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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant |X|
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 under ss. 240.14a-12
WINSTON HOTELS, INC.
----------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
----------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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WINSTON HOTELS, INC.
2626 GLENWOOD AVENUE, SUITE 200
RALEIGH, NORTH CAROLINA 27608
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 2001
You are cordially invited to attend the Annual Meeting of Shareholders
of Winston Hotels, Inc. (the "Company") which will be held on May 8, 2001, at
10:00 a.m., local time, at the Homewood Suites, 5400 Homewood Banks Drive,
Raleigh, North Carolina for the following purposes:
(1) To elect seven members to the Board of Directors;
(2) To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants for the Company for the year ending
December 31, 2001; and
(3) To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on March 15, 2001 are
entitled to notice of and to vote at the Annual Meeting and any and all
adjournments or postponements thereof.
IT IS DESIRABLE THAT YOUR SHARES OF STOCK BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING YOU
MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors,
Robert W. Winston, III
Chief Executive Officer
Raleigh, North Carolina
March 31, 2001
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WINSTON HOTELS, INC.
2626 Glenwood Avenue, Suite 200
Raleigh, North Carolina 27608
PROXY STATEMENT
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement and the accompanying proxy card are being mailed
to shareholders on or about March 31, 2001, by the Board of Directors of Winston
Hotels, Inc. (the "Company") in connection with the solicitation of proxies for
use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at
the Homewood Suites Hotel, 5400 Homewood Banks Drive, Raleigh, North Carolina on
May 8, 2001, at 10:00 a.m., local time, and at all adjournments or postponements
thereof. The Company will pay all expenses incurred in connection with this
solicitation, including postage, printing, handling and the actual expenses
incurred by custodians, nominees and fiduciaries in forwarding proxy material to
beneficial owners. In addition to solicitation by mail, certain officers and
directors of the Company, who will receive no additional compensation for their
services, may solicit proxies by telephone, personal communication or other
means.
PURPOSES OF ANNUAL MEETING
The principal purposes of the Annual Meeting are to: (1) elect seven
members to the Board of Directors; (2) ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants for the Company for the
year ending December 31, 2001; and (3) transact such other business as may
properly come before the Annual Meeting or any adjournment or postponement
thereof. The Board of Directors knows of no other matters other than those
stated above to be brought before the Annual Meeting.
VOTING RIGHTS
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. If the proxy card is signed and returned, but voting
directions are not made, the proxy will be voted in favor of the proposals set
forth in the accompanying "Notice of Annual Meeting of Shareholders" and in such
manner as the proxyholders named on the enclosed proxy card in their discretion
determine upon such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof. Any proxy given pursuant to
this solicitation may be revoked by the person giving it at any time before it
is voted by (1) filing written notice of revocation with the Secretary of the
Company which is actually received prior to the vote of shareholders, (2) filing
a duly executed proxy bearing a later date with the Secretary of the Company
before the vote of shareholders or (3) attending the Annual Meeting and voting
in person.
The Board of Directors has fixed the close of business on March 15,
2001 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and all adjournments or
postponements thereof. As of the close of business on March 15, 2001, the
Company had outstanding 16,926,678 shares of Common Stock. On all matters to
come before the Annual Meeting, each holder of Common Stock will be entitled to
vote at the Annual Meeting and will be entitled to one vote for each share
owned. The representation in person or by proxy of a majority of the issued and
outstanding shares of Common Stock is necessary to provide a quorum for voting
at the Annual Meeting.
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SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 15,
2001, regarding shares of Common Stock of the Company owned of record or known
to the Company to be owned beneficially by each director and nominee for
director, each executive officer named in the Summary Compensation Table in this
Proxy Statement and all directors and executive officers as a group. There are
no five-percent shareholders of the Company other than as indicated below.
Except as set forth in the footnotes to the table below, each of the
shareholders identified in the table below has sole voting and investment power
over the shares of Common Stock beneficially owned by such person.
Shares
of Common Stock
Name Beneficially Owned (1)(2) Percent of Class
---- ------------------------- ----------------
DIRECTORS AND EXECUTIVE OFFICERS
Charles M. Winston (3)(11) 1,130,764 6.3%
Robert W. Winston, III (4) 2,003,167 11.0%
James D. Rosenberg (5) 233,000 1.4%
Joseph V. Green (6) 207,500 1.2%
Kenneth R. Crockett (7) 146,500 *
James H. Winston (8)(9)(11) 61,500 *
Thomas F. Darden, II (8)(11) 21,500 *
Richard L. Daugherty (8)(11) 28,911 *
Edwin B. Borden (8)(11) 44,000 *
David C. Sullivan (10)(11) 21,276 *
All directors and executive officers
as a group (10 persons) (12) 3,221,745 17.0%
- -------------------------------
*Less than one percent
(1) Pursuant to the rules of the Securities and Exchange Commission,
certain shares of the Company's Common Stock which a person has the
right to acquire within 60 days of March 15, 2001 pursuant to the
exercise of stock options are deemed to be outstanding for the purpose
of computing the percentage ownership of such person but are not deemed
outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Assumes that all units of limited partnership interest (the "Units") in
WINN Limited Partnership (the "Partnership"), which are redeemable
within 60 days of March 15, 2001 for shares of the Company's Common
Stock or, at the option of the Company, for an equivalent amount of
cash, are redeemed for shares of Common Stock. The total number of
shares outstanding used in calculating the percentage ownership of such
person assumes that none of the Units held by other persons are
redeemed for shares of Common Stock.
