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-12
HUDSON HOTELS
CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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and 0-11.
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2001
ANNUAL MEETING OF SHAREHOLDERS
-OF-
HUDSON HOTELS CORPORATION
300 BAUSCH & LOMB PLACE
ROCHESTER, NY 14604
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 2001 Annual Meeting of Shareholders of Hudson Hotels Corporation (the
"Company") will be held at The Brookwood Inn, 800 Pittsford-Victor Road,
Pittsford, New York 14534 on Thursday, June 14, 2001 at 10:00 a.m. local time,
for the following purposes:
1. To elect five (5) directors for a term of one (1) year or until their
successors have been elected and qualified.
2. To consider and act upon a proposal to appoint Bonadio & Co., LLP as the
Company's independent public accountants for the year ending
December 31, 2001.
3. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Information concerning matters to be acted upon at the Annual Meeting is set
forth in the accompanying Proxy Statement.
Shareholders of record at 5:00 p.m. Eastern Daylight Time on April 27, 2001,
are entitled to notice of and to vote at the meeting. Each shareholder, even
though he or she now plans to attend the meeting, is requested to execute the
enclosed proxy card and return it without delay in the enclosed postage-paid
envelope. Any shareholder present at the meeting may withdraw his or her proxy
in writing and vote personally on each matter brought before the meeting.
By Order of the Board of Directors
Alan S. Lockwood
Secretary
April 27, 2001
2001
ANNUAL MEETING OF SHAREHOLDERS
-OF-
HUDSON HOTELS CORPORATION
300 BAUSCH & LOMB PLACE
ROCHESTER, NY 14604
PROXY STATEMENT
This Proxy Statement (the "Proxy Statement") is furnished to shareholders of
Hudson Hotels Corporation, a New York corporation having its principal executive
offices at 300 Bausch & Lomb Place, Rochester, New York 14604 (the "Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company relating to the 2001 Annual Meeting of shareholders (the "Annual
Meeting") which will be held at the Brookwood Inn, 800 Pittsford-Victor Road,
Pittsford, New York 14534 on Thursday, June 14, 2001, at 10:00 a.m., local time,
and at any and all adjournments of the Annual Meeting.
This Proxy Statement, together with the accompanying form of proxy, was
mailed to shareholders on or about April 30, 2001.
VOTING SECURITIES
As of April 27, 2001, the record date for the Annual Meeting, there were
2,749,527 of the Company's common shares, par value $.001 per share (the "Common
Shares"), issued and outstanding. Only shareholders of record on the books of
the Company at the close of business on April 27, 2001 are entitled to notice
of, and to vote at, the Annual Meeting and at any and all adjournments of the
Annual Meeting. Each such shareholder is entitled to one vote for each Common
Share registered in the name of the shareholder. A majority of the outstanding
Common Shares represented in person or by proxy at the Annual Meeting will
constitute a quorum for the transaction of business.
Under the law of New York, the Company's state of incorporation, abstentions
and broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Broker non-votes occur
where a broker holding stock in street name votes the shares on some matters but
not others. Usually, this occurs where brokers have not received instructions
from clients, in which case brokers are permitted to vote on "routine" matters
but not on non-routine matters. The missing votes on non-routine matters are
broker non-votes.
The enclosed proxy, when properly executed and received by the Secretary of
the Company prior to the Annual Meeting, will be voted as therein specified
unless revoked by filing with the Secretary prior to any vote at the Annual
Meeting, a written revocation or a duly executed proxy bearing a later date.
Unless authority to vote for one or more of the director nominees is
specifically withheld according to the instructions, a signed proxy will be
voted FOR the election of the five director nominees named herein. Unless a
proxy is designated as being voted against, or unless a shareholder designates
that the shareholder abstains, a signed proxy will be voted FOR each proposal
described herein. The Board knows of no other matters to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting
upon which a vote properly may be taken, shares represented by all proxies
received by the Board will be voted with respect thereto in accordance with the
judgment of the persons named in the proxies.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by use of the mails, officers and regular employees of the Company,
without extra compensation, may solicit proxies personally, by telephone or
telegraph. The Company has requested persons holding Common Shares in their
names for others or in the names of nominees to forward soliciting material to
the beneficial owners of such Common Shares and the Company will, if requested,
reimburse such persons for their reasonable expenses in so doing.
PRINCIPAL SHAREHOLDERS
The following table sets forth as of April 25, 2001, the name and address of
each director and executive officer who owns shares of Common Stock and each
other person known by the Company to own beneficially more than 5% of the
Company's outstanding shares of Common Stock and the number of shares owned by
all directors and executive officers of the Company, as a group, together with
the respective percentage holdings of each such person.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) CLASS (1)(2)
- --------------------------------- ------------------------------------ ------------
E. Anthony Wilson................ 431,514 (3) 14.50%
300 Bausch & Lomb Place
Rochester, New York 14604
Bruce Sahs....................... 51,953 (4) 1.85%
300 Bausch & Lomb Place
Rochester, New York 14604
Ralph L. Peek.................... 193,768 (5) 6.91%
300 Bausch & Lomb Place
Rochester, New York 14604
Richard C. Fox................... 73,598 (6) 2.67%
20 North Union Street
Rochester, New York 14607
Alan S. Lockwood................. 34,661 (7) 1.26%
7291 Dennisport Lane
Victor, New York 14564
Ted Filer........................ 6,000 (8) 0.22%
31 Beach Flint Way
Victor, New York 14564
LIVA & Co., f/b/o................ 151,633 (9) 5.35%
The Q-Tip Trust of
Jennifer L. Ansley
The Chase Manhattan Bank, N.A.
