SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
INNKEEPERS USA TRUST
(Name of Registrant as Specified in Its Charter)
INNKEEPERS USA TRUST
(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):
[ ] 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
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 2000
---------------------------------------------------------
The annual meeting of the shareholders (the "Annual Meeting") of
Innkeepers USA Trust (the "Company") will be held at the Courtyard by Marriott,
2440 W. Cypress Creek Road, Ft. Lauderdale, Florida 33309, on Thursday, May 4,
2000 at 9:00 a.m., local time, for the following purposes:
1. To elect three Class III trustees to serve on the Board of
Trustees until the annual meeting of shareholders in 2003 or
until their successors have been duly elected and qualified
("Proposal One");
2. To approve an amendment to the Company's 1994 Share Incentive
Plan (the "1994 Plan") to increase the number of shares
authorized for issuance under the 1994 Plan ("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, 2000 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
March 31, 2000
IMPORTANT
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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. The Annual
Meeting will be held at the Courtyard by Marriott hotel, 2440 W. Cypress Creek
Road, Ft. Lauderdale, Florida 33309, on Thursday, May 4, 2000 at 9:00 a.m. EST.
The mailing address of the principal executive offices of the Company is 306
Royal Poinciana Plaza, Palm Beach, Florida 33480. The Company's telephone number
is (561) 227-1336. The Company maintains a website at www.innkeepersusa.com.
This Proxy Statement and the accompanying proxy card and Notice of Annual
Meeting are first being mailed on or about March 31, 2000 to shareholders of
record at the close of business on March 13, 2000 (the "Record Date").
THE COMPANY
The Company is a Maryland real estate investment trust which invests in
hotel properties and has elected to be taxed as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986. The Company, through
Innkeepers USA Limited Partnership (with its subsidiary partnerships, the
"Partnership"), owned a total of 67 hotels (the "Hotels") with an aggregate of
8,138 rooms in 23 states on December 31, 1999. In order to qualify as a REIT,
neither the Company nor the Partnership can operate hotels. Sixty of the Hotels
are leased to Innkeepers Hospitality, Inc. (or other entities under common
ownership, collectively, the "IH Lessee") and seven of the Hotels are leased to
affiliates of Wyndham International, Inc. (collectively, the "Summerfield
Lessee" and, collectively with the IH Lessee, the "Lessees"), 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, 1999, the IH Lessee operated 31 of the Hotels,
affiliates of the Summerfield Lessee operated seven of Hotels, 27 of the Hotels
were managed by wholly-owned subsidiaries of Marriott International, Inc.
("Marriott"), and two of the Hotels were managed by another independent
operator.
THE PROXY
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 1, 2000, the Company had outstanding 34,676,586 Common
Shares and 4,630,000 Series A Cumulative Convertible Preferred Shares. The
Company's 4,630,000 Series A Preferred Shares are convertible into a total of
6,857,493 Common Shares.
A proxy will be voted as specified by a Shareholder 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 of this Proxy Statement. A
Shareholder giving a proxy has the power to revoke it either (1) by delivering
written notice of such revocation to the Secretary of the Company prior to the
Annual Meeting or (2) by attending the Annual Meeting and voting in person.
A beneficial owner of Common Shares may hold shares in "street name"
rather than be the record holder themselves. That is, the record holder of their
shares may be their broker or another intermediary. These beneficial owners may
vote (or revoke a previous vote) only through, and in accordance with procedures
established by, the record holder or its agent (i.e., the broker or other
intermediary).
<PAGE>
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.
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 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.
The solicitation of proxies is being made primarily by the use of the
mails. 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, 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 $5,000, plus expenses. Shareholders are urged to return their
proxies without delay.
REQUIRED VOTE
If a majority of the votes entitled to be cast are present at the
Annual Meeting, in person or by proxy, a quorum will exist and the Annual
Meeting will continue. If a quorum is not present, the Annual Meeting will be
adjourned until enough shareholders are present in person or by proxy so that a
quorum exists. If a quorum exists, the Shareholders will vote, in person or by
proxy, on the matters described in this Proxy Statement. An affirmative vote of
a plurality of all the votes cast will elect each nominee for Class III trustee.
An affirmative vote of a majority of the votes cast will amend the 1994 Plan.
If a Shareholder attends the Annual Meeting, either in person or by
proxy, but fails to vote on a matter, the Shareholder will have abstained from
voting. Since the vote required to elect Class III trustees or amend the 1994
Plan is based on the votes cast, abstentions will have no effect on the outcome
of the vote.
Brokers holding shares for beneficial owners (i.e., in "street name")
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" are counted for the purpose of
determining the existence of a quorum.
Proposal One, the election of trustees, is a routine matter. Proposal
Two, increasing the number of shares authorized for issuance under the 1994
Plan, is also a routine matter because the increase covers a number of shares
less than 5% of the number of outstanding Common Shares. As both proposals to be
considered at the Annual Meeting are routine matters, no broker non-votes are
expected to occur.
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<PAGE>
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 1999 fiscal year. A filing was made in January 2000
relating to an October 1999 acquisition of 1,000 Series A Cumulative Convertible
Preferred Shares by Mr. Miles Berger, a trustee of the Company. Other than as
set forth above, based on information available to the Company, the Company
believes that all required filings for executive officers and trustees in 1999
were timely made.
3
<PAGE>
OWNERSHIP OF THE COMPANY'S COMMON SHARES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of December 31, 1999,
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.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF
BENEFICIAL PERCENT OF
OWNERSHIP(1) CLASS(1)
------------ --------
<S> <C> <C>
Jeffrey H. Fisher 2,290,492(2) 6.3%
Frederic M. Shaw 871,191(3) 2.5%
David Bulger 168,391(4) *
Gregory M. Fay 127,351(5) *
Mark A. Murphy 145,616(6) *
Miles Berger 27,906(7) *
Thomas J. Crocker 11,660(8) *
Jack P. DeBoer 2,435,494(9) 6.6%
9342 East Central
Wichita, Kansas 67206
C. Gerald Goldsmith 23,462(7) *
Rolf P. Ruhfus 752,055(10) 2.1%
Bruce Zenkel 20,500(7) *
Franklin Resources, Inc. 5,510,493(11) 14.5%
777 Mariners Island Boulevard
San Mateo, CA 94404
Brinson Partners, Inc. 1,998,400(12) 5.8%
209 South LaSalle Street
Chicago, IL 60604-1295
All trustees and executive officers as a group (11 persons) 6,873,118(2)-(10) 17.2%
</TABLE>
- -----------------------------
*Represents less than 1% of the outstanding Common Shares.
4
<PAGE>
(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) the named person exercised
all options to acquire Common Shares held by him which are currently
exercisable or which become exercisable on or before February 29, 2000
and (c) the named person exercised his right to convert all of his
Series A Cumulative Convertible Preferred Shares of Beneficial Interest
of the Company ("Series A Preferred Shares") into Common Shares. The
total number of Common Shares used in calculating the percent of class
owned by each named person assumes that none of (x) the Units held by
other persons are redeemed, (y) the options held by other persons are
exercised and (z) the Series A Preferred Shares held by other persons
are converted. Outstanding Units may be tendered for redemption by the
limited partners on a one-for-one basis for Common Shares, or at the
election of the Company an equivalent amount of cash ("Redemption
Rights").