(3) Includes 105,643 shares issuable to Mr. Winston upon exercise of
redemption rights with respect to Units held directly by Mr. Winston.
Also includes 109,516 shares issuable upon redemption of Units held by
WJS - Perimeter, Inc., a corporation owned 33.33% by Mr. Winston;
606,413 shares issuable upon redemption of Units held by Cary Suites,
Inc., a corporation owned 23.33% by Mr. Winston, 23.33% by Mr.
Winston's spouse, 30% by Robert W. Winston, III, and 23.33% by Mr.
Winston's daughter-in-law; and 69,960 shares issuable upon redemption
of Units held by
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RWW, Inc., a corporation owned 33.33% by Mr. Winston, 33.33% by Mr.
Winston's spouse and 33.33% by Robert W. Winston, III. Also includes
20,000 shares held by Charles M. Winston Associates, Limited Liability
Limited Partnership, a partnership owned 50% by Mr. Winston and 50% by
Mr. Winston's spouse. Also includes 10,000 shares owned by Mr.
Winston's spouse. Mr. Winston shares voting and investment power over
the Units held by these entities but disclaims beneficial ownership of
any Company securities held by such entities except to the extent of
his direct ownership interest in such entities.
(4) Includes 255,000 shares subject to stock options exercisable within 60
days of March 15, 2001. Also includes 30,000 and 10,000 shares issued
to Mr. Winston under the Winston Hotels, Inc. Stock Incentive Plan (the
"Incentive Plan") in January 2000 and 2001, respectively. These shares
vest at a rate of 20% per year beginning January 2000 and 2001,
respectively. Mr. Winston is entitled to vote and to receive dividends
paid on these shares prior to vesting. Also includes 297,500 shares
issuable upon redemption of Units held by Hotel 1, Inc., a corporation
owned 37% by Mr. Winston, and 63% by Mr. Winston's spouse and trusts
for the benefit of his minor children; 606,413 shares issuable upon
redemption of Units held by Cary Suites, Inc., a corporation owned 30%
by Mr. Winston, 23.33% by Mr. Winston's spouse, 23.33% by Charles M.
Winston and 23.33% by Charles M. Winston's spouse; 69,960 shares
issuable upon redemption of Units held by RWW, Inc., a corporation
owned 33.33% by Mr. Winston, 33.33% by Charles M. Winston and 33.33% by
Charles M. Winston's spouse; and 45,651 shares issuable upon redemption
of Units held by Hotel II, Inc., a corporation owned 60% by Mr.
Winston, 20% by trusts for the benefit of his minor children and 20% by
Mr. Winston's sister. Mr. Winston serves on the board of directors of
the above entities and thereby shares voting and investment power over
the Units held by these corporations but disclaims beneficial ownership
of any Company securities held by such corporations except to the
extent of his direct ownership interest in such corporations.
(5) Includes 20,000 shares issued to Mr. Rosenberg in January 1998. These
shares vest at a rate of 25% per year beginning January 1999. Also
includes 7,500, 20,000 and 7,000 shares issued in January 1999, 2000
and 2001, respectively. These grants vest at a rate of 20% per year
beginning January 1999, 2000 and 2001, respectively. All shares were
issued under the Incentive Plan. Mr. Rosenberg is entitled to vote and
to receive dividends paid on these shares prior to vesting. Also
includes 178,500 shares subject to stock options exercisable within 60
days of March 15, 2001.
(6) Includes 7,500, 15,000 and 5,000 shares issued to Mr. Green in January
1999, 2000 and 2001, respectively. These grants vest at a rate of 20%
per year beginning January 1999, 2000 and 2001, respectively. All
shares were issued under the Incentive Plan. Mr. Green is entitled to
vote and to receive dividends paid on these shares prior to vesting.
Also includes 180,000 shares subject to stock options exercisable
within 60 days of March 15, 2001.
(7) Includes 5,000 shares issued to Mr. Crockett in May 1998. These shares
vest at a rate of 20% per year beginning in May 1998 and continuing
each January 1, from January 1, 1999 through 2002. Also includes 5,000,
12,000 and 3,000 shares issued to Mr. Crockett in January 1999, 2000
and 2001, respectively. These grants vest at a rate of 20% per year
beginning January 1999, 2000 and 2001, respectively. All shares were
issued under the Incentive Plan. Mr. Crockett is entitled to vote and
to receive dividends paid on these shares prior to vesting. Also
includes 114,000 shares subject to stock options exercisable within 60
days of March 15, 2001.
(8) Includes 7,500 shares issued under the Winston Hotels, Inc. Directors'
Stock Incentive Plan to each director, other than Charles M. Winston
and Robert W. Winston, III, serving in June 1994. They were fully
vested as of May 18, 1999.
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(9) Includes 1,000 shares held by Mr. Winston's wife.
(10) Includes 2,275 shares issued to Mr. Sullivan in January 1998 under the
Directors' Plan.
(11) Includes 7,000 shares issued to each director, other than Robert W.
Winston, III, in May 1999 under the Incentive Plan. Such shares vest at
a rate of 20% per year beginning in May 1999. Each director is entitled
to vote and receive the dividends paid on such shares. Also includes
2,000 shares subject to stock options exercisable within 60 days of
March 15, 2001, granted to each director, other than Robert W. Winston,
III, in May 1999. These options were 100% vested on the grant date.
