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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
SECURITIES EXCHANGE ACT OF 1934
Filed
by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
| o | Preliminary Proxy Statement | ||
| o |
Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
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| þ | Definitive Proxy Statement | ||
| o | Definitive Additional Materials | ||
| o | Soliciting Material Pursuant to §240.14a-12 |
RED LION HOTELS CORPORATION
(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 |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Form, Schedule or Registration Statement No.:
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| Dear Shareholder: | April 20, 2006 |
You are cordially invited to attend the 2006 Annual Meeting of
Shareholders of Red Lion Hotels Corporation at 9:00 a.m. on
Thursday, May 18, 2006, at the Red Lion River Inn,
700 N. Division, Spokane, Washington.
The accompanying Notice of 2006 Annual Meeting of Shareholders
and Proxy Statement describe the matters to be presented at the
meeting.
Whether or not you plan to attend the meeting, we hope you will
have your stock represented by completing, signing, dating and
returning your proxy card in the enclosed postage-paid envelope
as soon as possible.
| Sincerely, | |
|
|
| Donald K. Barbieri | |
| Chairman of the Board |
IMPORTANT
A Proxy Statement and proxy card are enclosed. All shareholders
are urged to complete and mail the proxy card promptly. The
enclosed envelope for return of the proxy card requires no
postage. Any shareholder of record attending the meeting may
personally vote on all matters that are considered, in which
event the signed proxy will be revoked.
IT IS IMPORTANT THAT YOUR STOCK BE VOTED.
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RED LION HOTELS CORPORATION
NOTICE OF 2006 ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 2006
To the Shareholders:
The 2006 Annual Meeting of Shareholders of Red Lion Hotels
Corporation (the “Company”) will be held at
9:00 a.m. on Thursday, May 18, 2006, at the Red Lion
River Inn, Spokane, Washington, for the following purposes:
| (1) To elect two directors to hold office until the expiration of their respective three-year terms and until their respective successors are elected and qualified; | |
| (2) To ratify the appointment of BDO Seidman, LLP as the Company’s independent registered public accounting firm for 2006; | |
| (3) To approve the 2006 Stock Incentive Plan; and | |
| (4) To transact such other business as may properly come before the meeting and any adjournments thereof. |
Nominees for directors are named in the enclosed Proxy Statement.
March 31, 2006 has been set as the record date for the
meeting. Only shareholders of record at the close of business on
that date will be entitled to notice of and to vote at the
meeting.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON,
BUT EVEN IF YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID ENVELOPE
PROVIDED TO ENSURE YOUR REPRESENTATION. SHAREHOLDERS OF RECORD
ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE
PREVIOUSLY SENT IN A PROXY.
| By Order of the Board of Directors | |
|
|
| Thomas L. McKeirnan | |
| Senior Vice President, General Counsel and | |
| Corporate Secretary | |
| Spokane, Washington | |
| April 20, 2006 |
The 2005 Annual Report of Red Lion Hotels Corporation
accompanies this
Proxy Statement.
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RED LION HOTELS CORPORATION
2006 PROXY STATEMENT
General
The enclosed proxy is solicited by Red Lion Hotels Corporation,
a Washington corporation (the “Company”), for use at
the 2006 Annual Meeting of Shareholders to be held at
9:00 a.m. on Thursday, May 18, 2006, at the Red Lion
River Inn, Spokane, Washington, and at any adjournments thereof.
Only holders of record of the Company’s common stock, par
value $0.01 per share (the “Common Stock”), at
the close of business on March 31, 2006 will be entitled to
notice of and to vote at the meeting. On that date, the Company
had 13,299,022 shares of Common Stock outstanding. Each
share of Common Stock outstanding on the record date is entitled
to one vote on each matter that comes before the meeting.
The address of the Company’s principal executive offices is
201 West North River Drive, Suite 100, Spokane,
Washington 99201 and its website is
www.redlion.com
.
This Proxy Statement and the accompanying proxy are first being
mailed to the Company’s shareholders on or about
April 20, 2006.
Voting
Under Washington law and the Company’s Articles of
Incorporation and By-Laws, the presence at the meeting, in
person or by duly authorized proxy, of holders of a majority of
the outstanding shares of Common Stock constitutes a quorum for
the transaction of business.
Shares of Common Stock for which proxies are properly executed
and returned will be voted at the meeting in accordance with the
directions noted thereon or, in the absence of directions to the
contrary, will be voted (i) “FOR” the election of
the two nominees for the Board of Directors named on the
following pages (provided that, if any one or more of such
nominees should become unavailable for election for any reason,
such shares will be voted for the election of such substitute
nominee or nominees as the Board of Directors may propose);
(ii) “FOR” the ratification of the appointment of
BDO Seidman, LLP as the Company’s independent registered
public accounting firm for 2006; and (iii) “FOR”
the approval of the 2006 Stock Incentive Plan.
The two nominees for the Board of Directors who receive the
greatest number of votes cast in the election of directors by
the shares entitled to vote and present in person or by proxy at
the meeting shall be elected directors. In order to approve the
proposal to ratify the appointment of BDO Seidman, LLP, the
affirmative vote of a majority of the votes cast by the holders
of shares entitled to vote and present in person or by proxy at
the meeting is required. In order to approve the 2006 Stock
Incentive Plan, the same majority affirmative vote of
shareholders is required and in addition, under New York Stock
Exchange rules, the votes cast must represent at least a
majority of all of the outstanding shares of Common Stock
entitled to be voted on the proposal. Abstention from voting for
a nominee for director may make it less likely that the nominee
will be one of the two nominees for director who receive the
greatest number of votes cast. Abstention from voting on the
proposal to ratify the appointment of BDO Seidman, LLP will have
no effect, since approval of that proposal is based solely on
the number of votes actually cast. Abstentions from voting on
the proposal to approve the 2006 Stock Incentive Plan could
prevent that proposal from passing if, as a result of the
abstentions, the number of votes cast does not represent at
least a majority of all of the outstanding shares of Common
Stock entitled to be voted on the proposal.
Brokerage firms and other intermediaries holding shares of
Common Stock in street name for customers are generally required
to vote such shares in the manner directed by their customers.
In the absence of timely directions, brokerage firms and other
intermediaries generally will have discretion to vote their
customers’ shares in the election of directors and on the
proposal to ratify the appointment of BDO Seidman, LLP, but they
will not have discretion to their shares on the proposal to
approve the 2006 Stock Incentive Plan. If a brokerage firm or
other intermediary votes its customers’ shares on some but
not all proposals, the effect of the
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non-vote will vary depending on the proposal. A non-vote for a
nominee for director will make it less likely that the nominee
will be one of the two nominees for director who receive the
greatest number of votes cast. A non-vote on the proposal to
ratify the appointment of BDO Seidman, LLP will have no effect,
since approval of that proposal is based solely on the number of
votes actually cast. Non-votes on the proposal to approve the
2006 Stock Incentive Plan could prevent that proposal from
passing if, as a result of the non-votes, the number of votes
cast does not represent at least a majority of all of the
outstanding shares of Common Stock entitled to be voted on the
proposal.
The Company will bear the expense of preparing, printing and
distributing proxy materials to its shareholders. In addition to
solicitations by mail, a number of regular employees of the
Company may solicit proxies on behalf of the Board of Directors
in person or by telephone and may also retain others on behalf
of the Board of Directors to assist in the solicitation of
proxies by mail, telephone,
e-mail
and personal
interview. The Company will also reimburse brokerage firms and
other intermediaries for their expenses in forwarding proxy
materials to beneficial owners of the Company’s Common
Stock.
Revocation
Any shareholder giving a proxy may revoke it at any time before
it is voted by delivering to the Company’s Corporate
Secretary a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the meeting and
electing to vote in person.