Rochester, New York
Richard E. Sands................. 496,793 (10) 18.1%
300 Willowbrook Office Park
Fairport, NY 14450
Robert S. Sands.................. 231,115 (10) 8.4%
300 Willowbrook Office Park
Fairport, NY 14450
CWC Partnership-I................ 230,793 (10) 8.4%
300 Willowbrook Office Park
Fairport, NY 14450
RHD Capital Ventures LLC......... 555,556 (10) 20.2%
300 Willowbrook Office Park
Fairport, NY 14450
All directors and executive (1),(2),(3),(4),(5),(6),(7),(8) %
officers as a group (6 746,867 24.16
persons).......................
- ------------------------
(1) Unless otherwise indicated below, each director, officer and 5% shareholder
has sole voting and investment power with respect to all shares beneficially
owned.
2
(2) Does not give effect to 318,125 shares reserved for issuance upon the
exercise of outstanding warrants issued to non-affiliates.
(3) Includes 34,002 shares owned by Wilson Enterprises, L.P. and 10,625 shares
issuable upon exercise of non-qualified stock options granted to Wilson
Enterprises, L.P. of which Mr. Wilson is a general partner, and which option
shares Mr. Wilson has the right to acquire within 60 days. Also includes an
aggregate of 216,667 shares issuable upon exercise of non-qualified stock
options granted to E. Anthony Wilson, which shares Mr. Wilson has the right
to acquire within 60 days.
(4) Includes an aggregate of 51,667 shares issuable upon exercise of
non-qualified stock options granted to Mr. Sahs, which shares Mr. Sahs has
the right to receive within 60 days.
(5) Includes 42,365 shares owned beneficially and of record by Patricia L. Peek,
wife of Mr. Peek, ownership of which shares Mr. Peek specifically disclaims.
Includes 6,000 shares owned by Kacey L. Peek, Mr. Peek's daughter under the
Uniform Gifts to Minors Act. Includes 34,002 shares by Wilson Enterprises,
L.P. and 10,625 shares issuable upon exercise of a non-qualified stock
option granted to Wilson Enterprises, L.P. of which Ralph L. Peek is a
general partner, and an aggregate of 42,334 shares issuable upon exercise of
non-qualified stock options granted to Ralph L. Peek, which shares Mr. Peek
has the right to acquire within 60 days.
(6) Includes 14,333 shares owned by Wendy's Restaurants of Rochester, Inc. and
13,333 shares owned by JV Renard & Company, Inc. Includes 9,000 shares
issuable upon exercise of a non-qualified stock option granted to Mr. Fox as
a director of the Company, which shares Mr. Fox has the right to acquire
within sixty (60) days; does not include 6,000 shares issuable upon exercise
of the option, which shares have not yet vested.
(7) Includes 9,000 shares issuable upon exercise of a non-qualified stock option
granted to Mr. Lockwood as a director of the Company, which shares
Mr. Lockwood has the right to acquire within sixty (60) days; does not
include 6,000 shares issuable upon exercise of the option, which shares have
not yet vested. Also includes 20,000 shares owned outright by, and 2,222
shares issuable upon exercise of a non-qualified stock option granted to,
900 Midtown Investments, an investment partnership of which Mr. Lockwood is
managing partner.
(8) Includes 6,000 shares issuable upon exercise of a non-qualified stock option
granted to Mr. Filer as a director of the Company, which shares Mr. Filer
has the right to acquire within sixty (60) days; does not include 9,000
shares issuable upon exercise of the option, which shares have not yet
vested.
(9) Includes 82,489 shares issuable upon conversion of the Company's Series A
Preferred Stock, which the Trust has the right to receive within 60 days.
Does not include an aggregate of 13,213 shares held by trusts for the
children of Loren G. Ansley, or 15,752 shares reserved for issuance upon
conversion of 15,752 Series A Preferred Shares held by those trusts.
(10) As reflected on Schedule 13D (Amendment No. 5) dated April 12, 2001 and
filed April 23, 2001. These shareholders as a group own 46.7% of the
outstanding common stock of the Company.
3
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
As of April 20, 2001 the directors and executive officers of the Company
were as follows:
NAME AGE POSITION
- ---- -------- -----------------------------------------------------
E. Anthony Wilson...................... 56 Chairman of the Board of Directors, President, Chief
Executive Officer, and Director
Bruce A. Sahs.......................... 56 Executive Vice President and Chief Operating Officer
Ralph L. Peek.......................... 52 Vice President, Treasurer and Director
Thomas W. Blank........................ 52 Executive Vice President and General Counsel
Richard C. Fox......................... 54 Director
Alan S. Lockwood....................... 48 Director and Secretary
Ted Filer.............................. 36 Director
All directors serve for a term of one year and until their successors are
duly elected. All officers serve at the discretion of the Board of Directors.
Messrs. Wilson, Fox, Peek, Filer and Lockwood are each nominees for the
position of director of the Company to be voted upon at the 2001 Annual Meeting.
For a brief description of their respective business experience during the past
five years please refer to that portion of this Proxy Statement entitled
"Election of Directors." A brief description of the business experience of
Mr. Sahs and Mr. Blank is presented here.
