SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
RESORTQUEST INTERNATIONAL
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(Name of Registrant as Specified In Its Charter)
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Registrant)
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and 0-11.
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[LOGO]
March 29, 2000
Dear Shareholder,
On behalf of our entire Board of Directors, we cordially invite you to
attend our Annual Meeting of Shareholders on Thursday, May 11, 2000. At the
meeting, we will review ResortQuest's performance for fiscal year 1999 and our
expectations for the future.
A notice of the meeting and Proxy Statement follow. You will also find
enclosed your proxy voting card and the 1999 Annual Report. We would like to
take this opportunity to remind you that your vote is important. Please take a
moment now to complete, sign and date the enclosed proxy voting card and return
it in the postage-paid envelope we have provided.
We look forward to seeing you on May 11(th) and addressing your questions
and comments.
Sincerely,
/s/ DAVID C. SULLIVAN /s/ DAVID L. LEVINE
---------------------------- ------------------------
David C. Sullivan David L. Levine
Chairman President and Chief
Executive Officer
530 OAK COURT DRIVE, SUITE 360 - MEMPHIS, TN 38117 - 901-762-0600
[LOGO]
March 29, 2000
NOTICE OF THE 2000
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of ResortQuest International, Inc. will
be held on Thursday, May 11, 2000, at 9:00 a.m., at the Embassy Suites, 1022
South Shady Grove Road, Memphis, TN 38120, to consider and take action on the
following matters:
1. The election of nine directors to serve until the next annual meeting of
shareholders;
2. The ratification of the appointment of Arthur Andersen LLP as our
independent public accountants for fiscal year 2000; and
3. The transaction of any other business that is properly raised at the
meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "IN FAVOR OF" THE TWO PROPOSALS.
By Order of the Board of Directors,
/s/ DAVID L. LEVINE
-----------------------------------
David L. Levine
President and Chief Executive Officer
530 OAK COURT DRIVE, SUITE 360 - MEMPHIS, TN 38117 - 901-762-0600
TABLE OF CONTENTS ______________________________________________________________
PAGE
--------
Annual Meeting Information.................................. 1
Who is entitled to vote?.................................. 1
What am I voting on?...................................... 1
How does the Board of Directors recommend I vote on the
proposals?................................................ 1
How do I vote?............................................ 1
What is a quorum?......................................... 2
What vote is required to approve each item?............... 2
Who will count the vote?.................................. 2
What is the deadline for shareholder proposals for next
year's
Annual Meeting?......................................... 2
How much did this proxy solicitation cost?................ 2
Securities Ownership of Management and Principal
Stockholders................................................ 2
Item l -- Election of Directors............................. 4
Nominees.................................................... 4
Board Committees and Meeting Attendance..................... 7
Audit Committee........................................... 8
Compensation Committee.................................... 8
Executive Committee....................................... 8
Capital Approval Committee................................ 8
Compensation of Directors................................... 9
Report of the Compensation Committee of the Board of
Directors................................................... 9
General................................................... 9
The Executive Compensation Plan........................... 9
CEO Compensation.......................................... 10
Policy on Deductibility of Compensation................... 10
Compensation Committee Interlocks and Insider
Participation............................................. 11
Corporate Performance....................................... 12
Compensation of Executive Officers.......................... 13
Summary of Compensation................................... 13
Option Grants in Fiscal 1999 and Fiscal Year-End Option
Values.................................................... 14
Employment Agreements and Covenants not to Compete........ 15
Indemnification Agreements................................ 16
Incentive Plan............................................ 17
Savings and Retirement Plan............................... 17
Certain Relationships and Related Transactions.............. 18
Leases of Facilities...................................... 18
Management Agreements..................................... 19
PAGE
--------
Other Transactions........................................ 19
Item 2 -- Ratification of Appointment of Independent Public
Accountants............................................... 22
Item 3 -- Other Matters..................................... 22
RESORTQUEST INTERNATIONAL, INC.
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
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PROXY STATEMENT
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ANNUAL MEETING INFORMATION _____________________________________________________
This proxy statement contains information related to the Annual Meeting of
Shareholders of ResortQuest International, Inc. to be held on Thursday, May 11,
2000 beginning at 9 a.m., at the Embassy Suites, 1022 South Shady Grove Road,
Memphis, TN 38120, and at any postponements or adjournments thereof. The proxy
statement was prepared under the direction of ResortQuest's Board of Directors
to solicit your proxy for use at the Annual Meeting. The approximate date of
mailing this proxy statement is March 29, 2000.
WHO IS ENTITLED TO VOTE? _________________________________
ResortQuest's outstanding Common Stock consists of Restricted Common Stock
and non-restricted Common Stock (together, the "Common Stock"). Shareholders
owning our Common Stock on March 21, 2000 are entitled to vote at the Annual
Meeting, or any postponement or adjournment of the meeting. Each holder of
Restricted Common Stock has one-half vote per share on all matters to be voted
on. Each holder of non-restricted Common Stock has one vote per share on all
matters to be voted on. On March 21, 2000, there were 18,917,893 shares of
Common Stock outstanding, consisting of 2,981,602 shares of Restricted Common
Stock and 15,936,291 shares of non-restricted Common Stock.
WHAT AM I VOTING ON? _____________________________________
You will be asked to elect nominees to serve on the Board of Directors and
to ratify the appointment of our independent accountants for the 2000 fiscal
year. The Board of Directors is not aware of any other matters to be presented
for action at the meeting. If any other matter requiring a vote of the
shareholders should arise, your signed proxy card gives authority to David L.
Levine, our President and Chief Executive Officer, James Olin, our Chief
Operations Officer and J. Mitchell Collins, our Senior Vice President and Chief
Financial Officer (together, the "Proxies"), to vote in accordance with their
best judgment.
HOW DOES THE BOARD OF DIRECTORS
RECOMMEND I VOTE ON THE PROPOSALS? _______________________
The Board recommends a vote FOR each of the nominees for election to the
Board and FOR the appointment of Arthur Andersen LLP as our independent public
accountants for the 2000 fiscal year.
HOW DO I VOTE? ___________________________________________
Sign and date each proxy card you receive and return it in the prepaid
envelope. If you sign your proxy, but do not mark your choices, your shares will
be voted for the persons nominated for election as directors and in favor of
ratifying the appointment of Arthur Andersen LLP as independent public
accountants for the 2000 fiscal year.
You can revoke your proxy at any time before it is exercised. To do so, you
must give written notice of revocation to the Secretary, ResortQuest
International, Inc., 530 Oak Court Drive, Suite 360, Memphis, Tennessee 38117,
submit another properly signed proxy with a more recent date, or vote in person
at the meeting.
WHAT IS A QUORUM? ________________________________________
A "quorum" is the presence at the meeting, in person or by proxy, of the
holders of a number of shares entitling them to exercise a majority of the
voting power of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting. There must be a quorum for the meeting to be held. Abstentions
are counted for purposes of determining the presence or absence of a quorum, but
are not considered a vote cast under Delaware law. Shares held by brokers in
street name and for which the beneficial owners have withheld the discretion to
vote from brokers are called "broker non-votes." They are counted to determine
if a quorum is present, but are not considered a vote cast under Delaware law.
Broker non-votes will not affect the outcome of a vote on a particular matter.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM? ______________
The director nominees will be elected by a plurality of the votes cast at
the Annual Meeting. All other matters to be considered at the meeting require
the affirmative vote of a majority of the votes cast at the meeting to be
approved.
WHO WILL COUNT THE VOTE? _________________________________
American Stock Transfer & Trust Company will tabulate the votes cast by
proxy or in person at the Annual Meeting.
