1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Felcor Lodging Trust Incorporated
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(Name of Registrant as Specified In Its Charter)
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2
Notice of Annual Meeting
on May 15, 2001 [FELCOR LODGING TRUST LOGO]
and Proxy Statement
FELCOR LODGING TRUST INCORPORATED
545 E. John Carpenter Frwy., Suite 1300
Irving, Texas 75062
April 6, 2001
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders on
May 15, 2001, in Irving, Texas. The meeting will be held in the Cottonwood Room
at our Harvey Hotel (DFW Airport North) located at 4545 W. John Carpenter
Freeway, Irving, Texas at 9:00 a.m. Dallas time. At the meeting, you will hear a
report on our 2000 results.
This booklet includes the formal notice of the meeting and the Proxy
Statement. The Proxy Statement tells you about the matters to be addressed and
the procedures for voting at the meeting. It also describes how the Board
operates, gives personal information about our director candidates, and provides
other information about the Company.
Your vote is very important. Even if you have only a few shares, we want
your shares to be represented at the meeting. I urge you to vote promptly in
order to be certain your shares are represented at the meeting.
I look forward to seeing you at the meeting.
Sincerely,
/s/ LAWRENCE D. ROBINSON
Lawrence D. Robinson
Executive Vice President
General Counsel & Secretary
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF FELCOR LODGING TRUST INCORPORATED
Time: 9:00 a.m., Central Time
Date: May 15, 2001
Place: Harvey Hotel (DFW Airport North)
4545 W. John Carpenter Freeway
Irving, Texas 75062
Purposes: o To elect four directors to three-year terms; and
o To conduct any other business that may properly be raised.
Who may vote: Stockholders of record on March 23, 2001.
Annual Report: A copy of the Annual Report is enclosed.
Date of Mailing: This notice, together with the Proxy Statement and Annual
Report, are first being mailed to stockholders on or about
April 6, 2001.
Sincerely,
/s/ LAWRENCE D. ROBINSON
Lawrence D. Robinson
Secretary
April 6, 2001
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PROXY STATEMENT
FELCOR LODGING TRUST INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2001
TABLE OF CONTENTS PAGE
----
GENERAL INFORMATION.................................................. 1
ELECTION OF DIRECTORS................................................ 2
Nominees for Class I Directors.................................. 3
Continuing Directors............................................ 4
Director Compensation........................................... 6
Board Committees................................................ 7
STOCK OWNERSHIP...................................................... 8
Principal Stockholders.......................................... 8
Security Ownership of Management................................ 9
MANAGEMENT........................................................... 11
Executive Officers of FelCor.................................... 11
Executive Compensation Tables................................... 13
Compensation Committee Report................................... 15
Compensation Committee Interlocks............................... 17
Certain Relationships and Related Transactions.................. 17
Section 16(a) Beneficial Ownership Reporting Compliance......... 18
Report of Audit Committee....................................... 19
INDEPENDENT AUDITORS................................................. 20
STOCK PERFORMANCE GRAPH.............................................. 21
ADDITIONAL INFORMATION............................................... 21
5
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of FelCor Lodging Trust Incorporated of proxies to be voted
at the Annual Meeting of Stockholders being held on Tuesday, May 15, 2001, and
at any adjournment of the meeting. The following questions and answers provide
important information about the Annual Meeting and this Proxy Statement.
WHAT AM I VOTING ON?
o The election of four directors, each for a three year term; and
o Any other matters properly brought before the meeting.
WHO IS ENTITLED TO VOTE?
FelCor stockholders of record at the close of business on March 23, 2001, are
entitled to vote at the meeting. Each stockholder is entitled to cast one vote
for each share of common stock owned.
HOW DO I VOTE?
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting. If you have shares held by a broker or other nominee, you may
instruct your broker or nominee to vote your shares by following the
instructions that the broker or nominee provides you. Most brokers offer voting
by mail, telephone and Internet.
HOW DO PROXIES WORK?
The Board of Directors of FelCor is asking for your proxy. Giving your proxy to
the persons named by us, means you authorize them to vote your shares at the
meeting in the manner you direct. You may vote for all, some, or none of our
director candidates.
If you sign and return the enclosed proxy card but do not specify how your
shares are to be voted, your shares will be voted FOR the election of all of our
director candidates.
You may receive more than one proxy or voting card depending on how you hold
your shares. Shares registered in your name are covered by one card. If you also
hold shares through a broker or other nominee, you may also get material from
them asking how you want to vote. To be sure that all of your shares are voted,
we encourage you to respond to each request you receive.
HOW DO I REVOKE A PROXY?
You may revoke your proxy before it is voted by submitting a new proxy with a
later date; by voting in person at the meeting; or by notifying FelCor's
Secretary in writing at the address listed under "Questions" on page 19.
WILL MY SHARES BE VOTED IF I DON'T SIGN A PROXY?
If you hold your shares directly in your own name, they will not be voted unless
you provide a proxy. Under certain circumstances, shares which you own that are
held by a broker may be voted even if you do not provide voting instructions to
the broker. Brokerage firms have the authority under the New York Stock Exchange
rules to vote customers' unvoted shares on certain "routine" matters, including
the election of directors.
WHAT CONSTITUTES A QUORUM?
In order to carry on the business of the meeting, we must have a quorum. This
means that at least a majority of the outstanding shares eligible to vote must
be represented at the meeting, either by proxy or in person. Shares owned by
FelCor are not voted and do not count for this purpose. On the record date, we
had 53,154,141 shares of common stock outstanding and entitled to vote at the
meeting.
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HOW MANY VOTES ARE NEEDED FOR APPROVAL?
The four director candidates receiving the most "FOR" votes will be elected to
the four seats on the Board to be filled at the meeting. Abstentions,
withholding authority to vote for a candidate and broker non-votes (described
below) will only reduce the number of votes a candidate receives.
A "broker non-vote" occurs when a broker submits a proxy but does not vote for
or against a matter. This will occur when the beneficial owner has not
instructed the broker how to vote and the broker does not have discretionary
authority to vote in the absence of instructions.
WHAT SHOULD I DO IF I WANT TO ATTEND IN PERSON?
Only stockholders of record, their proxy holders, and invited guests may attend
the meeting. If you wish to vote in person and your shares are held by a broker
or nominee, you will need to obtain a proxy from the broker or nominee
authorizing you to vote your shares held in their name.
ELECTION OF DIRECTORS
The Board of Directors of FelCor has nominated the four director candidates
named below.
Our Board of Directors oversees the management of the Company on your behalf.
The Board reviews FelCor's long-term strategic plans and exercises direct
decision-making authority on key issues, such as the declaration of dividends,
the selection of the Chief Executive Officer, setting the scope of his authority
to manage the Company's day-to- day operations, and evaluation of his
performance.
Nine of FelCor's eleven directors, including our four nominees, are Independent
Directors. "Independent Directors," as defined in FelCor's Charter, are not
officers or employees of FelCor or any of its affiliates; or officers, employees
or affiliates of any lessee of property from FelCor, any subsidiary of FelCor,
or any partnership that is an affiliate of FelCor.
FelCor's Charter and Bylaws provide for three classes of directors, who serve
staggered three-year terms expiring at the annual meeting of stockholders three
years following their election. The FelCor Board has nominated for re-election
each of the four persons currently serving as Class I directors, whose terms are
expiring at the 2001 annual meeting of stockholders. If elected, each of these
persons will serve until the annual meeting of stockholders in 2004. Personal
information on each of our nominees, and on each of the other directors who will
continue to serve on FelCor's Board following the annual meeting, is given
below.
The FelCor Board of Directors met six times during 2000. On average, FelCor's
directors attended 85% of the Board and committee meetings held during 2000.
Only Mr. Mathewson and Mr. North attended fewer than 75% of the meetings of the
Board and of the Board committees on which each director served.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES FOR ELECTION AS CLASS I DIRECTORS DESCRIBED ON THE FOLLOWING PAGES.