BRUCE A. SAHS
SENIOR VICE PRESIDENT
Mr. Sahs is currently serving as the Company's Executive Vice President and
Chief Operating Officer and has held various other capacities throughout his
tenure, commencing in June 1986. Prior to joining the Company, Mr. Sahs, as a
CPA, specialized in hotel and restaurant auditing controls and management
services. Mr. Sahs received his degree from the Rochester Institute of
Technology and is a Certified Public Accountant, as well as a Certified Hotel
Administrator. He is also a member of the New York State Society of Certified
Public Accountants.
THOMAS W. BLANK
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
Thomas W. Blank is an attorney who serves as general counsel to the Company,
handling and monitoring its inside and outside legal affairs, as well as
assisting with development activities. Mr. Blank has been involved in the hotel
business for ten years and joined the Company in 1998. Mr. Blank is a graduate
of Hartwick College and received his law degree from Albany Law School, Union
University.
4
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company proposes that a Board of Directors consisting of five
(5) directors be elected by the shareholders at the Annual Meeting, each
director to hold office until the next Annual Meeting of shareholders or until
the successor of the director is duly elected and qualified. The number of
directors to be elected has been fixed by the Board of Directors pursuant to the
Company's By-Laws.
The Board of Directors recommends the election of the five (5) nominees
named below. Messrs. Wilson, Peek, Filer, Fox and Lockwood were elected as
directors at the Company's 2000 annual meeting of shareholders. The Board of
Directors does not contemplate that any of the nominees will be unable to serve
as a director, but should any such nominee so notify the Company of the
nominee's unavailability prior to the voting of the proxies, the persons named
in the enclosed proxy reserve the right to vote for such substitute nominee or
nominees as they, in their sole discretion, shall determine.
Unless authority to vote for one or more of the director nominees is
specifically withheld according to the instructions, proxies which are executed
and returned to the Company prior to the Annual Meeting in the enclosed form
will be voted FOR the election of each of the five (5) nominees named below. The
proxy solicited by the Board of Directors will be so voted unless shareholders
specify a contrary choice therein. Directors are elected by a plurality of votes
cast. What follows is certain information relating to each of the nominees for
director:
E. ANTHONY WILSON, age 56, serves as the Chairman of the Board and Chief
Executive Officer of the Company. Mr. Wilson was a co-founder of the Company,
has served as its Chairman of the Board since its inception, and as Chief
Executive Officer since January 1993. In 1984 he co-founded Hudson Hotels Corp.
which was acquired by the Company in June 1992. He has over 25 years experience
in the hospitality and real estate industries as a developer, owner and manager.
As general partner of Wilson Enterprises, L.P., a real estate development firm
in Rochester, New York, he has developed a significant amount of office,
warehouse, apartments and related facilities. Mr. Wilson is an alumnus of the
School of Business at Indiana University. He has served as the Chairperson of
the Strong Memorial Hospital Children's Fund, and has been a Director of Erdle
Perforating Corp., and the Rochester Family of Mutual Funds.
RICHARD C. FOX, age 54, currently owns and operates 92 Wendy's restaurants
and has been a franchisee of Wendy's for 25 years. Mr. Fox's restaurants are
located principally in Rochester, New York, Ft. Wayne and South Bend, Indiana,
Erie, Pennsylvania, Cleveland, Ohio and Buffalo, New York. Mr. Fox is originally
from the Cleveland, Ohio area, is a graduate of Kenyon College and received his
MBA from Harvard Business School in 1971. After graduating from Harvard,
Mr. Fox worked with Price Waterhouse Co. In 1974, he moved to Columbus, Ohio to
become the Financial Vice President of Wendy's International, Inc. He left
Wendy's International, Inc. to become a Wendy's franchise in 1976. Mr. Fox is a
member of the Board of Trustees of the Norman Howard School, the McQuaid Jesuit
High School, Genesee Country Museum and is a member of the Board of Directors of
Vehicare Corp.
RALPH L. PEEK, age 52, has been involved with the Company and has served as
a Director since its inception in 1987. As of December 31, 1996, Mr. Peek was
named Vice President and Treasurer of the Company. Mr. Peek is licensed as a CPA
in New York State and is a graduate of the Rochester Institute of Technology.
ALAN S. LOCKWOOD, age 48, is a partner in the law firm of Boylan, Brown,
Code, Vigdor & Wilson, LLP of Rochester, New York, which firm is general counsel
to the Company. Mr. Lockwood specializes in corporate finance and has been
affiliated with Boylan, Brown since 1978. He is a graduate of Cornell University
School of Arts and Sciences and Cornell Law School. Mr. Lockwood has served as
Secretary of the Company since its inception.
5
TED FILER, age 36, is co-founder of Central Auto Auctions, Inc. Over the
past 10 years, Central Auto Exchange has successfully auctioned over 20,000
vehicles a year through its dealer-only auctions. As an owner and former general
manager, Mr. Filer has been instrumental in positioning Central Auto Exchange as
the regional leader in automobile remarketing in Western New York. For the past
5 years, Mr. Filer has been the co-founder, CEO and director of Origin
Communications Inc. Under Mr. Filer's direction, Origin has grown to nearly
$20 million in annual revenue. Origin is a fully integrated service bureau,
providing customer service support, sales/billing support, and electronic voice
messaging services.
