SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities Exchange Act of 1934
(Amendment No. __ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Apple Suites, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
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JOE BLY JOE BLY JOE BLY JOE BLY
2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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APPLE SUITES, INC.
MARCH 29, 2001
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, MAY 16, 2001
The Annual Meeting of Shareholders of Apple Suites, Inc. (the "Company")
will be held at the Company's offices at 9 North Third Street, Richmond,
Virginia 23219 on Wednesday, May 16, 2001, at 2:00 p.m. (EST) for the following
purposes:
1. To elect two (2) directors to serve until the 2004 Annual Meeting of
Shareholders.
2. To transact such other business as may properly come before the
meeting.
If you were a holder of record of any common shares of the Company at the
close of business on March 21, 2001, you are entitled to vote at the meeting.
If you are present at the meeting, you may vote in person even though you may
have previously returned a proxy card.
A proxy card for the voting of your shares is located in the window pocket
of the envelope in which these proxy materials were mailed. If necessary, an
additional proxy card may be obtained by calling Ms. Krissy M. Gathright,
Investors Services, at (804) 643-4964.
By Order of the Board of Directors
/S/ Glade M. Knight
Glade M. Knight
President
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW
YOUR PROXY AND VOTE IN PERSON.
APPLE SUITES, INC.
PROXY STATEMENT
MARCH 29, 2001
ANNUAL MEETING OF SHAREHOLDERS
MAY 16, 2001
GENERAL
The enclosed proxy is solicited by the directors of Apple Suites, Inc.
(the "Company") for the Annual Meeting of Shareholders to be held at the
Company's offices at 9 North Third Street, Richmond, Virginia 23219 on
Wednesday, May 16, 2001, at 2:00 p.m. (EST) (the "Annual Meeting"). Your proxy
may be revoked at any time before being voted at the Annual Meeting, either by
a written notice of revocation that is received by the Company before the
meeting or by conduct that is inconsistent with the continued effectiveness of
the proxy, such as delivering a proxy with a later date or attending the Annual
Meeting and voting in person. Unless your proxy indicates otherwise, all shares
represented by a proxy that you complete and return will be voted FOR the
election of the persons named therein as directors.
This proxy statement and the enclosed proxy were mailed on March 29, 2001,
to the common shareholders of record at the close of business on March 21, 2001
(the "Record Date"). The Company also has mailed to each shareholder of record
on the Record Date an Annual Report that includes audited financial statements
for the year ended December 31, 2000.
At the close of business on the Record Date, a total of 10,261,366 common
shares of the Company ("Shares") were outstanding and entitled to vote at the
Annual Meeting. Each Share has one vote on all matters, including those to be
acted upon at the Annual Meeting. The presence in person or by proxy of a
majority of the Shares entitled to vote at the Annual Meeting constitutes a
quorum for the transaction of business. If a quorum is present, two positions
on the Board of Directors will be filled by the election of the two properly
nominated candidates who receive the greatest number of affirmative votes at
the Annual Meeting, even if the nominees do not receive a majority of all votes
entitled to be represented and cast. A shareholder who wishes to abstain from
voting on the election of directors may do so by specifying, as provided on the
enclosed proxy, that authority to vote for any or all of the nominees is to be
withheld. By withholding authority in this manner, the Shares that otherwise
could be voted by such shareholder will not be included in determining the
number of Shares voted for such nominees. The Company will comply with
instructions in a proxy executed by a broker or other nominee shareholder
indicating that less than all of the Shares of the record shareholder on the
Record Date are to be voted on a particular matter. All Shares that are not
voted will be treated as Shares as to which voting authority has been withheld.
The mailing address of the Company is 9 North Third Street, Richmond,
Virginia 23219. Notice of revocation of proxies should be sent to ADP Proxy
Services, 51 Mercedes Way, Edgewood, New York 11717, Attn: Issuer Services
Department.
THE COMPANY WILL PROVIDE SHAREHOLDERS, WITHOUT CHARGE (EXCEPT FOR
EXHIBITS), A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2000,
INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, ON WRITTEN REQUEST TO
MS. KRISSY M. GATHRIGHT, INVESTOR SERVICES, AT THE MAILING ADDRESS FOR THE
COMPANY SET FORTH ABOVE.