(2) Includes 278,813 shares owned by the IH Lessee, in which Mr. Fisher
owns 80% of the capital stock. Mr. Fisher disclaims beneficial
ownership of 55,763 (20%) of the included shares owned by the IH
Lessee. Also includes (A) 360,000 restricted Common Shares, 8,571 of
which will vest in 2000, 68,071 of which will vest in each of 2001-2003
and 68,074 of which will vest in 2004, (B) 413,595 Common Shares
issuable upon exercise of Redemption Rights and (C) 962,500 Common
Shares issuable upon the exercise of options. Does not include 386,000
Common Shares issuable upon the exercise of unvested options, (x)
58,000 of which will vest in 2000, (y) 106,000 of which will vest in
each of 2001 and 2002 and (y) 58,000 of which will vest in each of 2003
and 2004.
(3) Includes 278,813 shares owned by the IH Lessee, in which Mr. Shaw owns
20% of the capital stock. Mr. Shaw disclaims beneficial ownership of
223,050 (80%) of the included shares owned by the IH Lessee. Also
includes (A) 162,500 restricted Common Shares, 7,142 of which will vest
in 2000, 29,225 of which will vest in each of 2001-2003 and 29,233 of
which will vest in 2004, (B) 80,725 Common Shares issuable upon
exercise of Redemption Rights and (C) 286,000 Common Shares issuable
upon the exercise of options. Does not include 84,000 Common Shares
issuable upon the exercise of unvested options, (x) 12,000 of which
will vest in 2000, (y) 24,000 of which will vest in each of 2001 and
2002 and (z) 12,000 of which will vest in each of 2003 and 2004.
(4) Includes (A) 39,688 restricted Common Shares, 536 of which will vest in
2000 and 7,692 of which will vest in each of 2001-2004, and (B) 100,000
Common Shares issuable upon the exercise of options.
(5) Includes (A) 38,125 restricted Common Shares, 357 of which will vest in
2000, 7,461 of which will vest in each of 2001-2003 and 7,463 of which
will vest in 2004, and (B) 83,333 Common Shares issuable upon the
exercise of options. Does not include 16,667 Common Shares issuable
upon the exercise of unvested options, which will vest in 2000.
(6) Includes (A) 38,125 restricted Common Shares, 357 of which will vest in
2000, 7,461 of which will vest in each of 2001-2003 and 7,463 of which
will vest in 2004, and (B) 100,000 Common Shares issuable upon the
exercise of options.
(7) Includes (A) 12,500 restricted Common Shares and (B) 8,000 Common
Shares issuable upon the exercise of options.
(8) Includes (A) 5,660 restricted Common Shares, 1,132 of which will vest
in each of 2000 and 2001, and (B) 6,000 Common Shares issuable upon the
exercise of options.
(9) Includes an aggregate of 2,417,188 Common Shares issuable upon the
exercise of Redemption Rights; of those included shares, Mr. DeBoer
disclaims beneficial ownership of 688,348 Common Shares issuable upon
redemption of Units owned by his wife and adult children. Also includes
(A) 6,382 restricted Common Shares, 1,278 of which will vest in
November 2000, and (B) 6,000 Common Shares issuable upon the exercise
of options.
(10) Includes (A) 5,172 restricted Common Shares, 1,034 of which will vest
in 2000 and 1,036 of which will vest in 2001, (B) 731,775 Common Shares
issuable upon the exercise of Redemption Rights and (C) 4,000 Common
Shares issuable upon the exercise of options.
(11) Based on information contained in a Schedule 13-G dated January 19,
2000, 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. Includes 3,221,393 Common Shares into which
2,175,000 Series A Preferred Shares owned by the investment companies
and/or accounts may be converted.
(12) Based on information contained in a Schedule 13-G dated February 4,
2000, and jointly filed with the Securities and Exchange Commission
("SEC") by Brinson Partners, Inc. and UBS AG, with respect to shares
owned by accounts managed on a discretionary basis by them. Each of the
joint filers disclaims beneficial ownership of the shares.
5
<PAGE>
PROPOSAL ONE - ELECTION OF TRUSTEES
NOMINEES FOR CLASS 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 III trustees, Mr. Jeffrey H. Fisher, Mr. Thomas J. Crocker and Mr.
Rolf E. Ruhfus, expires at the Annual Meeting. 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 trustees 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 III trustees, Messrs. Fisher, Crocker and Ruhfus, to
serve as Class III trustees for three-year terms expiring at the Company's
annual meeting in 2003 or until their successors are 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 the Class
III nominees to serve as trustees until the 2003 annual meeting or until their
successors are elected and qualify. 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.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE
FOR EACH OF THE NOMINEES FOR CLASS III TRUSTEES
The following table sets forth information as of March 1, 2000 with
respect to the nominees and each other trustee whose term of office will
continue after the Annual Meeting.
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NOMINEES FOR ELECTION AS CLASS III TRUSTEES
(TERMS EXPIRING 2003)
JEFFREY H. FISHER, age 44, 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
Executive Officer of JF Hotel Management, Inc., an affiliate of the IH Lessee,
which leases 60 and operates 31 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 46, is Chief Executive Officer and a director of
Koger Equity, Inc., a real estate investment trust specializing in developing,
owning and operating suburban office parks under the "Koger Center" brand name,
a position he assumed in March 2000. Koger Equity owns and operates a total of
220 office buildings, containing over 12 million square feet, located in 15
cities throughout the Southeast and extending into the Southwest. Prior to
joining Koger Equity, Mr. Crocker served as the Chairman of the Board and Chief
Executive Officer of Crocker Realty Trust, Inc., a privately held real estate
investment trust which owns and operates approximately 6.1 million square feet
in 127 office buildings located in the southeastern United States, plus more
than
6
<PAGE>
125 acres of developable land. Previously, Mr. Crocker was Chairman of the Board
and Chief Executive Officer of (the former) Crocker Realty Trust, Inc.,which was
one of largest office-based publicly-held real estate investment trusts in the
southeastern United States, from that company's inception until June 30, 1996.
Prior to forming Crocker Realty Trust, Inc., Mr. Crocker headed Crocker & Co., a
privately-held firm responsible for development, leasing and property management
services for approximately 1.7 million square feet of commercial property and
270 residential units. Prior to 1984, Mr. Crocker was a real estate lending
officer at Chemical Bank. Mr. Crocker has received numerous awards for his work
in commercial real estate development and for his commitment to organizations
such as the Anti-Defamation League and Junior Achievement.
Committee: Audit
ROLF E. RUHFUS, age 55, is Chairman and Chief Executive Officer of
Wichita Consulting Company, L.P., an investment and consulting services company.
Previously, Mr. Ruhfus served as the Chairman and Chief Executive Officer of
Summerfield Hotel Corporation, a hotel development and management company and
former owner of the Summerfield Suites hotel brand, since its founding in 1988
until its sale to Wyndham International, Inc. in 1998. 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 Wyndham
and several European companies.