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NOMINEES FOR CLASS I DIRECTORS (TERMS EXPIRING IN 2004)
MELINDA J. BUSH Mrs. Bush was elected as a director of FelCor in
Age 60 May 2000. From more than five years ago until
September 1996, she was Executive Vice President of
[PHOTO] Reed Elsevier's Reed Travel Group/Hotel & Travel
Index, which was engaged in hotel industry
marketing and publishing activities on a global
basis. Since that time, she has served as the
Executive Vice President, Editorial and Publishing
Director of Premier Hotels & Resorts,
www.premierhotels.com, a division of Advanstar
Communications. Mrs. Bush has more than 20 years
experience in the hospitality industry, and is also
a director and trustee of the American Hotel
Foundation. She has honorary degrees from Cornell
Hotel School and Johnson & Wales Universities and
carries the CHA (Certified Hotel Administrator)
designation awarded by the industry to hotel
operators and general managers. She was also named
Woman of the Year in Travel by the Travel Industry
of America and is the recipient of several other
industry awards for her achievements in the
industry.
CHARLES A. LEDSINGER, JR. Mr. Ledsinger has served as a director of FelCor
Age 51 since November 1997. Mr. Ledsinger became the
President and Chief Executive Officer of Choice
[PHOTO] Hotels International in August 1998. Prior to that
time, Mr. Ledsinger served as Senior Vice President
and Chief Financial Officer of St. Joe Corporation
from May 1997 until his election as President and
Chief Operating Officer of that corporation in
February 1998. From June 1995 until May 1997, Mr.
Ledsinger was Senior Vice President and Chief
Financial Officer of Harrah's Entertainment, Inc.
For more than three years prior to that, Mr.
Ledsinger served as Senior Vice President and Chief
Financial Officer of The Promus Companies
Incorporated, the former parent of Harrah's
Entertainment, Inc. He is also a director of Choice
Hotels International, TBC Corporation and Friendly
Ice Cream Corporation. He is a member and a past
chairman of the Real Estate Financial Advisory
Council of the American Hotel and Motel
Association.
ROBERT H. LUTZ, JR. Mr. Lutz served as a director of Bristol Hotel
Age 51 Company from December 1995 until its merger into
FelCor in July 1998, and has served as a director
[PHOTO] of FelCor since that time. Mr. Lutz is currently
the President of R.L. Investments, Inc., a private
investment firm. From 1994 through 2000, Mr. Lutz
served as the Chairman and Chief Executive Officer,
and a member of the executive committee, of
Amresco, Inc., a financial services company. From
1991 to 1994, Mr. Lutz served as President and
Chief Operating Officer of Balcor/Allegiance Realty
Group, a subsidiary of the American Express Company
engaged in real estate ownership and management. He
is a Trustee and member of the Executive Committee
of the Urban Land Institute and a past Vice
Chairman of the National Realty Committee.
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MICHAEL D. ROSE Mr. Rose has served as a director of FelCor
Age 59 since July 1998. He served as the Chairman of
the Board of Promus Hotel Corporation from
[PHOTO] April 1995 through December 1997 and,
thereafter, as a director until December 1998.
Mr. Rose served as Chairman of the Board of
Harrah's Entertainment Inc. from June 1995
until his retirement as of December 31, 1996.
He also served as Chairman of the Board of The
Promus Companies Incorporated from November
1989 through June 1995 and as Chief Executive
Officer of that company from November 1989 to
April 1994. Mr. Rose is also a director of
Ashland, Inc., First Tennessee National
Corporation, General Mills, Inc., Stein Mart,
Inc., Resortquest International, Inc. and
Darden Restaurants, Inc.
CONTINUING DIRECTORS
Continuing Class II Directors (Terms expiring in 2002)
THOMAS J. CORCORAN, JR. Mr. Corcoran is the President and Chief
Age 52 Executive Officer of FelCor and has served in
that capacity since its formation in 1994. From
[PHOTO] 1991 to 1994, Mr. Corcoran held the same
positions with the general partner of the
partnerships that were merged into FelCor at
its formation. From October 1990 to December
1991, he served as the Chairman, President and
Chief Executive Officer of Fiesta Foods, Inc.,
a manufacturer of tortilla chips and taco
shells. From 1979 to 1990, Mr. Corcoran held
various positions with ShowBiz Pizza Time, Inc.
(now CEC Entertainment, Inc.), an operator and
franchisor of family entertainment center/pizza
restaurants, and with Integra -- A Hotel and
Restaurant Company (formerly Brock Hotel
Corporation). He served as the President and
Chief Executive Officer of Integra from 1986 to
1990.
THOMAS A. MCCHRISTY Mr. McChristy has served as a director of
Age 74 FelCor since its formation in 1994. He was the
President of T.A. McChristy Co., Inc., a real
[PHOTO] estate investment company, from 1957 to 1996.
Mr. McChristy also served as the president and
Chief Operating Officer of Syntech
International, Inc., a lottery systems and
equipment manufacturing company, from 1986 to
1988 and as its Chief Executive Officer from
1989 to 1992.
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DONALD J. MCNAMARA Mr. McNamara was the Chairman of the Board of
Age 48 Bristol Hotel Company from November 1994 until its
merger into FelCor in July 1998. Since the merger,
[PHOTO] he has served as the Chairman of the Board of
FelCor. Mr. McNamara previously served as a
director of FelCor from July 1994 until November
1997. He is also the Chairman of The Hampstead
Group, a private equity real estate investment
company. Mr. McNamara also serves as a director of
Omega Healthcare Investors, Inc.
RICHARD C. NORTH Mr. North served as a director of Bristol Hotel
Age 51 Company from 1997 until its merger into FelCor in
July 1998, and has served as a director of FelCor
[PHOTO] since that time. Mr. North has been the Group
Finance Director of Bass plc since 1994. Bass plc
is the parent of Bass Hotels & Resorts, Inc., which
operates or franchises more than 2,700 hotels in
more than 75 countries under various brands,
including Inter-Continental(R), Crowne Plaza(R)and
Holiday Inn(R). Prior to 1994, Mr. North served as
the Group Finance Director of The Burton Group.
Continuing Class III Directors (Terms Expiring in 2003)
RICHARD S. ELLWOOD Mr. Ellwood, a director of FelCor since its
Age 69 formation in 1994, is the founder and President of
R.S. Ellwood & Co., Inc., a real estate investment
[PHOTO] banking firm which was organized in 1987. Prior to
1987, as an investment banker, Mr. Ellwood was
elected successively in 1963 a vice president of
Morgan Guaranty Trust Company, in 1968 a general
partner of White Weld & Co., in 1978 a managing
director of Warburg Paribas Becker, Incorporated
and in 1984 a managing director and senior banker
of Merrill Lynch Capital Markets. Mr. Ellwood has
extensive experience in hotel financing. He was a
founder of Hotel Investors Trust, a REIT, and
served as a trustee from 1970 until its merger with
another REIT in 1987. He is currently a director of
Apartment Investment and Management Company and
Florida East Coast Industries, Inc.
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RICHARD O. JACOBSON Mr. Jacobson has served as a director of FelCor
Age 64 since its formation in 1994 and is the Chairman of
the Board of Jacobson Warehouse Company, Inc., a
[PHOTO] privately held warehouse company with facilities in
53 locations in 19 states, which Mr. Jacobson
founded 32 years ago. He is also Chairman of the
Board of Jacobson Transportation Company, Inc., a
truckload common carrier with authority to operate
in the United States (48 states), Canada and
Mexico. Mr. Jacobson is a member of the boards of
directors of Atrion Corporation, Firstar Bank Des
Moines, N.A. and Heartland Express, Inc.
CHARLES N. MATHEWSON Mr. Mathewson has served as a director of FelCor
Age 72 since its formation in 1994. Additionally, Mr.
Mathewson has served, for more than the past five
[PHOTO] years, in various positions with International Game
Technology (IGT), a company engaged in the design
and manufacture of microprocessor based gaming
products and gaming monitoring systems. Since
February 1988, he has served as the Chairman of the
Board of IGT. He has served as a director of IGT
since December 1985, as President from December
1986 to February 1988, and as Chief Executive
Officer from December 1986 until June 1993 and from
February 1996 until December 2000. Mr. Mathewson is
also a member of the board of directors of Baron
Asset Fund.