PROPOSAL 1:
ELECTION OF DIRECTORS
The By-Laws of the Company provide that there shall be no fewer
than three and no more than thirteen members of the Board of
Directors, as determined from time to time by the Board of
Directors. The Board of Directors currently consists of seven
members, divided into three classes with terms expiring as
follows:
Class A (two positions with terms expiring in 2006):
| Peter F. Stanton | |
| Ryland P. “Skip” Davis |
Class B (three positions with terms expiring in
2007):
| Donald K. Barbieri | |
| Ronald R. Taylor | |
| Arthur M. Coffey |
Class C (two positions with terms expiring in 2008):
| Richard L. Barbieri | |
| Jon E. Eliassen |
NOMINEES
At the meeting, two persons will be elected to fill the
Class A positions for terms of three years, to hold office
until the annual meeting of shareholders in the year their terms
expire (2009) and until their respective successors have
been elected and shall have qualified as provided by the
By-laws. Peter F. Stanton and Ryland P. “Skip”
Davis are present directors of the Company and have been
nominated to continue as directors to fill the two Class A
positions.
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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
CLASS A (TERMS TO EXPIRE IN 2009)
Peter F. Stanton
, age 49, has been a director since
April 1998. Mr. Stanton has served as the Chief Executive
Officer of Washington Trust Bank (W.T.B.) since 1993 and
its Chairman since 1997. Mr. Stanton previously served as
President of Washington Trust Bank from 1990 to 2000.
Mr. Stanton is also Chief Executive Officer, President and
a director of W.T.B. Financial Corporation (a bank holding
company). In addition to serving on numerous state and local
civic boards, Mr. Stanton was President of the Washington
Bankers Association from 1995 to 1996 and served as Washington
state chairman of the American Bankers Association in 1997 and
1998. He currently serves as a National Trustee for the
Boy’s and Girl’s Club of America.
Ryland P. “Skip” Davis
, age 65, has been a
director since May 2005. He has served as Chief Executive
Officer of Providence Health Care since 1998 and Chief Executive
Officer of Sacred Heart Medical Center in Spokane since 1996.
From 1993 to 1996, Mr. Davis was Senior Vice President for
the Hunter Group, a hospital management firm specializing in
healthcare consulting and management nationally. From 1988 to
1993, he was Chairman and CEO of Synergos Neurological Centers,
Inc., in Santa Ana and Sacramento, California. From 1987 to
1988, he was President of Diversified Health Group, Inc., of
Sacramento. From 1982 to 1987, he worked for American Health
Group International as President and CEO of Amerimed in Burbank,
California, and as Executive Vice President of Operations. From
1981 to 1982, he worked for Hospital Affiliates International,
as Group Vice President in Sacramento, and as CEO of Winona
Memorial Hospital in Indianapolis, Indiana. From 1972 to 1975,
he was Associate Administrator of San Jose Hospital and
Health Care Center in San Jose, California and from 1968 to
1971, Assistant Administrator of Alta Bates Hospital in
Berkeley, California. He has done numerous private business
ventures related to healthcare. Mr. Davis is a Fellow of
the American College of Health Care Executives and has published
articles in “Modern Healthcare,” “Health
Week,” and other business publications regarding healthcare
issues and perspectives. Mr. Davis is currently on the
Board and is Chair of the Spokane Area Chamber of Commerce, on
the Boy Scouts of America Inland Northwest Council Board, and a
member of the Washington State University Advisory Council.
The Board of Directors recommends a vote “FOR” the
election of Peter F. Stanton and Ryland P. “Skip”
Davis to the Company’s Board of Directors.
CONTINUING DIRECTORS — NOT STANDING FOR ELECTION
THIS YEAR
CLASS B (TERM TO EXPIRE IN 2007)
Donald K. Barbieri
, age 60, has been a director
since 1978 and Chairman of the Board since 1996. He served as
President and Chief Executive Officer from 1978 until April
2003. Mr. Barbieri joined the Company in 1969 and was
responsible for its development activities in hotel,
entertainment and real estate areas. Mr. Barbieri is a past
Trustee of Gonzaga University; Chairman of the Board for the
Spokane Regional Chamber of Commerce; served as President of the
Spokane Chapter of the Building Owners and Managers Association;
as President of the Spokane Regional Convention and Visitors
Bureau and as Chairman of the Spokane United Way Campaign.
Barbieri chaired the State of Washington’s Quality of Life
Task Force. He has served as board Chairman for the Inland
Northwest’s largest hospital system, Sacred Heart Medical
Center and was founding president of the Physician Hospital
Community Organization. He has served three governors on the
Washington Economic Development Board and currently chairs the
Spokane County Democratic Election Committee after being a
candidate for the Fifth District US Congressional Seat from the
State of Washington. Mr. Barbieri is the brother of Richard
L. Barbieri.
Ronald R. Taylor
, age 58, has been a director since
April 1998. Mr. Taylor is President of Tamarack
Bay, LLC, a private consulting firm and is currently a
director of two other public companies, Watson Pharmaceuticals,
Inc. (a pharmaceutical manufacturer) and ResMed, Inc. (a
manufacturer of equipment relating to the management of
sleep-disordered breathing). Mr. Taylor is also Chairman of
the Board of three privately held companies. From 1998 to 2001,
Mr. Taylor was a general partner of Enterprise Partners, a
venture capital firm. From 1996 to 1998, Mr. Taylor worked
as an independent business consultant. From
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1987 to 1996, Mr. Taylor was Chairman, President and Chief
Executive Officer of Pyxis Corporation (a health care service
provider), which he founded in 1987. Prior to founding Pyxis, he
was an executive with both Allergan Pharmaceuticals and
Hybritech, Inc.
Arthur M. Coffey
, age 50, has been a director of Red
Lion Hotels Corporation since 1990 and has served as its
President and Chief Executive Officer since April 2003.
Mr. Coffey has over 30 years of experience in the
hospitality industry and has been with Red Lion Hotels
Corporation since 1981. He has held a variety of management
positions including Executive Vice President, Chief Financial
Officer, and Chief Operating Officer. Mr. Coffey played a
key role in taking the company public and listing on the NYSE in
1998. He possesses a unique combination of expertise in
development, operations and financial disciplines and during his
tenure the company has grown from ownership of three hotels into
a multi-division hospitality company that owns, manages and
franchises more than 60 hotels. He previously served as trustee
of the Spokane Area Chamber of Commerce, director of the
Washington State Hotel Association, and President of the Spokane
Hotel Association. Mr. Coffey is currently a director of
the Association of Washington Business. He also serves on the
board for the Inland Northwest Council, Boy Scouts of America.
CLASS C (TERMS TO EXPIRE IN 2008)
Richard L. Barbieri
, age 64, has been a director
since 1978. From 1994 until he retired in December 2003, he
served as the Company’s full-time General Counsel, first as
Vice President, then Senior Vice President and Executive Vice
President. He currently serves as Chairman of the Board of Puget
Sound Neighborhood Health Centers and as a member of the Board
of the Pike Market Foundation, both non-profit organizations.
From 1978 to 1995, Mr. Barbieri served as legal counsel and
Secretary, during which time he was first engaged in the private
practice of law at Edwards and Barbieri, a Seattle law firm, and
then at Riddell Williams P.S., a Seattle law firm.
Mr. Barbieri has also served as chairman of various
committees of the Washington State Bar Association and the King
County (Washington) Bar Association, and as a member of the
governing board of the King County bar association. He also
served as Vice Chairman of the Citizens’ Advisory Committee
to the Major League Baseball Stadium Public Facilities District
in Seattle in 1996 and 1997. Mr. Barbieri is the brother of
Donald K. Barbieri.
Jon E. Eliassen
, age 59, has been a director since
September 2003. Mr. Eliassen is currently President and CEO
of the Spokane Area Economic Development Council.
Mr. Eliassen retired in 2003 from his position as Senior
Vice President and Chief Financial Officer of Avista Corp., a
publicly-traded diversified utility. Mr. Eliassen spent
33 years at Avista, including the last 16 years as its
Chief Financial Officer. While at Avista, Mr. Eliassen was
an active participant in development of a number of successful
subsidiary company operations including technology related
startups Itron, Avista Labs and Avista Advantage.
