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INTERSTATE HOTELS & RESORTS INC DEF 14A 2008
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Interstate Hotels & Resorts, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box): þ No fee required. o 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:
(2) Aggregate number of securities to which transaction applies:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
Dear Stockholder:
You are cordially invited to attend the 2008 Annual Meeting of
Stockholders of Interstate Hotels & Resorts, Inc.,
which will be held at the Hamilton Crowne Plaza, 14th and K
Streets, NW, Washington, DC, 20005, on Wednesday May 21,
2008, at 8:30 a.m., Eastern Time. All holders of our
outstanding common stock, par value $.01 per share, as of the
close of business on March 26, 2008, are entitled to vote
at the Annual Meeting.
Enclosed for your information are copies of our Proxy Statement
and Annual Report to Stockholders. We believe that you will find
these materials informative.
We hope you will be able to attend the Annual Meeting. Whether
or not you expect to attend, please complete, sign, date and
return the enclosed proxy card in the envelope provided, or
place your vote by telephone or Internet as described in this
document, as promptly as possible in order to make certain that
your shares will be represented at our Annual Meeting.
Thomas F. Hewitt
Chief Executive Officer
To the
Stockholders of INTERSTATE HOTELS & RESORTS, INC.:
Notice is hereby given that the 2008 Annual Meeting of
Stockholders of Interstate Hotels & Resorts, Inc. will
be held at the Hamilton Crowne Plaza, 14th and K Streets,
NW, Washington, DC, 20005, on Wednesday May 21, 2008, at
8:30 a.m., Eastern Time. The Annual Meeting will be held
for the following purposes:
1. To ratify the appointment of KPMG LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2008;
2. To elect
and/or
re-elect four members of our board of directors to serve terms
ranging from one (1) to three (3) years expiring on
the date of the Annual Meeting in such year or until his or her
successor is duly elected and qualified; and
3. To transact such other business as may properly be
presented at the Annual Meeting.
The board of directors has fixed the close of business on
March 26, 2008, as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof. A list of these stockholders
will be available at our corporate offices.
All stockholders are cordially invited to attend the Annual
Meeting in person. For the convenience of our stockholders,
proxies may be given either by telephone, electronically through
the Internet, or by completing, signing and returning the
enclosed proxy card. Instructions for each of these options are
included in the enclosed materials. The presence, in person or
by proxy, of one-third of the shares entitled to vote shall
constitute a quorum at the Annual Meeting. Broker non-votes and
abstentions are counted for purposes of determining a quorum.
Broker non-votes are shares held by a broker or nominee for
which an executed proxy is received by us, but which are not
voted as to one or more proposals because timely instructions
have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have
discretionary voting power to vote such shares. Brokers and
nominees will have discretionary voting power with respect to
Proposals 1 and 2.
In order to approve Proposal 1, our bylaws require the
affirmative vote of the majority of votes cast affirmatively or
negatively by holders of shares present in person or represented
by proxy at the Annual Meeting. For this reason, an abstention
will have no effect on Proposal 1.
Nominees for director under Proposal 2 will be elected by a
plurality of votes cast at the Annual Meeting. An abstention
will have no effect on Proposal 2.
By Order of the Board of Directors
Christopher L. Bennett
Executive Vice President,
General Counsel and Secretary
April 23, 2008
PROXY
STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS INTERSTATE HOTELS & RESORTS, INC. TO BE HELD ON MAY 21, 2008
INTRODUCTION
The board of directors of Interstate Hotels & Resorts,
Inc., a Delaware corporation (“we”, “us”,
“our”, “Interstate”, or the
“Company”), is soliciting proxies from holders of our
common stock, par value $.01 per share (NYSE: IHR), to be voted
at the 2008 Annual Meeting of Stockholders. This Notice of
Annual Meeting, Proxy Statement and the enclosed proxy card are
first being mailed to stockholders on or about April 23,
2008.
The Annual Meeting will be held at the Hamilton Crowne Plaza,
14th and K Streets, NW, Washington, DC, 20005, on Wednesday
May 21, 2008, at 8:30 a.m., Eastern Time.
At the Annual Meeting, the stockholders of the Company will
consider and vote upon:
2. The election
and/or
re-election of four members of our board of directors; and
3. Such other business as may properly come before the
Annual Meeting.
Only holders of record of our common stock at the close of
business on March 26, 2008, are entitled to vote at the
Annual Meeting. At the close of business on March 26, 2008,
we had 31,755,184 shares of common stock outstanding. Each
outstanding share of common stock receives one vote with respect
to matters to be voted on at the Annual Meeting.
The representation in person or by proxy of one-third of the
shares entitled to vote shall constitute a quorum at the Annual
Meeting. Your shares are counted as present at the Annual
Meeting if you:
Broker non-votes and abstentions are counted for purposes of
determining a quorum. Broker non-votes are shares held by a
broker or nominee for which an executed proxy is received by us,
but which are not voted as to one or more proposals because
timely instructions have not been received from the beneficial
owners or persons entitled to vote and the broker or nominee
does not have discretionary voting power to vote such shares.
Brokers and nominees will have discretionary voting power with
respect to Proposals 1 and 2.
In order to approve the proposal to ratify the appointment of
KPMG LLP, our bylaws require the affirmative vote of the
majority of votes cast affirmatively or negatively by holders of
shares present in person or represented by proxy at the Annual
Meeting. For this reason, an abstention will have no effect on
the proposal.
Nominees for director will be elected by a plurality of votes
cast at the Annual Meeting. An abstention will have no effect on
the election of directors.
If a proxy in the accompanying form is duly executed and
returned, or you have properly authorized a proxy over the
telephone or Internet, the shares represented thereby will be
voted at the Annual Meeting and, where a choice is specified,
the proxy will be voted in accordance with such specification.
You may vote in person at the Annual Meeting or you may
authorize a proxy to vote on your behalf. There are three ways
to authorize a proxy:
Your broker will send you directions on how you can instruct
your broker to vote. Under New York Stock Exchange rules,
brokers will have discretion to vote the shares of customers who
fail to provide voting instructions on “routine
matters,” but brokers may not vote such shares on
“non-routine matters” without voting instructions. The
election of directors and the ratification of the appointment of
KPMG LLP as our independent registered public accounting firm
are routine matters.
If you do not provide instructions to your broker on how to vote
your shares on the routine matters, they may either vote your
shares on the routine matters in their discretion or leave your
shares un-voted.
Any stockholder giving a proxy for the Annual Meeting has the
power to revoke it any time prior to or at the Annual Meeting by
(i) granting a subsequently dated proxy,
(ii) attending the Annual Meeting and voting in person,
or (iii) otherwise giving notice in person or in writing to
the Secretary of Interstate Hotels & Resorts, Inc. at
4501 N. Fairfax Drive, Arlington, Virginia 22203.
The board’s recommendations are set forth after the
description of each proposal in this proxy statement. In
summary, the board recommends a vote:
The cost of soliciting proxies will be borne by us. We hired
Broadridge Financial Solutions, Inc. (formerly a subsidiary of
ADP) to assist in the distribution of proxy materials to
registered holders for approximately $25,000 which includes
reimbursement of certain out-of-pocket expenses. In addition to
soliciting proxies by mail, our directors, executive officers
and employees, without receiving additional compensation, may
solicit proxies by telephone, by fax, by
e-mail or in
person. Arrangements will also be made with brokerage firms and
other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of our
common stock, and we will reimburse such brokerage firms and
other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection with
forwarding such materials.
At the Annual Meeting, the stockholders will vote on the
ratification of the appointment of KPMG LLP, a firm of
registered public accountants, as our independent registered
public accounting firm to audit and report to our stockholders
on the consolidated financial statements of the Company and its
subsidiaries for the year ending December 31, 2008.
In order to ratify the appointment of KPMG LLP as our registered
public accounting firm, our bylaws require the affirmative vote
of the majority of votes cast by holders of shares physically
present or represented by proxy at the Annual Meeting. An
abstention will have no effect on this proposal.
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM.
Our board of directors currently consists of eight directors,
divided into three classes. The terms for directors in
Class I expire this year, the terms for directors in
Class II expire in 2009 and the terms for directors in
Class III expire in 2010. Directors in all classes are
typically elected for three-year terms.
At the Annual Meeting, four directors will be considered for
election/re-election. Messrs. James F. Dannhauser, Thomas
F. Hewitt, and Paul W. Whetsell, our current Class I
directors, are being considered for re-election for three-year
terms expiring on the date of the Annual Meeting in 2011 or
until his respective successor has been duly elected and
qualified. In May 2007, the board appointed Mr. H. Eric
Bolton as a member of our board of directors and, as a result,
Mr. Bolton is up for election by our stockholders at this
Annual Meeting. In order for our three classes of directors to
be balanced, Mr. Bolton was designated as a Class II
director by our board of directors
and is up for election by our stockholders as a Class II
director at this Annual Meeting. Mr. Bolton’s term
will expire with the expiration of the term of the other
Class II directors on the date of our Annual Meeting in
2009 or until his successor has been duly elected and qualified.
During 2007, our board of directors met 13 times. While we have
no formal policy on director attendance at board meetings or
Annual Meetings of stockholders, each of our current directors
attended at least 75% of the board meetings other than
Mr. Alibhai who attended seven meetings. During 2007,
Mr. Alibhai recused himself from one board meeting due to a
potential conflict of interest. Mr. Alibhai resigned from
our board of directors on April 9th, 2008.
Properly executed proxies will be voted as marked and, if not
marked, will be voted “FOR” the election of each
nominee, except where authority has been withheld. Proxies
cannot be voted for more people than the number of nominees
named below. The board of directors has no reason to believe
that any nominee will be unable to serve if elected. In the
event any nominee shall become unavailable to stand for
re-election, the individuals named as proxies in the
accompanying proxy may vote for the election of a substitute
nominee designated by our board of directors. Certain
information concerning such nominees is set forth below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
“FOR” THE ELECTION OR RE-ELECTION OF EACH OF THE
NOMINEES IDENTIFIED BELOW.