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INCUMBENT CLASS II TRUSTEES
(TERMS EXPIRING 2002)
MILES BERGER, age 69, has been engaged in various real estate and
banking activities since 1950. In 1998, Mr. Berger became Chairman and Chief
Executive Officer of Berger Management Services LLC, a real estate and financial
consulting and advisor services company. Previously, Mr. Berger served as Vice
Chairman of the Board of Heitman Financial Ltd., a real estate investment
management firm, with which Mr. Berger was employed for more than five years. He
is Chairman of the Board of Mid-Town BanCorp, served as Vice Chairman of
Columbia National Bank Corp. From 1965-1995 and serves as Chairman of the Board
of Berger Financial Services, a full service real estate advisory, banking and
financial services company. Mr. Berger has also served on the boards of numerous
philanthropic organizations.
Committees: Audit, Compensation
C. GERALD GOLDSMITH, age 71, has been an independent investor and
financial advisor since 1976. He is currently a director of Palm Beach National
Bank and Trust and American Banknote Inc., and he 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 and
various philanthropic organizations. He holds an A.B. from the University of
Michigan and an M.B.A. from Harvard Business School.
Committees: Audit, Compensation
- --------------------------------------------------------------------------------
7
<PAGE>
INCUMBENT CLASS I TRUSTEES
(TERMS EXPIRING 2001)
JACK P. DEBOER, age 69, has served as Chairman of the Board, President
and Chief Executive Officer of Candlewood Hotel Company, Inc. since its
inception in 1995. 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. Previously,
Mr. DeBoer founded and developed the Residence Inn franchise prior to selling
the franchise to Marriott International, Inc. in 1987.
BRUCE ZENKEL, age 68, is a partner of Zenkel Schoenfeld LLC, 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
- --------------------------------------------------------------------------------
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 Board of
Trustees holds regular quarterly meetings and special meetings as necessary. The
Board of Trustees held four meetings during 1999. All incumbent trustees
attended more than 75% of the aggregate number of meetings of the Board of
Trustees.
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
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. Berger, Crocker and Goldsmith,
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, reviews the adequacy of the Company's internal
accounting controls and practices, and reviews financial disclosures. The Audit
Committee met twice in 1999. Messrs. Berger and Goldsmith attended both meetings
and Mr. Crocker attended one of the 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 Company's 1994 Share Incentive
Plan. The Compensation Committee met twice in 1999, and each member attended
both meetings.
8
<PAGE>
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 out-of-pocket expenses
incurred in connection with meetings of the Board or committees thereof.
In addition, under the Company's Trustee Share Incentive Plan, each
non-employee trustee who was a member of the Board of Trustees at the time of
the initial public offering in 1994 received 7,500 restricted Common Shares.
These Common Shares vested at the rate of 1,500 shares per year. Non-employee
trustees joining the Board after the initial public offering receive Common
Shares with a fair market value of $75,000, 20% of which vest on the date of
grant and 20% of which vest on each of the first four anniversaries of the date
of grant, if the trustee is a member of the Board on the applicable vesting
date. Messrs. DeBoer, Crocker and Ruhfus each received restricted share grants
under these provisions when they joined the Board. Each trustee is entitled to
receive dividends paid on, and to vote, all such shares, 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 Trustee Share Incentive Plan, each non-employee trustee who
was a member of the Board of Trustees at the time of the initial public offering
in 1994 (i.e., Messrs. Berger, Goldsmith and Zenkel) was also granted options to
purchase 5,000 Common Shares. Options were granted to the other non-employee
trustees on the date that they became trustees, 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 the options
described above became exercisable at a rate of 1,000 Common Shares per year.
In addition to the awards described above, (a) Messrs. Berger,
Goldsmith and Zenkel, who have served on the Board since the initial public
offering, each received an award of 5,000 restricted Common Shares, which vested
over three years, and (b) each non-employee trustee receives a fully exercisable
option to acquire Common Shares each year, which covered 1,000 Common Shares in
1998 and 1999 and will cover 2,000 Common Shares in year 2000 and thereafter.
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. Vested options
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 Trustee Share Incentive Plan after the date of the annual shareholders
meeting 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. All
options and share awards will become fully exercisable and vested on a change of
control (as defined in the Trustee Share Incentive Plan), and in the event a
trustee ceases to serve on the Board on account of death or disability.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or accrued by the
Company from January 1, 1997 to December 31, 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------ -------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL SHARE UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(1) OPTIONS/SAR PAYOUTS COMPENSATION
------------------ ---- ------ ----- ------------ --------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey H. Fisher 1999 $ 255,000 $ 175,000 0 $1,594,755(2) 240,000(5) -- --
Chairman, Chief 1998 $ 162,374 $ 150,000 0 $1,573,125(3) -- -- --
Executive Officer 1997 $ 150,000 $ 150,000 0 $ 840,000(4) 702,500(6) -- --
and President -- --
Frederic M. Shaw 1999 $ 180,000(7) $ 122,500(7) 0 -- 60,000(5) -- --
Executive Vice 1998 $ 114,562(7) $ 105,000(7) 0 $1,087,500(3) -- -- --
President and 1997(8) $ 94,902(7) $ 105,000(7) 0 $ 700,000(4) 310,000(9) -- --
Chief Operating
Officer
David Bulger 1999 $ 155,595 $ 75,000 0 -- -- -- --
Chief Financial 1998 $ 141,265 $ 22,500 0 $ 327,352(3) -- -- --
Officer and Treasurer 1997 $ 110,200 $ 26,488 0 $ 52,500(4) 80,000 -- --
Gregory M. Fay 1999 $ 157,065 $ 75,000 0 -- -- -- --
Vice President of 1998 $ 139,891 $ 22,500 0 $ 322,501(3) -- -- --
Accounting 1997(8) $ 45,660 $ 10,014 0 $ 35,000(4) 100,000(10) -- --
Mark A. Murphy 1999 $ 157,065 $ 75,000 0 -- -- -- --
General Counsel and 1998 $ 138,640 $ 22,500 0 $ 322,501(3) -- -- --
Secretary 1997(8) $ 92,416 $ 26,488 0 35,000(4) 100,000 -- --
</TABLE>
- -----------------------------
(1) At December 31, 1999 an aggregate of 638,438 restricted Common Shares,
with an aggregate value of $5,277,530 (based on the closing market
price of the Common Shares of $8.188 on December 31, 1999), were held
as follows: Mr. Fisher - 360,000 shares (with a value at December 31,
1999 of $2,947,680); Mr. Shaw - 162,500 shares (with a value at
December 31, 1999 of $1,330,550); Mr. Bulger - 39,688 shares (with a
value at December 31, 1999 of $324,965); and Messrs. Fay and Murphy -
38,125 shares each (with a value at December 31, 1999 of $312,168
each). Of such outstanding restricted shares, a total of 141,820 shares
were vested and 496,618 were unvested at January 1, 2000.
(2) Mr. Fisher received a grant of 135,000 restricted shares as of January
1, 1999, which vest in five equal installments beginning in January
2000.
(3) A portion of these shares were issued pursuant to performance share
awards made in 1997, and were issued in January 1998 based on a total
shareholder return target met in 1997. These shares vest in six equal
installments beginning in January 1999. The number of such shares
granted to each officer was: Mr. Fisher - 15,000; Mr. Shaw - 12,500;
Mr. Bulger - 938; Mr. Fay - 625; and Mr. Murphy - 625. The remainder of
these shares were granted in November 1998 and vest in five equal
installments beginning in January 2000. The number of shares granted in
November 1998 was: Mr. Fisher - 150,000; Mr. Shaw - 100,000; and
Messrs. Bulger, Fay and Murphy - 35,000 each.