Mr. Eliassen serves on the Board of Directors of Itron
Corporation, IT Lifeline, Inc, and is the principal of Terrapin
Capital Group, LLC. Mr. Eliassen’s corporate
accomplishments are complemented by his extensive service to the
community in roles which have included director and President of
the Spokane Symphony Endowment Fund, director of The Heart
Institute of Spokane, Washington State University Research
Foundation, Washington Technology Center, Spokane
Intercollegiate Research and Technology Institute and past
director of numerous other organizations and energy industry
associations.
Director Independence
The Board has determined that each of the following four members
of the Board is “independent” within the meaning of
applicable listing standards of the New York Stock Exchange (the
“NYSE”): Ryland P. “Skip” Davis, Jon E.
Eliassen, Peter F. Stanton and Ronald R. Taylor. Under the NYSE
listing standards, a director is considered
“independent” if the Board affirmatively determines
that he or she has no material relationship with the Company,
either directly or as a partner, shareholder or officer of an
organization that has a relationship with the Company. The NYSE
listing standards permit the Board to adopt categorical
standards to assist it in making determinations of independence.
The Board has adopted such standards, which are set forth in the
Company’s Corporate Governance Guidelines, a copy of which
is attached to this Proxy
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Statement as Appendix A. The Board has made an affirmative
determination that each of the four directors named above
satisfies these categorical standards.
Executive Sessions of the Board
Following regularly scheduled meetings of the Board, the
non-management directors, which consist of the independent
directors identified above and Messrs. Donald K. Barbieri
and Richard L. Barbieri, generally meet in executive session
without Mr. Coffey or other members of management. Donald
K. Barbieri, as Chairman of the Board, serves as the presiding
director for these executive sessions. Interested parties may
contact the Chairman of the Board at
chairman@redlion.com
.
At least once each year, and generally at each quarterly meeting
of the Board, the independent directors meet in executive
session without any of the non-independent directors or members
of management present. Communications to the independent
directors may be addressed to Red Lion Hotels Corporation
Independent Directors, c/o Corporate Secretary, Red Lion
Hotels Corporation, 201 W. North River Drive,
Suite 100, Spokane, WA 99201. The Corporate Secretary will
forward all such comments to each of the independent directors.
Meetings of the Board of Directors
The Board of Directors met seven times in 2005. All directors
attended at least 75% of the meetings of the Board of Directors
and its committees on which they serve.
The Company encourages all of its directors to attend each
annual meeting of shareholders. All of the Company’s
directors attended the Company’s 2005 annual meeting of
shareholders.
Committees of the Board of Directors
The Company has established standing audit, compensation and
nominating and corporate governance committees, each of which is
composed solely of independent directors. The functions
performed by these committees are summarized below:
Audit Committee.
The Audit Committee engages the
Company’s independent registered public accounting firm,
reviews with the firm the plans and results of the audit
engagement, approves the audit and non-audit services provided
by the firm, reviews the Company’s financial statements,
reviews the Company’s compliance with laws and regulations,
receives and reviews complaints relating to accounting or
auditing matters, considers the adequacy of the Company’s
internal accounting controls, and produces a report for
inclusion in the Company’s annual proxy statement. The
members of the Audit Committee are Peter F. Stanton, Chairman,
Ryland P. “Skip” Davis, Jon E. Eliassen and Ronald R.
Taylor. The Audit Committee met six times during 2005. The
written charter for the Audit Committee can be found in the
Investor Relations section of the Company’s website at
www.redlion.com
.
Compensation Committee.
The Compensation Committee
discharges the responsibilities of the Board relating to
compensation and evaluation of the Company’s Chief
Executive Officer and other executive officers, recommends to
the Board the compensation of Board members, oversees the
administration of the Company’s equity incentive plan and
produces an annual report on executive compensation for
inclusion in the Company’s annual proxy statement. The
members of the Compensation Committee are Ronald R. Taylor,
Chairman, Ryland P. “Skip” Davis and Peter F. Stanton.
The Compensation Committee met four times in 2005. The Board of
Directors has adopted a written charter for the Compensation
Committee. It can be found in the Investor Relations section of
the Company’s website at
www.redlion.com
.
Nominating and Corporate Governance Committee.
The
Nominating and Corporate Governance Committee is responsible for
identifying and recommending to the Board for selection or
nomination those individuals qualified to become members of the
Board under the criteria established by the Corporate Governance
Guidelines of the Company, periodically reviewing and making
recommendations to the Board with regard to size and composition
of the Board and its committees, recommending and periodically
reviewing for adoption and modification by the Board the
Corporate Governance Guidelines of the Company
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and overseeing the evaluation of the Board and management. The
members of the Nominating and Corporate Governance Committee are
Jon E. Eliassen, Chairman, Peter F. Stanton and Ronald R.
Taylor. The Nominating and Corporate Governance Committee met
five times in 2005. The Board of Directors has adopted a written
charter for the Nominating and Corporate Governance Committee.
It can be found in the Investor Relations section of the
Company’s website at
www.redlion.com
.
Directors may be nominated by the Board of Directors or by
shareholders in accordance with the By-Laws of the Company. The
Nominating and Corporate Governance Committee will review all
proposed nominees for the Board of Directors, including those
recommended by shareholders, in accordance with its charter, the
By-Laws of the Company and the guidelines set forth in the
Company’s Corporate Governance Guidelines. The committee
will review age (a minimum age of 21 is prescribed for directors
under the By-Laws), desired experience, mix of skills and other
qualities to assure appropriate Board composition, taking into
account the current Board members and the specific needs of the
Company and the Board. The committee will generally look for
individuals who have displayed high ethical standards, integrity
and sound business judgment. This process is designed to ensure
that the Board includes members with diverse backgrounds, skills
and experience, including appropriate financial and other
expertise relevant to the business of the Company.
While the committee is authorized to retain a third party to
assist in the nomination process, the Company has not paid a fee
to any third party to identify or assist in identifying or
evaluating potential nominees.
A shareholder of record can nominate a candidate for election to
the Board by complying with the procedures in Section 3.3
of the Company’s By-Laws. Any shareholder of record who
wishes to submit a nomination should review the By-Law
requirements on nominations by shareholders, which are included
in the excerpt from the By-Laws attached as Appendix B to
this Proxy Statement. Any nomination should be sent to the Red
Lion Hotels Corporation Board of Directors —
Nominating and Corporate Governance Committee,
c/o Corporate Secretary, Red Lion Hotels Corporation,
201 W. North River Drive, Suite 100, Spokane, WA
99201. Any recommendations from shareholders regarding director
nominees should be sent to the Nominating and Corporate
Governance Committee in care of the Corporate Secretary of the
Company at the same address.
Communications with the Company’s Board of Directors
The Company takes actions to ensure that the views of
shareholders are heard by the Board or individual directors, as
applicable, and that appropriate responses are provided to
shareholders in a timely manner. The Company believes
shareholder communications have been excellent. The
e-mail
address for
contacting the Chairman of the Board of Directors is
chairman@redlion.com.
Shareholders may also communicate
with directors by directing written communications to Red Lion
Hotels Corporation Board of Directors or individual directors,
as applicable, c/o Corporate Secretary, Red Lion Hotels
Corporation, 201 W. North River Drive, Suite 100,
Spokane, WA 99201.
Audit Committee Financial Experts
The Board of Directors has determined that each member of the
Audit Committee is financially literate under the current
listing standards of the NYSE. The Board also has determined
that each member of the Audit Committee qualifies as an
“audit committee financial expert” as defined by
applicable rules of the Securities and Exchange Commission. The
audit committee financial experts are Ryland P. “Skip”
Davis, Jon E. Eliassen, Peter F. Stanton and Ronald R. Taylor.
All members of the Audit Committee are considered independent
because they satisfy the independence requirements for Board
members prescribed by the NYSE listing standards, including
those set forth in Rule 10A-3 under the Securities Exchange
Act of 1934, as amended.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company’s financial
reporting process on behalf of the Board. Management has the
primary responsibility for the financial statements and the
reporting process including the systems of internal controls. In
fulfilling its oversight responsibilities, the committee
reviewed and discussed the audited financial statements with
management.