WHAT IS THE DEADLINE FOR SHAREHOLDER
PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING? ________________
Shareholders may submit proposals on matters appropriate for shareholder
action at future annual meetings by following the rules of the Securities and
Exchange Commission. Proposals intended for inclusion in next year's proxy
statement and proxy card must be received by ResortQuest not later than
November 30, 2000. If we do not receive notice of any other matter that a
shareholder wishes to raise at the Annual Meeting in 2001 by February 14, 2001
and a matter is raised at that meeting, the Proxies will have discretionary
authority to vote on the matter. All proposals and notifications should be
addressed to ResortQuest's Secretary.
HOW MUCH DID THIS PROXY SOLICITATION COST? _______________
We have engaged D. F. King & Co., Inc. to solicit proxies for a fee of
$5,000 plus expenses. We also reimburse banks, brokerage firms and other
institutions, nominees, custodians and fiduciaries for their reasonable expenses
for sending proxy materials to beneficial owners and obtaining their voting
instructions. Certain directors, officers and regular employees of ResortQuest
and its subsidiaries may solicit proxies personally or by telephone or facsimile
without additional compensation.
SECURITIES OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS _____________________________________________________
The following table shows the number of shares of Common Stock beneficially
owned by each person known to ResortQuest to beneficially own more than 5% of
the Common Stock, by the directors and the Named Executive Officers listed on
page 14, and by the directors and all ResortQuest executive officers as a group.
Unless otherwise indicated, the persons listed have an address c/o ResortQuest's
executive offices and have sole voting and investment power with respect to
their shares.
The table shows ownership as of January 1, 2000.
2
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SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
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SHARES OF COMMON
STOCK BENEFICIALLY PERCENTAGE
NAME OWNED OWNED
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Cumberland Associates LLC (1) 1,289,900 7.0
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David C. Sullivan (2)(3) 299,293 1.6
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David L. Levine (2)(4) 78,750 *
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Jeffery M. Jarvis (2) 52,500 *
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W. Michael Murphy (2)(5) 54,700 *
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Jules S. Sowder (2) 31,250 *
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Frederick L. Farmer (2) 45,750 *
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John K. Lines (2) 31,929 *
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William W. Abbott, Jr. (6) 150,091 *
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Elan J. Blutinger (6)(7) 655,205 3.5
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D. Fraser Bullock (6)(7)(8) 674,235 3.6
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Joshua M. Freeman (6)(9) 982,685 5.3
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Heidi Houston (10) 250,667 1.3
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Michael D. Rose (6) 110,455 *
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Andre S. Tatibouet 1,339,933 7.2
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Joseph V. Vittoria (6) 55,000 *
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Theodore L. Weise (6) 56,000 *
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All directors and executive officers as a group
(16 persons including those listed above) 4,778,776 25.5
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* Less than 1.0%
(1) The address of the shareholder is 1114 Avenue of the Americas, New York, NY
10036. Information is based solely on our review of the Schedule 13G dated
January 11, 2000, as filed by the shareholder with the Securities and
Exchange Commission.
(2) Includes the following currently exercisable options: 25,000 shares for
Mr. Sullivan, 18,750 shares for Mr. Levine, 12,500 shares for Mr. Jarvis,
12,500 shares for Mr. Murphy, 6,250 shares for Ms. Sowder, 18,750 shares for
Mr. Farmer and 6,250 shares for Mr. Lines.
(3) Includes 2,091 shares attributable to Mr. Sullivan's account in the
ResortQuest Savings and Retirement Plan. Participants have voting power over
shares purchased with their own contributions.
(4) Includes 40,000 shares held in trust for the benefit of his minor children.
(5) Includes 200 shares owned by his spouse.
(6) Includes 15,000 shares which may be acquired upon the exercise of
exercisable options.
(7) Includes 41,667 shares which may be acquired upon the exercise of
exercisable options held by Alpine Consolidated II, LLC, of which
Mr. Blutinger and Mr. Bullock are each a Managing Director.
(8) Includes 5,000 shares held by Mr. Bullock as custodian for his minor
children.
(9) Includes 33,000 shares held by the Carl M. Freeman Foundation, Inc., of
which Mr. Freeman is a trustee and over which he shares voting and
investment power. Mr. Freeman disclaims beneficial ownership of these
shares.
(10) Includes 2,500 shares held in trust for the benefit of her minor children.
3
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ITEM 1 -- ELECTION OF DIRECTORS
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NOMINEES _______________________________________________________________________
Nine directors will be elected at the Annual Meeting. Directors will serve
until the next annual meeting or until their earlier resignation or removal. If
any nominee is not available for election, proxies will be voted for another
person nominated by the Board of Directors or the size of the Board will be
reduced.
The Compensation Committee of the Board, which considers nominees for
election to the Board, has recommended that the size of the Board of Directors
be reduced from eleven members to nine members. The Board of Directors
unanimously believes that a reduction of the size of the Board is in the best
interests of ResortQuest and its shareholders. A smaller Board will facilitate
communication among the directors and increase the efficiency of the Board.
Accordingly, nine directors will be elected at the Annual Meeting.
The following two current members of the Board are not nominees for
re-election at the Annual Meeting: Andre S. Tatibouet and D. Fraser Bullock.
The nominees and their biographies are as follows:
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WILLIAM W. ABBOTT, JR.
DIRECTOR SINCE NOVEMBER 1998
AGE 54
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Mr. Abbott is a consultant to ResortQuest. He previously served as Vice
Chairman of Abbott Resorts, Inc. from March 1997 to November 1998. He served as
Chairman of the Board and Chief Executive Officer of Abbott Resorts from 1976 to
March 1997. Abbott Resorts, the largest provider of beach vacation property
rentals, management services and real estate sales in Florida, is a ResortQuest
subsidiary.
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ELAN J. BLUTINGER
DIRECTOR SINCE SEPTEMBER 1997
AGE 44
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Mr. Blutinger is a founding partner of Alpine Consolidated LLC, a merchant
bank specializing in the consolidation of fragmented industries. He is a
director and co-founder of Travel Services International, Inc. and is Chairman
of its Compensation Committee. In 1987, Mr. Blutinger founded and, from that
time until its acquisition in 1995, was the Chief Executive Officer of Shoppers
Express, which became "OnCart" in 1997, an electronic retailing service. From
1983 until its acquisition in 1986 by IDI, Mr. Blutinger was Chief Executive
Officer of DSI, a wholesale software distributor.
4
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JOSHUA M. FREEMAN
DIRECTOR SINCE MAY 1998
AGE 35
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Mr. Freeman has served since 1998 as Chairman, and from 1992 to 1998 served
as the President and Chief Operating Officer, of Carl M. Freeman
Associates, Inc., a real estate development and management company. From 1996 to
1998 he also served as President and managing member of Coastal Resorts Realty,
L.L.C. and as President and a director of Coastal Resorts Management, Inc.
Coastal Resorts Realty and Coastal Resorts Management are ResortQuest
subsidiaries.
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HEIDI HOUSTON
DIRECTOR SINCE MAY 1998
AGE 47
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Ms. Houston formed Houston and O'Leary Company in 1986 and has served as its
President and principal broker since that time. She formed her own real estate
brokerage and development company in 1976. From 1976 to 1986 she consulted on
redevelopment projects in Denver and developed residential and commercial real
estate in Denver and Aspen. Houston and O'Leary Company, a leading provider of
luxury vacation rental properties and sales in Aspen, is a ResortQuest
subsidiary.