10
<PAGE>
(4) These shares vest in equal installments on each of the first seven
anniversaries of the date of grant. The number of share granted was:
Mr. Fisher, 60,000 shares; Mr. Shaw, 50,000 shares; Mr. Bulger, 3,750
shares; and Messrs. Fay and Murphy, 2,500 shares each.
(5) Represents the grant of options in May 1999, 20% of which vest in May
of each of 2000 - 2004.
(6) Represents the grant of options in February 1997 covering (a) 240,000
Common Shares, 20% of which became exercisable in each of February 1998
- 2000, and 20% of which becomes exercisable in February of each of
2001 and 2002 and (b) 462,500 Common Shares, 50% of which vested on the
date of grant, 16.66% of which became exercisable in February of each
of 1998 - 2000 and 16.66% of which will vest in February 2001. In
February 1997, the IH Lessee granted approximately 300,000 share
appreciation rights ("SARs") to various employees of the IH Lessee.
Each of the SARs issued by the IH Lessee which remains outstanding
entitles 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 IH
Lessee.
(7) Mr. Shaw also receives a salary and bonus from the IH Lessee, of which
he serves as President.
(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 1997 bonus is a pro-rated portion of the annual
bonus that would have been payable for the full year under his
employment contract.
(9) Represents the grant in February 1997 of (a) an option covering 60,000
Common Shares, 20% of which became exercisable in February of each of
1998 - 2000 and 20% of which becomes exercisable in February of each of
2001 and 2002, and (b) an option covering 250,000 Common Shares, 50% of
which vested on the date of grant, 16.66% of which vested in February
of each of 1998 - 2000 and 16.66% of which will vest in February 2001.
As noted above, in February 1997 the IH Lessee granted approximately
300,000 SARs to various employees of the IH Lessee. Each of the SARs
which remains outstanding entitles 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 IH Lessee.
(10) Represents the grant of an option in August 1997, 50% of which vested
on the date of grant, 16.66% of which vested in each of August 1998 and
1999 and 16.66% of which vests in August 2000.
OPTION GRANTS
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SHARES OPTIONS OF SHARE PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
---- ---------- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Fisher 240,000 80% $ 10.25 May 2009 $1,747,200 $3,919,200
Frederic M. Shaw 60,000 20% $ 10.25 May 2009 $ 436,800 $ 979,800
</TABLE>
- -----------------------------
(1) Options vest 20% per year in each May of 2000 - 2004.
(2) 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
11
<PAGE>
consideration the provisions of the options providing for limits on
transferability, delayed exercisability or termination of the options
in certain circumstances.
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 1999 fiscal year by its executive officers and
regarding unexercised options at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
----------------- -----------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Jeffrey H. Fisher -- -- 837,416/511,084 (2)
Frederic M. Shaw -- -- 232,332/137,668 (2)
David Bulger -- -- 86,666/13,334 (2)
Gregory M. Fay -- -- 83,333/16,667 (2)
Mark A. Murphy -- -- 83,333/16,667 (2)
</TABLE>
(1) The exercise prices of the options held by Mr. Fisher as of December
31, 1999 is (a) $10.00, with respect to 250,000 of the options, (b)
$9.75, with respect to 156,000 of the options, (c) $13.25, with respect
to 702,500 of the options and (d) $10.25, with respect to 240,000 of
the options. The exercise price of the options held by Mr. Shaw as of
December 31, 1999 is (a) $13.25, with respect to 310,000 of the
options, and (b) $10.25, with respect to 60,000 of the options. The
exercise prices of the options held by Mr. Bulger as of December 31,
1999 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 price of
the options held by Mr. Murphy at December 31, 1999 is $13.25. The
exercise price of the options held by Mr. Fay at December 31, 1999 is
$14.0625. The closing price of the Common Shares on December 31, 1999
was $8.188.
(2) No options were in-the-money at December 31, 1999.
EMPLOYMENT AND RELATED CONTRACTS
The Company has entered into employment agreements with each of its
five executive officers. Each employment agreement sets forth an annual base
salary for the officer. The base salaries for 2000 are: Mr. Fisher, $273,000;
Mr. Shaw, $192,000; and Messrs. Bulger, Fay and Murphy, $165,000 each. Each
officer's salary is subject to increase on January 1 of each subsequent year by
a percentage equal to the sum of (a) the percentage increase in the CPI in such
prior year plus (b) five. Each employment agreement provides for annual cash
bonuses if the Company meets certain financial goals. Maximum target bonuses are
set for each officer. A substantial portion of the maximum target bonus is
reserved for payment if the Company achieves certain financial results and the
remainder is reserved for payment in the discretion of the Compensation
Committee of the Board of Trustees. 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 would have
12
<PAGE>
to pay the officer 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 IH Lessee. Mr. Shaw has entered into an employment agreement with the IH
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 IH Lessee employment agreement Mr. Shaw's base salary for
2000 is set at approximately $81,000, subject to increase on January 1 of each
subsequent year by a percentage equal to the sum of (a) the percentage increase
in the consumer price index in the previous year plus (b) five. The IH Lessee
agreement also provides that Mr. Shaw will receive an annual cash bonus from the
IH Lessee if the Company meets or exceeds the same financial goals upon which
his bonus from the Company depends.
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
The Compensation Committee is responsible for setting and administering
compensation policies, fixing salaries of and awarding discretionary 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.
The goals of the compensation plan are to (1) attract and retain important
managers, (2) motivate managers to attain the goals of the Company, (3) enable
the managers to share both in the Company's risks and rewards and (4) tie
managers' interests with shareholders' interests. There are three components of
the Company's executive compensation: base salary, annual bonuses and long-term
share incentive compensation. 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 1998, the
Compensation Committee implemented revisions to the executive compensation
structure based, in part, on a report commissioned from an independent
consultant.
In establishing the base salaries of the executives, the Compensation
Committee considered (a) the responsibilities of each officer, (b) each
officer's experience, (c) the salaries of officers with similar responsibilities
at real estate companies, other REITs in general and other REITs that acquire
hotels, specifically, (d) the competitive market that exists for personnel with
the experience and skill sets of the Company's officers, (e) the
responsibilities of each officer in light of the size, scope and geographic
dispersion of the Company's asset base, (f) the increasing sophistication of the
Company's systems and (g) the corresponding increase in the intensity of the
knowledge and time commitment required of the officers. 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 IH Lessee.
13
<PAGE>
Each employment agreement establishes an annual bonus for the officers
based, in substantial part, on the attainment of annual financial goals approved
by the Compensation Committee. Based on the analysis referred to above, the
Compensation Committee implemented a plan for 1999 and future years which sets
targeted bonus amounts for each officer based, in substantial part, on achieving
performance goals relating to the funds from operations realized by the Company.
The officers will not earn any bonus if a minimum performance goal is not met,
and bonuses may exceed the target bonus amounts (subject to a pre-set maximum)
if higher results are achieved. Additional annual bonuses are payable in the
discretion of the Compensation Committee, subject to maximums. In 1999, maximum
discretionary bonuses were paid to Messrs. Fisher, Bulger, Fay and Murphy in the
amount of $25,000 each and to Mr. Shaw in the amount of $17,500. In determining
whether to grant discretionary bonuses for 1999, the Compensation Committee
considered, among other factors, (i) the prevailing capital market environment
for real estate investment trusts in general and hotel real estate investment
trusts particularly, (ii) the short-term dampening effect that the Company's
capital strategies may have had on the financial results of the Company relative
to its peers and (iii) the opportunity costs of the executive officers who may
be foregoing opportunities available to persons with similar skill sets and
experience.
