ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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MARYLAND
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27-0372343
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Title of Each Class
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Name of Exchange On Which Registered
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Common Shares of Beneficial Interest, $.01 par value
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New York Stock Exchange
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Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, $.01 par value
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New York Stock Exchange
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Large accelerated filer
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ý
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Accelerated filer
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o
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Page
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PART I
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Business
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Risk Factors
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Unresolved Staff Comments
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Properties
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Legal Proceedings
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Mine Safety Disclosures
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PART II
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Selected Financial Data
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Quantitative and Qualitative Disclosures About Market Risk
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Financial Statements and Supplementary Data
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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Controls and Procedures
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Other Information
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PART III
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Directors, Executive Officers and Corporate Governance
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Executive Compensation
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Certain Relationships and Related Transactions, and Director Independence
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Principal Accounting Fees and Services
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PART IV
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Exhibits, Financial Statement Schedules
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Item 1.
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Business
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Item 1A.
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Risk Factors
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•
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require us to maintain minimum debt service coverage ratios;
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•
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require us to maintain minimum levels of tangible net worth;
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•
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limit our ability to make certain investments;
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•
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prevent us from incurring total debt in excess of a percentage of our total asset value;
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•
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prohibit us from making annual distributions to our shareholders in excess of 90% of our funds from operations, or FFO, over time, except for such distributions as may be required to enable us to maintain our qualification as a REIT for U.S. federal income tax purposes, and prohibit us from making any distributions to shareholders while there is a continuing event of default;
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•
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impose concentration limitations on the value and other characteristics of hotels comprising the collateral pool securing the revolving credit facility; and
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•
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limit our ability to engage in a change in control transaction without causing the amounts outstanding under the revolving credit facility to become immediately due and payable.
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•
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our cash flow from operations will be insufficient to make required payments of principal and interest;
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•
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our debt may increase our vulnerability to adverse economic and industry conditions;
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•
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we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing cash available for distribution to our shareholders, funds available for operations and capital expenditures, future business opportunities or other purposes;
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•
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the terms of any refinancing may not be as favorable as the terms of the debt being refinanced; and
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•
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the terms of our debt may limit our ability to make distributions to our shareholders and therefore adversely affect the market price of our shares.
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•
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competition from other hotels in our markets;
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•
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development of new hotels in our markets, which could adversely affect occupancy and revenues at the hotels we currently own or may acquire;
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•
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dependence on business and commercial travelers and tourism;
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•
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increases in energy costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists;
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•
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increases in operating costs due to inflation and other factors that may not be offset by increased room rates;
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•
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changes in governmental laws and regulations, fiscal policies and zoning ordinances that may increase our costs of compliance with laws and regulations, fiscal policies and ordinances;
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•
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adverse effects of international, national, regional and local economic and market conditions;
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•
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unforeseen events beyond our control, such as terrorist attacks, travel related health concerns, including pandemics and epidemics, such as H1N1 influenza (swine flu), avian bird flu, SARS, and Ebola, political instability, regional hostilities, imposition of taxes or surcharges by regulatory authorities, travel related accidents and unusual weather patterns, including natural disasters, such as hurricanes, tsunamis or earthquakes;
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•
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adverse effects of a downturn in the lodging industry; and
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•
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risks generally associated with the ownership of hotels and real estate, as we discuss in detail below.
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•
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construction cost overruns and delays;
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•
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a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available to us on affordable terms;
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•
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uncertainties as to market demand or a loss of market demand after capital improvements have begun; and
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•
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possible environmental problems.
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•
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construction delays or cost overruns that may increase project costs;
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•
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receipt of zoning, occupancy and other required governmental permits and authorizations;
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•
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development costs incurred for projects that are not pursued to completion;
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•
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acts of God, such as earthquakes, hurricanes, floods or fires that could adversely impact a project;
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•
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ability to raise capital; and
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•
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governmental restrictions on the nature or size of a project.
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•
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adverse changes in international, national, regional and local economic and market conditions;
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•
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changes in interest rates and in the availability, cost and terms of debt financing;
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•
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changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;
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•
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the ongoing need for capital improvements, particularly in older structures;
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•
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changes in operating expenses; and
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•
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civil unrest, acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses, and acts of war or terrorism, including the consequences of the terrorist acts, such as those that occurred on September 11, 2001.
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•
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actual receipt of an improper benefit or profit in money, property or services; or
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•
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active and deliberate dishonesty by the trustee or officer that was established by a final judgment as being material to the cause of action adjudicated.
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•
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our inability to invest our available cash;
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•
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our inability to realize attractive risk-adjusted returns on our investments;
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•
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unanticipated expenses that reduce our cash flow;
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•
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defaults in our investment portfolio or decreases in the value of the underlying assets; and
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•
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the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
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•
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actual or anticipated variations in our quarterly results of operations;
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•
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changes in market valuations of companies in the hotel or real estate industries;
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•
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changes in expectations of future financial performance or changes in estimates of securities analysts;
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•
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fluctuations in stock market prices and volumes;
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•
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issuances of common or preferred shares or other securities in the future;
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•
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the addition or departure of key personnel;
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•
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announcements by us or our competitors of acquisitions, investments or strategic alliances; and
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•
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unforeseen events beyond our control, such as terrorist attacks, travel related health concerns including pandemics and epidemics, such as H1N1 influenza (swine flu), avian bird flu, SARS, and Ebola, political instability, regional hostilities, increases in fuel prices, imposition of taxes or surcharges by regulatory authorities, travel related accidents and unusual weather patterns, including natural disasters, such as hurricanes, tsunamis or earthquakes.
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Hotel
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Number of
Rooms
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Location
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1
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Hyatt Regency Boston
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502
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Boston, MA
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2
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Hilton Checkers Los Angeles
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193
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Los Angeles, CA
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3
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Boston Marriott Newton
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430
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Newton, MA
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4
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Le Meridien San Francisco
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360
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San Francisco, CA
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5
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Homewood Suites Seattle Convention Center
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195
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Seattle, WA
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6
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W Chicago – City Center
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403
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Chicago, IL
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7
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Hotel Indigo San Diego Gaslamp Quarter
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210
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San Diego, CA
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8
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Courtyard Washington Capitol Hill/Navy Yard
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204
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Washington, DC
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9
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Hotel Adagio San Francisco, Autograph Collection
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171
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San Francisco, CA
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10
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Denver Marriott City Center
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613
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Denver, CO
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11
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Hyatt Herald Square New York
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122
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New York, NY
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12
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W Chicago – Lakeshore
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520
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Chicago, IL
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13
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Hyatt Regency Mission Bay Spa and Marina
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429
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San Diego, CA
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14
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The Hotel Minneapolis, Autograph Collection
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222
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Minneapolis, MN
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15
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Hyatt Place New York Midtown South
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185
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New York, NY
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16
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W New Orleans – French Quarter
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97
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New Orleans, LA
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17
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Le Meridien New Orleans
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410
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New Orleans, LA
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18
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Hyatt Fisherman's Wharf
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313
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San Francisco, CA
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19
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Hyatt Santa Barbara
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200
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Santa Barbara, CA
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20
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JW Marriott San Francisco Union Square
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337
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San Francisco, CA
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Total number of rooms
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6,116
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Price Range
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Dividends
Declared
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||||||||
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High
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Low
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|||||||
2014
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||||||
First quarter
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$
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26.71
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$
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23.31
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$
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0.30
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Second quarter
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$
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31.07
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$
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25.16
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$
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0.30
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Third quarter
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$
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31.03
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$
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28.79
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$
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0.30
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Fourth quarter
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$
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38.15
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$
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28.15
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$
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0.30
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2013
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||||||
First quarter
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$
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23.44
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$
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20.78
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$
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0.24
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Second quarter
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$
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24.13
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$
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19.85
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$
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0.24
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Third quarter
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$
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24.52
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$
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20.80
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$
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0.26
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Fourth quarter
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$
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25.69
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$
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22.17
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$
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0.26
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2014
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2013
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||||||||||
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$
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%
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$
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%
|
||||||
Common shares:
|
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|
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||||||
Ordinary income
|
|
$
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1.134553
|
|
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97.81
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%
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$
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0.955327
|
|
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99.51
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%
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Return of capital
|
|
0.025447
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|
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2.19
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%
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0.004673
|
|
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0.49
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%
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||
Capital gain distribution
|
|
—
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|
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—
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|
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—
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|
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—
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||
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$
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1.160000
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|
|
100.00
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%
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$
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0.960000
|
|
|
100.00
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%
|
|
|
|
|
|
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|
||||||
Preferred shares:
|
|
|
|
|
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||||||
Ordinary income
|
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$
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1.937500
|
|
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100.00
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%
|
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$
|
1.937500
|
|
|
100.00
|
%
|
Return of capital
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Capital gain distribution
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
|
|
$
|
1.937500
|
|
|
100.00
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%
|
|
$
|
1.937500
|
|
|
100.00
|
%
|
•
|
our results of operations, including our operating expenses and taxable income;
|
•
|
the timing of the investment of proceeds from future share offerings;
|
•
|
debt service requirements;
|
•
|
capital expenditure requirements for our hotels;
|
•
|
the annual distribution requirement under the REIT provisions of the Internal Revenue Code; and
|
•
|
other factors that our board of trustees may deem relevant.
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Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
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|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|
|||
October 1, 2014—October 31, 2014
|
|
—
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|
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$
|
—
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|
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n/a
|
|
n/a
|
November 1, 2014—November 30, 2014
|
|
—
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|
|
$
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—
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|
|
n/a
|
|
n/a
|
December 1, 2014—December 31, 2014
|
|
61,059
|
|
|
$
|
37.12
|
|
|
n/a
|
|
n/a
|
|
|
61,059
|
|
|
$
|
37.12
|
|
|
n/a
|
|
n/a
|
Item 6.
|
Selected Financial Data
|
|
|
As of December 31,
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||||||||||||||||||
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2014
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|
2013
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|
2012
|
|
2011
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|
2010
|
||||||||||
Hotel Portfolio Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Number of hotels
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20
|
|
|
20
|
|
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15
|
|
|
12
|
|
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5
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|
|||||
Number of hotel rooms
|
|
6,116
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|
|
5,932
|
|
|
4,727
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|
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3,556
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|
|
1,638
|
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|||||
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|
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|
|
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|
||||||||||
Balance Sheet Data:
|
|
|
|
|
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|
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|
||||||||||
Cash and cash equivalents
|
|
$
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29,326
|
|
|
$
|
28,713
|
|
|
$
|
33,194
|
|
|
$
|
20,960
|
|
|
$
|
10,551
|
|
Restricted cash
|
|
43,387
|
|
|
34,235
|
|
|
23,460
|
|
|
15,034
|
|
|
2,588
|
|
|||||
Investments in hotels, net
|
|
1,617,419
|
|
|
1,461,220
|
|
|
1,147,104
|
|
|
919,206
|
|
|
400,634
|
|
|||||
Total assets
|
|
1,719,935
|
|
|
1,554,158
|
|
|
1,232,828
|
|
|
971,138
|
|
|
425,308
|
|
|||||
Long-term debt
|
|
551,723
|
|
|
531,771
|
|
|
405,208
|
|
|
407,736
|
|
|
105,000
|
|
|||||
Total shareholders’ equity
|
|
1,081,982
|
|
|
946,557
|
|
|
766,808
|
|
|
520,129
|
|
|
305,256
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
|
$
|
477,980
|
|
|
$
|
420,177
|
|
|
$
|
278,276
|
|
|
$
|
172,191
|
|
|
$
|
54,194
|
|
Hotel operating expenses, excluding depreciation and amortization
|
|
324,882
|
|
|
284,963
|
|
|
185,842
|
|
|
116,127
|
|
|
37,341
|
|
|||||
Corporate general and administrative
|
|
15,557
|
|
|
13,125
|
|
|
11,297
|
|
|
9,996
|
|
|
7,085
|
|
|||||
Hotel acquisition costs
|
|
3,622
|
|
|
4,222
|
|
|
2,994
|
|
|
5,081
|
|
|
3,597
|
|
|||||
Net income (loss)
|
|
60,954
|
|
|
45,318
|
|
|
27,177
|
|
|
9,036
|
|
|
(674
|
)
|
|||||
Net income (loss) available per common share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
1.01
|
|
|
0.75
|
|
|
0.66
|
|
|
0.30
|
|
|
(0.07
|
)
|
|||||
Diluted
|
|
1.00
|
|
|
0.75
|
|
|
0.66
|
|
|
0.30
|
|
|
(0.07
|
)
|
|||||
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
50,488,007
|
|
|
47,295,089
|
|
|
34,048,752
|
|
|
29,413,841
|
|
|
11,236,120
|
|
|||||
Diluted
|
|
50,890,861
|
|
|
47,295,089
|
|
|
34,048,752
|
|
|
29,413,841
|
|
|
11,236,120
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating activities
|
|
119,634
|
|
|
99,962
|
|
|
67,737
|
|
|
36,708
|
|
|
12,199
|
|
|||||
Investing activities
|
|
(209,816
|
)
|
|
(361,558
|
)
|
|
(270,459
|
)
|
|
(491,991
|
)
|
|
(411,199
|
)
|
|||||
Financing activities
|
|
90,795
|
|
|
257,115
|
|
|
214,956
|
|
|
465,692
|
|
|
409,528
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Hotel
|
|
Location
|
|
Rooms
|
|
Acquisition Date
|
|||
1
|
|
Hyatt Regency Boston
|
|
Boston, MA
|
|
502
|
|
|
March 18, 2010
|
2
|
|
Hilton Checkers Los Angeles
|
|
Los Angeles, CA
|
|
193
|
|
|
June 1, 2010
|
3
|
|
Boston Marriott Newton
|
|
Newton, MA
|
|
430
|
|
|
July 30, 2010
|
4
|
|
Le Meridien San Francisco
|
|
San Francisco, CA
|
|
360
|
|
|
December 15, 2010
|
5
|
|
Homewood Suites Seattle Convention Center
|
|
Seattle, WA
|
|
195
|
|
|
May 2, 2011
|
6
|
|
W Chicago – City Center
|
|
Chicago, IL
|
|
403
|
|
|
May 10, 2011
|
7
|
|
Hotel Indigo San Diego Gaslamp Quarter
|
|
San Diego, CA
|
|
210
|
|
|
June 17, 2011
|
8
|
|
Courtyard Washington Capitol Hill/Navy Yard
|
|
Washington, DC
|
|
204
|
|
|
June 30, 2011
|
9
|
|
Hotel Adagio San Francisco, Autograph Collection
|
|
San Francisco, CA
|
|
171
|
|
|
July 8, 2011
|
10
|
|
Denver Marriott City Center
|
|
Denver, CO
|
|
613
|
|
|
October 3, 2011
|
11
|
|
Hyatt Herald Square New York
|
|
New York, NY
|
|
122
|
|
|
December 22, 2011
|
12
|
|
W Chicago – Lakeshore
|
|
Chicago, IL
|
|
520
|
|
|
August 21, 2012
|
13
|
|
Hyatt Regency Mission Bay Spa and Marina
|
|
San Diego, CA
|
|
429
|
|
|
September 7, 2012
|
14
|
|
The Hotel Minneapolis, Autograph Collection
|
|
Minneapolis, MN
|
|
222
|
|
|
October 30, 2012
|
15
|
|
Hyatt Place New York Midtown South
|
|
New York, NY
|
|
185
|
|
|
March 14, 2013
|
16
|
|
W New Orleans – French Quarter
|
|
New Orleans, LA
|
|
97
|
|
|
March 28, 2013
|
17
|
|
Le Meridien New Orleans
|
|
New Orleans, LA
|
|
410
|
|
|
April 25, 2013
|
18
|
|
Hyatt Fisherman's Wharf
|
|
San Francisco, CA
|
|
313
|
|
|
May 31, 2013
|
19
|
|
Hyatt Santa Barbara
|
|
Santa Barbara, CA
|
|
200
|
|
|
June 27, 2013
|
20
|
|
JW Marriott San Francisco Union Square
|
|
San Francisco, CA
|
|
337
|
|
|
October 1, 2014
|
|
|
|
|
|
|
6,116
|
|
|
|
|
Year Ended December 31,
|
||||||||
|
2014
(1)
|
|
2013
(1)
|
|
Change
|
||||
17-Hotel Portfolio
(2)
|
|
|
|
|
|
||||
Occupancy
|
83.4
|
%
|
|
81.8
|
%
|
|
160 bps
|
||
ADR
|
$
|
218.72
|
|
|
$
|
203.61
|
|
|
7.4%
|
RevPAR
|
$
|
182.35
|
|
|
$
|
166.59
|
|
|
9.5%
|
Adjusted Hotel EBITDA
|
$
|
144,955
|
|
|
$
|
126,087
|
|
|
15.0%
|
Adjusted Hotel EBITDA Margin
|
32.9
|
%
|
|
30.9
|
%
|
|
200 bps
|
||
|
|
|
|
|
|
||||
20-Hotel Portfolio
|
|
|
|
|
|
||||
Occupancy
|
79.9
|
%
|
|
80.4
|
%
|
|
(50) bps
|
||
ADR
|
$
|
216.21
|
|
|
$
|
202.81
|
|
|
6.6%
|
RevPAR
|
$
|
172.80
|
|
|
$
|
163.12
|
|
|
5.9%
|
Adjusted Hotel EBITDA
|
$
|
160,258
|
|
|
$
|
146,639
|
|
|
9.3%
|
Adjusted Hotel EBITDA Margin
|
31.8
|
%
|
|
30.5
|
%
|
|
130 bps
|
(1)
|
Includes results of operations for certain hotels prior to our acquisition.
|
(2)
|
Excludes the W Chicago – Lakeshore, the Le Meridien New Orleans, and the Hyatt Herald Square New York, as these hotels were undergoing comprehensive renovations during 2014.
|
|
Year Ended December 31,
|
||||||
|
2014
(1)
|
|
2013
(1)
|
||||
17-Hotel Portfolio
(2)
|
|
|
|
||||
Total revenue
|
$
|
441,231
|
|
|
$
|
407,598
|
|
Less: Total hotel operating expenses
|
297,161
|
|
|
281,209
|
|
||
Hotel EBITDA
|
144,070
|
|
|
126,389
|
|
||
Add: Non-cash amortization
(3)
|
885
|
|
|
(302
|
)
|
||
Adjusted Hotel EBITDA
|
$
|
144,955
|
|
|
$
|
126,087
|
|
Adjusted Hotel EBITDA Margin
|
32.9
|
%
|
|
30.9
|
%
|
||
|
|
|
|
||||
20-Hotel Portfolio
|
|
|
|
||||
Total revenue
|
$
|
504,107
|
|
|
$
|
480,204
|
|
Less: Total hotel operating expenses
|
344,734
|
|
|
333,263
|
|
||
Hotel EBITDA
|
159,373
|
|
|
146,941
|
|
||
Add: Non-cash amortization
(3)
|
885
|
|
|
(302
|
)
|
||
Adjusted Hotel EBITDA
|
$
|
160,258
|
|
|
$
|
146,639
|
|
Adjusted Hotel EBITDA Margin
|
31.8
|
%
|
|
30.5
|
%
|
(1)
|
Includes results of operations for certain hotels prior to our acquisition.
|
(2)
|
Excludes the W Chicago – Lakeshore, the Le Meridien New Orleans, and the Hyatt Herald Square New York, as these hotels were undergoing comprehensive renovations during 2014.
|
(3)
|
Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, and unfavorable contract liability.