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DAVID L. LEVINE
DIRECTOR SINCE MAY 1998
AGE 52
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Mr. Levine became the President and Chief Executive Officer of ResortQuest
in December 1999. From May 1998 until December 1999, he was President and Chief
Operations Officer of ResortQuest. Mr. Levine was President and Chief Operating
Officer of Equity Inns, Inc., a real estate investment trust that specializes in
hotel acquisitions, from June 1994 to April 1998. Mr. Levine was also President
and Chief Operations Officer of Trust Management Inc., which operated Equity
Inns properties, from June 1994 until November 1996. Prior to that, he was
President of North American Hospitality, Inc., a hotel management and consulting
company, which he formed in 1985.
The Board has elected Mr. Levine as Chairman of ResortQuest to succeed
Mr. Sullivan effective May 11, 2000.
5
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MICHAEL D. ROSE
DIRECTOR SINCE MAY 1998
AGE 58
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Mr. Rose served as Chairman of the Board of Promus Hotel Corporation from
April 1995 to December 1997. From June 1995 to December 1996, he was Chairman of
the Board of Harrah's Entertainment, Inc. Prior to that, Mr. Rose served as
Chairman of the Board from 1989 to 1995 and Chief Executive Officer and
President from 1989 to 1991 of The Promus Companies, Inc. From 1984 to 1990 he
was the Chairman of the Board and from 1988 to 1990 he was the President and
Chief Executive Officer of Holiday Corporation. Mr. Rose is also a director of
Darden Restaurants, Inc., FelCor Lodging Trust, Inc., First Tennessee National
Corporation, General Mills, Inc., Nextera Enterprises, Inc. and SteinMart, Inc.
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DAVID C. SULLIVAN
DIRECTOR SINCE MAY 1998
AGE 60
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Mr. Sullivan is the Chairman of ResortQuest. From May 1998 to December 1999
he was the Chairman and Chief Executive Officer of ResortQuest. From April 1995
to December 1997, Mr. Sullivan was the Executive Vice President and Chief
Operating Officer, and a director, of Promus Hotel Corporation, a publicly
traded hotel franchisor, manager and owner of hotels whose brands include
Hampton Inn, Homewood Suites and Embassy Suites.
From 1993 to 1995, Mr. Sullivan was the Executive Vice President and Chief
Operation Officer of the Hotel Division of The Promus Companies Incorporated
("PCI"). He was the Senior Vice President of Development and Operations of the
Hampton Inn/Homewood Suites Hotel Division of PCI from 1991 to 1993. From 1990
to 1991, Mr. Sullivan was the Vice President of Development of the Hampton Inn
Hotel Division of PCI. Mr. Sullivan is also a director of Winston Hotels, Inc.
Mr. Sullivan will retire as Chairman and become a consultant to ResortQuest
effective May 11, 2000.
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JOSEPH V. VITTORIA
DIRECTOR SINCE MAY 1998
AGE 64
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Mr. Vittoria has been the Chairman and Chief Executive Officer of Travel
Services International, Inc., a leading single source distributor of specialized
leisure travel services, since July 1997. From September 1987 to February 1997,
Mr. Vittoria was the Chairman and Chief Executive Officer of Avis, Inc., a
multinational auto rental company. Mr. Vittoria serves on the Board of Directors
of Carey International, Inc., Sirius Satellite Radio, Inc. and Transmedia Asia.
6
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THEODORE L. WEISE
DIRECTOR SINCE MAY 1998
AGE 55
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From February 1998 to February 1999, Mr. Weise served as the President and
Chief Executive Officer of Federal Express Corporation, the world's largest
express transportation company. He was previously Executive Vice President and
Chief Operating Officer of Federal Express Corporation from February 1996 to
February 1998. From August 1991 to February 1996 he served as Senior Vice
President of Air Operations of Federal Express Corporation. Mr. Weise is also a
director of Federal Express Corporation.
BOARD COMMITTEES AND MEETING ATTENDANCE ________________________________________
The Board of Directors has four committees, the Audit, Compensation,
Executive and Capital Approval Committees. Committees report their actions to
the full Board at its next regular meeting. A description of the duties of each
committee follows the table below.
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COMMITTEE MEMBERSHIP AND MEETINGS HELD
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CAPITAL
NAME AUDIT COMPENSATION EXECUTIVE APPROVAL
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William W. Abbott, Jr. X
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Elan J. Blutinger X* X
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Joshua M. Freeman X
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David L. Levine X X*
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Michael D. Rose X* X X
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David C. Sullivan X* X
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Joseph V. Vittoria X
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Theodore L. Weise X X
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Number of meetings in
fiscal 1999** 2 4 3 6***
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X Member
* Chairperson
** The Board held five meetings and took a number of other actions by written
consent in 1999. All but one incumbent director, Mr. Bullock, attended at
least 75% of the aggregate of all meetings of the Board of Directors and
Committees of the Board.
*** The Capital Approval Committee also includes one advisory member from senior
management who is not a member of the Board and who has no voting rights on
any matters brought before the Committee.
7
AUDIT COMMITTEE __________________________________________
- - Examines the activities of our independent auditors to determine whether these
activities are reasonably designed to assure the soundness of accounting and
financial procedures.
- - Reviews our accounting policies and the objectivity of our financial
reporting.
- - Considers annually the qualifications of our independent auditors and the
scope of their audit and makes recommendations to the Board as to their
selection.
COMPENSATION COMMITTEE ___________________________________
- - Establishes executive compensation policies and programs.
- - Recommends to the Board base salaries and target bonus levels for executive
officers.
- - Approves the awards and payments to be made to employees of ResortQuest and
its subsidiaries under its long-term compensation plans.
- - Makes recommendations to the Board of Directors concerning outside director
compensation.
- - Reviews the qualifications of persons eligible to stand for election as
directors and makes recommendations to the Board on this matter.
- - Considers as nominees for director qualified persons recommended by directors,
management and shareholders. Written recommendations for director nominees
should be delivered to the Secretary, ResortQuest International, Inc., 530 Oak
Court Drive, Suite 360, Memphis, TN 38117. ResortQuest's bylaws do not permit
shareholders to nominate candidates from the floor at an annual meeting
without notifying the Secretary at least 60 but not more than 90 days prior to
the date of the annual meeting. Notification must include certain information
detailed in the bylaws. If you intend to nominate a candidate from the floor
at an annual meeting, please contact the Secretary.
EXECUTIVE COMMITTEE ______________________________________
- - Has the full power of the Board between meetings of the Board, with specified
limitations relating to major corporate matters.
CAPITAL APPROVAL COMMITTEE _______________________________
- - Reviews, evaluates, approves and adopts acquisitions and other specific
capital expenditures with an acquisition or specific capital requirement of
$5 million or less, without Board approval.
- - Reviews, evaluates and approves acquisitions and other specific capital
expenditures with an acquisition or specific capital requirement in excess of
$5 million and provides recommendations to the Executive Committee for its
consideration and ultimate approval.
8
COMPENSATION OF DIRECTORS ______________________________________________________
Employee directors receive no additional compensation for serving on the
Board of Directors or its committees. Non-employee directors receive $3,000 for
attendance at each Board meeting and $1,500 for each committee meeting.
Under ResortQuest's Amended and Restated 1998 Long-Term Incentive Plan (the
"Incentive Plan"), each non-employee director also receives an option to acquire
10,000 shares of Common Stock upon the non-employee director's initial election
as a director and an annual option to acquire 5,000 shares at each annual
meeting at which the non-employee director is re-elected or continues to serve.
These options will have an exercise price equal to the fair market value of a
share of Common Stock on the date the options are issued.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS _________________________________________________________
GENERAL __________________________________________________
The Compensation Committee of the Board of Directors for the fiscal year
ended December 31, 1999 was comprised entirely of non-employee directors,
Messrs. Blutinger, Rose and Weise. The Compensation Committee is responsible for
establishing and administering the Company's executive compensation programs.