The Compensation Committee believes that it is essential 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
determining the awards that have been made to the Company's executive officers
(including restricted shares, performance share awards and options), the
Committee considered (a) whether and to what extent the proposed grants would
further its compensation goals and (b) 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 intends 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, or increases in the
value, of those awards directly to the creation of shareholder value. In
approving awards, the Compensation Committee has 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 and be subject to forfeiture if
the recipient leaves the Company prior to vesting and/or achieving performance
goals.. The Committee believes this will further its goal of providing the
employee with long-term incentives. For example, the latest grants of restricted
shares vest over five years beginning in 2000, if the officer remains an
employee of the Company on the vesting dates. The Company has also adopted a
policy of granting options to the Company's non-executive employees who are
employed by the Company for a pre-set tenure. While the Committee has focused on
long-term incentives, it also recognizes that short-term share incentive
compensation can be an important factor in retaining key employees and fostering
share ownership. In recognition of this principle, the Compensation Committee
has considered the benefits of dividends that may be paid on restricted share
awards, which provide additional cash annually to the recipient while the
recipient bears the risk of forfeiture until the underlying shares have fully
vested.
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, which is 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
14
<PAGE>
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, 1999, 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 seventeen 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
TOTAL RETURN PERFORMANCE
[GRAPH OMITTED]
<TABLE>
<CAPTION>
PERIOD ENDING
----------------------------------------------------------------------------------
INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Innkeepers USA Trust 100.00 137.88 227.86 272.43 226.56 177.68
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
SNL Hotel REITs 100.00 131.64 201.14 263.71 130.39 101.27
</TABLE>
15
<PAGE>
PROPOSAL TWO -- AMENDMENT OF 1994 PLAN TO INCREASE
NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE PLAN
GENERAL. The Board of Trustees is proposing for approval by
Shareholders an amendment to the 1994 Plan to increase the number of Common
Shares issuable under the 1994 Plan. The Board believes that the amendment
further the Board's philosophy of closely aligning the interests of the
Company's shareholders and management and using incentive based compensation to
encourage and reward performance. The amendment will permit the Company to
continue to emphasize compensation with a value directly tied to Company goals
and performance. The Board of Trustees believes that the amendment to the 1994
Plan will enable the Company to maintain a total compensation program which
combines salary, bonuses and long-term share incentive awards to encourage
management strategies and action that will continue to build shareholder value.
For these reasons, the Company recommends a vote FOR Proposal Two.
As amended, the 1994 Plan will provide that a maximum of 3,700,000
Common Shares may be issued, up to 1,200,000 of which may be issued as
restricted share awards and in settlement of performance shares. As currently in
effect, the maximum number of Common Shares that may be issued is 2,700,000, up
to 900,000 of which may be issued as restricted share awards and in settlement
of performance shares.
The following paragraphs summarize the principal features of the 1994
Plan. This summary is subject, in all respects, to the terms of the 1994 Plan.
The Company will provide promptly, upon request and without charge, a copy of
the full text of the 1994 Plan to each person to whom a copy of this proxy
statement is delivered. Requests should be directed to Investor Relations, 306
Royal Poinciana Plaza, Palm Beach, Florida 33480. The Company's telephone number
is (561) 835-1800. The Company's Investor Relations department may also be
contacted through the Company's website at www.innkeepersusa.com
ADMINISTRATION. The 1994 Plan is administered by the Compensation
Committee, although the Compensation Committee may delegate its authority and
responsibilities under the 1994 Plan to one or more officers of the Company. The
Compensation Committee may not, however, delegate its authority with respect to
grants and awards to individuals subject to Section 16 of the Securities
Exchange Act of 1934. As used in this summary, the term "Administrator" means
the Compensation Committee or its delegate, as appropriate. The Administrator
generally has the authority, within limitations described in the 1994 Plan, (i)
to establish rules and policies concerning the 1994 Plan, (ii) to determine the
persons to whom share options, share appreciation rights ("SARs"), restricted
Common Shares, cash incentive awards and performance shares may be granted,
(iii) to fix the number of Common Shares to be covered by each award and the
value of incentive awards, and (iv) to set the terms of each award. Each type of
award is described below.
ELIGIBILITY. Each employee of the Company, or an Affiliate (as defined
in the 1994 Plan), including an employee who is a member of the Board, is
eligible to participate in the 1994 Plan. The Administrator selects the
individuals who will participate in the 1994 Plan ("Participants") but no person
may participate in the 1994 Plan while he is a member of the Compensation
Committee. Under the 1994 Plan, no Participant may be granted, in any calendar
year, options for more than 750,000 Common Shares or SARs for more than 750,000
Common Shares. Options granted with related SARs shall be treated as a single
award for purposes of applying the limitation in the preceding sentence. Also,
under the 1994 Plan, no Participant may be granted, in any calendar year, an
award of more than 150,000 restricted shares or an award of more than 150,000
performance shares. In addition, no Participant may receive a cash incentive
award payment in any calendar year that exceeds the lesser of (i) $300,000 and
(ii) 150% of the Participant's base salary (prior to any salary reduction or
deferral election) as of the date of grant of the incentive award.
OPTIONS. Options granted under the 1994 Plan may be incentive share
options ("ISOs") or nonqualified options. An option entitles a Participant to
purchase Common Shares from the Company at the option price. The option price
may be paid in cash, with Common Shares, or with a combination of cash and
Common Shares. The
16
<PAGE>
option price is fixed by the Administrator at the time the option is granted,
but the price cannot be less than the shares' fair market value on the date of
grant. No Participant may be granted ISOs or related SARs (under all incentive
share option plans of the Company and its affiliates) which are first
exercisable in any calendar year for shares having an aggregate fair market
value (determined as of the date the ISO was granted) that exceeds $100,000. The
term of an ISO cannot exceed ten years.
The Administrator may also grant performance based dividend equivalent
rights ("Performance Awards") in tandem with newly granted or outstanding
options. A Performance Award entitles a Participant to receive a cash payment
for all dividends that would have been paid on each Common Share for which the
related option is exercised, during the period from the date of grant of the
option (or, if later, the date of grant of the Performance Award) through the
exercise date or dates of the option, had each such Common Share been held by
the Participant throughout that period. A Performance Award will vest only if
the performance measures designated by the Administrator are satisfied for the
period designated by the Administrator. In the absence of any such designation,
(i) the performance period will be the five year period beginning on the date of
grant; provided, however, that the performance period will end on such earlier
date on which (a) a Change of Control (as defined below) occurs, (b) the
Participant's employment is terminated by the Company without cause or (c) the
Participant's employment ceases due to death or disability, and (ii) the measure
of performance will be achievement of a 15% annual compounded increase in the
fair market value of an investment in Common Shares during the performance
period, assuming all dividends paid are reinvested in Common Shares. Settlement
of a Performance Award will be made on the last day of the performance period
or, if later, the exercise date or dates of the option, provided that a
Participant is an employee of the Company at the end of the performance period.