OWNERSHIP OF EQUITY SECURITIES
"Beneficial Ownership" as used herein has been determined in accordance
with the rules and regulations of the Securities and Exchange Commission and is
not to be construed as an admission that any of the Shares involved are in fact
beneficially owned by any person. As of the Record Date, there are no
shareholders known to the Company who own beneficially 5% or more of the
outstanding Shares.
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Beneficial Ownership of Shares held by directors and executive officers of
the Company and nominees for election as directors at the Annual Meeting, as of
the Record Date, are indicated in the table below. Each person named in the
table and included in the Director/Officer group has sole voting and investment
powers as to such Shares, or shares such powers with his or her spouse and
minor children, if any.
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME (1) OWNED (2) CLASS
- --------------------------------------------------------- -------------- -----------
Lisa B. Kern ............................................ 6,406 *
Michael S. Waters ....................................... 6,406 *
Bruce H. Matson ......................................... 6,406 *
Robert M. Wily .......................................... 6,406 *
Glade M. Knight (3) ..................................... 10 *
All directors and executive officers as a group ......... 25,634 *
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* Less than one percent of outstanding Shares.
(1) The first two listed individuals are directors of the Company standing for
reelection at the Annual Meeting. The remaining three individuals will not
stand for reelection at the Annual Meeting because their terms as
directors extend to future years.
(2) Except in the case of Mr. Knight, consisting entirely of Shares that may be
acquired upon the exercise of stock options.
(3) Number of Shares beneficially owned by Mr. Knight consists of 10 Shares
owned by a corporation wholly owned by him. In addition, Mr. Knight owns
202,500 Class B Convertible Shares. The Class B Convertible Shares are
convertible, upon the occurrence of certain events, into Shares pursuant
to a formula based upon the gross proceeds raised by the Company.
ELECTION OF DIRECTORS
Nominees for Directors. At the Annual Meeting, two (2) individuals are to
be elected to the Board of Directors. The nominees for election as directors
are Lisa B. Kern and Michael S. Waters. If elected, each individual's term on
the Board of Directors will extend until the 2004 Annual Meeting of
Shareholders or until a successor is duly elected and qualified (except in the
event of death, resignation or removal).
Messrs. Knight, Matson and Wily will not stand for reelection as directors
at the Annual Meeting because their terms extend to future years. Mr. Knight's
term will continue until the 2002 Annual Meeting of Shareholders. The terms of
Mr. Matson and Mr. Wily will continue in each case until the 2003 Annual
Meeting of Shareholders.
Unless otherwise specified, proxies solicited hereby will be voted FOR the
election of the nominees listed. In the event any of those named should not
continue to be available for election, discretionary authority may be exercised
to vote for a substitute. No circumstances are presently known that would
render any nominee named herein unavailable. All of the nominees are now
members of the Board of Directors and have been nominated by action of the
Board of Directors. The nominees were originally elected as directors by a
Consent of Sole Shareholder dated August 16, 1999.
If a quorum is present, the two properly nominated candidates who receive
the greatest number of affirmative votes of the Shares that are represented and
voted at the Annual Meeting will be elected as directors of the Company. The
nominees, their ages, their principal occupations during the past five years or
more, and directorships of each in public companies in addition to the Company
are as follows:
Lisa B. Kern. Ms. Kern, 40, is a portfolio manager and Vice President of
Davenport & Co., LLC, an investment banking firm, in Richmond Virginia.
Previously, Ms. Kern was a Vice President with Crestar Bank's Trust and
Investment Management Group from 1989 to 1996. She also is expected to become a
director of Apple Hospitality Two, Inc. (founded by Glade M. Knight, as
discussed below).
Michael S. Waters. Mr. Waters, 46, is President and co-founder of
Partnership Marketing, Inc. From 1995 through 1998, Mr. Waters served as a Vice
President and general manager of GT Foods, a division of GoodTimes Home Video.
From 1987 to 1995, he served as Vice President and general
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manager for two subsidiaries (Instant Products of America and Chocolate
Products) of George Weston Ltd. (Canada), a fully-integrated food retailer and
manufacturer. He also is expected to become a director of Apple Hospitality
Two, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE TWO NOMINEES.
Other Directors. The following are the directors of the Company whose
terms expire in 2002 or 2003.
Glade M. Knight. Mr. Knight, 57, is Chairman of the Board, Chief Executive
Officer and President of the Company. His term on the Board expires in 2002.
