Executive Officers
(page
21
)
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Name
|
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Age
|
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Title
|
|
|
|
|
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Hasu P. Shah*
|
|
72
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Chairman of the Board
|
Jay H. Shah*
|
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48
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|
Chief Executive Officer
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Neil H. Shah*
|
|
43
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President and Chief Operating Officer
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Ashish R. Parikh*
|
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47
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Chief Financial Officer and Assistant Secretary
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Michael R. Gillespie*
|
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44
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Chief Accounting Officer, Controller, and Assistant Secretary
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David L. Desfor
|
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56
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Treasurer and Corporate Secretary
|
* Indicates the executive is a named executive officer ("NEO" or, collectively, "NEOs") of the Company.
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Executive Compensation (page
49
)
The objective
s
of the Company’s executive compensation program
are
to attract, retain and motivate experienced and talented executives who can maximize shareholder value, and is designed to closely align compensation paid to executives
, including the Company’s named executive officers (“NEOs”),
with the Company’s performance on both a short-term and long-term basis.
Compensation Discussion and Analysis (page 31)
|
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☑
WHAT WE DO
|
☒
WHAT WE DO NOT DO
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The Company ties NEO pay to performance. For 2016, 82% of the NEOs’ pay potential was performance-based and at-risk. The Company sets clear goals for company performance and differentiates certain elements of compensation based on individual NEO achievement.
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The Company has no contractual arrangements for guaranteed payouts (other than base salary which is only 18% of the NEOs’ pay potential). There are no guarantees in place for any potential changes to our NEOs’ base salaries, cash incentive payments, or equity awards.
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The Company mitigates undue risk, including retention provisions, multiple performance targets, and robust Board and management processes to identify risk. The Company intends to clawback bonuses and other incentive-based and equity-based compensation if misconduct results in a financial restatement.
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The Compensation Committee does not believe the executive compensation program creates risks that are reasonably likely to pose a material adverse impact to the Company.
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The Company has reasonable post-employment and change in control provisions. The employment agreements with the NEOs generally provide for cash payments after a change in control only if the NEO is also terminated without cause or voluntarily resigns for good reason within one year of the change in control (a double-trigger).
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The Company does not have any tax gross-up provisions for any of the NEOs and maintains that it will not enter into an agreement with a new executive officer that includes a tax gross-up provision with respect to payments contingent upon a change in control.
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The Compensation Committee benefits from its utilization of an independent compensation consulting firm. The reports prepared by the compensation consulting firm are used by the Compensation Committee to set executive compensation at levels that are intended to be competitive with the Company’s industry peers.
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The Company’s compensation consulting firm does not provide any other services to the Company or management.
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The Company has adopted share ownership guidelines for the NEOs. In addition, the Company implemented requirements for the NEOs to hold shares granted for two years beyond vesting.
|
The Company has not used options or share appreciation rights. If used, the Company would not reprice these securities if they were underwater. The Company does not pay dividends on unvested performance shares.
|
Only customary perquisites, such as health and insurance benefits, are provided. Perquisites represent only a small portion of the total NEO compensation.
|
The Company does not have pension plans and does not provide perquisites to the NEOs that would be considered significant or extraordinary.
|
The Compensation Committee establishes rigorous metrics for the NEOs, and attempts to tie pay for performance on various company specific metrics and total shareholder returns.
The table below highlights
the total returns on our common shares against certain major indices and Fortune 500 companies since
our
IPO
:
(Represents total returns
on our common shares
from January 26, 1999 through December 31,
2016
.
Source: Bloomberg and SNL Financial
.
)
The Company has significantly transformed itself over the long-term into a lodging REIT focused on an urban transient customer and, amongst its hotel REIT peers, has one of the highest exposures to coastal gateway markets in the United States. As a result,
Hersha
Hospitality Trust
achieves
RevPAR that is
$13, or 8.4%, higher than its
lodging REIT
peers
. The
table
below
illustrates
the Company’s RevPAR compared to the RevPAR of its peers
:
(Source:
P
ublicly
available information and
SEC
filings)
The following table highlights the historical transformation of the Company since its IPO in 1999
:
Since the start of the last lodging cycle
, Hersha Hospitality Trus
t has been a leader in RevPAR growth. The following table highlights the Company’s compound annual growth rate in RevPAR compared to peers in the lodging REIT sector
for the period beginning January 1,
2009
through December 31,
2016
:
(
Table excludes
certain hospitality REITs that the Company considers to be peers for executive compensation purposes
that
completed IPOs
after
January 1,
2009
.
Source:
Publicly
available information and
SEC
filings
.
)
Say on Pay (page
58 and page 60
)
Our shareholders have supported our NEO compensation program each year it has been presented for approval. The
2016
NEO compensation program
was
substantially the same as the
2015
NEO compensation program.
Enhancements
to the
2017
NEO compensation program developed by our Compensation Committee, in consultation with our independent compensation consultant
,
are
not material to the overall program.
We are asking our shareholders to approve
, on
an advisory
basis, the
compensation
of our NEOs
for
2016
.
In addition, we
are asking our shareholders to
recommend
, on an advisory basis,
the frequency of
future advisory votes on
the compensation of our NEOs.
Ratification of Auditors (page
64
)
We are asking our shareholders to ratify the selection of KPMG, LLP as our independent registered public accounting firm for
2017
.
Voting Proposals Summary
|
|
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Proposal Number
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Page Number
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Proposal
|
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Recommendation
|
PROPOSAL 1
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15
|
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To elect four Class II Trustees to the Board of Trustees.
|
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FOR - All Nominees
|
PROPOSAL 2
|
|
58
|
|
To approve on an advisory basis the compensation of the Company’s named executive officers.
|
|
FOR
|
PROPOSAL 3
|
|
60
|
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To approve on an advisory basis the frequency of future advisory shareholder votes to approve the compensation of the named executive officers.
|
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EVERY YEAR
|
PROPOSAL 4
|
|
64
|
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To ratify the appointment of KPMG LLP as the Company’s independent auditors for the year ending December 31, 2017
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FOR
|
PLEASE VOTE
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND THIS PROXY STATEMENT
THE PROXY SOLICITATION
This proxy statement is provided in connection with the solicitation of proxies by the Board of Trustees of Hersha Hospitality Trust for use at the
2017
annual meeting of shareholders to be
held at
the Ritz-Carlton, 10 Avery Street, Boston, MA 02111
at 9:00 a.m. (EDT)
on
June 1
,
2017
and at any adjournment or postponement thereof. The mailing address of the Company’s principal executive office is 44 Hersha Drive, Harrisburg, Pennsylvania 17102.
The
Notice of Internet Availability of Proxy Materials is first being mailed, and t
he Company’s proxy materials, including the notice of the annual meeting, this proxy statement, the proxy card and the
2016
annual report to shareholders, are first being
made available
to the Company’s shareholders
,
on or about
April
21
,
2017
.
Solicitation of Proxies
The cost of preparing and mailing this proxy statement and accompanying proxy materials, and the cost of any supplementary proxy solicitations, which may be made by mail, telephone or personally by the Company’s trustees, executive officers and employees, will be borne by the Company.
Although no proxy solicitor has been engaged at this time, we may determine it is necessary to employ an outside firm
to assist in the solicitation process. If so, we will
pay the proxy solicitor reasonable and customary fees.
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 by the Company. 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 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.
How To Vote; Revocability of Proxy
You may authorize your proxy over the Internet (at
www.proxyvote.com
), by telephone (at 1-800-690-6903) or
, if you receive a printed copy of the proxy materials by mail,
by executing and returning the proxy card accompanying this proxy statement. Once you authorize a proxy, you may revoke that proxy by (1) executing and submitting a later-dated proxy card prior to
June 1
,
2017
, (2) subsequently authorizing a proxy over the Internet or by telephone, (3) sending a written revocation of your proxy to the Company’s Corporate Secretary at its principal executive offices, or (4) attending the annual meeting and voting in person
.
Attending the annual meeting without submitting a new proxy or voting in person will not automatically revoke the prior authorization of your proxy. Only the last vote of a shareholder will be counted.
If you hold the Company’s common shares in “street” name (
i.e.
, through a bank, broker or other nominee), you will receive instructions from your bank, broker or nominee that you must follow in order to give them your voting instructions, or you may contact your nominee directly to request these instructions.
Shareholders Entitled To Vote
Only holders of record of the Company’s common shares at the close of business on the record date, March 31,
2017
, and their legal proxy holders, are entitled to notice of, and to vote at, the annual meeting. On the record date, there were
41,794,680
common shares outstanding. Each shareholder of record is entitled to one vote per common share. Cumulative voting is not permitted in the election of Class
I
I
Trustees.
Attending the Annual Meeting In Person
If you would like to attend the annual meeting in person, you will need to bring an account statement or other evidence acceptable to the Company of ownership of your common shares as of the close of business on the record date. If you hold common shares in “street” name and wish to vote in person at the annual meeting, you will need to contact your broker, bank or nominee and obtain a written proxy from them and bring it to the annual meeting.
Quorum
The Company’s Bylaws provide that the holders of a majority of the
votes entitled to be cast at the annual meeting
as of the close of business on the record date present in person or by proxy constitutes a quorum for the transaction of business at the annual meeting. As of March 31,
2017
, there were
41,794,680
common shares outstanding.
Vote Required
The Company’s Bylaws provide for the election of trustees in uncontested elections by a majority of the votes cast. Under this standard, a majority of the votes cast means the number of votes cast “for” a trustee’s election exceeds the number of votes cast “against” that trustee’s election. The Bylaws provide for the election of trustees by a plurality of the votes cast if the number of nominees exceeds the number of trustees to be elected (a contested election). The election of Class
I
I
Trustees at the annual meeting is uncontested. Therefore, in acc
ordance with the Bylaws, Class
I
I
Trustee nominees will be elected at the annual meeting by a majority of the votes cast.
The affirmative vote of a majority of all of the votes cast at the annual meeting, if a quorum is present, is required for the proposal to approve, on an advisory basis, the compensation of the Company’s
NEOs
.
The option of one year, two years or three years that receives the most votes will be the frequency for the advisory vote on executive compensation that has been recommended by shareholders.
The affirmative vote of a majority of all of the votes cast at the annual meeting, if a quorum is present, is required to ratify the appointment of KPMG LLP (“KPMG”) as the Company’s independent auditors for the fiscal year ending December 31,
2017
.
How Votes Will Be Counted
In the election of Class
I
I
Trustees, you may vote “for,” “against” or “absta
in” with respect to each Class
I
I
Trustee nominee. For the proposal to approve, on an advisory basis, the compensation of the Company’s named executive officers
and for the proposal to ratify the appointment of KPMG as the Company’s independent auditors for the fiscal year ending December 31,
2017
, you may vote “for,” “against” or “abstain.”
The option of one year, two years or three years that receives the most votes will be the frequency for the advisory vote on executive compensation that has been recommended by shareholders
on an advisory basis
.
For purposes of
these
advisory vote
s
, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.
These
vote
s
are
advisory and not binding on the Board of Trustees in any way, and the Board of Trustees, based upon the recommendation of the Compensation Committee, may determine that it is in the best interests of the Company to hold an advisory vote on the compensation of the Company’s named executive officers more or less frequently than the option recommended by the shareholders.
Abstentions with respect to any proposal at the annual meeting will be counted as present and entitled to vote for purposes of determining the presence of quorum, but will not be counted as a vote cast on the proposal and therefore will not be counted in determining the outcome of the proposal.
If you hold your common shares in street name through a brokerage firm and you do not submit voting instructions to your broker, your broker may generally vote your common shares in its discretion on routine matters. However, a broker cannot vote common shares held in street name on non-routine matters unless the broker receives voting instructions from the street name holder. The proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31,
2017
is considered routine under applicable rules, while each of the other items to be submitted for a vote of shareholders
at the annual meeting is considered non-routine. Accordingly, if you hold your common shares in street name through a brokerage account and you do not submit voting instructions to your broker, your broker may exercise its discretion to vote your common shares on the proposal to ratify the appointment of KPMG, but will not be permitted to vote your common shares on any of the other items at the annual meeting. If your broker exercises this discretion, your common shares will be counted as present for the purpose of determining the presence of a quorum at the annual meeting and will be voted on the proposal to ratify the appointment of KPMG in the manner directed by your broker, but your common shares will constitute “broker non-votes” on each of the other items at the annual meeting, including the election of Class
I
I
Trustees. Broker non-votes will not be counted as a vote cast with respect to these other items and therefore will not be counted in determining the outcome of the items.
Householding
We are sending only a single
Notice of Internet Availability of Proxy Materials
to any household at which two or more
share
holders
reside if they share the same last name or we reasonably believe they are members of the same family, unless we have received instructions to the contrary from any
shareholders
at that address. This practice is known as “householding” and is permitted by rules adopted by the SEC. This practice reduces the volume of duplicate information received at your household and helps us to reduce costs. We will deliver promptly, upon written request or oral request, a copy of the proxy materials, as applicable, to
holders of our common shares as of the record date for the annual meeting, March 31, 2017
. If you prefer to receive
printed copies of our proxy materials
, you may direct requests to the following address: Hersha Hospitality Trust, Attention:
Corporate
Secretary, 44 Hersha Drive, Harrisburg, Pennsylvania 17102. If you are a
shareholders
who receives multiple copies of our proxy materials, you may request householding by contacting us in the same manner and requesting a householding consent form.
CORPORATE GOVERNANCE
We are committed to pursuing best corporate governance practices. Among other things, during 2016 and thereafter we undertook the following initiatives to structure our corporate governance in a manner we believe closely aligns our interests with those of our shareholders:
•
Effective May 10, 2016, we amended our declaration of trust to decrease the number of our Priority Class A common shares that we are authorized to issue from 300,000,000 to 75,000,000. Solely as a result of the need to authorize the issuance of our common shares that may be issuable in certain circumstances upon the conversion of our 6.50% Series D Cumulative Redeemable Preferred Shares and our 6.50% Series E Cumulative Redeemable Preferred Shares, both of which we issued
for
the first time in 2016 in order to take advantage of historically attractive market prices for preferred securities, we subsequently amended our declaration of trust to authorize us to issue up to 90,000,000 Priority Class A common shares.
•
Effective March 31, 2017
,
we have amended our Bylaws to permit shareholders to
alter,
amend
or repeal
the Bylaws upon obtaining the requisite shareholder approval.
Board Leadership Structure
Lead Independent Trustee
-
The Board of Trustees designates an independent, non-employee trustee to serve as the Lead Independent Trustee
that presides over the regularly conducted
executive sessions of the independent trustees
.
In addition to chairing all executive sessions of the independent trustees, the Lead Independent Trustee has the authority to call meetings of the independent trustees
,
presides at all meetings of the Board of Trustees at which the Chairman of the Board, the Chief Executive Officer and the President and Chief Operating Officer are not present, and has such other duties as the Board of Trustees may determine from time to time.
T
he Board of Trustees has currently designated Mr. Landry as the Lead Independent Trustee.
In June of 2015,
New York Stock Exchange Governance Services, a subsidiary of
the
New York Stock Exchange
(“NYSE”)
,
honored Mr. Landry as the
Independent Lead Director of the Year
.
As part of
its
Governance, Risk
and
Compliance Leadership Awards
, NYSE Governance Services presents t
he
Independent Lead Director of the Year
Award to an exemplary leader
in governance, risk and compliance
that
has clearly demonstrated an unwavering commitment to independence, integrity, and leadership in
governance at the board level.
The
Governance, Risk,
and Compliance Leadership Awards underscore the role that corporate governance plays in shaping a company's success and a board's contribution to long-term value.