The committee reviewed with the Company’s independent
registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards No. 61, as
amended by Statement on Auditing Standards No. 90
(Communication with Audit Committees). In addition, the
committee has received written disclosures and the letter from
the firm required by Independence Standards Board Standard
No. 1, and has discussed with the firm the firm’s
independence.
In reliance on the reviews and discussions referred to above,
the committee recommended to the Board that the audited
financial statements be included in the Annual Report on
Form
10-K
for the
year ended December 31, 2005 for filing with the Securities
and Exchange Commission. The committee and the Board have also
recommended, subject to shareholder ratification, the selection
of BDO Seidman, LLP as the Company’s independent registered
public accounting firm for 2006.
| Respectfully submitted, | |
| Peter F. Stanton, Chairman | |
| Ryland P. “Skip” Davis | |
| Jon E. Eliassen | |
| Ronald R. Taylor | |
| April 20, 2006 |
CODE OF ETHICS
The Company has adopted a Code of Business Conduct and Ethics
that applies to all of its directors, officers and employees.
The Company has made the code available in the Investor
Relations section of its website at
www.redlion.com
.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive any
fees for their service on the Board of Directors or any
committee thereof. The Company currently pays each of its
non-employee directors, with the exception of the Chairman of
the Board, an annual fee of $30,000. The annual fee for the
Chairman of the Board is $60,000. In addition to the annual fee,
the Company provides office space to the Chairman as part of his
compensation. During 2005 the cost of that office space to the
Company was $6,123. In addition, directors receive the following
supplemental annual fees for certain committee memberships:
chair of the Audit Committee, $15,000; chairs of each of the
Compensation Committee and the Nominating and Corporate
Governance Committee, $5,000; and non-chair members of the Audit
Committee, $5,000. All annual fees described above are payable
to directors in quarterly installments. In addition to annual
fees, each new non-employee director is entitled to a one-time
grant, at or following the Company’s annual meeting of
shareholders at which he or she is first elected, of shares of
Common Stock valued at $20,000. Thereafter, at or following each
subsequent annual meeting of shareholders, each non-employee
director is entitled to receive a grant of Common Stock valued
at $12,000. In addition to the annual fees and stock grants, it
is the Company’s policy to reimburse directors for their
out-of
-pocket expenses
incurred in connection with their service on the Board and its
committees.
7
Table of Contents
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the beneficial ownership of the
Common Stock as of March 31, 2006, by (i) each
shareholder known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock, (ii) each
director, (iii) each named executive officer and
(iv) all directors and executive officers as a group.
| Number of | |||||||||
| Shares | Percentage of | ||||||||
| Beneficial Owner | Owned(1) | Common Stock(1) | |||||||
|
Donald K. Barbieri(2)(3)
|
1,856,516 | 13.9 | % | ||||||
|
201 W. North River Dr., Ste. 360
|
|||||||||
|
Spokane, Washington 99201
|
|||||||||
|
Heather H. Barbieri(2)(4)
|
1,794,813 | 13.5 | % | ||||||
|
201 W. North River Dr., Ste. 100
|
|||||||||
|
Spokane, Washington 99201
|
|||||||||
|
WM Advisors, Inc.(5)
|
1,392,945 | 10.4 | % | ||||||
|
1201 Third Avenue, 22nd Floor
|
|||||||||
|
Seattle, Washington 98101
|
|||||||||
|
Wellington Management Company, LLP(6)
|
1,223,300 | 9.2 | % | ||||||
|
75 State Street
|
|||||||||
|
Boston, Massachusetts 02109
|
|||||||||
|
Wells Fargo & Company(7)
|
1,135,800 | 8.5 | % | ||||||
|
420 Montgomery Street
|
|||||||||
|
San Francisco, California 94104
|
|||||||||
|
Dimensional Fund Advisors Inc.(8)
|
946,800 | 7.1 | % | ||||||
|
1299 Ocean Ave., 11th Floor
|
|||||||||
|
Santa Monica, California 90401
|
|||||||||
|
Barington Companies Equity Partners, L.P.(9)
|
865,700 | 6.5 | % | ||||||
|
888 Seventh Avenue, 17th Floor
|
|||||||||
|
New York, NY 10019
|
|||||||||
|
DKB and HHB Unity Trust(10)
|
759,366 | 5.7 | % | ||||||
|
201 W. North River Dr., Ste. 360
|
|||||||||
|
Spokane, Washington 99201
|
|||||||||
|
David M. Bell(11)
|
566,816 | 4.2 | % | ||||||
|
Richard L. Barbieri
|
414,730 | 3.1 | % | ||||||
|
Arthur M. Coffey(12)
|
85,162 | * | |||||||
|
Ronald R. Taylor(13)
|
34,126 | * | |||||||
|
Peter F. Stanton(14)
|
19,126 | * | |||||||
|
John M. Taffin(15)
|
13,726 | * | |||||||
|
Jon E. Eliassen
|
11,000 | * | |||||||
|
Thomas L. McKeirnan(16)
|
8,870 | * | |||||||
|
Anupam Narayan
|
7,414 | * | |||||||
|
Ryland P. “Skip” Davis
|
2,999 | * | |||||||
|
All directors and executive officers as a group (10 persons)
(17)
|
2,453,669 | 18.4 | % | ||||||
| * | Represents less than 1% of the outstanding Common Stock. |
| (1) | For purposes of this table, a person is deemed to have “beneficial ownership” of shares of Common Stock if such person has the right to acquire beneficial ownership of such shares within 60 days. For purposes of computing the percentage of outstanding shares held by each person named above, any security that such person has the right to acquire within 60 days after March 31, 2006 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. | |
| (2) | The shares shown for this beneficial owner include 759,366 shares held by the DKB & HHB Unity Trust (see footnote 10), as required by the rules of the Securities and Exchange Commission. |
8
Table of Contents
| (3) | Includes 22,418.50 shares that may be issued to Donald K. Barbieri if he elects to have a like number of limited partnership units (“OP Units”) that he holds in Red Lion Hotels Limited Partnership redeemed by that partnership. | |
| (4) | Includes 1,875 shares subject to options exercisable within 60 days of March 31, 2006. Also includes 558,700 shares held by the Heather M. Barbieri Family LLC of which Heather H. Barbieri is a beneficiary but disclaims beneficial ownership except to the extent of her beneficial interest therein. Also includes 22,418.50 shares that may be issued to Ms. Barbieri if she elects to have a like number of OP Units that she holds in Red Lion Hotels Limited Partnership redeemed by that partnership. | |
| (5) | The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on February 28, 2006. | |
| (6) | The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on February 16, 2006. | |
| (7) | The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on February 17, 2006. | |
| (8) | The shares shown for this beneficial owner are based solely on the Schedule 13G filed by this beneficial owner on February 6, 2006. | |
| (9) | The shares shown for this beneficial owner are based solely on the Schedule 13D filed by this beneficial owner on July 18, 2005. |
| (10) | This beneficial owner is an irrevocable trust of which Donald K. Barbieri and Heather H. Barbieri are co-trustees. The shares held by this trust are also included in the number of shares shown for Mr. Barbieri and Ms. Barbieri. Mr. Barbieri and Ms. Barbieri disclaim beneficial ownership of the trust’s shares. Beneficial ownership of these shares is required to be duplicated in each of Donald Barbieri’s and Heather Barbieri’s respective share counts. |
| (11) | On March 29, 2006, David M. Bell, Executive Vice President, Development, announced his intention to retire from the Company on or before February 28, 2007. Since that announcement, Mr. Bell has not served as an executive officer of the Company. The shares shown for Mr. Bell include 40,706 shares subject to options exercisable within 60 days of March 31, 2006. |
| (12) | Includes 53,812 shares subject to options exercisable within 60 days of March 31, 2006. |
| (13) | Includes 10,600 shares subject to options exercisable within 60 days of March 31, 2006. |
| (14) | Includes 10,600 shares subject to options exercisable within 60 days of March 31, 2006. |
| (15) | Includes 7,030 shares subject to options exercisable within 60 days of March 31, 2006. |
| (16) | Includes 2,612 shares subject to options exercisable within 60 days of March 31, 2006. |
| (17) | Includes 84,654 shares subject to options exercisable within 60 days of March 31, 2006. Also includes 22,418.50 shares that may be issued to a member of this group if he elects to have a like number of OP Units that he holds in Red Lion Hotels Limited Partnership redeemed by that partnership. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Based on the Company’s review of Forms 3, 4 and 5 and
any amendments thereto furnished to it pursuant to
Section 16 of the Securities Exchange Act of 1934, as
amended, and written representations by the Company’s
officers and directors regarding compliance with applicable
filing requirements, the Company believes that all filing
requirements under Section 16 applicable to its officers,
directors and greater than ten percent shareholders were
complied with in 2005.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company conducted various business transactions during 2005,
2004 and 2003 with entities in which directors and/or
shareholders of the Company held ownership interests. The
transactions were limited to the following: the Company’s
performing certain management and administrative functions for
the entities; the Company’s receipt of commissions for real
estate sales for the entities; the Company’s leasing of
office space to the entities; and the Company’s purchases
from the entities of products for use in the Company’s
hotels and restaurants. The total aggregate value of these
transactions in 2005, 2004 and 2003 was $282,000, $398,000, and
$330,000, respectively.