None of the Company's directors is a director of any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended, or of any company registered under the Investment Company Act
of 1940, as amended. There is no family relationship among any members of the
Board of Directors or the executive officers or significant employees of the
Company. The Board of Directors met five times during the year ended
December 31, 2000. Each Director attended all of the meetings held by the Board
of Directors and the Committees on which the Director served.
At the present time the Company has no Nominating Committee. The Board has a
Compensation Committee whose members in 2000 were Mr. Fox and Mr. Lockwood, and
an Audit Committee whose members in 2000 were Mr. Fox, Mr. Filer and
Mr. Lockwood. The Audit Committee has the responsibility for recommending the
appointment of the Company's outside auditors, reviewing the scope and results
of audits, and reviewing internal accounting controls and systems. The
Compensation Committee establishes the compensation of the Chief Executive
Officer of the Company, reviews the recommendations of management regarding the
compensation of other executive officers and administers the Company's Stock
Option Plans. All directors and executive officers are elected to serve as
directors and executive officers until the next annual meeting of shareholders
of the Company or until their successors have been elected and qualified.
There are no arrangements or understandings between any director or
executive officer and any other persons pursuant to which any such directors or
executive officers was or is to be selected as a director or nominee for
director.
In September 1993, the Company adopted the 1993 Director Stock Option Plan.
The 1993 Director Stock Option Plan originally authorized the issuance of
options to purchase up to 135,000 shares of Common Stock by Directors pursuant
to the formula set forth in the plan; on June 11, 1998, the Shareholders
authorized the issuance of an additional 81,000 shares pursuant thereto. On
September 14, 2000, the Shareholders authorized additional amendments to the
Plan. Following the Company's reverse split, there are 72,000 shares reserved
for issuance under the Director Plan. Pursuant to the 1993 Director Stock Option
Plan, each non-employee director is granted options to purchase 15,000 shares of
the Company's stock, at the closing price on the date of grant, vesting over
five years. Options to purchase 54,000 under the 1993 Director Stock Option Plan
were outstanding as of December 31, 2000; none of these options have been
exercised.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE POLICY. The Company has an
insurance policy for $2,000,000 effective until October 31, 2001, which protects
its officers and directors against losses which certain persons may incur
because of their acts or omissions as officers or directors. The policy is
underwritten by Royal Indemnity Company at a premium of $38,000 per year.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Based solely upon its
review for Forms 3 and 4 year ended December 31, 2000 and in reliance upon
written representations regarding the necessity to file Form 5, and except as
previously reported, the Company has determined that, to the best of its
knowledge, no officer, director or shareholder required to file such form has
failed to do so timely.
6
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation for fiscal 2000, 1999
and 1998 to the Company's Chief Executive Officer, officers who earned in excess
of $100,000 and to all executive officers as a group.
SUMMARY COMPENSATION TABLE
RESTRICTED
NAME OF INDIVIDUAL OR GROUP AND PRINCIPAL STOCK AWARDS
POSITION YEAR CASH COMPENSATION (A) OPTIONS/SARS (#) ($)
- ----------------------------------------- -------- --------------------- ---------------- ------------
E. Anthony Wilson, CEO.................. 2000 $ 308,220 216,667 0
1999 431,327 0 0
1998 300,146 166,667 0
Michael T. George....................... 2000 $ 254,953 0 $15,313
1999 $ 332,083 0 0
1998 124,819 166,667 20,000
John M. Sabin........................... 2000 $ 156,923 0 0
1999 254,299 0 $19,688
1998 169,704 166,667 20,000
Ralph L. Peek........................... 2000 $ 114,009 33,334 0
1999 111,903 0 0
1998 89,668 0 0
Bruce A. Sahs........................... 2000 $ 113,330 50,000 0
1999 97,227 0 0
1998 142,572 0 0
All Executive Officers as a Group (6 in 2000 $1,046,388 333,001 0
2000; 6 in 1999; 6 in 1998)........... 1999 1,328,491 0 $19,688
1998 909,960 1,510,000 40,000
- ------------------------
Note: Columnar information required by Item 402(a)(2) has been omitted for
categories where there has been no compensation awarded to, earned by, or
paid to, any of the named Executives required to be reported in the table
during fiscal 2000, 1999 and 1998.
(a) In addition, the Company in 2000 provided Messrs. Wilson, Peek and Sahs with
an automobile. Other than the cash compensation set forth in the table, none
of the Executive Officers individually, nor the Executive Officers as a
group, received non-cash benefits having a value exceeding $50,000, or 10%
of their cash compensation.
(b) In 1999, the Company issued to Mr. Sabin 25,000 shares of common stock in
connection with the termination of Mr. Sabin's employment agreement.
(c) In 2000, the Company issued to Mr. George 8,333 shares of common stock in
connection with the termination of Mr. George's employment contract.
(d) The shares of common stock and options for the year 2000 have been adjusted
to reflect a one for three reverse split that was effective 9/14/00.
(e) Options granted to Messrs. George and Sabin expired with the termination of
their employment contract.
7
AGGREGATED OPTION EXERCISES IN 2000 AND
2000 YEAR-END OPTION VALUES
(1)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES VALUE AT FY-END (#) AT FY END
ACQUIRED REALIZED EXERCISABLE EXERCISABLE
NAME ON EXERCISE $ UNEXERCISABLE UNEXERCISABLE
- ---- ------------ --------- -------------- --------------
E. Anthony Wilson................... 0 0 216,667/0 0/0
Ralph L. Peek....................... 0 0 42,334/0 0/0
Bruce A. Sahs....................... 0 0 51,667/0 0/0
- ------------------------
(1) Based upon a stock price of $0.63, the closing price on April 12, 2001.