Mr. Landry is expected to continue serving in this capacity following the annual meeting. All interested parties may communicate with the Lead Independent Trustee by following the procedure described below under “—Communications with the Board of Trustees.”
Chairman of the Board and Chief Execu
ti
ve Officer Separate
d
-
The Board of Trustees believes that it is in the best interests of the Company that the roles of Chief Executive Officer and Chairman of the Board of Trustees be separated in order for the individuals to focus on their primary roles. The Company’s Chief Executive Officer is responsible for setting the strategic direction for the Company and the day to day leadership and performance of the Company, while the Company’s Chairman of the Board of Trustees provides guidance to the Company’s Chief Executive Officer, presides over meetings of the full Board of Trustees and, together with the Lead Independent Trustee, sets the agenda for Board of Trustees meetings.
Board’s Role in
Risk Oversight
While the Board of Trustees believes it is the job of the Company’s senior management to assess and manage the Company’s exposure to risk,
t
he Board of Trustees and its committees play an important role in the risk oversight of the Company.
The Board of Trustees and its committees are involved in risk oversight through its direct decision-making authority with respect to significant matters and the oversight of management. The Board of Trustees (or the appropriate committee in the case of risks that are under the purview of a particular committee) administers its risk oversight function by receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and reputational risks, and from the chairs of the Audit Committee and the Compensation Committee.
In addition, the Board of Trustees administers its risk oversight function through the required approval by the Board of Trustees (or a committee thereof) of significant transactions and other decisions, including, among others, acquisitions and dispositions of properties, new borrowings, significant capital expenditures, refinancing of existing indebtedness and the appointment and retention of the Company’s senior management.
The Audit Committee has a Risk Sub-Committee to assist the Audit Committee and the Board of Trustees in developing guidelines and policies related to risk assessment and management
which
govern the process by which risk assessment and management is handled by the Company’s senior management. The Risk Sub-Committee, which is chaired by Ms. Morgan, met four times in
2016
. Senior management attended each meeting. Messrs.
Hutchison
and Landry
, both of whom serve on the Audit Committee, also serve on the Risk Sub-Committee. Ms. Morgan reports to the full Audit Committee on the discussions and findings of the Risk Sub-Committee and makes recommendations to the Audit Committee regarding steps the Company’s senior management has taken to monitor and control major financial and other risk exposures. In addition, as discussed under “Compensation Discussion and Analysis—Compensation-Related Risk” below, the Compensation Committee meets with senior management to discuss compensation-related risks.
Trustee Independence
A
majority of the Board of Trustees is independent. The Board of Trustees has determined that the following trustees and trustee nominees are independent in accordance with the corporate governance standards of the NYSE: Ms. Morgan and Messrs. Hutchison,
Hsieh,
Landry, Leven and Sabin.
Code of Ethics
and
Policies on
Corporate Governance
The Board of Trustees has adopted a Code of Ethics that applies to all of the Company’s trustees, executive officers and employees.
The Company makes available on its website,
www.hersha.com
, current copies of its corporate governance documents, including charters of the Audit, Compensation,
Nominating and Corporate Governance (“NCG”)
and Acquisition Committees, its Corporate Governance Guidelines and its Code of Ethics. The Company will post any future changes to these corporate governance documents on its website and may not otherwise publicly file such changes.
The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to
or waivers from the Code of Ethics granted to the Company’s principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and other executive officers by posting such information on the Company’s website.
Majority Voting For Trustees Elections
The Company’s Bylaws provide for the election of trustees in uncontested elections by a majority of the votes cast. Under this standard, a majority of the votes cast means the number of votes cast “for” a trustee’s election exceeds the number of votes cast “against” that trustee’s election. The Bylaws provide for the election of trustees by a plurality of the votes cast if the number of nominees exceeds the number of trustees to be elected (a contested election).
The Company’s Bylaws include a trustee resignation policy, establishing procedures under which any incumbent trustee who fails to receive a majority of the votes cast in an uncontested election will be required to tender his or her resignation to the Board of Trustees for consideration. As provided in the Bylaws, the Board of Trustees will act on any such resignation, taking into account the
NCG
Committee’s recommendation, and publicly disclose (by a press release, a filing with the SEC or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the uncontested election results.
Trustee Nominating Process
The NCG Committee performs the functions of a nominating committee and will actively seek, screen and recommend trustee candidates for nomination by the Board of Trustees, consistent with criteria approved by the Board of Trustees, including, without limitation, strength of character, maturity of judgment, independence, expertise in the hospitality industry, experience as a senior executive or with corporate strategy initiatives generally, diversity and the extent to which the candidate would fill a present need on the Board of Trustees. The NCG Committee Charter describes the Committee’s responsibilities, including seeking, screening and recommending trustee candidates for nomination by the Board of Trustees.
The charter of the NCG Committee provides that the NCG Committee will consider shareholder recommendations for trustee candidates. Shareholders should submit any such recommendations for consideration by the NCG Committee through the method described under “—Communications with the Board of Trustees” below. In addition, in accordance with the Company’s Bylaws, any shareholder of record entitled to vote for the election of trustees at the applicable meeting of shareholders may nominate persons for election to the Board of Trustees if such shareholder complies with the notice procedures set forth in the Bylaws and summarized in “—Shareholder Proposals and Nominations for the
2017
Annual Meeting” below.
Trustee candidates submitted by our shareholders will be evaluated by the NCG Committee on the same basis as any other trustee.
The NCG Committee does not have a formal policy with respect to diversity; however, the Board of Trustees and the NCG Committee believe that it is important that the trustee candidates represent key and diverse skill sets.
The NCG Committee considers diversity of race, ethnicity, gender, age, cultural background, professional experiences and expertise and education in evaluating trustee candidates for Board membership. We believe that considerations of diversity are, and will continue to be, an important component relating to the Board’s composition as multiple and varied points of view contribute to a more effective decision-making process.
The NCG Committee evaluates each candidate’s qualifications to serve as a member of the Board of Trustees based on his or her skills and characteristics, as well as the composition of the board as a whole. In addition, the NCG Committee will evaluate a candidate’s independence and diversity, age, skills and experience in the context of the board’s needs. In addition to considering incumbent trustees, the NCG Committee identifies trustee candidates based on recommendations from the trustees, shareholders, management and others. The NCG Committee may in the future engage the services of third-party search firms to assist in identifying or evaluating trustee candidates. No such firm was engaged in
2016
.
Communications with the Board of Trustees
Shareholders and other interested parties who wish to communicate with the Board of Trustees or any of its committees may do so by writing to the Lead Independent Trustee, Board of Trustees of Hersha Hospitality Trust,
c/o Corporate Secretary, 44 Hersha Drive, Harrisburg, Pennsylvania 17102. The Corporate Secretary will review all communications received. All communications that relate to matters that are within the scope of the responsibilities of the Board of Trustees and its committees are to be forwarded to the Lead Independent Trustee. Communications that relate to matters that are within the scope of responsibility of one of the Board committees are also to be forwarded to the Chairperson of the appropriate committee. Solicitations, junk mail and obviously frivolous or inappropriate communications are not to be forwarded, but will be made available to any non-management trustee who wishes to review them.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s trustees, executive officers and persons who own more than 10% of any registered class of the Company’s equity securities (“10% Holders”) to report their ownership of common shares and any changes in ownership to the SEC. These persons are also required by SEC regulations to furnish the Company with copies of these reports. Based solely on a review of the copies of such reports received by the Company and on written representations from certain reporting persons that no reports were required, or if required, such reports were filed on a timely basis for those persons, the Company believes
that all such forms have been filed on a timely basis
.
PROPOSAL ONE
:
ELECTION OF CLASS
I
I
TRUSTEES
The Board of Trustees, upon the recommendation of the Nominating and Corporate Governance Committee, nominated
Hasu P. Shah
,
Jackson Hsieh
,
Dianna F. Morgan
, and
John M. Sabin
for election at the annual meeting as Class
I
I
Trustees. Each of these nominees
, except Mr. Hsieh,
currently is serving as a Class
I
I
Trustee. If elected, these individuals will serve as Class
I
I
Trustees until the
2019
annual meeting of shareholders and until their successors are duly elected and qualified.
Unless you direct otherwise in the proxy card accompanying this proxy statement, the persons named as proxies will vote your proxy for all of the nominees named above. If any nominee becomes unavailable or unwilling to serve as a Class
I
I
Trustee, the persons named as proxies in the accompanying proxy card will vote your proxy for an alternate nominee that has been nominated by the Board of Trustees. Alternatively, the Board of Trustees may reduce the size of the Board of Trustees and the number of nominees standing for election as Class
I
I
Trustees at the annual meeting. Proxies will only be voted for the nominees named above or their alternates. Each nominee for election to the Board of Trustees as a Class
I
I
Trustee has indicated that he
or she
is willing to serve if elected. The Board of Trustees has no reason to doubt that any nominee for election will be unable or unwilling to serve if elected.
The Board of Trustees unanimously recommends a vote “FOR” each of the nominees for election as a Class
I
I
Trustee.
BOARD OF TRUSTEES and executive officers
The Board of Trustees consists of nine trusteeships with
seven
currently serving trustees and
two
vacanc
ies
. At this time, the Board of Trustees has elected not to fill
one of
these
opening
s
and will continue to evaluate the composition of the Board.
Shareholders are not being asked for proxies to fill these vacancies and proxies may only be voted for the nominees below.
The Company’s Declaration of Trust divides the Board of Trustees into two classes, as nearly equal in number as possible. At the annual meeting, shareholders are voting to elect
four
persons as
Class II
Trustees. Each
Class II
Trustee
nominee, except Mr. Hsieh,
currently is serving a two-year term expiring at the annual meeting. Each Class
I
trustee was elected at the
2016
annual meeting and is serving a two-year term expiring at the
2018
annual meeting of shareholders. Generally, one full class of trustees is elected by the shareholders of the Company at each annual meeting.
The fo
llowing pages include biographical information for each of our Class
I
I
Trustee Nominees and
Class I
Trustees, including their qualifications to serve on our board of trustees.
Class
II
Trustee
Nominees
|
|
Hasu P. Shah
Chairman of the Board and
Class II Trustee Nominee
Age: 72
Trustee since May 1998
Committees Served:
None
Other Public Company Boards:
None
|
Mr. Hasu Shah has been the Chairman of the Board and a Class II Trustee since the Company’s inception in May 1998 and was the Company’s Chief Executive Officer until his retirement in 2005. Mr. Hasu Shah began his career in lodging with the purchase of a single hotel in Harrisburg, Pennsylvania in 1984. In the last 30 years, he has developed, owned, or managed over 50 hotels across the Eastern United States and started real estate related businesses in general construction, purchasing, and hotel management. He has been recognized for both his business accomplishments and his philanthropic endeavors, including the Entrepreneur of the Year award given by Ernst & Young LLP and the Central Penn Business Journal Hall of Fame award for lifetime achievements in both business and philanthropy. Mr. Hasu Shah and his wife, Hersha, are active members of the local community and remain involved with charitable initiatives in India. In 2010, he was honorably bestowed with the National United Way Tocqueville Society award, the highest honor given for philanthropic work across the country. Mr. Hasu Shah has been an active Rotarian for nearly 25 years and continues to serve as a trustee of several community service and spiritual organizations including Vraj Hindu Temple and the India Heritage Research Foundation. He also received an honorary Doctorate of Public Service (DPS) Degree from Harrisburg Area Community College. Mr. Hasu Shah received a bachelors of science degree in chemical engineering from Tennessee Technical University and obtained a masters degree in public administration from Pennsylvania State University, which named him as a Fellow. He is an alumnus of the Owner and President’s Management program at Harvard Business School. Mr. Hasu Shah is the father of Jay H. Shah, the Company’s Chief Executive Officer and Class I Trustee, and Neil H. Shah, the Company’s President and Chief Operating Officer.
The Board of Trustees has determined that Mr. Hasu Shah’s qualifications to serve on the Board of Trustees include his extensive experience in the lodging industry, including his role as our former Chief Executive Officer and his decades of experience building the Company, which he took public in 1999. Over the past 30 years he has developed, owned or managed over 50 hotels across the Eastern United States. With over three decades of lodging industry experience, Mr. Hasu Shah has developed a broad network of hotel industry contacts and relationships, including relationships with hotel owners, operators, project managers, contractors, franchisors, lenders, and other key industry participants.
|
|
|
Jackson Hsieh
Class II Trustee Nominee
Age: 56
Has not previously served as Trustee
Committees Served:
None
Other Public Company Boards:
None
|
Mr. Hsieh has served as President and Chief Operating Officer of Spirit Realty Capital, Inc. since September 2016, and is responsible for Spirit’s credit underwriting, new investments, and portfolio and asset management. Prior to joining Spirit, Mr. Hsieh worked for Morgan Stanley, where he served as Managing Director and a Vice Chairman of Investment Banking, primarily focusing on the firm’s real estate clients. Prior to rejoining Morgan Stanley, Jackson was Vice Chairman and Sole/Co-Global Head of UBS’s Real Estate Investment Banking Group, managing a team of over 70 professionals in six offices worldwide. During his career, including a prior period at Morgan Stanley and tenures at Bankers Trust Company and Salomon Brothers, Inc., he served as senior lead banker on over $285 billion of real estate and lodging transactions. Mr. Hsieh is a graduate of the University of California at Berkeley, and earned a Master’s degree from Harvard University.
The Board of Trustees has determined that Ms. Hsieh’s qualifications to serve on the Board of Trustees include his substantial experience in investment banking and the real estate and lodging industries.
|
Dianna F. Morgan
Class II Trustee
Age: 65
Trustee since April 2010
Committees Served:
Audit Committee
Risk Sub-Committee (Chair)
Compensation Committee
NCG Committee
Other Public Company Boards:
Chesapeake Utilities Corp.
Marriott Vacations
Worldwide Corporation
|
Ms. Morgan retired in 2001 from a long career with the Walt Disney World Company, where she served as Senior Vice President of Public Affairs and Human Resources. She also oversaw the Disney Institute — a recognized leader in experiential training, leadership development, benchmarking and cultural change for business professionals around the world. Ms. Morgan currently serves on the Board of Directors of Chesapeake Utilities Corp., where she chairs the Compensation Committee, the Board of Directors of Marriott Vacations Worldwide Corporation, where she serves on the Compensation and Nominating and Governance Committees, and the Board of Directors of CNL Healthcare Properties II. She previously served on the Board of Directors and the Compensation and Audit Committees of CNL Hotels & Resorts, Inc. and the Board of Directors of CNL Bancshares, Inc. In addition, Ms. Morgan is the past Chair and is a former member of the Board of Trustees for the University of Florida. Ms. Morgan is a former member of the Board of Directors and past Chairman of Orlando Health and previously served as Chairman of the national board for the Children’s Miracle Network. Ms. Morgan received her Bachelor of Arts degree in organizational communications from Rollins College.
The Board of Trustees has determined that Ms. Morgan’s experience serving as a board member of both private and public companies, her previous experience overseeing the Disney Institute and her prior service as a senior manager at Walt Disney World Company provide her with extensive knowledge of innovation and customer service, a solid foundation in media relations, risk management, and government relations and “best practice” expertise in human capital and the customer experience.
|
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee
were
an officer or employee of the Company or any of its subsidiaries during
2016
or any prior period. No executive officer of the Company served as a member of the compensation committee or as a director of any company where an executive officer of such company is a member of the Compensation Committee or is a trustee of the Company.