If provided in the option agreement, the Administrator may grant
nonqualified share options that are transferable to a Participant's spouse,
children or grandchildren, to trusts for the benefit of such persons, or to
partnerships in which those persons are the only partners, on such terms and
conditions as may be permitted under Securities and Exchange Commission Rule
16b-3 from time to time. The option will continue to be subject to the same
terms and conditions following the transfer, and no such transferee may transfer
the option other than by will or the laws of descent and distribution. An option
and any Corresponding SAR (defined below) that relates to the option must be
transferred to the same persons or entities.
SARS. SARs may be granted under the 1994 Plan in relation to option
grants ("Corresponding SARs") or independently of option grants. The difference
between these two types of SARs is that to exercise a Corresponding SAR, the
Participant must surrender unexercised that portion of the option to which the
Corresponding SAR relates. SARs entitle the Participant to receive a payment
based on a formula determined by the Administrator and set forth in an agreement
with the Participant. In the absence of such a determination, the Participant is
entitled to receive the excess of the fair market value of a Common Share on the
date of exercise over the initial value of the SAR. The initial value of an SAR
that is granted independently of an option is the fair market value of a Common
Share on the date of grant. The initial value of a Corresponding SAR is the
option price per share of the related option. The amount payable upon the
exercise of an SAR may be paid in cash, Common Shares, or a combination of the
two. If the 1994 Plan amendments are approved, and if provided in the SAR
agreement, the Administrator may also grant SARs that are transferable, subject
to the same general conditions described above under "Options."
RESTRICTED SHARE AWARDS. Under the 1994 Plan, Participants may be
awarded restricted shares. A Participant's rights in a restricted share award
are nontransferable or forfeitable or both unless certain conditions prescribed
by the Administrator, in its discretion, are satisfied. These conditions may
include, for example, a requirement that the Participant continue employment
with the Company for a specified period or that the Company or the Participant
achieve stated, performance-related objectives such as earnings per share, fair
market value, return on assets, the Company's return on equity, total earnings,
earnings growth, return on capital, Common Share price appreciation, funds from
operations growth, or other objectives. In cases where conditions on vesting are
performance-related, the vesting period shall be one year. In all other cases,
vesting will not occur sooner than three years after the award date. These
minimum vesting periods apply to restricted share awards granted after June 19,
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1997; except that the Company may grant restricted share awards for up to ten
percent of the aggregate number of shares authorized under the 1994 Plan that do
not contain the minimum vesting periods.
PERFORMANCE SHARE AWARDS. The 1994 Plan also provides for the award of
performance shares. A performance share award entitles the Participant to
receive a payment equal to the fair market value of a specified number of Common
Shares if certain standards are met. The Administrator prescribes the
requirements that must be satisfied before a performance share award is earned.
Those standards may be based on the fair market value of the Common Shares,
return on assets, earnings per share, the Company's return on equity, total
earnings, earnings growth, return on capital, Common Share price appreciation,
funds from operations growth, or other objectives. To the extent that
performance shares are earned, the obligation may be settled in cash, in Common
Shares (including restricted shares), or by a combination of the two. The period
in which performance is measured must be at least one year. The Administrator
may also award performance shares that include dividend equivalent rights. The
rights will entitle a Participant to receive a cash payment for accumulated
dividends that would have been paid during the period described in the following
sentence, without interest or compounding, on the number of Common Shares for
which the performance share award is settled. The payment is determined over the
period from the date of grant through the date of settlement of the performance
share award, and is paid only to the extent that the performance criteria which
must be satisfied for the performance share award to be earned are met. If
provided in the performance shares agreement, the Administrator may also grant
performance shares that are transferable, subject to the same general conditions
described above under "Options."
INCENTIVE AWARDS. A Participant may also receive a cash incentive award
that will be earned if stated performance objectives and any other conditions
prescribed by the Administrator are met. Performance objectives may be stated
with respect to the Company's return on equity, total earnings, earnings growth,
return on capital, Common Share price appreciation, funds from operations growth
or other measures that the Administrator selects. The Administrator may also
provide in an incentive award agreement that the award is transferable, subject
to the same general conditions described above under "Options."
CHANGE OF CONTROL AND OTHER ACCELERATION EVENTS. All options, SARs,
share awards, performance shares and incentive awards, including outstanding
awards, will be exercisable, vested or earned upon a "Change of Control" of the
Company (as defined below). In addition, in the event a Participant incurs an
excise tax under Code section 4999, and any payment under the 1994 Plan is
deemed a "parachute payment" under that Code section, the Company will indemnify
the Participant for his excise tax liability, including additional excise,
income and employment taxes incurred as a result of the initial indemnification
payment. Under the amended 1994 Plan, "Change of Control" means the occurrence
of one of the following events: (i) any person or entity (other than certain
entities related to the Company prior to the occurrence of the Change of
Control), together with any associate or affiliate of the person or entity (as
those terms are used in Rule 12b-2 under the Securities Exchange Act of 1934)
acquires or enters into an agreement for acquisition of beneficial ownership of
at least thirty percent (30%) of the Company's then outstanding securities
entitled to vote generally in the election of the Board; (ii) the Company enters
into any agreement with a person or entity that involves a transfer of at least
fifty percent (50%) of the Company's total assets on a consolidated basis, as
reported in the Company's consolidated financial statements filed with the
Securities and Exchange Commission; (iii) the Company enters into any agreement
to merge or consolidate the Company or to effect a statutory share exchange with
another entity, regardless of whether the Company is intended to be the
surviving or resulting entity after the merger, consolidation or statutory share
exchange; or (iv) the Continuing Trustees cease for any reason to constitute a
majority of the Board. For this purpose, "Continuing Trustee" means any member
of the Board, while a member of the Board and (i) who was a member of the Board
on March 1, 1997 or (ii) whose nomination for or election or appointment to the
Board was recommended or approved by a majority of the Continuing Trustees.
SHARE AUTHORIZATION. All awards made under the 1994 Plan are evidenced
by written agreements between the Company and the Participant. A maximum of
2,700,000 Common Shares may be issued under the 1994 Plan as currently in
effect. The maximum aggregate number of Common Shares that may be issued
currently under the 1994 Plan pursuant to an award of restricted shares and in
full or partial settlement of an award of performance
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shares is 900,000 Common Shares. These share limitations and the terms of
outstanding awards will be adjusted, as the Compensation Committee deems
appropriate, in the event of a share dividend, share split, combination,
reclassification, recapitalization or other similar event. If the 1994 Plan
amendments are approved by the Company's shareholders, the maximum number of
Common Shares issuable under the 1994 Plan will be increased to 3,700,000. The
maximum number of Common Shares issuable as restricted share awards and in full
or partial settlement of awards of performance shares will increase to
1,200,000.
TERMINATION AND AMENDMENT. No option, SAR, share award, performance
shares, or incentive award may be granted under the 1994 Plan after December 31,
2006. The Board may amend or terminate the 1994 Plan at any time, but an
amendment will not become effective without shareholder approval if the
amendment changes the eligibility requirements, increases the maximum number of
Common Shares that may be issued, or materially increases the benefits that may
be provided to Participants under the 1994 Plan.
