the consent of the applicable members of the DeBoer Group
and (ii) the Company will maintain at all times outstanding
indebtedness of at least approximately $40 million, subject to
reduction upon the occurrence of certain events, including
certain redemptions or taxable transfers of Preferred Units by
the applicable members of the DeBoer Group (the "Required
Indebtedness"). In the event that the Company fails to maintain
the Required Indebtedness, the Company will be liable for any
resulting income tax liabilities incurred by the applicable
members of the DeBoer Group.
Mr. DeBoer and certain of his affiliates have in the past,
and continue to be, involved in the development of hotels,
including extended-stay hotels. Mr. DeBoer is the President,
Chairman of the Board and a major shareholder of Candlewood Hotel
Company, Inc. ("Candlewood"), a public hotel company that is the
owner, operator and franchisor of Candlewood hotels, an economy
extended-stay hotel chain recently founded by Mr. DeBoer. Hotels
developed by Mr. DeBoer and his affiliates, including Candlewood
hotels, may compete with the Company's hotels for guests, and
other hotel companies with which Mr. DeBoer is affiliated,
including Candlewood, may compete with the Company for
acquisition opportunities. Accordingly, the interests of the
Company and Mr. DeBoer could be different in connection with
matters relating to the Company's Hotels or proposed acquisitions
that are competitive with hotels owned or being considered for
acquisition or development by Mr. DeBoer and his affiliates.
22
<PAGE>
Rolf E. Ruhfus. In June 1997, the Company acquired nine
hotels (the "Summerfield Hotels") from affiliates of Rolf E.
Ruhfus (the "Summerfield Group") for a total purchase price of
approximately $118.6 million, consisting of (I) approximately
$89.5 million in cash and (ii) approximately 1.94 million Common
Units, which were assumed to have a value of $15 per Common Unit.
The Company leases the Summerfield Hotels to the Summerfield
Lessee, of which Mr. Ruhfus is the Chairman and a major
shareholder. For the year ended December 31, 1997, the
Summerfield Lessee incurred or paid the Partnership an aggregate
of approximately $7,500,000 in lease payments under the
Percentage Leases for the Summerfield Hotels.
Beginning in July 1998, each Common Unit held by the
Summerfield Group may be redeemed for an amount of cash equal to
the then-trading value of a Common Share on the NYSE or, at the
option of the Company, one Common Share. Assuming full
redemption of all Common Units held by the Summerfiield Group
(and 475,003 Preferred Units held by Mr. Ruhfus) and the issuance
of Common Shares in exchange therefor, the Summerfield Group
would own approximately 6.8% of the Common Shares currently
outstanding. Following the acquisition of the Summerfield
Hotels, Mr. Ruhfus joined the Company's Board of Trustees.
The Summerfield Hotels include six Summerfield Suites hotels
and one Sunrise Suites hotel - which are upscale extended-stay
hotels - and two Sierra Suites hotels - which are mid-price
extended-stay hotels. Mr. Ruhfus and certain of his affiliates
have in the past, and continue to be, involved in the development
of hotels, including extended-stay hotels. Mr. Ruhfus is the
President, Chairman of the Board and a major shareholder of
Summerfield Hotel Company and its affiliates ("Summerfield"), a
private hotel company that is the owner (except with respect to
those hotels owned by the Company), operator and franchisor of
Summerfield Suites and Sierra Suites hotels. Hotels developed
by Mr. Ruhfus and his affiliates, including Summerfield Suites
and Sierra Suites hotels, may compete with the Company's hotels
for guests. Accordingly, the interests of the Company and Mr.
Ruhfus could be different in connection with matters relating to
the Company's Hotels or proposed acquisitions that are
competitive with hotels owned or being considered for acquisition
or development by Mr. Ruhfus and his affiliates.
The Company and Summerfield entered into an agreement in
principle pursuant to which the Company has a right of first
refusal to acquire or own any all-suite hotel development project
(a "Development Hotel") undertaken by Summerfield through June
2002, other than certain hotels currently in development and an
additional two development projects per year selected by
Summerfield, with respect to which the Company has no rights.