The following directors’ terms do not expire in 2008 and
therefore are not standing for re-election at this Annual
Meeting:
5
Our board of directors has four committees: an audit committee,
a compensation committee, an investment committee, and a
corporate governance and nominating committee.
The audit committee consists of four independent directors and
is responsible for:
Our audit committee’s charter is available on our Web site
at www.ihrco.com. The current members of the audit
committee are Messrs. Bolton, McCurry and Russell and
Ms. Doggett. Mr. McCurry is the chair of this
committee. Mr. Bolton was named to the audit committee by
the full board of directors upon the determination that he is
6
independent which occurred shortly after Mr. Bolton joined
our board of directors in May 2007. During 2007, our audit
committee met seven times and all of the members of the Audit
Committee attended at least 75% of the meetings that occurred
while they were on the Committee.
The board of directors has determined that Mr. Bolton, a
member of the audit committee, possesses all of the attributes
of an “audit committee financial expert,” for the
purposes of Item 407(d)(5) of
Regulation S-K.
In addition, and in accordance with New York Stock Exchange
Rule 303A, the board of directors has determined that all
of the current members of the audit committee are
“financially literate” and Messrs. Bolton and
McCurry have “accounting or related financial management
expertise.” The committee has the authority to engage
independent legal counsel or other experts or consultants,
including accountants, as it deems appropriate to carry out its
responsibilities.
The compensation committee consists of three independent
directors and is responsible for recommending to the board of
directors the compensation of our executive officers and for
administering our employee incentive plans. Our compensation
committee’s charter is available on our Web site at
www.ihrco.com. The current members of the compensation
committee are Messrs. Bolton, McCurry and Russell.
Mr. Russell is the chair of this committee. Mr. Bolton
was named to the compensation committee by the full board of
directors upon the determination that he is independent which
occurred shortly after Mr. Bolton joined our board of
directors in May 2007. The compensation committee met seven
times in 2007. All of the then-current members of the
compensation committee attended all of the meetings.
The investment committee currently consists of two independent
directors following the resignation of Mr. Alibhai from the
board of directors on April 9, 2008. The investment
committee is responsible for the review of investments proposed
by our management and the approval of such investments up to
$5 million. Investments in excess of $5 million are
considered by the entire board of directors. The current members
of the investment committee are Messrs Allen and Dannhauser.
Mr. Alibhai was the chair of the committee prior to his
resignation. The investment committee met eight times in 2007.
All of the then-current investment committee members attended at
least 75% of the meetings except for Mr. Alibhai who
attended 5 of the meetings.
The corporate governance and nominating committee consists of
three independent directors and is responsible for:
Our corporate governance and nominating committee’s charter
is available on our Web site at www.ihrco.com. The
current members of this committee are Ms. Doggett and
Messrs. Dannhauser and Whetsell. Mr. Dannhauser is the
chair of this committee. The corporate governance and nominating
committee met three times in 2007. All of the then-current
corporate governance and nominating committee members attended
all of the meetings except for Ms. Doggett who attended two
of the meetings.
In determining whether to nominate an incumbent director for
re-election, the corporate governance and nominating committee
assesses each incumbent’s current abilities and performance
over the prior year. In nominating a new director, the committee
will determine, at that time, the appropriate means to perform a
search for a qualified candidate, which may include engaging
outside consultants or search firms. When evaluating
prospective candidates for director, regardless of the source of
the nomination, the corporate governance and nominating
committee will consider such factors as it deems appropriate,
including:
The corporate governance and nominating committee will also use
its best efforts to seek to ensure that the composition of the
board at all times adheres to the independence requirements
applicable to companies listed for trading on the New York Stock
Exchange. The corporate governance and nominating committee may
consider candidates proposed by management, but it is not
required to do so. Other than the foregoing, there are no stated
minimum requirements for director nominees.
The corporate governance and nominating committee does not
currently have a formal policy regarding stockholder nominations
of directors. However, we would be pleased to receive
suggestions from stockholders about persons we should consider
as possible members of the board of directors. Any suggestion of
candidates for director should be sent to our Secretary and will
be considered by the corporate governance and nominating
committee.
Executive sessions or meetings of outside (non-management)
directors without management present are held regularly (at
least four times a year) to review the reports of the
independent registered public accounting firm, the criteria upon
which the performance of the Chief Executive Officer and other
senior managers is evaluated, the performance of the Chief
Executive Officer against such criteria, the compensation of the
Chief Executive Officer and other senior managers and other
matters. Mr. Russell is the chairman of the executive
sessions. There were four executive sessions held during 2007.
Interested parties who wish to communicate directly with
Mr. Russell or the other non-management directors should
address their communications to the attention of Mr. John
J. Russell, Jr.
c/o Christopher
L. Bennett, Secretary, Interstate Hotels & Resorts,
Inc., 4501 N. Fairfax Drive, Arlington, Virginia
22203. Mr. Russell will notify the board or the chairs of
the relevant board committees as to those matters that he
believes are appropriate for further action or discussion.
We have adopted Corporate Governance Guidelines, which are
available on our Web site at www.ihrco.com, along with
the charter of our corporate governance and nominating
committee. The corporate governance and nominating committee is
responsible for reviewing, revising, and ensuring compliance
with the Guidelines and reporting any governance concerns to the
board.
We have adopted a Code of Ethics for our principal executive
officer and senior financial officers. Our senior financial
officers include our principal financial officer, principal
accounting officer, and those officers responsible for financial
areas that impact our internal control over financial reporting.
A copy of this Code of Ethics is available on our Web site at
www.ihrco.com. We will disclose on our Web site when
there have been amendments to or waivers of the Code of Ethics.
No such waivers have been requested or granted.
We have also adopted a Code of Conduct and Ethics for our
directors which is available at our Web site at
www.ihrco.com. We will disclose on our Web site when
there have been amendments to or waivers of the Code of Conduct
and Ethics. No such waivers have been requested or granted.
We have a Business Code of Conduct which applies to all
employees, officers and directors of the Company. The Business
Code of Conduct can be found on our Web site at
www.ihrco.com, and we will disclose on our Web site when
there have been amendments to such code. Waivers of the Business
Code of Conduct for Named Officers (as defined below) and
directors, will also be posted on our Web site. No such waivers
have been requested or granted.
Copies of each of our Corporate Governance Guidelines, our Codes
of Conduct and each committee charter mentioned in this proxy
statement can also be obtained free of charge by written request
to Christopher L. Bennett, Secretary, Interstate
Hotels & Resorts, Inc., 4501 N. Fairfax
Drive, Arlington, Virginia 22203.
Our board of directors has determined that seven of our current
directors are “independent” for purposes of New York
Stock Exchange Rule 303A. A director that is referred to as
being “independent” in this proxy statement has been
determined by our board of directors to be independent for
purposes of Rule 303A. As required by Rule 303A, a
majority of the members of our board of directors are considered
independent. As permitted by Rule 303A, we have adopted
Categorical Standards of Director Independence, which is
attached as Annex A to this proxy statement and is
available on our Web site at www.ihrco.com. Our
independent directors are Ms. Doggett and
Messrs. Allen, Bolton, Dannhauser, McCurry, Russell, and
Whetsell. Mr. Alibhai was one of our directors until he
resigned on April 9, 2008. Mr. Alibhai was considered
an independent director during his tenure on the board of
directors. As part of the determination on independence, the
Board has concluded that none of our independent directors has a
material relationship with us.
Mr. Hewitt is not considered an independent director
because he is our Chief Executive Officer.
We have implemented a confidential hotline so that employees
serving in our United States operations may report any concerns
regarding corporate governance. The confidential hotline number
is posted in our corporate offices and hotels, as well as on our
internal web portal, and we have implemented procedures to
follow up on all claims reported to the hotline.
We have an International Compliance Manual which applies to all
of our employees, officers and directors that transact business
on our behalf internationally. The Manual summarizes
U.S. laws relating to our international business
transactions and serves as a guide when our employees, officers
and directors contemplate, effect or review our transactions or
operations abroad.
No contributions were made by us to any tax exempt organization
in which any independent director serves as an executive officer.
Stockholders who wish to communicate with the board of directors
or a particular director may send a letter to Christopher L.
Bennett, Secretary, Interstate Hotels & Resorts, Inc.
4501 N. Fairfax Drive, Arlington, Virginia 22203. The
mailing envelope must contain a clear notation indicating that
the enclosed letter is a “Stockholder-Board
Communication” or
“Stockholder-Director
Communication.” All such letters must identify the author
as a stockholder and clearly state whether the intended
recipients are all members of the board or just certain
specified individual directors. The Secretary will make copies
of all such letters and circulate them to the appropriate
director or directors.
The names, positions, business experience, terms of office and
ages of our executive officers, other than Mr. Hewitt,
whose biography is listed under “Election of
Directors,” are as follows:
This section contains a discussion of the material elements of
compensation awarded to, earned by or paid to the principal
executive and principal financial officers of Interstate, and
the other three most highly compensated executive officers of
Interstate. These individuals are referred to as the “Named
Officers” in this proxy statement.
Our current executive compensation programs are determined and
approved by the compensation committee of our board of
directors. None of the Named Officers are members of the
compensation committee.
Interstate’s current executive compensation program is
intended to achieve three fundamental objectives:
(1) attract and retain qualified executives;
(2) motivate performance to achieve specific strategic and
operating objectives of Interstate; and (3) align
executives’ interests with the long-term interests of our
stockholders. As described in more detail below, the material
elements of our current executive compensation program for Named
Officers include a base salary, an annual bonus opportunity, a
long-term equity incentive opportunity, retirement benefits,
severance protection for certain actual or constructive
terminations of the Named Officers’ employment, and other
post-termination benefits payable upon retirement, death or
disability.
We believe that each element of our executive compensation
program helps us to achieve one or more of our compensation
objectives. The table below lists each material element of our
executive compensation program and the compensation objective or
objectives that it is designed to achieve.