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Net income
|
$
|
60,954
|
|
|
$
|
45,318
|
|
|
$
|
27,177
|
|
Add: Depreciation and amortization
|
51,567
|
|
|
44,469
|
|
|
28,931
|
|
|||
Interest expense
|
27,357
|
|
|
25,780
|
|
|
20,976
|
|
|||
Loss on early extinguishment of debt
|
—
|
|
|
372
|
|
|
—
|
|
|||
Income tax expense
|
535
|
|
|
1,655
|
|
|
738
|
|
|||
Less: Interest income
|
(8
|
)
|
|
(247
|
)
|
|
(199
|
)
|
|||
Corporate EBITDA
|
140,405
|
|
|
117,347
|
|
|
77,623
|
|
|||
Add: Hotel acquisition costs
|
3,622
|
|
|
4,222
|
|
|
2,994
|
|
|||
Non-cash amortization
(1)
|
1,408
|
|
|
223
|
|
|
242
|
|
|||
Less: Gain on sale of hotel
|
(7,006
|
)
|
|
—
|
|
|
—
|
|
|||
Adjusted Corporate EBITDA
|
$
|
138,429
|
|
|
$
|
121,792
|
|
|
$
|
80,859
|
|
(1)
|
Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
|
|
Year Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Net income
|
$
|
60,954
|
|
|
$
|
45,318
|
|
|
$
|
27,177
|
|
Add: Depreciation and amortization
|
51,567
|
|
|
44,469
|
|
|
28,931
|
|
|||
Less: Gain on sale of hotel
|
(7,006
|
)
|
|
—
|
|
|
—
|
|
|||
FFO
|
105,515
|
|
|
89,787
|
|
|
56,108
|
|
|||
Less: Preferred share dividends
|
(9,688
|
)
|
|
(9,688
|
)
|
|
(4,413
|
)
|
|||
Dividends declared on unvested time-based awards
|
(499
|
)
|
|
(361
|
)
|
|
(177
|
)
|
|||
Undistributed earnings allocated to unvested time- based awards
|
—
|
|
|
—
|
|
|
—
|
|
|||
FFO available to common shareholders
|
95,328
|
|
|
79,738
|
|
|
51,518
|
|
|||
Add: Hotel acquisition costs
|
3,622
|
|
|
4,222
|
|
|
2,994
|
|
|||
Non-cash amortization
(1)
|
1,408
|
|
|
223
|
|
|
242
|
|
|||
AFFO available to common shareholders
|
$
|
100,358
|
|
|
$
|
84,183
|
|
|
$
|
54,754
|
|
|
|
|
|
|
|
||||||
FFO available per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
1.89
|
|
|
$
|
1.69
|
|
|
$
|
1.51
|
|
Diluted
|
$
|
1.87
|
|
|
$
|
1.69
|
|
|
$
|
1.51
|
|
AFFO available per common share:
|
|
|
|
|
|
||||||
Basic
|
$
|
1.99
|
|
|
$
|
1.78
|
|
|
$
|
1.61
|
|
Diluted
|
$
|
1.97
|
|
|
$
|
1.78
|
|
|
$
|
1.61
|
|
(1)
|
Includes non-cash amortization of ground lease asset, deferred franchise costs, deferred key money, unfavorable contract liability, and air rights contract.
|
•
|
W Chicago – Lakeshore—A comprehensive renovation encompassing guestrooms, public spaces, restaurant, bars, and meeting space, which commenced in the third quarter of 2013, was completed in the second quarter of 2014. The renovation cost is approximately $38.0 million. As of December 31, 2014, $36.5 million had been spent and approximately $1.5 million remained to be spent on final contractor and vendor payments.
|
•
|
Le Meridien New Orleans—A comprehensive renovation encompassing guestrooms, public spaces, restaurant, bars, and meeting space to reposition the former W New Orleans, which commenced in the second quarter of 2014, was completed in the fourth quarter of 2014. The current estimated renovation cost is approximately $26.0 million. As of December 31, 2014, $19.4 million had been spent and approximately $6.6 million remained to be spent on final contractor and vendor payments.
|
•
|
Hyatt Herald Square New York—A comprehensive renovation encompassing guestrooms, public spaces, restaurant, and bar to reposition the former Holiday Inn New York City Midtown – 31st Street, which commenced in the third quarter of 2014, was completed in the fourth quarter of 2014. The renovation cost was approximately $6.5 million.
|
|
|
Payments Due by Period
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
Less Than
One Year
|
|
One to
Three Years
|
|
Three to
Five Years
|
|
More Than
Five Years
|
||||||||||
Revolving credit facility, including interest
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mortgage loans, including interest
|
|
688,305
|
|
|
34,464
|
|
|
180,593
|
|
|
53,834
|
|
|
419,414
|
|
|||||
Corporate office lease
|
|
639
|
|
|
227
|
|
|
412
|
|
|
—
|
|
|
—
|
|
|||||
Ground leases
(2)
|
|
210,924
|
|
|
3,933
|
|
|
7,867
|
|
|
7,867
|
|
|
191,257
|
|
|||||
|
|
$
|
899,868
|
|
|
$
|
38,624
|
|
|
$
|
188,872
|
|
|
$
|
61,701
|
|
|
$
|
610,671
|
|
(1)
|
Assumes no additional borrowings, and interest payments are based on the interest rate in effect as of
December 31, 2014
. Also assumes that no extension options are exercised. See the notes to our consolidated financial statements for additional information relating to our revolving credit facility.
|
(2)
|
The ground leases for the Hyatt Regency Mission Bay Spa and Marina and the JW Marriott San Francisco Union Square provide for the greater of base or percentage rent, subject to potential increases over the term of the leases. Amounts assume only base rent for all periods presented and do not assume any adjustments for potential increases.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accounting Fees and Services
|
Item 15.
|
Exhibits, Financial Statement Schedules
|
1.
|
Financial Statements
|
2.
|
Financial Statement Schedules
|
3.
|
Exhibits
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
3.1+
|
|
Articles of Amendment and Restatement of Declaration of Trust of Registrant
|
|
|
|
3.1.1
|
|
Articles Supplementary to the Articles of Amendment and Restatement of Declaration of Trust (incorporated by reference to Exhibit 3.1.1 to the Registrant's Current Report on Form 8-K filed on April 1, 2014)
|
|
|
|
3.1.2
|
|
Articles Supplementary relating to the Series A Cumulative Redeemable Preferred Shares (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on July 13, 2012)
|
|
|
|
3.2
|
|
Amended and Restated Bylaws, as amended through March 26, 2014 (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on April 1, 2014)
|
|
|
|
10.1†
|
|
Employment Agreement between Registrant and James L. Francis, dated January 27, 2015*
|
|
|
|
10.2†
|
|
Employment Agreement between Registrant and Douglas W. Vicari, dated January 27, 2015*
|
|
|
|
10.3†
|
|
Employment Agreement between Registrant and D. Rick Adams, dated January 27, 2015*
|
|
|
|
10.4†
|
|
Employment Agreement between Registrant and Graham J. Wootten, dated January 27, 2015*
|
|
|
|
10.5+
|
|
Form of Restricted Share Award Agreement for Executive Officers*
|
|
|
|
10.6+
|
|
Form of Restricted Share Agreement for Trustees*
|
|
|
|
10.7+
|
|
Form of Indemnification Agreement between Registrant and its Trustees and Executive Officers
|
|
|
|
10.8
|
|
Limited Partnership Agreement of Chesapeake Lodging, L.P. (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-11 filed on October 5, 2010)
|
|
|
|
10.8.1
|
|
Amendment No. 1 to the Limited Partnership Agreement of Chesapeake Lodging, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on July 13, 2012)
|
|
|
|
10.9
|
|
Chesapeake Lodging Trust Equity Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 filed on January 27, 2010)*
|
|
|
|
10.9.1
|
|
Amendment to the Chesapeake Lodging Trust Equity Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 30, 2012)*
|
|
|
|
10.10
|
|
Assumption and Release Agreement, dated June 30, 2011, by and among NJA Hotel LLC, as original borrower, CHSP Navy Yard LLC, as new borrower, and Wells Fargo Bank, N.A., As Trustee for Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 2006-1Q12, as lender (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2011)
|
|
|
|
10.11
|
|
Loan Agreement, dated October 1, 2006, by and between NJA Hotel LLC, as original borrower, and Morgan Stanley Mortgage Capital Inc., as lender (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2011)
|
|
|
|
10.12
|
|
Loan Agreement, dated June 30, 2011, by and between CHSP Boston II LLC, as borrower, and Goldman Sachs Commercial Mortgage Capital, L.P., as lender (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2011)
|
|
|
|
10.13
|
|
Promissory Note, dated July 27, 2012, by CHSP Denver LLC in favor of Western National Life Insurance Company (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2012)
|
|
|
|
10.14
|
|
Fee and Leasehold Deed of Trust and Security Agreement by CHSP Denver LLC, as grantor, to the Public Trustee of the (City and) County of Denver, Colorado, as trustee, for the use and benefit of Western National Life Insurance Company, as beneficiary, dated July 25, 2012 (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2012)
|
|
|
|
10.15
|
|
Third Amended and Restated Credit Agreement, dated October 25, 2012, by and among Chesapeake Lodging, L.P., as borrower, the financial institutions party thereto and their assignees under section 13.6, as lenders, and Wells Fargo Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 2012)
|
|
|
|
10.16
|
|
Loan Agreement, dated July 11, 2013, by and between CHSP San Francisco LLC, as borrower, and PNC Bank, National Association, as lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2013)
|
|
|
|
10.17
|
|
Loan Agreement, dated July 11, 2013, by and between CHSP Chicago LLC, as borrower, and Goldman Sachs Mortgage Company, as lender (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2013)
|
|
|
|
10.18
|
|
Loan Agreement, dated July 3, 2014, by and between CHSP 31st Street LLC and CHSP 36th Street LLC, as borrowers, and Goldman Sachs Mortgage Company, as lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2014)
|
|
|
|
12.1†
|
|
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends
|
|
|
|
21.1†
|
|
List of Subsidiaries of Registrant
|
|
|
|
23.1†
|
|
Consent of Ernst & Young LLP
|
|
|
|
31.1†
|
|
Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer
|
|
|
|
31.2†
|
|
Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer
|
|
|
|
32.1†
|
|
Section 1350 Certification of President and Chief Executive Officer
|
|
|
|
32.2†
|
|
Section 1350 Certification of Executive Vice President and Chief Financial Officer
|
|
|
|
101.INS XBRL†
|
|
Instance Document
|
|
|
|
101.SCH XBRL†
|
|
Taxonomy Extension Schema Document
|
|
|
|
101.CAL XBRL†
|
|
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF XBRL†
|
|
Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB XBRL†
|
|
Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE XBRL†
|
|
Taxonomy Extension Presentation Linkbase Document
|
†
|
Filed herewith
|
+
|
Incorporated by reference to the same-numbered exhibit to Amendment No. 2 to the Registrant’s IPO Registration Statement on Form S-11 filed on November 24, 2009
|
*
|
Denotes management or trustee compensation plan or arrangement
|
|
CHESAPEAKE LODGING TRUST
|
||
|
|
|
|
Date: February 19, 2015
|
By:
|
|
/
S
/ D
OUGLAS
W. V
ICARI
|
|
|
|
Douglas W. Vicari
|
|
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
Signature
|
|
Title
|
|
Date
|
|
|
|
||
/s/ T
HOMAS
A. N
ATELLI
|
|
Chairman of the Board of Trustees
|
|
February 19, 2015
|
Thomas A. Natelli
|
|
|
||
|
|
|
|
|
/s/ J
AMES
L. F
RANCIS
|
|
President, Chief Executive Officer and Trustee (Principal Executive Officer)
|
|
February 19, 2015
|
James L. Francis
|
|
|
||
|
|
|
|
|
/s/ D
OUGLAS
W. V
ICARI
|
|
Executive Vice President, Chief Financial Officer, and Trustee (Principal Financial Officer)
|
|
February 19, 2015
|
Douglas W. Vicari
|
|
|
||
|
|
|
|
|
/s/ T
HOMAS
D. E
CKERT
|
|
Trustee
|
|
February 19, 2015
|
Thomas D. Eckert
|
|
|
||
|
|
|
|
|
/s/ G
EORGE
F. M
C
K
ENZIE
|
|
Trustee
|
|
February 19, 2015
|
George F. McKenzie
|
|
|
||
|
|
|
|
|
/s/ J
OHN
W. H
ILL
|
|
Trustee
|
|
February 19, 2015
|
John W. Hill
|
|
|
||
|
|
|
|
|
/s/ J
EFFREY
D. N
UECHTERLEIN
|
|
Trustee
|
|
February 19, 2015
|
Jeffrey D. Nuechterlein
|
|
|
||
|
|
|
|
|
/s/ G
RAHAM
J. W
OOTTEN
|
|
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
|
|
February 19, 2015
|
Graham J. Wootten
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
|
December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
ASSETS
|
|
|
|
|
||||
Property and equipment, net
|
|
$
|
1,580,427
|
|
|
$
|
1,422,439
|
|
Intangible assets, net
|
|
36,992
|
|
|
38,781
|
|
||
Cash and cash equivalents
|
|
29,326
|
|
|
28,713
|
|
||
Restricted cash
|
|
43,387
|
|
|
34,235
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $161 and $91, respectively
|
|
13,102
|
|
|
13,011
|
|
||
Prepaid expenses and other assets
|
|
10,637
|
|
|
10,478
|
|
||
Deferred financing costs, net of accumulated amortization of $4,048 and $3,497, respectively
|
|
6,064
|
|
|
6,501
|
|
||
Total assets
|
|
$
|
1,719,935
|
|
|
$
|
1,554,158
|
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
||||
Long-term debt
|
|
$
|
551,723
|
|
|
$
|
531,771
|
|
Accounts payable and accrued expenses
|
|
53,442
|
|
|
45,982
|
|
||
Other liabilities
|
|
32,788
|
|
|
29,848
|
|
||
Total liabilities
|
|
637,953
|
|
|
607,601
|
|
||
Commitments and contingencies (Note 14)
|
|
|
|
|
||||
Preferred shares, $.01 par value; 100,000,000 shares authorized; Series A Cumulative Redeemable Preferred Shares; 5,000,000 shares issued and outstanding, respectively ($127,422 liquidation preference)
|
|
50
|
|
|
50
|
|
||
Common shares, $.01 par value; 400,000,000 shares authorized; 54,818,064 shares and 49,574,005 shares issued and outstanding, respectively
|
|
548
|
|
|
496
|
|
||
Additional paid-in capital
|
|
1,138,391
|
|
|
991,417
|
|
||
Cumulative dividends in excess of net income
|
|
(57,007
|
)
|
|
(45,339
|
)
|
||
Accumulated other comprehensive loss
|
|
—
|
|
|
(67
|
)
|
||
Total shareholders’ equity
|
|
1,081,982
|
|
|
946,557
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
1,719,935
|
|
|
$
|
1,554,158
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
REVENUE
|
|
|
|
|
|
|
||||||
Rooms
|
|
$
|
364,727
|
|
|
$
|
316,434
|
|
|
$
|
210,265
|
|
Food and beverage
|
|
94,307
|
|
|
86,884
|
|
|
57,673
|
|
|||
Other
|
|
18,946
|
|
|
16,859
|
|
|
10,338
|
|
|||
Total revenue
|
|
477,980
|
|
|
420,177
|
|
|
278,276
|
|
|||
|
|
|
|
|
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
||||||
Hotel operating expenses:
|
|
|
|
|
|
|
||||||
Rooms
|
|
84,445
|
|
|
73,711
|
|
|
48,159
|
|
|||
Food and beverage
|
|
71,816
|
|
|
65,090
|
|
|
41,678
|
|
|||
Other direct
|
|
8,032
|
|
|
8,042
|
|
|
5,137
|
|
|||
Indirect
|
|
160,589
|
|
|
138,120
|
|
|
90,868
|
|
|||
Total hotel operating expenses
|
|
324,882
|
|
|
284,963
|
|
|
185,842
|
|
|||
Depreciation and amortization
|
|
51,567
|
|
|
44,469
|
|
|
28,931
|
|
|||
Air rights contract amortization
|
|
520
|
|
|
520
|
|
|
520
|
|
|||
Corporate general and administrative
|
|
15,557
|
|
|
13,125
|
|
|
11,297
|
|
|||
Hotel acquisition costs
|
|
3,622
|
|
|
4,222
|
|
|
2,994
|
|
|||
Total operating expenses
|
|
396,148
|
|
|
347,299
|
|
|
229,584
|
|
|||
Operating income
|
|
81,832
|
|
|
72,878
|
|
|
48,692
|
|
|||
Interest income
|
|
8
|
|
|
247
|
|
|
199
|
|
|||
Interest expense
|
|
(27,357
|
)
|
|
(25,780
|
)
|
|
(20,976
|
)
|
|||
Gain on sale of hotel
|
|
7,006
|
|
|
—
|
|
|
—
|
|
|||
Loss on early extinguishment of debt
|
|
—
|
|
|
(372
|
)
|
|
—
|
|
|||
Income before income taxes
|
|
61,489
|
|
|
46,973
|
|
|
27,915
|
|
|||
Income tax expense
|
|
(535
|
)
|
|
(1,655
|
)
|
|
(738
|
)
|
|||
Net income
|
|
60,954
|
|
|
45,318
|
|
|
27,177
|
|
|||
Preferred share dividends
|
|
(9,688
|
)
|
|
(9,688
|
)
|
|
(4,413
|
)
|
|||
Net income available to common shareholders
|
|
$
|
51,266
|
|
|
$
|
35,630
|
|
|
$
|
22,764
|
|
|
|
|
|
|
|
|
||||||
Net income available per common share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
1.01
|
|
|
$
|
0.75
|
|
|
$
|
0.66
|
|
Diluted
|
|
$
|
1.00
|
|
|
$
|
0.75
|
|
|
$
|
0.66
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Net income
|
|
$
|
60,954
|
|
|
$
|
45,318
|
|
|
$
|
27,177
|
|
Other comprehensive income:
|
|
|
|
|
|
|
||||||
Unrealized losses on cash flow hedge instruments
|
|
(9
|
)
|
|
(109
|
)
|
|
(682
|
)
|
|||
Reclassification of unrealized losses on cash flow hedge instruments to interest expense
|
|
76
|
|
|
871
|
|
|
983
|
|
|||
Comprehensive income
|
|
$
|
61,021
|
|
|
$
|
46,080
|
|
|
$
|
27,478
|
|
|
|
Preferred Shares
|
|
Common Shares
|
|
Additional Paid-In Capital
|
|
Cumulative
Dividends in