During 2005, 2004 and 2003, the Company held certain cash and
investment accounts at Washington Trust Bank and had
certain notes payable to this bank. The chairman and chief
executive officer of this bank is a director of the Company. At
December 31, 2005 and 2004, the Company held cash and
investment accounts at this bank totaling approximately
$0.5 million and $3.9 million, respectively, and had
notes payable to this bank totaling approximately
$7.9 million and $4.5 million, respectively. The
Company’s net interest expense paid to this bank was
$172,000, $205,000, and $312,000 during 2005, 2004 and 2003,
respectively. Additionally, the Company manages this bank’s
corporate office building under the terms of a management
agreement. Management fees from this agreement during 2005, 2004
and 2003 were $127,000, $124,000, and $121,000, respectively.
9
Table of Contents
With respect to any material transaction (or series of related
transactions) between the Company and a related party, it is the
policy of the Company that such transaction be approved by a
majority of the Company’s non-conflicted directors upon
such directors’ determination that the terms of the
transaction are no less favorable to the Company than those that
could be obtained from an unrelated third party.
EXECUTIVE COMPENSATION
The following table discloses compensation received by the
Company’s named executive officers for services rendered to
the Company for the three years ended December 31, 2005.
Summary Compensation Table
| Long-Term | |||||||||||||||||||||||||||||
| Compensation | |||||||||||||||||||||||||||||
| Annual Compensation | |||||||||||||||||||||||||||||
| Restricted | Securities | ||||||||||||||||||||||||||||
| Name and Principal | Other Annual | Stock | Underlying | All Other | |||||||||||||||||||||||||
| Position | Year | Salary($) | Bonus($)(1) | Compensation($) | Awards($) | Options(#) | Compensation($)(2) | ||||||||||||||||||||||
|
Arthur M. Coffey
|
2005 | 321,536 | 150,717 | — | — | 100,000 | 4,900 | ||||||||||||||||||||||
|
President, Chief
|
2004 | 294,694 | 48,750 | — | — | 250,000 | 4,550 | ||||||||||||||||||||||
|
Executive Officer
|
2003 | 261,134 | — | — | — | 27,757 | — | ||||||||||||||||||||||
|
and Director
|
|||||||||||||||||||||||||||||
|
Anupam Narayan(3)
|
2005 | 225,000 | 67,790 | 46,407 | (4) | — | 30,000 | 3,375 | |||||||||||||||||||||
| Executive Vice | 2004 | 17,308 | 18,683 | — | 74,733 | (5) | 80,000 | — | |||||||||||||||||||||
|
President, Chief
|
2003 | — | — | — | — | — | — | ||||||||||||||||||||||
|
Investment Officer
|
|||||||||||||||||||||||||||||
|
and Chief Financial
|
|||||||||||||||||||||||||||||
|
Officer
|
|||||||||||||||||||||||||||||
|
John M. Taffin
|
2005 | 177,829 | 51,411 | — | — | 20,000 | 1,468 | ||||||||||||||||||||||
|
Executive Vice
|
2004 | 163,385 | 22,574 | 19,183 | (6) | — | 65,000 | 2,484 | |||||||||||||||||||||
|
President, Hotel
|
2003 | 48,615 | — | 9,556 | (7) | — | 14,060 | — | |||||||||||||||||||||
|
Operations
|
|||||||||||||||||||||||||||||
|
David M. Bell(8)
|
2005 | 153,802 | 25,237 | — | — | 7,500 | 3,395 | ||||||||||||||||||||||
| Executive Vice | 2004 | 144,471 | 13,491 | — | — | 35,000 | 3,152 | ||||||||||||||||||||||
|
President, Development
|
2003 | 137,179 | — | — | — | 22,726 | 3,361 | ||||||||||||||||||||||
|
Thomas L. McKeirnan
|
2005 | 143,846 | 31,630 | — | — | 7,500 | 2,249 | ||||||||||||||||||||||
| Senior Vice | 2004 | 134,695 | 7,950 | — | — | 25,000 | 2,049 | ||||||||||||||||||||||
|
President, General
|
2003 | 59,615 | — | — | — | 10,451 | — | ||||||||||||||||||||||
|
Counsel and
|
|||||||||||||||||||||||||||||
|
Corporate Secretary
|
|||||||||||||||||||||||||||||
| (1) | Awards of bonuses are made by the Compensation Committee. |
| (2) | Except as otherwise disclosed, represents matching contributions made by the Company under the Company’s 401(k) Savings Plan. |
| (3) | Mr. Narayan joined the Company on November 22, 2004. |
| (4) | Represents relocation costs paid by the Company for Mr. Narayan. |
| (5) | Consists of 14,828 restricted shares of Common Stock granted on November 22, 2004. The restrictions on 3,707 of these shares lapsed on November 22, 2005. The remaining 11,121 shares, the restrictions on which will lapse in one-third increments on each of the next three anniversaries of their date of grant, had a value of $99,533 on December 31, 2005. |
| (6) | Represents relocation costs paid by the Company for Mr. Taffin. |
| (7) | Represents relocation costs paid by the Company for Mr. Taffin. |
| (8) | On March 29, 2006, Mr. Bell announced his intention to retire from the Company on or before February 28, 2007. Since that announcement, Mr. Bell has not served as an executive officer of the Company. |
10
Table of Contents
Option Grants In Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants
Option Term
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Number of
Percent of
Securities
Total Options
Underlying
Granted to
Options
Employees
Exercise
Expiration
Name
Granted(#)(1)
in 2005
Price($)
Date
5%($)
10%($)
Arthur M. Coffey
100,000
49.8
%
7.46
11/10/2015
469,155
1,188,932
Anupam Narayan
30,000
14.9
%
7.46
11/10/2015
140,747
356,680
David M. Bell(2)
7,500
3.7
%
7.46
11/10/2015
35,187
89,170
John M. Taffin
20,000
10.0
%
7.46
11/10/2015
93,831
237,786
Thomas L. McKeirnan
7,500
3.7
%
7.46
11/10/2015
35,187
89,170
| (1) | All of these options were nonqualified options with a term of ten years and an exercise price equal to the fair market value of the Common Stock on the date of grant. Generally, fifty percent of each option will vest on the fourth anniversary of the date of grant and the remaining fifty percent will vest on the fifth anniversary of the date of grant. However, an option will vest earlier, to the extent shown in the following table, if, between the second anniversary and the fourth anniversary of the option grant date, the market price of the Common Stock increases by the indicated amount over the option’s exercise price and trades for 60 consecutive trading days at that level: |
| Stock Price | Percent of Option | |||||
| Increase | Shares Vested | |||||
| 100% | 25 | % | ||||
| 200% | 50 | % | ||||
| (2) | On March 29, 2006, Mr. Bell announced his intention to retire from the Company on or before February 28, 2007. Since that announcement, Mr. Bell has not served as an executive officer of the Company. |
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
| Number of Securities | ||||||||||||||||||||||||
| Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||
| Number of | Options at Fiscal | In-The-Money Options at | ||||||||||||||||||||||
| Shares | Year-End(#) | Fiscal Year-End($) | ||||||||||||||||||||||
| Acquired | Value | |||||||||||||||||||||||
| Name | on Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
|
Arthur M. Coffey
|
— | — | 53,812 | 360,379 | 145,724 | 1,141,392 | ||||||||||||||||||
|
Anupam Narayan
|
— | — | — | 110,000 | — | 352,700 | ||||||||||||||||||
|
David M. Bell(1)
|
— | — | 40,706 | 47,875 | 110,942 | 161,405 | ||||||||||||||||||
|
John M. Taffin
|
— | — | — | 99,060 | — | 325,886 | ||||||||||||||||||
|
Thomas L. McKeirnan
|
— | — | — | 42,951 | — | 138,464 | ||||||||||||||||||
| (1) | On March 29, 2006, Mr. Bell announced his intention to retire from the Company on or before February 28, 2007. Since that announcement, Mr. Bell has not served as an executive officer of the Company. |
11
Table of Contents
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The purposes of the Compensation Committee, which consists of
independent directors, are to discharge the responsibilities of
the Board relating to compensation of the Company’s Chief
Executive Officer (“CEO”) and other executive
officers, to recommend to the Board the compensation of Board
members, to oversee the administration of the Company’s
equity incentive plans and to produce an annual report on
executive compensation for inclusion in the Company’s
annual proxy statement that complies with the rules and
regulations of the Securities and Exchange Commission and the
NYSE and any other applicable rules and regulations. The
committee implements and endorses the goals of the
Company’s executive compensation program, which reflect
three guiding principles: (i) to provide compensation and
benefits that allow the Company to maintain competitive
compensation to attract and retain executives with the skills
critical to the Company’s long-term success, (ii) to
reward performance in attaining business objectives and
maximizing shareholder value and (iii) to encourage Company
stock ownership which is monitored by the committee on an
ongoing basis.