(12) Includes 739,500 shares subject to stock options exercisable within 60
days of March 15, 2001, and 1,234,683 shares issuable upon redemption
of all outstanding Units redeemable within 60 days of March 15, 2001,
held by executive officers and directors.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at seven. The
seven persons named below are nominated to serve on the Board of Directors until
the 2002 Annual Meeting of Shareholders (or until such time as their respective
successors are elected and qualified). Each nominee is currently a director of
the Company. The Board of Directors has no reason to believe that the persons
named below as nominees for directors will be unable or will decline to serve if
elected. In the event of death or disqualification of any nominee or the refusal
or inability of any nominee to serve as a director, the proxy may be voted with
discretionary authority for a substitute or substitutes as shall be designated
by the Board of Directors. Pursuant to North Carolina law, the seven candidates
who receive the highest number of votes as directors will be elected as
directors of the Company. Abstentions and shares held in street name that are
not voted in the election of directors will not be included in determining which
nominees received the highest number of votes.
NOMINEES FOR ELECTION AS DIRECTORS
CHARLES M. WINSTON - Charles Winston, age 71, has served as Chairman of
the Board of Directors since March 15, 1994. Mr. Winston is a native of North
Carolina and a graduate of the University of North Carolina at Chapel Hill with
an A.B. degree. Mr. Winston has more than 37 years of experience in developing
and operating full service restaurants and hotels. Mr. Winston is Robert
Winston's father and James Winston's brother.
ROBERT W. WINSTON, III - Robert Winston, age 39, has served as Chief
Executive Officer and director of the Company since March 15, 1994. Mr. Winston
served as President of the Company for the period beginning March 15, 1994 and
ending January 14, 1999. Mr. Winston is a native of North Carolina and a
graduate of the University of North Carolina at Chapel Hill with a B.A. degree
in economics. Mr. Winston is Charles Winston's son and James Winston's nephew.
JAMES H. WINSTON - James Winston, age 67, has been a director of the
Company since May 25, 1994. Mr. Winston is the President of Omega Insurance
Company, a property and casualty insurance company doing business mainly in the
State of Florida and throughout five southeastern states, and has served in that
capacity for more than the past five years. He is also President of LPMC, Inc.,
a real estate investment firm. Mr. Winston is a native of North Carolina and
graduated Phi Beta Kappa from the University of North Carolina at Chapel Hill.
Mr. Winston serves on the boards of directors of Stein Mart, Inc., and Patriot
Transportation, Inc. Mr. Winston is the brother of Charles Winston and the uncle
of Robert Winston.
THOMAS F. DARDEN, II - Thomas Darden, age 46, has been a director of
the Company since May 25, 1994. Mr. Darden is the Chairman of Cherokee
Investment Partners, LLC, a private equity investment fund, where he has been
employed for more than the past five years. Mr. Darden graduated with highest
honors from the University of North Carolina at Chapel Hill with a B.A. degree
in 1976 and graduated from Yale Law School with a J.D. degree in 1981. In 1991,
Mr. Darden was appointed by the Governor of North Carolina to the board of the
North Carolina Department of Transportation, and was subsequently appointed to
the Triangle Transit Authority Board of Trustees. In 1992, Mr. Darden received a
Master's Degree in City and Regional Planning from the University of North
Carolina at Chapel Hill. Mr. Darden serves or has served on a variety of
community, charitable and college boards. Mr. Darden serves as a director of
Waste Industries, Inc. and BTI Telecom Corporation.
RICHARD L. DAUGHERTY - Richard Daugherty, age 65, has been a director
of the Company since May 25, 1994. Mr. Daugherty serves as Executive Director of
the North Carolina State University Research Corporation. Until 1994 Mr.
Daugherty was Vice President of Worldwide Manufacturing for the IBM PC Company
in Research Triangle Park, North Carolina, where he had been employed for more
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than five years. At the time of his retirement in 1994, Mr. Daugherty was the
senior IBM executive for the State of North Carolina. He serves on various
community and business boards of directors, including the boards of Wachovia
Bank & Trust Company, N.A., and Progress Energy, Inc.
EDWIN B. BORDEN - Edwin Borden, age 66, has been a director of the
Company since May 25, 1994. Mr. Borden is President and Chief Executive Officer
of The Borden Manufacturing Company, Inc. a textile management company, where he
has been employed for more than the past five years. Mr. Borden is a native of
North Carolina and a graduate of the University of North Carolina at Chapel
Hill. He serves on the boards of directors of Progress Energy, Inc.,
Jefferson-Pilot Corporation and Ruddick Corp.
DAVID C. SULLIVAN - David Sullivan, age 61, has been a director of the
Company since January 1, 1998. Mr. Sullivan serves as Chairman of the Board of
Directors of The Sullivan Development Group, a real estate development
consulting company. From 1997 until 2000, Mr. Sullivan served as chairman and
CEO of Resort Quest International, Inc., a resort property management company.
From 1990 until 1997, Mr. Sullivan served in various positions with Promus Hotel
Corporation, a franchisor of Hampton Inns, Embassy Suites, Homewood Suites and
Hampton Inn and Suites hotels. Mr. Sullivan served as director, Executive Vice
President and Chief Operating Officer for Promus from April 1995 until December
1997. He also serves on the board of directors of Resort Quest International,
Inc. and John Q. Hammons Hotels, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES.