DIRECTOR COMPENSATION
In lieu of cash compensation for their services during 2000, FelCor has issued
to each director, except as described below, that number of shares of FelCor
common stock determined by dividing (i) the sum of $35,000 plus, if a director
attended more than five Board meetings during the year, $1,000 for each
additional meeting attended in person and $500 for each additional telephonic
meeting in which he participated, by (ii) $23.80, the closing price of the
common stock on February 28, 2001, the date the issuance was authorized by the
Board, and rounding to the nearest whole lot of 100 shares. In addition to such
compensation, each director is reimbursed for out-of-pocket expenses incurred in
connection with his or her service on the FelCor Board. No additional
compensation is paid to directors for service on various Board committees.
The number of shares of FelCor common stock issued to each director for his
services during 2000 are set forth below:
NAME NUMBER OF SHARES
- ---- ----------------
Donald J. McNamara 1,500
Thomas J. Corcoran, Jr. 1,500
Melinda J. Bush 1,200
Richard S. Ellwood 1,500
Richard O. Jacobson 1,500
Charles A. Ledsinger, Jr. 1,500
Robert H. Lutz, Jr. 1,500
Charles N. Mathewson 1,500
Thomas A. McChristy 1,500
Michael D. Rose 1,500
Mrs. Bush's compensation was pro rated since she joined the Board in May 2000.
Mr. North is not permitted by his employer to accept any compensation for his
services as a director of FelCor.
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Director compensation will be determined in a manner similar to that described
above for services during 2001, except that Mr. Corcoran will receive no
separate compensation for serving as a director.
BOARD COMMITTEES
The Board appoints committees to help carry out its duties. In particular, Board
committees work on key issues in greater detail than would be practicable at a
full Board meeting. Each committee reviews the results of its meetings with the
full Board. Donald J. McNamara, the Chairman of the Board, is an ex-officio
member of all committees.
The Executive Committee was established to exercise broad powers on behalf of
the Board. In practice, the committee only meets when it is impractical to call
a meeting of the full Board. The Executive Committee is comprised of Donald J.
McNamara (Chairman), Thomas J. Corcoran, Jr., Robert H. Lutz, Jr. and Charles N.
Mathewson.
The Executive Committee held two meetings during 2000.
The Audit Committee oversees audits, accounting, financial reporting, and
internal control matters. The Audit Committee selects the independent public
accountants to audit FelCor's financial statements. The committee consults with
the independent accountants and reviews their audit and other work. The
committee also consults with FelCor's Chief Accounting Officer and reviews
FelCor's internal controls and compliance with policies.
During 2000, the committee met prior to each release of earnings by FelCor to
review the earnings to be reported and to examine any issues relating to the
report of such earnings. The directors serving on the Audit Committee are:
Charles A. Ledsinger, Jr. (Chairman); Richard S. Ellwood; Richard O. Jacobson;
and Richard C. North.
The Audit Committee held six meetings during 2000.
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The Compensation Committee determines the compensation to be paid to FelCor's
senior executive officers and advises the Board on the adoption of, and
administers, employee benefit and compensation plans. The Compensation Committee
is comprised of Michael D. Rose (Chairman), Melinda J. Bush, Thomas A.
McChristy, and Robert H. Lutz, Jr.
The Compensation Committee held two meetings during 2000.
The Corporate Governance and Nominating Committee was formed in May 2000 to
recommend to the Board candidates for election to FelCor's Board of Directors,
to establish criteria for membership on the Board and Board committees, and to
consider other corporate governance issues. This committee is comprised of three
directors, currently Richard S. Ellwood (Chairman), Charles A. Ledsinger, Jr.
and Michael D. Rose.
The Corporate Governance and Nominating Committee did not meet during 2000.
The Capital Approval Committee currently consists of three of FelCor's officers,
Thomas J. Corcoran, Jr. (President and Chief Executive Officer), Lawrence D.
Robinson (Executive Vice President, General Counsel and Secretary), and Andrew
J. Welch (Senior Vice President and Treasurer). The Board has delegated to this
committee the authority to approve, and authorize actions taken in connection
with, the acquisition, improvement, disposition or financing of hotel assets by
FelCor within specified limits.
The Capital Approval Committee acted only by unanimous written consent during
2000.
STOCK OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table shows how much FelCor common stock was beneficially owned on
March 15, 2001, by each person known to FelCor to beneficially own more than 5%
of its common stock.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
------------------- ----------- --------
Hampstead Genpar, L.P.; HH Genpar Partners;
Hampstead Associates, Inc.; RAW Genpar, Inc.;
InMed, Inc.; Donald J. McNamara;
Robert A. Whitman; and Daniel A. Decker............................... 9,630,875(2) 18.1%
4200 Texas Commerce Tower West
2200 Ross Avenue
Dallas, Texas 75201
Bass plc.............................................................. 10,032,328(3) 17.1%
20 North Audley Street
London, England W1Y1WE
- ----------
(1) Based upon 53,105,335 shares outstanding as of March 15, 2001.
(2) Based solely upon information contained in Schedule 13D, dated August 6,
1998. The named persons reported that they shared voting and dispositive
power with respect to 9,630,875 shares of common stock held of record by
United/Harvey Investors I, L.P., United/Harvey Investors II, L.P.,
United/Harvey Investors III, L.P., United/Harvey Investors IV, L.P., and
United/Harvey Investors V, L.P. Subsequent to March 15, 2001, these
partnerships distributed the FelCor common stock held by them to their
respective partners.
(3) Includes 5,713,185 shares issuable upon redemption of FelCor Lodging
Limited Partnership Units held by subsidiaries of Bass plc.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table shows how much FelCor common stock, Series A Preferred Stock
and Series B Preferred Stock was beneficially owned on March 15, 2001, by
certain executive officers named in the Summary Compensation Table on page 12,
each nominee and continuing director, and all directors and executive officers
as a group. Unless otherwise indicated, each person owns directly the number of
shares shown after his or her name in the table below.
AMOUNT AND AMOUNT AND
AMOUNT AND NATURE OF NATURE OF
NATURE OF BENEFICIAL BENEFICIAL
BENEFICIAL PERCENT OWNERSHIP OF PERCENT OWNERSHIP OF PERCENT
NAME OF OWNERSHIP OF OF SERIES A OF SERIES B OF
BENEFICIAL OWNER COMMON STOCK CLASS(1) PREFERRED STOCK CLASS(1) PREFERRED STOCK CLASS(1)
- ---------------- ------------ -------- --------------- -------- --------------- --------
Melinda J. Bush............. 2,200(2) * 0 * 0 *
Thomas J. Corcoran, Jr. .... 1,078,905(3) 2.0% 3,000 * 800 *
Richard S. Ellwood.......... 15,800(4) * 0 * 0 *
Richard O. Jacobson......... 43,558 * 0 * 0 *
Charles A. Ledsinger, Jr.... 5,475 * 0 * 0 *
Robert H. Lutz, Jr.......... 28,114(5) * 0 * 0 *
Charles N. Mathewson........ 1,221,008(6) 2.3% 170,000(15) 2.8% 71,600(15) 1.2%
Thomas A. McChristy......... 146,473(7) * 0 * 0 *
Donald J. McNamara.......... 9,640,675(8) 18.2% 0 * 0 *
Richard C. North............ 0 * 0 * 0 *
Michael D. Rose............. 69,925(9) * 0 * 10,000(16) *
Jack Eslick................. 100,5811(10) * 0 * 0 *
June H. McCutchen........... 75,821(11) * 0 * 0 *
Lawrence D. Robinson........ 183,601(12) * 0 * 1,306(17) *
Andrew J. Welch............. 77,119(13) * 0 * 0 *
All executive officers and
directors as a group
(18 persons)............. 13,023,780(14) 22.8% 173,100 2.9% 82,067 1.4%
- ----------
* Represents less than 1% of the outstanding shares of such class.
(1) Based upon 53,105,335 shares of common stock, 5,980,600 shares of Series A
Preferred Stock and 5,750,000 Depository Shares representing 57,500 shares
of Series B Preferred Stock outstanding as of March 15, 2001.
(2) Includes 1,000 shares held by her IRA and 1,200 shares credited to her
account in the FelCor Deferred Compensation Plan.
