Additionally, all of our directors will be reimbursed for reasonable travel and related expenses associated with
attendance at our Board or committee meetings.
To align the interests of directors with stockholders, the Board has adopted a requirement that each of our independent,
non-employee
directors who receives compensation for his or her service on our Board or a committee thereof will be required to own stock in an amount equal to five times his or her annual cash retainer. For
purposes of this requirement, a directors holdings include shares held directly or indirectly, individually or jointly; shares underlying vested options (based on excess value over the exercise price); shares underlying unvested time-vesting
restricted stock and restricted stock units; and shares held under a deferral or similar plan.
Non-employee
directors are expected to meet this ownership requirement within five years of the later of
(a) February 23, 2017 (
i.e.
, the date on which the Company made its first broad-based equity incentive grants following the
Spin-off)
or (b) the date he or she first becomes subject to
this stock ownership policy.
In order to encourage our independent directors to better understand our hotel assets and provide feedback on our portfolio, our independent
directors are entitled to up to 30 complimentary room nights per calendar year, including associated room taxes and fees, at properties owned by the Company. The Company does not provide tax
gross-ups
to the
directors with respect to these benefits.
The Company finished fiscal year 2016 as a portion of the ownership business segment of Hilton, one of the worlds largest
hospitality companies, and began fiscal year 2017 as a separate, independent publicly-traded company and leading lodging real estate company with a diverse portfolio of market-leading hotels. As we were not a separate public company during 2016, our
executive compensation programs for 2016 were generally programs that had been established by Hilton.
This Compensation Discussion and Analysis (CD&A) provides an overview of the compensation for
each of Parks named executive officers (NEOs) for 2016. In addition, the CD&A covers the new executive compensation programs adopted by the Committee for the Company on a going forward basis in 2017 following the
Spin-off.
For fiscal year 2016, our NEOs were:
The primary goals of our executive compensation programs are (i) aligning the interests of our executives with those of our stockholders
to maximize stockholder value; (ii) properly motivating management to balance short-term objectives with long-term value creation to the stockholders; and (iii) attracting and retaining the best executive talent by offering competitive
compensation programs. Set forth below is a summary of some of the key attributes that define our executive compensation programs.
Our executive compensation programs are designed and administered under the direction and control of the Committee. The Committee is comprised
solely of independent directors who review and approve our overall executive compensation programs and practices and set the compensation of our executive officers. In determining compensation for our executive officers, other than our Chief
Executive Officer, the Committee considers, among other things, the recommendations of our Chief Executive Officer. The Committee is, however, solely responsible for making the final decisions on compensation for the Chief Executive Officer and
other executive officers.
The Companys executive compensation programs strive to achieve the following philosophy, principles and
business objectives:
During 2016, Ferguson Partners L.P., an affiliate of FPL, was retained by Hilton, our former
corporate parent prior to the
Spin-off,
to provide recruitment services that resulted in the placement of five members of our
Board of Directors and our chief executive officer. The aggregate fees paid by Hilton in 2016 for all services provided by Ferguson Partners were approximately $1,134,872. None of our Board
members or our chief executive officer were involved in the engagement by Hilton of Ferguson Partners.
In 2017, the Committee assessed
the independence of FPL in accordance with the applicable rules of the Securities and Exchange Commission and the New York Stock Exchange. After considering the foregoing, the Committee determined that it was appropriate to engage FPL as its
compensation consultant.
The Committee worked with FPL to develop peer groups of companies for benchmarking purposes. Traditionally, companies compare their
compensation practices and performance against the performance of a group of companies whose business model and industry are relatively similar to those of the company. However, in recognition of the size and complexity of the Company, the
Committee, at FPLs recommendation, determined that it would be appropriate to utilize two peer groups in designing and administering the Companys compensation programs. One peer group may be utilized to assess Company executive
compensation practices against other lodging REITs and in the future for measuring relative performance. The other peer group may be utilized in designing pay programs calculated to attract and retain key employees in recognition of the greater
responsibilities involved in managing a company of our size and complexity.
Lodging REIT-Based Peer Group
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Apple Hospitality REIT, Inc.
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LaSalle Hotel Properties
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Ryman Hospitality Properties, Inc.
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Chesapeake Lodging Trust
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Pebblebrook Hotel Trust
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Sunstone Hotel Investors, Inc.
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DiamondRock Hospitality Company
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RLJ Lodging Trust
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Xenia Hotels & Resorts, Inc.
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Host Hotels & Resorts, Inc.
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FPLs benchmarking compared the compensation of our executive officers based on base salary and total
target compensation (including base salary, target short-term annual incentive compensation and an annualized long-term incentive compensation) with that of executive officers of similar titles and job roles across the peer companies. The Committee
considered and expects to continue to consider the amount and mix of base and variable compensation by referencing, for each executive officer position, the prevalence of each element and the level of compensation that are provided in the market
based on FPLs comparison analysis.
Role of Executives
The Committee believes management input is important to the overall effectiveness of the Companys executive compensation programs. The
Committee believes the advice of an independent compensation consultant should be combined with
11
management input and the business judgment of the Committee members to arrive at a proper alignment of our compensation philosophy, principles and business objectives.
The Chief Executive Officer, the Senior Vice President and General Counsel and the Senior Vice President, Human Resources are the members of
the Company who interact most closely with the Committee. These individuals work with the Committee to provide their perspective on aligning executive compensation strategies with our business objectives. When determining compensation for our
executive officers, other than the Chief Executive Officer, the Committee considered individual performance as summarized and assessed by the Chief Executive Officer. The performance of the Chief Executive Officer was assessed directly by the
Committee in executive session without the Chief Executive Officer present.
Say On Pay
As 2017 is our first year as a separate, independent publicly traded company, we have no say on pay results from the previous year to report.
We intend to provide the Companys stockholders with the opportunity to cast a say on pay and a say on frequency vote during our 2017 Annual Meeting of stockholders.
Compensation Framework
The
primary components of our new executive compensation program, which commenced in fiscal year 2017, are base salary, short-term incentive compensation (cash) and long-term incentive compensation (equity). These components are described in more detail
below.