Excess of Net Income
|
|
Accumulated
Other
Comprehensive Loss
|
|
|
||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
Total
|
|||||||||||||||||
Balances at December 31, 2011
|
|
—
|
|
|
$
|
—
|
|
|
32,161,620
|
|
|
$
|
322
|
|
|
$
|
543,861
|
|
|
$
|
(22,924
|
)
|
|
$
|
(1,130
|
)
|
|
$
|
520,129
|
|
Sale of common shares, net of underwriting fees and offering costs
|
|
—
|
|
|
—
|
|
|
7,475,000
|
|
|
75
|
|
|
132,515
|
|
|
—
|
|
|
—
|
|
|
132,590
|
|
||||||
Sale of preferred shares, net of underwriting fees and offering costs
|
|
5,000,000
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|
120,531
|
|
|
—
|
|
|
—
|
|
|
120,581
|
|
||||||
Repurchase of common shares
|
|
—
|
|
|
—
|
|
|
(44,250
|
)
|
|
(1
|
)
|
|
(794
|
)
|
|
—
|
|
|
—
|
|
|
(795
|
)
|
||||||
Issuance of restricted common shares
|
|
—
|
|
|
—
|
|
|
192,900
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Issuance of unrestricted common shares
|
|
—
|
|
|
—
|
|
|
4,239
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80
|
|
||||||
Forfeiture of restricted common shares
|
|
—
|
|
|
—
|
|
|
(25,579
|
)
|
|
—
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
47
|
|
||||||
Amortization of deferred compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,085
|
|
|
—
|
|
|
—
|
|
|
3,085
|
|
||||||
Declaration of dividends on common shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,599
|
)
|
|
—
|
|
|
(31,599
|
)
|
||||||
Declaration of dividends on preferred shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,790
|
)
|
|
—
|
|
|
(4,790
|
)
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,177
|
|
|
—
|
|
|
27,177
|
|
||||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
301
|
|
|
301
|
|
||||||
Balances at December 31, 2012
|
|
5,000,000
|
|
|
$
|
50
|
|
|
39,763,930
|
|
|
$
|
398
|
|
|
$
|
799,278
|
|
|
$
|
(32,089
|
)
|
|
$
|
(829
|
)
|
|
$
|
766,808
|
|
Sale of common shares, net of underwriting fees and offering costs
|
|
—
|
|
|
—
|
|
|
9,349,558
|
|
|
94
|
|
|
189,300
|
|
|
—
|
|
|
—
|
|
|
189,394
|
|
||||||
Repurchase of common shares
|
|
—
|
|
|
—
|
|
|
(76,358
|
)
|
|
(1
|
)
|
|
(1,768
|
)
|
|
—
|
|
|
—
|
|
|
(1,769
|
)
|
||||||
Issuance of restricted common shares
|
|
—
|
|
|
—
|
|
|
537,400
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of unrestricted common shares
|
|
—
|
|
|
—
|
|
|
3,475
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80
|
|
||||||
Forfeiture of restricted common shares
|
|
—
|
|
|
—
|
|
|
(4,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of deferred compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,532
|
|
|
—
|
|
|
—
|
|
|
4,532
|
|
||||||
Declaration of dividends on common shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,880
|
)
|
|
—
|
|
|
(48,880
|
)
|
||||||
Declaration of dividends on preferred shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,688
|
)
|
|
—
|
|
|
(9,688
|
)
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,318
|
|
|
—
|
|
|
45,318
|
|
||||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
762
|
|
|
762
|
|
||||||
Balances at December 31, 2013
|
|
5,000,000
|
|
|
$
|
50
|
|
|
49,574,005
|
|
|
$
|
496
|
|
|
$
|
991,417
|
|
|
$
|
(45,339
|
)
|
|
$
|
(67
|
)
|
|
$
|
946,557
|
|
Sale of common shares, net of underwriting fees and offering costs
|
|
—
|
|
|
—
|
|
|
4,830,000
|
|
|
48
|
|
|
143,880
|
|
|
—
|
|
|
—
|
|
|
143,928
|
|
||||||
Repurchase of common shares
|
|
—
|
|
|
—
|
|
|
(79,417
|
)
|
|
(1
|
)
|
|
(2,704
|
)
|
|
—
|
|
|
—
|
|
|
(2,705
|
)
|
||||||
Issuance of restricted common shares
|
|
—
|
|
|
—
|
|
|
491,564
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of unrestricted common shares
|
|
—
|
|
|
—
|
|
|
2,662
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80
|
|
||||||
Forfeiture of restricted common shares
|
|
—
|
|
|
—
|
|
|
(750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of deferred compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,723
|
|
|
—
|
|
|
—
|
|
|
5,723
|
|
||||||
Declaration of dividends on common shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62,934
|
)
|
|
—
|
|
|
(62,934
|
)
|
||||||
Declaration of dividends on preferred shares
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,688
|
)
|
|
—
|
|
|
(9,688
|
)
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,954
|
|
|
—
|
|
|
60,954
|
|
||||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
67
|
|
||||||
Balances at December 31, 2014
|
|
5,000,000
|
|
|
$
|
50
|
|
|
54,818,064
|
|
|
$
|
548
|
|
|
$
|
1,138,391
|
|
|
$
|
(57,007
|
)
|
|
$
|
—
|
|
|
$
|
1,081,982
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
60,954
|
|
|
$
|
45,318
|
|
|
$
|
27,177
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
51,567
|
|
|
44,469
|
|
|
28,931
|
|
|||
Air rights contract amortization
|
|
520
|
|
|
520
|
|
|
520
|
|
|||
Deferred financing costs amortization
|
|
2,448
|
|
|
2,837
|
|
|
2,081
|
|
|||
Gain on sale of hotel
|
|
(7,006
|
)
|
|
—
|
|
|
—
|
|
|||
Loss on early extinguishment of debt
|
|
—
|
|
|
372
|
|
|
—
|
|
|||
Share-based compensation
|
|
5,803
|
|
|
4,612
|
|
|
3,165
|
|
|||
Other
|
|
625
|
|
|
(295
|
)
|
|
(523
|
)
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable, net
|
|
1,277
|
|
|
(2,543
|
)
|
|
(197
|
)
|
|||
Prepaid expenses and other assets
|
|
(290
|
)
|
|
(3,305
|
)
|
|
18
|
|
|||
Accounts payable and accrued expenses
|
|
3,766
|
|
|
7,203
|
|
|
6,552
|
|
|||
Other liabilities
|
|
(30
|
)
|
|
774
|
|
|
13
|
|
|||
Net cash provided by operating activities
|
|
119,634
|
|
|
99,962
|
|
|
67,737
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
||||||
Acquisition of hotels, net of cash acquired
|
|
(152,292
|
)
|
|
(331,058
|
)
|
|
(231,051
|
)
|
|||
Disposition of hotel, net of cash sold
|
|
31,822
|
|
|
—
|
|
|
—
|
|
|||
Deposit on hotel acquisition
|
|
—
|
|
|
—
|
|
|
(700
|
)
|
|||
Receipt of deposit on hotel acquisition
|
|
—
|
|
|
700
|
|
|
—
|
|
|||
Improvements and additions to hotels
|
|
(87,182
|
)
|
|
(28,235
|
)
|
|
(23,847
|
)
|
|||
Repayment of (investment in) hotel construction loan
|
|
—
|
|
|
7,810
|
|
|
(7,810
|
)
|
|||
Change in restricted cash
|
|
(2,164
|
)
|
|
(10,775
|
)
|
|
(7,051
|
)
|
|||
Net cash used in investing activities
|
|
(209,816
|
)
|
|
(361,558
|
)
|
|
(270,459
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
||||||
Proceeds from sale of common shares, net of underwriting fees
|
|
144,320
|
|
|
189,862
|
|
|
132,756
|
|
|||
Proceeds from sale of preferred shares, net of underwriting fees
|
|
—
|
|
|
—
|
|
|
121,062
|
|
|||
Payment of offering costs related to sale of common and preferred shares
|
|
(392
|
)
|
|
(468
|
)
|
|
(647
|
)
|
|||
Borrowings under revolving credit facility
|
|
100,000
|
|
|
105,000
|
|
|
198,000
|
|
|||
Repayments under revolving credit facility
|
|
(100,000
|
)
|
|
(155,000
|
)
|
|
(293,000
|
)
|
|||
Proceeds from issuance of mortgage debt
|
|
90,000
|
|
|
312,500
|
|
|
95,000
|
|
|||
Principal prepayment of mortgage debt
|
|
—
|
|
|
(130,000
|
)
|
|
—
|
|
|||
Scheduled principal payments on mortgage debt
|
|
(69,837
|
)
|
|
(5,726
|
)
|
|
(2,317
|
)
|
|||
Payment of deferred financing costs
|
|
(2,011
|
)
|
|
(3,080
|
)
|
|
(3,445
|
)
|
|||
Payment of dividends to common shareholders
|
|
(58,892
|
)
|
|
(44,516
|
)
|
|
(29,290
|
)
|
|||
Payment of dividends to preferred shareholders
|
|
(9,688
|
)
|
|
(9,688
|
)
|
|
(2,368
|
)
|
|||
Repurchase of common shares
|
|
(2,705
|
)
|
|
(1,769
|
)
|
|
(795
|
)
|
|||
Net cash provided by financing activities
|
|
90,795
|
|
|
257,115
|
|
|
214,956
|
|
|||
Net increase (decrease) in cash
|
|
613
|
|
|
(4,481
|
)
|
|
12,234
|
|
|||
Cash and cash equivalents, beginning of period
|
|
28,713
|
|
|
33,194
|
|
|
20,960
|
|
|||
Cash and cash equivalents, end of period
|
|
$
|
29,326
|
|
|
$
|
28,713
|
|
|
$
|
33,194
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
||||||
Cash paid for interest
|
|
$
|
24,976
|
|
|
$
|
22,421
|
|
|
$
|
18,830
|
|
Cash paid for income taxes
|
|
$
|
1,126
|
|
|
$
|
1,590
|
|
|
$
|
597
|
|
Hotel
|
|
Location
|
|
Rooms
|
|
Net Assets
Acquired
|
|
Acquisition Date
|
||
2012 Acquisitions:
|
|
|
|
|
|
|
|
|
||
W Chicago – Lakeshore
|
|
Chicago, IL
|
|
520
|
|
|
124,920
|
|
|
August 21, 2012
|
Hyatt Regency Mission Bay Spa and Marina
(1)
|
|
San Diego, CA
|
|
429
|
|
|
59,900
|
|
|
September 7, 2012
|
The Hotel Minneapolis, Autograph Collection
|
|
Minneapolis, MN
|
|
222
|
|
|
46,372
|
|
|
October 30, 2012
|
|
|
|
|
1,171
|
|
|
231,192
|
|
|
|
2013 Acquisitions:
|
|
|
|
|
|
|
|
|
||
Hyatt Place New York Midtown South
|
|
New York, NY
|
|
185
|
|
|
76,362
|
|
|
March 14, 2013
|
W New Orleans – French Quarter
|
|
New Orleans, LA
|
|
97
|
|
|
25,595
|
|
|
March 28, 2013
|
Le Meridien New Orleans
|
|
New Orleans, LA
|
|
410
|
|
|
65,786
|
|
|
April 25, 2013
|
Hyatt Fisherman's Wharf
|
|
San Francisco, CA
|
|
313
|
|
|
102,485
|
|
|
May 31, 2013
|
Hyatt Santa Barbara
|
|
Santa Barbara, CA
|
|
200
|
|
|
60,972
|
|
|
June 27, 2013
|
|
|
|
|
1,205
|
|
|
331,200
|
|
|
|
2014 Acquisition:
|
|
|
|
|
|
|
|
|
||
JW Marriott San Francisco Union Square
(2)
|
|
San Francisco, CA
|
|
337
|
|
|
154,143
|
|
|
October 1, 2014
|
|
|
|
|
337
|
|
|
154,143
|
|
|
|
(1)
|
As part of the acquisition, the Trust assumed a ground lease, which has an initial term ending
January 2056
. See Note 14, "Commitments and Contingencies," for additional information relating to the lease agreement.
|
(2)
|
As part of the acquisition, the Trust assumed a ground lease, which has a term ending
January 2083
. See Note 14, "Commitments and Contingencies," for additional information relating to the lease agreement.
|
|
|
Acquisitions
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Land and land improvements
|
|
$
|
—
|
|
|
$
|
82,462
|
|
|
$
|
42,350
|
|
Buildings and leasehold improvements
|
|
139,150
|
|
|
228,349
|
|
|
178,421
|
|
|||
Furniture, fixtures and equipment
|
|
8,000
|
|
|
20,140
|
|
|
12,811
|
|
|||
Cash
|
|
1,851
|
|
|
142
|
|
|
141
|
|
|||
Restricted cash
|
|
6,937
|
|
|
—
|
|
|
1,375
|
|
|||
Accounts receivable, net
|
|
1,513
|
|
|
2,084
|
|
|
1,885
|
|
|||
Prepaid expenses and other assets
|
|
132
|
|
|
1,633
|
|
|
1,246
|
|
|||
Accounts payable and accrued expenses
|
|
(3,440
|
)
|
|
(3,610
|
)
|
|
(6,909
|
)
|
|||
Other liabilities
|
|
—
|
|
|
—
|
|
|
(128
|
)
|
|||
Net assets acquired
|
|
$
|
154,143
|
|
|
$
|
331,200
|
|
|
$
|
231,192
|
|
|
|
Year Ended December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Total revenue
|
|
$
|
509,273
|
|
|
$
|
486,816
|
|
Total hotel operating expenses
|
|
347,802
|
|
|
337,184
|
|
||
Total operating expenses
|
|
416,611
|
|
|
403,252
|
|
||
Operating income
|
|
92,662
|
|
|
83,564
|
|
||
Net income available to common shareholders
|
|
61,857
|
|
|
45,252
|
|
||
Net income available per common share:
|
|
|
|
|
||||
Basic
|
|
$
|
1.14
|
|
|
$
|
0.85
|
|
Diluted
|
|
$
|
1.13
|
|
|
$
|
0.85
|
|
|
|
December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Land and land improvements
|
|
$
|
255,037
|
|
|
$
|
262,322
|
|
Buildings and leasehold improvements
|
|
1,312,529
|
|
|
1,136,808
|
|
||
Furniture, fixtures and equipment
|
|
138,163
|
|
|
103,291
|
|
||
Construction-in-progress
|
|
20,205
|
|
|
16,593
|
|
||
|
|
1,725,934
|
|
|
1,519,014
|
|
||
Less: accumulated depreciation and amortization
|
|
(145,507
|
)
|
|
(96,575
|
)
|
||
Property and equipment, net
|
|
$
|
1,580,427
|
|
|
$
|
1,422,439
|
|
|
|
December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Intangible assets:
|
|
|
|
|
||||
Air rights contract
(1)
|
|
$
|
36,105
|
|
|
$
|
36,105
|
|
Favorable ground leases
(2)
|
|
3,568
|
|
|
4,828
|
|
||
|
|
39,673
|
|
|
40,933
|
|
||
Less: accumulated amortization
|
|
(2,681
|
)
|
|
(2,152
|
)
|
||
Intangible assets, net
|
|
$
|
36,992
|
|
|
$
|
38,781
|
|
|
|
|
|
|
||||
Intangible liability:
|
|
|
|
|
||||
Unfavorable contract liability
(2)
|
|
$
|
14,236
|
|
|
$
|
14,236
|
|
Less: accumulated amortization
|
|
(1,276
|
)
|
|
(883
|
)
|
||
Intangible liability, net (included within other liabilities)
|
|
$
|
12,960
|
|
|
$
|
13,353
|
|
(1)
|
In conjunction with the acquisition of the Hyatt Regency Boston on March 18, 2010, the Trust acquired an air rights contract which expires in
September 2079
and that requires no payments through maturity. The Trust recorded the fair value of the air rights contract of
$36.1 million
as an intangible asset and is amortizing the value over the term of the contract.
|
(2)
|
In conjunction with the acquisition of the Denver Marriott City Center on October 3, 2011, the Trust assumed
three
lease agreements for land parcels underlying a portion of the hotel with initial terms ending
July 2068
,
February 2072
and
April 2072
. The Trust concluded that the terms of
two
of the
three
ground leases were below market terms and recorded an aggregate of
$4.8 million
of favorable ground lease assets, which the Trust is amortizing over the life of the respective leases and including within indirect hotel operating expenses in the consolidated statements of operations. On July 29, 2014, the Trust terminated
one
of the
two
ground leases with below market terms in connection with acquiring the associated land parcel and recognized a
$1.2 million
loss on impairment of intangible asset, which is included within indirect hotel operating expenses in the consolidated statement of operations for the year ended December 31, 2014. Also in conjunction with the acquisition of the Denver Marriott City Center, the Trust assumed a management contract with a non-cancelable term ending
December 2047
. The Trust concluded that the management agreement terms were above market terms and recorded a
$14.2 million
unfavorable contract liability, which the Trust is amortizing over the remaining non-cancelable term and including within indirect hotel operating expenses in the consolidated statements of operations.
|
|
Origination
|
|
Original Principal Amount
|
|
|
|
Interest Rate
|
|
Principal Amortization Period
|
|
December 31,
|
||||||
|
|
|
Maturity
|
|
|
|
2014
|
|
2013
|
||||||||
Revolving credit facility
(1)
|
July 2010
|
|
n/a
|
|
April 2016
|
|
Floating
|
|
n/a
|
|
$
|
—
|
|
|
$
|
—
|
|
Term loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Hyatt Herald Square New York/Hyatt Place New York Midtown South
(2)
|
July 2012
|
|
$60,000
|
|
July 2014
|
|
Floating
|
|
n/a
|
|
—
|
|
|
60,000
|
|
||
Other mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Hyatt Regency Boston
|
June 2011
|
|
$95,000
|
|
July 2016
|
|
5.01%
|
|
30
|
|
90,184
|
|
|
91,689
|
|
||
Courtyard Washington Capitol Hill/Navy Yard
(3)
|
June 2011
|
|
$37,497
|
|
November 2016
|
|
5.90%
|
|
30
|
|
35,245
|
|
|
35,956
|
|
||
Boston Marriott Newton
|
May 2013
|
|
$60,000
|
|
June 2020
|
|
3.63%
|
|
25
|
|
57,776
|
|
|
59,274
|
|
||
Le Meridien San Francisco
|
July 2013
|
|
$92,500
|
|
August 2020
|
|
3.50%
|
|
25
|
|
89,402
|
|
|
91,742
|
|
||
Denver Marriott City Center
(4)
|
July 2012
|
|
$70,000
|
|
August 2022
|
|
4.90%
|
|
30
|
|
67,464
|
|
|
68,586
|
|
||
Hilton Checkers Los Angeles
|
February 2013
|
|
$32,000
|
|
March 2023
|
|
4.11%
|
|
30
|
|
31,054
|
|
|
31,606
|
|
||
W Chicago – City Center
|
July 2013
|
|
$93,000
|
|
August 2023
|
|
4.25%
|
|
25
|
|
90,211
|
|
|
92,320
|
|
||
Hyatt Herald Square New York/Hyatt Place New York Midtown South
(5)
|
July 2014
|
|
$90,000
|
|
July 2024
|
|
4.30%
|
|
30
|
|
90,000
|
|
|
—
|
|
||
|
|
|
|
|
|
|
|
|
|
|
551,336
|
|
|
531,173
|
|
||
Unamortized premium
(3)
|
|
|
|
|
|
|
|
|
|
|
387
|
|
|
598
|
|
||
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
$
|
551,723
|
|
|
$
|
531,771
|
|
(1)
|
The Trust may exercise an option to extend the maturity by
one
year, subject to certain customary conditions. As of
December 31, 2014
, the interest rate in effect was
1.92%
. See below for additional information related to the revolving credit facility.