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BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held six meetings during 2000. All incumbent
directors attended more than 75% of the aggregate number of meetings of the
Board of Directors and its committees on which they served in 2000. The Board of
Directors has an Audit Committee and a Compensation Committee. The Board of
Directors does not have a nominating committee. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews the plans and results of the audit engagement and other services
provided by the Company's independent public accountants. Directors Borden,
Darden and Sullivan are members of the Audit Committee. During 2000, the Audit
Committee met six times. The Compensation Committee administers the Incentive
Plan and is responsible for determining compensation for the Company's executive
officers. Directors Daugherty, Darden and Borden make up the Compensation
Committee. During 2000, the Compensation Committee met two times.
DIRECTOR COMPENSATION
The primary means of compensating directors is the grant of restricted
stock to each director. On May 18, 1999, the Company issued 7,000 shares of
Common Stock to each director, other than Robert Winston. These shares vest at
the rate of 20% per year beginning on the date of their issuance. Directors who
cease to be directors will forfeit any shares not previously vested. Each
director is entitled to vote and receive the distributions paid on such shares
of Common Stock prior to vesting. Also on May 18, 1999, the Company granted each
director, other than Robert Winston, options to purchase 2,000 shares of Common
Stock with an exercise price of $9.38 per share. These options were 100% vested
on the grant date. The Company also pays each director $1,500 per Board of
Directors' meeting and $500 per committee meeting attended. In addition, the
Company will reimburse all directors for their out-of-pocket expenses incurred
in connection with their service on the Board of Directors. Robert Winston
receives no compensation as a director, other than reimbursement for any
out-of-pocket expenses incurred in connection with his service on the Board of
Directors.
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EXECUTIVE COMPENSATION
The following tables set forth a summary of annual and long-term
compensation paid or accrued by the Company for services rendered, for the
fiscal years indicated, by the Company's Chief Executive Officer and the
executive officers (the "named executive officers") whose total salary and bonus
exceeded $100,000 individually during the year ended December 31, 2000.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
----------------------------------- -------------------------
No. Of
Restricted Securities
Name and Stock Underlying
Principal Position Year Salary Bonus Awards (10) Options
------------------ ---- -------- -------- ----------- ----------
Robert W. Winston, III 2000 $235,000 $100,000 $255,000 (1) --
Chief Executive Officer 1999 $225,000 $100,000 -- 100,000
1998 $210,000 -- -- 100,000
James D. Rosenberg 2000 $250,000 $100,000 $170,000 (2) --
President, Chief Operating 1999 $222,000 $100,000 $ 65,625 (3) 110,000
Officer and Secretary 1998 $180,000 $75,000 $263,750 (4) 150,000
Joseph V. Green 2000 $235,000 $75,000 $127,500 (5) --
Executive Vice President, 1999 $222,000 $75,000 $ 65,625 (6) 100,000
Chief Financial Officer 1998 $210,000 $75,000 -- 150,000
Kenneth R. Crockett 2000 $183,000 $40,000 $102,000 (7) --
Executive Vice President 1999 $172,000 $40,000 $ 43,750 (8) 40,000
of Development 1998 $160,000 $40,000 $ 61,875 (9) 50,000
(1) During 2000, Robert W. Winston received a grant of 30,000 shares of
restricted stock which vests at a rate of 20% per year beginning
January 31, 2000. Dividends are paid on the restricted stock.
(2) During 2000, James D. Rosenberg received a grant of 20,000 shares of
restricted stock which vests at a rate of 20% per year beginning
January 31, 2000. Dividends are paid on the restricted stock.
(3) During 1999, James D. Rosenberg received a grant of 7,500 shares of
restricted stock which vests at a rate of 20% per year beginning
January 14, 1999. Dividends are paid on the restricted stock.
(4) During 1998, James D. Rosenberg received a grant of 20,000 shares of
restricted stock which vests at a rate of 25% per year beginning
January 2, 1999. Dividends are paid on the restricted stock.
(5) During 2000, Joseph V. Green received a grant of 15,000 shares of
restricted stock which vests at a rate of 20% per year beginning
January 31, 2000. Dividends are paid on the restricted stock.
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(6) During 1999, Joseph V. Green received a grant of 7,500 shares of
restricted stock which vests at a rate of 20% per year beginning
January 14, 1999. Dividends are paid on the restricted stock.
(7) During 2000, Kenneth R. Crockett received a grant of 12,000 shares of
restricted stock which vests at a rate of 20% per year beginning
January 31, 2000. Dividends are paid on the restricted stock.
(8) During 1999, Kenneth R. Crockett received a grant of 5,000 shares of
restricted stock which vests at a rate of 20% per year beginning
January 14, 1999. Dividends are paid on the restricted stock.
(9) During 1998, Kenneth R. Crockett received a grant of 5,000 shares of
restricted stock which vests at the rate of 20% per year beginning May
5, 1998, and continuing each January 1, from January 1, 1999 through
2002. Dividends are paid on the restricted stock.
(10) At December 31, 2000, an aggregate of 75,200 shares of restricted
common stock were held by the named executive officers, with an
aggregate value at such date (based on the closing market price of the
common stock at December 31, 2000 of $7.125) of $535,800 as follows:
Mr. Winston, 26,000 shares valued at $185,250; Mr. Rosenberg, 20,600
shares valued at $146,775; Mr. Green, 16,000 shares valued at $114,000;
and Mr. Crockett, 12,600 shares valued at $89,775. Prior to vesting,
the recipients are entitled to vote and receive distributions with
respect to shares of restricted common stock.
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table provides information about the stock options held
by the named executive officers on December 31, 2000.