The Company’s regular filings with the SEC and its trustees’ and executive officers’ filings under Section 16(a) of the Exchange Act are also available on the Company’s website.
|
|
|
COMPENSATION COMMITTEE,
|
|
|
|
Thomas J. Hutchison III (Chair)
|
|
Michael A. Leven
|
|
Dianna F. Morgan
|
April 21
,
2017
|
John M. Sabin
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS
This
section of
the
proxy statement explains the type and amount of compensation provided to the Company’s NEOs in
2016
, as well as the principles and processes that the Compensation Committee of the Board of Trustees follows in determining such compensation. The NEOs consist of the Company’s Chief Executive Officer, the Company’s Chief Financial Officer and the Company’s three other most highly paid executive officers as of December 31,
2016
.
The NEOs for
2016
are as follows:
|
·
|
|
Hasu P. Shah, the Company’s Chairman of the Board;
|
|
·
|
|
Jay H. Shah, the Company’s Chief Executive Officer;
|
|
·
|
|
Neil H. Shah, the Company’s President and Chief Operating Officer;
|
|
·
|
|
Ashish R. Parikh, the Company’s Chief Financial Officer; and
|
|
·
|
|
Michael R. Gillespie, the Company’s Chief Accounting Officer
.
|
The NEOs named above were also NEOs in
2014
and
2015
.
Investor Outreach
At
our
2016
annual shareholder meeting,
shareholders overwhelmingly supported the Company’s executive compensation
program
, with
more than
98
%
of the shareholders entitled to vote at the
2016
annual shareholders meeting
approving
,
on an advisory basis
,
the compensation earned by the NEOs in
2015
.
The Compensation Committee viewed the
advisory
vote in favor of the Company’s executive compensation as a validation of its compensation philosophy, including its emphasis on pay
-
for
-
performance and equity based
compensation.
In light of this overwhelming investor endorsement
of the compensation program
, the Compensation Committee retained all of the key elements of the 2015
program
when formulating the 2016 compensation program for the NEOs.
During meetings with shareholders
throughout 2016
, management was provided with i
nput on executive compensation issues,
the results of the
advisory vote on
executive compensation
at the
2016
annual shareholders meeting
, governance matters and Company performance.
The feedback that
the Company
received
through this communicative process
was beneficial and insightful
.
These meetings
, along with a near unanimous shareholder vote on the 2015
program,
highlighted for the Compensation Committee that
t
he majority of the investors we met with strongly support the executive
compensation
program structure and believe
it
is well designed
.
Executive Summary
The objective
s
of the Company’s executive compensation program
are
to attract, retain and motivate experienced and talented executives who can help maximize
share
holder
value. The Company believes that a significant portion of the compensation paid to executive officers should be closely aligned with the Company’s performance on both a short-term and long-term basis. In addition, a significant portion of compensation should be in the form of the Company
’s common shares
to more fully align the interests of the Company’s executives and its shareholders and to mitigate any risks associated with pay
-
for
-
performance components of our compensation program.
The following table summarizes our compensation philosophy:
|
|
|
Philosophy Component
|
Rationale/Commentary
|
Pay Element
|
Compensation should reinforce business objectives and Company values
|
The Company strives to provide a rewarding and professionally challenging work environment for its executive officers. The Company believes that executive officers who are motivated and challenged by their duties are more likely to achieve the individual and corporate performance goals designed by the Compensation Committee. The Company’s executive compensation package should reflect this work environment and performance expectations.
|
All elements
(salary, annual cash incentive, equity incentive compensation)
|
Key executive officers should be retained
|
The primary purpose of the Company’s executive compensation program has been
,
and is
,
to achieve the Company’s business objectives by attracting, retaining and motivating talented executive officers by providing incentives and economic security.
|
Equity incentive compensation, s
alary
|
Compensation should align interests of executive officers with shareholders
|
The Company’s executive compensation is designed to reward favorable total shareholder returns, both in an absolute amount and relative to
the Company’s
peers, taking into consideration the Company’s competitive position within the
lodging REIT industry
and each executive’s long-term career contributions to the Company.
|
Equity incentive compensation
|
|
|
|
Philosophy Component
|
Rationale/Commentary
|
Pay Element
|
A significant amount of compensation for top executive officers should be based on performance
|
Performance-based pay aligns the interest of management with the Company’s shareholders. Performance-based compensation motivates and rewards individual efforts and Company success. Approximately
79%
of the
NEO’s
targeted
aggregate
compensation is linked to
Company specific or
individual performance
metrics
. The performance-based percentage of actual compensation increases as performance improves and decreases as performance declines. If the Company has poor
absolute or
relative performance, the executive officers will receive reduced incentive compensation and reduced total compensation.
|
A
nnual cash incentive bonuses and equity incentive compensation
|
Compensation should be competitive
|
To attract and
retain
valuable
executive talent
but avoid the expense of excessive pay, compensation should be competitive. The Compensation Committee, with the help of
its independent compensation consultant
, assesses the competitiveness of the Company’s compensation
program for each of
its executive officers by comparison to
the
compensation of executive officers at other public real estate companies. The Compensation Committee has regularly retained the services of
FPL
, an independent human resources and compensation consulting firm
which specializes in the REIT industry
, to report on current market data regarding executive officer pay levels and incentive programs.
In addition to its own proprietary databases, FPL
obtains data for its reports from publicly-available proxy statements and other public filings with the SEC.
|
All elements
|
The following table summarizes certain aspects of our pay practices:
|
|
☑
WHAT WE DO
|
☒
WHAT WE DO NOT DO
|
The Company ties NEO pay to performance. For 2016, 82% of the NEOs’ pay potential was performance-based and at-risk. The Company sets clear goals for company performance and differentiates certain elements of compensation based on individual NEO achievement.
|
The Company has no contractual arrangements for minimum or guaranteed payouts (other than base salary which is only 18% of the NEOs’ pay potential). There are no guarantees in place for any potential changes to our NEOs’ base salaries, cash incentive payments or equity awards.
|
The Company mitigates undue risk, including retention provisions, multiple performance targets, and robust Board and management processes to identify risk. The Company intends to clawback bonuses and other incentive-based and equity-based compensation when misconduct results in a financial restatement.
|
The Compensation Committee does not believe the executive compensation program creates risks that are reasonably likely to pose a material adverse impact to the Company.
|
The Company has reasonable post-employment and change in control provisions. The employment agreements with the NEOs generally provide for cash payments after a change in control only if the NEO is also terminated without cause or voluntarily resigns for good reason within one year of the change in control (a double-trigger).
|
The Company does not have any tax gross-up provisions for any of the NEOs and maintains that it will not enter into an agreement with a new executive officer that includes a tax gross-up provision with respect to payments contingent upon a change in control.
|
|
|
☑
WHAT WE DO
|
☒
WHAT WE DO NOT DO
|
The Compensation Committee benefits from its utilization of an independent compensation consulting firm. The reports prepared by the compensation consulting firm are used by the Compensation Committee to set executive compensation at levels that are intended to be competitive with the Company’s industry peers.
|
The Company’s compensation consulting firm does not provide any other services to the Company or management.
|
The Company has adopted share ownership guidelines for the NEOs. In addition, the Company implemented requirements for the NEOs to hold shares granted for two years beyond vesting.
|
The Company has not used options or share appreciation rights. If used, the Company would not reprice these securities if they were underwater. The Company does not pay dividends on unvested performance shares.
|
Only customary perquisites, such as health and insurance benefits, are provided. Perquisites represent only a small portion of the total NEO compensation.
|
The Company does not have pension plans and does not provide perquisites to the NEOs that would be considered significant or extraordinary.
|
The Compensation Committee establishes rigorous metrics for the NEO’s, and attempts to tie pay for performance on various company specific metrics and total shareholder returns.
Pay
-
for
-
Performance
Pay
-
for
-
performance is an important
cornerstone
of
the Company’s
compensation philosophy. Consistent with this focus, the Company’s executive compensation program includes annual cash incentives, annual equity incentives and multi-year equity incentives.
Annual cash incentives are provided under the Company’s
a
nnual
c
ash
i
ncentive
p
rogram
(“Annual CIP”) to all of the NEOs other than
the Company’s
Chairman, Mr. Hasu Shah. The purpose of the program is to reward achievement of annual goals and objectives and to provide at-risk, comprehensive opportunities
to earn additional cash compensation
linked
primarily
to company-wide
and, to a lesser extent, individual NEO
performance. Eighty percent
(80%)
of the
potential
cash incentive is based on the achievement of
c
ompany
-wide operational and financial goals, including the achievement of adjusted funds from operations (“AFFO”) targets, AFFO multiple targets and fixed charge coverage ratio targets. The remaining 20% of the
potential
cash incentive is based on the achievement by each NEO of individual-specific operational and strategic goals.
Annual and multi-year equity incentives are provided under the Company’s
a
nnual
l
ong
-
t
erm
equity
i
ncentive
p
rogram
(the “
Annual EIP
”) and
its m
ulti-
y
ear
l
ong-
t
erm
equity
i
ncentive
p
rogram
s
(the “
Multi-Year EIP
s
”).
If earned, the awards will be settled in the form of common shares issued by the Company or LTIP Units issued by the Company’s operating partnership.
T
he Company must achieve certain financial performance goals during the performance period in order for
Annual EIP
awards to be earned by the NEOs.
Under
the
Annual EIP
, p
erformance is measured based on the Company’s achievement of absolute and relative RevPAR growth. In addition, the Compensation Committee has discretion under the
Annual EIP
to grant equity awards to the NEOs based on how the NEOs individually and as a group effected transactions that continued the transformation of the Company’s portfolio and continued to strengthen the Company’s financial position.
Under the
2014
,
2015
and
2016
Multi-Year EIP
s
, performance is measured based on the Company’s achievement of
RevPAR growth relative to a predetermined peer group,
absolute
total shareholder return
and total shareholder return relative to a predetermined peer group over a
three year period
.
During the past several years, the Company has been focused on transforming its portfolio through strategic acquisitions and dispositions, improving its balance sheet and strategically accessing capital markets. Accomplishments in the year ended December 31,
2016
include, among other things, the following:
|
·
|
|
Returned capital of approximately $52 million to shareholders through the repurchase of approximately 2.8 million shares, or 6.2% of the Company’s outstanding common shares. Over a three year period, the Company has repurchased approximately 20% of the outstanding common shares at prices that represent significant discounts to the Company’s Net Asset Value.
|
|
·
|
|
Entered into sales transactions of approximately $850 million, which will result in gains approaching $300 million.
|
|
·
|
|
Successfully
deferred
all of the taxable gains totaling $187 million recognized through the Company’s asset dispositions in 2016
by way of
Section 1031
like-kind
exchanges.
|
|
·
|
|
Entered into purchase contracts of $38
1
million, increasing the Company’s presence in several strategic markets, while reducing concentration to lower barrier suburban markets.
|
|
·
|
|
Continued penetration into the Washington, DC Central Business District via the acquisition of the Hilton Garden Inn M Street. Expanded the Company’s presence in Boston via the acquisition of The Envoy Hotel in the Seaport Innovation District.
|
|
·
|
|
Increased exposure to the West Coast with the acquisitions of the Courtyard Sunnyvale and The Ambrose Hotel in Santa Monica, resulting in the West Coast being the Company’s largest market in terms of EBITDA generation.
|
|
·
|
|
Closed a transformative portfolio sale in Manhattan with Cindat Capital Management (“Cindat”), forming a joint venture for 7 of the Company’s limited service hotels for a total purchase price of $571 million, or $526,000 per key. This represented an 81% premium to the Company’s purchase price of $316 million or $291,000 per key.
|
|
·
|
|
Entered into a new $200 million term loan facility, increasing the Company’s unsecured borrowing capacity to $1.0 billion, while maintaining an overall cost of debt of 3.43%, the lowest in the Company’s history.
|
|
·
|
|
The Company’s new $200 million Term Loan addressed all 2016 and 2017 debt maturities, saving approximately $7.0 million in interest expense on a full-year pro forma basis.
|
|
·
|
|
Accessed
a favorable
Preferred Equity market, raising $292.5 million at a record low coupon rate of 6.5%, providing attractive perpetual capital for the Company.
|
Based on these and other measures specified in the Annual CIP and the
Annual EIP
, the Company awarded the NEOs the performance-based compensation
more fully
described below under “—Annual Cash Incentive Program” and “—Annual Long-Term Incentive Program for
2016
.”
Share
holder Interest Alignment
We believe that our
Annual EIP
and
Multi-Year EIP
s
further enhance long-term shareholder value by incentivizing long-term performance and aligning the interests of the NEOs and the shareholders. In addition, paying a significant portion of an NEO’s compensation in the form of restricted equity awards mitigates potential risks associated with pay-for-
performance
elements of compensation and is a helpful tool in retaining senior executives. Therefore, equity is a key component of the Company’s executive compensation program, with equity award
potential accounting for
55
%
of the total compensation
program for our CEO and
54
% of the total compensation program of our other NEOs
. All equity awards granted to the NEOs in
2016
were in the form of restricted
equity
that
,
once earned based on prior performance
,
subsequently
vest over time
and are required to be owned for a minimum of one year after the vesting date
and therefore have a
significant
retention element. Before these
awards
are earned, as described above, significant value is at risk for the NEOs.
As described under “—Stock Ownership Guidelines” below
,
the Company has formal stock ownership guidelines that require:
|
·
|
|
the Company’s non-
employee
trustees
, within three years of becoming a trustee,
to own Company shares equal in value to at least five times the annual cash retainer paid to non-
employee
trustees;
|
|
·
|
|
the Company’s executive officers to own Company shares equal in value to a multiple of such executive’s base salary as follows: Chairman of the Board (4 times); Chief Executive Officer (6 times); President and Chief Operating Officer (6 times); Chief Financial Officer (3 times); and Chief Accounting Officer and all other executive officers (1 times); and
|
|
·
|
|
the Company’s executive officers to own Company shares received from vesting of share awards for a minimum of one year after the vesting date.
|
For purposes of these guidelines, units of limited partnership interest issued by the Company’s operating partnership
are considered “Company Shares.”
Compensation and Corporate Governance
The Compensation Committee believes that solid corporate governance should be reinforced through the Company’s executive compensation programs
and
has adopted the following policies with regard to share ownership and compensation that are intended to promote good corporate governance:
|
·
|
|
hedging
of Company shares is prohibited
;
|
|
·
|
|
if
the Company is required to prepare an accounting restatement due to material noncompliance, as a result of misconduct, with any financial reporting under federal securities law,
the
Company
will
“clawback”
any bonus or other incentive-based or equity-based
compensation
received by the NEOs from the Company during the twelve month period following the first issuance or filing of the financial statements that are required to be restated and any profits realized from the sale of the Company’s securities during such twelve month period
; and
|
|
·
|
|
additional pledges of Company shares by Trustees and NEOs are prohibited.
|
Compensation Principles
The Compensation Committee designs and oversees the Company’s compensation policies and approves compensation for the NEOs. Each year, the Compensation Committee’s goal is to create an executive compensation program for the NEOs that is linked to the creation of shareholder value. To accomplish this
goal
, the executive compensation program for the NEOs is designed to:
|
·
|
|
Support the Company’s business strategy
—The Compensation Committee seeks to align executive compensation programs for the NEOs with business strategies focused on long-term growth and sustained shareholder value. The programs are designed to motivate the NEOs to overcome challenges and exceed company goals.
|
|
·
|
|
Pay for performance
—The Compensation Committee places a large portion of the NEOs’ pay “at risk” and dependent upon the achievement of specific corporate and individual performance goals. The Company pays higher compensation when goals are exceeded and lower compensation when goals are not met.
|
|
·
|
|
Pay competitively
—The Compensation Committee sets target compensation to be competitive with its peer group. We set “maximum” objectives that if achieved may place the compensation paid to the NEOs above the median compared to the peer group.
|
Compensation Objectives
In designing the executive compensation programs for the NEOs, the objectives are to:
|
·
|
|
drive superior business and financial performance by designing programs that motivate the NEOs to achieve or exceed goals within their control;
|
|
·
|
|
attract, retain and motivate the right people in the right job by rewarding NEOs that perform at a high level;
|
|
·
|
|
align the long-term interests of the NEOs and the shareholders by building significant ownership of
common shares
into our annual and multi-year equity incentive programs;
|
|
·
|
|
focus on long-term results, such as total shareholder return; and
|
|
·
|
|
create a balanced executive compensation program that utilizes elements that discourage excessive risk taking.
|
Independent Compensation Consultant
The Compensation Committee engaged FPL during
2016
as its independent compensation consultant. FPL advised the Compensation Committee on the design of the Company’s executive compensation program for
2016
and the amounts the Company should pay to the Chief Executive Officer and the other NEOs. FPL also provided the Compensation Committee with information on executive compensation trends, best practices and advice for potential improvements to the Company’s executive compensation program. In addition, FPL advised the Compensation Committee on the design of the compensation program for the Company’s non-employee trustees.