|
(2)
|
At origination,
$25.0 million
was advanced by the lender and was secured by the Hyatt Herald Square New York. On March 14, 2013,
$35.0 million
was advanced by the lender in connection with the acquisition of the Hyatt Place New York Midtown South. Following the subsequent advance, the entire
$60.0 million
principal amount of the loan was secured by both hotels. The loan bore interest equal to LIBOR plus
3.25%
. Contemporaneous with the origination of the term loan, the Trust entered into an interest rate swap to effectively fix the interest rate on the initial
$25.0 million
advance for the original
two
-year term at
3.75%
per annum. Under the terms of this interest rate swap, the Trust paid fixed interest of
0.50%
per annum on a notional amount of
$25.0 million
and received floating rate interest equal to the one-month LIBOR. The effective date of this interest rate swap was
July 3, 2012
and it matured on
July 3, 2014
. Contemporaneous with the subsequent advance, the Trust entered into an interest rate swap to effectively fix the interest rate on the
$35.0 million
subsequent advance for the remaining initial term of the loan at
3.65%
per annum. Under the terms of this interest rate swap, the Trust paid fixed interest of
0.40%
per annum on a notional amount of
$35.0 million
and received floating rate interest equal to the one-month LIBOR. The effective date of this interest rate swap was
March 14, 2013
and it matured on
July 3, 2014
. The Trust repaid the term loan at maturity on
July 3, 2014
.
|
(3)
|
On June 30, 2011, in connection with the acquisition of the Courtyard Washington Capitol Hill/Navy Yard, the Trust assumed an existing loan agreement with an outstanding principal balance of
$37.5 million
. Based on interest rates on similar types of debt instruments at the time of assumption, the Trust recorded the loan at its estimated fair value of
$38.6 million
, which included a premium on mortgage loan of
$1.1 million
. Amortization of premium on mortgage loan is computed using a method that approximates the effective interest method over the term of the loan agreement and is included in interest expense in the consolidated statements of operations.
|
(4)
|
The loan has a term of
30
years, but is callable by the lender after
10
years, and the Trust expects the lender to call the loan at that time. The indicated maturity is based on the date the loan is callable by the lender.
|
(5)
|
The loan requires interest-only payments for the first
two
years and principal and interest payments thereafter.
|
Year
|
|
Amounts
|
||
2015
|
|
$
|
10,271
|
|
2016
|
|
131,909
|
|
|
2017
|
|
10,074
|
|
|
2018
|
|
10,493
|
|
|
2019
|
|
10,930
|
|
|
Thereafter
|
|
377,659
|
|
|
|
|
$
|
551,336
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Numerator:
|
|
|
|
|
|
|
||||||
Net income available to common shareholders
|
|
$
|
51,266
|
|
|
$
|
35,630
|
|
|
$
|
22,764
|
|
Less: Dividends declared on unvested time-based awards
|
|
(499
|
)
|
|
(361
|
)
|
|
(177
|
)
|
|||
Less: Undistributed earnings allocated to unvested time-based awards
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income available to common shareholders, excluding amounts attributable to unvested time-based awards
|
|
$
|
50,767
|
|
|
$
|
35,269
|
|
|
$
|
22,587
|
|
Denominator:
|
|
|
|
|
|
|
||||||
Weighted-average number of common shares outstanding—basic
|
|
50,488,007
|
|
|
47,295,089
|
|
|
34,048,752
|
|
|||
Effect of dilutive unvested performance-based awards
|
|
402,854
|
|
|
—
|
|
|
—
|
|
|||
Weighted-average number of common shares outstanding–diluted
|
|
50,890,861
|
|
|
47,295,089
|
|
|
34,048,752
|
|
|||
Net income available per common share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
1.01
|
|
|
$
|
0.75
|
|
|
$
|
0.66
|
|
Diluted
|
|
$
|
1.00
|
|
|
$
|
0.75
|
|
|
$
|
0.66
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
First Quarter
|
|
$
|
0.484375
|
|
|
$
|
0.484375
|
|
|
$
|
—
|
|
Second Quarter
|
|
0.484375
|
|
|
0.484375
|
|
|
—
|
|
|||
Third Quarter
|
|
0.484375
|
|
|
0.484375
|
|
|
0.473600
|
|
|||
Fourth Quarter
|
|
0.484375
|
|
|
0.484375
|
|
|
0.484375
|
|
|||
|
|
$
|
1.937500
|
|
|
$
|
1.937500
|
|
|
$
|
0.957975
|
|
Trust TSR as % of
Index Total Return
|
|
Payout
(% of Maximum)
|
<67%
|
|
0%
|
67%
|
|
25%
|
100%
|
|
50%
|
≥133%
|
|
100%
|
|
|
Number of
Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
|||
Restricted common shares as of December 31, 2011
|
|
366,734
|
|
|
$
|
17.75
|
|
Granted
|
|
192,900
|
|
|
$
|
20.28
|
|
Vested
|
|
(192,472
|
)
|
|
$
|
17.40
|
|
Forfeited
|
|
(25,579
|
)
|
|
$
|
15.00
|
|
Restricted common shares as of December 31, 2012
|
|
341,583
|
|
|
$
|
19.59
|
|
Granted
|
|
537,400
|
|
|
$
|
17.50
|
|
Vested
|
|
(245,128
|
)
|
|
$
|
18.20
|
|
Forfeited
|
|
(4,000
|
)
|
|
$
|
22.07
|
|
Restricted common shares as of December 31, 2013
|
|
629,855
|
|
|
$
|
18.33
|
|
Granted
|
|
491,564
|
|
|
$
|
13.83
|
|
Vested
|
|
(193,117
|
)
|
|
$
|
18.68
|
|
Forfeited
|
|
(750
|
)
|
|
$
|
23.58
|
|
Restricted common shares as of December 31, 2014
|
|
927,552
|
|
|
$
|
15.87
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Current:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
685
|
|
|
$
|
1,330
|
|
|
$
|
305
|
|
State
|
|
141
|
|
|
314
|
|
|
48
|
|
|||
|
|
826
|
|
|
1,644
|
|
|
353
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
Federal
|
|
(243
|
)
|
|
12
|
|
|
304
|
|
|||
State
|
|
(48
|
)
|
|
(1
|
)
|
|
81
|
|
|||
|
|
(291
|
)
|
|
11
|
|
|
385
|
|
|||
Income tax expense
|
|
$
|
535
|
|
|
$
|
1,655
|
|
|
$
|
738
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Statutory federal income tax expense
|
|
$
|
20,906
|
|
|
$
|
15,971
|
|
|
$
|
9,491
|
|
Effect of non-taxable REIT income
|
|
(20,764
|
)
|
|
(14,445
|
)
|
|
(8,761
|
)
|
|||
State income tax expense, net of federal taxes
|
|
60
|
|
|
209
|
|
|
73
|
|
|||
Other
|
|
333
|
|
|
(80
|
)
|
|
(65
|
)
|
|||
Income tax expense
|
|
$
|
535
|
|
|
$
|
1,655
|
|
|
$
|
738
|
|
|
|
December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
Deferred tax asset:
|
|
|
|
|
||||
Employee-related compensation
|
|
$
|
108
|
|
|
$
|
95
|
|
Other
|
|
278
|
|
|
—
|
|
||
|
|
386
|
|
|
95
|
|
||
Deferred tax liability:
|
|
|
|
|
||||
Other
|
|
18
|
|
|
19
|
|
||
|
|
18
|
|
|
19
|
|
||
Net deferred tax asset
|
|
$
|
368
|
|
|
$
|
76
|
|
|
|
Quarter Ended - 2014
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
|
|
(in thousands, except per share data)
|
||||||||||||||
Total revenue
|
|
$
|
94,774
|
|
|
$
|
128,865
|
|
|
$
|
130,840
|
|
|
$
|
123,501
|
|
Total operating expenses
|
|
89,307
|
|
|
98,232
|
|
|
101,070
|
|
|
107,539
|
|
||||
Operating income
|
|
5,467
|
|
|
30,633
|
|
|
29,770
|
|
|
15,962
|
|
||||
Net income
|
|
2,178
|
|
|
21,249
|
|
|
28,688
|
|
|
8,839
|
|
||||
Net income (loss) available to common shareholders, excluding amounts attributable to unvested time-based awards
(1)
|
|
(373
|
)
|
|
18,664
|
|
|
26,054
|
|
|
6,303
|
|
||||
Net income (loss) available per common share
(2)
:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
(0.01
|
)
|
|
0.38
|
|
|
0.52
|
|
|
0.12
|
|
||||
Diluted
|
|
(0.01
|
)
|
|
0.38
|
|
|
0.52
|
|
|
0.12
|
|
|
|
Quarter Ended - 2013
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
|
|
(in thousands, except per share data)
|
||||||||||||||
Total revenue
|
|
$
|
70,601
|
|
|
$
|
115,570
|
|
|
$
|
122,443
|
|
|
$
|
111,563
|
|
Total operating expenses
|
|
70,172
|
|
|
89,218
|
|
|
94,992
|
|
|
92,917
|
|
||||
Operating income
|
|
429
|
|
|
26,352
|
|
|
27,451
|
|
|
18,646
|
|
||||
Net income (loss)
|
|
(2,510
|
)
|
|
17,057
|
|
|
19,243
|
|
|
11,528
|
|
||||
Net income (loss) available to common shareholders, excluding amounts attributable to unvested time-based awards
(1)
|
|
(5,020
|
)
|
|
14,522
|
|
|
16,690
|
|
|
9,021
|
|
||||
Net income (loss) available per common share
(2)
:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
(0.11
|
)
|
|
0.30
|
|
|
0.35
|
|
|
0.18
|
|
||||
Diluted
|
|
(0.11
|
)
|
|
0.30
|
|
|
0.35
|
|
|
0.18
|
|
(1)
|
The sum of amounts for the four quarters may differ from the annual amount due to the required method of computing the two-class method in the respective periods.
|
(2)
|
The sum of per share amounts for the four quarters may differ from the annual per share amount due to the required method of computing weighted-average number of common shares outstanding in the respective periods.
|
Description
|
|
Encumbrances
|
|
Initial Cost
|
|
Costs Capitalized
Subsequent to
Acquisition
|
|
Gross Amount at End of Year
|
|
Accumulated
Depreciation
|
|
Year of
Acquisition
|
|
Depreciation
Life
|
||||||||||||||||||||||
|
Land
|
|
Buildings and
Improvements
|
|
|
Land
|
|
Buildings and
Improvements
|
|
Total
|
|
|||||||||||||||||||||||||
Hyatt Regency Boston
Boston, Massachusetts
|
|
$
|
90,184
|
|
|
$
|
—
|
|
|
$
|
71,462
|
|
|
$
|
6,612
|
|
|
$
|
75
|
|
|
$
|
77,999
|
|
|
$
|
78,074
|
|
|
$
|
9,649
|
|
|
2010
|
|
40 years
|
Hilton Checkers Los Angeles
Los Angeles, California
|
|
31,054
|
|
|
9,010
|
|
|
32,710
|
|
|
1,990
|
|
|
9,022
|
|
|
34,688
|
|
|
43,710
|
|
|
3,972
|
|
|
2010
|
|
40 years
|
||||||||
Boston Marriott Newton
Newton, Massachusetts
|
|
57,776
|
|
|
11,800
|
|
|
56,450
|
|
|
778
|
|
|
11,998
|
|
|
57,030
|
|
|
69,028
|
|
|
6,331
|
|
|
2010
|
|
40 years
|
||||||||
Le Meridien San Francisco
San Francisco, California
|
|
89,402
|
|
|
28,737
|
|
|
100,734
|
|
|
3,363
|
|
|
28,768
|
|
|
104,066
|
|
|
132,834
|
|
|
10,722
|
|
|
2010
|
|
40 years
|
||||||||
Homewood Suites Seattle Convention Center
Seattle, Washington
|
|
(1
|
)
|
|
6,266
|
|
|
44,004
|
|
|
759
|
|
|
6,266
|
|
|
44,763
|
|
|
51,029
|
|
|
4,124
|
|
|
2011
|
|
40 years
|
||||||||
W Chicago – City Center
Chicago, Illinois
|
|
90,211
|
|
|
29,800
|
|
|
93,464
|
|
|
6,334
|
|
|
29,800
|
|
|
99,798
|
|
|
129,598
|
|
|
9,374
|
|
|
2011
|
|
40 years
|
||||||||
Hotel Indigo San Diego Gaslamp Quarter
San Diego, California
|
|
(1
|
)
|
|
8,300
|
|
|
43,000
|
|
|
660
|
|
|
8,308
|
|
|
43,652
|
|
|
51,960
|
|
|
3,846
|
|
|
2011
|
|
40 years
|
||||||||
Courtyard Washington Capitol Hill/Navy Yard
Washington, DC
|
|
35,245
|
|
|
9,661
|
|
|
57,930
|
|
|
1,415
|
|
|
9,661
|
|
|
59,345
|
|
|
69,006
|
|
|
5,194
|
|
|
2011
|
|
40 years
|
||||||||
Hotel Adagio San Francisco, Autograph Collection
San Francisco, California
|
|
(1
|
)
|
|
7,900
|
|
|
33,973
|
|
|
5,397
|
|
|
7,905
|
|
|
39,365
|
|
|
47,270
|
|
|
3,825
|
|
|
2011
|
|
40 years
|
||||||||
Denver Marriott City Center
Denver, Colorado
|
|
67,464
|
|
|
3,500
|
|
|
118,209
|
|
|
4,836
|
|
|
4,026
|
|
|
122,519
|
|
|
126,545
|
|
|
9,819
|
|
|
2011
|
|
40 years
|
||||||||
Hyatt Herald Square New York
New York, New York
|
|
(2
|
)
|
|
14,350
|
|
|
36,325
|
|
|
5,260
|
|
|
14,365
|
|
|
41,570
|
|
|
55,935
|
|
|
2,834
|
|
|
2011
|
|
40 years
|
||||||||
W Chicago – Lakeshore
Chicago, Illinois
|
|
(1
|
)
|
|
40,000
|
|
|
80,800
|
|
|
26,688
|
|
|
40,019
|
|
|
107,469
|
|
|
147,488
|
|
|
5,946
|
|
|
2012
|
|
40 years
|
||||||||
Hyatt Regency Mission Bay Spa and Marina
San Diego, California
|
|
—
|
|
|
—
|
|
|
57,633
|
|
|
1,033
|
|
|
—
|
|
|
58,666
|
|
|
58,666
|
|
|
3,419
|
|
|
2012
|
|
40 years
|
||||||||
The Hotel Minneapolis, Autograph Collection
Minneapolis, Minnesota
|
|
(1
|
)
|
|
2,350
|
|
|
39,988
|
|
|
299
|
|
|
2,350
|
|
|
40,287
|
|
|
42,637
|
|
|
2,179
|
|
|
2012
|
|
40 years
|
||||||||
Hyatt Place New York Midtown South
New York, New York
|
|
(2
|
)
|
|
18,470
|
|
|
55,002
|
|
|
158
|
|
|
18,477
|
|
|
55,153
|
|
|
73,630
|
|
|
2,534
|
|
|
2013
|
|
40 years
|
||||||||
W New Orleans – French Quarter
New Orleans, Louisiana
|
|
—
|
|
|
4,092
|
|
|
19,468
|
|
|
44
|
|
|
4,097
|
|
|
19,507
|
|
|
23,604
|
|
|
855
|
|
|
2013
|
|
40 years
|
||||||||
Le Meridien New Orleans
New Orleans, Louisiana
|
|
(1
|
)
|
|
4,700
|
|
|
54,875
|
|
|
13,022
|
|
|
4,700
|
|
|
67,897
|
|
|
72,597
|
|
|
2,365
|
|
|
2013
|
|
40 years
|
||||||||
Hyatt Fisherman's Wharf
San Francisco, California
|
|
(1
|
)
|
|
24,200
|
|
|
74,400
|
|
|
73
|
|
|
24,200
|
|
|
74,473
|
|
|
98,673
|
|
|
2,950
|
|
|
2013
|
|
40 years
|
||||||||
Hyatt Santa Barbara
Santa Barbara, California
|
|
(1
|
)
|
|
31,000
|
|
|
24,604
|
|
|
197
|
|
|
31,000
|
|
|
24,801
|
|
|
55,801
|
|
|
933
|
|
|
2013
|
|
40 years
|
||||||||
JW Marriott San Francisco Union Square
San Francisco, California
|
|
—
|
|
|
—
|
|
|
139,150
|
|
|
7
|
|
|
—
|
|
|
139,157
|
|
|
139,157
|
|
|
870
|
|
|
2014
|
|
40 years
|
||||||||
Totals
|
|
$
|
551,336
|
|
|
$
|
254,136
|
|
|
$
|
1,234,181
|
|
|
$
|
78,925
|
|
|
$
|
255,037
|
|
|
$
|
1,312,205
|
|
|
$
|
1,567,242
|
|
|
$
|
91,741
|
|
|
|
|
|
(1)
|
This hotel secures borrowings made under the Trust's revolving credit facility, which had no outstanding borrowings as of
December 31, 2014
.
|
(2)
|
This hotel secures a mortgage loan issued in
July 2014
, which had an outstanding principal balance of
$90,000
as of
December 31, 2014
.
|
Balance as of December 31, 2011
|
$
|
843,473
|
|
Acquisitions
|
220,771
|
|
|
Capital expenditures and transfers from construction-in-progress
|
12,941
|
|
|
Balance as of December 31, 2012
|
1,077,185
|
|
|
Acquisitions
|
310,811
|
|
|
Capital expenditures and transfers from construction-in-progress
|
10,810
|
|
|
Balance as of December 31, 2013
|
1,398,806
|
|
|
Acquisition
|
139,150
|
|
|
Capital expenditures and transfers from construction-in-progress
|
53,710
|
|
|
Disposition
|
(24,424
|
)
|
|
Balance as of December 31, 2014
|
$
|
1,567,242
|
|
Balance as of December 31, 2011
|
$
|
14,737
|
|
Depreciation and amortization
|
19,329
|
|
|
Balance as of December 31, 2012
|
34,066
|
|
|
Depreciation and amortization
|
27,391
|
|
|
Balance as of December 31, 2013
|
61,457
|
|
|
Depreciation and amortization
|
32,012
|
|
|
Disposition
|
(1,728
|
)
|
|
Balance as of December 31, 2014
|
$
|
91,741
|
|
(a)
|
General
. The Executive agrees not to engage in any business activities during the Employment Period except those which are for the sole benefit of the Partnership or the
|
(b)
|
Corporate Opportunities
. The Executive agrees that he will not take personal advantage of any business opportunities which arise during his employment with the Company Group and which may be of benefit to the Company Group. All material facts regarding such opportunities must be promptly reported by the Executive to the Board of Trustees for consideration by the Company Group.
|
(a)
|
Salary
. The Trust shall pay the Executive a gross base annual salary (“Base Salary”) of $750,000. The salary shall be payable in arrears in approximately equal semi-monthly installments (except that the first and last such semi-monthly installments may be prorated if necessary) on the Trust’s regularly scheduled payroll dates, minus such deductions as may be required by law or reasonably requested by the Executive. The Trust’s Compensation Committee (the “Compensation Committee”) shall review his Base Salary annually in conjunction with its regular review of employee salaries and may increase (but not decrease) his Base Salary as in effect from time to time as the Compensation Committee shall deem appropriate.