Mr. Knight founded, and serves as Chairman of the Board and Chief Executive
Officer of, Cornerstone Realty Income Trust, Inc., which is a real estate
investment trust that owns apartment communities. Since 1972, Mr. Knight has
held executive and/or ownership positions in several corporations involved in
the management of and investment in real estate, and also has served, directly
or indirectly, as a general or limited partner of 71 limited partnerships
owning 80 properties comprising over 13,000 apartment units. Recently, Mr.
Knight founded, and serves as the sole director and Chief Executive Officer of,
Apple Hospitality Two, Inc. This corporation will seek to offer shares for sale
to the public, to operate as a real estate investment trust, and to acquire and
own upscale, high-quality, extended-stay hotel properties located in selected
metropolitan areas. Currently, Apple Hospitality Two, Inc. expects to seek
property acquisitions from entities other than the Company's franchisor, but it
will not be restricted in the types of properties it may acquire or their
locations.
Bruce H. Matson. Mr. Matson, 43, is a director of the Company. He is a
Vice President and Director of the law firm of LeClair Ryan, a Professional
Corporation, in Richmond, Virginia. He has been with LeClair Ryan since 1994.
Mr. Matson has practiced law since 1983. He also is expected to become a
director of Apple Hospitality Two, Inc. His term on the Board expires in 2003.
Robert M. Wily. Mr. Wily, 51, is a director of the Company. He is the
Director of Client Services for the Center of Claims Resolution located in
Princeton, New Jersey. Previously, he was the Deputy Chief, Article III Judges
Division of the Administrative Office of the U.S. Courts from 1999 to 2000. He
has served as the Clerk of Court for both the United States Bankruptcy Court
for the Eastern District of Virginia from 1986 to 1999 and the District of Utah
from 1981 to 1986. Prior to those positions, Mr. Wily was in the private
practice of law. He also is expected to become a director of Apple Hospitality
Two, Inc. His term on the Board expires in 2003.
COMMITTEES OF THE BOARD
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee as its standing committees. The Board of
Directors has no Nominating Committee.
The Executive Committee has, to the extent permitted by law, all powers
vested in the Board of Directors except such powers specifically denied the
Committee under the Company's Bylaws or by law. Messrs. Knight, Matson and Wily
are the members of the Executive Committee.
The Audit Committee oversees the relationship between the Company and its
independent auditor, monitors the reasonableness of Company expenses and
declares distributions to shareholders. Ms. Kern and Messrs. Waters and Wily are
the members of the Audit Committee.
The Compensation Committee administers the Company's incentive and stock
option plans, and oversees the compensation and reimbursement of directors and
officers of the Company. The members of the Compensation Committee are Messrs.
Matson and Wily.
During 2000, the Board of Directors held four meetings, the Audit
Committee met four times and the Compensation Committee met once. The Executive
Committee did not meet during 2000. Each director attended at least 75% of the
meetings of the Board and of the committee to which he or she was assigned.
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AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of three directors. It operates under a written charter (Exhibit A)
that was adopted by the Board of Directors on May 15, 2000, and is annually
reassessed and updated, as needed, in accordance with applicable rules of the
Securities and Exchange Commission. The Board of Directors has determined that
each member of the Audit Committee is independent, as defined by the Audit
Committee independence rules of the New York Stock Exchange (which the Company
has adopted for purposes of determining Audit Committee member independence).
In general, these rules state that a director is independent if he or she has
no relationship to the Company that may interfere with the exercise of his or
her independence from the Company and its management. Generally, directors who
are employees of the Company or any of its affiliates may not qualify as
independent directors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's financial statements in
accordance with auditing standards generally accepted in the United States and
issuing a report thereon. The Audit Committee's primary responsibility is to
monitor and oversee these processes. The Audit Committee also recommends to the
Board of Directors the selection of the Company's independent auditors.
In this context, the Audit Committee has reviewed and discussed the
Company's audited financial statements in the Annual Report with both
management and the independent auditors, including a discussion of the quality,
not just the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements. The Audit Committee also discussed with the independent auditors
matters required of auditors to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Company's independent
auditors also provided to the Audit Committee the written disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee discussed with the independent
auditors their independence. The Audit Committee has considered whether the
nonaudit services rendered by the principal accountant are compatible with
maintaining auditor independence.
The Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. Based
on the foregoing, the Audit Committee recommended to the Board of Directors
(and the Board has approved) that the audited financial statements be included
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2000 for filing with the Securities and Exchange Commission. The Audit
Committee also recommended (and the Board has approved) that Ernst & Young LLP
be retained as the Company's independent auditors for the fiscal year ending
December 31, 2001.
Audit Committee Members:
Lisa B. Kern, Chairperson
Michael S. Waters
Robert M. Wily
COMPENSATION OF DIRECTORS
During 2000, directors not affiliated with Apple Suites Advisors, Inc.
received annual directors' fees of $5,000, plus $1,000 (increased from $500 as
of August 17, 2000) for each meeting of the Board. Mr. Knight, as a director
affiliated with Apple Suites Advisors, Inc., received no compensation from the
Company for his service as a director. All directors were reimbursed by the
Company for their travel and other out-of-pocket expenses incurred in attending
meetings of the directors, or a committee, and in conducting the business of
the Company.
4
COMPENSATION OF EXECUTIVE OFFICERS
The only executive officer of the Company, Mr. Knight, did not receive
compensation from the Company in 2000 for carrying out his duties as executive
officer. Also, Mr. Knight did not receive stock options under the Incentive
Plan in 2000, as described below.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The Company has adopted two stock incentive plans that apply to certain
employees or affiliated persons (the "Incentive Plan") and directors (the
"Directors' Plan"). Under the Incentive Plan, incentive awards may be granted
to certain employees (including officers and directors who are employees) of
the Company, Apple Suites Advisors, Inc. or Apple Suites Realty Group, Inc. The
Directors' Plan applies to directors of the Company who are not employees of
the Company, Apple Suites Advisors, Inc. or Apple Suites Realty Group, Inc.
Pursuant to the Incentive Plan or the Directors' Plan, as applicable, the
following persons received, in 2000, the following options to purchase Shares:
NUMBER OF SHARES
UNDERLYING OPTIONS
(EXERCISABLE AT $10 PER SHARE)
NAME RECEIVED IN 2000 (3)
- ---------------------------------------- -------------------------------
Lisa B. Kern (1) .............. 906
Bruce H. Matson (1) ........... 906
Michael S. Waters (1) ......... 906
Robert M. Wily (1) ............ 906
Glade M. Knight (2) ........... 0
- ----------
(1) Director participating in the Directors' Plan
(2) Director and executive officer participating in Incentive Plan
(3) None of the options were exercised during the fiscal year ended December
31, 2000.
CERTAIN AFFILIATES
Glade M. Knight is the sole shareholder and director of Apple Suites
Advisors, Inc. and Apple Suites Realty Group, Inc. (these two companies
sometimes referred to herein as the "Apple Suites Companies"), which provide
brokerage, business and management services to the Company.
CERTAIN RELATIONSHIPS AND AGREEMENTS
The Company has three paid employees but no paid executive officers.
However, the Company has entered into certain agreements with the Apple Suites
Companies under which those entities have agreed to provide certain brokerage,
business and management services to the Company in exchange for compensation
from the Company.
The Company has entered into an Advisory Agreement (the "Advisory
Agreement") with Apple Suites Advisors, Inc., a Virginia corporation. Under the
Advisory Agreement, Apple Suites Advisors, Inc. receives an annual asset
management fee which is calculated as follows: The asset management fee is a
percentage of the gross offering proceeds received by the Company from time to
time from the sales of the Shares ("Total Contributions"). The applicable
percentage used to calculate the asset management fee is based on the ratio of
funds from operations to Total Contributions (the "Return Ratio") for the
preceding calendar quarter. The per annum asset management fee is equal to the
following with respect to each calendar quarter: 0.1% of Total Contributions if
the Return Ratio for the preceding calendar quarter is 6% or less; 0.15% of
Total Contributions if the Return Ratio for the preceding calendar quarter is
more than 6% but not more than 8%; and 0.25% of Total Contributions if the
Return Ratio for the preceding calendar quarter is above 8%. Apple Suites
Advisors, Inc. earned an asset management fee of $134,579 in 2000.
5
Apple Suites Realty Group, Inc. earned real estate commissions aggregating
$607,480 during 2000. This amount reflects a commission rate of 2% of the total
purchase price for property acquisitions by the Company in 2000.