EMPLOYMENT AGREEMENTS
E. Anthony Wilson, Chairman, President and Chief Executive Officer, entered
into an Employment Agreement with the Company effective May 1, 1998. As of
October 1, 2000, Mr. Wilson agreed to the termination of his Employment
Agreement and voluntarily reduced his salary to $120,000 per year. The Company
agreed to lend Mr. Wilson up to $25,000 per month for three years, with a
maximum annual commitment of $240,000, and a maximum total commitment of
$720,000. At the end of three years (September 30, 2003), the loan terms out
over ten years with interest at 8% per annum.
Mr. Wilson also surrendered warrants to purchase an aggregate of 70,625
shares of company common stock at prices ranging from $9.00 to $19.80 per share.
The Company now has no employment agreements with any of its employees.
8
CORPORATE PERFORMANCE GRAPH
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY
STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING PERFORMANCE GRAPH AND THE REPORT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
The following graph reflects a comparison of the cumulative total return of
the Company's Common Shares from December 31, 1995 through December 31, 2000,
with the Russell 2000 Index and a peer group consisting of public hotel
companies. Comparisons of this sort are required by the Securities and Exchange
Commission and, therefore, are not intended to forecast or be indicative of
possible future performance of the Company's Common Shares. The graph assumes
that $100 was invested on December 31, 1995 in each of the Company's Common
Shares, the Russell 2000 Index and the peer group and that all the dividends
were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
DEC-95 DEC-96 DEC-97 DEC-98 DEC-99 DEC-00
HUDSON HOTELS CORPORATION 100 58.02 40.74 13.89 6.8 13.58
RUSSELL 2000 100 116.49 142.55 138.92 168.45 163.36
PEER GROUP 100 148.65 98.39 43.89 40.13 47.24
* $100 Invested on 12/31/95 in stock or index including reinvestment of
dividends. Fiscal year ended December 31.
9
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of non-employee directors (Messrs. Fox and Lockwood),
approves all of the policies under which compensation is paid or awarded to the
Company's executive officers.
The Company's executive compensation policy is intended (i) to support the
attainment of the Company's long and short-term strategic and financial
objectives; (ii) to provide a competitive total compensation program that
enables the Company to attract, motivate and retain the key executives needed to
accomplish the Company's goals; (iii) to provide variable compensation
opportunities that are directly related to the performance of the Company;
(iv) to align executive compensation with growth in shareholder value; and
(v) to recognize and reward executives for their contributions and commitment to
the growth and profitability of the Company. The Compensation Committee believes
this policy is generally best accomplished by providing a competitive total
compensation package, a significant portion of which is variable and at risk and
related to established performance goals.
To maintain a competitive level of compensation, the Company and the
Committee utilized the services of an independent compensation consultant during
1998 to analyze compensation data for comparable companies in the hotel business
and to recommend plan designs and guidelines and compensation strategies.
The Company's compensation program for executive officers consists of the
following key elements: base salary, annual cash incentives and equity-based
incentives. Salary and annual incentive payments are mainly designed to reward
current and past performances. Equity-based incentives are primarily designed to
provide strong incentives for long-term future performance. The components of
the compensation program for executives are described below.
BASE SALARY: Mr. Wilson's base salary is established by the Board. Base
salaries and increases for other executive officers are determined by the Chief
Executive Officer within the guidelines established by the Committee and are
based upon the officer's current performance, experience, the scope and
complexity of his or her position within the Company and the external
competitive marketplace for comparable positions at peer companies. Base
salaries are designed to be competitive, as compared to salary levels for
equivalent executive positions in comparable companies and are normally reviewed
annually.
ANNUAL INCENTIVE: A substantial portion of each executive officer's
compensation is intended to be variable and tied to Company performance. As the
Company has not been profitable in the recent past, this element of compensation
has not played a role in total executive compensation for several years. As the
Company returns to profitability, the Compensation Committee intends that annual
bonuses tied to Company performance will be a significant portion of executive
compensation.
EQUITY-BASED INCENTIVES: Stock options are granted to aid in the retention
of key employees and to align the interests of key employees with those of the
shareholders. Stock option grants are discretionary and reflect the current
performance and continuing contribution of the individual to the success of the
Company. The Committee is responsible for determining the individuals to whom
grants should be made, the time of the grants and the number of shares subject
to each option. Stock options are granted with an exercise price equal to the
fair market value of the Company's Common Shares on the date of grant. Any value
received by the executive from an option grant depends completely upon increases
in the price of the Company's Common Shares. Consequently, the full value of an
executive's compensation package cannot be realized unless an appreciation in
the price of the Company's Common Shares occurs over a period of years.
CEO COMPENSATION
An employment agreement was entered into with Mr. Wilson effective May 1,
1998, which established Mr. Wilson's base salary at $360,000. Effective
October 1, 2000, Mr. Wilson terminated his employment agreement and voluntarily
reduced his annual salary to $120,000. The Company agreed to lend Mr. Wilson up
to $25,000 per month for three years, with a maximum annual commitment of
$240,000, and a maximum total commitment of $720,000. At the end of three years
(September 30, 2003), the loan terms out over ten years with interest at 8% per
annum.