|
(b)
|
Annual Bonus
. Executive shall be entitled to earn bonuses with respect to each fiscal year (or partial fiscal year), based upon Executive’s and the Company Group’s achievement of performance objectives set by the Trust, pursuant to one or more bonus opportunities granted to Executive under the Trust’s cash bonus plan(s) in effect for such fiscal year (or partial fiscal year). Any threshold bonus amount, target bonus amount, and/or maximum bonus amount relating to any such bonus opportunity shall be expressed as a percentage of Executive’s annual salary in effect for such fiscal year (or partial fiscal year) and shall be communicated by the Trust to Executive. Any such bonus earned by
|
(c)
|
Restricted Share Grants
. Pursuant to the Chesapeake Lodging Trust Equity Plan (or any successor plan thereto), as it may be amended from time to time, the Trust may make one or more grants to the Executive of common shares of beneficial interest of the Trust or other securities (including securities of the Partnership) as may be issued thereunder from time to time subject to certain vesting requirements and other conditions set forth in the applicable award agreement(s).
|
(d)
|
Other Benefits
. The Executive shall be entitled to paid time off and holiday pay in accordance with the Company Group’s policies in effect from time to time and shall be eligible to participate in such life, health, and disability insurance, pension, deferred compensation and incentive plans, options and awards, performance bonuses and other benefits as the Company Group extends, as a matter of policy, to its executive employees. The Company Group shall maintain a disability insurance policy or plan covering the Executive during the Employment Period.
|
(e)
|
Reimbursement of Business Expenses
. The Company Group shall reimburse the Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, upon presentation by the Executive of documentation, expense statements, vouchers, and/or such other supporting information as the Trust may reasonably request.
|
(f)
|
Physical Examinations
. The Company Group shall pay or reimburse the Executive for all uninsured costs of a comprehensive annual physical examination by a physician of his choice annually up to $10,000 per year.
|
(g)
|
Financial Planning
. The Company Group shall pay or reimburse the Executive for reasonable financial planning services annually up to $15,000 per year.
|
(h)
|
Timing of Reimbursements
. Any reimbursement under this Agreement that is taxable to the Executive shall be made by December 31 of the calendar year following the calendar year in which the Executive incurred the expense.
|
(a)
|
Termination by the Trust for Cause
. The Trust may terminate the Executive’s employment under this Agreement at any time for Cause, upon written notice by the Trust to the Executive. For purposes of this Agreement, “Cause” for termination shall mean any of the following: (i) the conviction of the Executive of, or the entry of a plea of guilty or nolo contendere by the Executive to, any felony; (ii) fraud, misappropriation or embezzlement by the Executive; (iii) the Executive’s willful failure or gross negligence in the performance of his assigned duties for the Company Group, which failure or negligence continues for more than fifteen (15) calendar days following the Executive’s
|
(b)
|
Termination by the Trust Without Cause or by the Executive Without Good Reason
. Either party may terminate this Agreement at any time without Cause (in the case of the Trust) or without Good Reason (in the case of the Executive), upon giving the other party sixty (60) days’ written notice. At the Trust’s sole discretion, it may substitute sixty (60) days’ salary (or any lesser portion for any shortened period provided) in lieu of notice. Any salary paid to the Executive in lieu of notice shall not be offset against any entitlement the Executive may have to the Severance Payment pursuant to Section 6(c).
|
(c)
|
Termination by Executive for Good Reason
. The Executive may terminate his employment under this Agreement at any time for Good Reason, upon written notice by the Executive to the Trust. For purposes of this Agreement, Good Reason for termination shall mean, without the Executive’s consent, (i) the assignment to the Executive of substantial authority, duties or responsibilities inconsistent with the Executive’s position at the Company Group, or any other action by the Company Group which results in a material diminution of the Executive’s authority, duties or responsibilities other than any such reduction which is remedied by the Company Group within 30 days of receipt of written notice thereof from the Executive; (ii) a requirement that the Executive work principally from a location outside the fifty (50) mile radius from the Trust’s address first written above as long as such requirement is a material change in the geographic location at which the Executive must perform the services; or (iii) a material diminution in the Executive’s aggregate Base Salary and other compensation taken as a whole, excluding any reductions caused by the failure to achieve performance targets. Good Reason shall not exist pursuant to any subsection of this Section 5(c) unless (A) the Executive shall have delivered notice to the Board of Trustees within 90 days of the initial occurrence of such event constituting Good Reason, and (B) the Board of Trustees shall have failed to remedy the circumstances giving rise to the Executive’s notice within 30 days of receipt of notice. The Executive must terminate his employment under this Section 5(c) at a time agreed reasonably with the Trust, but in any event within two years from the initial occurrence of an event constituting Good Reason.
|
(d)
|
Executive’s Death or Disability
. The Executive’s employment shall terminate immediately upon his death or, upon written notice as set forth below, his Disability. As used in this Agreement, Disability shall mean such physical or mental impairment as would render the Executive eligible to receive benefits under the long-term disability insurance policy or plan then made available by the Company Group to the Executive. If the Employment Period is terminated by reason of the Executive’s Disability, either party shall give thirty (30) days’ advance written notice to that effect to the other.
|
(a)
|
General
. Regardless of the reason for any termination of this Agreement, the Executive (or the Executive’s estate if the Employment Period ends on account of the Executive’s death) shall be entitled to (i) payment of any unpaid portion of his Base Salary through the effective date of termination; (ii) reimbursement for any outstanding reasonable business expense he has incurred in performing his duties hereunder; (iii) continued insurance benefits to the extent required by law; (iv) payment of any vested but unpaid rights as required independent of this Agreement by the terms of any bonus or other incentive pay or equity plan, or any other employee benefit plan or program of the Company Group; and (v) except in the case of Termination by the Trust for Cause, any bonus or incentive compensation that was approved but not paid.
|
(b)
|
Termination by the Trust for Cause or by Executive Without Good Reason
. If the Trust terminates the Executive’s employment for Cause or the Executive terminates his employment without Good Reason, the Executive shall have no rights or claims against the Company Group except to receive the payments and benefits described in Section 6(a).
|
(c)
|
Termination by the Trust Without Cause
. Except as provided in Section 6(d), if the Trust terminates the Executive’s employment without Cause pursuant to Section 5(b), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a), the following:
|
(i)
|
continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of twenty-four (24) months (the “Severance Payment”). The Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
|
(ii)
|
continued payment by the Trust for the Executive’s life and health insurance coverage during the twenty-four (24) month severance period referenced in Section 6(c)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the twenty-four (24) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
|
(iii)
|
vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
|
(iv)
|
a bonus equal to two (2) times the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the Executive’s employment if shorter), and (y) the most recent bonus paid to the Executive. Such bonus shall be paid to the Executive within sixty (60) days following the end of the fiscal year in which such termination occurs.
|
(d)
|
Termination Following Change in Control
. If, during the Employment Period and within twelve (12) months following a Change in Control, the Trust (or its successor) terminates the Executive’s employment without Cause pursuant to Section 5(b) or the Executive terminates his employment for Good Reason pursuant to Section 5(c), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a) and in lieu of any benefits described in Section 6(c), the following:
|
(i)
|
continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of thirty-six (36) months (the “Control Change Severance Payment”). The Control Change Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
|
(ii)
|
continued payment by the Trust for the Executive’s life and health insurance coverage during the thirty-six (36) month severance period referenced in Section 6(d)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the thirty-six (36) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
|
(iii)
|
vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
|
(iv)
|
a bonus equal to three (3) times the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the Executive’s employment if shorter), and (y) the most recent bonus paid to the Executive. Such bonus shall be paid to the Executive within sixty (60) days following the end of the fiscal year in which such termination occurs.
|
(v)
|
None of the benefits described in this Section 6(d) will be payable unless the Executive has signed and delivered a general release (attached hereto as Exhibit A) within 45 days of date of termination, which has (and not until it has) become irrevocable, satisfactory to the Trust in the reasonable exercise of its discretion, releasing the Company Group and its affiliates, including their respective officers, trustees, members, partners, directors and employees, from any and all claims or potential claims arising from or related to the Executive’s employment or termination of employment.
|
(vi)
|
For purposes of this Agreement, a “Change in Control” shall mean any of the following events:
|
(e)
|
Termination In the Event of Death or Disability
.
|
(i)
|
If the Executive’s employment terminates because of his death, any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group shall become fully vested as of the date of his death. In addition, the Executive’s estate shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been entitled for the fiscal year in which his death occurs.
|
(ii)
|
In the event the Executive’s employment terminates due to his Disability, he shall be entitled to receive his Base Salary until such date as he shall commence receiving disability benefits pursuant to any long-term disability insurance policy or plan provided to him by the Company Group. In addition, as of the effective date of the termination notice specified in Section 5(d), the Executive shall vest in any unvested portion of any option and any restricted shares previously granted to him by the Company Group. The Executive also shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been entitled for the fiscal year in which his employment terminates due to his Disability.
|
(f)
|
Additional Provisions
. Anything in this Agreement to the contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Trust and reasonably acceptable to Executive (the “Accounting Firm”) shall determine that receipt of all payments or distributions by the Company Group and each of their respective affiliates in the nature of compensation to or for Executive's benefit, whether paid or payable pursuant to this Agreement or otherwise (a “Payment”), would subject Executive to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Accounting Firm shall determine as required below whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive's Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if Executive’s Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which Executive is entitled.
|
(i)
|
“Reduced Amount” shall mean the greatest amount of Agreement Payments that can be paid to Executive without resulting in the imposition of the excise tax under Section 4999 of the Code.
|
(ii)
|
“Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive's taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm shall have determined to be likely to apply to Executive in the relevant taxable year(s).
|
(a)
|
Definition of Proprietary Information
. The Executive acknowledges that he may be furnished or may otherwise receive or have access to confidential information which
|
(b)
|
Exclusions
. Notwithstanding the foregoing, Proprietary Information shall not include information in the public domain not as a result of a breach of any duty by the Executive or any other person.
|
(c)
|
Obligations
. Both during and after the Employment Period, the Executive agrees to preserve and protect the confidentiality of the Proprietary Information and all physical forms thereof, whether disclosed to him before this Agreement is signed or afterward. In addition, the Executive shall not (i) disclose or disseminate the Proprietary Information to any third party, including employees of the Company Group (or their affiliates) without a legitimate business need to know during the Employment Period; (ii) remove the Proprietary Information from the Company Group’s premises without a valid business purpose; or (iii) use the Proprietary Information for his own benefit or for the benefit of any third party.
|
(d)
|
Return of Proprietary Information
. The Executive acknowledges and agrees that all the Proprietary Information used or generated during the course of working for the Company Group is the property of the Company Group. The Executive agrees to deliver to the Company Group all documents and other tangibles (including diskettes and other storage media) containing the Proprietary Information at any time upon request by the Board of Trustees during his employment and immediately upon termination of his employment.
|
(a)
|
Restriction on Competition
. For the period of the Executive’s employment with the Company Group and for twenty-four (24) months following the expiration or termination of the Executive’s employment by the Company Group (the “Restricted Period”), the Executive agrees not to engage, directly or indirectly, as an owner, director, trustee, manager, member, employee, consultant, partner, principal, agent, representative, stockholder, or in any other individual, corporate or representative capacity, in any of the following: (i) any public or private lodging company, or (ii) any other business that the Company Group conducts as of the date of the Executive’s termination of employment.
|
(b)
|
Non-Solicitation of Clients
. During the Restricted Period, the Executive agrees not to solicit, directly or indirectly, on his own behalf or on behalf of any other person(s), any client of the Company Group to whom the Company Group had provided services at any time during the Executive’s employment with the Company Group in any line of business that the Company Group conducts as of the date of the Executive’s termination of employment or that the Company Group is actively soliciting, for the purpose of marketing or providing any service competitive with any service then offered by the Company Group.
|
(c)
|
Non-Solicitation of Employees
. During the Restricted Period, the Executive agrees that he will not, directly or indirectly, hire or attempt to hire or cause any business, other than an affiliate of the Company Group, to hire any person who is then or was at any time during the preceding six (6) months an employee of the Company Group and who is at the time of such hire or attempted hire, or was at the date of such employee’s separation from the Company Group a vice president, senior vice president or executive vice president or other senior executive employee of the Company Group.
|
(d)
|
Non-Disparagement
. Executive will not disparage the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents, or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents.
|
(e)
|
Acknowledgement
. The Executive acknowledges that he will acquire much Proprietary Information concerning the past, present and future business of the Company Group as the result of his employment, as well as access to the relationships between the Partnership and the Trust and their clients and employees. The Executive further acknowledges that the business of the Company Group is very competitive and that competition by him in that business during his employment, or after his employment terminates, would severely injure the Company Group. The Executive understands and agrees that the restrictions contained in this Section 8 are reasonable and are required for the Company Group’s legitimate protection, and do not unduly limit his ability to earn a livelihood.
|
(f)
|
Rights and Remedies upon Breach
. The Executive acknowledges and agrees that any breach by him of any of the provisions of Sections 7 and 8 (the “Restrictive Covenants”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company Group and their respective affiliates shall have the following rights and remedies, each of which
|
(i)
|
The right and remedy to have the Restrictive Covenants specifically enforced (without posting bond and without the need to prove damages) by any court of competent jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants; and
|
(ii)
|
The right and remedy to require the Executive to account for and pay over to the Company Group and their respective affiliates all compensation, profits, monies, accruals, increments or other benefits (collectively, “Benefits”) derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive shall account for and pay over such Benefits to the Company Group and, if applicable, their respective affected affiliates.
|
(g)
|
Without limiting Section 12(i), if any court or other decision-maker of competent jurisdiction determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, it shall be revised by the court or other decision-maker to reflect most nearly the parties’ intent and the remainder of the provision or provisions of this Agreement shall be unaffected and shall continue in full force and effect. If a court or other decision-maker of competent jurisdiction is unwilling to revise any portion of the Restrictive Covenants and holds them unenforceable, then, after such determination has become final and non-appealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
|
(a)
|
Except as provided in Section 10(b), any disputes between the Company Group and the Executive in any way concerning the Executive’s employment, the termination of his employment, this Agreement or its enforcement shall be submitted at the initiative of either party to mandatory arbitration in Maryland before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association, or its
|
(b)
|
Notwithstanding the foregoing, the Partnership or the Trust, in its sole discretion, may bring an action in any court of competent jurisdiction to seek injunctive relief and such other relief as the Partnership or the Trust shall elect to enforce the Restrictive Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of breadth of scope or otherwise it is the intention of the Company Group and the Executive that such determination not bar or in any way affect the Company Group’s right, or the right of any of their respective affiliates, to the relief provided in Section 8(f) above in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective jurisdictions, such Restrictive Covenants as they relate to each jurisdiction being, for this purpose, severable, diverse and independent covenants, subject, where appropriate, to the doctrine of res judicata. The parties hereby agree to waive any right to a trial by jury for any and all disputes hereunder (whether or not relating to the Restrictive Covenants).
|
(a)
|
Notices
. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective (i) upon personal delivery, (ii) upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid, or (iii) in the case of facsimile transmission or delivery by nationally recognized overnight delivery service, when received, addressed as follows:
|
(b)
|
Pronouns
. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
|
(c)
|
Entire Agreement
. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings (including, but not limited to, that certain prior employment agreement by and among the parties dated January 27, 2010 and all amendments thereto), whether written or oral, relating to the subject matter of this Agreement.
|
(d)
|
Amendment
. This Agreement may be amended or modified only by a written instrument executed by both the Trust and the Executive.
|
(e)
|
Governing Law
. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Maryland, without regard to its conflicts of laws principles.
|
(f)
|
Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any entity with which or into which the Partnership or the Trust may be merged or which may succeed to its assets or business or any entity to which the Partnership or the Trust may assign its rights and obligations under this Agreement; provided, however, that the obligations of the Executive are personal and shall not be assigned or delegated by him.
|
(g)
|
Waiver
. No delays or omission by the Partnership, the Trust or the Executive in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Trust, for itself, the Partnership or any other member of the Company Group, or the Executive on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
|
(h)
|
Captions
. The captions appearing in this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
|
(i)
|
Severability
. In case any provision of this Agreement shall be held by a court or arbitrator with jurisdiction over the parties to this Agreement to be invalid, illegal or otherwise unenforceable, such provision shall be restated to reflect as nearly as possible the original intentions of the parties in accordance with applicable law, and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
|
(j)
|
Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
|
By:
|
/s/ Douglas W. Vicari
|
Name:
|
Douglas W. Vicari
|
Title:
|
Executive Vice President and
|
|
Chief Financial Officer
|
By:
|
Chesapeake Lodging Trust, its general partner
|
By:
|
/s/ Douglas W. Vicari
|
Name:
|
Douglas W. Vicari
|
Title:
|
Executive Vice President and
|
|
Chief Financial Officer
|
(a)
|
He is hereby advised in writing to consult an attorney before signing this Release;
|
(b)
|
He has relied solely on his own judgment and/or that of his attorney regarding the consideration for and the terms of this Release and is signing this Release knowingly and voluntarily of his own free will;
|
(c)
|
He is not entitled to the Severance Payment unless he agrees to and honors the terms of this Release;
|
(d)
|
He has been given at least twenty-one (21) calendar days to consider this Release, or he expressly waives his right to have at least twenty-one (21) days to consider this Release;
|
(e)
|
He may revoke this Release within seven (7) calendar days after signing it by submitting a written notice of revocation to the Employer. He further understands that this Release is not effective or enforceable until after the seven (7) day period of revocation has expired without revocation, and that if he revokes this Release within the seven (7) day revocation period, he will not receive the Severance Payment;
|
(f)
|
He has read and understands the Release and further understands that, subject to the limitations contained herein, it includes a general release of any and all known and unknown, foreseen or unforeseen claims presently asserted or otherwise arising through the date of his signing of this Release that he may have against the Employer, including claims under various civil rights laws, including the Age Discrimination in Employment Act and the Older Worker Benefit Protection Act; and
|
(g)
|
No statements made or conduct by the Employer has in any way coerced or unduly influenced him to execute this Release.
|
(a)
|
General
. The Executive agrees not to engage in any business activities during the Employment Period except those which are for the sole benefit of the Partnership or the
|
(b)
|
Corporate Opportunities
. The Executive agrees that he will not take personal advantage of any business opportunities which arise during his employment with the Company Group and which may be of benefit to the Company Group. All material facts regarding such opportunities must be promptly reported by the Executive to the Board of Trustees for consideration by the Company Group.
|
(a)
|
Salary
. The Trust shall pay the Executive a gross base annual salary (“Base Salary”) of $475,000. The salary shall be payable in arrears in approximately equal semi-monthly installments (except that the first and last such semi-monthly installments may be prorated if necessary) on the Trust’s regularly scheduled payroll dates, minus such deductions as may be required by law or reasonably requested by the Executive. The Trust’s Compensation Committee (the “Compensation Committee”) shall review his Base Salary annually in conjunction with its regular review of employee salaries and may increase (but not decrease) his Base Salary as in effect from time to time as the Compensation Committee shall deem appropriate.
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(b)
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Annual Bonus
. Executive shall be entitled to earn bonuses with respect to each fiscal year (or partial fiscal year), based upon Executive’s and the Company Group’s achievement of performance objectives set by the Trust, pursuant to one or more bonus opportunities granted to Executive under the Trust’s cash bonus plan(s) in effect for such fiscal year (or partial fiscal year). Any threshold bonus amount, target bonus amount, and/or maximum bonus amount relating to any such bonus opportunity shall be expressed as a percentage of Executive’s annual salary in effect for such fiscal year (or partial fiscal year) and shall be communicated by the Trust to Executive. Any such bonus earned by
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(c)
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Restricted Share Grants
. Pursuant to the Chesapeake Lodging Trust Equity Plan (or any successor plan thereto), as it may be amended from time to time, the Trust may make one or more grants to the Executive of common shares of beneficial interest of the Trust or other securities (including securities of the Partnership) as may be issued thereunder from time to time subject to certain vesting requirements and other conditions set forth in the applicable award agreement(s).