The right of first refusal will terminate earlier upon the
occurrence of certain events, including the Company's failure to
accept 10 consecutive development projects offered by Summerfield
or the sale of all or substantially all of the Summerfield
Lessee's assets or ownership interests. The Company's cost for a
Development Hotel shall be no greater than Summerfield's
development budget for the Development Hotel plus a specified
development fee. The Company will lease any Development Hotel
that it acquires to the Summerfield Lessee, pursuant to a
percentage lease substantially similar to the Percentage Leases
for the Summerfield Hotels. In addition, with respect to any
Development Hotel, Summerfield will be entitled to an additional
payment (a "Carried Interest") equal to fifteen percent of any
increase in value of the Development Hotel over the Company's
cost, measured at the second (for Sierra Suites hotels) or third
anniversary (for Summerfield Suites hotels) of the opening of the
Development Hotel. Pursuant to this arrangement, the Company
agreed to develop a 113-room Sierra Suites hotel in Westborough,
Massachusetts (the "Westborough Development Hotel"), retaining
Summerfield as the developer. Summerfield has guaranteed that
the Westborough Development Hotel will cost no more than
approximately $7.9 million, excluding the Carried Interest but
including a cash development fee payable to Summerfield of
approximately $540,000. The Carried Interest will be payable
in Common Units with respect to which Summerfield will have
Redemption Rights beginning one year after issuance. The
Westborough Development Hotel is expected to be completed in the
first half of 1998. Until definitive agreements are executed,
the Company has no obligation with respect to any other
Development Hotel, and there are no assurances that the Company
will acquire or own any other Development Hotel.
23
<PAGE>
PROPOSAL TWO - AMENDMENT OF ARTICLE VII OF THE
DECLARATION OF TRUST
The Board of Trustees has unanimously approved and
recommends to the Shareholders that they approve and adopt
Proposal Two, the proposed amendment to Article VII of the
Declaration of Trust, in the form attached as Exhibit A hereto.
Article VII of the Declaration of Trust currently contains
certain provisions ("Share Transfer Restrictions") that restrict
the transfer of the Company's capital shares if, following such
transfer, any person would own at any time, directly or
indirectly, in the aggregate more than 9.8% of the outstanding
capital shares of the Company, including any shares deemed to be
constructively owned by such person under applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Ownership
Limit"). The Share Transfer Restrictions, which are similar to
provisions of the charter documents of many REITs, are designed,
in part, to insure compliance with certain REIT tax law
requirements, which provide that not more than 50% of the
Company's outstanding capital shares can be owned, directly or
indirectly, by five or fewer persons.
The proposed amendment clarifies that nothing in the
Company's Declaration of Trust would prohibit the settlement of
any transactions entered into through the facilities of any
national securities association registered under the Securities
Exchange Act of 1934, as amended (e.g., the NYSE), or of the
national market system of a national securities association
registered under the Exchange Act (i.e., Nasdaq NMS), while
maintaining the authority of the Board of Trustees to take all
action necessary to maintain the Company's status as a REIT for
under the Code.
The Board of Trustees believes that it is important to
assure the investment community and the NYSE that the Company's
remedies under the Shares Transfer Restrictions in the
Declaration of Trust do not prohibit the settlement of any
transactions on the NYSE. The NYSE has advised the Company that
the NYSE currently requires any REIT listed on the NYSE and
having share transfer restrictions in its charter to include
provisions similar to those proposed to be included in the
Company's Declaration of Trust. Adoption of Proposal Two would
place the Company fully in compliance with the listing
requirements of the NYSE regarding share transfer restrictions in
REIT charters.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR APPROVAL OF
PROPOSAL TWO
24
<PAGE>
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The Board of Trustees will provide for presentation of
shareholder proposals at the 1999 annual meeting of shareholders,
provided that such proposals are submitted by eligible
shareholders who have complied with the relevant regulations of
the SEC regarding such proposals, and with requirements of the
Company's Bylaws, a copy of which is available upon written
request addressed to the Secretary of the Company. Shareholder
proposals intended to be submitted for presentation at the
Company's 1999 annual meeting of shareholders must be made in
writing and must be received by the Company at its executive
offices no later than one hundred and twenty (120) days before
the anniversary of the date of the Annual Meeting for inclusion
in the Company's proxy statement and the form of proxy relating
to the 1999 annual meeting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. has served as auditors for the
Company and its subsidiaries for the year ended December 31, 1997
and will continue to so serve for the year ending December 31,
1998 until and unless changed by action of the Board of Trustees.
A representative of Coopers & Lybrand will not be present at the
Annual Meeting.