FPL does no work for management, receives no compensation from the Company other than for its work in advising the Compensation Committee and maintains no other economic relationships with the Company or any of its affiliates. From time to time, FPL receives input from the Company’s Chief Executive Officer regarding the Company’s strategic goals and the manner in which the executive compensation program should support these goals.
Process for Determining Executive Compensation
The Compensation Committee structures executive compensation for the NEOs so that total targeted annual compensation opportunities are competitive with comparable positions at companies considered to be the Company’s peers. The Compensation Committee intends for the level of compensation for the NEOs to be competitive with the compensation offered by publicly held companies that are comparable to the Company with regard to size (based on total assets and market capitalization) and industry focus (publicly trading lodging companies, including REITs). The Compensation Committee believes this allows the Company to successfully attract and retain the high quality executive talent critical to the Company’s long-term success.
In setting executive compensation for the NEOs in
2016
, the Compensation Committee considered levels of compensation paid by the following group of publicly traded lodging
REIT
companies (“
2016
Peer Group”):
|
|
|
|
Company
|
Total
Assets
(1)
|
Market
Capitalization
(1)
|
Total
Room Count
(1)
|
Apple Hospitality REIT, Inc.
|
$3.7 billion
|
$3,482 million
|
22,961
|
Ashford Hospitality Trust
|
$5.0 billion
|
$602 million
|
27,977
|
Chatham Lodging Trust
|
$1.3 billion
|
$785 million
|
5,678
|
Chesapeake Lodging Trust
|
$2.1 billion
|
$1,501 million
|
6,699
|
DiamondRock Hospitality Company
|
$3.3 billion
|
$1,937 million
|
10,928
|
FelCor Lodging Trust Incorporated
|
$1.9 billion
|
$1,035 million
|
12,443
|
LaSalle Hotel Properties
|
$4.1 billion
|
$2,842 million
|
12,075
|
Pebblebrook Hotel Trust
|
$3.1 billion
|
$2,010 million
|
7,408
|
RLJ Lodging Trust
|
$4.0 billion
|
$2,696 million
|
20,897
|
Summit Hotel Properties, Inc.
|
$1.6 billion
|
$1,037 million
|
11,420
|
Sunstone Hotel Investors, Inc.
|
$3.9 billion
|
$2,593 million
|
13,845
|
Xenia Hotels & Resorts, Inc.
|
$3.0 billion
|
$1,712 million
|
12,548
|
25
th
Percentile
|
$2.1 billion
|
$1,037 million
|
10,048
|
50
th
Percentile
|
$3.2 billion
|
$1,825 million
|
12,259
|
75
th
Percentile
|
$3.9 billion
|
$2,619 million
|
15,608
|
Hersha Hospitality Trust
|
$2.0 billion
|
$967 million
|
8,594
|
(1)
Information presented was derived from public filings for the year ended December 31,
2015
.
The Compensation Committee, with input from
FPL and from
management, annually reviews the companies included in the peer group. Accordingly, the Compensation Committee may add or eliminate companies based on factors the Compensation Committee deems relevant. The primary criteria evaluated in the selection of the peer group include similarity of business strategy, scope of operations, total market capitalization and total assets. The
Compensation Committee excluded certain lodging-focused, self-managed equity REITs
with dissimilar business strategies or
that were larger and smaller than the companies named above in terms of
scope of operations,
total assets and market capitalization, such as Host Hotels & Resorts, Inc.
,
and
Condor Hospitality Trust, Inc.
Based on information provided to the Compensation Committee by FPL, the Compensation Committee determined that the total targeted annual compensation opportunity for each of the NEOs was competitive compared to the
2016
Peer Group.
The following table shows each element of the total annual compensation for
2015
for each NEO compared to the
same information for the
2016
Peer Group
:
|
|
|
|
|
|
Executive
|
Benchmark
|
Base Salary
|
Non-Equity Incentive
|
Equity
Incentive
|
Total
Annual Compensation
|
Hasu P. Shah
|
Chairman
|
4
th
of 4
|
4
th
of 4
|
3
rd
of 4
|
4
th
of 4
|
Jay H. Shah
|
CEO
|
9
th
of 13
|
11
th
of 13
|
11
th
of 13
|
12
th
of 13
|
Neil H. Shah
|
COO
|
1
st
of 11
|
1
st
of 11
|
2
nd
of 11
|
2
nd
of 11
|
Ashish R. Parikh
|
CFO
|
4
th
of 13
|
10
th
of 13
|
12
th
of 13
|
11
th
of 13
|
Michael R. Gillespie
|
CAO
|
2
nd
of 4
|
4
th
of 4
|
4
th
of 4
|
4
th
of 4
|
Although the Compensation Committee seeks to provide total targeted annual compensation opportunities that approximate the 50
th
percentile of the
2016
Peer Group, the Compensation Committee does not rely exclusively on the
2016
Peer Group data in establishing target levels of compensation and does not have a rigid or formulaic process with regard to using peer data to set target levels of compensation (for example, assigning specific weights or values to each member of the
2016
Peer Group). Instead, the Compensation Committee uses the
2016
Peer Group data as one of many tools to assist the Compensation Committee. Survey information provided by FPL to the Compensation Committee assists the Compensation Committee in confirming the validity of the market competitiveness of the Company’s executive compensation program and provides broader context to the
2016
Peer Group data, as well as provide data for positions where data for the
2016
Peer Group is not available from public filings with the SEC. In setting total target annual compensation opportunities for each NEO, the Compensation Committee considers the following factors:
|
·
|
|
the competitive data (
2016
Peer Group and survey data), focusing on the median of the data as a starting point;
|
|
·
|
|
each NEO’s past and continuing performance;
|
|
·
|
|
each NEO’s scope of responsibility and impact on the Company’s performance and contribution to its long-term success;
|
|
·
|
|
internal equity (
i.e.
, an NEO’s compensation levels relative to his or her peers, direct reports and supervisors);
|
|
·
|
|
the Chief Executive Officer’s recommendations for the other NEOs; and
|
|
·
|
|
the views of the members of the Compensation Committee and the other members of the Board of Trustees on individual contribution based upon routine interaction with the NEOs on corporate and public reporting matters.
|
In making executive compensation determinations, the Compensation Committee generally considers the results of the most recent shareholder advisory vote on executive compensation.
As reported in the Company’s Current Report on Form 8-K filed with the SEC on May
31
,
2016
,
approximately
98
% of the votes cast on the “say-on-pay” proposal were in favor of the advisory vote to approve
the NEOs’
2015
compensation.
The Compensation Committee viewed the
advisory
vote in favor of the
NEOs’
2015
compensation as a validation of its compensation philosophy, including its emphasis on pay for performance and equity based compensation.
In summary, the Compensation Committee’s process for setting total targeted annual compensation opportunities employs a flexible approach that responds to and adjusts for the evolving business environment. The Compensation Committee believes this approach permits the Company to respond to dynamics in the market for executive talent and provides the Company with flexibility in maintaining and enhancing the NEOs’ engagement, focus, motivation and enthusiasm for the Company’s long-term growth and sustained shareholder value.
Each of the NEOs’ performance is evaluated in light of the Company’s overall performance (as described in greater detail below) and non-financial goals and strategic objectives approved by the
Compensation
Committee and the Board of Trustees. For
2016
, the Compensation Committee believed annual base salary and benefits when added to the potential variability of the annual cash and equity incentive programs and the multi-year equity incentive program provided an appropriate mix of financial security, risk and reward.
Interaction with Management
Our Compensation Committee regularly meets in executive sessions without management present.
Our Chief Executive Officer, considering each of the performance factors outlined below under “
-
Components of Executive
Compensation
,” annually reviews the compensation for each
NEO
, other than himself,
and makes recommendations to
the
Compensation Committee regarding any proposed adjustments. Recommendations, if any, for interim modifications to salaries are also based on the factors outlined above and are made by the Chief Executive Officer to the Compensation Committee. Final compensation decisions are ultimately made in the sole discretion of the Compensation Committee.
Components of Executive Compensation
In
2016
, the components of executive compensation consisted of the following:
|
·
|
|
annual
cash
incentives;
|
|
·
|
|
long-term
equity
incentives (annual and multi-year); and
|
Base Salary
Base salary provides the NEOs with a basic level of financial security and promotes the Compensation Committee’s objectives by attracting and retaining top talent. Base salary increases for the Company’s Chief Executive Officer are determined by the Compensation Committee and approved by the Board of Trustees. Base salary increases for the other NEOs are recommended by the Company’s Chief Executive Officer and are subject to review and approval by the Compensation Committee.
To more
appropriately align with the market data provided for the
2016
Peer Group,
the Compensation Committee increased base salary
between
3.0
% and
3.4
%.
T
he Compensation Committee
wa
s satisfied that each NEO’s base salary for
2016
was reasonable and appropriate based on each NEO’s responsibilities and performance.
Base salaries for the NEOs
for
201
5
and
201
6
are
as follows:
|
|
|
|
|
|
|
|
|
|
|
2015
|
2016
|
Increase over 2015
|
|
Base Salary
|
Base Salary
|
($)
|
(%)
|
Hasu P. Shah
|
$ 235,000
|
$ 242,000
|
$ 7,000
|
3.0%
|
Jay H. Shah
|
$ 710,000
|
$ 732,000
|
$ 22,000
|
3.1%
|
Neil H. Shah
|
$ 685,000
|
$ 706,000
|
$ 21,000
|
3.1%
|
Ashish R. Parikh
|
$ 445,000
|
$ 460,000
|
$ 15,000
|
3.4%
|
Michael R. Gillespie
|
$ 300,000
|
$ 310,000
|
$ 10,000
|
3.3%
|
Annual Cash Incentive Program (“Annual CIP”)
The purpose of the Annual CIP is to reward achievement of annual goals and objectives and provide at-risk, comprehensive pay opportunities linked
primarily
to company-wide performance
and, to a lesser extent, individual performance
. Each year, management proposes and the Compensation Committee evaluates and finalizes the annual goals and objectives, which are subsequently approved by the Board of Trustees. By using goals and objectives thoroughly reviewed by the Board of Trustees, the Compensation Committee rewards participants for achieving performance levels that management has identified and the Board of Trustees are critical to creating and sustaining long-term shareholder value.
The Compensation Committee believe
s
the Annual CIP provides the NEOs other than Mr. Hasu Shah, who has not historically participated in the program, with an incentive to excel at their individual job function and area of expertise in a manner that contributes to overall Company-wide performance, and further align
s
the financial interests of the participating NEOs with those of shareholders. The selected performance criteria include Company-wide performance goals and specific performance goals related to the job function of each participating NEO.
Key features of the Annual CIP include the following:
|
·
|
|
a primary emphasis on (1) sustained Company-wide financial growth as measured by such metrics as AFFO per share, an
EBITDA
multiple, and (2) financial flexibility and balance sheet strength as measured by a fixed charge coverage ratio;
|
|
·
|
|
a structured approach to determine awards by measuring against pre-established metrics; and
|
|
·
|
|
the recognition of individual leadership achievements and contributions of participants by making
a portion of
the award subject to individual-specific performance goals.
|
The Compensation Committee, in conjunction with the Chief Executive Officer,
review
ed
the annual cash incentive awards. Annual cash incentive awards
were
based on an evaluation of the performance, level of responsibility and leadership of the named executive officer in relation to overall corporate results.
For
2016
, the Compensation Committee established the following mix of
C
ompany performance measures for the Annual CIP:
|
|
Component/Metric
|
Weighting
|
AFFO per share
|
30%
|
EBITDA multiple
|
30%
|
Fixed charge coverage ratio
|
20%
|
Individual-specific performance objectives
|
20%
|
The Compensation Committee believes AFFO per share, an
EBITDA
multiple and a fixed charge coverage ratio are appropriate and effective measures of annual Company-wide performance.
These performance measures were chosen because they strike a balance between maximizing AFFO per share in the short-term and driving a premium multiple for our shares
while
maintaining long-term value with a lower risk balance sheet.
The threshold level for each performance measure was set based on a level of performance that was believed
at the time
to be achievable in order to motivate and retain the participating NEOs. The target level for each performance measure was set based on a level of performance that was believed
at the time
to be aggressive, but obtainable. The maximum level for each performance measure was set based on a level of performance that was believed to be realizable, but only as a result of exceptional performance.
The following table summarizes the threshold, target and maximum levels of performance
for each of the company-specific performance measures under
the Annual CIP
and the level of performance the Company achieved in
2016
:
|
|
|
|
|
|
Component/Metric
|
|
Threshold
|
Target
|
Maximum
|
Actual 2016 Performance
|
AFFO per share
(1)
|
$2.30 per share
|
$2.40 per share
|
$2.50 per share
|
$2.40 per share
|
EBITDA multiple
(2)
|
9.5x
|
10.0x
|
10.5x
|
>10.5x
|
Fixed charge coverage ratio
(3)
|
2.25x
|
2.35x
|
2.50x
|
>2.50x
|
Individual-specific performance objectives
(4)
|
N/A
|
N/A
|
N/A
|
Met
|
(1)
AFFO per share
is
determined by calculating funds from operations (“FFO”) applicable to
common shares
and partnership units in accordance with the April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (“NAREIT”), which the Company refers to as the “White Paper.” The White Paper defines FFO as net income (loss) (computed in accordance with GAAP) excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated assets, plus certain non-cash items, such as
loss from impairment of assets and
depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Management’s interpretation of the NAREIT definition is that
noncontrolling
interest in net income (loss)
should be added back to (deducted from) net income (loss) as part of reconciling net income (loss) to FFO. Management calculated AFFO, which reflects FFO in accordance with the NAREIT definition further adjusted by: (i) adding back write-offs of deferred financing costs on debt extinguishment, both for consolidated and unconsolidated properties; (ii) adding back amortization of deferred financing costs; (iii) making adjustments for the amortization of original issue discount/premium; (iv) adding back non-cash stock expense; (v) adding back
acquisition and terminated transaction expenses
, as well as accruals for contingent consideration on acquisitions
; (vi) adding back FFO attributed to the Company’s partners in consolidated joint ventures; (vii) making adjustments to ground lease payments, which are required by GAAP to be amortized on a straight-line basis over the term of the lease, to reflect the actual lease payment
; and (viii) state and local tax expense related to the reassessment of prior period assessments
.