THE EXECUTIVE COMPENSATION PLAN __________________________
The Compensation Committee's compensation philosophy is designed to support
ResortQuest's primary objective of creating value for shareholders. The
Compensation Committee believes that the following compensation strategies for
ResortQuest's executive officers, including the Chief Executive Officer (the
"CEO"), achieve this objective:
- - Attract and retain talented executives -- ResortQuest provides core
compensation in the form of base salary and benefit programs that are
comparable to those of similarly sized companies in the
resort/leisure/hospitality industry. The base salary target is generally based
on industry survey results. For higher levels of responsibility, the base
salary component is intended to be a diminishing portion of the executive's
potential total compensation.
- - Emphasize pay for performance -- ResortQuest's incentive plan establishes a
significant relationship between current ResortQuest performance and incentive
compensation, on a sliding scale basis, with substantial rewards possible for
exceptional results and no reward for results below plan.
- - Encourage management stock ownership -- The Compensation Committee firmly
believes that long-term shareholder value will be significantly enhanced by
management stock ownership. As a result, ResortQuest's stock option program
strongly encourages stock ownership by executive officers.
The Company generally establishes base salary ranges by considering
compensation levels in similarly sized companies in the resort/leisure/
hospitality industry. In 1999, the Company retained the services of Towers
Perrin, a compensation consultant, to review and evaluate the Company's
executive compensation practices and base salary. As a result of the
compensation study conducted, the Company, in 1999, adjusted certain executive
salaries upward to reflect comparable positions of responsibility in comparable
companies. The base salary targets are generally established based upon industry
survey results in light of the Company's strategic goals compared to other
publicly owned, growth-oriented companies. The Company's current
9
philosophy is to pay base salaries sufficient to attract and retain executives
with a broad, proven track record of performance.
The base salary and performance of each executive officer is reviewed
periodically (at least annually) by his or her immediate supervisor (or the
Compensation Committee in the case of the Chairman and CEO) resulting in salary
actions as appropriate. An executive officer's level of responsibility is the
primary factor used in determining base salary. Individual performance and
industry information are also considered in determining any salary adjustment.
The Compensation Committee reviews and approves all executive officer salary
adjustments as recommended by the CEO. The Committee reviews the performance of
the CEO and establishes his base salary.
In addition to compensation through base salaries, the Compensation
Committee has the authority to issue performance-based bonuses. Incentive
bonuses will be paid only to the extent that ResortQuest meets performance
objectives. Bonus awards are based on the Compensation Committee's determination
of the individual's position and level of responsibility and the individual's
impact on ResortQuest's financial success. Bonus payments may, at the discretion
of the Compensation Committee, be made in cash or stock options. No bonus
payments were made in connection with performance in 1999.
The Compensation Committee is also responsible for the approval of option
grants for employees, the number of shares subject to each such option and the
terms and conditions of such options, consistent with the Incentive Plan. In
addition to year-end performance bonuses, determinations of option grants may be
made during the year, either in connection with new acquisitions, additional
equity offerings, or the addition of new key personnel, as appropriate in
furtherance of ResortQuest's objectives. Such objectives may include recognition
of past qualitative performance and incentives to continue the growth and
profits of our business.
CEO COMPENSATION _________________________________________
Mr. Sullivan served as Chief Executive Officer of ResortQuest until
December 7, 1999. In establishing Mr. Sullivan's base salary, the Compensation
Committee considered the factors discussed above, including the level of CEO
compensation in other publicly owned/growth oriented and similar sized companies
in comparable industries. Mr. Sullivan also was granted 115,500 stock options in
1999. This grant was based on ResortQuest's performance in 1998 and
Mr. Sullivan's demonstrated ability to grow ResortQuest through acquisitions,
expanding internal growth opportunities and ResortQuest's increase in net income
over the prior year.
Mr. Levine became the CEO of ResortQuest on December 7, 1999. Mr. Levine's
new base salary and the grant of an additional 75,500 stock options were
approved in connection with the amendment of his employment agreement to assume
the position of CEO. The Compensation Committee considered the same factors
concerning base salary as described above for Mr. Sullivan. The Compensation
Committee believes the additional stock option grant reflected ResortQuest's
need to retain a talented senior executive with the background, experience and
leadership skills to help ResortQuest integrate the operations of its recently
acquired operating companies and pursue ResortQuest's focus on internal growth.
POLICY ON DEDUCTIBILITY OF COMPENSATION __________________
Section 162(m) of the Internal Revenue Code generally limits the tax
deduction to public companies for compensation over $1 million paid to a
corporation's chief executive officer and the four next most highly compensated
executive officers, except to the extent that any such excess compensation is
paid pursuant to a performance-based or stock option plan that has been approved
by stockholders. The Compensation Committee will study the potential impact of
Section 162(m) and will, to the extent it deems appropriate, take reasonable
10
steps to minimize or eliminate any potential impact of Section 162(m) on
ResortQuest, while at the same time preserving the objective of providing
appropriate incentive awards. The
Compensation Committee believes that there are no current executive compensation
programs or outstanding awards that would be impacted by Section 162(m).
COMPENSATION COMMITTEE
ELAN J. BLUTINGER, CHAIRMAN
MICHAEL D. ROSE
THEODORE L. WEISE
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION ____________________________________
During 1999, the Compensation Committee was composed of Messrs. Blutinger,
Rose, and Weise. Neither of Messrs. Rose or Weise is or has been an officer or
employee of ResortQuest or it subsidiaries. Mr. Blutinger was an officer of
ResortQuest prior to our initial public offering in May 1998.
11
CORPORATE PERFORMANCE __________________________________________________________
The line graph shown below shows a comparison of the cumulative total
shareholder return on the Common Stock as compared to the cumulative total
return of two indexes: the S&P 500 Index and the Russell 2000 Index. The Graph
covers the period from May 20, 1998, the date on which ResortQuest Common Stock
commenced trading on the New York Stock Exchange, to December 31, 1999.
The performance illustrated assumes that $100 was invested in ResortQuest
Common Stock at its closing price on May 20, 1998 and each index on May 20,
1998. The returns reflected in the graph for ResortQuest, the S&P 500 Index and
the Russell 2000 Index were 33.0%, 11.7% and (11.9)% respectively, for the
seven-month period ended December 31, 1998, and (71.8)%, 21.0% and 21.3%,
respectively, for the twelve-month period ended December 31, 1999.
The closing prices of the Common Stock on May 20, 1998 and December 31, 1999
were $15.50, and $6.00, respectively. The price of the Common Stock in
ResortQuest's initial public offering was $11.00 per share.
We do not believe we can reasonably identify a peer group on an industry or
line of business basis, or a published industry or line of business index for
comparison to ResortQuest. As a result we have used the Russell 2000 Index for
comparison purposes because it represents growth companies with market
capitalizations similar to ResortQuest.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DOLLARS
May 20, 1998 1998 1999
RESORTQUEST INT $100.00 $132.96 $37.49
S & P 500 $100.00 $111.71 $135.21
RUSSELL 2000 $100.00 $88.14 $106.88
*TOTAL RETURN BASED ON $100 INITIAL INVESTMENT & REINVESTMENT OF DIVIDENDS
12
COMPENSATION OF EXECUTIVE OFFICERS _____________________________________________
SUMMARY OF COMPENSATION __________________________________
The following table shows cash and other compensation paid or accrued during
the 1999 fiscal year to each person who served as ResortQuest's Chief Executive
Officer and each of the five other most highly compensated executive officers
(the "Named Executive Officers").