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(d)
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Other Benefits
. The Executive shall be entitled to paid time off and holiday pay in accordance with the Company Group’s policies in effect from time to time and shall be eligible to participate in such life, health, and disability insurance, pension, deferred compensation and incentive plans, options and awards, performance bonuses and other benefits as the Company Group extends, as a matter of policy, to its executive employees. The Company Group shall maintain a disability insurance policy or plan covering the Executive during the Employment Period.
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(e)
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Reimbursement of Business Expenses
. The Company Group shall reimburse the Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, upon presentation by the Executive of documentation, expense statements, vouchers, and/or such other supporting information as the Trust may reasonably request.
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(f)
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Physical Examinations
. The Company Group shall pay or reimburse the Executive for all uninsured costs of a comprehensive annual physical examination by a physician of his choice annually up to $10,000 per year.
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(g)
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Financial Planning
. The Company Group shall pay or reimburse the Executive for reasonable financial planning services annually up to $15,000 per year.
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(h)
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Timing of Reimbursements
. Any reimbursement under this Agreement that is taxable to the Executive shall be made by December 31 of the calendar year following the calendar year in which the Executive incurred the expense.
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(a)
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Termination by the Trust for Cause
. The Trust may terminate the Executive’s employment under this Agreement at any time for Cause, upon written notice by the Trust to the Executive. For purposes of this Agreement, “Cause” for termination shall mean any of the following: (i) the conviction of the Executive of, or the entry of a plea of guilty or nolo contendere by the Executive to, any felony; (ii) fraud, misappropriation or embezzlement by the Executive; (iii) the Executive’s willful failure or gross negligence in the performance of his assigned duties for the Company Group, which failure or negligence continues for more than fifteen (15) calendar days following the Executive’s
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(b)
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Termination by the Trust Without Cause or by the Executive Without Good Reason
. Either party may terminate this Agreement at any time without Cause (in the case of the Trust) or without Good Reason (in the case of the Executive), upon giving the other party sixty (60) days’ written notice. At the Trust’s sole discretion, it may substitute sixty (60) days’ salary (or any lesser portion for any shortened period provided) in lieu of notice. Any salary paid to the Executive in lieu of notice shall not be offset against any entitlement the Executive may have to the Severance Payment pursuant to Section 6(c).
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(c)
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Termination by Executive for Good Reason
. The Executive may terminate his employment under this Agreement at any time for Good Reason, upon written notice by the Executive to the Trust. For purposes of this Agreement, Good Reason for termination shall mean, without the Executive’s consent, (i) the assignment to the Executive of substantial authority, duties or responsibilities inconsistent with the Executive’s position at the Company Group, or any other action by the Company Group which results in a material diminution of the Executive’s authority, duties or responsibilities other than any such reduction which is remedied by the Company Group within 30 days of receipt of written notice thereof from the Executive; (ii) a requirement that the Executive work principally from a location outside the fifty (50) mile radius from the Trust’s address first written above as long as such requirement is a material change in the geographic location at which the Executive must perform the services; or (iii) a material diminution in the Executive’s aggregate Base Salary and other compensation taken as a whole, excluding any reductions caused by the failure to achieve performance targets. Good Reason shall not exist pursuant to any subsection of this Section 5(c) unless (A) the Executive shall have delivered notice to the Board of Trustees within 90 days of the initial occurrence of such event constituting Good Reason, and (B) the Board of Trustees shall have failed to remedy the circumstances giving rise to the Executive’s notice within 30 days of receipt of notice. The Executive must terminate his employment under this Section 5(c) at a time agreed reasonably with the Trust, but in any event within two years from the initial occurrence of an event constituting Good Reason.
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(d)
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Executive’s Death or Disability
. The Executive’s employment shall terminate immediately upon his death or, upon written notice as set forth below, his Disability. As used in this Agreement, Disability shall mean such physical or mental impairment as would render the Executive eligible to receive benefits under the long-term disability insurance policy or plan then made available by the Company Group to the Executive. If the Employment Period is terminated by reason of the Executive’s Disability, either party shall give thirty (30) days’ advance written notice to that effect to the other.
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(a)
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General
. Regardless of the reason for any termination of this Agreement, the Executive (or the Executive’s estate if the Employment Period ends on account of the Executive’s death) shall be entitled to (i) payment of any unpaid portion of his Base Salary through the effective date of termination; (ii) reimbursement for any outstanding reasonable business expense he has incurred in performing his duties hereunder; (iii) continued insurance benefits to the extent required by law; (iv) payment of any vested but unpaid rights as required independent of this Agreement by the terms of any bonus or other incentive pay or equity plan, or any other employee benefit plan or program of the Company Group; and (v) except in the case of Termination by the Trust for Cause, any bonus or incentive compensation that was approved but not paid.
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(b)
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Termination by the Trust for Cause or by Executive Without Good Reason
. If the Trust terminates the Executive’s employment for Cause or the Executive terminates his employment without Good Reason, the Executive shall have no rights or claims against the Company Group except to receive the payments and benefits described in Section 6(a).
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(c)
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Termination by the Trust Without Cause
. Except as provided in Section 6(d), if the Trust terminates the Executive’s employment without Cause pursuant to Section 5(b), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a), the following:
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(i)
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continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of twenty-four (24) months (the “Severance Payment”). The Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
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(ii)
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continued payment by the Trust for the Executive’s life and health insurance coverage during the twenty-four (24) month severance period referenced in Section 6(c)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the twenty-four (24) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
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(iii)
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vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
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(iv)
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a bonus equal to two (2) times the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the Executive’s employment if shorter), and (y) the most recent bonus paid to the Executive. Such bonus shall be paid to the Executive within sixty (60) days following the end of the fiscal year in which such termination occurs.
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(d)
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Termination Following Change in Control
. If, during the Employment Period and within twelve (12) months following a Change in Control, the Trust (or its successor) terminates the Executive’s employment without Cause pursuant to Section 5(b) or the Executive terminates his employment for Good Reason pursuant to Section 5(c), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a) and in lieu of any benefits described in Section 6(c), the following:
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(i)
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continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of thirty-six (36) months (the “Control Change Severance Payment”). The Control Change Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
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(ii)
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continued payment by the Trust for the Executive’s life and health insurance coverage during the thirty-six (36) month severance period referenced in Section 6(d)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the thirty-six (36) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
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(iii)
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vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
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(iv)
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a bonus equal to three (3) times the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the Executive’s employment if shorter), and (y) the most recent bonus paid to the Executive. Such bonus shall be paid to the Executive within sixty (60) days following the end of the fiscal year in which such termination occurs.
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(v)
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None of the benefits described in this Section 6(d) will be payable unless the Executive has signed and delivered a general release (attached hereto as Exhibit A) within 45 days of date of termination, which has (and not until it has) become irrevocable, satisfactory to the Trust in the reasonable exercise of its discretion, releasing the Company Group and its affiliates, including their respective officers, trustees, members, partners, directors and employees, from any and all claims or potential claims arising from or related to the Executive’s employment or termination of employment.
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(vi)
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For purposes of this Agreement, a “Change in Control” shall mean any of the following events:
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(e)
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Termination In the Event of Death or Disability
.
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(i)
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If the Executive’s employment terminates because of his death, any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group shall become fully vested as of the date of his death. In addition, the Executive’s estate shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been entitled for the fiscal year in which his death occurs.
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(ii)
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In the event the Executive’s employment terminates due to his Disability, he shall be entitled to receive his Base Salary until such date as he shall commence receiving disability benefits pursuant to any long-term disability insurance policy or plan provided to him by the Company Group. In addition, as of the effective date of the termination notice specified in Section 5(d), the Executive shall vest in any unvested portion of any option and any restricted shares previously granted to him by the Company Group. The Executive also shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been entitled for the fiscal year in which his employment terminates due to his Disability.
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(f)
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Additional Provisions
. Anything in this Agreement to the contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Trust and reasonably acceptable to Executive (the “Accounting Firm”) shall determine that receipt of all payments or distributions by the Company Group and each of their respective affiliates in the nature of compensation to or for Executive's benefit, whether paid or payable pursuant to this Agreement or otherwise (a “Payment”), would subject Executive to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Accounting Firm shall determine as required below whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive's Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if Executive’s Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which Executive is entitled.
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(i)
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“Reduced Amount” shall mean the greatest amount of Agreement Payments that can be paid to Executive without resulting in the imposition of the excise tax under Section 4999 of the Code.
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(ii)
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“Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive's taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm shall have determined to be likely to apply to Executive in the relevant taxable year(s).
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(a)
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Definition of Proprietary Information
. The Executive acknowledges that he may be furnished or may otherwise receive or have access to confidential information which
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(b)
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Exclusions
. Notwithstanding the foregoing, Proprietary Information shall not include information in the public domain not as a result of a breach of any duty by the Executive or any other person.
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(c)
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Obligations
. Both during and after the Employment Period, the Executive agrees to preserve and protect the confidentiality of the Proprietary Information and all physical forms thereof, whether disclosed to him before this Agreement is signed or afterward. In addition, the Executive shall not (i) disclose or disseminate the Proprietary Information to any third party, including employees of the Company Group (or their affiliates) without a legitimate business need to know during the Employment Period; (ii) remove the Proprietary Information from the Company Group’s premises without a valid business purpose; or (iii) use the Proprietary Information for his own benefit or for the benefit of any third party.
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(d)
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Return of Proprietary Information
. The Executive acknowledges and agrees that all the Proprietary Information used or generated during the course of working for the Company Group is the property of the Company Group. The Executive agrees to deliver to the Company Group all documents and other tangibles (including diskettes and other storage media) containing the Proprietary Information at any time upon request by the Board of Trustees during his employment and immediately upon termination of his employment.
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(a)
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Restriction on Competition
. For the period of the Executive’s employment with the Company Group and for twenty-four (24) months following the expiration or termination of the Executive’s employment by the Company Group (the “Restricted Period”), the Executive agrees not to engage, directly or indirectly, as an owner, director, trustee, manager, member, employee, consultant, partner, principal, agent, representative, stockholder, or in any other individual, corporate or representative capacity, in any of the following: (i) any public or private lodging company, or (ii) any other business that the Company Group conducts as of the date of the Executive’s termination of employment.
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(b)
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Non-Solicitation of Clients
. During the Restricted Period, the Executive agrees not to solicit, directly or indirectly, on his own behalf or on behalf of any other person(s), any client of the Company Group to whom the Company Group had provided services at any time during the Executive’s employment with the Company Group in any line of business that the Company Group conducts as of the date of the Executive’s termination of employment or that the Company Group is actively soliciting, for the purpose of marketing or providing any service competitive with any service then offered by the Company Group.
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(c)
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Non-Solicitation of Employees
. During the Restricted Period, the Executive agrees that he will not, directly or indirectly, hire or attempt to hire or cause any business, other than an affiliate of the Company Group, to hire any person who is then or was at any time during the preceding six (6) months an employee of the Company Group and who is at the time of such hire or attempted hire, or was at the date of such employee’s separation from the Company Group a vice president, senior vice president or executive vice president or other senior executive employee of the Company Group.
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(d)
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Non-Disparagement
. Executive will not disparage the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents, or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents.
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(e)
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Acknowledgement
. The Executive acknowledges that he will acquire much Proprietary Information concerning the past, present and future business of the Company Group as the result of his employment, as well as access to the relationships between the Partnership and the Trust and their clients and employees. The Executive further acknowledges that the business of the Company Group is very competitive and that competition by him in that business during his employment, or after his employment terminates, would severely injure the Company Group. The Executive understands and agrees that the restrictions contained in this Section 8 are reasonable and are required for the Company Group’s legitimate protection, and do not unduly limit his ability to earn a livelihood.
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(f)
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Rights and Remedies upon Breach
. The Executive acknowledges and agrees that any breach by him of any of the provisions of Sections 7 and 8 (the “Restrictive Covenants”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company Group and their respective affiliates shall have the following rights and remedies, each of which
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(i)
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The right and remedy to have the Restrictive Covenants specifically enforced (without posting bond and without the need to prove damages) by any court of competent jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants; and
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(ii)
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The right and remedy to require the Executive to account for and pay over to the Company Group and their respective affiliates all compensation, profits, monies, accruals, increments or other benefits (collectively, “Benefits”) derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive shall account for and pay over such Benefits to the Company Group and, if applicable, their respective affected affiliates.
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(g)
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Without limiting Section 12(i), if any court or other decision-maker of competent jurisdiction determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, it shall be revised by the court or other decision-maker to reflect most nearly the parties’ intent and the remainder of the provision or provisions of this Agreement shall be unaffected and shall continue in full force and effect. If a court or other decision-maker of competent jurisdiction is unwilling to revise any portion of the Restrictive Covenants and holds them unenforceable, then, after such determination has become final and non-appealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
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(a)
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Except as provided in Section 10(b), any disputes between the Company Group and the Executive in any way concerning the Executive’s employment, the termination of his employment, this Agreement or its enforcement shall be submitted at the initiative of either party to mandatory arbitration in Maryland before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association, or its
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(b)
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Notwithstanding the foregoing, the Partnership or the Trust, in its sole discretion, may bring an action in any court of competent jurisdiction to seek injunctive relief and such other relief as the Partnership or the Trust shall elect to enforce the Restrictive Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of breadth of scope or otherwise it is the intention of the Company Group and the Executive that such determination not bar or in any way affect the Company Group’s right, or the right of any of their respective affiliates, to the relief provided in Section 8(f) above in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective jurisdictions, such Restrictive Covenants as they relate to each jurisdiction being, for this purpose, severable, diverse and independent covenants, subject, where appropriate, to the doctrine of res judicata. The parties hereby agree to waive any right to a trial by jury for any and all disputes hereunder (whether or not relating to the Restrictive Covenants).
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(a)
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Notices
. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective (i) upon personal delivery, (ii) upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid, or (iii) in the case of facsimile transmission or delivery by nationally recognized overnight delivery service, when received, addressed as follows:
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(b)
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Pronouns
. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
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(c)
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Entire Agreement
. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings (including, but not limited to, that certain prior employment agreement by and among the parties dated January 27, 2010 and all amendments thereto), whether written or oral, relating to the subject matter of this Agreement.
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(d)
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Amendment
. This Agreement may be amended or modified only by a written instrument executed by both the Trust and the Executive.
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(e)
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Governing Law
. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Maryland, without regard to its conflicts of laws principles.
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(f)
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Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any entity with which or into which the Partnership or the Trust may be merged or which may succeed to its assets or business or any entity to which the Partnership or the Trust may assign its rights and obligations under this Agreement; provided, however, that the obligations of the Executive are personal and shall not be assigned or delegated by him.
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(g)
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Waiver
. No delays or omission by the Partnership, the Trust or the Executive in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Trust, for itself, the Partnership or any other member of the Company Group, or the Executive on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
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(h)
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Captions
. The captions appearing in this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
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(i)
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Severability
. In case any provision of this Agreement shall be held by a court or arbitrator with jurisdiction over the parties to this Agreement to be invalid, illegal or otherwise unenforceable, such provision shall be restated to reflect as nearly as possible the original intentions of the parties in accordance with applicable law, and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
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(j)
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Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
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By:
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/s/ James L. Francis
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Name:
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James L. Francis
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Title:
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President and Chief Executive Officer
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|
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By:
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Chesapeake Lodging Trust, its general partner
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By:
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/s/ James L. Francis
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Name:
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James L. Francis
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Title:
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President and Chief Executive Officer
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|
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(a)
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He is hereby advised in writing to consult an attorney before signing this Release;
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(b)
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He has relied solely on his own judgment and/or that of his attorney regarding the consideration for and the terms of this Release and is signing this Release knowingly and voluntarily of his own free will;
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(c)
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He is not entitled to the Severance Payment unless he agrees to and honors the terms of this Release;
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(d)
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He has been given at least twenty-one (21) calendar days to consider this Release, or he expressly waives his right to have at least twenty-one (21) days to consider this Release;
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(e)
|
He may revoke this Release within seven (7) calendar days after signing it by submitting a written notice of revocation to the Employer. He further understands that this Release is not effective or enforceable until after the seven (7) day period of revocation has expired without revocation, and that if he revokes this Release within the seven (7) day revocation period, he will not receive the Severance Payment;
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(f)
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He has read and understands the Release and further understands that, subject to the limitations contained herein, it includes a general release of any and all known and unknown, foreseen or unforeseen claims presently asserted or otherwise arising through the date of his signing of this Release that he may have against the Employer, including claims under various civil rights laws, including the Age Discrimination in Employment Act and the Older Worker Benefit Protection Act; and
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(g)
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No statements made or conduct by the Employer has in any way coerced or unduly influenced him to execute this Release.
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(a)
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General
. The Executive agrees not to engage in any business activities during the Employment Period except those which are for the sole benefit of the Partnership or the
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(b)
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Corporate Opportunities
. The Executive agrees that he will not take personal advantage of any business opportunities which arise during his employment with the Company Group and which may be of benefit to the Company Group. All material facts regarding such opportunities must be promptly reported by the Executive to the Board of Trustees for consideration by the Company Group.
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(a)
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Salary
. The Trust shall pay the Executive a gross base annual salary (“Base Salary”) of $475,000. The salary shall be payable in arrears in approximately equal semi-monthly installments (except that the first and last such semi-monthly installments may be prorated if necessary) on the Trust’s regularly scheduled payroll dates, minus such deductions as may be required by law or reasonably requested by the Executive. The Trust’s Compensation Committee (the “Compensation Committee”) shall review his Base Salary annually in conjunction with its regular review of employee salaries and may increase (but not decrease) his Base Salary as in effect from time to time as the Compensation Committee shall deem appropriate.
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(b)
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Annual Bonus
. Executive shall be entitled to earn bonuses with respect to each fiscal year (or partial fiscal year), based upon Executive’s and the Company Group’s achievement of performance objectives set by the Trust, pursuant to one or more bonus opportunities granted to Executive under the Trust’s cash bonus plan(s) in effect for such fiscal year (or partial fiscal year). Any threshold bonus amount, target bonus amount, and/or maximum bonus amount relating to any such bonus opportunity shall be expressed as a percentage of Executive’s annual salary in effect for such fiscal year (or partial fiscal year) and shall be communicated by the Trust to Executive. Any such bonus earned by
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(c)
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Restricted Share Grants
. Pursuant to the Chesapeake Lodging Trust Equity Plan (or any successor plan thereto), as it may be amended from time to time, the Trust may make one or more grants to the Executive of common shares of beneficial interest of the Trust or other securities (including securities of the Partnership) as may be issued thereunder from time to time subject to certain vesting requirements and other conditions set forth in the applicable award agreement(s).
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(d)
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Other Benefits
. The Executive shall be entitled to paid time off and holiday pay in accordance with the Company Group’s policies in effect from time to time and shall be eligible to participate in such life, health, and disability insurance, pension, deferred compensation and incentive plans, options and awards, performance bonuses and other benefits as the Company Group extends, as a matter of policy, to its executive employees. The Company Group shall maintain a disability insurance policy or plan covering the Executive during the Employment Period.
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(e)
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Reimbursement of Business Expenses
. The Company Group shall reimburse the Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, upon presentation by the Executive of documentation, expense statements, vouchers, and/or such other supporting information as the Trust may reasonably request.