(2)
Calculated as
(i) enterprise value divided by
(
i
i) consolidated adjusted earnings before income tax, depreciation and amortization (“Adjusted EBITDA”). The Company’s interpretation of Adjusted EBITDA is that EBITDA derived from its investment in unconsolidated joint ventures should be added back to net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. In addition, Adjusted EBITDA is adjusted to (i) add back write-offs of deferred financing costs on debt extinguishment, both for consolidated and unconsolidated properties; (ii) adding back non-cash stock expense; (iii) adding back impairment related expenses; (iv) adding back acquisition and terminated transaction expenses, as well as accruals for contingent consideration on acquisitions; (v) making adjustments to ground lease payments, which are required by GAAP to be amortized on a straight-line basis over the term of the lease, to reflect the actual lease payment; and (vi) state and local tax expense related to the reassessment of prior period assessments.
(
3
)
Calculated as (i) consolidated adjusted earnings before income tax, depreciation and amortization (“Adjusted EBITDA”), divided by (i) the sum of (A) interest expense, plus (B) preferred share distributions. The Company’s interpretation of Adjusted EBITDA is that EBITDA derived from its investment in unconsolidated joint ventures should be added back to net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. In addition, Adjusted EBITDA is adjusted to (i) add back write-offs of deferred financing costs on debt extinguishment, both for consolidated and unconsolidated properties; (ii) adding back non-cash stock expense; (iii) adding back impairment related expenses;
(iv)
adding back acquisition and terminated transaction expenses, as well as accruals for contingent consideration on acquisitions;
(
v
) making adjustments to ground lease payments, which are required by GAAP to be amortized on a straight-line basis over the term of the lease, to reflect the actual lease payment
;
and (vi) state and local tax expense related to the reassessment of prior period assessments
.
(
4
)
For purposes of the Annual CIP, the Compensation Committee utilized the following individual-specific performance objectives, which are the same objectives used for the
2015
program:
Chief Executive Officer and Chief Operating Officer:
|
·
|
|
meet with each of the top ten institutional investor accounts at least once in
2016
;
|
|
·
|
|
meet with the sales force of two different broker-dealers with significant retail customer bases in an effort to increase interest in the ownership of the Company’s
common shares
; and
|
|
·
|
|
completion of each subordinate’s position-specific performance goals outlined below.
|
Chief Financial Officer and Chief Accounting Officer:
|
·
|
|
complete all SEC filings on a timely basis and maintain full compliance with SEC rules and regulations;
|
|
·
|
|
receive an unqualified opinion on the effectiveness of the Company’s internal controls over financial reporting in connection with KPMG LLP’s audit of the same; and
|
|
·
|
|
have the Chief Accounting Officer accompany the Chief Executive Officer, the Chief Operating Officer and/or the Chief Financial Officer on at least four investor or lender meetings.
|
The Compensation Committee chose the performance targets described above to align the Annual CIP with the Company’s
2016
goals and objectives as established by management and the Board of Trustees. The Compensation Committee chose the relative weights of the performance measures based on the Compensation Committee’s desire to emphasize financial results while maintaining a focus on non-financial initiatives.
The Compensation Committee
retains discretion to
take into account extraordinary, unusual or infrequently occurring events and transactions to adjust the performance goals used to determine whether or not the components of the Annual CIP are met. For example, the Compensation Committee may take into account effects of items that were not foreseen or contemplated when the performance goals were set by backing out the impact of such events on the performance goals being measured.
For
2016
, no such adjustments were made to actual amounts reported by the Company.
The Compensation Committee also retains the right to exercise discretion to reduce an incentive payout to ensure that payouts from the plan produce their desired result. The use of discretion was especially important at the time the performance measures were established.
If the threshold is not achieved, the NEO could receive no Annual CIP payout.
The participating NEOs satisfied each of the individual-specific performance objectives described above. As a result, each of the participating NEOs was awarded the
target
cash
payment
under
the
AFFO per share
metric
and
maximum cash payment under the EBITDA multiple metric,
fixed charge coverage ratio metric and the individual performance-specific objectives.
The following table indicates the
amounts
the participating NEOs may earn
for threshold, target and maximum performance
and the amount of the cash bonuses that were earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
|
Target
|
Maximum
|
Actual Bonus Earned
|
|
(as a % of
2016 base salary)
|
(as a % of
2016 base salary)
|
(as a % of
2016 base salary)
|
(as a % of
2016 base salary)
|
(in dollars)
|
Jay H. Shah
|
75%
|
150%
|
200%
|
185%
|
$1,354,200
|
Neil H. Shah
|
75%
|
150%
|
200%
|
185%
|
$1,306,100
|
Ashish R. Parikh
|
75%
|
125%
|
150%
|
143%
|
$655,500
|
Michael R. Gillespie
|
50%
|
75%
|
100%
|
93%
|
$286,750
|
Long-Term Equity Incentive Programs
The Compensation Committee believes it is important to provide the NEOs with equity incentives to promote retention, incent sustainable growth and long-term value creation, and to further align the interests of the NEOs with those of shareholders by exposing the NEOs to stock price changes during the performance and vesting periods. Awards under the
long-term equity incentive programs
are both “performance based” and “time based.”
To balance annual performance with performance over a longer term, the Compensation Committee uses a mix of long-term equity incentives that include one and three year performance periods. The
multi-year long-term incentive programs (“Multi-Year EIP
s”) have a three-year performance period followed by a one-year vesting period for awards issued under the programs. The annual long term equity incentive programs (“Annual EIPs”) have a one-year performance period followed by a three-year vesting period for awards issued under the programs. The following illustrates
the Multi-Year EIPs and Annual EIPs designed by the Compensation Committee:
|
|
|
|
|
|
|
|
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
Multi-Year EIPs
(1)
|
|
|
|
|
|
|
|
2014 Multi-Year EIP
|
|
|
|
|
|
2015 Multi-Year EIP
|
|
|
|
|
|
2016 Multi-Year EIP
|
|
|
|
|
|
2017 Multi-Year EIP
|
|
|
|
|
|
Annual EIPs
(2)
|
|
|
|
|
|
|
|
2016 Annual EIP
|
|
|
|
|
|
|
|
2017 Annual EIP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Performance period to determine amount of award earned
|
|
|
|
|
- Vesting period of awards earned
|
|
|
(1)
Awards can be earned under the
Multi-Year
EIP
s
programs based on the achievement of determined levels of Absolute
Total Shareholder Return (“TSR”)
(
37.5
% of the potential award),
TSR
relative to the Company’s peers (
37.5
% of the potential award), and RevPAR growth relative to the Company’s peers (
25.0
% of the potential award
)
.
(
2
)
Awards can be earned under the Annual EIP programs based on the achievement of determined levels of Absolute RevPAR growth (40% of the potential award), RevPAR growth relative to the Company’s peers (40% of the potential award), and subjective factors determined by the
Compensation
Committee (20% of the potential award).
Annual Long-Term
Equity
Incentive Program for
2016
(“
Annual EIP
”)
The Compensation Committee adopted the
Annual EIP
for the NEOs, pursuant to which the NEOs are eligible to earn equity awards in the form of stock awards
,
performance share awards
or LTIP Units
.
T
he Company must achieve certain financial performance during the performance period
in order for
80
% of the award to be earned
. The
remaining portion
of the award is granted at the discretion of the Compensation Committee based on its assessment of company and individual performance without regard to pre-defined performance criteria. If awards are earned, the
equity securities
granted are subject to vesting over a four year period that begins on the first
day of the performance period
.
T
he Compensation Committee determined that
no payout was earned for the absolute RevPAR metric as threshold performance was not achieved. Further, the Compensation Committee determined that target
payout for the Relative RevPAR metric was warranted
as performance exceeded threshold
.
The following table summarizes the threshold, target and maximum levels of performance for the
Annual EIP
and the Company’s actual
2016
performance in relation to the RevPAR performance goals:
|
|
|
|
|
|
Component/Metric
|
Weighting
|
Threshold
|
Target
|
Maximum
|
Actual 2016 Performance
|
Absolute RevPAR growth
|
40%
|
3.0%
|
4.0%
|
5.0%
|
<3.0%
|
Relative RevPAR growth
|
40%
|
2016 Peer Group median
+ 20 basis points
|
2016 Peer Group median
+ 40 basis points
|
2016 Peer Group median
+ 60 basis points
|
+30 basis points
|
Subjective
|
20%
|
N/A
|
N/A
|
N/A
|
Met
|
In assessing the subjective, discretionary element of the
Annual EIP
, the Compensation Committee considered, in general, how the NEOs individually and as a group effected transactions that continued the transformation of the Company’s portfolio and continued to strengthen the Company’s financial position. The Compensation Committee believes that the NEOs performance in
2016
positioned the Company for continued growth in
2017
.
The Compensation Committee also considered the following:
|
·
|
|
The
complet
ion of
over $1.0 billion in hotel transactions, adding to
the Company’s
presence in the strategic growth markets of Boston, Washington, DC and the West Coast
, while
work
ing
to reduce exposure to challenging markets
.
|
|
·
|
|
C
apital recycling efforts
that
produced over $180 million of gains on property sales,
increasing
the Company’s Net Income to $9
6
million, or $2.18 per diluted common share, in 2016 compared to Net Income of $27 million, or $0.56 per diluted common share in 2015.
|
|
·
|
|
The achievement of
Average Daily Rates (“ADR”) of $207 and Revenue Per Available Room (“RevPAR”) of $171,
for the Company’s
core portfolio
,
both record highs for the Company, while registering sector leading EBITDA Margins of 37.0%.
|
As a result of these contributions and the performance with respect to the
relative
RevPAR growth
performance measure established under the
Annual EIP
, the Compensation Committee approved the following awards for the NEOs in March
2017
:
|
|
|
|
NEO
|
Dollar Value of Possible Equity Awards
(Threshold to Maximum)
(1)
|
Dollar Amount
of Annual EIP Awards
(Actual Performance)
(1)
|
Number of
Restricted
LTIP Units
Awarded
(2)
|
Hasu P. Shah
|
$363,000 to $484,000
|
$266,200
|
12,481
|
Jay H. Shah
|
$1,281,000 to $1,647,000
|
$915,000
|
42,898
|
Neil H. Shah
|
$1,235,500 to $1,588,500
|
$882,500
|
41,374
|
Ashish R. Parikh
|
$460,000 to $690,000
|
$368,000
|
17,253
|
Michael R. Gillespie
|
$232,500 to $310,000
|
$186,000
|
8,721
|
(1)
Threshold amounts presented
as an
aggregate
of
the threshold amounts achievable for each component/metric. As noted, failure to achieve
Absolute RevPAR growth at or above a threshold level resulted in no payout for that component of the Annual EIP awards and the dollar amount of Annual EIP awards earned was less than the aggregate threshold potential.
(
2
)
Determined by dividing the dollar amount of the award under the
Annual EIP
by $
21.33
, the per share volume weighted average trading price of the Company’s common shares on the NYSE for the 20 trading days prior to and including December 31,
2016
. The award
s issued
to the NEOs pursuant to the
Annual EIP
vest as follows: 25% on the date of grant and 25% on
each of
December 31,
2017
,
2018
and
2019
.
Multi-Year Long-Term
Equity
Incentive Program
s
(“
Multi-Year EIP
s
”)
In
2014
,
2015
and
2016
, t
he
Compensation Committee adopted multi-year long-term incentive program
s
(“
2014
Multi-Year EIP
,
”
“
2015
Multi-Year EIP
,
”
and “
2016
Multi-Year EIP,” collectively the “Multi-Year EIPs”
) and granted awards pursuant to the program
s
to the NEOs. The awards pursuant to the
Multi-Year EIP
s
consisted of agreements to
issue
equity awards
where the number of
awards issued
is not determined until the end of a three-year performance period
. The
2014
Multi-Year EIP
commence
d
on January 1,
2014
and
end
ed
on December 31,
2016
. T
he
2015
Multi-Year EIP
commenced on January 1,
2015
and ends on December 31,
2017
, and the
2016
Multi-Year EIP commenced January 1,
2016
and ends on December 31,
2018
.
Once the Compensation Committee determines the awards have been earned and the equity underlying the awards has been issued, one-half of the equity awards will remain subject to time-based forfeiture provisions.
Common shares, LTIP Units or a combination of common shares and LTIP Units may be used to settle awards under the programs, if the awards are earned based on the metrics described above. Any equity awards pursuant to the programs will be made under the Company’s 2012 Equity Incentive Plan or any other equity incentive plan approved by the Company’s shareholders.
The following table summarizes the metrics used to determine awards to issued under the
Multi-Year EIP
s
:
|
|
|
|
|
|
|
Metric
|
Weighting
|
Threshold
|
Target
|
Maximum
|
|
2014
Multi-Year EIP
|
2015
Multi-Year EIP
|
2016
Multi-Year EIP
|
|
|
|
Absolute TSR
|
37.5%
|
37.5%
|
37.5%
|
10.0%
|
12.0%
|
14.0%
|
Relative TSR
(1)
|
37.5%
|
37.5%
|
37.5%
|
Peer Group median
- 150 basis points
|
Peer Group median
+ 50 basis points
|
Peer Group median
+ 250 basis points
|
Relative RevPAR
(1)
|
25.0%
|
25.0%
|
25.0%
|
Peer Group median
+ 25 basis points
|
Peer Group median
+ 50 basis points
|
Peer Group median
+ 75 basis points
|
(1)
Relative TSR and Relative RevPar performance is determined by comparing the performance of the
2014
Peer Group
for the
2014
Multi-Year EIP
, the
2015
Peer Group for the
2015
Multi-Year EIP
,
and the
2016
Peer Group for the
2016
Peer Group
over the same performance period.
Actual performance under the
2014
Multi-Year EIP was as follows:
|
|
|
|
|
Metric
|
Threshold
|
Target
|
Maximum
|
Actual
2014
Multi-Year EIP Performance
|
Absolute TSR
|
10.0%
|
12.0%
|
14.0%
|
10.2%
|
Relative TSR
|
Peer Group median
- 150 basis points
|
Peer Group median
+ 50 basis points
|
Peer Group median
+ 250 basis points
|
< -150 basis points
|
Relative RevPAR
|
Peer Group median
+ 25 basis points
|
Peer Group median
+ 50 basis points
|
Peer Group median
+ 75 basis points
|
> +75 basis points
|
For the
2014
Multi-Year EIP, t
he Compensation Committee determined that a
threshold
payout for the
Absolute TSR
and
a maximum payout
for
the Relative RevPAR metric was warranted. No amounts were awarded under the
Relative TSR
metric
as performance was below the threshold level of performance
.
As a result
,
the Compensation Committee approved the following awards for the NEOs in March
2017
:
|
|
|
|
NEO
|
Dollar Value of Possible Equity Awards
(Threshold to Maximum)
(1)
|
Dollar Amount
of Multi-Year EIP Awarded
(1)
|
Number of
Restricted
LTIP Units
Awarded
(2)
|
Hasu P. Shah
|
$225,000 to $375,000
|
$178,125
|
7,982
|
Jay H. Shah
|
$600,000 to $1,000,000
|
$475,000
|
21,282
|
Neil H. Shah
|
$600,000 to $1,000,000
|
$475,000
|
21,282
|
Ashish R. Parikh
|
$225,000 to $375,000
|
$178,125
|
7,982
|
Michael R. Gillespie
|
$71,250 to $118,750
|
$56,406
|
2,529
|
|
(1)
|
|
Threshold amounts presented
as an
aggregate
of
the threshold amounts achievable for each component/metric. As noted, failure to achieve
Relative TSR
at or above a threshold level resulted in no payout for that component of the
Multi-Year EIP
awards and the dollar amount of
Multi-Year
EIP awards earned was less than the aggregate threshold potential
.
|
|
(2)
|
|
Determined by dividing the dollar amount of the award under the Multi-Year EIP by $
22.32
, the per share volume weighted average trading price of the
Company’s common shares on the NYSE for the 20 trading days prior to and including December 31,
201
3
. The aw
ards issued to the NEOs pursuant to the Multi-Year EIP vest as follows: 50% on the date of issuance and 50% on December 31,
2017
.
|
The
equity awards
issuable pursuant to
the
2015
Multi-Year EIP
and the
2016
Multi-Year EIP
will be determined and issued to the NEOs in the first quarter of
2018
and
2019
, respectively
, if earned
. The number of shares
or units
awarded
pursuant to the programs
will be based on a specified dollar amount for each NEO divided by the 20-day volume weighted average closing price of the Company’s common shares on the New York Stock Exchange as of December 31,
2014
and December 31,
2015
, respectively
.