10
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code generally limits the corporate
tax deduction for compensation paid to the Named Executive Officers to
$1,000,000 each. However, compensation is exempt from this limit if it qualifies
as "performance-based compensation". The Compensation Committee has carefully
considered the impact of this tax code provision and its normal practice is to
take such action as is necessary to preserve the Company's tax deduction. The
Committee believes that all of the Company's 2000 compensation expense will be
deductible for federal income tax purposes.
Although the Compensation Committee will continue to consider deductibility
under Section 162(m) with respect to future compensation arrangements with
executive officers, deductibility will not be the sole factor used in
determining appropriate levels or methods of compensation. Since Company
objectives may not always be consistent with the requirements for full
deductibility, the Company may enter into compensation arrangements under which
payments are not deductible under Section 162(m). It is not expected that the
compensation of any executive officer will exceed $1,000,000 in fiscal 2001.
REPORT ON REPRICING OF OPTIONS
In May 2000, the Company issued options to purchase a total of 1,097,000
shares at an exercise price of $ 0.75 per share, which was the closing price on
the day before the date of the grant. Following the Company's 1-for-3 reverse
split, these became options to purchase 365,667 shares at $2.25 per share. These
options were issued to both executive officers and other employees; a total of
300,000 (split-adjusted) options were issued to executive officers.
In late 2000, the Company approached all of its employees, including
executive officers, and asked them to surrender all outstanding options which
predated the May 2000 grant. This was done to improve the Company's capital
structure and to enhance its flexibility in the future. Although under no
compulsion to do so, all of the employees so approached agreed to surrender
their old options, effective November 30, 2000. This totaled 229,434 shares at
exercise prices ranging form $6.00 to $22.13 per share.
The Compensation Committee and the Company do not consider this to have been
a repricing, because the May 2000 grant was not linked in any way to the
November 2000 surrender. Nevertheless, the effect of that sequence of events is
disclosed here.
10-YEAR OPTION/SAR REPRICINGS
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF STOCK ORIGINAL
UNDERLYING AT TIME OF EXERCISE OPTION TERM
OPTIONS/ REPRICING PRICE AT REMAINING
SARS REPRICED OR TIME OF REPRICING NEW AT DATE OF
OR AMENDED AMENDMENT OR AMENDMENT EXERCISE REPRICING OR
NAME(A) DATE(B) (#)(C) ($)(D) ($)(E) PRICE($)(F) AMENDMENT(F)
- --------------------------- ----------- ------------- -------------- ----------------- ----------- ------------
E. Anthony Wilson.......... May 3, 2000 150,000 $2.25 $7.50-$22.13 $2.25 4-8 yrs.
Bruce A. Sahs.............. May 3, 2000 50,000 $2.25 $6.00-$22.13 $2.25 1-7 yrs.
Ralph L. Peek.............. May 3, 2000 3,333 $2.25 $ 18.00 $2.25 7 yrs.
Compensation Committee
Richard C. Fox
Alan S. Lockwood
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee consist of Messrs. Fox and
Lockwood. Each member is a non-employee director and does not have any direct or
indirect material interest in or relationship with the Company outside of his
position as director.
11
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is responsible for providing independent,
objective oversight and review of the Company's accounting functions, internal
controls and financial reporting process. The Audit Committee is comprised of
three independent directors, and is governed by a written charter adopted and
approved by the Board. Each of the members of the Audit Committee is independent
as defined by the Company policy and the National Association of Securities
Dealers, Inc. ("NASD") listing standards. A copy of the Audit Committee Charter
is attached to this Proxy Statement as Appendix A.
Management has the primary responsibility for the financial statements and
the reporting process, including the Company's system of internal controls. The
independent accountants are responsible for performing an independent audit of
the Company's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes. The Audit Committee
also recommends to the Board the selection of the Company's independent
auditors.
The Audit Committee is responsible for recommending to the Board that the
Company's financial statements be included in the Company's Annual Report on
Form 10-K. In order to fulfill its responsibilities, the Audit Committee
(a) discussed with Bonadio & Co., LLP ("Bonadio"), the Company's independent
auditors for 2000, the overall scope and plans for its audit, (b) reviewed and
discussed with management and Bonadio the Company's audited consolidated
financial statements for 2000, (c) discussed with Bonadio their judgments as to
the quality and acceptability of the Company's accounting principles as applied
in its financial reporting and such other matters as are required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees); and (d) received and reviewed the written disclosures and the
letter from Bonadio required by Independence Standard No. 1 (Independence
Discussions with Audit Committees) and have discussed with Bonadio their
independence.
Based upon the discussions with Bonadio concerning the audit, the
independence discussions, and the financial statement review, and additional
matters deemed relevant and appropriate by the Audit Committee, the Audit
Committee recommended to the Board that the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 include these financial
statements.
Audit Committee:
Richard C. Fox
Ted Filer
Alan S. Lockwood
12
APPROVAL OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 2)
The Board of Directors, upon the recommendation of the Audit Committee, has
designated Bonadio & Co., LLP to serve as the Company's principal accountants to
audit the Company's financial statements for the year ending December 31, 2001.
For the year ended December 31, 1999, PricwaterhouseCoopers, LLP served as
the Company's independent public accountants. PricewaterhouseCoopers, LLP
declined to stand for re-election effective April 28, 2000.