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(f)
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Physical Examinations
. The Company Group shall pay or reimburse the Executive for all uninsured costs of a comprehensive annual physical examination by a physician of his choice annually up to $10,000 per year.
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(g)
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Financial Planning
. The Company Group shall pay or reimburse the Executive for reasonable financial planning services annually up to $15,000 per year.
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(h)
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Timing of Reimbursements
. Any reimbursement under this Agreement that is taxable to the Executive shall be made by December 31 of the calendar year following the calendar year in which the Executive incurred the expense.
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(a)
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Termination by the Trust for Cause
. The Trust may terminate the Executive’s employment under this Agreement at any time for Cause, upon written notice by the Trust to the Executive. For purposes of this Agreement, “Cause” for termination shall mean any of the following: (i) the conviction of the Executive of, or the entry of a plea of guilty or nolo contendere by the Executive to, any felony; (ii) fraud, misappropriation or embezzlement by the Executive; (iii) the Executive’s willful failure or gross negligence in the performance of his assigned duties for the Company Group, which failure or negligence continues for more than fifteen (15) calendar days following the Executive’s
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(b)
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Termination by the Trust Without Cause or by the Executive Without Good Reason
. Either party may terminate this Agreement at any time without Cause (in the case of the Trust) or without Good Reason (in the case of the Executive), upon giving the other party sixty (60) days’ written notice. At the Trust’s sole discretion, it may substitute sixty (60) days’ salary (or any lesser portion for any shortened period provided) in lieu of notice. Any salary paid to the Executive in lieu of notice shall not be offset against any entitlement the Executive may have to the Severance Payment pursuant to Section 6(c).
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(c)
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Termination by Executive for Good Reason
. The Executive may terminate his employment under this Agreement at any time for Good Reason, upon written notice by the Executive to the Trust. For purposes of this Agreement, Good Reason for termination shall mean, without the Executive’s consent, (i) the assignment to the Executive of substantial authority, duties or responsibilities inconsistent with the Executive’s position at the Company Group, or any other action by the Company Group which results in a material diminution of the Executive’s authority, duties or responsibilities other than any such reduction which is remedied by the Company Group within 30 days of receipt of written notice thereof from the Executive; (ii) a requirement that the Executive work principally from a location outside the fifty (50) mile radius from the Trust’s address first written above as long as such requirement is a material change in the geographic location at which the Executive must perform the services; or (iii) a material diminution in the Executive’s aggregate Base Salary and other compensation taken as a whole, excluding any reductions caused by the failure to achieve performance targets. Good Reason shall not exist pursuant to any subsection of this Section 5(c) unless (A) the Executive shall have delivered notice to the Board of Trustees within 90 days of the initial occurrence of such event constituting Good Reason, and (B) the Board of Trustees shall have failed to remedy the circumstances giving rise to the Executive’s notice within 30 days of receipt of notice. The Executive must terminate his employment under this Section 5(c) at a time agreed reasonably with the Trust, but in any event within two years from the initial occurrence of an event constituting Good Reason.
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(d)
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Executive’s Death or Disability
. The Executive’s employment shall terminate immediately upon his death or, upon written notice as set forth below, his Disability. As used in this Agreement, Disability shall mean such physical or mental impairment as would render the Executive eligible to receive benefits under the long-term disability insurance policy or plan then made available by the Company Group to the Executive. If the Employment Period is terminated by reason of the Executive’s Disability, either party shall give thirty (30) days’ advance written notice to that effect to the other.
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(a)
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General
. Regardless of the reason for any termination of this Agreement, the Executive (or the Executive’s estate if the Employment Period ends on account of the Executive’s death) shall be entitled to (i) payment of any unpaid portion of his Base Salary through the effective date of termination; (ii) reimbursement for any outstanding reasonable business expense he has incurred in performing his duties hereunder; (iii) continued insurance benefits to the extent required by law; (iv) payment of any vested but unpaid rights as required independent of this Agreement by the terms of any bonus or other incentive pay or equity plan, or any other employee benefit plan or program of the Company Group; and (v) except in the case of Termination by the Trust for Cause, any bonus or incentive compensation that was approved but not paid.
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(b)
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Termination by the Trust for Cause or by Executive Without Good Reason
. If the Trust terminates the Executive’s employment for Cause or the Executive terminates his employment without Good Reason, the Executive shall have no rights or claims against the Company Group except to receive the payments and benefits described in Section 6(a).
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(c)
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Termination by the Trust Without Cause
. Except as provided in Section 6(d), if the Trust terminates the Executive’s employment without Cause pursuant to Section 5(b), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a), the following:
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(i)
|
continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of twenty-four (24) months (the “Severance Payment”). The Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
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(ii)
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continued payment by the Trust for the Executive’s life and health insurance coverage during the twenty-four (24) month severance period referenced in Section 6(c)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the twenty-four (24) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
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(iii)
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vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
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(iv)
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a bonus equal to two (2) times the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the Executive’s employment if shorter), and (y) the most recent bonus paid to the Executive. Such bonus shall be paid to the Executive within sixty (60) days following the end of the fiscal year in which such termination occurs.
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(d)
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Termination Following Change in Control
. If, during the Employment Period and within twelve (12) months following a Change in Control, the Trust (or its successor) terminates the Executive’s employment without Cause pursuant to Section 5(b) or the Executive terminates his employment for Good Reason pursuant to Section 5(c), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a) and in lieu of any benefits described in Section 6(c), the following:
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(i)
|
continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of thirty-six (36) months (the “Control Change Severance Payment”). The Control Change Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
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(ii)
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continued payment by the Trust for the Executive’s life and health insurance coverage during the thirty-six (36) month severance period referenced in Section 6(d)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the thirty-six (36) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
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(iii)
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vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
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(iv)
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a bonus equal to three (3) times the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the Executive’s employment if shorter), and (y) the most recent bonus paid to the Executive. Such bonus shall be paid to the Executive within sixty (60) days following the end of the fiscal year in which such termination occurs.
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(v)
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None of the benefits described in this Section 6(d) will be payable unless the Executive has signed and delivered a general release (attached hereto as Exhibit A) within 45 days of date of termination, which has (and not until it has) become irrevocable, satisfactory to the Trust in the reasonable exercise of its discretion, releasing the Company Group and its affiliates, including their respective officers, trustees, members, partners, directors and employees, from any and all claims or potential claims arising from or related to the Executive’s employment or termination of employment.
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(vi)
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For purposes of this Agreement, a “Change in Control” shall mean any of the following events:
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(e)
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Termination In the Event of Death or Disability
.
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(i)
|
If the Executive’s employment terminates because of his death, any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group shall become fully vested as of the date of his death. In addition, the Executive’s estate shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been entitled for the fiscal year in which his death occurs.
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(ii)
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In the event the Executive’s employment terminates due to his Disability, he shall be entitled to receive his Base Salary until such date as he shall commence receiving disability benefits pursuant to any long-term disability insurance policy or plan provided to him by the Company Group. In addition, as of the effective date of the termination notice specified in Section 5(d), the Executive shall vest in any unvested portion of any option and any restricted shares previously granted to him by the Company Group. The Executive also shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been entitled for the fiscal year in which his employment terminates due to his Disability.
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(f)
|
Additional Provisions
. Anything in this Agreement to the contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Trust and reasonably acceptable to Executive (the “Accounting Firm”) shall determine that receipt of all payments or distributions by the Company Group and each of their respective affiliates in the nature of compensation to or for Executive's benefit, whether paid or payable pursuant to this Agreement or otherwise (a “Payment”), would subject Executive to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Accounting Firm shall determine as required below whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive's Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if Executive’s Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which Executive is entitled.
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(i)
|
“Reduced Amount” shall mean the greatest amount of Agreement Payments that can be paid to Executive without resulting in the imposition of the excise tax under Section 4999 of the Code.
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(ii)
|
“Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive's taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm shall have determined to be likely to apply to Executive in the relevant taxable year(s).
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(a)
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Definition of Proprietary Information
. The Executive acknowledges that he may be furnished or may otherwise receive or have access to confidential information which
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(b)
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Exclusions
. Notwithstanding the foregoing, Proprietary Information shall not include information in the public domain not as a result of a breach of any duty by the Executive or any other person.
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(c)
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Obligations
. Both during and after the Employment Period, the Executive agrees to preserve and protect the confidentiality of the Proprietary Information and all physical forms thereof, whether disclosed to him before this Agreement is signed or afterward. In addition, the Executive shall not (i) disclose or disseminate the Proprietary Information to any third party, including employees of the Company Group (or their affiliates) without a legitimate business need to know during the Employment Period; (ii) remove the Proprietary Information from the Company Group’s premises without a valid business purpose; or (iii) use the Proprietary Information for his own benefit or for the benefit of any third party.
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(d)
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Return of Proprietary Information
. The Executive acknowledges and agrees that all the Proprietary Information used or generated during the course of working for the Company Group is the property of the Company Group. The Executive agrees to deliver to the Company Group all documents and other tangibles (including diskettes and other storage media) containing the Proprietary Information at any time upon request by the Board of Trustees during his employment and immediately upon termination of his employment.
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(a)
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Restriction on Competition
. For the period of the Executive’s employment with the Company Group and for twenty-four (24) months following the expiration or termination of the Executive’s employment by the Company Group (the “Restricted Period”), the Executive agrees not to engage, directly or indirectly, as an owner, director, trustee, manager, member, employee, consultant, partner, principal, agent, representative, stockholder, or in any other individual, corporate or representative capacity, in any of the following: (i) any public or private lodging company, or (ii) any other business that the Company Group conducts as of the date of the Executive’s termination of employment.
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(b)
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Non-Solicitation of Clients
. During the Restricted Period, the Executive agrees not to solicit, directly or indirectly, on his own behalf or on behalf of any other person(s), any client of the Company Group to whom the Company Group had provided services at any time during the Executive’s employment with the Company Group in any line of business that the Company Group conducts as of the date of the Executive’s termination of employment or that the Company Group is actively soliciting, for the purpose of marketing or providing any service competitive with any service then offered by the Company Group.
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(c)
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Non-Solicitation of Employees
. During the Restricted Period, the Executive agrees that he will not, directly or indirectly, hire or attempt to hire or cause any business, other than an affiliate of the Company Group, to hire any person who is then or was at any time during the preceding six (6) months an employee of the Company Group and who is at the time of such hire or attempted hire, or was at the date of such employee’s separation from the Company Group a vice president, senior vice president or executive vice president or other senior executive employee of the Company Group.
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(d)
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Non-Disparagement
. Executive will not disparage the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents, or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents.
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(e)
|
Acknowledgement
. The Executive acknowledges that he will acquire much Proprietary Information concerning the past, present and future business of the Company Group as the result of his employment, as well as access to the relationships between the Partnership and the Trust and their clients and employees. The Executive further acknowledges that the business of the Company Group is very competitive and that competition by him in that business during his employment, or after his employment terminates, would severely injure the Company Group. The Executive understands and agrees that the restrictions contained in this Section 8 are reasonable and are required for the Company Group’s legitimate protection, and do not unduly limit his ability to earn a livelihood.
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(f)
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Rights and Remedies upon Breach
. The Executive acknowledges and agrees that any breach by him of any of the provisions of Sections 7 and 8 (the “Restrictive Covenants”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company Group and their respective affiliates shall have the following rights and remedies, each of which
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(i)
|
The right and remedy to have the Restrictive Covenants specifically enforced (without posting bond and without the need to prove damages) by any court of competent jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants; and
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(ii)
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The right and remedy to require the Executive to account for and pay over to the Company Group and their respective affiliates all compensation, profits, monies, accruals, increments or other benefits (collectively, “Benefits”) derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive shall account for and pay over such Benefits to the Company Group and, if applicable, their respective affected affiliates.
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(g)
|
Without limiting Section 12(i), if any court or other decision-maker of competent jurisdiction determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, it shall be revised by the court or other decision-maker to reflect most nearly the parties’ intent and the remainder of the provision or provisions of this Agreement shall be unaffected and shall continue in full force and effect. If a court or other decision-maker of competent jurisdiction is unwilling to revise any portion of the Restrictive Covenants and holds them unenforceable, then, after such determination has become final and non-appealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
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(a)
|
Except as provided in Section 10(b), any disputes between the Company Group and the Executive in any way concerning the Executive’s employment, the termination of his employment, this Agreement or its enforcement shall be submitted at the initiative of either party to mandatory arbitration in Maryland before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association, or its
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(b)
|
Notwithstanding the foregoing, the Partnership or the Trust, in its sole discretion, may bring an action in any court of competent jurisdiction to seek injunctive relief and such other relief as the Partnership or the Trust shall elect to enforce the Restrictive Covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of breadth of scope or otherwise it is the intention of the Company Group and the Executive that such determination not bar or in any way affect the Company Group’s right, or the right of any of their respective affiliates, to the relief provided in Section 8(f) above in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenants, as to breaches of such Restrictive Covenants in such other respective jurisdictions, such Restrictive Covenants as they relate to each jurisdiction being, for this purpose, severable, diverse and independent covenants, subject, where appropriate, to the doctrine of res judicata. The parties hereby agree to waive any right to a trial by jury for any and all disputes hereunder (whether or not relating to the Restrictive Covenants).
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(a)
|
Notices
. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective (i) upon personal delivery, (ii) upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid, or (iii) in the case of facsimile transmission or delivery by nationally recognized overnight delivery service, when received, addressed as follows:
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(b)
|
Pronouns
. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
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(c)
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Entire Agreement
. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings (including, but not limited to, that certain prior employment agreement by and among the parties dated January 27, 2010 and all amendments thereto), whether written or oral, relating to the subject matter of this Agreement.
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(d)
|
Amendment
. This Agreement may be amended or modified only by a written instrument executed by both the Trust and the Executive.
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(e)
|
Governing Law
. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Maryland, without regard to its conflicts of laws principles.
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(f)
|
Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any entity with which or into which the Partnership or the Trust may be merged or which may succeed to its assets or business or any entity to which the Partnership or the Trust may assign its rights and obligations under this Agreement; provided, however, that the obligations of the Executive are personal and shall not be assigned or delegated by him.
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(g)
|
Waiver
. No delays or omission by the Partnership, the Trust or the Executive in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Trust, for itself, the Partnership or any other member of the Company Group, or the Executive on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
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(h)
|
Captions
. The captions appearing in this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
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(i)
|
Severability
. In case any provision of this Agreement shall be held by a court or arbitrator with jurisdiction over the parties to this Agreement to be invalid, illegal or otherwise unenforceable, such provision shall be restated to reflect as nearly as possible the original intentions of the parties in accordance with applicable law, and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
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(j)
|
Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
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By:
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/s/ James L. Francis
|
Name:
|
James L. Francis
|
Title:
|
President and Chief Executive Officer
|
|
|
By:
|
Chesapeake Lodging Trust, its general partner
|
By:
|
/s/ James L. Francis
|
Name:
|
James L. Francis
|
Title:
|
President and Chief Executive Officer
|
|
|
(a)
|
He is hereby advised in writing to consult an attorney before signing this Release;
|
(b)
|
He has relied solely on his own judgment and/or that of his attorney regarding the consideration for and the terms of this Release and is signing this Release knowingly and voluntarily of his own free will;
|
(c)
|
He is not entitled to the Severance Payment unless he agrees to and honors the terms of this Release;
|
(d)
|
He has been given at least twenty-one (21) calendar days to consider this Release, or he expressly waives his right to have at least twenty-one (21) days to consider this Release;
|
(e)
|
He may revoke this Release within seven (7) calendar days after signing it by submitting a written notice of revocation to the Employer. He further understands that this Release is not effective or enforceable until after the seven (7) day period of revocation has expired without revocation, and that if he revokes this Release within the seven (7) day revocation period, he will not receive the Severance Payment;
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(f)
|
He has read and understands the Release and further understands that, subject to the limitations contained herein, it includes a general release of any and all known and unknown, foreseen or unforeseen claims presently asserted or otherwise arising through the date of his signing of this Release that he may have against the Employer, including claims under various civil rights laws, including the Age Discrimination in Employment Act and the Older Worker Benefit Protection Act; and
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(g)
|
No statements made or conduct by the Employer has in any way coerced or unduly influenced him to execute this Release.
|
(a)
|
General
. The Executive agrees not to engage in any business activities during the Employment Period except those which are for the sole benefit of the Partnership or the
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(b)
|
Corporate Opportunities
. The Executive agrees that he will not take personal advantage of any business opportunities which arise during his employment with the Company Group and which may be of benefit to the Company Group. All material facts regarding such opportunities must be promptly reported by the Executive to the Board of Trustees for consideration by the Company Group.
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(a)
|
Salary
. The Trust shall pay the Executive a gross base annual salary (“Base Salary”) of $325,000. The salary shall be payable in arrears in approximately equal semi-monthly installments (except that the first and last such semi-monthly installments may be prorated if necessary) on the Trust’s regularly scheduled payroll dates, minus such deductions as may be required by law or reasonably requested by the Executive. The Trust’s Compensation Committee (the “Compensation Committee”) shall review his Base Salary annually in conjunction with its regular review of employee salaries and may increase (but not decrease) his Base Salary as in effect from time to time as the Compensation Committee shall deem appropriate.
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(b)
|
Annual Bonus
. Executive shall be entitled to earn bonuses with respect to each fiscal year (or partial fiscal year), based upon Executive’s and the Company Group’s achievement of performance objectives set by the Trust, pursuant to one or more bonus opportunities granted to Executive under the Trust’s cash bonus plan(s) in effect for such fiscal year (or partial fiscal year). Any threshold bonus amount, target bonus amount, and/or maximum bonus amount relating to any such bonus opportunity shall be expressed as a percentage of Executive’s annual salary in effect for such fiscal year (or partial fiscal year) and shall be communicated by the Trust to Executive. Any such bonus earned by
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(c)
|
Restricted Share Grants
. Pursuant to the Chesapeake Lodging Trust Equity Plan (or any successor plan thereto), as it may be amended from time to time, the Trust may make one or more grants to the Executive of common shares of beneficial interest of the Trust or other securities (including securities of the Partnership) as may be issued thereunder from time to time subject to certain vesting requirements and other conditions set forth in the applicable award agreement(s).
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(d)
|
Other Benefits
. The Executive shall be entitled to paid time off and holiday pay in accordance with the Company Group’s policies in effect from time to time and shall be eligible to participate in such life, health, and disability insurance, pension, deferred compensation and incentive plans, options and awards, performance bonuses and other benefits as the Company Group extends, as a matter of policy, to its executive employees. The Company Group shall maintain a disability insurance policy or plan covering the Executive during the Employment Period.
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(e)
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Reimbursement of Business Expenses
. The Company Group shall reimburse the Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement, upon presentation by the Executive of documentation, expense statements, vouchers, and/or such other supporting information as the Trust may reasonably request.
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(f)
|
Timing of Reimbursements
. Any reimbursement under this Agreement that is taxable to the Executive shall be made by December 31 of the calendar year following the calendar year in which the Executive incurred the expense.