- ----------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------
SECURITIES
OTHER UNDERLYING ALL
NAME AND PRINCIPAL FISCAL ANNUAL OPTIONS LTIP OTHER
POSITIONS YEAR(1) SALARY(2) BONUS COMPENSATION GRANTED PAYOUTS COMPENSATION
- ----------------------------------------------------------------------------------------------------------------------
David C. Sullivan 1999 $238,542 $ -- $ -- 115,500 $ -- $ --
Chairman and Chief
1998 $122,820 $122,820 $ -- 115,500 $ -- $ --
Executive Officer (3)
- ----------------------------------------------------------------------------------------------------------------------
David L. Levine 1999 $195,625 $ -- $ -- 140,500 $ -- $ --
President and Chief 1998 $ 99,792 $ 99,792 $ -- 75,000 $ -- $ --
Operations Officer (3)
- ----------------------------------------------------------------------------------------------------------------------
Jeffery M. Jarvis 1999 $167,500 $ -- $ -- 45,000 $ -- $ --
Senior Vice President and 1998 $ 92,115 $ 81,058(5) $ -- 45,000 $ -- $ --
Chief Financial Officer(4)
- ----------------------------------------------------------------------------------------------------------------------
W. Michael Murphy 1999 $167,500 $ -- $ -- 45,000 $ -- $ --
Senior Vice President and 1998 $ 92,115 $ 76,058(5) $ -- 45,000 $ -- $ --
Chief Development Officer
- ----------------------------------------------------------------------------------------------------------------------
Jules S. Sowder 1999 $139,583 $ -- $ -- 25,000 $ -- $ --
Senior Vice President and 1998 $ 76,763 $ 63,382(5) $ -- 25,000 $ -- $ --
Chief Marketing Officer(4)
- ----------------------------------------------------------------------------------------------------------------------
Frederick L. Farmer 1999 $139,583 $ -- $ -- 25,000 $ -- $ --
Senior Vice President and 1998 $ 76,763 $ 38,381 $ -- 75,000 $ -- $ --
Chief Information Officer
- ----------------------------------------------------------------------------------------------------------------------
John K. Lines 1999 $139,583 $ -- $ -- 25,000 $ -- $ --
Senior Vice President and 1998 $ 76,763 $ 37,881 $ -- 25,000 $ -- $ --
General Counsel (4)
- ----------------------------------------------------------------------------------------------------------------------
(1) Each of the Named Executive Officers commenced employment with ResortQuest
upon consummation of our initial public offering (May 26, 1998).
(2) Annual salaries for 1998 were as follows: $200,000 for Mr. Sullivan;
$162,500 for Mr. Levine; $150,000 for each of Mr. Jarvis and Mr. Murphy; and
$125,000 each for Ms. Sowder and Mr. Lines.
(3) Mr. Sullivan resigned as Chief Executive Officer and Mr. Levine became Chief
Executive Officer effective December 7, 1999.
(4) Messrs. Jarvis and Lines and Ms. Sowder resigned their positions with
ResortQuest effective January 31, 2000, February 4, 2000 and February 15,
2000, respectively.
(5) Includes payments for consulting services rendered prior to ResortQuest's
initial public offering as follows: $35,000 for Mr. Jarvis; $30,000 for
Mr. Murphy and $25,000 for Ms. Sowder.
13
OPTION GRANTS IN FISCAL 1999
AND FISCAL YEAR-END OPTION VALUES ________________________
The table below presents additional information concerning option awards for
each of the Named Executive Officers shown in the Summary Compensation Table.
None of the Named Executive Officers exercised any stock options in 1999. All of
the options shown in the table become exercisable at the rate of 33 1/3% per
year.
- -----------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN FISCAL 1999
- -----------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS (1) OPTION TERM (2)
- -----------------------------------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED 1999 PER SHARE DATE 0% 5% 10%
- -----------------------------------------------------------------------------------------------------------------------
David C. Sullivan 115,500 16.3 $ 8.56 5/31/04 $ -- $ 273,154 $ 603,599
- -----------------------------------------------------------------------------------------------------------------------
David L. Levine 65,000 9.2 $ 8.56 5/31/04 $ -- $ 153,723 $ 339,688
75,500 10.7 $ 4.94 12/14/04 $ -- $ 87,400 $ 193,132
- -----------------------------------------------------------------------------------------------------------------------
Jeffery M. Jarvis 45,000 6.4 $ 8.56 5/31/04 $ -- $ 106,424 $ 235,168
- -----------------------------------------------------------------------------------------------------------------------
W. Michael Murphy 45,000 6.4 $ 8.56 5/31/04 $ -- $ 106,424 $ 235,168
- -----------------------------------------------------------------------------------------------------------------------
Jules S. Sowder 25,000 3.5 $ 8.56 5/31/04 $ -- $ 59,124 $ 130,649
- -----------------------------------------------------------------------------------------------------------------------
Frederick L. Farmer 25,000 3.5 $ 8.56 5/31/04 $ -- $ 59,124 $ 130,649
- -----------------------------------------------------------------------------------------------------------------------
John K. Lines 25,000 3.5 $ 8.56 5/31/04 $ -- $ 59,124 $ 130,649
- -----------------------------------------------------------------------------------------------------------------------
All Shareholders (3) n/a n/a n/a n/a $ -- $45,140,499 $99,748,697
- -----------------------------------------------------------------------------------------------------------------------
All Optionees 707,102 100.0% $ 8.73(4) Various $ -- $ 1,705,486 $ 3,768,679
- -----------------------------------------------------------------------------------------------------------------------
All optionees gain as a
percentage of all
stockholders gain n/a n/a n/a n/a -- 3.8% 3.8%
- -----------------------------------------------------------------------------------------------------------------------
(1) These options to purchase Common Stock were granted under ResortQuest's
Amended and Restated 1998 Long-Term Incentive Plan on May 31, 1999, except
for the 75,500 options granted to Mr. Levine on December 14, 1999.
(2) The dollar amounts under these columns are the result of calculations at
zero percent, five percent and ten percent rates set by the Securities and
Exchange Commission and therefore are not intended to forecast possible
future appreciation, if any, of our stock price. In the above table, we did
not use an alternative formula for a grant valuation, as we are not aware of
any formula, which will determine with reasonable accuracy a present value
based on future unknown or volatile factors.
(3) These amounts represent the appreciated value which holders of Common Stock
would receive at the hypothetical zero, five and ten percent rates based on
the market value of Common Stock outstanding at or near the option grant
dates.
(4) Represents the weighted average price of options granted to all optionees.
14
EMPLOYMENT AGREEMENTS AND COVENANTS
NOT TO COMPETE ___________________________________________
ResortQuest is a party to employment agreements with each of the Named
Executive Officers, except for Messrs. Jarvis and Lines and Ms. Sowder. In
connection with ResortQuest's decision to focus primarily on internal growth for
the foreseeable future, Messrs. Jarvis and Lines and Ms. Sowder resigned their
positions with ResortQuest effective January 31, 2000, February 4, 2000 and
February 15, 2000, respectively.
The employment agreements for Messrs. Sullivan, Levine, Murphy and Farmer
provide for annual base salaries of $150,000, $275,000, $210,000 and $200,000,
respectively. The employment agreements for Messrs. Jarvis and Lines and
Ms. Sowder provided for annual base salaries of $180,000, $150,000 and $150,000,
respectively. Each of these agreements are for a term of three years (the
"Initial Term"). In addition, certain executive officers of our operating
subsidiaries, including Ms. Houston, have entered into employment agreements for
an Initial Term of three years. Unless terminated or not renewed by ResortQuest
or the employee, the term will continue after the Initial Term on a year-to-year
basis on the same terms and conditions existing at the time of renewal. The base
salary for Ms. Houston is $150,000.