As noted above, Mr. Knight also serves as Chairman of the Board and Chief
Executive Officer of Cornerstone. During 2000, Cornerstone provided services
and rented office space to the Company and in exchange the Company paid
Cornerstone approximately $292,000.
Effective January 1, 2001, the Company paid Mr. Knight a total of $900,000
to acquire all of his shares of Apple Suites Management, Inc., which became,
upon such acquisition, a wholly-owned subsidiary of the Company. This
acquisition was made possible by the REIT Modernization Act, which allows the
Company to operate its properties through a taxable REIT subsidiary without
using a third party.
INDEPENDENT PUBLIC ACCOUNTANT
The firm of Ernst & Young LLP served as independent auditors for the
Company in 2000. A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting. The representative will have an opportunity to
make a statement if he so desires and will be available to answer appropriate
questions from shareholders. The Board of Directors is expected to retain Ernst
& Young LLP as the Company's independent auditors for 2001. Fees for the last
fiscal year were $94,000 for annual audit, and $131,171 for all other services,
of which $97,361 was for audit related services and $33,810 was for all other
nonaudit services. Audit related services include accounting consultations and
services related to SEC registration statements.
MATTERS TO BE PRESENTED AT THE 2002 ANNUAL MEETING OF SHAREHOLDERS
Any qualified shareholder who wishes to make a proposal to be acted upon
at the 2002 Annual Meeting of Shareholders must submit such proposal for
inclusion in the Proxy Statement to the Company at its principal office in
Richmond, Virginia, no later than February 13, 2002.
With respect to shareholder proposals not included in the Company's Proxy
Statement for the 2002 Annual Meeting, the persons named in the Board of
Directors' proxy for such meeting will be entitled to exercise the
discretionary voting power conferred by such proxy under the circumstances
specified in Rule 14a-4(c) under the Securities Exchange Act of 1934, including
with respect to proposals received by the Company after February 13, 2002.
OTHER MATTERS FOR THE 2001 ANNUAL MEETING OF SHAREHOLDERS
Management knows of no matters, other than those stated above, likely to
be brought before the Annual Meeting. However, if any matters not now known
come before the Annual Meeting, the persons named in the enclosed proxy are
expected to vote the Shares represented by such proxy on such matters in
accordance with their best judgment.
By Order of the Board of Directors
/S/ Glade M. Knight
Glade M. Knight
President
THE COMPANY DEPENDS UPON ALL SHAREHOLDERS PROMPTLY SIGNING AND RETURNING
THE ENCLOSED PROXY CARD TO AVOID COSTLY SOLICITATION. YOU CAN SAVE THE COMPANY
CONSIDERABLE EXPENSE BY SIGNING AND RETURNING YOUR PROXY CARD IMMEDIATELY.
6
EXHIBIT A
APPLE SUITES, INC.
AUDIT COMMITTEE CHARTER
This charter governs the Audit Committee. The Committee shall review and
reassess the charter at least annually and obtain the approval of the Board of
Directors to the charter annually.
Structure and Membership
The Committee shall be appointed by the Board of Directors and shall
consist of at least three directors, each of whom is independent of management
and the Company within the meaning of the rules of the New York Stock Exchange
("NYSE"). Members of the Committee shall be considered independent if they have
no relationship that may interfere with the exercise of their independence from
management and the Company. All Committee members shall be financially
literate, or shall become financially literate within a reasonable period of
time after appointment to the Committee, and at least one member shall have
accounting or related financial management expertise, within the meaning of the
NYSE rules.
Statement of Policy
The Audit Committee shall provide assistance to, and serve as the
representative of, the Board of Directors in fulfilling its oversight
responsibility to the shareholders, potential shareholders, the investment
community, and others relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, the internal audit function, the annual independent audit of the
Company's financial statements, and the legal compliance programs as
established by management and the Board. In so doing, it is the responsibility
of the Committee to maintain free and open communication among the Committee,
independent auditors, the internal auditors and management of the Company. In
discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company, and the power to retain outside
counsel, or other experts, for this purpose.
Responsibilities and Processes
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of its activities to the Board. Management is responsible for preparing
the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The policies and
procedures of the Committee should remain flexible, in order to best react to
changing conditions and circumstances. The Committee should take the
appropriate actions to set the overall corporate "tone" for quality financial
reporting, sound business risk practices, and ethical behavior.