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Compensation Element
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Form
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Primary
Objective
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Key Feature
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Base salary
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Cash
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Recognize the performance of job
responsibilities
Attract and retain the best executive talent to drive our
success
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Adjustments are considered annually based on
competitive market analysis and individual performance
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Short-Term Incentive
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Cash
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Promote short-term business objectives and growth
strategies
Align pay with performance
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Annual cash incentive awards are made with respect
to achievement of Company performance objectives and individual performance
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Long-Term Incentive
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Equity, including restricted stock awards (RSAs) and performance stock units (PSUs)
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Promote long-term value creation and growth
strategies
Encourage maximization of stockholder value
Promote retention and provide ongoing incentives by encouraging
long-term stock ownership
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50% of annual long-term incentive award is delivered
in RSAs that generally vest over 3 years
Remaining 50% is delivered in PSUs that have a
3-year
performance period with performance based solely on relative total stockholder return (as described below)
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Base Salary
Structure
The base salary
payable to each executive officer provides a fixed component of compensation that reflects the executives position and responsibilities. Base salary levels are intended to be comparable with the competitive market, as determined by the
Committee in its judgment, but are not targeted to specific market levels. The Committee expects to review base salaries annually and may make adjustments to better match competitive market levels or to recognize an executives professional
growth and development or increased responsibilities.
2016 and
Spin-off
Matters
With respect to fiscal year 2016, the base salaries for Messrs. Baltimore and Morey were determined pursuant to arms-length negotiations of an
employment agreement or offer letter related to their initial employment.
12
With respect to Mr. DellOrto, as Park was still a part of Hilton prior to the
Spin-off,
Hilton set the base salary level as set forth in the
table below.
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Name
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Base Salary ($)
(1)
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Thomas J. Baltimore, Jr.
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1,000,000
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Sean M. DellOrto
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371,315
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(2)
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Thomas M. Morey
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450,000
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(1)
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The amounts shown reflect annualized base salary amounts for fiscal year 2016. Actual base salary amounts received during 2016 by the NEOs are reported in the 2016 Summary Compensation Table below.
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(2)
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This amount reflects base salary compensation received by Mr. DellOrto from Hilton in relation to his role as Senior Vice President, Treasurer of Hilton during 2016. The Company increased
Mr. DellOrtos base salary to $500,000, effective as of January 3, 2017, in order to reflect Mr. DellOrtos new role as Chief Financial Officer and increased responsibilities with the Company.
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Short-Term Incentive
Structure
Following the
Spin-off,
the Committee approved an executive short-term incentive plan (the STIP), which is intended to reward Company executives designated at the level of senior vice president and above who are
members of the Companys executive committee or are subject to Section 16 of the Exchange Act, based on our Companys overall performance and the individuals contribution to that performance. Pursuant to the STIP, each fiscal
year, the Committee will determine a target bonus (the Target Bonus) for each such participant. Unless otherwise determined by the Committee, the Target Bonus for each participant (other than the Chief Executive Officer) will be up to
75% (for officers at the senior vice president level) or up to 100% (for officers at the executive vice president level) of his or her base salary, with the actual bonus range that may be earned by each participant being determined by the Committee
each fiscal year. Pursuant to Mr. Baltimores Executive Employment Agreement with the Company, dated April 26, 2016 (the CEO Employment Agreement), his Target Bonus will be 150% of his base salary, with the actual bonus
range that may be earned by Mr. Baltimore ranging from 75% to 225% of his base salary.
Annual STIP bonuses will be earned based on
the achievement of both individual and Company performance objectives each fiscal year, as follows: (i) 25% (for officers at the senior vice president level), 20% (for officers at the executive vice president level) or 10% (for the Chief Executive
Officer) of the bonus will be earned based on the achievement of individual performance objectives; and (ii) the remainder of the bonus will be earned based on the achievement of corporate performance objectives determined by the Committee at
the beginning of such fiscal year. Individual objectives will be approved and scored by the Committee for the Chief Executive Officer and by the immediate supervisor for each other participant (with the Chief Executive Officer having the authority
to revise any individual objectives or the scoring of such objectives for participants for whom the Chief Executive Officer is not the immediate supervisor). Corporate objectives will be approved and scored by the Committee.
To receive an award, participants must be employed by the Company through December 31 of the relevant fiscal year. Notwithstanding the
foregoing, in the event of a participants termination of employment prior to December 31 of the relevant fiscal year (i) due to death or disability (as defined in the Companys 2017 Omnibus Incentive Plan), the
participant will receive a bonus for such fiscal year based on achievement of target performance but prorated for the actual days worked during such year, or (ii) due to retirement (as defined in the STIP), the participant will
receive a bonus for such fiscal year based on actual achievement but prorated for the actual days worked during such year. In the event of a participants termination of employment by the Company for cause (as defined in the
Companys 2017 Omnibus Incentive Plan) following the end of the relevant fiscal year but prior to the payment of STIP bonuses for such fiscal year, the participant will forfeit his or her right to receive an annual STIP bonus for such fiscal
year.
2016 and
Spin-off
Matters
For fiscal year 2016, the executive officers annual cash incentives were determined based on each officers participation in the
Hilton annual cash incentive program and subsequently approved and ratified by the Committee. Each such officers annual incentive opportunities were expressed as a percentage of his base salary in effect at the fiscal
year-end.
For Mr. DellOrto, who had previously been an officer of Hilton prior and unrelated to the
Spin-off,
13
the threshold, target and maximum annual incentive opportunities of 30%, 60% and 90%, respectively, of base salary were set by Hilton based on peer group benchmark data and his scope and impact
on Hiltons overall results. The target and maximum annual incentive opportunities of each of Messrs. Baltimore and Morey were determined pursuant to the terms of their respective employment agreement or offer letter, and the actual amount of
each officers annual award was
pro-rated
based on the number of days during 2016 that such officer was employed by Hilton or the Company. Pursuant to the terms of the CEO Employment Agreement, the target
annual incentive opportunity for Mr. Baltimore was 150% of his base salary, with a threshold annual incentive opportunity set at 75% of his base salary and a maximum annual incentive opportunity set at 225% of his base salary. Pursuant to the
terms of his offer letter, the target annual incentive opportunity for Mr. Morey was 75% of base salary, with a maximum annual incentive opportunity of 112.5%. Pursuant to the provisions of Hiltons annual cash incentive plan,
Mr. Moreys threshold annual incentive opportunity was set at 37.5% of base salary.