Each employment agreement contains a covenant not to compete (the
"Covenant") with ResortQuest for a period of two years immediately following
termination of employment or, in the case of a termination by ResortQuest
without cause in the absence of a change in control, for a period of one year
following termination of employment. Under the Covenant, the employee generally
is prohibited from:
- - engaging in any hotel management or non-commercial property management, rental
or sales business in direct competition with ResortQuest within defined
geographic areas in which ResortQuest or its subsidiaries do business;
- - enticing a managerial employee of ResortQuest away from ResortQuest;
- - calling upon any person or entity which is, or has been, within one year prior
to the date of termination, a customer of ResortQuest; or
- - calling upon a prospective acquisition candidate which the employee knew was
approached or analyzed by ResortQuest, for the purpose of acquiring the
entity.
The Covenant may be enforced by injunctions or restraining orders and shall
be construed in accordance with the changing location of ResortQuest.
Each of these employment agreements provides that, in the event of a
termination of employment by ResortQuest without cause during the Initial Term
the employee will be entitled to receive from ResortQuest an amount equal to his
or her then current salary for the remainder of the Initial Term or for one
year, whichever is greater. In the event of a termination of employment without
cause after the Initial Term of the employment agreement, the employee will be
entitled to receive an amount equal to his or her then current salary for one
year.
In the event of a change in control of ResortQuest (as defined in the
employment agreement) during the Initial Term, if the employee is not given at
least five days' notice of such change in control and the successor's intent to
be bound by such employment agreement, the employee may elect to terminate his
or her employment and receive:
- - a lump sum payment equal to three times the total remaining compensation due
under the employment agreement or the employee's annual base salary in effect
immediately prior to the change of control, whichever is greater;
- - all compensation earned and benefits due through the termination date; and
- - continued participation in all health and welfare plans at ResortQuest's
expense for the employee and eligible dependents for up to 36 months after the
termination date.
15
If the employee's employment by ResortQuest is terminated within one year
after a change of control by the employee for good reason (as defined in the
employment agreement) or by ResortQuest without good cause, the employee will
receive the accrued compensation payment and health and welfare benefits
described immediately above plus a lump sum payment equal to three times the
employee's base salary in effect immediately prior to the change of control. If
the employee's employment is terminated by ResortQuest without good cause during
the 180 days prior to the effective date of a change of control, the employee
will receive:
- - a lump sum payment equal to the employee's annual base salary in effect at the
time of employee's termination for whatever time period is remaining in the
term of the employment agreement at the time of the employee's termination,
less any amounts previously paid at the time of termination and plus an amount
equal to one times the employee's annual base salary; and
- - continued participation in all health and welfare plans at ResortQuest's
expense for the employee and eligible dependents for up to 36 months after the
termination date.
The employment agreements also state that in the event of a termination
without cause by ResortQuest or a change in control, the employee may elect to
waive the right to receive severance compensation and, in such event, the
noncompetition provisions of the employment agreement will not apply. In the
event the employee is given at least five days' notice of such change in
control, the employee may elect to terminate his or her employment agreement and
receive a lump sum payment equal to two times the amount he or she would receive
pursuant to a termination without cause during the Initial Term. In such an
event, the noncompetition provisions of the employment agreement would apply for
two years from the effective date of termination.
On January 31, 2000, Mr. Jarvis resigned from his position as Senior Vice
President and Chief Financial Officer of ResortQuest. On February 4, 2000,
Mr. Lines resigned from his position as Senior Vice President, General Counsel
and Secretary. On February 15, 2000, Ms. Sowder resigned from her position as
Senior Vice President and Chief Marketing Officer. Pursuant to individual
separation agreements, Messrs. Jarvis and Lines and Ms. Sowder received
severance payments of $237,432, $240,000 and $191,610 respectively.
On March 7, 2000, Mr. Sullivan notified the Board that he will resign as
Chairman effective on May 11, 2000. ResortQuest and Mr. Sullivan have agreed to
enter into a consulting agreement commencing May 12, 2000, for a term of
approximately 26 months. ResortQuest will pay Mr. Sullivan a consulting fee of
$12,500 per month.
INDEMNIFICATION AGREEMENTS _______________________________
ResortQuest has entered into indemnification agreements with each of its
directors and executive officers. The indemnification agreements require, among
other things, that ResortQuest indemnify its directors and executive officers to
the fullest extent permitted by law, and advance to the directors and executive
officers all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. ResortQuest must also
indemnify and advance all expenses incurred by directors and executive officers
seeking to enforce their rights under ResortQuest directors' and officers'
liability insurance. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by provisions in ResortQuest's
Articles of Incorporation and Bylaws, it provides greater assurance to directors
and executive officers that indemnification will be available, because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or by the shareholders to eliminate the rights it provides.
16
INCENTIVE PLAN ___________________________________________
In March 1988, the Board of Directors and ResortQuest's shareholders
approved the 1998 Long-Term Incentive Plan, which was later amended and restated
effective May 13, 1999. The purpose of the Incentive Plan is to provide
officers, employees, directors who are also employees, consultants and
independent contractors of ResortQuest or any of its subsidiaries, with
additional incentives by increasing their ownership interests in ResortQuest.
Individual awards under the Incentive Plan may take the form of one or more of:
(i) either incentive stock options or non-qualified stock options; (ii) stock
appreciation rights; (iii) restricted or deferred stock; (iv) dividend
equivalents; and (v) other awards not otherwise provided for, the value of which
are based in whole or in part upon the value of ResortQuest Common Stock.
The number of shares available for use in connection with the Incentive Plan
may not exceed 15% of the aggregate number of shares of Common Stock outstanding
prior to the date of grant. As of March 21, 2000, 2,807,318 shares were reserved
for use in connection with the Incentive Plan, of which 2,478,112 shares had
been granted and were outstanding. Shares of Common Stock which are attributable
to awards which have expired, terminated or been canceled or forfeited are
available for issuance or use in connection with future awards. All options have
been granted with exercise prices at least equal to the fair market value at the
time of grant.
The Incentive Plan will remain in effect until terminated by the Board of
Directors. The Incentive Plan may be amended by the Board of Directors without
the consent of ResortQuest's shareholders, except that any amendment, although
effective when made, will be subject to shareholder approval if required by any
Federal or state law or regulation or by the rules of any stock exchange or
automated quotation system on which the Common Stock may then be listed or
quoted.
SAVINGS AND RETIREMENT PLAN ______________________________
ResortQuest established the Savings and Retirement Plan, a 401 (k) Plan,
effective April 1, 1999. Similar plans existing at certain Operating Companies
have either been suspended or rolled into the Savings and Retirement Plan. All
employees of the Company meeting certain minimum eligibility requirements are
eligible to participate in the Savings and Retirement Plan. The Savings and
Retirement Plan provides that each participant may contribute up to 20% of his
or her pre-tax gross compensation (but not greater than a statutorily prescribed
annual limit). The percentage elected by certain highly compensated participants
may be required to be lower. The Savings and Retirement Plan permits, but does
not require, additional contributions to the Savings and Retirement Plan by the
Company. All amounts contributed by employee participants in conformance with
the Savings and Retirement Plan requirements and earnings on such contributions
are fully vested at all times. For the year ended December 31, 1999, ResortQuest
made an aggregate matching contribution to the Savings and Retirement Plan of
$827,167 based on a match of 50% of employee contributions, up to a maximum of
6% of compensation. The Board of Directors will determine on an annual basis
whether a matching contribution will be made and, if so, at what level of
contribution.
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS _________________________________
LEASES OF FACILITIES _____________________________________
ABBOTT RESORTS. Abbott Resorts, a ResortQuest subsidiary, leases 9,350
square feet of office space in Destin, Florida for the main office for its
property management and real estate brokerage activities from SAVA Properties, a
Florida general partnership which is 25.5% owned by William Abbott, Jr. The
lease expires September 29, 2018. The aggregate annual rent paid by Abbott
Resorts is $118,932. Abbott Resorts leases approximately 3,700 square feet of
indoor and outdoor space in Santa Rosa, Florida for its rental property
management and real estate sales activities in the Santa Rosa and Grayton Beach,
Florida areas from VAGAS Properties, a Florida general partnership which is 20%
owned by William Abbott, Jr. The lease expires September 29, 2018. The aggregate
annual rent payment is approximately $50,000.