OTHER MATTERS
The Board of Trustees knows of no other business to be
brought before the Annual Meeting. If any other matters properly
come before the Annual Meeting, the proxies will be voted on such
matters in accordance with the judgment of the persons named as
proxies therein, or their substitutes, present and acting at the
meeting.
The Company will furnish to each beneficial owner of Common
Shares entitled to vote at the Annual Meeting, upon written
request to David Bulger, the Company's Chief Financial Officer
and Treasurer, at the Company's executive offices at
306 Royal Poinciana Way, Palm Beach, Florida 33480, telephone
(561) 835-1800, copies of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, including the
financial statements and financial statement schedules filed by
the Company with the SEC therewith.
25
<PAGE>
EXHIBIT A
PROPOSED AMENDMENTS TO DECLARATION
OF TRUST OF INNKEEPERS USA TRUST
Article VII, Section 1 of the Company's Declaration of Trust
is hereby amended by adding a new Section (H), which would read
in its entirety as follows:
(H) Securities Exchange Transactions. Nothing in this
Article VII or this Declaration of Trust shall prohibit
the settlement of any transaction entered into through
the facilities of any national securities exchange
registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or of the national
market system of a national securities association
registered under the Exchange Act. The immediately
preceding sentence shall not limit the authority of the
Board of Trustees to take any and all actions it deems
necessary or advisable to protect the Company and the
interests of its shareholders in preserving the
Company's status as a REIT, so long as such actions do
not prohibit the settlement of any transactions entered
into through the facilities of any national securities
exchange registered under the Exchange Act or of the
national market system of a national securities
association registered under the Exchange Act.
In addition, the following clause shall be added to the end
of Article VII, Section 3:"..., so long as such actions do not
prohibit the settlement of any transaction entered into through
the facilities of any national securities exchange registered
under the Exchange Act or of the national market system of a
national securities association registered under the Exchange
Act", so that such Article VII, Section 3, as so amended, would
read in its entirety as follows:
Section 3. Remedies Not Limited. Nothing
contained in this Article VII shall limit the authority
of the Trust to take such other action as it deems
necessary or advisable to protect the Trust and the
interests of its shareholders by preservation of the
Trust's status as a REIT and to ensure compliance with
the Ownership Limit, so long as such action does not
prohibit the settlement of any transaction entered into
through the facilities of any national securities
exchange registered under the Exchange Act or of the
national market system of a national securities
association registered under the Exchange Act.
26
<PAGE>
NO. OF SHARES _________
PROXY
INNKEEPERS USA TRUST
306 Royal Poinciana Way
Palm Beach, Florida 33480
ANNUAL MEETING OF SHAREHOLDERS -- MAY 6, 1998
The undersigned hereby appoints Jeffrey H. Fisher and David
Bulger, or either of them, with full power of substitution in
each, proxies (and if the undersigned is a proxy, substitute
proxies) to vote all Common Shares of Innkeepers USA Trust owned
by the undersigned at the Annual Meeting of Shareholders to be
held at the Hampton Inn, 1505 Belvedere Road, West Palm Beach,
Florida, at 9:00 a.m., local time, on Wednesday, May 6, 1998 and
at any adjournments thereof, as specified below:
1. ELECTION OF TRUSTEES ("PROPOSAL ONE")
(Instruction: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name below)
__ CLASS I -- TERM EXPIRING 2001 - FOR BOTH NOMINEES
LISTED BELOW
Jack P. DeBoer
Bruce Zenkel
__ CLASS III -- TERM EXPIRING 2000 - FOR THE NOMINEE
LISTED BELOW
Rolf E. Ruhfus
__ WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
2. PROPOSAL TO AMEND ARTICLE VII OF THE DECLARATION OF TRUST
("PROPOSAL TWO")
__ FOR __ AGAINST __ ABSTAIN
3. In their discretion, the proxies (and if the undersigned
is a proxy, any substitute proxies) are authorized to
vote upon such other business as may properly come before
the meeting.
[Please sign and date on the reverse side of this proxy.]
27
<PAGE>
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned shareholder.
Dated: _______________________, 1998
Please sign name exactly
as it appears on share
certificate. Only one of
several joint owners need
sign. Fiduciaries should
give full title.
_____________________________________
Signature
____________________________________
Title
THIS PROXY IS SOLICITED BY THE COMPANY'S BOARD OF TRUSTEES. IF
NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH NOMINEE FOR TRUSTEE AND FOR ADOPTION OF PROPOSAL TWO.
28