(3) Includes 503,249 shares that FelCor, Inc. has the right to receive upon
redemption of FelCor Lodging Limited Partnership Units. Mr. Corcoran is a
50% stockholder and director of FelCor, Inc. and may be deemed to
beneficially own all of the Units owned by FelCor, Inc. Also includes (i)
an aggregate of 94,600 shares issued pursuant to stock grants (9,000 in
February 1995, 9,000 in December 1995, 15,000 in February 1997, 30,600 in
April 2000 and 31,000 in March 2001) which vest over a five-year period
from the date of grant at 20% annually and of which 36,120 shares are fully
vested, including 6,120 shares that are held in the FelCor Deferred
Compensation Plan, (ii) 429,248 shares issuable pursuant to stock options
that are currently exercisable or exercisable within 60 days, (iii) 2,325
shares issuable upon conversion of 3,000 shares of Series A Preferred
Stock, (iv) 400 shares owned by his spouse, (v) 4,685 shares owned by his
children, (vi) 1,995 shares owned by his IRA, and (vi) 500 shares owned by
Corcoran Investments, L.L.C., a limited liability company wholly-owned by
him.
(4) Includes (i) 2,200 shares held by trusts of which Mr. Ellwood is a
beneficiary and trustee, and (ii) 1,500 shares held by R. S. Ellwood & Co.,
Inc., of which Mr. Ellwood is the sole stockholder.
(5) Includes (i) 15,414 shares issuable pursuant to currently exercisable stock
options, and (ii) 2,500 shares owned by Mr. Lutz's spouse.
(6) Includes an aggregate of 407,524 shares of common stock issuable upon
redemption of FelCor Lodging Limited Partnership Units held by trusts for
Mr. Mathewson and his spouse. Also includes 131,784 shares issuable upon
conversion of 170,000 shares of Series A Preferred Stock held by the
Charles N. Mathewson Trust.
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(7) Includes (i) 101,503 shares held by the T. A. McChristy Living Trust, (ii)
4,200 shares held by his spouse's trust, (iii) 1,800 shares held by his
spouse's IRA, and (iv) 3,000 shares held by Mr. McChristy's IRA.
(8) Includes 9,630,875 shares held by United/Harvey Investors I, L.P.;
United/Harvey Investors II, L.P.; United/Harvey Investors III, L.P.;
United/Harvey Investors IV, L.P.; and United/Harvey Investors V, L.P.
("Partnerships"). Mr. McNamara is the sole shareholder and director of
Hampstead Associates, Inc., which is the managing general partner of HH
GenPar Partners. HH GenPar Partners is the managing general partner of
Hampstead GenPar, L.P., which is the general partner of each of the
Partnerships. Mr. McNamara disclaims beneficial ownership of the shares
held by the Partnerships, except to the extent of his pecuniary interest
therein. Subsequent to March 15, 2001, the Partnerships distributed the
common stock held by them to their respective partners, resulting in the
distribution to Mr. McNamara of an aggregate of 789,283 shares of common
stock.
(9) Includes (i) 21,600 shares owned by a trust for which Mr. Rose is the
trustee, (ii) 43,275 shares owned by a corporation controlled by Mr. Rose,
(iii) 750 shares owned by Mr. Rose's spouse, and (iv) 4,300 shares credited
to his account in the FelCor Deferred Compensation Plan.
(10) Includes (i) 41,500 shares issued pursuant to stock grants (2,000 in April
1996, 23,500 in April 2000 and 16,000 in March, 2001), which vest over a
five-year period from the date of grant at 20% annually and of which 6,700
shares are fully vested, including 4,700 shares that are held in the FelCor
Deferred Compensation Plan, and (ii) 58,081 shares issuable pursuant to
stock options that are currently exercisable or exercisable within 60 days.
(11) Includes (i) 39,500 shares issued pursuant to stock grants (23,500 in April
2000 and 16,000 in March, 2001), which vest over a five-year period from
the date of grant at 20% annually and of which 4,700 shares are fully
vested and held in the FelCor Deferred Compensation Plan, and (ii) 36,321
shares issuable pursuant to currently exercisable stock options.
(12) Includes (i) 56,000 shares issued pursuant to stock grants (12,000 in May
1996, 2,500 in February 1997, 23,500 in April 2000 and 18,000 in March
2001), which shares vest over a five-year period from the date of grant at
20% annually, of which 18,700 shares are fully vested, including 11,200
shares that are held in the FelCor Deferred Compensation Plan, (ii) 123,196
shares issuable pursuant to stock options that are currently exercisable or
exercisable within 60 days, and (iii) 2,288 shares held by his IRA.
(13) Includes (i) 37,000 shares issued pursuant to stock grants (2,500 in
September 1998, 23,500 in April 2000 and 11,000 in March 2001), which
shares vest over a five-year period from the date of grant at 20% annually,
of which 5,700 shares are fully vested, including 4,700 shares that are
held in the FelCor Deferred Compensation Plan, (ii) 38,114 shares issuable
pursuant to stock options that are currently exercisable or exercisable
within 60 days, and (iii) 2,005 shares held by his IRA.
(14) See notes 2 through 12.
(15) Represents shares held by the Charles N. Mathewson Trust.
(16) Represents shares held by a corporation controlled by Mr. Rose.
(17) Represents shares held by his IRA.
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MANAGEMENT
EXECUTIVE OFFICERS OF FELCOR
The current executive officers of FelCor, their ages, positions held and tenure
is set forth in the table below.
OFFICER
NAME AGE POSITION(S) WITH FELCOR SINCE
- ---- --- ----------------------- -----
Thomas J. Corcoran, Jr............ 52 President, Chief Executive Officer 1994
and Director
Lawrence D. Robinson.............. 57 Executive Vice President, General 1996
Counsel and Secretary
Jack Eslick....................... 49 Senior Vice President, Director of 1996
Asset Management
Lester C. Johnson................. 48 Senior Vice President and Controller 1995
June H. McCutchen................. 45 Senior Vice President, Director of 1995
Design and Construction
Larry J. Mundy.................... 50 Senior Vice President, Director of 1998
Administration and Business
Initiatives
William P. Stadler................ 46 Senior Vice President, Director of 1995
Corporate Acquisitions
Andrew J. Welch................... 39 Senior Vice President and Treasurer 1998
Business Experience of Executive Officers
Information concerning the business experience of THOMAS J. CORCORAN, JR. is set
forth above under "Election of Directors-Continuing Class II Directors."
LAWRENCE D. ROBINSON, who has served as Senior Vice President, General Counsel
and Secretary of FelCor since May 1996, was named Executive Vice President ,
General Counsel and Secretary in March 2001. From 1972 to 1989, Mr. Robinson was
a partner in the Kansas City-based law firm of Stinson, Mag & Fizzell, for which
he founded and managed a Dallas, Texas office from 1982 to 1989. From 1989
through April 1996, Mr. Robinson was a partner in the Houston-based law firm of
Bracewell & Patterson, L.L.P., where he served as the managing partner of its
Dallas office until 1992, as the head of that office's corporate and securities
law section and as chairman of its firmwide hospitality group.
JACK ESLICK joined FelCor in April 1996 as its Vice President, Director of Asset
Management. He was named Senior Vice President, Director of Asset Management in
1998. Mr. Eslick has more than 20 years experience in hotel operations. From
April 1991 until he joined FelCor, Mr. Eslick served as Vice President of
Operations of Promus Hotel Corporation, where he had direct responsibility for
all operations in a region that grew from 14 hotels to 26 hotels. Prior to April
1991, he served in various capacities with Holiday Inns, Inc., including serving
as general manager of various hotels and as a Regional Director of Operations.
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LESTER C. JOHNSON, who was named Senior Vice President and Controller in March
2001, joined FelCor in September 1995 as its Vice President and Controller.
Prior to joining FelCor, Mr. Johnson held various positions with Integra -- A
Hotel and Restaurant Company and Show Biz Pizza Time, Inc. (now CEC
Entertainment, Inc.) from 1981 to 1995. He served as the Vice President and
Controller of Integra from 1991 to 1995.