Number of Securities Underlying Unexercised
Options at Fiscal Year-End (1)
-------------------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
Robert W. Winston III 215,000 100,000
James D. Rosenberg 119,000 141,000
Joseph V. Green 130,000 120,000
Kenneth R. Crockett 96,000 44,000
(1) On December 31, 2000, the aggregate fair market value of the
unexercised options did not exceed the aggregate exercise price of the
options.
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EMPLOYMENT AGREEMENT
The Company has an employment agreement with Mr. Crockett, the
Company's Executive Vice President of Development. The agreement has a
three-year term that commenced on July 31, 1997 and automatically renews for
subsequent one-year terms unless either party gives the other one hundred twenty
(120) days prior notice of intent not to renew. If the Company terminates the
agreement upon such notice, all of its obligations shall terminate upon the
passing of said 120-day period. The Board of Directors increased Mr. Crockett's
base salary to $183,000 in 2000. Mr. Crockett is eligible to participate in any
bonus programs the Company has or may create for persons of Mr. Crockett's level
and is eligible to receive stock options and restricted stock awards under the
Company's Incentive Plan. The employment agreement is terminable by either party
giving 90 days prior notice to the other party during the course of any one-year
extension period. If the Company terminates the agreement upon such notice, it
shall pay Mr. Crockett a lump sum amount equal to two years of his then current
salary plus a bonus equal to the average of the bonus paid for the preceding two
years. The Company may also terminate the agreement immediately for death,
disability or for cause as defined in the agreement. If the Company terminates
the agreement for cause it shall pay Mr. Crockett the amount of salary due at
that time. Mr. Crockett may terminate the agreement upon notice in the event of
a change in control unless after the change in control Mr. Crockett retains his
position and the principal executive offices of the acquiring company remain
within a 30-mile radius of Raleigh, North Carolina. If Mr. Crockett elects to
terminate upon a change in control he shall be entitled to continue to receive
medical and health insurance for a period of two years and he shall receive a
"stay bonus" equal to two years of his then current salary including the amount
of his most recent annual bonus, if he agrees to stay with the acquiring
corporation for a period of six months following the change in control.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, a committee
composed entirely of non-officer and non-employee directors, is responsible for
determining the compensation of the Company's executive officers and
administering the Company's Incentive Plan.
Executive Compensation. The Company is committed to implementing a scheme of
executive compensation which will contribute to the achievement of the Company's
business objectives. The Compensation Committee's policy is to implement a
scheme of executive compensation so that the compensation paid to executive
officers shall be commensurate with their positions and determined with
reference to compensation paid to similarly situated officers of companies which
the Board of Directors deems to be comparable to the Company.
The Compensation Committee establishes ranges for executive
compensation using regional and national surveys of comparable companies.
Companies included in these salary surveys are not necessarily the same as the
companies used for purposes of the performance graph included in this Proxy
Statement, but instead include a broader set of companies with which the Company
competes for qualified personnel.
Executive compensation consists of three components: base salary,
annual incentive and long-term incentive compensation. These components provide
elements of fixed income and variable compensation that is linked to the
achievement of individual and corporate goals and enhanced shareholder value.
Base salary represents the fixed component of the Company's executive
compensation package. Executives receive a salary that is within a range
established by the Compensation Committee for their respective positions based
on the comparative analysis described above. The determination of where an
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executive's salary falls within the salary range is based on a determination of
the level of experience that the executive brings to the position and how
successful the executive has been in achieving set goals. Adjustments to
salaries are based on a similar evaluation and a comparison of adjustments made
by competitors and any necessary inflationary adjustments.
Annual incentives exist in the form of bonuses which are provided for
each executive officer as a means of linking compensation to objective
performance criteria that are within the control of the executive officer. At
the beginning of each year the Compensation Committee establishes a target bonus
for each executive and identifies performance goals for each executive to meet
to receive the full bonus. The actual amount of incentive bonus received by each
of the Company's executive officers is determined by the Compensation Committee
after the end of the applicable year. Where an executive's performance is not
easily fixed to objective standards, the Compensation Committee will exercise
its subjective judgment in determining the extent to which goals are achieved.
The third component of executive compensation is targeted toward
providing rewards for long-term performance. The Compensation Committee believes
that long-term incentives are important to motivate and reward executives and
employees of the Company for maximizing shareholder value. Long-term incentives
are provided primarily pursuant to the Incentive Plan, which is administered by
the Compensation Committee. The purpose of the Incentive Plan is to (i) attract
and retain employees, and other service providers with ability and initiative;
(ii) provide incentives to those deemed important to the success of the Company;
and (iii) associate the interests of these individuals with the interests of the
Company and its shareholders through opportunities for increased stock
ownership. Awards of stock options and restricted stock under the Incentive Plan
are based on comparisons to incentives offered at other comparable companies and
serve as a means of retaining valued employees.
During the year ended December 31, 2000, the Company issued restricted
stock grants for a total of 77,000 shares of common stock to the Company's
executive officers. Of the total of 77,000 shares issuable pursuant to these
grants, Mr. Winston received 30,000 shares, Mr. Rosenberg received 20,000
shares, Mr. Green received 15,000 shares and Mr. Crockett received 12,000
shares. The grants vest 20% immediately and 20% on the anniversary date of the
grant over the next four years. This feature is intended to focus executives on
the enhancement of shareholder value over the long-term and to increase their
equity ownership in the Company. Dividends are paid on the restricted stock.