The following table sets forth the potential equity awards for
each of
the
2015
Multi-Year EIP
and
2016
Multi-Year EIP
, in terms of dollar value, that each NEO may earn
for each program
:
|
|
NEO
|
Dollar Value of Possible Equity Awards
|
Hasu P. Shah
|
$225,000 to $375,000
|
Jay H. Shah
|
$600,000 to $1,000,000
|
Neil H. Shah
|
$600,000 to $1,000,000
|
Ashish R. Parikh
|
$225,000 to $375,000
|
Michael R. Gillespie
|
$71,250 to $118,750
|
Distributions on the common shares
and/or LTIP Units
issuable pursuant to
the
2015
Multi-Year EIP
and the
2016
Multi-Year EIP
accumulate from the beginning of the performance period and
will be
paid in cash when
, and to the extent that,
the common shares
and/
or
LTIP Units
issuable
pursuant to the program
are issued
. It is the Compensation Committee’s intention to make the multi-year long term incentive program a rolling program
, and
a similar program
has been
put in place in
2017
,
with a performance period that commence
d
on January 1,
2017
and
will
end on December 31,
2019
.
Benefits
Benefits are established based upon an assessment of competitive market factors and a determination of what is required to attract and retain talent, as well as provide long-term financial security to the Company’s employees and their families. The Compensation Committee periodically considers benefit levels based on competitive influences, as well as the cost of the programs to the Company relative to the value to employees. The Company’s primary benefits for executive officers include participation in the Company’s health, dental and vision plans,
40
1
(k) plan and various insurance plans, including disability and life insurance, on the same basis as any other employee
.
The Company does not match employee contributions to its 401(k) plan, including contributions made
by named executive officers.
Except as described in this paragraph, the Company does not provide NEOs with other benefits or perquisites.
Dual Role Structure
In establishing the compensation for Mr. Neil Shah, President and Chief Operating Officer, the Compensation Committee considers the dual roles that Mr. Neil Shah serves for the Company. Mr. Neil Shah is currently the President and Chief Operating Officer of the Company and serves as the Chief Investment Officer and Head of Asset Management.
These roles are typically performed by multiple executive level individuals
.
The Compensation Committee has worked with FP
L
, our Compensation
Consultant
, to put together a pay structure for Mr. Neil Shah that incorporates these additional duties and the leadership role that Mr. Neil Shah serves in these dual roles. The Compensation Committee believes that the overall
compensation
for Mr. Neil Shah is commensurate for the dual roles that he serves within the Company.
In addition, the Compensation Committee considers the compensation of Mr. Neil Shah as a part of a broader analysis of the aggregate pay level of our NEOs to ensure that, on a total pay basis across our
executive
team, it is appropriate when compared to our peers.
Contractual Arrangements
The Company has entered into employment agreements with Hasu P. Shah, Jay H. Shah, Neil H. Shah, Ashish R. Parikh and Michael R. Gillespie. The terms of these employment agreements include provisions related to payments to be made to the officers for events related to changes of control of the Company. These employment agreements are described under “
Executive Compensation -
Agreements with Executive Officers and Potential Payments Upon Termination or Change-in-Control” below. The Compensation Committee believes it is appropriate for the Company to have an employment agreement with the executive officers to support stable and highly competent management on a long-term basis.
The Compensation Committee believes that the employment agreements
serve the interests of the Company and its shareholders by ensuring that if a hostile or friendly change of control is ever under consideration, its executives will be able to advise the Board of Trustees about the potential transaction in the best interests of shareholders, without being unduly influenced by personal considerations, such as fear of the economic consequences of losing their jobs as a result of a change of control. The change of control
provisions of the employment
agreements include so-called double triggers, which mean that benefits become available to executives under the agreements only upon a change of control followed by termination of the executive without cause or resignation by the executive for good reason. The Compensation Committee believes that a double trigger appropriately protects the legitimate interests in employment security without unduly burdening the Company or shareholder value.
Stock Ownership Guidelines
To further align the interests of the Company’s trustees and executive officers with the interests of our shareholders, the Board has established minimum share ownership guidelines that apply to all non-management trustees and named executive officers. Non-
employee
trustees are required to own Company shares equal in value to at least five times the annual cash retainer paid to non-management trustees. In addition, the Company’s executive officers are required to own Company shares equal in value to a multiple of such executive’s base salary as follows: Chairman of the Board
:
4 times; Chief Executive Officer
:
6 times; President and Chief Operating Officer
:
6 times; Chief Financial Officer
:
3 times; and Chief Accounting Officer and all other named
executive officers
:
1 times.
All trustees and executives are expected to achieve this minimum ownership within three years of assuming the relevant positions with the Company. For the purpose of these guidelines, a person shall be deemed to own all Company shares beneficially owned by such person within the meaning of the United States federal securities laws, including for these purposes
preferred shares of the Company,
common shares of the Company, operating partnership units
(including LTIP Units)
in Hersha Hospitality Limited Partnership and other securities issued by the Company or its subsidiaries that are exercisable for, convertible into or exchangeable for common shares of the Company.
Compensation-Related Risk
The Compensation Committee oversees the compensation policies and plans for all employees. The Company’s senior management, at the request of the Compensation Committee, has assessed the Company’s compensation programs and has concluded that they do not create risks that are reasonably likely to have a material adverse effect on the Company.
As part of its annual risk assessment, the Company’s senior management, with
oversight from Risk Sub-Committee of the Audit Committee
, analyzed whether the Company’s compensation policies and practices, including non-executive officer compensation practices, could reasonably have a material adverse effect on the Company. This assessment focused primarily on the design of the Company compensation programs and practices for executive officers and employees as it relates to the business risks that the Company faces. Specifically, management considered the fact that employees, other than the
NEOs
who participate in the executive compensation program described in this proxy statement, receive only a small percentage of their total compensation in the form of variable, performance-based compensation. Further, performance-based compensation to executive officers is primarily in the form of equity awards, which the Company believes encourages actions for long term shareholder value, rather than short term risk-taking that could materially and adversely affect the Company’s business. The Company’s senior management also considered the active role played by the Compensation Committee and the overall design of the executive compensation program, which the Company’s senior management believes encourages an appropriate level of risk taking, creates long-term shareholder value and avoids unnecessary or excessive levels of enterprise risk.
In addition, the Company’s senior management discussed its assessment of the Company’s compensation practices and programs and whether those practices and programs create risks that could reasonably be expected to have a material
adverse effect
on the Company. Based on its assessment, the Company’s senior management has concluded that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. Upon completion of the risk assessment, the Company’s senior management reported its findings to the Compensation Committee and discussed with the Compensation Committee those findings in light of the disclosure requirements under applicable SEC rules.
2017
Executive Compensation Program
The Compensation Committee, in consultation with FPL, has conducted a comprehensive review of the Company’s executive compensation arrangements, including a comparison of compensation practices at several peer companies. As a result of that review,
and in preserving the previously stated Compensation Philosophy,
on
March
16
,
2017
, the Compensation Committee adopted the
2017
executive compensation program for the NEOs as indicated below.
The structure of the 2017 executive compensation program is substantially the same as the 2016 program.
Base Salary
The Compensation Committee and
FPL
undertook a review of base salary practices at peer companies. Based on that review, in furtherance of the Committee’s philosophy of targeting the 50th percentile of compensation practices at peer companies, and taking into consideration the Company’s recent performance, the Committee increase
d
2017
base salaries for the NEOs
by
between
3.1
%
and
4.8
%
over
2016
levels
.
2017
Annual Cash Incentive Program (“
2017
Annual CIP”)
Consistent with the
2016
Annual CIP, 80% of the
2017 Annual CIP
award will be based on the achievement of Company performance goals
.
Minimum payouts to be made to the NEOs for achieving the performance goals range from
50
% to
100
% of the participating NEOs’
2017
base salary. Maximum payouts to be made to the NEOs for achieving the maximum performance goals range from
125
% to
200
% of the participating NEOs’
2017
base salary. The
Compensation
Committee retains discretion to determine the actual payout within the range established for each NEO if the Company and individual-specific performance goals are achieved for the
2017
performance year.
The Compensation Committee has adopted a policy that allows the NEOs to elect to receive payouts
, if any,
under the 2017 Annual CIP in LTIP Units or cash
. For payments elected in LTIP Units, the NEO will receive a 25% premium. LTIP Units issued will be subject to a
two-year
vesting period from the date of issuance. Each NEO has elected to receive 100% of payout
s, if earned,
under the 2017 Annual CIP
in LTIP Units.
2017
Annual
Long-Term Equity Incentives
(“2017 Annual EIP”)
Consistent with the
2016
Annual EIP
,80% of the 2017 Annual EIP will be
based on the achievement of Company performance goals
and the remaining 20%
of the award is subject to the sole discretion of the Committee
.
T
he peer group
for
assessing relative performance components in
2017
is identical to the 2016 Peer Group.
All of the
common shares
and/or LTIP Units
subject to these equity awards will be granted subject to time-based forfeiture restrictions that will lapse over a four-year period.
The following table sets forth the potential equity awards for
the
2017
Annual EIP
, in terms of dollar value, that each NEO may earn:
|
|
NEO
|
Dollar Value of Possible Equity Awards
|
Hasu P. Shah
|
$375,000 to $500,000
|
Jay H. Shah
|
$1,312,500 to $1,687,500
|
Neil H. Shah
|
$1,268,750 to $1,631,250
|
Ashish R. Parikh
|
$475,000 to $831,250
|
Michael R. Gillespie
|
$243,750 to $406,250
|
2017
Multi-Year Long-Term Equity Incentives
(“2017 Multi-Year EIP”)
Consistent with the 2016 Multi-Year EIP
,
the Compensation Committee adopted a multi-year long-term incentive program and granted awards pursuant to the program to the NEOs.
T
he performance period
commenced on January 1,
2017
and ends on December 31,
2019
.
Once the Compensation Committee determines the awards have been earned, which will not occur until the first quarter of
2020
, and the common shares
and/or units
underlying the awards have been issued
, if any
, one-half of the
equity
awarded will remain subject to time-based forfeiture provisions.
The following table sets forth the potential equity awards for the
2017
Multi-Year EIP
,
in terms of dollar value, that each NEO may earn:
|
|
NEO
|
Dollar Value of Possible Equity Awards
|
Hasu P. Shah
|
$300,000 to $450,000
|
Jay H. Shah
|
$800,000 to $1,200,000
|
Neil H. Shah
|
$800,000 to $1,200,000
|
Ashish R. Parikh
|
$300,000 to $450,000
|
Michael R. Gillespie
|
$100,000 to $150,000
|
EXECUTIVE COMPENSATION
Summary Compensation Table for
2016
The following table presents information relating to total compensation of the
NEOs
for the fiscal year ended December 31,
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Stock Awards
(1)
|
|
Non-Equity Incentive Plan Compensation
(2)
|
|
All Other Compensation
(3)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hasu P. Shah
|
|
2016
|
|
$ 242,000
|
|
$ 454,147
|
|
$ -
|
|
$ 4,040
|
|
$ 700,187
|
Chairman of the Board of Trustees
|
|
2015
|
|
235,000
|
|
623,401
|
|
-
|
|
3,613
|
|
749,217
|
|
|
2014
|
|
225,000
|
|
520,701
|
|
-
|
|
3,516
|
|
718,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay H. Shah
|
|
2016
|
|
$ 732,000
|
|
$ 1,389,197
|
|
$ 1,354,200
|
|
$ 5,446
|
|
$ 3,480,843
|
Chief Executive Officer
|
|
2015
|
|
710,000
|
|
1,945,101
|
|
745,500
|
|
5,196
|
|
3,291,899
|
|
|
2014
|
|
680,000
|
|
1,586,753
|
|
1,020,000
|
|
5,146
|
|
2,987,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil H. Shah
|
|
2016
|
|
$ 706,000
|
|
$ 1,360,957
|
|
$ 1,306,100
|
|
$ 23,462
|
|
$ 3,396,519
|
President and Chief Operating Officer
|
|
2015
|
|
685,000
|
|
1,945,101
|
|
719,250
|
|
23,462
|
|
3,247,715
|
|
|
2014
|
|
655,000
|
|
1,586,753
|
|
982,500
|
|
23,462
|
|
2,944,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashish R. Parikh
|
|
2016
|
|
$ 460,000
|
|
$ 542,572
|
|
$ 655,500
|
|
$ 23,462
|
|
$ 1,681,534
|
Chief Financial Officer
|
|
2015
|
|
445,000
|
|
642,252
|
|
389,375
|
|
23,462
|
|
1,523,878
|
|
|
2014
|
|
425,000
|
|
544,166
|
|
531,250
|
|
23,462
|
|
1,379,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Gillespie
|
|
2016
|
|
$ 310,000
|
|
$ 232,189
|
|
$ 286,750
|
|
$ 23,462
|
|
$ 852,401
|
Chief Accounting Officer
|
|
2015
|
|
300,000
|
|
240,299
|
|
157,500
|
|
23,462
|
|
726,436
|
|
|
2014
|
|
285,000
|
|
204,224
|
|
213,750
|
|
23,462
|
|
661,806
|
|
(1)
|
|
The amounts in “Stock Awards” for
2016
include
the aggregate grant date fair value of
LTIP Units
, some of which are subject to time-based forfeiture restrictions, issued to the named executive officers in March
2017
pursuant to the
2016
Annual EIP
following completion of the one-year performance period
and pursuant to the
2014
MYEIP following completion of the three-year performance period
. The aggregate grant date fair value of these
LTIP Units
has been computed in accordance with FASB ASC Topic 718. These amounts are based on the
performance
level
s
determined to be achieved
by the Compensation Committee
for each component of the
2016
Annual EIP and the relative RevPAR component of the
2014
MYEIP
. The performance levels are described in “Compensation Discussion and Analysis— Components of Executive Compensation.” The aggregate grant date fair value of these awards was determined by multiplying the number of
LTIP Units
granted to the
NEO
by $
18.53
, the closing price of the Company’s
common shares
on the NYSE on March
28
,
2017
.
|
The amounts in “Stock Awards” for
2016
also include the aggregate grant date fair value of the right to receive common shares
, LTIP Units, or a combination of common shares and LTIP Units
following completion of the three-year performance period under
Absolute
TSR and
Relative
TSR components of
the
2016
Multi-Year EIP
. These amounts are based on the probable outcome of the performance conditions established by the Compensation Committee in
March
of
2016
, which are described in “Compensation Discussion and Analysis— Components of Exec
utive
Compensation” above
. The aggregate grant date fair value of these awards has been computed in accordance with FASB ASC Topic 718.
For additional information relating to assumptions made in the valuation of the awards pursuant to the
2016
Multi-Year EIP
, please refer to footnote 8 to our audited consolidated financial
statements included in our Annual Report on Form 10-K for the year ended December 31,
2016
.
|
(2)
|
|
As described in “Compensation Discussion and Analysis— Components of Executive Compensation” above, the amounts in the “Non-Equity Incentive Plan Compensation” column for
2016
represent the actual amounts paid to the named executive officers other than Mr. Hasu Shah pursuant to the Company’s Annual CIP for
2016
.