JUNE H. MCCUTCHEN joined FelCor in October 1995 as Vice President, Director of
Design and Construction, and was named Senior Vice President, Director of Design
and Construction in 1998. Prior to her engagement by FelCor, she was an Account
Executive for Hospitality Restoration & Builders, Inc. From 1992 to 1994 she was
Project Manager for American General Hospitality, Inc. where she managed all
capital improvement work for more than 35 properties. Prior to 1992, Ms.
McCutchen was Project Manager for Hilton Hotels, Inc. from 1987 to 1992, and
prior to 1987, she served as design coordinator and purchasing manager for
Embassy Suites, Inc.
LARRY J. MUNDY joined FelCor in January 1998 and is the Senior Vice President,
Director of Administration and Business Initiatives. From 1995 until he joined
FelCor, he was Vice President of Franchise Development for Motel 6. From 1987 to
1995, he was Vice President of Development in the South/Southeast for Hilton
Hotels and prior to 1987 he served as corporate counsel for Residence Inns and
Embassy Suites.
WILLIAM P. STADLER began his employment with FelCor in July 1995 as Vice
President, Director of Acquisition and Development. On January 14, 1998, Mr.
Stadler was promoted to Senior Vice President, Director of Corporate
Acquisitions. Mr. Stadler has more than 20 years of experience in hotel
acquisition and development, having served as Vice President Development for
Coastal Hotel Group from 1994 until he joined FelCor in 1995, as Vice
President-Development for Embassy Suites, Inc. from 1992 to 1994, as Senior Vice
President-Development for Landmark Hotels, Inc. from 1989 to 1991 and as Vice
President-Development for Marriott Corporation from 1985 to 1989.
ANDREW J. WELCH joined FelCor in July 1998 as the Company's Vice President and
Treasurer. He was named Senior Vice President and Treasurer in March 2001. Prior
to joining FelCor, Mr. Welch had served as Vice President and Treasurer of
Bristol Hotel Company from August 1997. Prior to joining Bristol, Mr. Welch was
responsible for originating investment banking and corporate banking business
for Bank of America, N.A., from 1991 to 1997, Citibank, N.A., from 1990 to 1991,
and NationsBank, N.A., from 1984 to 1990.
Terms of Office and Relationships
The officers of the Company are elected annually by the Board of Directors at a
meeting held following each annual meeting of stockholders, or as soon
thereafter as necessary and convenient in order to fill vacancies or newly
created offices. Each officer holds office until his successor is duly elected
and qualified or until death, resignation or removal, if earlier. Any officer or
agent elected or appointed by the Board of Directors may be removed by the Board
of Directors whenever in its judgement the best interests of the Company will be
served thereby, but such removal shall be without prejudice to the contractual
rights, if any, of the person so removed.
There are no family relationships among any of the directors or executive
officers of the Company. Except as described under
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"Election of Directors" above, none of the Company's directors hold
directorships in any company with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") or
pursuant to Section 15 (d) of the Exchange Act or any company registered as an
investment company under the Investment Company Act of 1940.
There are no arrangements or understandings between any nominee for election as
a director or officer and any other person pursuant to which that director was
nominated or officer was selected.
EXECUTIVE COMPENSATION TABLES
The following tables show the compensation of FelCor's President and the four
other most highly paid executives. See the Compensation Committee Report
beginning on page 13 for an explanation of our compensation philosophy.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------------
--------------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSATION STOCK OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) AWARDS($)(1) SARS(#) ($)(4)
- --------------------------- ---- ---------- --------- ------------ ------------ ----------- ------------
Thomas J. Corcoran, Jr............ 2000 400,000 336,830 None 543,150(2) 25,000 15,750
President and Chief 1999 325,000 None None None None 15,000
Executive Officer 1998 250,000 150,000 None None 324,953 15,000
Lawrence D. Robinson.............. 2000 231,750 228,325 None 417,125(3) None 15,750
Executive Vice President, 1999 225,000 40,000 None None None 15,000
General Counsel & Secretary 1998 175,000 75,000 None None 137,262 14,400
Jack Eslick....................... 2000 200,000 172,925 None 417,125(3) None 15,750
Senior Vice President 1999 180,000 50,000 None None None 15,000
Director of Asset Management 1998 150,000 70,000 None None 66,654 15,000
June H. McCutchen................. 2000 206,000 177,725 None 417,125(3) None 15,750
Senior Vice President, Director 1999 150,000 62,120 None None None 15,000
of Design and Construction 1998 100,000 112,472 None None 44,804 15,000
Andrew J. Welch................... 2000 140,600 145,405 None 417,125(3) None 15,750
Senior Vice President and 1999 136,500 50,000 None None None 15,000
Treasurer 1998 55,591(5) 25,000 None 53,125 40,702 2,499
- ----------
(1) There were 124,600 shares of restricted stock awarded to the above-named
officers during the 2000 fiscal year. Holders of restricted stock are
entitled to vote and receive dividends on such shares from the date of
grant. The amount reported in this table represents the market value of the
shares awarded on the date of grant, determined by the closing price of the
common stock on such date, without giving effect to the diminution of value
attributable to the restrictions on such stock. As of December 31, 2000,
the aggregate unvested restricted stock holdings by the named executive
officers consisted of 132,500 shares as set forth below, with a then
current aggregate market value, determined in the same manner as of
December 31, 2000, of $3,171,719, as follows: Mr. Corcoran, 33,600 shares
($804,300 in value); Mr. Robinson, 26,900 shares ($643,919 in value); Mr.
Eslick, 23,500 shares ($562,531 in value); Ms. McCutchen, 23,500 shares
($562,531 in value); and Mr. Welch, 25,000 shares ($598,438 in value).
(2) Represents an award of 30,600 shares of restricted stock on April 3, 2000
which become vested over a five-year period at the rate of 20% per year.
The value is based upon the closing price of the common stock on the date
of grant of $17.75 per share.
(3) Represents an award of 23,500 shares of restricted stock on April 3, 2000
which become vested over a five-year period at the rate of 20% per year.
The value is based upon the closing price of the common stock on the date
of grant of $17.75 per share.
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18
(4) These amounts represent the Company's contributions to the Company's
employee savings and investment plan in the amount of up to $15,750 to each
executive officer. The executive officers receive health and disability
insurance benefits which do not exceed 10% of their respective salaries.
These benefits are also made available to other employees of the Company.
(5) Includes compensation only from the date of commencement of Mr. Welch's
employment with FelCor (August 1998).
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The only grant of stock options or stock appreciation rights ("SARs") to
the Company's named executive officers during the 2000 fiscal year was the grant
of an option to Mr. Corcoran to purchase an aggregate of 25,000 shares at $19.50
per share. This option vests over five years at 20% per year.
The unexpired stock options to purchase the Company's common stock held by named
executive officers of the Company at December 31, 2000, are summarized in the
table below.
FISCAL YEAR END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 2000 December 31, 2000(1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Thomas J. Corcoran, Jr .... 390,421 190,532 $852,014 $397,839
Lawrence D. Robinson ...... 95,744 41,518 $173,536 $ 75,251
Jack Eslick ............... 44,768 21,796 $ 81,142 $ 39,505
June H. McCutchen ......... 27,360 17,444 $ 49,590 $ 31,617
Andrew J. Welch ........... 37,686 38,979 $ 29,508 $ 44,265
- ----------
(1) Based on the difference between the option exercise price for all
outstanding options and the closing sale price for the common stock on the
New York Stock Exchange on December 31, 2000, which was $23.9375 per share.
COMPENSATION COMMITTEE REPORT
Compensation Philosophy
The Compensation Committee works with senior management to develop and implement
FelCor's executive compensation philosophy. Historically, FelCor's philosophy on
executive compensation had been to provide a base cash compensation that was at
or below the average of other equity hotel REITs, and to provide additional
incentive compensation in the form of discretionary cash bonuses and grants of
options and restricted stock based on the realization of stated objectives, such
as acquisitions, financings, renovations, improvements in funds from operations
and other similar criteria expected to result in improvements in total
stockholder return.
In 2000, the Compensation Committee engaged a consulting firm to assist in the
review and development of a comprehensive FelCor executive compensation program.