In February 2017, the Committee approved
final determinations of each officers annual cash incentive award for fiscal year 2016. Mr. Baltimore received $1,800,000 (which included a regular annual cash incentive award of $1,016,336 and a
one-time
cash bonus of $783,664 related to his exceptional efforts and performance in completing the
Spin-off);
Mr. DellOrto received $273,629; and
Mr. Morey received $313,268 (which included a regular annual cash incentive award of $173,282 and a
one-time,
Spin-off
related cash bonus of $139,986).
Mr. Morey commenced employment with the Company in August 2016 and became our Senior Vice President and General Counsel in December 2016.
Pursuant to the terms of his offer letter, Mr. Morey received a
sign-on
cash payment equal to $130,000. This
sign-on
award is subject to clawback should
Mr. Moreys employment be terminated for cause or should he resign without good reason prior to the second anniversary of his date of employment.
Long-Term Incentive
Structure
Following the
Spin-off,
the Committee also approved an executive long-term incentive plan (the LTIP). The LTIP is intended to focus our executive officers and other eligible employees on, and reward them for,
achieving our long-term goals and enhancing stockholder value. In addition to the Target Bonus determined pursuant to the STIP, each fiscal year, the Committee will also determine an aggregate target value (the Aggregate Target Value)
under the LTIP for each participant. Unless otherwise determined by the Committee, the Aggregate Target Value for each participant (other than the Chief Executive Officer) will be up to 100% (for officers at the senior vice president level) or up to
200% (for officers at the executive vice president level) of his or her base salary. Pursuant to the CEO Employment Agreement, the Aggregate Target Value for the Chief Executive Officer will be equal to at least $3,500,000, as determined each year
by the Committee.
For each fiscal year, the Aggregate Target Value for each participant is allocated such that (i) 50% of the value is
granted in the form of a time-based award consisting of shares of restricted stock (RSAs) and (ii) 50% of the value is granted in the form of a performance-based award consisting of performance-based restricted stock units
(PSUs). The terms of each RSA award and PSU award are described below.
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Each fiscal years RSA award will vest ratably on each of the first three anniversaries of the grant date, subject to the continued employment of the participant through the applicable vesting date. In the event of
a participants termination of employment (i) without cause (as defined in the Companys 2017 Omnibus Incentive Plan) or due to retirement (as defined in the RSA award agreement), in each case after the first
anniversary of the grant date, all of the remaining unvested shares will become vested, (ii) without cause within 12 months following a change in control (as defined in the Companys 2017 Omnibus Incentive Plan), all of the
remaining unvested shares will become vested, and (iii) due to death or disability (as defined in the Companys 2017 Omnibus Incentive Plan), a prorated amount of the shares will vest based on the actual days worked during the
performance period. With respect to the Chief Executive Officers RSA awards, the vesting upon termination of employment will be as set forth in the CEO Employment Agreement, as described below. Participants will receive dividends on the RSAs
at the same time that regular dividend payments are made on the Companys common stock.
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Each fiscal years PSU award will vest based on the Companys total stockholder return relative to the
total stockholder returns of the companies that comprise the FTSE NAREIT Lodging Resorts Index
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14
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and that have a market capitalization in excess of $1 billion as of the first day of the applicable performance period, in each case over a three-year performance period beginning on
January 1 of the fiscal year of such grant (or, in the case of the PSU awards made during 2017, January 4, 2017, which was the Companys first day as a separate public company) (each a Performance Period), subject to the
participants continued employment through the end of the Performance Period. The number of PSUs that may become vested will range from 0% to 200% of the number of PSUs granted to the participant, based on the level of achievement of the
foregoing performance measure, as determined by the Committee. In the event of a participants termination of employment (i) without cause, due to retirement or due to death or disability, a prorated amount of the PSUs will vest based on
the actual days worked during the Performance Period (and calculated based on actual performance through the end of the Performance Period) and (ii) without cause within 12 months following a change in control, the PSUs will vest based on
actual performance through the end of the Performance Period and will not be prorated based on actual days worked during the Performance Period, provided that if the PSUs are not substituted or assumed following a change in control, then the PSUs
will vest on the day immediately prior to the consummation of such change in control based on actual performance through such day. With respect to the Chief Executive Officers PSU awards, the vesting upon termination of employment will be as
set forth in the CEO Employment Agreement, as described below. After the end of the Performance Period once the Committee has determined total stockholder return performance and the actual number of PSUs that have vested based on such performance,
participants will receive accrued dividends on the shares underlying the vested PSUs based on each regular cash dividend declared on the Companys common stock during the Performance Period.
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For 2017 only, the NEOs also received
one-time
transition awards equal to 75% of their Aggregate
Target Value (the Transition Awards). The value of such Transition Awards were allocated such that 33.34% of such value was delivered in RSAs that vest ratably on each of the first two anniversaries of the grant date and 66.66% of such
value was delivered in PSUs that will vest, if at all, based on the PSU TSR metric over the
two-year
performance period beginning on January 4, 2017 and ending on January 3, 2019. The Transition
Awards otherwise generally have the same terms as the regular annual RSA awards and PSU awards described above.
2016 and
Spin-Off
Matters
On May 16, 2016, pursuant to the CEO Employment Agreement, Mr. Baltimore
was granted a
one-time
sign-on
equity-based incentive award valued at $6,750,000 in the form of restricted stock units (RSUs) of Hilton that were originally
scheduled to vest, as to 40% of the award, on December 15, 2016 and, as to the remaining 60% of the award, in three substantially equal annual installments beginning on the first anniversary of the grant date, generally subject to his continued
employment through each applicable vesting date. In connection with the
Spin-off,
the vesting date for the 40% of the
sign-on
equity-based award was accelerated to
December 5, 2016.
Pursuant to the terms of Mr. Moreys offer letter,
on February 3, 2017, Mr. Morey was granted a
one-time
sign-on
RSA award, with a value of $1,300,000. This award will vest ratably on each of the first three
anniversaries of Mr. Moreys start date of August 1, 2016. On March 3, 2017, Mr. DellOrto was granted a
one-time
grant of RSAs, with a value of $1,000,000 and which will vest
ratably on each of the first three anniversaries of the grant date. The RSA award to Mr. DellOrto is otherwise on the same general terms and conditions described above with respect to annual RSA awards granted under the LTIP.