A portion of t
hese amounts were paid to the named executive officers other than Mr. Hasu Shah in
January of
2017
with the remaining balance paid in
March
2017
after the performance period had been completed and the actual level of performance had been determined. The estimated possible payouts under this program appear under the column “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” in the Grants of Plan-Based Awards Table.
|
|
(3)
|
|
Includes insurance premiums paid by the Company for medical, dental and life insurance benefits.
|
As described in “Compensation Discussion and Analysis— Components of Executive Compensation” above, the Company does not grant equity awards under the
2016
Annual EIP
or the
2016
Multi-Year EIP
until the applicable performance period has been completed and the actual level of performance achieved has been determined. The performance period under the
2016
Annual EIP
began on January 1,
2016
and was completed on December 31,
2016
.
In
March
of
2017
, the Compensation Committee determined that the named executive officers had achieved
a certain
level of performance under the
2016
Annual EIP
and
the Company
awarded an aggregate of
122,727
LTIP Units
to the
NEOs
.
The performance period under the
2016
Multi-Year EIP
began on January 1,
2016
and will not be completed until December 31,
2018
. The Compensation Committee intends to determine the actual level of performance under the
2016
Multi-Year EIP
during the first quarter of
2019
. Estimated future payouts under the Company’s
2016
Multi-Year EIP
appear under the column “Estimated Future Payouts Under Equity Incentive Plan Awards” in the Grants of Plan-Based Awards Table for
2016
.
T
he 2012
Equity Incentive
Plan
, as amended
(“the 2012 Plan”)
,
allows for
LTIP Units as a type of award available
.
The LTIP Units granted are subject to the same time-based vesting conditions that
apply
to restricted stock awards.
Initially, all LTIP Units will not have full parity with HHLP’s common units with respect to liquidating distributions. Upon the occurrence of certain “book-up” events described in the partnership agreement, LTIP Units can, over time, achieve full parity with our operating partnership’s common units for all purposes, and therefore accrete to an economic value equivalent to one common share. If such parity is reached, vested LTIP Units may be redeemed for cash in an amount equal to the then fair market value of an equal number of Hersha common shares or converted into an equal number of Hersha common shares, as determined by Hersha at its election.
Grants of Plan-Based Awards Table for
2016
The following table presents information regarding grants of plan-based awards to the named executive officers during the fiscal year ended December 31,
2016
. For more information regarding grants of plan-based awards, see “Compensation Discussion and Analysis” above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
Estimated Future Payouts Under
|
|
Grant Date
|
|
|
|
|
Non-Equity Incentive Plan Awards
(2)
|
|
Equity Incentive Plan Awards
(3)
|
|
Fair Value
|
|
|
Type of
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
of Stock Awards
|
Name
|
|
Award (1)
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hasu P. Shah
|
|
Annual EIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
363,000
|
|
423,500
|
|
484,000
|
|
231,273
|
|
|
2016 MYEIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
225,000
|
|
300,000
|
|
375,000
|
|
145,029
|
|
|
2014 MYEIP
|
|
4/11/2014
|
|
|
|
|
|
|
|
56,250
|
|
75,000
|
|
93,750
|
|
77,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay H. Shah
|
|
ACIP
|
|
3/16/2016
|
|
549,000
|
|
1,098,000
|
|
1,464,000
|
|
|
|
|
|
|
|
|
|
|
Annual EIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
1,281,000
|
|
1,464,000
|
|
1,647,000
|
|
794,900
|
|
|
2016 MYEIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
600,000
|
|
800,000
|
|
1,000,000
|
|
386,742
|
|
|
2014 MYEIP
|
|
4/11/2014
|
|
|
|
|
|
|
|
150,000
|
|
200,000
|
|
250,000
|
|
207,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil H. Shah
|
|
ACIP
|
|
3/16/2016
|
|
529,500
|
|
1,059,000
|
|
1,412,000
|
|
|
|
|
|
|
|
|
|
|
Annual EIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
1,235,500
|
|
1,412,000
|
|
1,588,500
|
|
766,660
|
|
|
2016 MYEIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
600,000
|
|
800,000
|
|
1,000,000
|
|
386,742
|
|
|
2014 MYEIP
|
|
4/11/2014
|
|
|
|
|
|
|
|
150,000
|
|
200,000
|
|
250,000
|
|
207,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashish R. Parikh
|
|
ACIP
|
|
3/16/2016
|
|
345,000
|
|
575,000
|
|
690,000
|
|
|
|
|
|
|
|
|
|
|
Annual EIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
460,000
|
|
575,000
|
|
690,000
|
|
319,698
|
|
|
2016 MYEIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
225,000
|
300,000
|
300,000
|
|
375,000
|
|
145,029
|
|
|
2014 MYEIP
|
|
4/11/2014
|
|
|
|
|
|
|
|
56,250
|
|
75,000
|
|
93,750
|
|
77,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Gillespie
|
|
ACIP
|
|
3/16/2016
|
|
155,000
|
|
232,500
|
|
310,000
|
|
|
|
|
|
|
|
|
|
|
Annual EIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
232,500
|
|
310,000
|
|
310,000
|
|
161,600
|
|
|
2016 MYEIP
|
|
3/16/2016
|
|
|
|
|
|
|
|
71,250
|
|
95,000
|
|
118,750
|
|
45,926
|
|
|
2014 MYEIP
|
|
4/11/2014
|
|
|
|
|
|
|
|
17,813
|
|
23,750
|
|
29,688
|
|
24,663
|
|
·
|
|
ACIP—Annual CIP for
2016
|
|
·
|
|
A
nnual
EIP
—
Annual EIP
for
2016
|
|
·
|
|
2016
MYEIP
–
Multi-Year EIP
for
2016
|
|
·
|
|
2014
MYEIP – Multi-Year EIP for
2014
|
|
(2)
|
|
Represents the range of potential cash payouts to be made to the named executive officers other than Mr. Hasu Shah pursuant to the Company’s Annual CIP. Under this program, cash payments were made to Messrs. Jay Shah, Neil Shah, Parikh and Gillespie in
January and
March
2017
in the amounts shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
|
|
(3)
|
|
Awards pursuant to the
2016
Annual EIP
are denominated in dollars, but are payable in common shares
, LTIP Units, or a combination of common shares and LTIP Units
based on the volume-weighted average price of the common shares for the 20 trading days prior to and including December 31,
2016
, as reported by the NYSE, or $
21.33
per share. On March
28
,
2017
, the Company issued an aggregate of
122,727
LTIP Units
to the
NEOs
pursuant to the
2016
Annual EIP
. The
LTIP Units
were issued pursuant to the Company’s 2012 Equity Incentive Plan and are subject to time-based forfeiture restrictions which lapse over the following schedule: 25% upon issuance and 25% on December 31,
2017
,
2018
and
2019
.
|
Awards pursuant to the Company’s
2016
Multi-Year EIP
are denominated in dollars, but are payable in common shares
, LTIP Units, or a combination of common shares and LTIP Units
based on the volume-weighted average price of the common shares for the 20 trading days prior to and including December 31,
2015
, as reported by the NYSE, or $
22.40
per share.
Awards pursuant to the
2014
M
ulti-Year
EIP are denominated in dollars, but are payable in common shares, LTIP Units, or a combination of common shares and LTIP Units based on the volume-weighted average price of the common shares for the 20 trading days prior to and including December 31,
2013
, as reported by the NYSE, or $
22.32
per share. On March
28
,
2017
, the Company issued an aggregate of
32,135
LTIP Units to the NEOs pursuant to the
Relative
RevPAR performance component of the
2014
M
ulti-year
EIP. The LTIP Units were issued pursuant to the Company’s 2012 Equity Incentive Plan and are subject to time-based forfeiture restrictions which lapse over the following schedule:
50
% upon issuance and
50
% on December 31,
2017
.
|
(4)
|
|
For the
2016
Annual EIP
, amount represents the aggregate fair value of the
common shares
and restricted
common shares
on the date of issuance, or $
18.53
per share, at the
actual
level of performance.
For
the
2016
Multi-Year EIP
awards
, amount represents the aggregate grant date fair value of the right to receive common shares
following the three-year performance period
. Fair value of these awards has been computed in accordance with FASB ASC Topic 718.
For the
2014
Multi-Year
EIP, amount represents the aggregate fair value of the common shares and restricted common shares on the date of issuance, or $
18.53
per share, at the actual level of performance.
|
Outstanding Equity Awards at Fiscal Year-End Table for
2016
The following table presents information concerning outstanding equity awards as of the end of the fiscal year ended December 31,
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
Time Vested Awards
|
|
Equity Incentive Plan Awards
|
|
NEO
|
|
Award Type
|
|
Number of Shares That Have Not Vested
(#)
(1)
|
|
Market Value of Shares
That Have Not Vested
($)
(2)
|
|
Number of Unearned Shares
That Have Not Vested
(#)
|
|
Payout Value of Unearned Shares That Have Not Vested
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hasu P. Shah
|
|
Time Vest
|
|
18,884
|
|
$ 406,006
|
|
|
|
|
|
|
|
Annual EIP
|
|
|
|
|
|
12,481
|
(3)
|
$ 268,342
|
(4)
|
|
|
2016 MYEIP
|
|
|
|
|
|
10,045
|
(5)
|
$ 215,960
|
(6)
|
|
|
2015 MYEIP
|
|
|
|
|
|
7,740
|
(5)
|
$ 166,409
|
(6)
|
|
|
2014 MYEIP
|
|
|
|
|
|
10,081
|
(5)
|
$ 216,734
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay H. Shah
|
|
Time Vest
|
|
96,338
|
|
$ 2,071,267
|
|
|
|
|
|
|
|
Annual EIP
|
|
|
|
|
|
42,898
|
(3)
|
$ 922,307
|
(4)
|
|
|
2016 MYEIP
|
|
|
|
|
|
26,786
|
(5)
|
$ 575,893
|
(6)
|
|
|
2015 MYEIP
|
|
|
|
|
|
20,640
|
(5)
|
$ 443,756
|
(6)
|
|
|
2014 MYEIP
|
|
|
|
|
|
26,882
|
(5)
|
$ 577,957
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil H. Shah
|
|
Time Vest
|
|
66,325
|
|
$ 1,425,988
|
|
|
|
|
|
|
|
Annual EIP
|
|
|
|
|
|
41,374
|
(3)
|
$ 889,541
|
(4)
|
|
|
2016 MYEIP
|
|
|
|
|
|
26,786
|
(5)
|
$ 575,893
|
(6)
|
|
|
2015 MYEIP
|
|
|
|
|
|
20,640
|
(5)
|
$ 443,756
|
(6)
|
|
|
2014 MYEIP
|
|
|
|
|
|
26,882
|
(5)
|
$ 577,957
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashish R. Parikh
|
|
Time Vest
|
|
21,199
|
|
$ 455,779
|
|
|
|
|
|
|
|
Annual EIP
|
|
|
|
|
|
17,253
|
(3)
|
$ 370,940
|
(4)
|
|
|
2016 MYEIP
|
|
|
|
|
|
10,045
|
(5)
|
$ 215,960
|
(6)
|
|
|
2015 MYEIP
|
|
|
|
|
|
7,740
|
(5)
|
$ 166,409
|
(6)
|
|
|
2014 MYEIP
|
|
|
|
|
|
10,081
|
(5)
|
$ 216,734
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Gillespie
|
|
Time Vest
|
|
7,463
|
|
$ 160,455
|
|
|
|
|
|
|
|
Annual EIP
|
|
|
|
|
|
8,721
|
(3)
|
$ 187,502
|
(4)
|
|
|
2016 MYEIP
|
|
|
|
|
|
3,181
|
(5)
|
$ 68,387
|
(6)
|
|
|
2015 MYEIP
|
|
|
|
|
|
2,451
|
(5)
|
$ 52,696
|
(6)
|
|
|
2014 MYEIP
|
|
|
|
|
|
3,192
|
(5)
|
$ 68,632
|
(6)
|
|
(1)
|
|
Represents
LTIP Units issued to the NEOs
on
April 22, 2012
,
March 21,
2015
and March
30,
2016
and vest as follows:
|
|
|
|
|
|
|
|
|
|
|
|
April 22, 2012
|
|
March 30, 2015
|
|
March 30, 2016
|
|
|
Vesting Date
|
|
Contract Amendment
|
|
2014
Annual EIP
|
|
2015
Annual EIP
|
|
Total
|
|
|
|
|
|
|
|
|
|
June 1, 2017
|
|
86,300
|
|
-
|
|
-
|
|
86,300
|
December 31, 2017
|
|
|
|
32,209
|
|
45,848
|
|
78,057
|
December 31, 2018
|
|
-
|
|
-
|
|
45,852
|
|
45,852
|
|
|
|
|
|
|
|
|
|
|
|
86,300
|
|
32,209
|
|
91,700
|
|
210,209
|
|
|
|
|
|
|
|
|
|
(2)
Calculated by multiplying the number of unvested
LTIP Units
as of December 31,
2016
by $
21.50
, which was the closing market price of the Company’s
common shares
on that date.
(3)
Represents the number of
common shares
and/or LTIP Units
issuable pursuant to the
2016
Annual EIP
based on achieving
actual
performance goals established by the Compensation Committee. On March
28
,
2017
, the Company granted a total of
122,727
LTIP Units
to the named executive officers pursuant to
2016
Annual EIP
program of which 25%, or
30,680
LTIP Units
, vested immediately upon issuance. The remaining
LTIP Units
issued are restricted and vest 25%, or
30,682
, on December 31,
2017
, 25%, or
30,680
, on December 31,
2018
,
and
25%, or
30,685
, on December 31,
2019
.
(4)
Calculated by multiplying the number of
common shares
and restricted
common shares
and/or LTIP Units
issuable pursuant to the
2016
Annual EIP
based on achieving
actual
performance goals established by the Compensation Committee by $
21.50
, which was the closing market price of the Company’s
common shares
on December 31,
2016
. As discussed elsewhere in this proxy statement, the
LTIP Units
were issued on March
28
,
2017
. Actual closing market price of the Company’s
common shares
on March
28
,
2017
, the date the
LTIP Units
were issued under the
2016
Annual EIP
, was $
18.53
per share.
(5)
Represents the number of common shares
and/or LTIP Units
issuable pursuant to the
2016
Multi-Year EIP
, the
2015
Multi-Year EIP,
and the
2014
Multi-Year EIP
based on achieving threshold performance goals established by the Compensation Committee. The common shares
and/or LTIP Units
will be issued, if earned,
pursuant to
the
2016
Multi-Year EIP,
the
2015
Multi-Year EIP
and the
2014
Multi-Year EIP
in the first quarter of
2019
,
in the first quarter of
2018
and in the first quarter of
2017
, respectively
.
On March
28
,
2017
, the Company granted a total of
61,057
LTIP Units to the named executive officers pursuant to
2014
Multi-Year EIP program of which 50%, or
30,524
LTIP Units, vested immediately upon issuance. The remaining
30,533
LTIP Units issued are restricted and vest on December 31,
2017
.
(6)
Calculated by multiplying the number of common shares
and/or LTIP Units
issuable pursuant to
the
2016
Multi-Year EIP,
the
2015
Multi-Year EIP
and the
2014
Multi-Year EIP
based on achieving threshold performance goals established by the Compensation Committee by $
21.50
, which was the closing market price of the Company’s common shares on December 31,
2016
.