As illustrated by the table above, base salaries, perquisites,
retirement benefits and severance and other termination benefits
are all primarily intended to attract and retain qualified
executives. These are the elements of our current executive
compensation program where the value of the benefit in any given
year is not dependent on performance (although base salary
amounts and benefits determined by reference to base salary will
increase from year to year depending on performance, among other
things). We believe that in order to attract and retain
top-caliber executives, we need to provide executives with
predictable benefit amounts that reward the executive’s
continued service. Some of the elements, such as base salary,
are generally paid out on a short-term or current basis. The
other elements are generally earned and paid out on a
longer-term basis as is the case with multi-year vesting of
restricted stock and stock option grants, multi-year vesting of
401(k) and non-qualified deferred compensation plan employer
matches and severance payments upon termination of employment.
We believe that this mix of long-term and short-term
compensation allows us to achieve our three primary executive
compensation program objectives mentioned above.
Our annual bonus opportunity is primarily intended to motivate
Named Officers to achieve specific strategies and operating
objectives, although we also believe it helps us attract and
retain executives. Our equity-based compensation is primarily
intended to align Named Officers’ long-term interests with
the long-term interests of our
stockholders, although we also believe this form of compensation
helps motivate performance and attract and retain the best
executives available. These are the elements of our current
executive compensation program that are designed to reward
performance and the creation of stockholder value, and therefore
the value of these benefits is dependent on performance. Each
Named Officer’s annual bonus opportunity is paid out in
cash on an annual basis and is designed to reward performance
for that period. Equity-based compensation takes the form of
restricted stock grants which vest over four years (except with
respect to Mr. Hewitt where vesting is over three years
pursuant to the terms of his employment agreement). The number
of restricted shares, if any, are granted based on our
performance and the Named Officers’ performance during the
prior calendar year’s restricted stock plan.
Our compensation committee’s general philosophy is that
bonus and equity compensation should fluctuate with our success
in achieving financial and other goals, and that we should
continue to use long-term compensation such as restricted stock
and stock options to align Named Officers’ interests with
our stockholders’ interests. The compensation committee
believes in providing our Named Officers with the opportunity to
earn significant compensation for results-based incentive
compensation; therefore, the committee believes in setting base
salaries near the median of peer companies.
Our compensation committee currently retains outside consulting
firms to provide general compensation expertise, explore
alternative incentive programs and analyze comparative
compensation information for the compensation committee. In
carrying out its responsibilities in 2007, the committee relied
on reports prepared for us in early 2007 by FPL Associates, a
nationally recognized executive and director compensation
consulting firm. The committee sought the consulting firm’s
advice regarding compensation levels within the industry and the
advisability of adopting alternative or additional performance
incentives. In addition, FPL provided valuable information to
the compensation committee by benchmarking the committee’s
planned executive compensation program against those of a peer
group, determined by FPL after discussion with the committee, of
comparable large hotel companies, which group consisted of
Bluegreen Corporation, Boykin Lodging Corporation, Choice Hotels
International, Inc., Eagle Hospitality Properties Trust, Inc.,
Gaylord Entertainment Company, Great Wolf Resorts Inc., Hersha
Hospitality Trust, Hilton Hotels Corporation, Lodgian, Inc.,
Marriott International, Inc., MHI Hospitality Corporation,
Morgans Hotel Group Company, Red Lion Hotels Corporation,
Starwood Hotels & Resorts Worldwide, Inc., Supertel
Hospitality, Inc., and Winston Hotels, Inc.. This benchmarking
was performed for comparative purposes to evaluate the annual
base salary, cash bonus, equity based compensation and other
compensation for each of the Named Officers.
FPL also prepared a report and assisted our compensation
committee in developing our 2007 Equity Award Plan, which was
adopted by our stockholders at the 2007 Annual Stockholders
Meeting. Committees of our board of directors also hired FPL
during 2006 to evaluate compensation of our board of directors,
as well as to perform a new director search which resulted in
the appointment of Mr. Bolton to our board of directors in
May 2007.
In 2007, our compensation committee evaluated our equity and
cash-based compensation programs using, among other factors, the
information provided to it by our consulting firm. The 2007
Equity Award Plan, which contemplates both equity and cash-based
compensation, was designed to give us a competitive edge in
attracting, retaining and motivating employees, directors and
consultants and to provide us with a stock plan providing
incentives directly related to increases in our stockholder
value. A detailed description of our 2007 Equity Award Plan can
be found below under “2007 Equity Award Plan.” As
sub-plans under our 2007 Equity Award Plan, the committee also
established the 2007 Bonus Plan and the 2007 Restricted Stock
Plan to carry out the objectives of the 2007 Equity Award Plan.
A brief description of the 2007 Bonus Plan and the 2007
Restricted Stock Plan is provided below.
Because we generally determine the target value of our executive
compensation program, in part, by using such benchmarked
information, we do not generally factor in amounts realized from
prior compensation paid to the Named Officers.
Current
Executive Compensation Program Elements
Like most companies, our policy is to pay Named Officers’
base salaries in cash. Messrs. Hewitt, Riggins, Bennett, Ng
and Knighton have employment agreements under which they receive
fixed base salaries. As of January 1, 2007, Mr. Hewitt
entered into an amended employment agreement with the Company
that extended the date of expiration of his agreement to
February 17, 2010, and increased his base salary from
$400,000 to $500,000. In approving salary increases, the
committee takes into account, among other things, the recent
performance of the Company, peer group comparisons provided by
the committee’s outside consulting firm, the
executive’s individual performance and, for Named Officers
other than the chief executive officer, the recommendation of
Mr. Hewitt. In addition to the factors listed in the
previous sentence, the compensation committee increased
Mr. Hewitt’s salary in 2007 in conjunction with their
negotiations with Mr. Hewitt pursuant to which the
compensation committee was seeking Mr. Hewitt’s
agreement to extend his employment agreement by two years. The
base salary that was paid to each Named Officer in 2007 is the
amount reported for such officer in column (c) of the
Summary Compensation Table on page 20. During 2007,
Mr. Bennett received an increase in his annualized base
salary from $260,000 to $295,000; Mr. Knighton received an
increase in his annualized base salary from $320,000 to
$329,600; Mr. Ng received an increase in his annualized
base salary from $289,156 to $297,831; and Mr. Riggins
received an increase in his annualized base salary from $325,000
to $334,750.
Our policy is to pay annual bonuses to the Named Officers in
cash. The compensation committee, pursuant to our 2007 Bonus
Plan, approved cash bonuses for 2007 for our five Named Officers
as shown in column (f) of the Summary Compensation Table on
page 20. In 2007, Mr. Hewitt was eligible to receive a
bonus of up to 150% of his base salary, Mr. Riggins was
eligible for a bonus of up to 125% of his base salary and
Messrs. Bennett, Knighton and Ng were eligible to receive a
bonus of up to 100% of their base salary.
Mr. Knighton’s bonus potential was increased to 115%
effective January 1, 2008. The 2007 Bonus Plan is based on
the achievement of goals related to our performance as measured
by budgeted earnings before interest, tax, depreciation and
amortization calculated according to Non-GAAP measures that are
similar but not the same as those presented in our quarterly
earnings releases (“Adjusted EBITDA”) and earnings per
share calculated according to Non-GAAP measures that are similar
but not the same as those presented in our quarterly earnings
releases (“Adjusted Diluted EPS”) set at the beginning
of the year by management and approved by the board of directors
with the objective of being aggressive but achievable. One third
of each Named Officer’s bonus potential is based on each of
Adjusted EBITDA, Adjusted Diluted EPS and individual performance
objectives. If we fail to meet 90% of budgeted Adjusted EBITDA
and Adjusted Diluted EPS, a bonus may not be paid. If the
minimum or any higher threshold of Adjusted EBITDA performance
is achieved, then the Named Officers earn up to 33.33% of the
potential bonus achievable at that Adjusted EBITDA performance
threshold. If the minimum or any higher threshold of Adjusted
Diluted EPS performance is achieved, then the Named Officers
earn up to 33.33% of the potential bonus achievable at that
Adjusted Diluted EPS performance threshold. If budgeted Adjusted
EBITDA or Adjusted Diluted EPS are achieved, our Named Officers
receive 50% of their full bonus potential in that category (or
16.7% of their maximum bonus potential — 50% of
33.33%), except for Bruce Riggins who receives 60% of his full
bonus potential in that category (or 20% of his maximum bonus
potential — 60% of 33.33%). Our Named Officers earn
their full 33% of bonus potential for achieving 130% for each of
budgeted Adjusted EBITDA
and/or
Adjusted Diluted EPS. The remaining 33.33% of the potential cash
bonus award is based on the achievement of predetermined
individual performance objectives, specific to each individual
and department, the recommendation of Mr. Hewitt (except
with respect to his own bonus) and the Named Officer’s
handling of projects and transactions. For 2007, the Named
Officers’ salaries and bonuses represented the following
percentages of their respective total compensation: for
Mr. Hewitt 72.6%, for Mr. Riggins 82.8%, for
Mr. Bennett 82.5%, for Mr. Knighton 84.8% and for
Mr. Ng 49.5%. According to our outside compensation
consulting firm, our executive compensation is in line with
average executive compensation among our peer companies.
In addition to base salaries and annual bonus opportunities, we
provide Messrs. Hewitt and Riggins payments to cover life
insurance related expenses. Mr. Hewitt is also entitled to
a monthly car allowance. The other Named Executives do not
receive life insurance (other than as provided to all associates
participating in the Company healthcare plan) or car allowances.
We believe that these perquisites offer tangible benefits which
Messrs. Hewitt and Riggins find more meaningful than
additional cash. When determining Messrs. Hewitt’s and
Riggins’ base salary, the compensation committee takes into
consideration the value of these perquisites.