For fiscal year 2016, Mr. DellOrto was eligible to participate in Hiltons long-term incentive award program (the Hilton
LTIP). The Hilton LTIP was designed to reward executives for future Hilton performance, align executives interests with the interests of stockholders and retain executives. Under the Hilton LTIP, executive officers were awarded stock
options, RSUs and performance shares in fiscal year 2016. Pursuant to the Hilton LTIP, performance shares generally vested at the end of a three-year period and were divided into two tranches: 50% based on achievement of Hiltons total
stockholder return (TSR) relative to the TSRs of each member of Hiltons peer company group; and 50% based on the compound annual growth rate of Hiltons adjusted EBITDA over that three-year period by measuring the growth of
Hiltons adjusted EBITDA at the end of the performance period to that for the fiscal year immediately prior to the performance period. According to Hiltons Annual Report on Form
10-K
for the fiscal
year ended December 31, 2016, Hilton defines adjusted EBITDA as net income adjusted to exclude interest expense, taxes and depreciation and amortization and further adjusted to exclude certain items, including gains, losses and expenses in
connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements;
(iv) non-cash
impairment losses;
15
(v) furniture, fixtures and equipment replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based compensation expense;
(viii) severance, relocation and other expenses; and (ix) other items. Based on the Hilton LTIP guidelines, for fiscal year 2016, the long-term incentive award grant value received by Mr. DellOrto was $371,274.
Pursuant to the CEO Employment Agreement and as described further below, Mr. Baltimore received a long-term incentive award grant of
$1,750,000, which represented 50% of the long-term incentive award that the Company was obligated to grant him pursuant to the CEO Employment Agreement. For further information regarding Mr. Baltimores long-term award grant for fiscal
year 2016, see the discussion under the caption Compensation TablesNarrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards TableCEO Employment Agreement. For further information regarding the
long-term incentive awards granted to our NEOs for fiscal year 2016, see the table entitled Compensation Tables2016 Grants of Plan-Based Awards below.
Lastly, in connection with the
Spin-off,
all equity awards under Hiltons Omnibus Incentive Plan
that were outstanding as of December 15, 2016, the record date for the
Spin-off,
and held by any executive officer employed by the Company on the
Spin-off
distribution date were converted into awards that settled or will settle in shares of our common stock as follows:
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Stock Options: Outstanding stock options converted into an option to purchase shares of our common stock, on the same general terms and conditions as the Hilton stock option, with appropriate adjustments to the number
of shares subject to the option and the exercise price payable per share;
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Time-Vesting Restricted Stock Units: Outstanding RSUs that were subject to time-based vesting converted into RSUs that will settle in our common stock, on the same general terms and conditions of as the Hilton RSUs,
with appropriate adjustments to the number of shares subject to such RSUs; and
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Performance-Vesting Restricted Stock Units and Restricted Shares: Outstanding PSUs granted in 2014 were converted into an award of PSUs that settled in shares of our common stock based on the actual performance level
achieved by Hilton during the performance period which ended on December 31, 2016. Outstanding PSUs and performance-vesting restricted stock (Performance Shares) that were granted in 2015 and 2016 were converted into time-vesting
RSUs that will settle in shares of our common stock and were adjusted in order to preserve the value of the award immediately following the
Spin-off.
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CEO Employment Agreement
We have
an employment agreement with our Chief Executive Officer, pursuant to which he is entitled to receive severance benefits in connection with certain terminations of employment and we are provided with the protections of certain restrictive covenants.
The material terms of this agreement are described below in the section entitled Compensation TablesNarrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table CEO Employment Agreement.
Other Elements of 2016 Compensation
Other Benefits and Perquisites
We maintain medical and dental insurance, accidental death insurance and disability insurance for all of our employees. Executives are eligible
to participate in the same welfare benefit plans as our other employees and are covered by the same vacation, leave of absence and similar polices. Our executives may participate in Hilton-sponsored arrangements for executives of designated major
hotel owners, including guaranteed access at Hilton-branded hotels at 25% discount off best available rate, up to 30 nights per year at cost, up to 30 nights per year at 50% off best available rate and 50% off food and beverage. We also plan to
provide our executive officers with the opportunity for an annual physical examination.
16
Severance Benefits
We have not adopted a formal severance policy for executives. In most cases, we would expect to provide for severance in the event of
termination without cause.
Pursuant to the CEO Employment Agreement, Mr. Baltimore is entitled to certain severance and change in
control payments. For a further description of these severance and change in control terms, see the discussion under the caption Compensation TablesNarrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards
TableCEO Employment Agreement.
Stock Ownership Policy
Our minimum stock ownership guidelines require each executive officer to maintain equity investment in the Company based upon a multiple (five
times, in the case of the Chief Executive Officer, and three times, in the case of all other executive officers) of his or her base salary. For purposes of this requirement, an executive officers holdings include shares held directly or
indirectly, individually or jointly; shares underlying vested options (based on excess value over the exercise price); shares underlying unvested time-vesting restricted stock and restricted stock units; and shares held under a deferral or similar
plan. Each executive officer is expected to meet this ownership requirement within five years of the later of (a) February 23, 2017 (i.e., the date on which the Company made its first broad-based equity incentive grants following the
Spin-off)
or (b) the date he or she first becomes subject to this stock ownership policy.
Clawback Policy
We have
adopted an incentive compensation clawback policy, which allows the Company to recover annual and/or long-term incentive compensation in specified situations. If the Committee determines that incentive compensation of our current and former officers
subject to reporting under Section 16 of the Exchange Act or any other employee designated by the Board or the Committee was overpaid, in whole or in part, as a result of a restatement of the reported financial results of the Company or any of
its segments due to material
non-compliance
with financial reporting requirements (unless due to a change in accounting policy or applicable law) caused or contributed to by such employees fraud, willful
misconduct or gross negligence, the Committee will review the incentive compensation paid, granted, vested or accrued based on the prior inaccurate results and determine whether to seek recovery of any excess incentive compensation paid or earned as
a result of such inaccurate results.
No Pledging Policy
The Company maintains a policy that generally prohibits directors, executive officers and other employees from purchasing any Company
securities on margin, borrowing against Company securities held in margin accounts or pledging Company securities as collateral for a loan, without the prior approval of our Chief Financial Officer or General Counsel.
No Hedging Policy
The
Company maintains a policy that prohibits directors, executive officers and other employees from completing any short sales of Company securities or from purchases or sales of puts, calls or other derivative instruments or securities based on the
Companys securities.