The aggregate grant date fair value of the right to receive equity awards under the
2016
Multi-Year EIP, calculated in accordance with FASB ASC 718, was $
145,029
for Mr. Hasu Shah, $
386,742
for Mr. Jay Shah, $
386,742
for Mr. Neil Shah, $
145,029
for Mr. Parikh and $
45,926
for Mr. Gillespie.
The aggregate grant date fair value of the right to receive equity awards under the
2015
Multi-Year EIP
, calculated in accordance with FASB ASC 718, was $
97,340
for Mr. Hasu Shah, $
259,573
for Mr. Jay Shah, $
259,573
for Mr. Neil Shah, $
97,340
for Mr. Parikh and $
30,825
for Mr. Gillespie.
The aggregate grant date fair value of the right to receive equity awards under the
2014
Multi-Year EIP
, calculated in accordance with FASB ASC 718, was $
138,830
for Mr. Hasu Shah, $
370,214
for Mr. Jay Shah, $
370,214
for Mr. Neil Shah, $
138,830
for Mr. Parikh and $
43,963
for Mr. Gillespie.
Option Exercises and Stock Vested Table for
2016
The following table presents information concerning restricted
common shares
and performance share awards that vested or were earned for each of the named executive officers during the fiscal year ended December 31,
2016
:
|
|
|
|
|
Stock Awards
|
|
Name
|
Number of Shares
Acquired on Vesting
(#)
|
Value Realized on Vesting
($)
(1)
|
|
Hasu P. Shah
|
36,618
|
$ 762,791
|
(2)
|
Jay H. Shah
|
145,005
|
$ 2,909,253
|
(3)
|
Neil H. Shah
|
114,993
|
$ 2,377,744
|
(4)
|
Ashish R. Parikh
|
39,026
|
$ 808,245
|
(5)
|
Michael R. Gillespie
|
13,409
|
$ 279,990
|
(6)
|
|
(1)
|
|
Represents the aggregate dollar amount realized upon the vesting of restricted
common shares
and LTIP Units
. This amount has been calculated by multiplying the number of vested
common shares
or LTIP Units
, including vested
common shares
or LTIP Units
issued upon the settlement of performance
awards
that have been earned, by the closing price of the Company’s
common shares
on the NYSE on the vesting date.
|
|
(2)
|
|
Represents the vesting of
12,267
LTIP Units
on
March
30
,
2016
, 5,201 LTIP Units on June 1,
2016
and
19,150
LTIP Units on
December
31
,
2016
.
|
|
(3)
|
|
Represents the vesting of
36,061
LTIP Units on March 30,
2016
,
51,264
LTIP Units on June 1,
2016
and
57,680
LTIP Units on December 31,
2016
.
|
|
(4)
|
|
Represents the vesting of
36,061
LTIP Units on March 30,
2016
,
21,251
LTIP Units on June 1,
2016
and
57,681
LTIP Units on December 31,
2016
.
|
|
(5)
|
|
Represents the vesting of
12,490
LTIP Units on March 30,
2016
,
6,845
LTIP Units on June 1,
2016
and
19,691
LTIP Units on December 31,
2016
.
|
|
(6)
|
|
Represents the vesting of
4,392
LTIP Units on March 30,
2016
,
1,739
LTIP Units on June 1,
2016
and
7,278
LTIP Units on December 31,
2016
.
|
Agreements with Executive Officers and Potential Payments Upon Termination or Change-in-Control
As described above under the heading “
Compensation Discussion & Analysis -
Contractual Arrangements,” t
he Company
has
entered into employment agreements with Hasu P. Shah (Chairman of the Board), Jay H. Shah (Chief Executive Officer), Neil H. Shah (President and Chief Operating Officer), Ashish R. Parikh (Chief Financial Officer) and Michael R. Gillespie (Chief Accounting Officer).
Each agreement
was
for an initial term through December 31,
201
4
. The employment agreements have renewed for additional
successive
one-year term
s
, the latest of which
expire
on December 31,
2017
. The employment agreements will continue to
renew for successive one year periods unless terminated by either party.
Each employment agreement provides for the payment of a minimum annual base salary to the executive officer, subject to any increase approved by the Board of Trustees. In addition, each executive officer is eligible to receive other incentive compensation,
which may include
common shares
and LTIP Units in accordance with rules and criteria
established by the Compensation Committee and approved by the Board of Trustees
. Each of the employment agreements also contains certain confidentiality, non-competition and non-recruitment provisions.
Each of the employment agreements provides for cash payments and the provision of other benefits to the executive officer upon the occurrence of certain triggers. These triggers include the executive officer’s voluntary termination, the executive officer’s termination without cause (other than a termination without cause during the 12-month period following a change of control), the executive officer’s termination with cause, the executive officer’s death or disability and the executive officer’s termination without cause or resignation for good reason
within 12 months of a change of control.
In addition, unvested LTIP Units issued on or after December 23, 2014 will be subject to accelerated vesting under certain conditions (termination without cause, termination due to death or disability or in the event of a change of control, as defined in the 2012 Plan), provided the executive officer has remained in the continuous employ of the Company until the date of such termination or the date of the change in control.
The following tables set forth the total cost that the Company would have incurred and the payments the named executive officers would have received if they were terminated as of December 31,
2016
under the terms of the employment agreements
, assuming such agreements were in place as of December 31,
2016
:
Voluntary Termination/Termination With Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment
($)
(1)
|
|
Continued Medical and Dental Benefits
($)
|
|
Number of Shares to Vest Upon Termination
(#)
|
|
Value of
Shares to Vest Upon Termination
($)
|
|
Total
Cost of Termination
($)
|
Hasu P. Shah
|
|
$ -
|
|
$ -
|
|
N/A
|
|
N/A
|
|
$ -
|
Jay H. Shah
|
|
$ -
|
|
$ -
|
|
N/A
|
|
N/A
|
|
$ -
|
Neil H. Shah
|
|
$ -
|
|
$ -
|
|
N/A
|
|
N/A
|
|
$ -
|
Ashish R. Parikh
|
|
$ -
|
|
$ -
|
|
N/A
|
|
N/A
|
|
$ -
|
Michael R. Gillespie
|
|
$ -
|
|
$ -
|
|
N/A
|
|
N/A
|
|
$ -
|
(1)
Each employment agreement provides that if the executive officer ceases being an employee of the Company on account of the executive officer’s voluntary termination or the executive officer’s termination with cause, the executive officer will not be entitled to any compensation after the effective date of the v
oluntary termination or termination with cause (except base salary and vacation accrued but unpaid on the effective date of such event)
.
Death or Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment
($)
(1)
|
|
Continued Medical and Dental Benefits
($)
|
|
Number of Shares to Vest Upon Termination
(#)
(2)
|
|
Value of
Shares to Vest Upon Termination
($)
(3)
|
|
Total
Cost of Termination
($)
|
Hasu P. Shah
|
|
$ 20,167
|
|
$ -
|
|
59,230
|
|
$ 1,273,450
|
|
$ 1,293,617
|
Jay H. Shah
|
|
$ 61,000
|
|
$ -
|
|
213,543
|
|
$ 4,591,180
|
|
$ 4,652,180
|
Neil H. Shah
|
|
$ 58,833
|
|
$ -
|
|
182,006
|
|
$ 3,913,135
|
|
$ 3,971,968
|
Ashish R. Parikh
|
|
$ 38,333
|
|
$ -
|
|
66,317
|
|
$ 1,425,820
|
|
$ 1,464,154
|
Michael R. Gillespie
|
|
$ 25,833
|
|
$ -
|
|
25,008
|
|
$ 537,672
|
|
$ 563,505
|
|
(1)
|
|
Each employment agreement provides that in the event of the death or disability of the executive officer, the Company will continue to pay the executive officer or his heirs, devisees, executors, legatees or personal representatives, as appropriate, the executive officer’s base salary then in effect through the month following the month in which such event occurs plus vacation accrued but unpaid as of the termination date.
|
|
(2)
|
|
Represents the sum of the number of unvested LTIP Units (including the LTIP Units granted on March
28
,
2017
pursuant to the
2016
Annual EIP
and the
2014
Multi-Year EIP
and the common shares and/or LTIP Units issuable pursuant to the
2016
Multi-Year EIP
and
2015
Multi-Year EIP
). The amount presented excludes the number of common shares and/or LTIP Units issuable pursuant to the
2017
Annual EIP
and the
2017
Multi-Year EIP
as those programs were not in existence as of December 31,
2016
.
|
|
(3)
|
|
Calculated by multiplying the number of shares to vest upon termination by $
21.50
, which was the closing market price of the Company’s common shares on December 31,
2016
.
|
Termination without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment
($)
(1)
|
|
Continued Medical and Dental Benefits
($)
|
|
Number of Shares to Vest Upon Termination
(#)
(2)
|
|
Value of
Shares to Vest Upon Termination
($)
(3)
|
|
Total
Cost of Termination
($)
|
Hasu P. Shah
|
|
$ 242,000
|
|
$ -
|
|
59,230
|
|
$ 1,273,450
|
|
$ 1,515,450
|
Jay H. Shah
|
|
$ 732,000
|
|
$ -
|
|
213,543
|
|
$ 4,591,180
|
|
$ 5,323,180
|
Neil H. Shah
|
|
$ 706,000
|
|
$ -
|
|
182,006
|
|
$ 3,913,135
|
|
$ 4,619,135
|
Ashish R. Parikh
|
|
$ 460,000
|
|
$ -
|
|
66,317
|
|
$ 1,425,820
|
|
$ 1,885,820
|
Michael R. Gillespie
|
|
$ 310,000
|
|
$ -
|
|
25,008
|
|
$ 537,672
|
|
$ 847,672
|
|
(1)
|
|
Each employment agreement provides that upon a termination without cause (other than a termination without cause during the 12-month period following a change of control), the Company will make a lump sum payment to the executive officer within ten days after such termination equal to the sum of: (1) the executive officer’s accrued but unused vacation to the date of termination, plus (2) the amount of the executive officer’s monthly base salary then in effect for the lesser of 12 months or the number of months (including a fractional month) remaining in the term of the employment agreement.
|
|
(2)
|
|
Represents the sum of the number of unvested
LTIP Units
(including the
LTIP Units
granted
on March
28
,
2017
pursuant to the
2016
Annual EIP
and the
2014
Multi-Year EIP
and the
common shares and/or LTIP Units
issuable pursuant to the
2016
Multi-Year EIP
and
2015
Multi-Year EIP
).
The amount presented excludes
the number of
common shares
and/or LTIP Units
issuable pursuant to the
2017
Annual EIP
and the
2017
Multi-Year EIP
as those programs were not in existence as of December 31,
2016
.
|
|
(3)
|
|
Calculated by multiplying the number of
shares
to vest upon termination
by $
21.50
, which was the closing market price of the Company’s
common shares
on
December 31,
2016
.
|
Termination without Cause / Resignation for Good Reason (Following a Change in Control)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Payment
($)
(1)
|
|
Continued Medical and Dental Benefits
($)
(1)
|
|
Number of Shares to Vest Upon Termination
(#)
(2)
|
|
Value of
Shares to Vest Upon Termination
($)
(1)(3)
|
|
Total
Cost of Termination
($)
(4)
|
Hasu P. Shah
|
|
$ 1,020,683
|
|
$ 5,216
|
|
46,749
|
|
$ 1,005,108
|
|
$ 2,031,007
|
Jay H. Shah
|
|
$ 9,323,738
|
|
$ 2,008
|
|
170,645
|
|
$ 3,668,873
|
|
$ 12,994,620
|
Neil H. Shah
|
|
$ 8,992,548
|
|
$ 34,253
|
|
140,632
|
|
$ 3,023,594
|
|
$ 12,050,394
|
Ashish R. Parikh
|
|
$ 3,041,879
|
|
$ 34,253
|
|
49,064
|
|
$ 1,054,881
|
|
$ 4,131,012
|
Michael R. Gillespie
|
|
$ 807,502
|
|
$ 34,253
|
|
16,287
|
|
$ 350,170
|
|
$ 1,191,924
|
|
(1)
|
|
Each employment agreement provides that upon a termination without cause or a resignation for good reason within 12 months following a change of control, the Company will fully vest the executive officer in any outstanding awards
made pursuant to the Company’s 2012 Plan or any other equity compensation plan adopted by the Company.
The
2014
Multi-Year EIP
, the
2015
Multi-Year EIP
and the
2016
Multi-Year EIP
provides for the right to receive common shares
and/or LTIP Units
based on the performance level achieved to date upon termination without cause or a resignation for good reason within 12 months following a change of control.
In addition, the Company will pay to the executive officer, in a lump sum, the following:
|
|
·
|
|
the executive officer’s base salary and expenses reimbursable, each through the date of the termination;
|
|
·
|
|
a
severance payment
equal to a multiple of the sum of: (i) the executive officer’s then annual base salary, (ii) the maximum annual bonus that the executive officer could earn for the year that includes the date of termination (or if no maximum bonus amount has been set, the executive officer’s target bonus for that year) and (iii) the fair market value (determined as of the date of the change of control) of the share award(s)
or other equity-based awards
received by the executive officer for the year that includes the date of termination (or if no
such
awards were made in that year, the next preceding year in which the effected executive officer received
such an
award). For purposes of calculating the
severance payment
, the following multiples apply: Hasu P. Shah–2x; Jay H Shah–2.99x; Neil H. Shah–2.99x; Ashish R. Parikh–2x; and Michael R. Gillespie–1x; and
|
|
·
|
|
the premiums paid for the executive officer’s medical and dental insurance benefits for a period of 18 months after termination.
|
The
severance payment
was calculated for each named executive officer by taking the sum of (i) each executive’s
2016
annual base salary, (ii) the maximum annual
cash
bonus for
2016
under the
2016
Annual CIP
, and (iii) the fair value of the maximum number of common shares
and/or LTIP Units
issuable under the
2016
Annual EIP
(which were issued in March
2017
in the form of LTIP Units
), and multiplying that sum by each named executive officer’s defined multiple. The fair value of the number of common shares
and/or LTIP Units
issuable under the
2016
Annual EIP
was based on a per share value of $
21.50
, which was the closing market price of the Company’s common shares on December
31
,
2016
.
|
(2)
|
|
Represents the sum of the number of unvested
LTIP Units
(excluding the
LTIP Units
granted on March
30
,
2017
pursuant to the
2016
Annual EIP
which are factored into the change of control cash payment described in footnote 1 to this table
)
,
the LTIP Units granted on March 30,
2017
pursuant to the
2014
Multi-Year EIP
,
the number of common shares
and/or LTIP Units
issuable pursuant to the
2014
Multi-Year EIP
and the
number of common shares
and/or LTIP Units
issuable pursuant to the
2015
Multi-Year EIP
. The amount presented
also
excludes the number of common shares
and/or LTIP Units
issuable pursuant to the
2017
Annual EIP
and the
2017
Multi-Year EIP
as those programs were not in existence as of December 31,
2016
.
|
|
(3)
|
|
Calculated by multiplying the number of shares to vest upon termination by $
21.50
, which was the closing market price of the Company’s common shares as of December 3
1,
2016
.
|
|
(4)
|
|
The benefits payable to the named executive officers on account of a change in control, including on account of a termination without cause or resignation with good reason, within 12 months after a change in control, could constitute excess parachute payments under Section 280G the Code. A named executive officer who receives excess parachute payments would be liable for the 20% excise tax on a portion of the parachute payments, and the Company would not be permitted to claim a federal income tax deduction for a portion of the parachute payments. The amended and restated employment agreements between the Company and each of the named executive officers provides that the Company will not indemnify the executive for any parachute payment excise tax liability. However, the total cash amounts payable to a named executive officer may be reduced if and only to the extent that a reduction will allow the named executive officer to receive a greater net after tax amount than executive would receive absent such reduction.
|