Hersha Agrees To Cancel Unit Options With Two Top Execs

HARRISBURG, PA— Hersha Hospitality Trust has entered into an agreement with REIT Chairman/CEO Hasu Shah and Trustee K.D. Patel to cancel all of the unit options held by these individuals and issued at the time of the company’s initial public offering. The units were issued in conjunction with a special stock appreciation rights (SAR) plan established for the benefit of employees of the company’s affiliated management company, Hersha Hospitality Management LP (HHMLP). The special stock appreciation rights plan was reportedly created as a way to incentivize HHMLP employees, who were not eligible to receive stock options under the company’s stock option plan. Shah and Patel were granted options to acquire units of limited-partnership interest in Hersha Hospitality LP at $6 per unit, the price per common share in Hersha’s 1999 IPO. It was noted these options were not exercisable until the closing price of Hersha’s common shares exceeded $9 for a 20-day period. In addition, these options were exercisable solely in connection with equivalent exercises of SARs by HHMLP employees. In order to cancel all of the outstanding options and stock appreciation rights, the company paid (in cash) the difference between the $6 exercise price and $9.69 (the closing price per common share on Dec. 11, 2003) for the 255,150 stock-appreciation rights outstanding— which was less than the total number of options cancelled. These proceeds were distributed to approximately 150 HHMLP employees, who exercised SARs granted to them since the company’s IPO. It was also pointed out neither Shah nor Patel retained any proceeds from the option cancellation. Shah and Patel— combined with other management and trustees— continue to own in excess of 21% of the company’s equity ownership.