During 2005, the committee’s compensation policies with
regard to the Company’s executive officers were as follows:
(1) the base 2004 salaries of the executive officers were
increased as reflected in the summary compensation table (the
committee annually reviews current economic trends in its
evaluation of the appropriate compensation package for all
executive officers); (2) the committee established a target
incentive bonus for the year for each executive officer ranging
from 30% to 60% of such executive officer’s 2005 base
salary based upon achieving earnings per share, divisional
performance and individual goals.
The CEO’s compensation was set after conducting a
compensation survey of at least twenty publicly-traded peer
companies. After analyzing base plus bonus compensation levels
for the chief executive officers of such companies, the
CEO’s relevant experience level and years of service, and
the committee’s expectations with respect to Company
knowledge and leadership skills, the committee set the
CEO’s base salary for 2005 at $325,000.
| Respectfully submitted, | |
| Ronald R. Taylor, Chairman | |
| Ryland P. “Skip” Davis | |
| Peter F. Stanton | |
| April 20, 2006 |
12
Table of Contents
EMPLOYMENT CONTRACTS, TERM OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company has written employment agreements with Arthur M.
Coffey, Anupam Narayan, David M. Bell (who ceased to be an
executive officer on March 29, 2006) and Thomas L.
McKeirnan, which provide for 2006 base salaries of $357,500,
$247,500, $162,750 and $159,500, respectively, subject in each
case to periodic increases. John M. Taffin is an employee at
will and his 2006 base salary is $196,735. These executive
officers are also eligible to receive annual bonuses under the
Company’s Executive Officers Variable Pay Plan (the
“Plan”). The maximum bonuses available under the Plan
for 2006, measured as a percentage of base salary, are 100% for
Mr. Coffey, 60% for Mr. Narayan, 50% for
Mr. Bell, 50% for Mr. Taffin, and 36% for
Mr. McKeirnan.
The written employment agreements with the executive officers
provide as follows:
| • | Each executive will serve in his current position through December 31, 2006, unless his agreement terminates earlier in accordance with its terms. Thereafter, each agreement automatically renews for additional one-year periods, unless terminated by either party upon 120-days notice (a “Non-renewal Notice”) prior to the end of the initial or any renewal period. | |
| • | In the case of Mr. Narayan, the Company must provide him each year with a bonus opportunity equal to 40% of his base salary. | |
| • | If the Company delivers a Non-Renewal Notice to an executive or terminates his agreement without cause, or if an executive terminates his agreement for good reason (as defined in the agreement), the executive will receive a severance payment equal to two times his compensation in the prior year, plus a continuation of all life and health insurance benefits for a two-year period (in the case of Mr. McKeirnan, the severance payment will be equal to six months of his base salary and he will not be entitled to any continuation of benefits). | |
| • | In the case of Mr. Coffey, he may terminate his agreement within six months following a change of control of the Company (as defined in the agreement), in which case he will receive a severance payment equal to two times his total cash compensation for the prior year, plus a continuation of all life and health insurance benefits for a two- year period. Mr. Bell has the same arrangement with the exception that the severance payment will equal three times his total cash compensation for the prior year plus a continuation of all life and health insurance benefits for a three-year period. | |
| • | If the Company delivers a Non-Renewal Notice to an executive or terminates his agreement without cause, or if an executive terminates his agreement for good reason (or, in the case of Mr. Coffey and Mr. Bell, within six months following a change of control), then any stock options held by the executive will immediately vest and be exercisable, any stock granted to the executive will immediately vest, and all Company imposed restrictions on restricted stock issued to the executive will terminate. In the case of Mr. Bell, the Company has also agreed to reimburse the executive for any federal, state or local excise taxes (“Excise Tax”), and any additional taxes to which he may be subject, on any payments to him from the Company as a result of accelerated vesting of his options, up to a maximum reimbursement equal to two times the amount of such Excise Tax. |
13
Table of Contents
STOCK PRICE PERFORMANCE
The following graph depicts the Company’s Common Stock
price performance relative to the performance of the Russell
2000 Composite Index and the Standard & Poor’s 500
Hotels, Resorts & Cruise Lines Index.
The graph above assumes an investment of $100 in the
Company’s Common Stock, the Russell 2000 Composite Index,
and the Standard & Poor’s 500 Hotels,
Resorts & Cruise Lines Index, and assumes a
reinvestment of all dividends. The Company has not paid cash
dividends on its Common Stock. The Company’s Common Stock
price performance on the graph above is not necessarily
indicative of future stock price performance.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors recommends a vote “FOR” the
ratification of the appointment of BDO Seidman, LLP.
The independent registered public accounting firm of BDO
Seidman, LLP has examined the financial statements of the
Company for the three years ended December 31, 2005, and
has been appointed by the Audit Committee to serve as the
Company’s independent registered public accounting firm for
2006. Representatives of the firm are expected to be present at
the meeting, will have the opportunity to make a statement if
they desire to do so, and are expected to be available to
respond to appropriate questions from shareholders. Unless
instructed to the contrary, the proxy solicited hereby will be
voted for the ratification of the appointment of BDO Seidman,
LLP as the Company’s independent registered public
accounting firm for 2006.
If this appointment is not ratified by a majority of the shares
cast on this proposal, the Board of Directors will consider the
selection of another independent registered public accounting
firm.
14
Table of Contents
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The audit fees incurred for professional services by BDO
Seidman, LLP for 2005 were $235,500, including fees for the
annual audit of the 2005 financial statements and quarterly
reviews, and $58,500 of fees for the audit of certain hotel
properties. The audit fees incurred for professional services by
BDO Seidman, LLP for 2004 were $255,877, including fees for
the annual audit of the 2004 financial statements and quarterly
reviews, $63,000 of fees for the audit of certain hotel
properties, and $33,877 of fees for consent and other services
performed in connection with the Company’s prospectus filed
on Form
S-1/
A
during the first quarter of 2004.