Chief Executive Officer Compensation. The Compensation Committee has adopted the
policies described above with respect to Mr. Winston's compensation. Mr.
Winston's salary and bonus for 2000 were $235,000 and $100,000, respectively.
Mr. Winston was issued a restricted stock grant for 30,000 shares of Common
Stock in 2000. The grant vests 20% immediately and 20% on the anniversary date
of the grant over the next four years. The Company believes this compensation is
competitive with compensation paid to chief executive officers in the hotel
industry.
This report is submitted by the following members of the Compensation
Committee of the Board of Directors:
COMPENSATION COMMITTEE
Richard L. Daugherty (Chairman)
Edwin B. Borden
Thomas F. Darden, II
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AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee")
is composed of Edwin B. Borden, Thomas F. Darden, II, and David C. Sullivan and
operates under a written charter (a copy of which is attached to this Proxy
Statement as Appendix A) adopted by the Board of Directors in May of 2000.
Messrs. Borden, Darden, and Sullivan are all "independent directors" as defined
by the NYSE.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent public 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 role of the Audit Committee is to monitor and oversee
these processes.
The Audit Committee has reviewed and discussed the consolidated
financial statements for the year ended December 31, 2000 with both management
and the independent public accountants. The Audit Committee also discussed with
the independent public accountants matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees) and other
non-audit services provided by the independent public accountants. The Company's
independent public accountants also provided to the Audit Committee the written
disclosures required by Independent Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Audit Committee discussed with the
independent public accountants their independence. The Audit Committee has
considered whether the other non-audit services by the independent auditors to
the Company are compatible with maintaining the auditor's independence.
Based upon the reports and discussions described in this report and the
Audit Committee's review of the representations of management and the
independent public accountants, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000 to be filed with
the Securities and Exchange Commission. The Audit Committee also recommended
that PricewaterhouseCoopers LLP be retained as the Company's independent public
accountants for the 2001 fiscal year.
This report is submitted by the following members of the Audit
Committee of the Board of Directors:
AUDIT COMMITTEE
Edwin B. Borden (Chairman)
Thomas F. Darden, II
David C. Sullivan
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COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph, prepared by SNL Securities, LLC, compares the
cumulative total shareholder return on the Company's Common Stock from December
31, 1995 through December 31, 2000, with the cumulative total return for the
same period on the Standard & Poor's 500 Stock Index (the "S&P 500"), the
National Association of Real Estate Investment Trust Equity REIT Index (the
"NAREIT All Equity REIT Index"), and the SNL Securities Hotel REIT Index (the
"SNL Hotel REIT Index"). The graph assumes that, at the beginning of the period
indicated, $100 was invested in the Company's Common Stock and the stock of the
companies comprising each index and that all dividends were reinvested.
The NAREIT All Equity REIT Index is currently comprised of 163 real
estate investment trusts ("REITs") which own a wide variety of real estate
assets, including regional shopping malls, shopping centers, apartments, self
storage facilities, industrial properties and manufactured housing communities.
The SNL Hotel REIT Index is currently comprised of 31 publicly traded hotel
REITs, organized for purposes substantially similar to that of the Company.
[TOTAL RETURN PERFORMANCE GRAPH]
PERIOD ENDING
----------------------------------------------------------------------------
INDEX 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- ------------------------------------------------------------------------------------------------------
Winston Hotels, Inc. $100.00 $124.17 $129.52 $ 89.92 $101.44 $102.49
S&P 500 $100.00 $122.86 $163.86 $210.64 $254.97 $231.74
NAREIT All Equity REIT $100.00 $135.27 $162.67 $134.20 $128.00 $161.76
SNL Hotel REIT $100.00 $152.80 $200.33 $ 99.05 $ 76.93 $110.07
13
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a REIT that through the Partnership owned 29 limited
service hotels, 9 extended stay hotels and 11 full service hotels as of March
23, 2001. The Company currently has a 92.86% interest in the Partnership and is
its sole general partner. In order for the Company to qualify as a REIT, neither
the Company nor the Partnership can operate hotels.
During 2000, the Company and Marsh Landing Investment, L.L.C. formed a
joint venture, Marsh Landing Hotel Associates, LLC, to jointly develop and own
hotel property. The Company owns a 49% ownership interest in the joint venture
and Marsh Landing Investment, L.L.C., owned by the Company's Chairman, Mr.
Charles M. Winston, and its board member Mr. James H. Winston, owns the other
51%. The joint venture has developed and owns a 118-room Hampton Inn in Ponte
Vedra, Florida.
During 2000, the Company formed a subsidiary of the Partnership,
FastForward, LLC, to provide office space and support services to incubate
certain qualified technology companies in exchange for a percentage ownership in
each such company. The Partnership owns 85% of FastForward, LLC and the
management and the Advisory Board of FastForward, LLC own the balance. During
2000, FastForward, LLC provided office space and support services to
Sentrisystems.com, Inc., an Internet infrastructure software company, in
exchange for an ownership interest in such company. Robert W. Winston, III is a
less than 10% shareholder and director of Sentrisystems.com, Inc.
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our officers, directors, and persons who own more than 10% of our
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers, directors, and greater than
10% shareholders are required by the SEC regulations to furnish us with copies
of all Section 16(a) reports they file. Based solely on a review of the copies
of such reports furnished to us, or representations by such persons that no Form
5s were required, we believe that during the fiscal year ended December 31,
2000, all Section 16(a) filing requirements applicable to our officers,
directors, and greater than 10% shareholders, were satisfied except that James
H. Winston inadvertently failed to report one gift transaction which occurred in
December 1999. Mr. Winston reported the gift transaction on a Form 5 for the
year ended December 31, 2000.