Tax Implication on Executive Compensation
Section 162(m) of the Internal Revenue Code (the Code) limits the deductibility of compensation over $1 million to the
Companys Chief Executive Officer and any of its three other most highly paid executive officers (other than the Chief Financial Officer) unless, in general, the compensation is paid pursuant to a plan which is performance-based,
non-discretionary
and has been approved by the Companys stockholders. The Company believes that, because it qualifies as a REIT under the Code, the payment of compensation that does not satisfy the
requirements under Section 162(m) for qualified performance-based compensation will not materially affect the Companys net income. The Company also believes that the payment of such compensation will not materially affect the Companys
dividend requirements as a REIT. For these reasons, the Committees compensation policy and practices are not currently guided by considerations relating to Section 162(m).
17
Compensation Committee Interlocks and Insider Participation
During the 2016 fiscal year, we did not have a separately designated compensation committee because we were not an independent public company.
None of the current members of our Committee have at any time been one of our executive officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or
board of directors of any other entity that has one or more executive officers serving as a member of our Board or compensation committee.
Compensation Committee Report
The
Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this report. Based upon this review and discussion, the Committee recommended to the Board that this Compensation
Discussion & Analysis section be included in this Amendment No. 1 to the Annual Report on Form
10-K
for the fiscal year ended December 31, 2016.
Respectfully submitted,
The Compensation Committee of the Board
Stephen I. Sadove (Chairman)
Gordon M. Bethune
Christie B. Kelly
Timothy J. Naughton
18
COMPENSATION TABLES
2016 Summary Compensation Table
The
following table summarizes the total compensation earned by each of our NEOs for the fiscal year ended December 31, 2016. As discussed in this Amendment, the Company became an independent, public company effective January 3, 2017. The
information provided below includes compensation earned by our NEOs for services provided to Hilton and the Company prior to the
Spin-off.
Furthermore, this table reflects the
pre-Spin-off
unadjusted stock awards and option awards granted by Hilton to our NEOs during 2016.
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Name and
Principal Position
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Year
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Salary ($)
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Bonus ($)
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Stock
Awards
(6)
($)
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Option
Awards
(7)
($)
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Non-Equity
Incentive
Plan
Compensation
(8)
($)
|
|
|
All Other
Compensation
(9)
($)
|
|
|
Total ($)
|
|
Thomas J. Baltimore, Jr.
(1)
President and Chief Executive Officer
|
|
|
2016
|
|
|
|
634,615
|
|
|
|
783,664
|
(4)
|
|
|
8,499,979
|
|
|
|
|
|
|
|
1,016,336
|
|
|
|
35,256
|
|
|
|
10,969,850
|
|
Sean M. DellOrto
(2)
Executive Vice President and Chief Financial Officer
|
|
|
2016
|
|
|
|
369,651
|
|
|
|
|
|
|
|
297,013
|
|
|
|
74,261
|
|
|
|
273,629
|
|
|
|
11,280
|
|
|
|
1,025,834
|
|
Thomas C. Morey
(3)
Senior Vice President and General Counsel
|
|
|
2016
|
|
|
|
190,385
|
|
|
|
269,986
|
(5)
|
|
|
|
|
|
|
|
|
|
|
173,282
|
|
|
|
2,561
|
|
|
|
636,214
|
|
(1)
|
Mr. Baltimore joined the Company on May 16, 2016 and, as a result, his compensation for 2016 shown above represents compensation for a partial year of service.
|
(2)
|
The amounts in this table reflect the compensation received by Mr. DellOrto from Hilton in relation to his role as Senior Vice President, Treasurer of Hilton during fiscal year 2016 and is not necessarily
indicative of the compensation that he will receive as an executive officer of the Company.
|
(3)
|
Mr. Morey joined the Company on August 1, 2016 and, as a result, his compensation for 2016 shown above represents compensation for a partial year of service.
|
(4)
|
Amount reflects a cash bonus awarded in recognition of Mr. Baltimores leadership role in relation to the
Spin-off.
|
(5)
|
Amount reflects Mr. Moreys (i) sign on cash bonus of $130,000 and (ii) an additional
Spin-off
related cash bonus of $139,986.
|
(6)
|
The amounts shown in the
Stock Awards
column reflect the aggregate grant date fair value of awards of RSUs and performance share awards, as computed in accordance with FASB ASC Topic 718, using the assumptions
discussed in Note 20 (Share-Based Compensation) of the consolidated financial statements included in Hiltons Annual Report on Form
10-K
for the year ended December 31, 2016. The grant
date fair value of RSUs is determined using the fair value of the underlying common stock on the grant date. The grant date fair value of the performance shares is based upon the probable outcome of the applicable performance conditions.
|
(7)
|
The amounts shown in the
Option Awards
column reflect the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718, using the assumptions discussed in Note 20
(Share-Based Compensation) of the consolidated financial statements included in Hiltons Annual Report on Form
10-K
for the year ended December 31, 2016. These amounts do not reflect
whether the recipient has actually realized or will realize a financial benefit from the awards (such as by exercising stock options).
|
(8)
|
The amounts shown in the
Non-Equity
Incentive Plan Compensation
column reflect the amount each NEO earned under Hiltons annual cash incentive program for fiscal year
2016.
|
(9)
|
The amounts shown in the
All Other Compensation
column reflect: (i) for Mr. Baltimore, group term life insurance premiums valued at $1,009 and attorney fees related to the negotiation of the CEO
Employment Agreement of $34,247; (ii) for Mr. DellOrto, group term life insurance premiums valued at $680 and our matching contributions under the Companys 401(k) plan of $10,600; and (iii) for Mr. Morey, group term life
insurance premiums valued at $138 and our matching contributions under the Companys 401(k) plan of $2,423.
|
2016 Grants of Plan
Based Awards Table
The following table sets forth information regarding grants of plan-based awards to each of our NEOs for the fiscal
year ended December 31, 2016. This table reflects the
pre-Spin-off
unadjusted stock awards and option awards granted by Hilton to our NEOs during 2016.