The committee developed a compensation program which was based, in part, on the
recommendations of the consulting firm and in part on the compensation levels of
the competitive set. Based on this information, the committee developed
compensation levels for the various executive officers and compared them against
the competitive companies identified by the consulting firm, and generally
concluded that the proposed compensation levels were appropriate.
The compensation program is comprised of a base salary, a cash bonus component
and a long-term incentive element, in the form of grants of restricted stock
that vest over a five-year period at 20% per year. The cash bonus component for
all executive officers is tied, in whole or in part, to corporate EBITDA
performance and, for certain officers, in part to the achievement of specific
objectives within their control. The amount of cash bonuses is determined based
upon the attainment of one of three levels of performance.
FelCor believes that the award of significant incentive compensation in the form
of restricted stock provides management with
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incentives consistent with the interests of stockholders. As a result of this
philosophy, executive compensation may be at or below other equity hotel REITs
during periods of average performance and above that of the competitive set
during periods of above average growth or performance. The competitive set that
has been used by the committee to measure performance includes other equity
hotel REITs, particularly those whose capitalization, revenues, assets, market
value and total stockholder returns are most nearly comparable to those of
FelCor. Since REITs do not pay taxes at the corporate level, no policy has been
established with respect to qualifying compensation paid to executive officers
under Section 162(m) of the Internal Revenue Code.
Executive Compensation
During 2000, Mr. Corcoran, FelCor's President and Chief Executive Officer
received a base salary of $400,000 per year. This base cash compensation, like
that paid to other executive officers, is related primarily to competitive
factors and is not tied to FelCor's financial performance or the achievement of
specific goals. The base compensation of FelCor's executive officers was
increased in 2000 over 1999, consistent with inflation, and with further
adjustments for certain individuals to bring them more nearly in line with the
base compensation being paid by the competitive set. In evaluating these further
adjustments, the committee also considered the overall performance of the
executive officers, in light of their objective and subjective contributions to
FelCor's success.
In addition to base salary, cash bonuses were paid to FelCor's executive
officers in early 2001, based upon their attainment of the performance criteria
established by the committee during 2000. With FelCor's performance
substantially exceeding expectations at the beginning of 2000, substantially all
of the executive officers received cash bonuses at the maximum approved levels.
It is expected that future cash bonuses, if any, paid to FelCor's executive
officers will be similarly based upon the attainment by both FelCor and the
individual of performance objectives established by the committee each year.
Other Incentive Compensation
Awards of an aggregate of 195,100 shares of restricted stock or stock options
were made to the executive officers during 2000. These awards were made
generally to adjust for compensation paid to the officers in prior years at
levels the committee believed to be below that for the competitive set. The
committee believes that grants of restricted stock should be a significant
component of compensation for executive officers in the future. Although there
is no generally applicable policy or formula for future grants, the committee
anticipates that future grants will be made generally in relation to base
salary.
Employment Arrangements
FelCor has entered into an employment agreement with Mr. Corcoran that continues
in effect until December 31, 2001 and automatically renews for successive
one-year terms, unless otherwise terminated. Under this agreement, Mr. Corcoran
serves as the President and Chief Executive Officer of FelCor. The agreement
provides that Mr. Corcoran be paid a salary in excess of a stated minimum and
that a comprehensive medical plan be maintained for the benefit of Mr. Corcoran
and his dependents. None of the other officers of FelCor has an employment
agreement.
FelCor has entered into change in control and severance agreements with each of
its executive officers and certain other key employees. Each of these agreements
currently extend until December 31, 2001, and will automatically renew for
successive one-year terms, unless terminated. In the event of a potential
change in control, each covered employee agrees to remain in the employ of
FelCor until the earlier of one year following the "potential change in control"
or
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six months following an actual "change in control." Following a "change in
control," if a covered employee's employment is terminated by FelCor other than
for disability, retirement, or "cause" (or by the employee for "good reason"),
then the employee will be entitled to (i) the immediate vesting of all stock
options, awards of restricted stock and other benefits previously awarded or
credited to his account and (ii) a lump sum severance payment of between 2.99
and 0.5 times the employee's average total annual compensation over the past
three years. FelCor will be required to "gross-up" the severance payment to
cover excise taxes on the benefits, thereby providing such benefits to the
employee on a net basis, after payment of any such excise taxes.
FelCor also maintains a 401(k) Plan, health insurance and other benefits
generally available to all employees. FelCor also provides a deferred
compensation plan that is available only to directors and employees making in
excess of $100,000 per year. FelCor makes no matching or other contributions to
this plan, other than the payment of its operating and administrative expenses.
This report has been furnished by the current members of the Compensation
Committee.
----------
Michael D. Rose Thomas A. McChristy
Melinda J. Bush Robert H. Lutz, Jr.
COMPENSATION COMMITTEE INTERLOCKS
None of the members of the Compensation Committee were officers or employees of
FelCor or had any relationship with the Company requiring disclosure under
regulations promulgated by Securities and Exchange Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At December 31, 2000, FelCor and its subsidiaries leased a total of 85 hotels
directly to, or to subsidiaries of, DJONT Operations, L.L.C. under Percentage
Leases. Hervey A. Feldman, who served as the Chairman of the Board of FelCor
until July 1998, and Thomas J. Corcoran, Jr., the President, Chief Executive
Officer and a director of FelCor, beneficially owned all of the voting common
equity interests (50% of the common equity interest) in, and served as officers
and managers of, DJONT. The remaining 50% non-voting common equity interest in
DJONT was held by entities owned by the children of Charles N. Mathewson, a
director of FelCor.
Effective January 1, 2000, the Company acquired from the prior owners and
contributed to a newly formed taxable REIT subsidiary all of the equity
interests in DJONT. In consideration for the equity interests in DJONT, the
Operating Partnership issued an aggregate of 416,667 units of limited partner
interest valued at approximately $10 million. At the time of acquisition, DJONT
had an accumulated shareholders' deficit of approximately $24.5 million. Mr.
Corcoran and Mr. Mathewson, whose personal interests were in conflict with those
of the Company relating to this acquisition, abstained from participation in the
Board of Directors' discussion and vote on this matter.
In May 2000, subsidiaries of Bass plc acquired all of the outstanding stock of
Bristol Hotels & Resorts through a merger. Richard C. North, a director of
FelCor, is the Group Finance Director of Bass plc.
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22
In connection with its acquisition of Bristol, a Bass subsidiary (Bass America,
Inc.) has contributed an aggregate of 5,713,185 shares of outstanding FelCor
common stock held by it to FelCor Lodging Limited Partnership in exchange for a
like number of Units of limited partner interest. If these Units were to be
redeemed for FelCor common stock, Bass and its affiliates would own
approximately 17.1% of FelCor's common stock. The exchange by Bass of common
stock for Units did not affect FelCor's FFO or earnings per share, although it
resulted in the reduction of FelCor's percentage ownership in FelCor Lodging
Limited Partnership from approximately 95% to approximately 87%.
The Percentage Leases
The Percentage Leases generally have initial terms of five to 15 years and
provide for the payment by the lessees to the FelCor subsidiary which owns the
property a minimum base rent or, if greater, rent measured as a percentage of
room or suite revenue and certain other hotel revenues. The lessees are entitled
to all profits from the operation of the hotels leased by them, after the
payment of rent and the operating, management and certain other expenses of the
hotels. During 2000, DJONT paid approximately $277 million, and Bristol Hotels &
Resorts paid approximately $260 million, in lease rent to FelCor's consolidated
subsidiaries.