Audit-Related Fees
The fees billed for professional services by BDO Seidman, LLP
for audit-related fees for 2005 were $19,000. Services covered
included audit and attest services required by agreement on
entities we consolidate, but not required by statute or a
regulatory body. They also included fees related to the audit of
our employee benefit plan, certain advice and accounting
research.
The fees billed for professional services by BDO Seidman, LLP
for audit-related fees for 2004 were $22,250. Services covered
included audit and attest services required by agreement on
entities we consolidate, but not required by statute or a
regulatory body. They also included certain advice and
accounting research.
Tax Fees
The fees billed by BDO Seidman, LLP for tax-related services for
2005 were $129,355. Services covered an IRS exam, tax returns,
year-end tax planning and tax advice.
The fees billed by BDO Seidman, LLP for tax-related services for
2004 were $95,350. Services covered an IRS exam, tax returns and
year end tax planning.
Other Fees
There were no other fees billed by BDO Seidman, LLP for any
other professional services rendered to the Company during 2005
or 2004.
During 2004 and 2005, BDO Seidman, LLP did not provide the
Company any professional services described in
paragraph (c)(4) of Rule 2-01 of
Regulation
S-X.
Pre-Approval Policies and Procedures
The Audit Committee is responsible for appointing, setting
compensation and overseeing the work of the Company’s
independent registered public accounting firm. The committee has
adopted a policy that requires advance approval of audit,
audit-related, tax, and other services (“audit and
non-audit services”) performed by the independent
registered public accounting firm.
The committee has delegated to its chairman authority to approve
permitted services provided that the chairman reports any
decisions to the committee at its next regularly scheduled
meeting. On an ongoing basis, management communicates specific
projects and categories of services for which the advance
approval of the committee or chairman is requested. The
committee or chairman reviews these requests and advises
management if the engagement services of the independent
registered public accounting firm are approved. On a periodic
basis, management reports to the committee actual spending for
audit and non-audit services compared to approved amounts
Auditor Independence
The Audit Committee has considered whether and determined that
the other professional services provided by BDO Seidman, LLP are
compatible with maintaining its independence.
15
Table of Contents
PROPOSAL 3: APPROVAL OF 2006 STOCK INCENTIVE PLAN
The Board of Directors recommends a vote “FOR” the
approval of the 2006 Stock Incentive Plan.
Subject to shareholder approval, the Board has adopted the 2006
Stock Incentive Plan (the “2006 Plan”). The 2006 Plan
is the successor to the Company’s existing 1998 Stock
Incentive Plan (the “1998 Plan”). There are currently
81,865 shares of Common Stock available for grants of
additional awards under the 1998 Plan. If the 2006 Plan is
approved by shareholders, the Company will not grant any
additional awards under the 1998 Plan. For additional
information on the 1998 Plan, see “Equity Compensation Plan
Information” below.
A copy of the 2006 Plan is attached to this Proxy Statement as
Appendix C. The following description of the 2006 Plan is a
summary and does not purport to be fully descriptive. Please
refer to Appendix C for more detailed information about the
2006 Plan.
Summary of Terms.
Purposes.
The purposes of the 2006 Plan are (a) to
enable the Company and its affiliates to obtain and retain the
services of the types of employees, consultants and directors
who will contribute to the Company’s long-term success, and
(b) to provide incentives that are linked directly to
increases in share value, which will inure to the benefit of all
shareholders of the Company.
Administration.
The 2006 Plan will be administered by the
Compensation Committee unless the Board delegates administration
to a different committee of the Board or determines to
administer the 2006 Plan itself.
Types of Awards.
The 2006 Plan provides for the following
types of awards: stock options, restricted stock, restricted
stock units, performance awards and stock appreciation rights.
Stock Subject to the 2006 Plan.
Subject to adjustment in
the event of stock splits, stock dividends and similar events, a
maximum of 1,000,000 shares of Common Stock are authorized
for issuance under the 2006 Plan. Subject to such adjustment, no
more than 500,000 shares may be issued under the 2006 Plan
pursuant to awards of restricted stock or restricted stock
units. Any shares of Common Stock that are subject to an award
that expires or terminates, or that are reacquired pursuant to
the forfeiture provisions of any award, will be available for
issuance in connection with future grants of awards under the
2006 Plan. If any payment required in connection with an award
is satisfied through the tendering or withholding of shares of
Common Stock, only the number of shares of Common Stock issued
by the Company, net of the shares tendered or withheld, will be
counted for purposes of determining the number of shares of
Common Stock available for issuance under the Plan. Shares of
Common Stock that are subject to tandem awards will be counted
only once.
Eligibility to Receive Awards.
Awards may be granted
under the 2006 Plan to those officers, directors and employees
of the Company and its subsidiaries that the plan administrator
from time to time selects. Awards may also be made to certain
consultants who provide services to the Company and its
subsidiaries. On March 31, 2006, there were approximately
3,000 employees, officers, directors and consultants of the
Company and it subsidiaries who would be eligible to receive
awards under the 2006 Plan should it be approved.
Terms and Conditions of Stock Option Grants.
Options
granted under the 2006 Plan may be “incentive stock
options” (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”)) or
“nonqualified stock options.” The exercise price for
each option granted under the 2006 Plan will be determined by
the plan administrator, but will not be less than 100% of the
Common Stock’s fair market value on the date of grant.
For purposes of the 2006 Plan, “fair market value”
means the closing selling price for the Common Stock on the New
York Stock Exchange on the date of grant of the option.
The exercise price for shares purchased under options must be
paid in cash, unless the plan administrator authorizes payment
by (a) tender of shares of Common Stock already owned by
the option holder, (b) delivery to the Company of a copy of
instructions to a broker directing the broker to sell the Common
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Stock for which the option is exercised and remit to the Company
the aggregate exercise price of such option, or (c) such
other legal consideration as the plan administrator may find
acceptable. Options granted under the 2006 Plan may not contain
a “reload” feature automatically entitling the holder
to receive an additional option upon exercise of the original
option.
The option term will be fixed by the plan administrator but, in
the case of an incentive stock option, may not be more than ten
years. The plan administrator may specify a vesting schedule
pursuant to which an option will be exercisable, but if not so
specified the option will vest at the rate of 25% per year.
The plan administrator may also specify the circumstances under
which an option will be exercisable in the event the optionee
ceases to provide services to the Company or one of its
subsidiaries. If not so specified, the portion of an option that
is vested and exercisable on the date of termination of services
will be exercisable for three months after that date, but in no
event may an option be exercised after the expiration of its
term. An option will not be exercisable following termination of
an optionee’s services for cause, as defined in the 2006
Plan.
Incentive stock options will be subject to certain other
limitations prescribed by the Code and set forth in the 2006
Plan.
Restricted Awards.
The plan administrator may make awards
of “restricted stock,” which are actual shares of
Common Stock, or “restricted stock units,” which are
awards that have a value equal to a specified number of shares
of Common Stock issuable in the future. The plan administrator
will determine the terms and conditions of restricted awards.
These terms and conditions may change from time to time and need
not be identical, but each restricted award will include the
substance of each of the following, to the extent applicable:
| Purchase Price. The purchase price for the restricted award, if any, which may be stated as cash, property or services. | |
| Consideration. The cash consideration, if any, that must be paid for Common Stock acquired pursuant to the restricted award. | |
| Vesting. The “restricted period” during which such the Common Stock or the right to acquire the Common Stock will be forfeited to the Company if specified restrictions or conditions for the restricted award are not satisfied. | |
| Termination of Service. What will happen to the restricted award if the participant’s service terminates for any reason (unless otherwise specified, the unvested portion of the restricted award will be forfeited). | |
| Restrictions on Transferability. Any restrictions on transferability to which the restricted award is subject. |
Performance Awards.