Abbott Resorts leases 1,665 square feet of office space in Fort Walton
Beach, Florida for real estate sales activities. This property is leased from
A&A Partnership ("AAP"), a general partnership which is 50% owned by William
Abbott, Jr., pursuant to the terms of a lease agreement which expires
January 31, 2001. The aggregate annual rent paid by Abbott Resorts is $21,182.
As part of such lease, Abbott Resorts also leases a two-bedroom apartment at
such site, which is subleased to unaffiliated third parties. Abbott Resorts also
leases 2,000 square feet of office space in Destin, Florida from AAP for use as
its personnel office. The lease agreement expires August 31, 2001 and provides
for aggregate annual rent of $23,320.
ASTON HOTELS & RESORTS. Approximately 950 square feet of office space,
which is part of a space leased by Aston Hotels & Resorts, a ResortQuest
subsidiary, is used by a former stockholder and the previous corporate secretary
of Aston Hotels & Resorts. Mr. Tatibouet has agreed to assume responsibility for
the approximately $31,000 annual rent allocable for this space to the extent and
for the period it is used for non-business purposes.
Aston Hotels & Resorts leases on a month-to-month basis approximately 618
square feet of office space in a hotel owned by Mr. Tatibouet. The monthly lease
amount is $754.
AST Development, Inc. ("AST Development") and AST International, LLC ("AST
International"), both entities controlled by Mr. Tatibouet, utilized in 1999
approximately 125 square feet and 240 square feet, respectively, of office space
leased by Aston Hotels & Resorts. AST Development and AST International were
charged approximately $5,300 and $9,400, respectively, for use of this space in
1999.
COASTAL RESORTS. Coastal Resorts Realty and Coastal Resorts Management,
both ResortQuest subsidiaries, lease office space and facilities under three
separate lease agreements from Carl M. Freeman Associates, Inc. ("CMFA"). Joshua
M. Freeman is the Chairman and majority shareholder of CMFA. The rent paid by
CMFA under these leases was $184,875 in 1999.
18
MANAGEMENT AGREEMENTS ____________________________________
ABBOTT RESORTS. Abbott Resorts manages vacation condominiums owned or
co-owned by Mr. Abbott pursuant to Abbott Resorts' standard management
agreement. Abbott Resorts received aggregate property management fees related to
these properties of approximately $587,214 in 1999.
ASTON HOTELS & RESORTS. Since 1994, Aston Hotels & Resorts has managed two
hotels owned by Andre S. Tatibouet. The aggregate management and other fees
charged by Aston Hotels & Resorts for the management of these properties was
$761,424 in 1999. The management agreements for these hotels terminate on
December 31, 2003. In addition, prior to our acquisition of Aston Hotels &
Resorts, Aston Hotels & Resorts was a party to two lease and management
agreements for two hotels dated February 1, 1996 and February 21, 1991,
respectively. Aston Hotels & Resorts transferred these lease and management
agreements to AST Holdings, Inc. and simultaneously entered into management
agreements with AST Holdings, Inc. to manage these properties. AST
Holdings, Inc. is owned by Mr. Tatibouet. The aggregate management and other
fees charged by Aston Hotels & Resorts during 1999 for the management of these
properties was $566,956.
OTHER TRANSACTIONS _______________________________________
ABBOTT RESORTS. ResortQuest and Mr. Abbott entered into an agreement with
respect to the payment of commissions on certain properties which were listed
for sale or whose sale was pending as of the date of ResortQuest's acquisition
of Abbott Resorts. ResortQuest paid Mr. Abbott approximately $171,000 in
commissions in 1999.
In connection with the acquisition of Abbott Resorts, Mr. Abbott entered
into a three-year consulting agreement with ResortQuest that expires
September 30, 2001. For all services rendered by Mr. Abbott pursuant to the
consulting agreement, ResortQuest has agreed to compensate Mr. Abbott as
follows:
- - to pay a consulting fee of $125,000 per year;
- - to pay premiums for coverage for Mr. Abbott and his immediate family under
such health, hospitalization, disability, dental, life and other insurance
plans that ResortQuest may have in effect from time to time;
- - to reimburse Mr. Abbott for all business travel and other out-of-pocket
expenses reasonably incurred by him in the performance of his duties; and
- - to pay for a full membership in the Tops'l Beach and Racquet Club (the current
cost for which is $1,200 per year).
The consulting agreement is terminable, by ResortQuest or Mr. Abbott, with cause
on ten (10) days written notice and or without cause thirty (30) days written
notice.
ASTON HOTELS & RESORTS. Since July 22, 1997, Aston Hotels & Resorts has
provided consulting and administrative services to AST International, LLC ("AST
International"), an entity controlled by Andre S. Tatibouet. AST International
has been billed $16,818 by Aston Hotels & Resorts for its services in 1999.
Aston Hotels & Resorts also charged Aston International, AST Development and
Mr. Tatibouet $61,606, $4,119 and $1,183, respectively, for expenditures on
their behalf in 1999.
19
At December 31, 1999, Mr. Tatibouet owed Aston Hotels & Resorts, either
directly or through entities controlled by him (including properties managed by
Aston Hotels & Resorts), an aggregate amount of approximately $4.9 million. Of
this amount, $4.0 million represented cash advances made prior to our
acquisition of Aston Hotel & Resorts that were formalized in a promissory note
(the "Note") executed at the time of the acquisition. Interest was payable
semi-annually under the Note at the prime rate less 0.5%, with a minimum of 6%
and maximum of 10% with principal to be paid on May 25, 2008. The remaining
$861,548 owed at December 31, 1999 represented interest due on the Note and
certain fees and reimbursements payable under the management agreements
described above.
During 1999, we began discussions with Mr. Tatibouet to restructure the Note
to provide for additional collateral. On February 16, 2000, we agreed with
Mr. Tatibouet to the formation of two separate notes (the "New Notes"), one for
$4 million and one for $940,000. The $940,000 note includes additional interest
payable under the Note in January 2000. The New Notes are fully collateralized
by certain real estate held by Mr. Tatibouet. The New Notes bear interest at
prime rate, less 0.5%, with a minimum of 6% and a maximum of 10%. The $940,000
note, plus accrued interest, is due and payable in two equal installments on
December 31, 2000 and July 31, 2001. Payments under the $4 million note are
interest only, due and payable every January and July 1(st). The $4 million note
is due and payable on May 25, 2008.
Aston Hotels & Resorts has entered into a 20-year royalty free license
agreement with AST Brands, LLC, an entity wholly-owned by Mr. Tatibouet, for use
of the name Aston Hotels & Resorts as well as other service marks, tradenames,
trademarks and logos.
COASTAL RESORTS. Pursuant to an exclusive listing agreement with Sea Colony
Development Corporation, a wholly-owned subsidiary of CMFA, dated January 1,
1997, Coastal Resorts Realty receives a real estate sales commission of 6.5% of
the full purchase price of each new home sold at the Sea Colony condominium
community in Bethany Beach, Delaware. Under the agreement, Coastal Resorts
Realty is also required to develop a marketing plan, at its own expense, to
promote home sales in the Sea Colony community. This agreement terminates on
September 30, 2000.