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
(1)
Under
Non-Equity Incentive Plan
Awards
|
|
|
Estimated Future Payouts
(2)
Under Equity Incentive
Plan
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum ($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
All Other
Stock Awards:
Number or
Shares of
Stock or
Units
(3)
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
Exercise
or Base
Price of
Option
Awards
($/sh)
|
|
|
Grant
Date Fair
Value of
Stock
and
Option
Awards
(4)
($)
|
|
Thomas J. Baltimore, Jr.
|
|
|
|
|
Annual Cash Incentive
|
|
|
|
|
|
|
471,311
|
|
|
|
942,623
|
|
|
|
1,413,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
(5)
|
|
|
5/16/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
310,202
|
|
|
|
|
|
|
|
|
|
|
|
6,749,996
|
|
RSUs
(6)
|
|
|
5/16/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,422
|
|
|
|
|
|
|
|
|
|
|
|
1,749,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean M. DellOrto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive
|
|
|
|
|
|
|
111,395
|
|
|
|
222,789
|
|
|
|
334,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
2/18/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,576
|
|
|
|
19.61
|
|
|
|
74,261
|
|
RSUs
|
|
|
2/18/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,786
|
|
|
|
|
|
|
|
|
|
|
|
74,243
|
|
PSUs
|
|
|
2/18/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,680
|
|
|
|
11,360
|
|
|
|
22,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Morey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentive
|
|
|
|
|
|
|
70,543
|
|
|
|
141,086
|
|
|
|
211,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects the possible payouts of cash incentive compensation under Hiltons annual cash incentive program. The actual amounts that were paid to the NEOs are set forth in the
Non-Equity
Incentive Plan Compensation column of the 2016 Summary Compensation Table. For Messrs. Baltimore and Morey, these amounts reflect prorated amounts based on the period during 2016 that
each worked at Hilton and the Company. See Executive Officer Compensation and Other MattersCompensation Discussion and Analysis Short-Term Incentive 2016 and
Spin-Off
Matters
above.
|
(2)
|
The amounts reported in the
Estimated Future Payouts Under Equity Incentive Plan Awards
column represent the possible number of performance shares granted to Mr. DellOrto under the Hilton LTIP that may
vest based upon the level of achievement of the applicable performance measures. As described in further detail under the section entitled Executive Compensation Executive Officer Compensation and Other MattersCompensation
Discussion and Analysis Long-Term Incentive 2016 and
Spin-Off
Matters, the performance shares have a three-year performance period and vest, as to 50% of the award, based on Hiltons TSR
relative to Hiltons peer company group and, as to 50% of the award, based on Hiltons adjusted EBITDA. Threshold assumes that 50% of the total performance shares awarded vest, target assumes that 100% of the total performance shares
awarded vest and maximum assumes that 200% of the total performance shares awarded vest. In relation to the
Spin-off,
all of the 2016 performance shares awarded to Mr. DellOrto were valued at target
and converted to RSUs of the Company that are subject to time-based vesting only.
|
(3)
|
The amounts reported in the
All Other Stock Awards: Number of Shares of Stock or Units
column represent the number of time vesting RSUs granted to the NEOs pursuant to the Hilton LTIP.
|
(4)
|
The amounts reported in the
Grant Date Fair Value of Stock and Option Awards
column show the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, using the assumptions discussed in
Note 20 (Share-Based Compensation) of the consolidated financial statements included in Hiltons Annual Report on Form
10-K
for the year ended December 31, 2016.
|
(5)
|
Reflects Mr. Baltimores
one-time
sign-on
equity incentive award granted pursuant to the terms of the CEO Employment Agreement.
For further details on this award, see Executive Officer Compensation and Other MattersCompensation Discussion and Analysis Long-Term Incentive 2016 and
Spin-Off
Matters above.
|
(6)
|
Reflects Mr. Baltimores long-term incentive award for fiscal year 2016. For further details on this award, see Executive Officer Compensation and Other MattersCompensation Discussion and Analysis
Long-Term Incentive 2016 and
Spin-Off
Matters above.
|
20
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table
The following discussion should be read in conjunction with (i) the 2016 Summary Compensation Table and the 2016 Grants
of Plan-Based Awards Table, as well as the footnotes to such tables, and (ii) the disclosure under the caption Executive Officer Compensation and Other MattersCompensation Discussion and Analysis above.
CEO Employment Agreement
On
April 26, 2016, the Company entered into the CEO Employment Agreement with Mr. Baltimore specifying the terms of his employment as Hiltons Executive AdviserReal Estate prior to the
Spin-off
and as our President and Chief Executive Officer and a director on our Board following the
Spin-off,
subject to his
re-election
at our annual stockholders meetings. The CEO Employment Agreement provides for an initial four-year employment term, which term will be automatically extended by one year at the end of the
then-current term unless either party provides advance notice of
non-renewal.
Under the terms of the CEO Employment Agreement, Mr. Baltimore is entitled to receive an initial annual base salary of
$1,000,000, which is subject to increase but not decrease. During the employment term, he is also eligible to receive an annual cash bonus of 150% of his annual base salary (the target annual bonus) if target performance objectives are
achieved, 75% of his annual base salary if threshold performance objectives are achieved and 225% of his annual base salary if maximum performance objectives are achieved. Pursuant to the CEO Employment Agreement, any bonus that was earned in
respect of 2016 was to be prorated based on the period during 2016 that he worked at Hilton and the Company.
During the employment term,
Mr. Baltimore was eligible to participate in the Hilton LTIP prior to the
Spin-off
and is eligible to participate in the Companys LTIP following the
Spin-off.
Mr. Baltimore is entitled to receive an annual grant of long-term equity-based incentive awards with a target value of $3,500,000 (based on the grant date fair market value of the common stock awarded). With respect to the first grant made
under the CEO Employment Agreement, fifty percent of the award was granted under the Hilton LTIP on May 16, 2016, and was in the form of Hilton RSUs that vest in three substantially equal annual installments beginning on the first anniversary
of such grant date, generally subject to his continued employment through each applicable vesting date. The remaining 50% of such award was granted under the Park LTIP on February 3, 2017, and was in the form of Park PSUs that are eligible to
vest in amounts ranging from 0% to 200% of the target number of units based on Parks relative TSR compared to the TSRs of the companies that comprise the FTSE NAREIT Lodging/Resorts Index (that have a market capitalization in excess of
$1 billion as of January 4, 2017) over a three-year performance period beginning on January 4, 2017 and ending on January 3, 2020, generally subject to his continued employment through the applicable vesting date. In addition to
the foregoing, on May 16, 2016, Mr. Baltimore was granted a
one-time
sign-on
equity-based incentive award valued at $6,750,000 in the form of Hilton RSUs that
were originally scheduled to vest, as to 40% of the award, on December 15, 2016 and, as to the remaining 60% of the award, in three substantially equal annual installments beginning on the first anniversary of the grant date, generally subject
to his continued employment through each applicable vesting date. In connection with the
Spin-off,
Hiltons compensation committee determined to accelerate the vesting date for the 40% of the
sign-on
equity-based award originally scheduled to vest on December 15, 2016 to December 5, 2016. Mr. Baltimore is also entitled to participate in all employee benefit plans, programs and arrangements
made available to our other executive officers generally.