Sharing of Offices and Employees
FelCor shares its executive offices and certain employees with DJONT and another
entity controlled by Messrs. Feldman and Corcoran, and each company bears its
share of the costs thereof, including an allocated portion of the rent, salaries
of certain personnel (other than Mr. Corcoran), office supplies, telephones and
depreciation of office furniture, fixtures and equipment. Any such allocation of
shared expenses to FelCor must be approved by a majority of the Independent
Directors of FelCor. During 2000, FelCor paid approximately $7.5 million (or
89.4% of all allocable expenses) under this arrangement. Mr. Corcoran's salary
is paid solely by FelCor and he receives no salary from either of the other
entities. Mr. Corcoran is the President, Chief Executive Officer and a director
of FelCor and also serves as a director (or manager) and the President of each
of such other entities. For a description of Mr. Corcoran's employment agreement
and of the change in control and severance agreements between FelCor and its
executive officers and certain other key employees, please see the discussion
under "Employment Arrangements" in the Compensation Committee Report, beginning
on page 13.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires officers and directors, and persons
who beneficially own more than ten percent (10%) of the Company's stock, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
ten percent (10%) beneficial owners are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies furnished to the Company and
representations from the officers and directors, the Company believes that all
Section 16(a) filing requirements for the year ended December 31, 2000,
applicable to its officers, directors and greater than ten percent (10%)
beneficial owners were satisfied, except that Charles N. Mathewson filed one
late Form 4 report reflecting a purchase of the Company's Series B Preferred
Stock and Michael D. Rose filed one late Form 4 reflecting two purchases of the
Company's Series B Preferred Stock.
Based on written representations from the officers and directors, the Company
believes that all Forms 5 for directors, officers and greater than ten percent
(10%) beneficial owners that were filed with the SEC were the only Forms 5
required to be filed for the period ended December 31, 2000.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of four directors and operates under a written
charter adopted by the Board of Directors. FelCor considers all members to be
independent as defined by New York Stock Exchange listing standards; however,
Mr. North, as Group Finance Director of Bass plc, may be considered to have a
business relationship with FelCor. The Board has determined, in its business
judgement, that such relationship does not interfere with his exercise of
independent judgement. A copy of the Audit Committee Charter is attached to this
Proxy Statement as Appendix A.
Management is responsible for the Company's internal controls and the financial
reporting process. PricewaterhouseCoopers LLP, the Company's independent
auditors, are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards. The Audit Committee's responsibility is to monitor and oversee the
financial reporting processes.
In this context, the Audit Committee reviewed and discussed the audited
consolidated financial statements with both management and
PricewaterhouseCoopers LLP. Specifically, the Audit Committee has discussed with
PricewaterhouseCoopers LLP matters required to be discussed by SAS 61, 89 and 90
(Codification of Statements on Auditing Standards, AU Section 380).
The Audit Committee received from PricewaterhouseCoopers LLP the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and has discussed with
PricewaterhouseCoopers LLP the issue of its independence from the Company.
Based on the Audit Committee's review of the audited consolidated financial
statements and its discussions with management and PricewaterhouseCoopers LLP
noted above, the Audit Committee recommended to the
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Board of Directors that the audited consolidated financial statements be
included in our Annual Report on Form 10-K for the year ended December 31, 2000.
This report has been furnished by the current members of the Audit Committee.
----------
Charles A. Ledsinger, Jr. Richard S. Ellwood
Richard O. Jacobson Richard C. North.
INDEPENDENT AUDITORS
The firm of PricewaterhouseCoopers, LLP has served as auditors for FelCor during
2000 and will serve in that capacity for 2001, unless the Board subsequently
determines that a change is desirable. A representative of the auditors is
expected to be at FelCor's 2001 Annual Meeting of Stockholders to respond to
appropriate questions and to make a statement if desired.
Audit Fees
Fees billed by PricewaterhouseCoopers LLP for the audit of the Company's 2000
annual financial statements and the reviews of the quarter financial statements
included in the Company's Forms 10-Q totaled $257,120.
Financial Information Systems Design and Implementation Fees
No fees were billed by PricewaterhouseCoopers LLP for services related to
financial information systems design and implementation during 2000.
All Other Fees
Fees billed by PricewaterhouseCoopers LLP in 2000 for all other services,
including fees for tax related services, totaled $671,944.
Auditor Independence
In determining the independence of PricewaterhouseCoopers LLP, the Audit
Committee considered whether the provision of the non-audit services is
compatible with maintaining PricewaterhouseCoopers LLP's independence.
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STOCK PERFORMANCE GRAPH
Annual total returns to FelCor stockholders are shown in the performance graph
appearing below. The graph shows the relative investment performance of FelCor
common stock, the S&P 500, and the NAREIT Equity Index from December 31, 1995,
through December 31, 2000.
[GRAPH]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
FelCor Lodging Trust 100.0 134.5 142.7 99.4 85.5 130.2
NAREIT Equity Index 100.0 135.3 162.7 134.2 128.0 161.8
S&P 500 Total Return 100.0 123.0 164.0 210.9 255.2 232.0
ADDITIONAL INFORMATION
Other Business
FelCor's Board does not intend to bring, and knows of no one intending to bring,
any matter before the annual meeting other than the election of the director
nominees. If any other matter is properly brought before the meeting, the
persons named as proxies will vote them in accordance with the direction of the
FelCor Board.
Outstanding Shares
On March 23, 2001, a total of 53,154,141 shares of FelCor common stock was
outstanding. Each share of common stock is entitled to one vote.
Annual Report
FelCor's 2000 Annual Report to Stockholders is enclosed with this Proxy
Statement. WE WILL ALSO SEND YOU A COPY OF FELCOR'S ANNUAL REPORT ON FORM 10-K
FOR 2000 IF REQUESTED IN WRITING SENT TO THE CORPORATE SECRETARY AT THE ADDRESS
LISTED UNDER QUESTIONS BELOW.
How We Solicit Proxies
In addition to this mailing, FelCor employees may solicit proxies personally,
electronically, or by telephone. FelCor pays the costs of soliciting the
proxies. We are paying Corporate Investor Communications, Inc. to help with the
solicitation. We do not expect their fees to exceed $5,000. We also reimburse
brokers and other nominees for
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their expenses in sending these materials to you and getting your voting
instructions.
Stockholder Proposals for Next Year
The deadline for stockholder proposals eligible for inclusion in next year's
proxy statement is December 8, 2001. All proposals should be submitted in
writing to the Secretary of FelCor at the address listed under Questions below.
Questions
If you have questions or need more information about the annual meeting, you may
write to:
Corporate Secretary
FelCor Lodging Trust Incorporated
545 E. John Carpenter Frwy., Suite 1300
Irving, Texas 75062
You may also or call us at (972) 444-4900 or send us an e-mail at
information@felcor.com.
We also invite you to visit FelCor's Internet site at www.felcor.com.
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Appendix A
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors, to be known as the "Audit
Committee," established pursuant to Section 2-411 of the Maryland General
Corporation Law and Section 3.15 of the Bylaws of FelCor Lodging Trust
Incorporated ("Corporation"). The Audit Committee shall be comprised of four (4)
members of the Board of Directors of the Corporation who are Independent
Directors of the Corporation and otherwise meet the qualifications for
membership set forth herein. The Board of Directors shall elect the members of
the Audit Committee, who shall serve until their successors are elected and
qualified, and shall designate one of the members of the Audit Committee to
serve as Chairman thereof. The Secretary of the Corporation shall serve as the
Secretary of the Audit Committee.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Corporation's directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the Corporation, and the quality and integrity of the financial reports of the
Corporation. In so doing, it is the responsibility of the Audit Committee to
maintain free and open means of communication between the directors, the
independent auditors and the financial management of the Corporation.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee shall maintain the
flexibility to react to changing conditions, and may adopt such policies and
procedures as it shall deem appropriate to provide assurance to the directors
and shareholders of the Corporation that the Corporation's accounting and
reporting practices are in compliance with all applicable legal requirements and
are consistent with industry practices. The Audit Committee shall also undertake
such other tasks as may be delegated to it, from time to time, by the Board of
Directors.
In carrying out its responsibilities, the Audit Committee will undertake the
activities, and follow the procedural rules, described below.
CONTINUOUS ACTIVITIES - GENERAL
1. Provide an open avenue of communication between the independent auditor
and the Board of Directors.
2. Meet at least four times during each calendar year, with additional
meetings to be called by the Chairman of the Committee if, in his
opinion, circumstances require. The Committee may ask members of
management or others to attend meetings and provide pertinent
information as necessary.
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3. Obtain a written statement from the independent auditor delineating all
relationships between the independent auditor and the Corporation,
discuss with the independent auditor the relationships disclosed in
such written statement, and make such other inquiries as the Audit
Committee deems necessary to confirm the independence of the
independent auditor. The Committee shall take or recommend such actions
as it deems appropriate to ensure the independence of the independent
auditor.