AWARDS. To date, the Company has granted awards under the 1994 Plan
covering a total of 2,675,938 Common Shares to executive officers as a group. Of
that total, the Company has granted Options to purchase 2,037,500 Common Shares,
and has granted restricted share awards for 638,438 Common Shares.
Except for the foregoing awards and those already outstanding, neither
the number of individuals who will be selected to participate in the 1994 Plan
nor the type or size of awards that will be approved by the Compensation
Committee can be determined.
FEDERAL INCOME TAXES. The Company has been advised by counsel regarding
the federal income tax consequences of the 1994 Plan. No income is recognized by
a Participant at the time an option is granted. If the option is an ISO, no
income will be recognized upon the Participant's exercise of the option. Income
is recognized by a Participant when he disposes of shares acquired under an ISO.
The exercise of a nonqualified share option generally is a taxable event that
requires the Participant to recognize, as ordinary income, the difference
between the shares' fair market value and the option price. No income is
recognized upon the grant of an SAR. The exercise of an SAR generally is a
taxable event. A Participant generally must recognize income equal to any cash
that is paid and the fair market value of Common Shares that are received in
settlement of an SAR. A Participant will recognize income on account of a
restricted share award on the first day that the shares are either transferable
or not subject to a substantial risk of forfeiture. The amount of income
recognized by the Participant is equal to the fair market value of the Common
Shares received on that date. A Participant will recognize income on account of
the settlement of a performance share award. A Participant will recognize income
equal to any cash that is paid and the fair market value of Common Shares (on
the date that the shares are first transferable or not subject to a substantial
risk of forfeiture) that are received in settlement of the award. No income is
recognized on the grant of a Performance Award or an incentive award. A
Participant will recognize income on settlement of a Performance Award or
incentive award equal to the amount of cash for which the award is settled. The
employer (either the Company or its Affiliate) will be entitled to claim a
federal income tax deduction on account of the exercise of a nonqualified option
or an SAR, the vesting of a share award and the settlement of a performance
share award, a Performance Award, or an incentive award. The amount of the
deduction is equal to the ordinary income recognized by the Participant. The
employer will not be entitled to a federal income tax deduction on account of
the grant or the exercise of an ISO. The employer may claim a federal income tax
deduction on account of certain dispositions of Common Shares acquired upon the
exercise of an ISO.
Unless a shareholder specifies otherwise, each shareholder's shares
represented by the enclosed proxy will be voted FOR approval of the amendments
to the 1994 Plan.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JEFFREY H. FISHER. Affiliates of Mr. Fisher contributed Hotels to the
Company on a favorable tax basis in connection with the Company's initial public
offering. The sale, refinancing or prepayment of indebtedness secured by those
Hotels may trigger adverse tax consequences to Mr. Fisher. Conflicts of
interest, therefore, exist between the Company and Mr. Fisher regarding any
transaction involving those Hotels that could trigger adverse tax consequences
to Mr. Fisher.
In May 1999, the Company acquired a parcel of land in Tyson's Corner,
Virginia from an affiliate of Mr. Fisher (the "Fisher Affiliate"). The Fisher
Affiliate acquired the land in March 1996 for $915,000. The Fisher Affiliate
obtained governmental approvals to build a hotel on the land and incurred costs
of approximately $70,000. In September 1997, the Fisher Affiliate contracted to
sell the land to Summerfield Hotel Corporation ("Summerfield") for $2.4 million.
In October 1998, Summerfield failed to close on the land and forfeited its
deposit. The Fisher Affiliate received several offers from unrelated buyers to
purchase the land for amounts approximating the Summerfield price between
October 1998 and May 1999. The Company subsequently acquired the land for $2.4
million. The Company is developing a 120-room Residence Inn by Marriott hotel on
the land at an estimated cost, including land, of approximately $14 million, and
anticipates opening the hotel during the fourth quarter of 2000. The land and
development costs are expected to be funded through the Company's line of credit
and available cash.
THE IH LESSEE. On December 31, 1999, the Partnership leased 60 Hotels
to the IH Lessee pursuant to Percentage Leases. The IH Lessee is owned by Mr.
Fisher (80%) and Mr. Shaw (20%), at December 31, 1999. Each Percentage Lease has
an initial term of at least 10 years. Under the Percentage Leases, the IH 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 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 with the IH Lessee constituted
approximately 88% of the Company's 1999 Percentage Lease revenues. For 1999, the
IH Lessee incurred or paid the Partnership an aggregate of approximately $99.4
million in lease payments and had combined net income of approximately $4.9
million from the operation of the Company's 60 Hotels leased by the IH Lessee.
In addition to his 20% ownership of the IH Lessee, Mr. Shaw serves as President
of, and derives a salary and bonus from, the IH Lessee.
FRANCHISE LICENSES; MANAGEMENT AGREEMENTS. The IH Lessee, which is
owned by Messrs. Fisher and Shaw, holds all of the franchise licenses for the
Hotels leased by the IH Lessee (to the extent such hotels have franchise
agreements) and is expected to hold any franchise licenses required for
subsequently acquired hotel properties that are leased to the IH Lessee. The IH
Lessee pays the franchise fees for all of the Company's Hotels which are leased
to the IH Lessee and are subject to franchise fees, except for franchise license
application and transfer fees, which are paid by the Partnership. Through 1999,
the Partnership incurred or paid franchise license application, transfer and
related fees for the Hotels leased to the IH Lessee in the aggregate amount of
approximately $876,000. The Company has also entered into agreements with the
franchisors under which the Company has guaranteed certain obligations of the IH
Lessee under franchise agreements, including obligations to pay royalties and
other fees to the franchisors, generally in exchange for the right to substitute
a different lessee as the franchisee under the relevant franchise agreement if
the Company terminates the Percentage Lease for a franchised hotel.
The IH Lessee is also the primary contracting party under management
agreements with subsidiaries of Marriott International, Inc. ("Marriott")
relating to the 27 Hotels managed by Marriott ("Marriott Management
Agreements"). The right of those Hotels to operate under the Residence Inn or
TownePlace Suites brands is generally contained in the Marriott Management
Agreements, and not in separate franchise agreements. The IH Lessee pays the
management and other fees payable under the Marriott Management Agreements. The
Company has loaned to the IH Lessee an aggregate of approximately $937,000,
which the IH Lessee was required to make available to Marriott for initial
working capital at 19 of the Hotels that are managed by Marriott. These loans
bear no interest and are payable on demand. The Company has executed most of the
Marriott Management Agreements as a third party, pursuant to which
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it has guaranteed certain of the obligations of the IH Lessee under those
agreements, including obligations to pay management and other fees to Marriott.
In exchange, the Company has the right, under certain circumstances, to
substitute a different lessee as party to the relevant Marriott Management
Agreement, if the Company terminates the Percentage Lease for a Hotel managed by
Marriott.
JACK P. DEBOER. In November 1996, the Company acquired seven Residence
Inn by Marriott hotels (the "DeBoer Hotels") from affiliates of Jack P. DeBoer
(the "DeBoer Group"), including Rolf E. Ruhfus. The DeBoer Group, including Mr.
DeBoer, received preferred units of limited partnership interest in the
Partnership ("Preferred Units") in partial consideration for the acquisitions.