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(a)
|
Termination by the Trust for Cause
. The Trust may terminate the Executive’s employment under this Agreement at any time for Cause, upon written notice by the Trust to the Executive. For purposes of this Agreement, “Cause” for termination shall mean any of the following: (i) the conviction of the Executive of, or the entry of a plea of guilty or nolo contendere by the Executive to, any felony; (ii) fraud, misappropriation or embezzlement by the Executive; (iii) the Executive’s willful failure or gross negligence in the performance of his assigned duties for the Company Group, which failure or negligence continues for more than fifteen (15) calendar days following the Executive’s receipt of written notice of such willful failure or gross negligence; (iv) the Executive’s breach of any of his fiduciary duties to the Company Group; (v) any act or omission of the Executive that has a demonstrated and material adverse impact on the Company Group’s reputation for honesty and fair dealing; or (vi) the breach by the Executive of any material term of this Agreement.
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(b)
|
Termination by the Trust Without Cause or by the Executive Without Good Reason
. Either party may terminate this Agreement at any time without Cause (in the case of the Trust) or without Good Reason (in the case of the Executive), upon giving the other party sixty (60) days’ written notice. At the Trust’s sole discretion, it may substitute sixty (60) days’ salary (or any lesser portion for any shortened period provided) in lieu of notice. Any salary paid to the Executive in lieu of notice shall not be offset against any entitlement the Executive may have to the Severance Payment pursuant to Section 6(c).
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(c)
|
Termination by Executive for Good Reason
. The Executive may terminate his employment under this Agreement at any time for Good Reason, upon written notice by the Executive to the Trust. For purposes of this Agreement, Good Reason for termination shall mean, without the Executive’s consent, (i) the assignment to the Executive of substantial authority, duties or responsibilities inconsistent with the Executive’s position at the Company Group, or any other action by the Company Group which results in a material diminution of the Executive’s authority, duties or responsibilities other than any such reduction which is remedied by the Company Group within 30 days of receipt of written notice thereof from the Executive; (ii) a requirement that the Executive work principally from a location outside the fifty (50) mile radius from the Trust’s address first written above as long as such requirement is a material change in the geographic location at which the Executive must perform the services; or (iii) a material diminution in the Executive’s aggregate Base Salary and other compensation taken as a whole, excluding any reductions caused by the failure to achieve performance targets. Good Reason shall not exist pursuant to any subsection of this Section 5(c) unless (A) the Executive shall have delivered notice to the Board of Trustees within 90 days of the initial occurrence of such event constituting Good Reason, and (B) the Board of Trustees shall have failed to remedy the circumstances giving rise to the Executive’s notice within 30 days of receipt of notice. The Executive must terminate his employment under this Section 5(c) at a time agreed reasonably with the Trust, but in any event within two years from the initial occurrence of an event constituting Good Reason.
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(d)
|
Executive’s Death or Disability
. The Executive’s employment shall terminate immediately upon his death or, upon written notice as set forth below, his Disability. As used in this Agreement, Disability shall mean such physical or mental impairment as would render the Executive eligible to receive benefits under the long-term disability insurance policy or plan then made available by the Company Group to the Executive. If the Employment Period is terminated by reason of the Executive’s Disability, either party shall give thirty (30) days’ advance written notice to that effect to the other.
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(a)
|
General
. Regardless of the reason for any termination of this Agreement, the Executive (or the Executive’s estate if the Employment Period ends on account of the Executive’s death) shall be entitled to (i) payment of any unpaid portion of his Base Salary through the effective date of termination; (ii) reimbursement for any outstanding reasonable
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(b)
|
Termination by the Trust for Cause or by Executive Without Good Reason
. If the Trust terminates the Executive’s employment for Cause or the Executive terminates his employment without Good Reason, the Executive shall have no rights or claims against the Company Group except to receive the payments and benefits described in Section 6(a).
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(c)
|
Termination by the Trust Without Cause
. Except as provided in Section 6(d), if the Trust terminates the Executive’s employment without Cause pursuant to Section 5(b), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a), the following:
|
(i)
|
continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of twelve (12) months (the “Severance Payment”). The Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
|
(ii)
|
continued payment by the Trust for the Executive’s life and health insurance coverage during the twelve (12) month severance period referenced in Section 6(c)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the twelve (12) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
|
(iii)
|
vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
|
(iv)
|
a bonus equal to the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the Executive’s employment if shorter), and (y) the most recent bonus paid to the Executive. Such bonus shall
|
(d)
|
Termination Following Change in Control
. If, during the Employment Period and within twelve (12) months following a Change in Control, the Trust (or its successor) terminates the Executive’s employment without Cause pursuant to Section 5(b) or the Executive terminates his employment for Good Reason pursuant to Section 5(c), the Executive shall be entitled to receive, in addition to the items referenced in Section 6(a) and in lieu of any benefits described in Section 6(c), the following:
|
(i)
|
continued payment of his Base Salary, at the rate in effect on his last day of employment, for a period of twenty-four (24) months (the “Control Change Severance Payment”). The Control Change Severance Payment shall be paid in approximately equal installments on the Trust’s regularly scheduled payroll dates, subject to all legally required payroll deductions and withholdings for sums owed by the Executive to the Company Group;
|
(ii)
|
continued payment by the Trust for the Executive’s life and health insurance coverage during the twenty-four (24) month severance period referenced in Section 6(d)(i) to the same extent that the Trust paid for such coverage immediately prior to the termination of the Executive’s employment and subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that if any such insurance coverage shall become unavailable during the twenty-four (24) month severance period, the Trust thereafter shall be obliged only to pay to the Executive an amount which, after reduction for income and employment taxes, is equal to the employer premiums for such insurance for the remainder of such severance period;
|
(iii)
|
vesting as of the last day of his employment in any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group; and
|
(iv)
|
a bonus equal to two (2) times the greater of (x) the average of all bonuses paid to the Executive (taking into account a payment of no bonus or a payment of a bonus of $0) over the preceding thirty-six (36) months (or the period of the
|
(v)
|
None of the benefits described in this Section 6(d) will be payable unless the Executive has signed and delivered a general release (attached hereto as Exhibit A) within 45 days of date of termination, which has (and not until it has) become irrevocable, satisfactory to the Trust in the reasonable exercise of its discretion, releasing the Company Group and its affiliates, including their respective officers, trustees, members, partners, directors and employees, from any and all claims or potential claims arising from or related to the Executive’s employment or termination of employment.
|
(vi)
|
For purposes of this Agreement, a “Change in Control” shall mean any of the following events:
|
(e)
|
Termination In the Event of Death or Disability
.
|
(i)
|
If the Executive’s employment terminates because of his death, any unvested portion of any option and any restricted shares previously issued to the Executive by the Company Group shall become fully vested as of the date of his death. In addition, the Executive’s estate shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been entitled for the fiscal year in which his death occurs.
|
(ii)
|
In the event the Executive’s employment terminates due to his Disability, he shall be entitled to receive his Base Salary until such date as he shall commence receiving disability benefits pursuant to any long-term disability insurance policy or plan provided to him by the Company Group. In addition, as of the effective date of the termination notice specified in Section 5(d), the Executive shall vest in any unvested portion of any option and any restricted shares previously granted to him by the Company Group. The Executive also shall be entitled to receive a pro-rata share of any performance bonus to which he otherwise would have been
|
(f)
|
Additional Provisions
. Anything in this Agreement to the contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Trust and reasonably acceptable to Executive (the “Accounting Firm”) shall determine that receipt of all payments or distributions by the Company Group and each of their respective affiliates in the nature of compensation to or for Executive's benefit, whether paid or payable pursuant to this Agreement or otherwise (a “Payment”), would subject Executive to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Accounting Firm shall determine as required below whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive's Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if Executive’s Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which Executive is entitled.
|
(i)
|
“Reduced Amount” shall mean the greatest amount of Agreement Payments that can be paid to Executive without resulting in the imposition of the excise tax under Section 4999 of the Code.
|
(ii)
|
“Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive's taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm shall have determined to be likely to apply to Executive in the relevant taxable year(s).
|
(a)
|
Definition of Proprietary Information
. The Executive acknowledges that he may be furnished or may otherwise receive or have access to confidential information which relates to the Company Group’s past, present or future business activities, strategies, services or products, research and development; financial analysis and data; improvements, inventions, processes, techniques, designs or other technical data; profit margins and other financial information; fee arrangements; terms and contents of leases, asset management agreements and other contracts; tenant and vendor lists or other compilations for marketing or development; confidential personnel and payroll information; or other information regarding administrative, management, financial, marketing, leasing or sales activities of the Company Group, or of a third party which provided proprietary information to the Company Group on a confidential basis. All such
|
(b)
|
Exclusions
. Notwithstanding the foregoing, Proprietary Information shall not include information in the public domain not as a result of a breach of any duty by the Executive or any other person.
|
(c)
|
Obligations
. Both during and after the Employment Period, the Executive agrees to preserve and protect the confidentiality of the Proprietary Information and all physical forms thereof, whether disclosed to him before this Agreement is signed or afterward. In addition, the Executive shall not (i) disclose or disseminate the Proprietary Information to any third party, including employees of the Company Group (or their affiliates) without a legitimate business need to know during the Employment Period; (ii) remove the Proprietary Information from the Company Group’s premises without a valid business purpose; or (iii) use the Proprietary Information for his own benefit or for the benefit of any third party.
|
(d)
|
Return of Proprietary Information
. The Executive acknowledges and agrees that all the Proprietary Information used or generated during the course of working for the Company Group is the property of the Company Group. The Executive agrees to deliver to the Company Group all documents and other tangibles (including diskettes and other storage media) containing the Proprietary Information at any time upon request by the Board of Trustees during his employment and immediately upon termination of his employment.
|
(a)
|
Restriction on Competition
. For the period of the Executive’s employment with the Company Group and for twelve (12) months following the expiration or termination of the Executive’s employment by the Company Group (the “Restricted Period”), the Executive agrees not to engage, directly or indirectly, as an owner, director, trustee, manager, member, employee, consultant, partner, principal, agent, representative, stockholder, or in any other individual, corporate or representative capacity, in any of the following: (i) any public or private lodging company, or (ii) any other business that the Company Group conducts as of the date of the Executive’s termination of employment. Notwithstanding the foregoing, the Executive shall not be deemed to have violated this Section 8(a) solely by reason of his passive ownership of 1% or less of the outstanding stock of any publicly traded corporation or other entity.
|
(b)
|
Non-Solicitation of Clients
. During the Restricted Period, the Executive agrees not to solicit, directly or indirectly, on his own behalf or on behalf of any other person(s), any client of the Company Group to whom the Company Group had provided services at any time during the Executive’s employment with the Company Group in any line of business that the Company Group conducts as of the date of the Executive’s termination of employment or that the Company Group is actively soliciting, for the purpose of
|
(c)
|
Non-Solicitation of Employees
. During the Restricted Period, the Executive agrees that he will not, directly or indirectly, hire or attempt to hire or cause any business, other than an affiliate of the Company Group, to hire any person who is then or was at any time during the preceding six (6) months an employee of the Company Group and who is at the time of such hire or attempted hire, or was at the date of such employee’s separation from the Company Group a vice president, senior vice president or executive vice president or other senior executive employee of the Company Group.
|
(d)
|
Non-Disparagement
. Executive will not disparage the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents, or otherwise take any action which could reasonably be expected to adversely affect the personal or professional reputation of the Company Group or its subsidiaries or affiliates, or any of their trustees, members, partners, directors, officers, employees, or agents.
|
(e)
|
Acknowledgement
. The Executive acknowledges that he will acquire much Proprietary Information concerning the past, present and future business of the Company Group as the result of his employment, as well as access to the relationships between the Partnership and the Trust and their clients and employees. The Executive further acknowledges that the business of the Company Group is very competitive and that competition by him in that business during his employment, or after his employment terminates, would severely injure the Company Group. The Executive understands and agrees that the restrictions contained in this Section 8 are reasonable and are required for the Company Group’s legitimate protection, and do not unduly limit his ability to earn a livelihood.
|
(f)
|
Rights and Remedies upon Breach
. The Executive acknowledges and agrees that any breach by him of any of the provisions of Sections 7 and 8 (the “Restrictive Covenants”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company Group and their respective affiliates shall have the following rights and remedies, each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company Group and such affiliates, under law or in equity (including, without limitation, the recovery of damages):
|
(i)
|
The right and remedy to have the Restrictive Covenants specifically enforced (without posting bond and without the need to prove damages) by any court of competent jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory,
|
(ii)
|
The right and remedy to require the Executive to account for and pay over to the Company Group and their respective affiliates all compensation, profits, monies, accruals, increments or other benefits (collectively, “Benefits”) derived or received by him as the result of any transactions constituting a breach of the Restrictive Covenants, and the Executive shall account for and pay over such Benefits to the Company Group and, if applicable, their respective affected affiliates.
|
(g)
|
Without limiting Section 12(i), if any court or other decision-maker of competent jurisdiction determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, it shall be revised by the court or other decision-maker to reflect most nearly the parties’ intent and the remainder of the provision or provisions of this Agreement shall be unaffected and shall continue in full force and effect. If a court or other decision-maker of competent jurisdiction is unwilling to revise any portion of the Restrictive Covenants and holds them unenforceable, then, after such determination has become final and non-appealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
|
(a)
|
Except as provided in Section 10(b), any disputes between the Company Group and the Executive in any way concerning the Executive’s employment, the termination of his employment, this Agreement or its enforcement shall be submitted at the initiative of either party to mandatory arbitration in Maryland before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association, or its successor, then in effect. The decision of the arbitrator shall be rendered in writing, shall be final, and may be entered as a judgment in any court in the State of Maryland. The parties irrevocably consent to the jurisdiction of the federal and state courts located in Maryland for this purpose. Each party shall be responsible for its or his own costs incurred in such arbitration and in enforcing any arbitration award, including attorneys’ fees and expenses.
|
(b)
|
Notwithstanding the foregoing, the Partnership or the Trust, in its sole discretion, may bring an action in any court of competent jurisdiction to seek injunctive relief and such
|
(a)
|
Notices
. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective (i) upon personal delivery, (ii) upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid, or (iii) in the case of facsimile transmission or delivery by nationally recognized overnight delivery service, when received, addressed as follows:
|
(b)
|
Pronouns
. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.
|
(c)
|
Entire Agreement
. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings (including, but not limited to, that certain prior employment agreement by and among the parties dated February 16, 2010 and all amendments thereto), whether written or oral, relating to the subject matter of this Agreement.
|
(d)
|
Amendment
. This Agreement may be amended or modified only by a written instrument executed by both the Trust and the Executive.
|
(e)
|
Governing Law
. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Maryland, without regard to its conflicts of laws principles.
|
(f)
|
Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any entity with which or into which the Partnership or the Trust may be merged or which may succeed to its assets or business or any entity to which the Partnership or the Trust may assign its rights and obligations under this Agreement; provided, however, that the obligations of the Executive are personal and shall not be assigned or delegated by him.
|
(g)
|
Waiver
. No delays or omission by the Partnership, the Trust or the Executive in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Trust, for itself, the Partnership or any other member of the Company Group, or the Executive on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
|
(h)
|
Captions
. The captions appearing in this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
|
(i)
|
Severability
. In case any provision of this Agreement shall be held by a court or arbitrator with jurisdiction over the parties to this Agreement to be invalid, illegal or otherwise unenforceable, such provision shall be restated to reflect as nearly as possible the original intentions of the parties in accordance with applicable law, and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
|
(j)
|
Counterparts
. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
|
By:
|
/s/ James L. Francis
|
Name:
|
James L. Francis
|
Title:
|
President and Chief Executive Officer
|
|
|
By:
|
Chesapeake Lodging Trust, its general partner
|
By:
|
/s/ James L. Francis
|
Name:
|
James L. Francis
|
Title:
|
President and Chief Executive Officer
|
|
|
(a)
|
He is hereby advised in writing to consult an attorney before signing this Release;
|
(b)
|
He has relied solely on his own judgment and/or that of his attorney regarding the consideration for and the terms of this Release and is signing this Release knowingly and voluntarily of his own free will;
|
(c)
|
He is not entitled to the Severance Payment unless he agrees to and honors the terms of this Release;
|
(d)
|
He has been given at least twenty-one (21) calendar days to consider this Release, or he expressly waives his right to have at least twenty-one (21) days to consider this Release;
|
(e)
|
He may revoke this Release within seven (7) calendar days after signing it by submitting a written notice of revocation to the Employer. He further understands that this Release is not effective or enforceable until after the seven (7) day period of revocation has expired without revocation, and that if he revokes this Release within the seven (7) day revocation period, he will not receive the Severance Payment;
|
(f)
|
He has read and understands the Release and further understands that, subject to the limitations contained herein, it includes a general release of any and all known and unknown, foreseen or unforeseen claims presently asserted or otherwise arising through the date of his signing of this Release that he may have against the Employer, including claims under various civil rights laws, including the Age Discrimination in Employment Act and the Older Worker Benefit Protection Act; and
|
(g)
|
No statements made or conduct by the Employer has in any way coerced or unduly influenced him to execute this Release.
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
Income (loss) before income taxes
|
|
$
|
61,489
|
|
|
$
|
46,973
|
|
|
$
|
27,915
|
|
|
$
|
9,154
|
|
|
$
|
(1,257
|
)
|
Add:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense (including amortization of capitalized interest)
|
|
27,357
|
|
|
25,780
|
|
|
20,976
|
|
|
12,868
|
|
|
2,344
|
|
|||||
Portion of rental expense representing interest
|
|
1,371
|
|
|
1,102
|
|
|
349
|
|
|
40
|
|
|
8
|
|
|||||
Total earnings
|
|
$
|
90,217
|
|
|
$
|
73,855
|
|
|
$
|
49,240
|
|
|
$
|
22,062
|
|
|
$
|
1,095
|
|
Fixed charges and preferred share dividends:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense (including amortization of capitalized interest)
|
|
$
|
27,357
|
|
|
$
|
25,780
|
|
|
$
|
20,976
|
|
|
$
|
12,868
|
|
|
$
|
2,344
|
|
Portion of rental expense representing interest
|
|
1,371
|
|
|
1,102
|
|
|
349
|
|
|
40
|
|
|
8
|
|
|||||
Preferred share dividends
|
|
9,688
|
|
|
9,688
|
|
|
4,413
|
|
|
—
|
|
|
—
|
|
|||||
Total fixed charges and preferred share dividends
|
|
$
|
38,416
|
|
|
$
|
36,570
|
|
|
$
|
25,738
|
|
|
$
|
12,908
|
|
|
$
|
2,352
|
|
Ratio of earnings to combined fixed charges and preferred share dividends
|
|
2.3
|
|
|
2.0
|
|
|
1.9
|
|
|
1.7
|
|
|
(a)
|
|
(a)
|
Earnings did not cover fixed charges and preferred share dividends by $1,257.
|
(1)
|
Form S-3 No. 333-198558,
|
(2)
|
Form S-3 No. 333-183280,
|
(3)
|
Form S-8 No. 333-181840,
|
(4)
|
Form S-8 No. 333-172311, and
|
(5)
|
Form S-8 No. 333-164537;
|
(1)
|
I have reviewed this report on Form 10-K of Chesapeake Lodging Trust;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(1)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(2)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(3)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(4)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
|
(1)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(2)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: February 19, 2015
|
|
/s/ James L. Francis
|
|
|
President and Chief Executive Officer
|
(1)
|
I have reviewed this report on Form 10-K of Chesapeake Lodging Trust;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(1)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(2)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(3)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(4)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
|
(1)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(2)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Douglas W. Vicari
|
Executive Vice President and Chief Financial Officer
|
/s/ James L. Francis
|
President and Chief Executive Officer
|
/s/ Douglas W. Vicari
|
Executive Vice President and Chief Financial Officer
|