Our policy is that the Named Officers’ long-term
compensation should be directly linked to the value provided to
stockholders. Accordingly, the compensation committee grants
equity awards under our 2007 Equity Award Plan designed to link
an increase in stockholder value to compensation. We believe
using the Company’s prior year performance to determine the
amount of equity award grants tangibly ties our Named
Officers’ short term focus to our current operations. We
further believe that vesting the grants over a period of four
years encourages our Named Officers to align their focus on long
term strategic goals designed to promote growth and accretion in
stock value to our stockholders. All Named Officers were awarded
equity-based compensation for 2007 in the form of grants of
restricted stock subject to our 2007 Restricted Stock Plan,
described in the following paragraph, which was established
pursuant to our 2007 Equity Award Plan. Those restricted stock
grants were made in February 2008. In addition, Mr. Ng
received stock options in April 2007 as required by his
employment agreement. The compensation committee believes that
these awards encourage executives to continue to consider our
long-term performance and to remain with us to participate in
our long-term performance. Options granted under our employee
incentive plan generally vest and become exercisable in equal
annual increments over a three-year period from the date of the
grant. Prior to 2007, restricted stock grants vested in equal
annual increments over a three year period as well. The
restricted stock grants made in March 2007 vest equally over
four years except for shares granted to Mr. Hewitt which,
pursuant to the terms of his employment agreement, vest over
three years. Our compensation committee, after consultation with
FPL Associates, believes that a four year vesting period is more
consistent with the practices of our peers and better aligns
compensation for our executives with our long-term performance.
The grants in March 2007 to the Named Officers consisted of:
50,000 restricted shares to Mr. Riggins; 30,000 restricted
shares to Mr. Bennett; and 20,000 restricted shares to
Mr. Knighton. Mr. Hewitt received a grant of 85,000
restricted shares in April 2007. The compensation committee did
not have a formal restricted stock plan for 2006 and the size of
the grants in April 2007, which we granted based on the
Company’s performance in 2006, were made by the
compensation committee (i) consistent with the
Company’s past practice, and (ii) limited by the
number of shares available to be granted at the time due to the
fact that the 2007 Equity Award Plan had not yet been presented
to the Company’s stockholders for approval. The March and
April restricted stock grants were all approved by the
compensation committee.
Beginning in 2007, the compensation committee instituted a 2007
Restricted Stock Plan in consultation with FPL, the
committee’s compensation advisors. The 2007 Restricted
Stock Plan, which was established pursuant to the 2007 Equity
Award Plan, is based on the achievement of goals related to our
performance as measured by budgeted Adjusted EBITDA and Adjusted
Diluted EPS set at the beginning of the year by management and
approved by the board of directors with the objective of being
aggressive but achievable. One third of each Named
Officer’s bonus potential is based on each of Adjusted
EBITDA, Adjusted Diluted EPS and individual performance
objectives. If we fail to meet 90% of budgeted Adjusted EBITDA
and Adjusted Diluted EPS, a restricted stock grant may not be
paid. If the minimum or any higher threshold of Adjusted EBITDA
performance is achieved, then the Named Officers earn up to
33.33% of their potential restricted stock grant achievable at
that Adjusted EBITDA performance threshold. If the minimum or
any higher threshold of Adjusted Diluted EPS performance is
achieved, then the Named Officers earn up to 33.33% of their
potential restricted stock grant achievable at that Adjusted
Diluted EPS performance threshold. If budgeted Adjusted EBITDA
or Adjusted Diluted EPS are achieved, our Named Officers receive
80% of their full restricted stock grant potential in that
category (or 26.4% of their maximum restricted stock grant
potential — 80% of 33.33%). Our Named Officers earn
their full 33.33% of restricted stock grant potential for
achieving 130% of each of budgeted Adjusted EBITDA
and/or
Adjusted Diluted EPS. The remaining 33.33% of the potential
restricted stock grant is based on the achievement of
predetermined
individual performance objectives, specific to each individual
and department, the recommendation of Mr. Hewitt (except
with respect to his own bonus) and the Named Officer’s
handling of projects and transactions The grants in February
2008 to the Named Officers pursuant to the 2007 Restricted Stock
Plan consisted of: 172,995 restricted shares to Mr. Hewitt;
102,320 restricted shares to Mr. Riggins; 69,367 restricted
shares to Mr. Bennett; 89,163 restricted shares to
Mr. Knighton; and 70,032 restricted shares to Mr. Ng.
We have traditionally awarded annual restricted stock grants to
employees (including the Named Officers) during the first
quarter or early in the second quarter of each year in
conjunction with the compensation committee’s first meeting
of the year. The timing of grants may be delayed if material
non-public information about us exists. Other than grants made
in connection with the hiring or promotion of employees or other
special circumstances, the committee generally does not grant
equity awards at any other time during the year.
The aggregate amount as determined under FAS No. 123R
recognized for purposes of our financial statements for 2006 and
2007 with respect to outstanding options and restricted stock
awards granted to the Named Officers is shown in columns
(d) and (e) of the Summary Compensation Table on
page 20. The grant date value of the options and restricted
stock awarded to the Named Officers in 2007 as determined under
FAS No. 123R for purposes of our financial statements
is shown in column (i) of the Grants of Plan-Based Awards
Table on page 22.
We offer a non-qualified supplemental deferred compensation plan
to our Named Officers and associates serving as Vice President
or above pursuant to the Internal Revenue Code Section 409A
rules governing such plans. Because our 401(k) plan has
historically not met the annual nondiscrimination testing
requirements, highly compensated associates are significantly
limited in how much they can contribute to our 401(k) plan. The
intention of the deferred compensation plan is to provide our
Named Officers and other associates that are so limited with a
vehicle to plan for retirement or defer taxation on a portion of
their base salary and annual bonus. For those that contribute an
aggregate of at least 4% of their base salary to the deferred
compensation plan, we match up to 4% of their base salary
(offset by their 401(k) employer match) into their deferred
compensation plan accounts. We view the deferred compensation
plan as a vehicle to make up for the limitations on the amount
these associates can contribute to the company sponsored 401(k)
plan.
Our employment agreements with our Named Officers provide for
the payment of severance benefits upon termination without cause
or upon our change in control, provided the Named Officer is
terminated within a certain period of time following such change
in control. Severance payments made to our Named Officers, when
they are terminated without cause, generally include
(1) payment of one times (1.5 times for Mr. Ng and two
times in the case of Mr. Hewitt) the sum of their annual
salary and the amount of their bonus for the preceding year
(with the multiplier increased to two times if the Named Officer
is terminated in connection with a change in control),
(2) immediate vesting of all unvested stock options which
then become exercisable for one year; (3) immediate vesting
of all unvested restricted stock which becomes free of all
contractual restrictions; and (4) continued health and
dental benefits for 18 months or until he or she receives
benefits from another employer. We believe these employment
agreements reward the Named Officers for hard work and value
creation, assist us in retaining our Named Officers, and provide
incentives for each of the Named Officers to stay with us during
periods of uncertainty at the end of which such Named Officers
may not be retained.
We do not have formal guidelines for the level of stock
ownership in our company by our officers and directors.
Section 162(m) of the Internal Revenue Code limits our
deductibility of cash compensation in excess of $1 million
paid to the Chief Executive Officer and the four highest
compensated executive officers during any taxable year, unless
such compensation meets certain requirements. We are within the
$1 million Section 162(m) threshold limitations
regarding compensation exclusion requirements and, therefore,
all compensation should be
deductible by us. The compensation committee has considered and
will continue to consider deductibility in structuring
compensation arrangements. However, the committee retains
discretion to provide compensation arrangements that it believes
are consistent with the goals described above and in the best
interests of us and our stockholders, even if those arrangements
are not fully deductible under Section 162(m).
Our cash bonuses are intended to comply with the rules under
Section 162(m) for treatment as performance-based
compensation. Therefore, we should be allowed to deduct
compensation related to cash bonuses.
Should Thomas F. Hewitt be assessed an excise tax under
section 280G of the Internal Revenue Code, in connection
with accelerated termination payments for a change in control,
the Company will
gross-up the
termination payment equal to the amount of the assessed excise
tax (subject to certain limitations). The excise tax is
sometimes assessed on payments made to certain individuals in
connection with a change in control of the company, when the
payments are unusually large when compared with the
individual’s historic pay. The tax can be assessed on
accelerated vesting of equity awards, and on certain severance
payments made to the individual if the individual is fired after
a change in control. If we undergo a change in control at a
share value high enough to subject Mr. Hewitt to this
excise tax, then Mr. Hewitt has acted in the best interests
of our stockholders, possibly at his own personal expense. We
have agreed to gross up Mr. Hewitt for any such excise
taxes because we believe Mr. Hewitt should be entitled to
the full economic benefit of the payments he would otherwise
receive, even though we would not be able to take a tax
deduction on those gross up payments. If payments made pursuant
to a change in control are considered “parachute
payments” under Section 280G of the Internal Revenue
Code, then the sum of such parachute payments plus any other
payments made by the Company to the Named Officer (other than
Mr. Hewitt) which are considered parachute payments shall
be limited to the greatest amount which may be paid to the Named
Officer under Section 280G without causing any loss of
deduction to the Company under such section; but only if, by
reason of such reduction, the net after-tax benefit to the Named
Officer shall exceed the net after-tax benefit if such reduction
were not made.
Messrs. McCurry and Russell were members of the
compensation committee during all of 2007. Mr. Bolton
joined our board of directors and the compensation committee in
May 2007. No member of the compensation committee is or has been
a former or current officer or employee of the Company or had
any relationships requiring disclosure by us under the
SEC’s rules requiring disclosure of certain relationships
and related-party transactions. None of our Named Officers
served as a director or a member of a compensation committee (or
other committee serving an equivalent function) of any other
entity, the Named Officers of which served as one of our
directors or as a member of our compensation committee during
the fiscal year ended December 31, 2007.
Our stockholders approved our 2007 Equity Award Plan at our 2007
Annual Stockholders meeting. The purpose of the 2007 Equity
Award Plan is to promote the success of our Company by
(i) compensating and rewarding participating executives and
directors with equity awards for the achievement of performance
targets with respect to a specified performance period and
(ii) motivating such executives by giving them
opportunities to receive awards directly related to such
performance. The 2007 Equity Award Plan is generally intended to
provide incentive compensation and performance compensation
awards that qualify as performance-based compensation within the
meaning of Section 162(m) of the Internal Revenue Code.