Pursuant to an agreement dated January 1, 1997, Coastal Resorts Realty
received sales commissions of 6% for selling properties developed by Cove Resort
Limited Partnership ("Cove Resort"). CMFA is the general partner and a 70% owner
of Cove Resort. Under the agreement, Coastal Resorts Realty also was required to
develop a marketing plan, at its own expense, to promote home sales in The Cove
community. The agreement terminated on December 31, 1999.
Sea Colony Development and Cove Resort paid Coastal Resorts Realty an
aggregate of $2,011,928 under their agreements in 1999. At December 31, 1999,
Coastal Resorts Realty owed Sea Colony Development $158,646 in overpayments
attributable to new home sales.
Coastal Resorts Management has a management agreement with CMF
Fitness, Inc., dated June 1, 1996, to manage the Sea Colony Fitness Center for
$5,834 a month. CMF Fitness is a wholly owned subsidiary of CMFA. CMF Fitness
paid Coastal Resorts Management $70,000 in 1999 under the agreement. The
agreement terminates on the earlier of (i) December 31 of the year in which the
last new home in the Sea Colony development is sold or (ii) December 31, 2005.
Pursuant to an agreement with Sea Colony Water Company, L.L.C., dated
January 1, 1997, Coastal Resorts Management was appointed exclusive agent for
and manager of the Sea Colony Water Plant. Sea Colony Water is a wholly owned
subsidiary of CMFA. Under the terms of the agreement, Coastal Resorts Management
is entitled to retain all revenue collected by the water plant, less costs and
expenses and certain payments to Sea Colony Water. Coastal Resorts Management
received net revenues of $141,288 in 1999 from its management of the water
plant. This agreement terminates on December 31, 2001 or upon the sale of the
water plant.
20
Coastal Resorts Management has also entered into an agreement with Sea
Colony Water Company dated January 1, 1997 to provide construction supervision
services for an upgrade to the water plant during a two-year term. Coastal
Resorts' fee for the services is the direct costs it incurs plus 5%. Coastal
Resorts Management received $12,600 for services under this Agreement in 1999.
Pursuant to an agreement with CMF Paymaster, Inc. dated January 1, 1997,
Paymaster provides administrative services relating to payroll and employee
benefit matters to Coastal Resorts Management and Coastal Resorts Realty, at a
cost of approximately $2 per pay period per employee. Paymaster is indirectly
owned by Mr. Freeman. Paymaster received $33,857 under this agreement in 1999.
This agreement was terminated on September 30, 1999.
CMFA has appointed Coastal Resorts Management as its sole and exclusive
agent for the management of commercial properties known as The Sea Colony
Marketplace and Units A, B, C and D in the Edgewater Building, both located in
Bethany Beach, Delaware. The Marketplace agreement runs for three years from
June 1, 1997 and the Edgewater agreement renews automatically for one year on
January 1 of each year, unless terminated in advance by either party. Both
agreements provide for payment to Coastal Resorts Management of a management fee
equal to 5% of gross receipts from the operation of the respective properties.
Amounts paid by CMFA to Coastal Resorts Management under these agreements in
1999 equaled $26,583.
Pursuant to an agreement dated January 1, 1998, CMFA has appointed Coastal
Resorts Management as its exclusive agent for the management of a private
thoroughfare running through the Sea Colony West condominium complex. The
agreement runs until the earlier of December 31, 2000 or the sale by CMFA of the
property. Payments to Coastal Resorts Management equal 20% of total budget
expenditures for management of the road under a budget prepared by Coastal
Resorts Management and approved by CMFA. CMFA paid Coastal Resorts Management
$9,500 under the agreement in 1999.
Pursuant to an agreement, dated as of January 1, 1998, between CMFA and
Coastal Resorts Management, CMFA has appointed Coastal Resorts Management as
CMFA's exclusive agent, for the period from January 1, 1998 to December 31,
2000, for the collection of ground rents owed to CMFA by condominium unit
homeowners in the Sea Colony condominium development in Bethany Beach, Delaware.
The agreement provides for CMFA to pay Coastal Resorts Management an
administration fee equal to 3% of net ground rents collected under the
agreement. In 1999, CMFA paid Coastal Resorts Management $28,262 under this
agreement.
During 1999, CMFA also paid $35,048 to Coastal Resorts Management for
marketing services and shared overhead relating to three affiliates of CMFA.
RESORTQUEST. ResortQuest paid approximately $1,513,000 to Thompson &
Company in 1999 for advertising services, including reimbursement of
approximately $752,526 for purchased advertising, production and printing costs.
Mr. Sullivan's son is a Vice President of Thompson & Company.
21
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ITEM 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------------------------------------------
The Board of Directors appointed Arthur Andersen LLP as independent public
accountants to examine and report on ResortQuest's consolidated financial
statements for the 2000 fiscal year and recommends that the shareholders ratify
the appointment. Arthur Andersen has served as our independent auditors since
ResortQuest was formed in September 1997. If the shareholders do not ratify the
appointment of Arthur Andersen, the Audit Committee and the Board of Directors
will consider the appointment of other independent public accountants. One or
more representatives of Arthur Andersen will be present at the Annual Meeting.
They will have the opportunity to respond to appropriate questions and to make a
statement if they wish to do so.
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ITEM 3 -- OTHER MATTERS
- ----------------------------------------------------------------------------
The Board of Directors is not aware of any other matter to be presented for
action at the meeting. If any other matter requiring a vote of the shareholders
should arise, the Proxies (or their substitutes) will vote in accordance with
their best judgment.
22
RESORTQUEST INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David L. Levine, James Olin and J. Mitchell
Collins, or any of them individually and each of them with full power of
substitution to represent them and to vote as designated on the reverse side
all of the shares of Common Stock of the ResortQuest International, Inc.,
which the undersigned is entitled to vote, at the Annual Meeting of
Stockholders to be held on Thursday, May 11, 2000 at the Embassy Suites, 1022
South Shady Grove Road, Memphis, TN 38120, and at any postponements or
adjournments thereof.
(TO BE SIGNED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
RESORTQUEST INTERNATIONAL, INC.
MAY 11, 2000
Please Detach and Mail in the Envelope Provided
Please mark your
A /X/ votes as in this
example.
FOR ALL WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF EACH OF ITEMS 1 AND 2.
NOMINEES AUTHORITY
LISTED AT TO VOTE FOR
RIGHT (except ALL NOMINEES
as marked to LISTED AT FOR AGAINST ABSTAIN
the contrary RIGHT NOMINEES: 2. APPOINTMENT OF
below) William W. Abbott, Jr. Michael D. Rose ACCOUNTANTS / / / / / /
Elan J. Blutinger David C. Sullivan Approval of the
Joshua M. Freeman Joseph V. Vittoria appointment of
1. ELECTION / / / / Heidi O'Leary Houston Theodore L. Weise Arthur Andersen LLP
OF David L. Levine as the Company's independent
DIRECTORS public accountants for the
2000 fiscal year.
INSTRUCTIONS: To withhold authority to
vote for any individual nominee, strike 3. VOTE ON OTHER MATTERS In their
a line through the nominee's name listed discretion, the Proxies are
at right. authorized to vote upon matters not
known to the Board of Directors as
of the date of the accompanying proxy
statement.
UNLESS OTHERWISE SPECIFIED IN THE
SQUARES PROVIDED, THE PROXIES SHALL
VOTE FOR THE ELECTION OF THE NOMINEES
LISTED ABOVE AND FOR THE APPROVAL OF
THE APPOINTMENT OF AUDITORS.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
_____________________________________________ ___________________________________________ Date: ______________________, 2000
Signature Signature, If Held Jointly
NOTE: Signature should be identical with the name typed on the Proxy. Joint owners should each sign personally. Persons signing
as attorney, executor, administrator, trustee or guardian should give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If partnership, please sign in partnership name by authorized person.