If Mr. Baltimores employment is terminated without cause
(other than due to death or disability), by him for good reason (as each such term is defined in the CEO Employment Agreement), or due to our
non-renewal
of the employment term, he will
be entitled to receive (1) all accrued but unpaid amounts (including, accrued but unpaid salary through the date of termination, any accrued but unpaid annual cash bonus and any unpaid or unreimbursed expenses) (collectively, the Accrued
Rights), (2) a lump sum cash severance payment in an amount equal to 2.99 times the sum of his annual base salary and target annual bonus then in effect, (3) subject to his election of COBRA continuation coverage, payment for a period of
12 months following the termination date (subject to earlier termination in certain cases) of an amount equal to the difference between the monthly COBRA premium cost and the monthly contribution paid by active employees for the same coverage and
(4) accelerated vesting of any then-held unvested time-based restricted stock and unvested stock options and a prorated portion of the target number of any then-held unvested PSUs and performance shares, provided that such target number will
not be prorated if the termination occurs within 12 months following a change in control (as defined in the CEO Employment Agreement). Mr. Baltimore is entitled to the foregoing, in each case, subject to his execution and
non-revocation
of a release of claims and continued compliance with
non-compete
and
non-solicitation
covenants for 18 months following
his termination and
non-disparagement
and confidentiality covenants at all times following his
21
termination. If Mr. Baltimores employment terminates due to death or disability, he will be entitled to receive (1) any Accrued Rights, (2) a prorated portion of the annual
cash bonus that he would have otherwise been entitled to receive had his employment not terminated and (3) accelerated vesting of any then-held unvested time-based restricted stock and unvested stock options and a prorated portion of the target
number of any then-held unvested PSUs and performance shares. The CEO Employment Agreement also provides that payments and benefits to be delivered in connection with this Agreement will be either delivered in full or to such lesser extent as would
result in no portion of such payments and benefits being subject to the excise taxes imposed by the golden parachute rules of Section 4999 of the Code, whichever of the foregoing amounts, after taking into account all applicable taxes, results
in the greatest amount of such payments and benefits to Mr. Baltimore on an
after-tax
basis.
Equity
Awards
The equity awards granted to our NEOs during 2016 that appear in the tables above were granted pursuant to the Hilton LTIP,
which is described further in the Compensation Discussion and Analysis section under the caption Executive Officer Compensation and Other MattersCompensation Discussion and Analysis Long-Term Incentive 2016 and
Spin-Off
Matters.
2
016 Outstanding Equity Awards at Fiscal
Year-End
The following table sets forth information regarding outstanding equity awards for each of our NEOs as of December 31, 2016. The
number of awards included in this table reflects the
pre-Spin-off
unadjusted equity awards granted by Hilton to our NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(1)
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have
Not
Vested
(2)
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have
Not
Vested
(2)(3)
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have
Not
Vested
(4)
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units
or
Other
Rights That
Have Not
Vested
(3)(4)
($)
|
|
Thomas J. Baltimore, Jr.
|
|
|
5/16/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,422
|
|
|
|
2,187,478
|
|
|
|
|
|
|
|
|
|
|
|
|
5/16/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186,120
|
|
|
|
5,062,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean M. DellOrto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/19/14
|
|
|
|
6,094
|
|
|
|
3,140
|
|
|
|
21.53
|
|
|
|
2/19/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/15
|
|
|
|
2,864
|
|
|
|
5,729
|
|
|
|
27.46
|
|
|
|
2/10/25
|
|
|
|
1,313
|
|
|
|
35,714
|
|
|
|
7,876
|
|
|
|
214,227
|
|
|
|
|
2/18/16
|
|
|
|
|
|
|
|
13,576
|
|
|
|
19.61
|
|
|
|
2/18/26
|
|
|
|
3,786
|
|
|
|
102,979
|
|
|
|
11,360
|
|
|
|
308,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Morey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1)
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Stock options vest in three equal annual installments beginning on the first anniversary of the grant date. For additional information on the conversion of the stock options in connection with the
Spin-off,
see Executive Officer Compensation and Other MattersCompensation Discussion and Analysis Long-Term Incentive 2016 and
Spin-Off
Matters.
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(2)
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Represents RSUs granted to the respective NEOs. Pursuant to the CEO Employment Agreement, Mr. Baltimore was granted (i) a
one-time
sign-on
equity award of 310,202 RSUs on May 16, 2016, 40% of which vested on December 5, 2016, and 60% of which vests in three substantially equal annual installments beginning on the first
anniversary of the grant date, and (ii) an award of 80,422 RSUs on May 16, 2016, which represents 50% of his annual long-term equity-based incentive award for 2016 and vests in three substantially equal annual installments beginning on the
first anniversary of the grant date. Pursuant to the Hilton LTIP, Mr. DellOrtos RSUs vest in two equal annual installments beginning on the first anniversary of the applicable grant date. For additional information on the conversion
of the RSUs in connection with the
Spin-off,
see Executive Officer Compensation and Other Matters Compensation Discussion and Analysis Long-Term Incentive 2016 and
Spin-Off
Matters.
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(3)
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Amounts reported are based on the adjusted closing price of Hiltons common stock on the NYSE as of December 30, 2016 ($27.20) multiplied by the number of outstanding shares.
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(4)
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Represents performance shares granted to Mr. DellOrto pursuant to the Hilton LTIP. Generally, Hiltons performance shares vest according to Hiltons EBITDA and Hiltons TSR relative to
Hiltons peer company group at the end of a three-year performance period. In connection with the
Spin-off,
on January 3, 2017, all of the performance shares granted to our NEOs in 2015 and 2016 were
valued at target and converted to RSUs subject to time-based vesting only.
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2016 Option Exercises and Stock Vested
The following table provides information regarding the number of Hilton stock options that were exercised by our NEOs and the number of Hilton
restricted stock units that vested during the fiscal year ended December 31, 2016 prior to the
Spin-off.
The number of awards included in this table reflects the
pre-Spin-off
unadjusted equity awards granted by Hilton to our NEOs.