The purpose of our 2007 Equity Award Plan is to give us a
competitive edge in attracting, retaining and motivating
employees, directors and consultants and to provide us with a
stock plan providing incentives directly related to increases in
our stockholder value. Our 2007 Restricted Stock Plan and 2007
Bonus Plan, both of which are described above, were established
pursuant to our 2007 Equity Award Plan.
Administration. Our compensation committee
administers our 2007 Equity Award Plan. The committee has the
authority to determine the terms and conditions of any
agreements evidencing any awards granted under our 2007 Equity
Award Plan and to adopt, alter and repeal rules, guidelines and
practices relating to our 2007 Equity Award Plan. Our
compensation committee has full discretion to administer and
interpret the 2007 Equity Award Plan and to adopt such rules,
regulations and procedures as it deems necessary or advisable
and to determine, among
other things, the time or times at which the awards may be
exercised and whether and under what circumstances an award may
be exercised.
Eligibility. Any of our employees, directors,
officers or consultants or of our subsidiaries or their
respective affiliates will be eligible for awards under our 2007
Equity Award Plan. Our compensation committee has the sole and
complete authority to determine who will be granted an award
under the 2007 Equity Award Plan.
Number of Shares Authorized. The 2007 Equity
Award Plan provides for an aggregate of 3,000,000 shares of
our common stock to be available for awards. No more than
500,000 shares of our common stock may be issued to any
participant during any single year with respect to incentive
stock options under our 2007 Equity Award Plan. No participant
may be granted awards of options and stock appreciation rights
with respect to more than 500,000 shares of our common
stock in any one year. No more than 500,000 shares of our
common stock may be granted under our 2007 Plan to any
participant during any single year with respect to performance
compensation awards in any one performance period. The maximum
amount payable pursuant to a cash bonus for an individual
employee or officer under our 2007 Equity Award Plan for any
single year during a performance period is $1,500,000. Cash
Bonuses in 2007 were granted pursuant to the 2007 Bonus Plan
which was established pursuant to the 2007 Equity Award Plan and
approved by our compensation committee. See “Annual
Bonuses” above for a description of the 2007 Bonus Plan.
Cash Bonuses for 2008 will be paid pursuant to the 2008 Bonus
Plan approved by the compensation committee.
If any award is forfeited or if any option terminates, expires
or lapses without being exercised, shares of our common stock
subject to such award will again be made available for future
grant. If there is any change in our corporate capitalization,
the compensation committee in its sole discretion may make
substitutions or adjustments to the number of shares reserved
for issuance under our 2007 Equity Award Plan, the number of
shares covered by awards then outstanding under our 2007 Equity
Award Plan, the limitations on awards under our 2007 Equity
Award Plan, the exercise price of outstanding options and such
other equitable substitution or adjustments as it may determine
appropriate.
The 2007 Equity Award Plan will have a term of ten years and no
further awards may be granted after that date.
Awards Available for Grant. The compensation
committee may grant awards of non-qualified stock options,
incentive (qualified) stock options, stock appreciation rights,
restricted stock awards, restricted stock units, stock bonus
awards, performance compensation awards (including cash bonus
awards) or any combination of the foregoing.
Options. The compensation committee is
authorized to grant options to purchase shares of common stock
that are either “qualified,” meaning they are intended
to satisfy the requirements of Section 422 of the Internal
Revenue Code for incentive stock options, or
“non-qualified,” meaning they are not intended to
satisfy such requirements. Options granted under our 2007 Equity
Award Plan will be subject to the terms and conditions
established by the compensation committee. Under the terms of
our 2007 Equity Award Plan, unless the compensation committee
determines otherwise, the exercise price of the options will not
be less than the fair market value of our common stock at the
time of grant. Options granted under the 2007 Equity Award Plan
will be subject to such terms, including the exercise price and
the conditions and timing of exercise, as may be determined by
our compensation committee and specified in the applicable award
agreement. The maximum term of an option granted under the 2007
Equity Award Plan will be ten years from the date of grant (or
five years in the case of a qualified option granted to a 10%
stockholder). Payment in respect of the exercise of an option
may be made in cash or by check, by surrender of unrestricted
shares (at their fair market value on the date of exercise) that
have been held by the participant for at least six months or
have been purchased on the open market, or the compensation
committee may, in its discretion and to the extent permitted by
law, allow such payment to be made through a broker-assisted
cashless exercise mechanism or by such other method as our
compensation committee may determine to be appropriate.
Stock Appreciation Rights. Our compensation
committee is authorized to award stock appreciation rights under
the 2007 Equity Award Plan. SARs will be subject to the terms
and conditions established by the compensation committee. A SAR
is a contractual right that allows a participant to receive,
either in the form of cash, shares or any combination of cash
and shares, the appreciation, if any, in the value of a share
over a certain
period of time. An option granted under the 2007 Equity Award
Plan may include SARs and SARs may also be awarded to a
participant independent of the grant of an option. SARs granted
in connection with an option shall be subject to terms similar
to the option corresponding to such SARs. The terms of the SARs
shall be subject to terms established by the compensation
committee and reflected in the award agreement.
Restricted Stock. Our compensation committee
is authorized to award restricted stock under the 2007 Equity
Award Plan. Awards of restricted stock will be subject to the
terms and conditions established by the compensation committee.
Restricted stock is common stock that generally is
non-transferable and is subject to other restrictions determined
by the compensation committee for a specified period. Unless the
compensation committee determines otherwise or specifies
otherwise in an award agreement, if the participant terminates
employment or services during the restricted period, then any
unvested restricted stock is forfeited. Restricted Stock grants
for 2007 were granted pursuant to the 2007 Restricted Stock Plan
which was established pursuant to the 2007 Equity Award Plan and
approved by our compensation committee. See “Equity-Based
Compensation” above for a description of the 2007
Restricted Stock Plan. The compensation committee has approved a
2008 Restricted Stock Plan pursuant to which grants of
restricted stock will be made for 2008.
Restricted Stock Unit Awards. Our compensation
committee is authorized to award restricted stock unit awards.
Restricted stock unit awards will be subject to the terms and
conditions established by the compensation committee. Unless the
compensation committee determines otherwise, or specifies
otherwise in an award agreement, if the participant terminates
employment or services during the period of time over which all
or a portion of the units are to be earned, then any unvested
units will be forfeited. At the election of the compensation
committee, the participant will receive a number of shares of
common stock equal to the number of units earned or an amount in
cash equal to the fair market value of that number of shares at
the expiration of the period over which the units are to be
earned or at a later date selected by the compensation committee.
Stock Bonus Awards. Our compensation committee
is authorized to grant awards of unrestricted shares of our
common stock, either alone or in tandem with other awards, under
such terms and conditions as the compensation committee may
determine.
Performance Compensation Awards. The
compensation committee may grant any award under the 2007 Equity
Award Plan in the form of a performance compensation award by
conditioning the vesting of the award on the satisfaction of
certain performance goals. The committee may establish these
performance goals with reference to one or more of the
following: net earnings or net income (before or after taxes);
basic or diluted earnings per share (before or after taxes); net
revenue or net revenue growth; gross profit or gross profit
growth; net operating profit (before or after taxes); return
measures (including, but not limited to, return on assets,
capital, invested capital, equity or sales); cash flow
(including, but not limited to, operating cash flow, free cash
flow and cash flow return on capital); earnings before or after
taxes, interest, depreciation, and amortization; gross or
operating margins; productivity ratios; share price (including,
but not limited to, growth measures and total stockholder
return); expense targets; margins; operating efficiency;
objective measures of customer satisfaction; working capital
targets; measures of economic value added; inventory control;
enterprise value; sales; stockholder return; return on
investment; return on capital; client retention; competitive
market metrics; employee retention; timely completion of new
product rollouts; timely launch of new facilities; earnings per
share; objective measures of personal targets, goals or
completion of projects; or any combination of the foregoing.
Transferability. Each award may be exercised
during the participant’s lifetime only by the participant
or, if permissible under applicable law, by the
participant’s guardian or legal representative and may not
be otherwise transferred or encumbered by a participant other
than by will or by the laws of descent and distribution.
Amendment. Our 2007 Equity Award Plan has a
term of ten years. Our board of directors may amend, suspend or
terminate our 2007 Equity Award Plan at any time; however,
stockholder approval to amend our 2007 Equity Award Plan may be
necessary if the law so requires. No amendment, suspension or
termination will impair the rights of any participant or
recipient of any award without the consent of the participant or
recipient.
Change in Control. In the event of a change in
control (as defined in the 2007 Equity Award Plan), all
outstanding options and equity awards (other than performance
compensation awards) issued under the 2007 Equity Award Plan
will become fully vested and performance compensation awards
will vest, as determined by the
compensation committee, based on the level of attainment of the
specified performance goals. The compensation committee may, in
its discretion, cancel outstanding awards and pay the value of
such awards to the participants in connection with a change in
control. The compensation committee can also provide otherwise
in an award agreement under the plan.
Summary
Compensation Table
The following table includes information concerning compensation
for each of the one year periods ended December 31, 2007
and 2006, in reference to our five Named Officers, which
includes required disclosure related to our CEO, CFO, and our
three other most highly compensated Named Officers as of those
dates. The Summary Compensation Table should be read in
connection with the tables and narrative descriptions that
follow.
Total compensation for our Named Officers consist of a base
salary, stock awards, options awards, non-equity incentive plan
compensation and personal benefits that consist of life
insurance premiums paid on behalf of the Named Officer,
termination payments, reimbursement of moving expenses,
commissions earned, and company matching contributions paid into
our retirement plans. Salary amounts reflect the actual base
salary payments made to the Named Officers in 2007 and 2006.