The report of PricewaterhouseCoopers, LLP on the financial statements for
the year ended December 31, 1999 originally contained a disclaimer of opinion
due to a condition of default in the Company's debt. The default condition was
resolved on April 14, 2000 and a Form 10K/A was filed on April 25, 2000 in which
the report of PricewaterhouseCoopers, LLP on the financial statements for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting
principle.
In connection with its audits for the two most recent fiscal years and
through April 28, 2000, there have been no disagreements with
PricewaterhouseCoopers, LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of PricewaterhouseCoopers, LLP
would have caused them to make reference thereto in their report on the
financial statements for such years.
The Registrant has requested that PricewaterhouseCoopers, LLP furnish it
with a letter addressed to the SEC stating whether or not it agrees with the
above statements. A copy of such letter, dated May 4, 2000, was filed with the
SEC.
Bonadio & Co., LLP was engaged by the Company to serve as the Company's
principal accountants to audit its financial statements commencing May 3, 2000.
In connection with the change of accountants, the Company did not consult with
the new accountants regarding either (1) the application of accounting
principles to a specific completed or contemplated transaction, or the type of
audit opinion that might be rendered on the Company's financial statements, or
(2) any disagreements with the Company's prior accountants. However, in
connection with its purchase of the Company's mezzanine debt, RHD Capital
Ventures LLC did engage Bonadio & Co., LLP to perform certain financial due
diligence on the Company in January and February 2000.
The decision to engage Bonadio & Co., LLP was approved by the Audit
Committee of the Board of Directors and by the full Board.
Approval of the auditors requires the affirmative vote of a majority of
votes cast. Abstentions and broker non-votes are not considered votes cast. In
the absence of instructions to the contrary, proxies covering the Common Shares
will be voted FOR the appointment of Bonadio & Co., LLP as the Company's
independent public accountants for the year ending December 31, 2001. If the
shareholders do not appoint Bonadio & Co., LLP, the selection of independent
public account will be made by the Board of Directors, and Bonadio & Co., LLP
may at that time be considered for such appointment.
A representative of Bonadio & Co., LLP is expected to be present at the
Annual Meeting. This representative will be given an opportunity to make a
statement if that person so desires and will be available to respond to
appropriate questions concerning the audit of the Company's financial
statements.
13
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matters that are to be presented for consideration at the Annual Meeting.
Should any other matter come before the Annual Meeting, however, the persons
named in the enclosed proxy will have discretionary authority to vote all
proxies with respect to any such matter in accordance with their judgment.
Shareholders are requested to date, sign and return the proxy in the
enclosed envelope. If you attend the Annual Meeting, you may revoke your proxy
at that time and vote in person if you so desire; otherwise, your proxy will be
voted for you.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
In order for any shareholder proposal to be included in the Company's Proxy
Statement to be issued in connection with the 2002 Annual Meeting of
Shareholders, such proposal must be received by the Company no later than
February 1, 2002.
THE FINANCIAL STATEMENTS OF THE COMPANY AS THEY APPEARED IN THE ANNUAL
REPORT OF THE COMPANY ON FORM 10-K/A FOR YEAR ENDED DECEMBER 31, 2000, TOGETHER
WITH THE AUDITORS' REPORT, IS INCLUDED WITH THIS PROXY. A COMPLETE COPY OF THE
COMPANY'S FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: HUDSON HOTELS CORPORATION, 300
BAUSCH & LOMB PLACE, ROCHESTER, NEW YORK 14604, ATTENTION: CORPORATE SECRETARY.
BY ORDER OF THE BOARD OF DIRECTORS
Alan S. Lockwood
Secretary
Dated: April 27, 2001
Rochester, New York
14
APPENDIX A
HUDSON HOTELS CORPORATION
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the board of directors to be known as the
audit committee which shall hold at least three meetings each year. The audit
committee shall be composed of not less than two directors, all of whom shall be
independent of the management of the corporation (as defined by the rules of
NASDAQ) and free of any relationship that, in the opinion of the board of
directors, would interfere with their exercise of independent judgment as
committee members. Members of the audit committee shall be appointed annually by
the board of directors at its annual meeting following the annual meeting of the
shareholders of the corporation.
STATEMENT OF POLICY
The role of audit committee shall be that of oversight of the Company's
financial functions, policies and procedures. It shall provide assistance to the
board in fulfilling its responsibility to the shareholders and the investment
community regarding internal controls, corporate accounting, reporting practices
and the quality and integrity of the corporation's financial reports. In so
doing, the audit committee shall maintain free and open means of communication
among the directors, the independent auditors, the internal auditors (if any)
and the financial management of the corporation. Accordingly, the independent
auditors and internal auditors (if any) should promptly consult with the
chairman of the committee if, at any time, any material concern or matter arises
which has not been promptly or appropriately addressed by the management of the
corporation or which involves any illegal or improper act (unless clearly
inconsequential) or conflict of interest or self dealing on the part of senior
management of the corporation.
RESPONSIBILITIES AND AUTHORITY
In carrying out these responsibilities, the audit committee will:
- Evaluate the qualifications and fees of the independent audit firm
recommended by management and recommend to the board of directors the firm
to be selected to audit the financial statements of the corporation and
its subsidiaries. This recommendation shall be based on the committee's
assessment of the overall plan of audit, adequacy of scope, reasonableness
of fees, quality of prior performance, composition of the audit team and
the independence of the public accountants. The engagement of the
independent audit firm shall be determined annually by the board of
directors which, as the shareholders' representative, shall be the
independent audit firm's client; the board of directors may present the
selection of auditors to the shareholders for confirmation at the
Company's annual meeting.
- Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit and any other
services to be performed for the current year, the procedures to be
utilized and the budgeted cost of such audit or other services. At the
conclusion of the audit, the audit committee shall review the results of
such audit, including the auditor's management letters and any comments or
recommendations of the independent auditors.
- Review prospective changes in financial accounting standards and their
impact on the Company's accounting methods and financial reporting.
- Review with the independent auditors, the company's internal auditor (if
any) and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of
15
the corporation, and elicit any recommendations for the improvement of the
internal control procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be given
to the adequacy of such internal controls to expose any payments,
transactions or procedures that might be deemed illegal or otherwise
improper, to assure that timely and appropriate remedial actions are taken
with respect to such matters.
- Review with management and the independent auditors, prior to their
publication, the financial statements contained in the annual report to
shareholders to determine that the independent auditors are satisfied with
the appropriateness, as well as the acceptability, of the disclosure,
content and clarity of the financial statements to be presented to the
shareholders. The committee shall solicit the independent auditor's views
about how the corporation's choice of accounting principles and disclosure
practices may affect the shareholders' and the public's attitudes about
the corporation. The independent auditor should review with the committee
the independent auditor's reasoning and qualitative judgment in
(a) accepting or questioning significant estimates made by management,
(b) determining the appropriateness, not merely the acceptability, of the
accounting principles and disclosure practices adopted by management,
(c) assessing the aggressiveness or conservatism of such principles and
whether they are common practices or minority practices and
(d) determining the appropriateness of changes in accounting principles
and disclosure practices.
- Be briefed on how management develops and summarizes quarterly financial
information, the extent of internal audit involvement, the extent to which
the external auditors review quarterly financial information, and whether
that review is performed on a pre- or post-issuance basis.
- Meet with management and, if a pre-issuance review was completed, with the
external auditors, either telephonically or in person, to review the
interim financial statements and the results of the review.
- Review management's policy statements and procedures to monitor compliance
with the Company's code of conduct, its conflict of interest policy and
its policy concerning trading in the company's securities and any reports
received thereunder or events of noncompliance.
- Review the internal audit function of the corporation (if any) including
the independence and authority of the internal auditor, the proposed
internal audit plans for the coming year and the coordination of the
internal audit plans with the independent auditors, in order to maintain
the optimal balance between internal and independent auditing resources.
The director of internal audit shall have free access to the chairman of
the audit committee, to refer any matters or seek guidance on any matters,
which the director of internal audit deems desirable. The executive
officer of the corporation to whom the director of internal audit reports
shall consult with the chairman of the audit committee concerning the
appointment or termination of any person as director of internal audit,
and provide the chairman of the audit committee with the opportunity to
interview candidates for the position of director of internal audit, in
the event a vacancy exists in such office.
- Receive prior to each meeting, a summary of findings from completed
internal audits (if any) and a progress report on the approved internal
audit plan, with explanations for any deviations from the original plan.
- Provide sufficient opportunity for the internal auditor (if any) and
independent auditors to meet with the members of the audit committee
without members of management present. Among the items to be discussed in
these meetings are the auditors' evaluation of the corporation's
financial, accounting and auditing personnel, and the cooperation that the
auditors received during the course of the audit.
- Review annually and assess the adequacy of the committee's own charter.
16
- Review senior level accounting, auditing and financial personnel
performance and succession planning.
- Review litigation, regulatory issues and contingent liabilities of the
corporation, including any reports thereon received from the Company's
counsel.
- Submit the minutes of all meetings of the audit committee to the board of
directors.
- Report to the board of directors at least annually concerning the
corporation's accounting records and internal controls, the results of the
annual audit, any material issues raised by the internal audit reports,
overall compliance with policies and procedures (including any material
events of noncompliance) and senior level accounting, auditing and
financial personnel performance and succession planning.
In fulfilling these responsibilities, the audit committee shall have full
and unrestricted access to all of the corporation's records and personnel.
17
PROXY
HUDSON HOTELS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints E. Anthony Wilson, Ralph L. Peek, or either
of them with full power of substitution, proxies to vote at the Annual Meeting
of Stockholders of HUDSON HOTELS CORPORATION (the "Company") to be held on June
14, 2001 at 10:00 a.m., local time, and at any adjournment or adjournments
thereof, hereby revoking any proxies heretofore given, to vote all shares of
common stock of the Company held or owned by the undersigned as directed on the
reverse side of this proxy card, and in their discretion upon such other matters
as may come before the meeting. If no direction is made, shares will be voted
FOR the election of directors named in the proxy and FOR Proposals 2 and 3.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
USING DARK INK ONLY. THE NOMINEES AND EACH OF THE PROPOSALS LISTED BELOW.
1. ELECTION OF DIRECTORS / / FOR / / WITHHELD
Nominees: E. Anthony Wilson, Ralph L. Peek, Richard C. Fox, Ted Filer, Alan S.
Lockwood
FOR, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
2. PROPOSAL #2 To consider and act upon a proposal to appoint Bonadio & Co. LLP
as the Company's Independent public accountants for the year
ending December 31,
2001. / / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL #3 To transact such other business as may properly come before the
meeting or any adjournment or adjournments
thereof. / / FOR / / AGAINST / / ABSTAIN
____________________________________________________
SIGNATURE(S)
DATE: ______________________________________________
NOTE: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, trustee or guardian, please give
the full title as such.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.