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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP as
independent accountants for fiscal year 2001. Although shareholder approval is
not required, the Company desires to obtain from the shareholders an indication
of their approval or disapproval of the Board's action in appointing
PricewaterhouseCoopers LLP as the independent accountants of the Company. If the
shareholders do not ratify this appointment, such appointment will be
reconsidered by the Audit Committee and the Board of Directors.
A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting and will be afforded an opportunity to make a statement and to
respond to questions.
AUDIT FEES
PricewaterhouseCoopers LLP's professional service fees for the audit
of the Company's annual financial statements for the fiscal year ended December
31, 2000 and for the reviews of the financial statements included in the
Company's Quarterly Reports on Form 10-Q for that fiscal year were $87,500, of
which an aggregate amount of $37,650 had been billed through December 31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no professional services rendered for information technology
services relating to financial information systems design and implementation for
the fiscal year ended December 31, 2000.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered to the Company, other than the services described
above under "Audit Fees" and "Financial Information Systems Design and
Implementation Fees," for the fiscal year ended December 31, 2000 were $143,097.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP FOR FISCAL YEAR
2001.
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SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Any proposals which shareholders intend to present for a vote of
shareholders at the 2002 Annual Meeting of Shareholders and which such
shareholders desire to have included in the Company's Proxy Statement and form
of proxy relating to that meeting must be sent to the Company's principal
executive offices, marked to the attention of the Secretary of the Company, and
received by the Company at such offices on or before December 1, 2001. The
determination by the Company of whether it will oppose inclusion of any proposal
in its Proxy Statement and form of proxy will be made on a case-by-case basis in
accordance with its judgment and the rules and regulations promulgated by the
Securities and Exchange Commission. Proposals received after December 1, 2001,
will not be considered for inclusion in the Company's proxy materials for its
2002 Annual Meeting of Shareholders.
In addition, if a shareholder intends to present a matter for a vote at
the 2002 Annual Meeting of Shareholders, other than by submitting a proposal for
inclusion in the Company's Proxy Statement for that meeting, the shareholder
must give timely notice in accordance with Securities and Exchange Commission
rules. To be timely, a shareholder's notice must be received by the Secretary of
the Company at its principal office, 2626 Glenwood Avenue, Suite 200, Raleigh,
North Carolina 27608, on or before February 15, 2002.
MISCELLANEOUS
SHAREHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S 2000 ANNUAL REPORT ON
FORM 10-K WITHOUT CHARGE UPON WRITTEN REQUEST TO JAMES D. ROSENBERG, PRESIDENT
AND CHIEF OPERATING OFFICER, WINSTON HOTELS, INC., 2626 GLENWOOD AVENUE, SUITE
200, RALEIGH, NORTH CAROLINA 27608.
By Order of the Board of Directors,
Robert W. Winston, III
Chief Executive Officer
March 31, 2001
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APPENDIX A: AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee of Winston Hotels, Inc. ("Winston"
or the "Company") is to assist the Board of Directors (the "Board") in
fulfilling its responsibility to the shareholders, potential shareholders and
investment community relating to the quality and integrity of the Company's
financial reporting. The Audit Committee's primary duties and responsibilities
are to:
o serve as an independent and objective party to monitor the
Company's financial reporting process and internal controls
regarding finance, accounting, compliance with applicable laws
and adherence to the Company's policies regarding the above;
o appraise the independence and performance of the outside
auditors;
o foster the continuous improvement of the Company's financial
policies, procedures and practices; and
o encourage an open avenue of communication among the outside
auditors, financial and senior management, and the Board.
II. MEMBERSHIP/STRUCTURE
The members of the Audit Committee are appointed by the Board. The Audit
Committee must consist of between three and five members of the Board, each of
whom shall be independent directors. For purposes of this charter, an
independent director may not be an officer of the Company and may not have a
relationship with the Company that may interfere with the exercise of his or her
independence from management and the Company. Each member of the Audit Committee
must be financially literate and at least one member of the Audit Committee must
have accounting or financial management expertise, as the Board of Directors
interprets such qualifications in its business judgment. Members of the Audit
Committee serve at the pleasure of the Board or until the Board appoints
successors. The Chairman of the Audit Committee, appointed by the Board, serves
in that capacity until his successor is appointed.
Notwithstanding the above, the Audit Committee may include one non-independent
director who is not a current employee of the Company or who is an immediate
family member of a former executive officer, but is not considered independent
under the New York Stock Exchange rules, if the Board, in exceptional and
limited circumstances, determines that it would be in the best interests of the
Company and the shareholders, and the Board discloses the nature of this
relationship and the reasons for the determination in its next annual proxy
statement after such appointment.
The Audit Committee may rely on Winston's existing staff and its outside
auditors for help in performing its duties and responsibilities. The Audit
Committee has direct access to financial, legal and other staff and advisors of
the Company. Such advisors may assist the Committee members in defining their
roles and responsibilities, consult with Committee members regarding a specific
audit or other issues that may arise in the course of the Committee's duties,
and conduct independent investigations, studies or tests. The Committee has the
authority to employ accountants, attorneys or other advisors for assistance,
though this power is typically used only in special circumstances.