Stock Awards (column (d)) and Option Awards (column (e))
represent restricted stock grants and stock option grants,
respectively, for which we recorded compensation expense for
2007 and 2006. We calculated these amounts in accordance with
the provisions of SFAS No. 123(R). Under this
methodology, the compensation expense reflected in these columns
is for grants made in 2007 and 2006 and grants made in prior
years which continued to be expensed in 2007 and 2006 during
their respective vesting periods. The full FAS 123(R) grant
date fair value of the Stock Awards and Option Awards granted in
2007 is included in column (i) in the 2007 Grants of
Plan-Based Awards table of this proxy statement. The assumptions
used in calculating the FAS 123(R) compensation expense of
the Stock Awards and Option Awards are provided in Note 14
of our Annual Report on
Form 10-K
for the year ended December 31, 2007. For the number of
outstanding equity awards held by the listed officers at fiscal
year-end, see the Outstanding Equity Awards at Fiscal Year End
Table. For the proceeds actually received by the listed officers
upon exercise of stock options granted in prior years, see the
Option Exercises and Stock Vested Table. The 2007 Equity Award
Plan provides for an aggregate of 3,000,000 shares of our
common stock to be available for awards to officers, key
employees and non-employee directors. Options granted under the
plan will have a term of no more than 10 years and an
option price not less than the fair market value of our common
stock at the time of grant. Under the 2007 Equity Award Plan,
stock-based awards typically vest in four annual installments
beginning on the date of grant and on subsequent anniversaries,
assuming the continued employment of the recipient. All stock
based compensation issued and awarded prior to the adoption of
the 2007 Equity Award Plan will continue to be administered
pursuant to either our former Employee Incentive Plan or our
former Non-Employee Director Incentive Plan, both of which had
been approved by our shareholders. All stock based compensation
issued and awarded after May 2007, will be administered under
the 2007 Equity Award Plan.
“Non-Equity Incentive Plan Compensation” reflects
compensation earned for 2007 and 2006 performance under the 2007
and 2006 bonus plans. The total cash bonus award for the Named
Officers in 2007 is based on the achievement of goals related to
our performance as measured by budgeted Adjusted EBITDA and
Adjusted Diluted EPS set at the beginning of the year by
management and approved by the board of directors with the
objective of being aggressive but achievable. One third of each
Named Officer’s bonus potential is based on each of
Adjusted EBITDA, Adjusted Diluted EPS and individual performance
objectives. If we fail to meet 90% of budgeted Adjusted EBITDA
and Adjusted Diluted EPS, a bonus may not be paid. If the
minimum or any higher threshold of Adjusted EBITDA performance
is achieved, then the Named Officers earn up to 33.33% of the
potential bonus achievable at that Adjusted EBITDA performance
threshold. If the minimum or any higher threshold of Adjusted
Diluted EPS performance is achieved, then the Named Officers
earn up to 33.33% of the potential bonus achievable at that
Adjusted Diluted EPS performance threshold. If budgeted Adjusted
EBITDA or Adjusted Diluted EPS are achieved, our Named Officers
receive 50% of their full bonus potential in that category (or
16.7% of their maximum bonus potential — 50% of 33%).
Our Named Officers earn their full 33.33% of bonus potential for
achieving 130% of each of budgeted Adjusted EBITDA
and/or
Adjusted Diluted EPS. The remaining 33.33% of the potential cash
bonus award is based on the achievement of predetermined
individual performance objectives, specific to each
individual and department, the recommendation of Mr. Hewitt
(except with respect to his own bonus) and the Named
Officer’s handling of projects and transactions.
“Change in Pension Value and Non-qualified Deferred
Compensation Earnings” includes only the earnings in 2007
(on our supplemental deferred compensation plan) in excess of
the IRS normalized rate of return of 5.6% for the 2007 fiscal
year, which was 120% of the applicable federal long-term rate in
December 2007, from the Company sponsored non-qualified deferred
compensation plan. The Company does not sponsor a pension plan
for the Named Officers nor provide pension benefits to former
employees, and as such no changes in pension values have been
reported.
“All Other Compensation” includes life insurance
payments made on behalf of the relevant Named Officer, severance
payments, commissions earned related to business transactions,
relocation benefits, and our matching contributions into our
retirement plans and non-qualified deferred compensation plan.
For additional information regarding compensation, see the
“Current Executive Compensation Program Elements”
portion of the compensation discussion and analysis.
Summary
Compensation Table for 2007
2007
Grants of Plan-Based Awards Table
The following table provides information about equity and
non-equity awards granted to the Named Officers in 2007: the
grant date which is equal to the date of board approval (column
(b)); the possible payout under the non-equity incentive plan,
as approved by the compensation committee, at the threshold
level (or “minimum”) as stated in their respective
employment agreements (column (c)), target level (meeting
budgeted EBITDA as approved by the board of directors) (column
(d)), and the maximum level as stated in their respective
employment agreements (column (e)); the restricted shares
granted in 2007 to the Named Officers (column (f)); the stock
options granted in 2007 to the Named Officers (column (g)); the
exercise price of option awards which reflects the closing price
of our stock on the date of grant (column (h)) and; the full
grant date fair value of stock options and restricted stock
computed under SFAS 123(R), granted to the Named Officers
in 2007 (column (i)).
The 2007 Equity Award Plan provides for an aggregate of
3,000,000 shares of our common stock to be available for
issue and awards to officers, key employees and non-employee
directors. Options granted under the plan will have a term of no
more than 10 years and an option price not less than the
fair market value of our common stock at the time of grant.
Under the plan, stock-based awards vest in four annual
installments beginning on the date of grant and on subsequent
anniversaries, assuming the continued employment of the Named
Officer (except for Mr. Hewitt whose grants vest in three
installments as required by his employment agreement). There are
no terms that would cause the vesting period to accelerate
unless the compensation committee approves it or if it is
explicitly stated in the Named Officer’s employment
agreement. The vesting date of all awards granted have been
disclosed in the 2007 Outstanding Equity Awards at Fiscal Year
End Table. Generally, the full grant date fair value is the
amount that we would expense in its financial statements over
the award’s vesting schedule. Fair value for stock options
is calculated in accordance with SFAS 123(R). In measuring
fair value, SFAS 123(R) distinguishes between vesting
conditions related to our stock price (market conditions) and
other non-stock price related conditions (service conditions).
This amount reflects our accounting expense for the stock
options, and most likely will not correspond to the actual value
that will be recognized by the option holder, which depends
solely on the achievement of the specified service period and
the stock price on the date of exercise. For restricted stock,
fair value is calculated using the closing price of our stock on
the grant date. For stock options, fair value is calculated
using the Black-Scholes value on the grant date. For additional
information on the valuation assumptions, refer to Note 14
of our Annual Report on
Form 10-K
for the year-ended December 31, 2007, as filed with the
SEC. These amounts reflect our accounting expense under
SFAS 123(R) and do not correspond to the actual value that
will be recognized by the Named Officers.
Grants of
Plan-based Awards in 2007
Outstanding
Equity Awards at Fiscal Year-End for 2007
The following table provides information on the current holdings
of stock option and restricted stock awards by the Named
Officers. This table includes unexercised and unvested option
awards and restricted stock awards. Each equity grant is shown
separately for each Named Officer. Stock options and restricted
stock awards granted prior to January 1, 2007, listed in
the table below, vest ratably over three years after the grant
date typically subject to continued service with us through each
annual vesting date. Stock options and restricted stock granted
under the 2007 Equity Award Plan vest in four annual
installments beginning on the date of the grant (except for
restricted stock grants to Mr. Hewitt which vest over three
years pursuant to the terms of his employment agreement), see
footnote one for those grants issued under the 2007 Equity Award
Plan. The dates on the table represent the date of the final
annual vesting with respect to each grant. The market value of
unvested restricted stock awards reflected in “Market Value
of Shares or Units of Stock That Have Not Vested” (column
(h)) have been valued by multiplying the number of unvested
restricted stock awards reflected in “Number of Shares or
Units of Stock That Have Not Vested” (column (g)) by $3.96,
or our closing stock price on December 31, 2007, the last
trading day of the 2007 fiscal year. The “Vesting Date of
Restricted Stock Awards” (column (i)) represent the date of
the final annual vesting with respect to each grant. For
additional information about option awards and stock awards, see
the “Equity-Based Compensation” portion of our
compensation discussion and analysis.
The following table provides information for the Named Officers
on stock award expenses during 2007 including (1) the
number of shares acquired upon exercise and the value realized
and (2) the number of shares acquired upon the vesting of
restricted stock awards and the value realized. The “Value
Realized on Exercise” (column (c)) is based upon the
closing market price on the day of exercise. The Value Realized
on Vesting” (column (e)) is based upon the closing stock
price on the vesting date.
Non-Qualified
Deferred Compensation for 2007
The tables below provide information on the non-qualified
deferred compensation plan of the Named Officers in 2007. The
purpose of the plan is to offer participants deferred
compensation benefits pursuant to Section 409A of the
Internal Revenue Code and to supplement such participants’
retirement benefits under the plan sponsor’s tax-qualified
retirement plan and other retirement programs. The plan is
intended to be an unfunded deferred compensation plan maintained
for a select group of management or highly compensated
employees. During
23
2005, participant contributions were frozen during the year due
to pending legislation to such plans being introduced by the IRS
that year. A plan amendment was made in 2006 and participation
has been reinstated for the plan.
The supplemental non-qualified deferred compensation plan allows
participants the option to defer a percentage of their
compensation, including base salary, non-equity cash incentives,
and commissions, on a pre-tax basis into specific investment
funds, with the potential opportunity to participate in the
market appreciation of these investments. The funds provided
within the plan are publicly traded funds, managed and
administered by 3rd parties. In addition, the plan allows
participants the option to withdraw their deferred compensation
while they are still active in the plan as long as the election
is made several years in advance. A participant (or his or her
beneficiary) shall become entitled to receive, on or about the
date or dates selected by the participant on his or her
participant enrollment and election form or, if none, on or
about the date of the participant’s termination of
employment a distribution in an aggregate amount equal to the
participant’s vested account. On his or her participant
enrollment and election form, a participant may elect to receive
some or all of each year’s deferrals and related earnings
on a specific date prior to his or her separation from service.
A maximum of three (3) distribution dates may be
established and maintained by each participant. Alternatively,
on his or her participant enrollment and election form, a
participant may select payment or commencement of payment of his
or her vested account to be made after his or her separation
from service with us.
The following funds are available under the non-qualified
deferred compensation plan from which participants may choose to
invest:
The following table provides information on the non-qualified
deferred compensation of the Named Officers in 2007:
Potential
Payments Upon Termination Of Employment
Our Named Officers are eligible for severance benefits under
certain circumstances, as stated in their employment agreements.