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Option Awards
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Stock Awards
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Name
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Number of Shares
Acquired on Exercise (#)
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Value Realized on
Exercise ($)
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Number of Shares
Acquired on Vesting
(1)
(#)
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Value Realized on
Vesting
(2)
($)
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Thomas J. Baltimore, Jr.
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124,082
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3,237,299
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Sean M. DellOrto
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15,347
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374,121
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Thomas C. Morey
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(1)
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Includes shares received from the vesting of RSUs and, for Mr. DellOrto, the Hilton performance shares granted in 2014 that vested on December 31, 2016 at 126% in relation to the TSR tranche and 100% in
relation to the adjusted EBITDA tranche.
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(2)
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Amounts reported are based on the closing price Hiltons common stock on the NYSE on the vesting date.
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Potential Payments Upon Termination or Change in Control
The following table, footnotes and narrative set forth our payment obligations pursuant to the compensation arrangements for each of our NEOs
under certain existing plans, agreements and awards, assuming (1) a termination of employment and/or (2) a change in control (CIC) occurred, in each case, on December 31, 2016. The amounts shown in the table do not include
payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the NEOs. The number of shares with respect to stock options
and stock units is presented on a
pre-Spin-off
and unadjusted basis.
In providing the estimated potential payments below, we have assumed that there are no (1) accrued but unpaid salary and annual bonuses
amounts outstanding, or (2) unpaid reimbursements for expenses incurred prior to the date of termination.
Because the disclosures in
the table assumes the occurrence of a termination or CIC as of a particular date and under a particular set of circumstances and therefore make a number of important assumptions, the actual amount to be paid to each of our NEOs upon a termination or
CIC may vary significantly from the amounts included herein. Factors that could affect these amounts include the timing during the year of any such event, the continued availability of benefit policies at similar prices and the type of termination
event that occurs.
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Name
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Benefit
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Termination by
Company without
Cause or by NEO
for Good
Reason
($)
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Termination by
Company for Cause or
by Executive without
Good Reason ($)
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Termination within 12
Months Following CIC
($)
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Termination due to
Death or Disability ($)
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Thomas J. Baltimore,
Jr.
(1)
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Cash Severance
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7,475,000
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(2)
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7,475,000
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(2)
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942,623
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Equity Awards
(3)
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7,249,942
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7,249,942
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7,249,942
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Continuation of Benefits
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12,481
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12,481
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Total Value of Benefits
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14,737,423
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14,737,423
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8,192,565
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Sean M. DellOrto
(4)
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Cash Severance
(5)
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594,104
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594,104
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222,789
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Equity Awards
(5)(6)
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265,254
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1,048,013
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1,048,013
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Continuation of Benefits
(7)
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12,396
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12,396
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Outplacement Services
(8)
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20,000
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20,000
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Total Value of Benefits
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891,754
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1,674,513
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1,270,802
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Thomas C. Morey
(4)
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Cash Severance
(5)
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787,500
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787,500
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337,500
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Equity Awards
(5)(6)
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Continuation of Benefits
(7)
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Outplacement Services
(8)
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20,000
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20,000
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Total Value of Benefits
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807,500
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807,500
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337,500
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(1)
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In relation to Mr. Baltimore, the above table summarizes the severance benefits that would have been owed to him pursuant to the terms of the CEO Employment Agreement if his employment had terminated under certain
circumstances. For a further description of such benefits, see Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards TableCEO Employment Agreement.
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(2)
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Under the terms of the CEO Employment Agreement, Mr. Baltimore would have been entitled to receive a cash severance amount equal to 2.99 times the sum of his base salary and target annual cash incentive
opportunity, paid in a lump sum.
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(3)
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Amounts represent the value of the acceleration of any unvested performance shares, RSUs and stock options, assuming the acceleration occurred on December 31, 2016 and based on the closing price of Hiltons
common stock on the NYSE as of December 30, 2016 ($27.20).
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(4)
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Prior to the
Spin-off,
the terms of any severance benefits owed to Messrs. DellOrto or Morey were set forth in Hiltons Executive Severance Plan.
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(5)
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Under the Hilton Executive Severance Plan, whether or not in connection with a change in control, Messrs. DellOrto and Morey would each have been entitled to receive a cash severance amount equal to his base
salary and annual cash incentive award payable at target, each as in effect at the date of termination. If the employment of the NEO was terminated for death or disability, such executive would have been entitled to receive a prorated bonus. Amounts
reported under Termination due to Death or Disability for Messrs. DellOrto and Morey reflect each such executives target annual bonus for the year ended December 31, 2016.
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(6)
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Amounts represent the value of the acceleration of any unvested performance shares, RSUs and stock options, assuming the acceleration occurred on December 31, 2016 and based on the closing price of Hiltons
common stock on the NYSE as of December 30, 2016 ($27.20). Pursuant to the terms of the Hilton award agreements:
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Performance shares: If the NEOs employment terminates as a result of death or disability, a prorated portion of the performance shares will immediately vest at target levels. Upon a change in control, a prorated
portion of the performance shares will immediately vest based on actual performance through the most recently completed fiscal quarter, or, if performance is unable to be calculated, at target. In the table above, amounts upon a change in control
reflect a prorated number of performance shares and are based on target performance. Performance shares are prorated based on the number of days in the performance period prior to the termination events described above.
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RSUs: If the NEOs employment is terminated without cause within 12 months following a change in control or due to the executives death or disability, all unvested RSUs will immediately vest.
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Stock options: If the NEOs employment terminates without cause within 12 months following a change in control or due to the executives death or disability, all unvested options will immediately vest and
become exercisable. In the table above, amounts reported reflect the spread, or difference between the exercise price and closing price as of December 30, 2016.
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24
(7)
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Upon certain termination events, each executive is entitled to continued healthcare coverage in an amount equal to the excess of the cost of the coverage over the amount that the executive would have had to pay if the
executive remained employed for 12 months following the date of termination. Additionally, under the Hilton Severance Plan, upon certain termination events, an executive who received life insurance coverage prior to the qualifying termination is
entitled to receive a cash payment equal to the premiums required to continue such coverage for 12 months following the termination. Amounts reported assume 2016 rates.
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(8)
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Under the Hilton Severance Plan, upon certain termination events, each executive is entitled to outplacement services for a period of 12 months following the date of termination. Amounts in the table above assume that
the cost to the Company for these outplacement services would be $20,000 for each executive.
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25