III. MEETINGS
The Audit Committee shall meet at least four times annually, and may meet more
frequently if necessary. The Audit Committee shall meet separately at least
annually with management and the outside auditors to discuss any matters the
Audit Committee, management or the independent auditors believe should be
discussed.
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The Audit Committee shall record minutes of each meeting and report to the
Board, and comply with requirements in the Company's bylaws regarding committees
of the Board.
IV. GENERAL RESPONSIBILITIES
The Audit Committee shall obtain the full Board's approval of this charter and
review and if necessary, update this charter at least annually, or more
frequently as conditions dictate. The Audit Committee shall propose any charter
amendments to the Board and receive approval of any such amendments from the
Board before they are implemented.
The Audit Committee shall comply with Securities and Exchange Commission and New
York Stock Exchange requirements governing Audit Committee reports for inclusion
in the Company's proxy statement.
V. OUTSIDE AUDITORS
With respect to the Company's outside auditors:
o The Audit Committee shall instruct the outside auditors for
the Company that the outside auditors are ultimately
accountable to the Board of Directors and the Audit Committee
of the Company.
o The Audit Committee shall instruct the outside auditors for
the Company that the Audit Committee and the Board of
Directors have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the outside
auditors.
o The Audit Committee and the Board of Directors have the
authority to nominate the outside auditors to be proposed for
shareholder approval in the proxy statement.
o The Audit Committee is responsible for ensuring that the
outside auditors submit to the Audit Committee, on a periodic
basis, a formal written statement delineating all
relationships between the auditors and the Company consistent
with Independence Board Standard No. 1 as modified or
supplemented.
o The Audit Committee is responsible for actively engaging in a
dialogue with the outside auditors with respect to any
disclosed relationships or services that may impact the
objectivity and independence of the outside auditors and for
recommending that the Board of Directors take appropriate
action, if necessary, in response to the outside auditors'
report to satisfy itself of the outside auditors'
independence.
o The Audit Committee shall review and discuss with the outside
auditors any matters described in Statement on Auditing
Standards No. 61, as modified or supplemented.
o The Audit Committee is responsible for reviewing,
understanding and approving the scope of the external audit
and related fees.
o The Audit Committee is responsible for reviewing,
understanding and assessing the nature and cost of non-audit
services provided by the outside auditors and the possible
effect of the performance of those services on the Company.
o The Audit Committee shall require the outside auditors to
communicate to the Audit Committee any matters required by
applicable regulations or accounting standards.
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VI. INTERNAL CONTROLS
With management and/or outside auditors, the Audit Committee shall understand
and assess:
o the quality of the financial reporting and the system of
internal controls; and
o the outside auditors' process of assessing risks.
VII. EXTERNAL FINANCIAL REPORTING
With management and outside auditors, the Audit Committee shall review,
understand and assess:
o the annual consolidated financial statements and notes thereto
prior to distribution and/or filing with the SEC;
o the quarterly consolidated financial statements and notes
thereto prior to distribution and/or filing with the SEC;
o significant accounting and reporting issues including any
significant assumptions in judgment matters and any audit
adjustments proposed by outside auditors;
o the effect of new auditing standards brought to the attention
of the Audit Committee;
o the effect of current and new accounting principles
communicated by the outside auditors to the Audit Committee;
and
o any disagreements between management and outside auditors.
The Audit Committee shall determine whether, based on the Audit Committee's
review and discussions with management and the outside auditors, the Audit
Committee will recommend to the Board that the annual financial statements be
included in the Company's annual report on Form 10-K for the previous fiscal
year.
VIII. LEGAL COMPLIANCE
The Audit Committee shall also be responsible for
o oversight of company policies and procedures regarding
compliance with law; and
o reporting to the Chairman of the Board any matter that the
Audit Committee feels should be brought to the Board,
including but not limited to inadequate controls, inordinate
undisclosed risks, quality of reporting, conflict of interest,
illegal activities or dishonesty.
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PROXY
WINSTON HOTELS, INC.
COMMON STOCK PROXY FOR
ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert W. Winston, III and James D.
Rosenberg and each of them as attorney and proxy of the undersigned, each with
the full power of substitution, to represent the undersigned and to vote all of
the shares of Common Stock in Winston Hotels, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held on May 8,
2001, at 10:00 a.m., local time, at the Homewood Suites Hotel, 5400 Homewood
Banks Drive, Raleigh, North Carolina, and any adjournments or postponements
thereof (1) as hereinafter specified upon the proposals listed below and as more
particularly described in the Company's Proxy Statement, receipt of which is
hereby acknowledged; and (2) in their discretion upon such other matters as may
properly come before the meeting and any adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS LISTED
BELOW.
1. ELECTION OF DIRECTORS
|_| FOR all nominees listed below (except as marked to the
contrary).
|_| WITHHOLD AUTHORITY to vote for all nominees listed below.
Charles M. Winston, Robert W. Winston, III, James H. Winston,
Thomas F. Darden, II, Richard L. Daugherty, Edwin B. Borden
and David C. Sullivan
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED
BELOW:
--------------------------------------------------------------
(Continued on other side)
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(Continued from other side)
2. RATIFY APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2001:
|_| FOR |_| AGAINST |_| ABSTAIN
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign.
Date , 2001
-----------------------------------
(Be sure to date Proxy)
---------------------------------------------
Signature and title, if applicable
---------------------------------------------
Signature if held jointly
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign the full corporate name by the
president or other authorized officer. If a
partnership, please sign in the partnership
name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.