If the Named Officer’s employment is terminated by the
Named Officer other than because of death, disability or for
good reason (“Voluntary Retirement”), the Named
Officer is not entitled to any termination benefits. If the
Named Officer is terminated by us for cause, the Named Officer
would not be eligible for any termination benefits. If the
termination of employment is as a result of death or disability,
we would pay the Named Officer or their estate a lump-sum
payment equal to the Named Officer’s base salary through
the termination date, plus a pro-rata portion of the Named
Officer’s bonus for the fiscal year in which the
termination occurred. In addition, we would pay the Named
Officer or their estate, the equivalent of one (1) times
the current annual base salary plus the preceding years’
bonus, as well as healthcare benefits for 12 months
following the date of termination. All unvested stock options
and restricted stock would vest immediately.
If the Named Officer’s employment is terminated by us
without cause or if the Named Officer terminates the employment
for good reason, we would pay the Named Officer a lump sum equal
to the product of one (1) times the sum (or, in the case of
Mr. Ng one and one-half times and in the case of
Mr. Hewitt two times the sum) of (A) the Named
Officer’s annual base salary and (B) the amount of the
Named Officer’s bonus for the preceding calendar year. In
both circumstances, all of the Named Officer’s unvested
stock options and restricted stock will immediately vest. In
addition, we would reimburse the Named Officer for the cost of
COBRA coverage, equivalent to coverage during the Named
Officer’s term of employment, until the earlier of
18 months after the date of termination, or until the Named
Officer receives benefits from a subsequent employer.
If the Named Officer is terminated as a result of change in
control, the Named Officer would receive two (2) times the
product of the sum, of the Named Officer’s current annual
base salary and an amount equivalent to that of the Named
Officer’s bonus for the preceding year. All unvested stock
options and restricted stock would vest immediately. In
addition, we would reimburse the Named Officer for the cost of
COBRA coverage, equivalent to coverage during Named
Officer’s term of employment, until the earlier of
18 months after the date of termination, or until the Named
Officer receives benefits from another employer.
Should Thomas F. Hewitt be assessed an excise tax under
section 280G of the Internal Revenue Code, in connection
with accelerated termination payments for a change in control,
the company will
gross-up the
termination payment equal to the amount of the assessed excise
tax (subject to certain limitations). If payments made pursuant
to a change in control are considered “parachute
payments” under Section 280G of the Internal Revenue
Code, then the sum of such parachute payments plus any other
payments made by the Company to the Named Officer (other than
Mr. Hewitt) which are considered parachute payments shall
be limited to the greatest amount which may be paid to the Named
Officer under Section 280G without causing any loss of
deduction to the Company under such section; but only if, by
reason of such reduction, the net after-tax benefit to the Named
Officer shall exceed the net after-tax benefit if such reduction
were not made. If our Named Offices were terminated or we
experienced a change in control on December 31, 2007, we
would make the following payments and provide the listed
benefits.
The severance payments provided in each Named Officer’s
employment agreement is based on the historical practice of the
Company which was based on (i) discussions the Company had
with its outside employment counsel with respect to common
severance practices our outside employment counsel saw at its
other publicly traded clients and (ii) the experience and
knowledge of the members of our compensation committee. Prior to
2005, our severance packages for our CEO typically included a
severance upon a change of control of three times the CEO’s
annual base salary and prior year’s bonus. This was reduced
to two years at the direction of the compensation committee when
we negotiated Mr. Hewitt’s employment agreement.
We vest our Named Officers in their unvested restricted stock
upon termination without cause because, under our historical
practice of granting restricted stock and pursuant to the terms
of our 2007 Restricted Stock Plan, grants are based on our
performance and the performance of our Named Officers during the
previous year. As a
retention tool, we vest the restricted stock over four years
(three years for Mr. Hewitt) following the date of grant;
however, if we terminate the Named Officer without cause, we
believe it is appropriate to vest the Named Officer for the
unvested shares since they relate to the Named Officer’s
past performance.
Director
Compensation for 2007
All independent, non-employee directors received cash
compensation for board and committee service as presented in
“Fees Earned or Paid in Cash” (column (b)). In
addition, all non-employee directors received an annual equity
award following the Annual Meeting. Directors are reimbursed for
expenses incurred to attend board and committee meetings.
Directors do not have retirement plans or receive any benefits
such as life or medical insurance. Directors who are employees
of us receive no additional compensation for serving as
directors.
Through September 30, 2006, our directors, other than
Mr. Whetsell, who were not our employees or employees of
our subsidiaries, were paid an annual fee of $20,000, and
Mr. Whetsell, as Chairman, received an annual fee of
$40,000. Beginning October 1, 2006, following the review
and recommendation of FPL Associates, our directors, other than
Mr. Whetsell, who are not our employees or employees of our
subsidiaries are paid an annual fee of $35,000, and
Mr. Whetsell, our Chairman, receives an annual fee of
$70,000. Also, beginning October 1, 2006, we pay an
additional annual fee of $15,000 to the audit committee
chairperson and $5,000 to the chairpersons of the compensation
committee, the corporate governance and nominating committee and
the investment committee. During all of 2006, each non-employee
director was paid $1,250 for attendance in person at each
meeting of our board of directors; $1,000 for attendance in
person at each meeting of a committee of our board of directors
of which the director is a member; and $500 for each telephonic
meeting of our board of directors or a committee of which the
director is a member. Non-employee directors may elect to
receive all or a portion of their annual fees in shares of our
common stock rather than cash. Directors who are our employees
do not receive any fees for their service on the board of
directors or committees. We reimburse all directors for their
out-of-pocket expenses in connection with their service on the
board of directors.
Prior to 2007, under our non-employee directors’ incentive
plan, each non-employee director was awarded an option to
purchase 7,500 shares of our common stock upon initial
commencement of service as a director, whether by appointment or
initial election. The exercise price of option grants is 100% of
the fair market value of our common stock on the date of grant,
and options will vest in three equal annual installments. The
exercise price may be paid in cash, cash equivalents acceptable
to the compensation committee of the board, our common stock or
any combination of them. Options granted under this plan, once
vested, will be exercisable for ten years from the date of
grant. Upon termination of service as a director, options which
have not vested will be forfeited, and vested options may be
exercised until they expire. All options will vest upon a change
in control of our Company. Beginning in 2007 and pursuant to our
2007 Equity Award Plan, directors are granted restricted stock
on the first business day after our Annual Stockholder’s
meeting having a value equal to $15,000 based on the closing
price of our common stock on the date of such grant. On
June 1, 2007, each of our directors was granted 2,525
restricted shares. The restricted shares granted to our
directors vest over four years with one-quarter of each grant
vesting on each of the first four anniversaries of the date of
such grant.
The following table below provides information concerning
compensation for the one year period ended December 31,
2007 in reference to the ten members that made up the board of
directors:
The following relates to the option awards outstanding for
non-employee directors:
The compensation committee has reviewed and discussed the
Compensation Discussion and Analysis with management, and based
on the committee’s review and those discussions with
management, the compensation committee recommended to the board
of directors that the Compensation Discussion and Analysis be
included in our proxy statement on Schedule 14A.
The Compensation Committee
John J. Russell, Jr. — Chair
H. Eric Bolton James B. McCurry
The audit committee of our board of directors is responsible for
providing independent, objective oversight of our accounting
functions and internal controls. The audit committee is composed
of three directors, each of whom is independent as defined by
the independence criteria under Section 301 of the
Sarbanes-Oxley Act of 2002 and the New York Stock Exchange
rules. The audit committee operates under a written charter
approved by our board of directors.
Management is responsible for our internal control over
financial reporting and financial reporting process. Our
independent registered public accounting firm, KPMG, is
responsible for performing an independent audit of our
consolidated financial statements on internal control over
financial reporting in accordance with generally accepted
auditing standards and to issue a report thereon. The audit
committee’s responsibility is to monitor and oversee these
processes. In performing these responsibilities, the audit
committee necessarily relies on the work and assurances of our
management and KPMG.
In connection with these responsibilities, the audit committee
reviewed and discussed with management and KPMG the
December 31, 2007 financial statements and
management’s assessment of the effectiveness of our
internal controls over financial reporting. The audit committee
also discussed with KPMG the matters required by Statement on
Auditing Standards No. 61 (Communications with audit
committees). The audit committee also received the written
disclosures and the letter from KPMG required by Independence
Standards Board Standard No. 1 (Independence Discussions
with audit committees), and the audit committee discussed with
KPMG the firm’s independence.
Based upon the audit committee’s discussions with
management and KPMG, and the audit committee’s review of
the representations of management and KPMG, the audit committee
recommended to our board of directors that the audited
consolidated financial statements be included in our annual
report on
Form 10-K
for the year ended December 31, 2007, as filed with the SEC.
The Audit Committee
James B. McCurry — Chair
H. Eric Bolton Leslie R. Doggett John J. Russell, Jr.
The audit committee has appointed KPMG LLP to serve as our
independent registered public accounting firm for 2008. KPMG LLP
has been our independent registered public accounting firm since
1998. A representative of KPMG LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if he
or she desires. KPMG LLP will be available to answer appropriate
questions.
The following fees were paid to KPMG LLP for the years ended
December 31, 2007 and 2006:
Notes:
The audit committee evaluates and considers whether any
financial information systems, design and implementation
services and other non-audit services provided by KPMG LLP to us
are compatible with maintaining KPMG LLP’s independence
pursuant to New York Stock Exchange and SEC rules and
regulations.
It has been the audit committee’s policy to approve in
advance the plan of audit services to be provided and an
estimate of the cost for such audit services. The audit
committee has also adopted a policy of approving in advance for
each calendar year a plan of the expected services and a related
budget, submitted by management, for audit-related services, tax
services and other services that we expect the auditors to
render during the year. Throughout the year, the audit committee
is provided with updates on the services provided and the
expected fees associated with each service. Any expenditure in
excess of the approval limits for approved services, and any
engagement of the auditors to render services in addition to
those previously approved, requires advance approval by the
audit committee. The audit committee approved the audit plan,
all of the fees disclosed above and the non-audit services that
we expect KPMG LLP to provide in 2008.