Following the acquisition of the DeBoer Hotels, Mr. DeBoer joined the Company's
board of Trustees. Mr. DeBoer joined the Board under an arrangement requiring
the Company to nominate Mr. DeBoer for election to the Board and to support his
nomination, except if Mr. DeBoer (i) acts or fails to act in a manner that the
Board deems detrimental to the Company and as a result of which the Board
determines unanimously that it cannot nominate Mr. DeBoer, (b) ceases to own at
least 25% of the Preferred Units that he owned upon the closing of the DeBoer
Hotel acquisition or (c) is legally disqualified from serving as a trustee.
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
generally 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 (the "Required Indebtedness"). The Required
Indebtedness is subject to reduction upon the occurrence of certain events,
including the death of, or certain redemptions or taxable transfers of the
Preferred Units held by, members of the DeBoer Group. If the Company sells a
DeBoer Hotel without the required consent or fails to maintain the Required
Indebtedness, the Company has agreed to indemnify the applicable members of the
DeBoer Group for certain resulting income tax liabilities, which could be
substantial.
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 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.
Each Preferred Unit held by the DeBoer Group may be redeemed for an
amount of cash equal to the then-trading value of a Common Share on the New York
Stock Exchange ("NYSE") or, at the option of the Company, one Common Share.
Assuming full redemption of all Units held by the DeBoer Group and the issuance
of Common Shares in exchange for those Units, the DeBoer Group would own
approximately 10.5% of the Common Shares outstanding at December 31, 1999
(assuming no redemptions of Units held by others).
The Company has, for the last three years, placed substantially all of
its insurance (including officers' and trustees' liability, property, casualty,
earthquake and worker's compensation coverages) with Manning & Smith, Wichita,
Kansas, a full service commercial insurance broker that has developed a
specialty in insuring hotels. During that same period, the IH Lessee placed
substantially all of its insurance (including workers' compensation, employment
practices liability and crime coverages) with Manning & Smith. Manning & Smith
is a private company of which Mr. DeBoer owns 47% of the stock. Mr. DeBoer has
informed the Company that he is not an officer of Manning & Smith and does not
participate in its management or the setting of its corporate policies. For
1999, the gross amount of the premiums paid for coverages placed by Manning &
Smith for the Company was approximately $896,000 and for the IH Lessee was
approximately $1,302,000.
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ROLF E. RUHFUS. In June 1997, the Company acquired nine hotels (the
"Summerfield Hotels") from affiliates of Rolf E. Ruhfus (the "Summerfield
Group"). The Summerfield Group, including Mr. Ruhfus, received common units of
limited partnership interest in the Partnership ("Units") in partial
consideration for the acquisitions. Following the acquisition of the Summerfield
Hotels, Mr. Ruhfus joined the Company's board of Trustees. Mr. Ruhfus joined the
Board under an arrangement requiring the Company to nominate Mr. Ruhfus for
election to the Board and to support his nomination, except if Mr. Ruhfus (i)
acts or fails to act in a manner that the Board deems detrimental to the Company
and as a result of which the Board determines unanimously that it cannot
nominate Mr. Ruhfus, (b) ceases to own at least 25% of the Units that he owned
upon the closing of the Summerfield Hotel acquisition or (c) is legally
disqualified from serving as a trustee.
The Company leases the Summerfield Hotels to the Summerfield Lessee.
Pursuant to the terms of the Percentage Leases, the Summerfield 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. For the year ended December 31,
1999, the Summerfield Lessee incurred or paid the Partnership an aggregate of
approximately $13.4 million in lease payments under the Percentage Leases for
the Summerfield Hotels.
Due to the potential adverse tax consequences to members of the
Summerfield Group that may result from a sale of the Summerfield Hotels, the
Company has agreed generally that for a period of up to seven years following
the closing of the acquisition of the Summerfield Hotels, any taxable sale of a
Summerfield Hotel will require the consent of the applicable members of the
Summerfield Group. If the Company sells a Summerfield Hotel without the required
consent, the Company has agreed to indemnify the applicable members of the
Summerfield Group for certain resulting income tax liabilities, which could be
substantial.
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 a Board member of Wyndham International, Inc. Wyndham owns,
operates and franchises Summerfield Suites hotels as well as other full and
limited service hotels and hotel brands. Hotels developed by Wyndham, including
Summerfield Suites hotels, may compete with the Company's hotels for guests and
other hotel companies with which Mr. Ruhfus is affiliated may compete with the
Company for acquisition opportunities. 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 Wyndham.
When the Summerfield Lessee was sold to Wyndham, the Company required
Wyndham's main operating partnership to either be the lessee for the Summerfield
Hotels, or to guarantee the obligations of the Summerfield Lessee. In addition,
the Company required Wyndham to post with the Company a letter of credit in an
amount equal to 40% of the 1998 budgeted lease payment to the Company, as
security for the obligations of Wyndham under the Summerfield Leases. Mr.
Ruhfus' roles as trustee of the Company and director of Wyndham may pose
conflicts regarding when, whether and to what extent (a) obligations under the
Summerfield Leases and related guarantees are adhered to and/or (b) remedies are
pursued and obtained by the Company under the Summerfield Leases, including
draws under the letter of credit.
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SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The Board of Trustees will provide for presentation of shareholder
proposals at the 2001 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 2001 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 2001 annual meeting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP has served as auditors for the Company and
its subsidiaries for the year ended December 31, 1999 and will continue to so
serve for the year ending December 31, 2000 until and unless changed by action
of the Board of Trustees. A representative of PricewaterhouseCoopers LLP will 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, copies of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, including financial statements and financial statement schedules. Please
direct requests to Investor Relations, Innkeepers USA Trust, at 306 Royal
Poinciana Plaza, Palm Beach, Florida 33480. The Company's telephone number is
(561) 835-1800. The Company maintains a website at www.innkeepersusa.com.
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INNKEEPERS USA TRUST
306 ROYAL POINCIANA WAY
PALM BEACH, FLORIDA 33480
ANNUAL MEETING OF SHAREHOLDERS--MAY 4, 2000
The undersigned hereby appoints Jeffrey H. Fisher and Mark A. Murphy,
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 the
undersigned in Innkeepers USA Trust at the Annual Meeting of Shareholders to be
held at the Courtyard by Marriott, 2440 W. Cypress Creek Road, Ft. Lauderdale,
FL 33309, at 9:00 a.m., local time, on Thursday, May 4, 2000 and at any
adjournments thereof, as specified below:
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
5064--Innkeepers USA Trust
<PAGE>
[ ]
This proxy is solicited by the Company's Board of Trustees. If no specification
is made, this proxy will be voted FOR the Proposals.
1. Election of Trustees-- FOR WITHHOLD FOR ALL
Class III-Term Expiring 2003- ALL ALL EXCEPT*
Nominees: 01-Jeffrey H. Fisher [ ] [ ] [ ]
02-Thomas J. Crocker
03-Rolf E. Ruhfus
- ------------------------------------
*(Except nominee(s) written above.)
2. Proposal to amend the 1994 Share FOR AGAINST ABSTAIN
Incentive Plan to increase the number of [ ] [ ] [ ]
shares authorized for issuance under the 1994 Plan.
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 this meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER.
Dated:____________, 2000
Signature_______________________________
Title___________________________________
Please sign name exactly as it appears on share certificate. Only one of several
joint owners need sign. Fiduciaries should give full title.
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
5064--Innkeepers USA Trust