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the Committee will supplement them
as appropriate.
The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable
to the Board and the Audit Committee, as representatives of the Company's
shareholders. The Committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. Annually, the Committee shall review and recommend to the Board the
selection of the Company's independent auditors, subject to shareholders'
approval, if appropriate.
The Audit Committee is responsible for ensuring that the independent
auditors submit on a periodic basis to the Audit Committee a formal written
statement delineating all relationships between the auditors and the Company,
and the Audit Committee is responsible for actively engaging in a dialogue with
the independent auditors with respect to any disclosed relationships or
services that may impact the
7
objectivity and independence of the auditors, and for recommending that the
Board of Directors take appropriate action in response to the auditors' report
to satisfy itself as to the auditors' independence. The Committee shall discuss
with the auditors their independence from management and the Company and the
matters included in the written disclosures required by the Independence
Standards Board.
The Committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including the
adequacy of staffing. Also, the Committee shall discuss with management, the
internal auditors, and the independent auditors the adequacy and effectiveness
of the Company's accounting and financial controls, including the Company's
system to monitor and manage business risk, and legal and ethical compliance
programs. Further, the Committee shall meet separately with the internal
auditors and the independent auditors, with and without management present, to
discuss the results of their examinations.
The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the Company's
Quarterly Reports on Form 10-Q. Also, the Committee shall discuss the results
of the quarterly review and any other matters required to be communicated to
the Committee by the independent auditors under generally accepted auditing
standards. The chair of the Committee may represent the entire Committee for
the purposes of this review.
The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on Form
10-K (and the annual report to shareholders), including their judgment about
the quality, not just acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of the disclosures in
the financial statements. Also, the Committee shall discuss the results of the
annual audit and any other matters required to be communicated to the Committee
by the independent auditors under generally accepted auditing standards.
The Committee shall undertake all actions requisite to the preparation of
an annual report of the Audit Committee, as required by the rules of the
Securities and Exchange Commission, and shall cause such report to be prepared
and included in the Company's proxy statements, all as required by such rules.
Additionally, the Audit Committee will:
1. Hold no less than three regularly scheduled meetings each year, and
other meetings from time to time as may be called pursuant to the
Company's Bylaws.
2. Review with representatives of the independent auditors:
a. The plan for and scope of its annual audit of the Company's financial
statements.
b. The results of the annual audit.
c. Any recommendations with respect to internal controls and other
financial matters, including any perceived weaknesses in the Company's
internal controls, policies, and procedures.
d. Any significant changes made by management in the basic accounting
principles and reporting standards used in the preparation of the
Company's financial statements.
3. Review the extent of any services outside the audit area performed for
the Company by its firm of independent auditors.
4. Review the fees proposed by the Company's independent auditors for
their services.
5. Review the work of the Company's internal audit department with the
internal auditors including management's responses to recommendations
made and plans for future audit coverage.
6. Make such other recommendations to the Board on such matters, within the
scope of its functions, as may come to its attention and which in its
discretion warrant consideration by the Board.
8
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin B. Richards, James W.C. Canup and Krissy M.
Apple Suites, Inc. Gathright as Proxies, each with the power to appoint his or her substitute, and hereby
9 North Third Street authorizes them to represent and to vote, as designated below, all the common shares of
Richmond, VA 23219 Apple Suites, Inc. held of record by the undersigned on March 21, 2001, at the Annual
- ---------------------- Meeting of Shareholders to be held on May 16, 2001, or any adjournment thereof.
The Board of Directors recommends a vote "FOR" in item 1.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) |_| to vote for all nominees listed below |_|
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided
below.)
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Lisa B. Kern and Michael S. Waters
2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual
Meeting.
THIS PROXY WHEN PROPERTY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED ABOVE.
(Continued on reverse side)
Please indicate whether you plan to attend the Annual Meeting in person: |_| Yes |_| No
Please print exact name(s) in which shares are registered, and sign exactly as
name appears. When shares are held by joint tenants, both should sign. When
signing as attorney, 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.
Dated: ___________________________, 2001 _____________________________________________
Printed Name
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Signature
Please mark, sign, date and return the Proxy Card promptly _____________________________________________
using the enclosed envelope. Signature if held jointly