Our Business Code of Conduct covers transactions and other
activities by directors and employees of us and our subsidiaries
that give rise to conflicts of interest. The conflicts of
interest policy in the Business Code of Conduct requires the
prior approval of, among other things, transactions by the
employee or director with (and employment with or substantial
investments in) an enterprise that is a present or potential
supplier, customer or competitor, or that engages or may engage
in any other business with us. Any waivers of the Business Code
of Conduct relating to members of our board of directors must be
approved by the independent members of our board of directors
upon the recommendation of the corporate governance and
nominating committee. As a Delaware corporation, we are also
subject to the requirement for disinterested director or
shareholder approval of transactions by us with our directors
and officers, as set forth in Section 144 of the Delaware
General Corporation Law.
In June 2006, Mr. Whetsell formed, as its sole stockholder,
CapStar Hotel Company, an owner of hospitality real estate. As
approved by our board of directors, CapStar currently uses a
portion of our corporate office space in Arlington, Virginia,
and reimburses us for our allocated lease cost of such space
along with other costs we reasonably allocate to CapStar in
connection with its operations out of our offices including IT,
parking and standard office supplies and services. During 2007,
CapStar paid us $71,000 for the use of our space and services.
In January 2007, CapStar formed a joint venture with Lehman
Brothers Inc. to acquire the Hilton Garden Inn Waltham in
Waltham, Massachusetts and the Copley Square Hotel in Boston,
Massachusetts. Mr. Whetsell, our Chairman, owns CapStar. On
the date each hotel was acquired, the CapStar/Lehman joint
venture entered into a management agreement with us. The terms
of the management agreement were approved by the corporate
governance and nominating committee of our board of directors
prior to our execution of the management agreements. In 2007, we
earned $238,000 in management fees from these hotels.
We manage the Marriott Pittsburgh in Pittsburgh, Pennsylvania
pursuant to a management agreement with a hotel owner which is
5.5% owned by an affiliate of Mr. Alibhai, who was one of
our directors until his resignation on April 9, 2008. An
affiliate of Mr. Alibhai is also acting as the asset
manager of the hotel. Mr. Alibhai is not personally
involved in the asset management responsibilities of the hotel.
In 2007, we earned $312,000 in management fees from properties
owned by this joint venture.
In March 2007, we entered into a senior secured credit facility
with various lenders. Lehman Brothers Inc. was the sole lead
arranger and sole bookrunner for the new facility. Joseph J.
Flannery, who was one of our directors until June 1, 2007,
is a managing director of Lehman Brothers Inc. The senior
secured credit facility replaced our prior amended and restated
senior secured credit facility and provided aggregate loan
commitments of a $65 million term loan and a
$60 million revolving credit facility. In May 2007, we
amended the senior secured credit facility to increase the
borrowings under our term loan by an additional
$50 million, resulting in a total of $115 million
outstanding under the term loan, and increased the availability
under our revolving loan to $85 million. The senior secured
credit facility has a scheduled maturity of March 2010.
PRINCIPAL
STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of March 26,
2008 by (i) all persons known by us to own beneficially
more than 5% of our common stock, (ii) each director who is
a stockholder, (iii) each of our named executive officers,
and (iv) all directors and executive officers as a group.
Notes:
Section 16(a) of the Exchange Act requires our directors
and executive officers, and persons who own more than 10% of the
issued and outstanding shares of our common stock, to file
reports of beneficial ownership and changes in beneficial
ownership with the SEC. Directors, executive officers and
greater than 10% stockholders are required by SEC regulation to
furnish us copies of all Section 16(a) forms they file.
Based on a review of the copies of the forms furnished to us or
representations by reporting persons, all of the filing
requirements applicable to our officers, directors and greater
than 10% stockholders were met for fiscal year 2007 except with
respect to Form 4s filed by Lehman Brothers Holding Inc on
January 3, 2008, Form 4s filed by Messrs. Bennett
and H. Lee Curtis on January 12, 2007, a Form 4 filed
by Mr. Hewitt on March 9, 2007, Form 4s filed by
Mr. Alibhai on May 18, 2007, and a Form 4 filed
by Mr. McCarthy on June 21, 2007.
Stockholders sharing an address with another stockholder may
receive only one set of proxy materials at that address unless
they have provided contrary instructions. Any such stockholder
who wishes to receive a separate set of proxy materials now or
in the future may write or call us to request a separate copy of
these materials from Christopher L. Bennett, Secretary, at
Interstate Hotels & Resorts, Inc.,
4501 N. Fairfax Drive, Arlington, Virginia 22203.
Similarly, stockholders sharing an address with another
stockholder who have received multiple copies of our proxy
materials may write or call the above address and phone number
to request delivery of a single copy of these materials.
MISCELLANEOUS
Our annual report, including financial statements for the fiscal
year ended December 31, 2007, is being forwarded to each
stockholder along with this proxy statement.
If any of our stockholders intend to present a proposal for
consideration at our next Annual Meeting of Stockholders and
wishes to have such proposal in the proxy statement distributed
by our board of directors with respect to such meeting, such
proposal must be received at our principal executive offices
located at 4501 N. Fairfax Drive, Arlington, Virginia
22203, Attention: Christopher L. Bennett, Secretary, not later
than the 120th day prior to the first anniversary of the
date of this year’s proxy statement. Accordingly, a
stockholder nomination or proposal intended to be included in
the proxy statement for consideration at the 2009 Annual Meeting
must be received by the Secretary prior to the close of business
on December 24, 2008. In accordance with our bylaws,
assuming the 2009 Annual Meeting of Stockholders is held on
May 29, 2009, proposals of stockholders made outside of
Rule 14a-8
under the Exchange Act (which we will not be required to include
in our proxy material) must be submitted not later than
April 29, 2009, and not earlier than March 30, 2008;
provided, however, that if the date of the meeting is first
publicly announced or disclosed (in a public filing or
otherwise) less than 70 days prior to the date of the
meeting, such advance notice shall be given not more than ten
days after such date is first so announced or disclosed.
Our board of directors does not know of any business to be
presented for consideration at the Annual Meeting or any
adjournment thereof other than as stated in the Notice of Annual
Meeting of Stockholders. The affirmative vote of the holders of
a majority of the shares of our common stock represented at the
Annual Meeting or any adjournment thereof and actually voted
would be required with respect to any such other matter that is
properly presented and brought to a stockholder vote.
Christopher L. Bennett
Secretary
April 23, 2008
COPIES OF THE COMPANY’S ANNUAL REPORT ON
FORM 10-K
FOR THE COMPANY’S FISCAL YEAR ENDED DECEMBER 31, 2007, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO
CHRISTOPHER L. BENNETT, SECRETARY, INTERSTATE HOTELS &
RESORTS, INC., 4501 N. FAIRFAX DRIVE, ARLINGTON,
VIRGINIA 22203.
ANNEX A
BOARD OF DIRECTORS CATEGORICAL STANDARDS OF DIRECTOR
INDEPENDENCE
A majority of directors of Interstate Hotels &
Resorts, Inc. (the “Company”) must be independent. The
following categorical standards meet all of the requirements
contained in the New York Stock Exchange Listed Company Manual
and add certain additional requirements established by the board
of directors of the Company.
A director who meets all of the following categorical standards
shall be presumed to be “independent”:
For directors who do not meet the above criteria, the
determination of whether a director is independent or not, shall
be made by the directors who satisfy the independence standards
set forth above and those who have previously been determined to
be independent. Any determination of independence for a director
who does not meet the above standards must be disclosed and
specifically explained.
INTERSTATE HOTELS & RESORTS, INC.
4501 NORTH FAIRFAX DRIVE SUITE 500 ARLINGTON, VA 22203 VOTE BY INTERNET — www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by Interstate Hotels & Resorts, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. VOTE BY PHONE — 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Interstate Hotels & Resorts, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
INTERSTATE HOTELS & RESORTS, INC.
The Board of Directors recommends votes “FOR” the ratification of KPMG LLP as the independent
registered public accounting firm for the Company for the fiscal
year ending December 31, 2008, and “FOR” all director nominees, all as more fully set forth in the accompanying Proxy Statement.
Please sign exactly as the name appears hereon. Joint owners should each sign. Executors,
administrators, trustees, guardians or other fiduciaries should give full title as such. If signing for a corporation or other entity, please sign in full
entity name by a duly authorized officer.
PROXY
INTERSTATE HOTELS & RESORTS, INC. 4501 N. FAIRFAX DRIVE
ARLINGTON, VIRGINIA 22203 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS The undersigned stockholder of Interstate Hotels & Resorts, Inc., a Delaware
corporation (the “Company”), hereby appoints Thomas F. Hewitt and Christopher L. Bennett,
or either of them, as proxies for the undersigned, with full power of substitution in each of
them, to attend the Annual Meeting of Stockholders of the Company to be held at the Hamilton
Crowne Plaza, 14th and K Streets, NW, Washington, DC 20005, on May 21, 2008, at 8:30 a.m., local
time, and any adjournment or postponement thereof, to cast on behalf of the undersigned all votes
that the undersigned is entitled to cast at such meeting and otherwise to represent the
undersigned at the meeting with all powers as if physically present at the meeting. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and of
the accompanying Proxy Statement and revokes any proxy heretofore given with respect to such
meeting.
The votes entitled to be cast by the undersigned will be cast as instructed on the reverse side.
If this Proxy is executed but no instruction is given,
the votes entitled to be cast by the undersigned will be cast “For All” the director nominees and
“FOR” the proposal as described in the Proxy
Statement and in the discretion of the Proxyholder on any other matter that may properly come
before the meeting or any adjournment or
postponement thereof. The Board of Directors has no reason to believe that any nominee
will be unable to serve if elected or
re-elected. In the event any director nominee is unable to serve or for good cause
will not serve, the proxies may vote for the election of a substitute
nominee designated by the Board of Directors.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY. YOU MAY
USE THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SEE REVERSE
SIDE (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
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