4. Review with management and the independent auditor the coordination of
audit efforts between the independent auditor and the work performed by
the internal audit staffs of the management companies engaged in
managing the Corporation's hotels with a view to completeness of
coverage, reduction of redundant efforts, and the effective use of
audit resources.
5. Inquire of management and the independent auditor about significant
risks or exposures and assess the steps management has taken to
minimize the same.
6. Consider and review with management and the independent auditor:
(a) The adequacy of internal controls, including computerized
information system controls and security;
(b) Recommendations of the independent auditor relating to
improvements in internal accounting controls, including the
status of previous recommendations;
(c) Other findings and recommendations of the independent auditor,
together with management's responses thereto;
(d) Any difficulities encountered by the independent auditor in
the course of its audit work, including any restrictions on
the scope of its activities or its access to required
information; and
(e) Any significant changes required in the scope of the
independent auditor's audit plan.
7. Meet at least annually with the independent auditor and management, in
separate executive sessions, to discuss any matters that the Committee
or these groups believe should be discussed privately with the Audit
Committee.
8. Report periodically to the Board of Directors on significant results of
the foregoing activities.
9. Instruct the independent auditor that (i) the independent auditor is
ultimately responsible to the Board of Directors and the Audit
Committee, (ii) the Board of Directors and Audit Committee retain the
ultimate authority and responsibility to select, evaluate and discharge
the independent auditor, and (iv) the Board of Directors is the
independent auditor's client.
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CONTINUOUS ACTIVITIES - REPORTING POLICIES
1. Advise management and the independent auditor that they are expected to
provide the Audit Committee with a timely analysis of significant
current financial reporting issues and developments affecting current
financial reporting practices.
2. Review and discuss with management and the independent auditor their
qualitative judgments about the appropriateness of accounting
principles and financial disclosure practices currently being followed
by the Corporation and of any changes therein that are proposed to be
adopted.
3. Review and discuss with management and the independent auditor the
degree of aggressiveness or conservatism of the accounting principles
and underlying estimates being utilized by the Corporation and whether
those principles and estimates are consistent with, or deviate from,
customary industry practices.
SCHEDULED ACTIVITIES
1. Recommend the selection of the independent auditor for approval by the
Board of Directors and approve the compensation of the independent
auditor. Review and approve the discharge of the independent auditor.
2. Consider, in consultation with management and the independent auditor,
the audit scope and plan proposed by the independent auditor.
3. Review with management and the independent auditor the results of the
independent auditor's reviews of interim financial information and of
annual audits, and solicit the independent auditor's comments relating
to:
(a) The independent auditor's review of interim financial
statements;
(b) The independent auditor's audit of the annual financial
statements and accompanying footnotes, and their report
thereon;
(c) Any significant changes proposed in the independent auditor's
audit plan; and
(d) Any matters relating to the conduct of the review of interim
financial statements or the conduct of the annual audit which
are required to be communicated to the Audit Committee under
Generally Accepted Auditing Standards.
4. Arrange for a representative of the independent auditor to be available
to the full Board of Directors at least annually to help provide an
appropriate basis for the Board of Directors to approve the appointment
of the auditor.
5. Consider the independent auditor's reasoning behind its acceptance or
questioning of significant estimates by management.
6. Based upon its review, recommend to the full Board of Directors that
the audited financial statements be included in the Corporation's
Annual Report on Form 10-K.
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7. At least annually, review, update as necessary and recommend to the
Board of Directors, the adoption of the Charter of the Audit Committee.
8. Prepare, and cause to be included in the Corporation's annual Proxy
Statement, a report of the Audit Committee in compliance with
applicable laws, rules and regulations.
"WHEN NECESSARY" ACTIVITIES
1. Review and approve any management consulting engagement to be performed
for the Corporation by the independent auditor and request information
on any other work undertaken by the independent auditor at the request
of management that is beyond the scope of the audit engagement letter.
2. Review periodically with the Corporation's general counsel those legal
and regulatory matters that may have a material impact on the
Corporation's financial statements, compliance policies and programs.
3. Conduct, or authorize investigations into, any matters within the Audit
Committee's scope of responsibilities. The Committee shall be empowered
to retain independent counsel and other professionals to assist in the
conduct of any such investigation.
MEMBERSHIP QUALIFICATIONS
1. All members of the Audit Committee shall be Independent Directors of
the Corporation and shall have no relationship to the Corporation that,
in the determination of the Board of Directors, may interfere with the
exercise of their independence from the Corporation and its management.
2. Members of the Audit Committee shall not be (or within the past three
(3) years have been) an officer or employee of the Corporation or any
of its affiliates.
3. Members of the Audit Committee shall not be a member of the immediate
family of any person who is (or within the past three (3) years has
been) an executive officer of the Corporation or any of its affiliates.
4. No member of the Audit Committee shall have received, within the past
three (3) years, any compensation from the Corporation or any of its
affiliates, other than for services as a director or under a
tax-qualified retirement or deferred compensation plan, unless the
Board of Directors shall have expressly determined that such
compensatory relationship will not interfere with such member's
independence.
5. No member of the Audit Committee shall be a partner, controlling
shareholder or executive officer of any orginization to which the
Corporation has made, or from which the Corporation has received,
significant payments during the past five (5) years, unless the Board
of Directors shall have expressly determined that such relationship
will not interfere with such member's independence.
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6. No member of the Audit Committee shall be an executive officer of any
company if any executive officer of the Corporation sits on the
compensation committee of such other company.
7. All members of the Audit Committee shall be financially literate and at
least one member of the Audit Committee shall have appropriate
accounting or related financial management expertise, in each case as
determined by the Board of Directors.
PROCEDURAL RULES
1. Each member of the Audit Committee shall have one vote.
2. A quorum of the Audit Committee shall consist of any three (3) members.
3. The Audit Committee shall take action only by the affirmative vote of a
majority of the members present at any meeting at which a quorum is
present, or by the unanimous written consent of the members thereof.
4. The Audit Committee shall maintain minutes of its meetings, reflecting
the actions taken or authorized by it, and copies thereof shall be
provided to the Board of Directors.
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[FELCOR LODGING TRUST]
FELCOR LODGING TRUST INCORPORATED
545 E. John Carpenter Frwy., Suite 1300
Irving, Texas 75062
33
PROXY
FELCOR LODGING TRUST INCORPORATED
545 E. JOHN CARPENTER FREEWAY, SUITE 1300, IRVING, TEXAS 75062
ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2001
The undersigned hereby appoints Thomas J. Corcoran, Jr. and Lawrence D.
Robinson, or either of them, with full power of substitution in each, proxies
(and if the undersigned is a proxy, substitute proxies) to vote all common stock
of the undersigned in FelCor Lodging Trust Incorporated at the Annual Meeting of
Stockholders to be held at the Harvey Hotel, 4545 W. John Carpenter Freeway,
Irving, Texas, at 9:00 a.m., Central Time, on May 15, 2001 and at any
adjournments thereof, as specified below:
1. ELECTION OF CLASS I DIRECTORS
[ ] FOR THE NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
Nominees: Melinda J. Bush
Charles A. Ledsinger, Jr.
Robert H. Lutz, Jr.
Michael D. Rose
To vote FOR or WITHHOLD AUTHORITY with respect to all nominees, check the
appropriate box above. To WITHHOLD AUTHORITY with respect to any individual
nominee, check the FOR box and write the name of such nominee(s) for which you
are withholding authority in the space below.
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PLEASE SIGN AND DATE ON REVERSE SIDE OF THIS PROXY
34
[REVERSE SIDE OF PROXY]
2. The proxies (and if the undersigned is a proxy, any substitute proxies) are
authorized to vote upon any other matter that is properly brought before
the meeting in the manner directed by FelCor's Board of Directors.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR the election of the nominees for Class I directors.
Dated: __________________________, 2001
Please sign exactly as name appears at
left. When shares are held by joint
tenants, both should sign. When signing
as attorney, as executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
-----------------------------------------
Signature
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Title
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND MATTERS SET FORTH
HEREIN WERE PROPOSED BY FELCOR. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES FOR CLASS I DIRECTORS.