A performance award is an award
entitling the recipient to acquire cash, actual shares of Common
Stock or hypothetical Common Stock units having a value equal to
the fair market value of an identical number of shares of Common
Stock upon the attainment of specified performance goals. The
plan administrator will determine whether and to whom
performance awards will be made, the performance goals
applicable under each award, the periods during which
performance is to be measured, and all other limitations and
conditions applicable to the awarded cash or shares. Performance
goals will be based on a pre-established objective formula or
standard that specifies the manner of determining the amount of
cash or the number of shares under the performance award that
will be granted or will vest if the performance goal is
attained. Performance goals will be determined by the plan
administrator prior to the time 25% of the service period has
elapsed and may be based on one or more business criteria that
apply to a participant, a business unit or the Company and its
affiliates. Such business criteria may include, by way of
example, revenue, earnings before interest, taxes, depreciation
and amortization (EBITDA), funds from operations, funds from
operations per share, operating income, pre-tax or after-tax
income, cash available for distribution, cash available for
distribution per share, net earnings, earnings per share, return
on equity, return on assets, return on capital, economic value
added, share price performance, improvements in the
Company’s attainment of expense levels, implementing or
completion of critical projects, or improvement in cash-flow
(before or
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after tax). Performance goals will be objective and
designed to meet the requirements of Section 162(m) of the
Code. The plan administrator will determine the circumstances
under which a performance award will be payable if a participant
ceases to provide services to the Company or a subsidiary. If
not so established, the performance award will automatically
terminate upon termination of the participant’s employment
for any reason.
Stock Appreciation Rights.
The plan administrator is
authorized to make awards of stock appreciation rights with
respect to specified shares of Common Stock. A stock
appreciation right will entitle the holder to receive any
increase in the fair market value of the shares subject to the
award over their fair market value of the time of grant of the
award. The 2006 Plan contains detailed rules designed to prevent
stock appreciation rights, if granted, from having adverse tax
consequences under Section 409A of the Code.
Transferability.
Except as otherwise determined by the
plan administrator, no award granted under the 2006 Plan may be
assigned or otherwise transferred by the holder other than by
will or the laws of descent and distribution and, during the
holder’s lifetime, awards may be exercised only by the
holder.
Adjustment of Shares.
If any change is made in the Common
Stock subject to the 2006 Plan or subject to any award through
merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or other
transaction not involving the receipt of consideration by the
Company, then certain changes will be made as specified in the
2006 Plan to the number and/or class of shares available for
awards, the number and/or class of shares covered by outstanding
awards, the maximum number of shares of Common Stock with
respect to which awards may be granted to any single option
holder during any calendar year; and the exercise price of
awards in effect prior to such change.
Corporate Transaction.
In the event of a change in
control (as defined in the 2006 Plan) or any other corporate
separation or division, merger or consolidation in which the
Company is not the surviving entity, or a reverse merger in
which the Company is the surviving entity but the shares of
Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, the plan
administrator is given broad discretion under the 2006 Plan to,
among other things, continue outstanding awards with appropriate
modifications, substitute new awards for outstanding awards, or
cancel outstanding awards in consideration for certain payments.
If there are one or more continuing awards following a change in
control, and the service of a participant holding one or more
such awards is terminated without cause within a period of one
year following the consummation of the change in control, or if
the participant voluntarily terminates his or her service for
good reason (as defined in the 2006 Plan) during such period,
then (a) the vesting and exercisability of all outstanding
options held by the participant will accelerate in full;
(b) the end of the restricted period for all outstanding
restricted awards held by the participant will accelerate, and
all restrictions and conditions of the restricted awards will
lapse or be deemed satisfied, as the case may be; (c) the
vesting of all outstanding performance awards held by the
participant will accelerate in full; and (d) all
outstanding stock appreciation rights held by the participant
will become exercisable in full.
Other Acceleration of Awards.
The plan administrator in
its discretion may provide, either in the award agreement for an
award or by a subsequent determination, for acceleration of the
vesting and exercisability of the award at any time, or in the
case of a restricted award for acceleration of the end of the
restricted period at any time (in which event all restrictions
and conditions of the restricted award shall lapse or be deemed
satisfied, as the case may be).
Award Limits for Purposes of Section 162(m) of the
Code.
No employee may be granted options or stock
appreciation rights covering more than 250,000 shares of
Common Stock during any fiscal year, or performance awards that
could result in such employee receiving more than
250,000 shares of Common Stock in the case of
share-denominated performance awards.
Amendment, Termination and Term.
The Board may terminate
or amend the 2006 Plan, subject to shareholder approval in
certain instances, as set forth in the 2006 Plan. The plan
administrator may amend the terms of any award outstanding under
the 2006 Plan, prospectively or retroactively. The amendment or
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termination of the 2006 Plan or the amendment of an outstanding
award under the 2006 Plan may not, without a participant’s
consent, impair the participant’s rights or increase the
participant’s obligations under his or her award or create
or increase the participant’s federal income tax liability
with respect to an award
Other Information.
A new plan benefits table, as
described in the proxy rules of the Securities and Exchange
Commission, is not provided because all awards made under the
2006 Plan will be discretionary. The closing selling price for
the Common Stock on the New York Stock Exchange on
March 31, 2006 was $13.30.
U.S. Federal Income Tax Consequences
The following briefly describes the U.S. federal income tax
consequences of the 2006 Plan generally applicable to the
Company and to participants who are U.S. citizens.
| Stock Options |
Nonqualified Stock Options.
A participant will not
recognize taxable income upon the grant of a non-qualified stock
option. Upon the exercise of a non-qualified stock option, a
participant will recognize taxable ordinary income equal to the
difference between the fair market value of the shares on the
date of exercise and the option exercise price. When a
participant sells the shares, the participant will have
short-term or long-term capital gain or loss, as the case may
be, equal to the difference between the amount the participant
received from the sale and the tax basis of the shares sold. The
tax basis of the shares generally will be equal to the greater
of the fair market value of the shares on the exercise date or
the option exercise price.
Incentive Stock Options.
A participant will not recognize
taxable income upon the grant of an incentive stock option. If a
participant exercises an incentive stock option during
employment or within three months after his or her employment
ends (12 months in the case of disability), the participant
will not recognize taxable income at the time of exercise
(although the participant generally will have taxable income for
alternative minimum tax purposes at that time as if the option
were a non-qualified stock option). If a participant sells or
exchanges the shares after the later of (a) one year from
the date the participant exercised the option and (b) two
years from the grant date of the option, the participant will
recognize long-term capital gain or loss equal to the difference
between the amount the participant received in the sale or
exchange and the option exercise price. If a participant
disposes of the shares before these holding period requirements
are satisfied, the disposition will constitute a disqualifying
disposition, and the participant generally will recognize
taxable ordinary income in the year of disposition equal to the
excess, as of the date of exercise of the option, of the fair
market value of the shares received over the option exercise
price (or, if less, the excess of the amount realized on the
sale of the shares over the option exercise price).
Additionally, the participant will have long-term or short-term
capital gain or loss, as the case may be, equal to the
difference between the amount the participant received upon
disposition of the shares and the option exercise price
increased by the amount of ordinary income, if any, the
participant recognized.
With respect to both non-qualified stock options and incentive
stock options, special rules apply if a participant uses shares
already held by the participant to pay the exercise price or if
the shares received upon exercise of the option are subject to a
substantial risk of forfeiture by the participant.
Restricted Awards.
Upon receipt of a stock award that is
not subject to restrictions, a participant generally will
recognize taxable ordinary income in an amount equal to the
excess of the fair market value of the shares at such time over
the amount, if any, that the participant pays to the Company for
the shares. If a participant receives a restricted stock award,
the participant generally will recognize taxable ordinary income
when the shares cease to be subject to restrictions in an amount
equal to the excess of the fair market value of the shares at
such time over the amount, if any, that the participant pays to
the Company for the shares. However, no later than 30 days
after a participant receives the restricted stock award, the
participant may elect to recognize taxable ordinary income in an
amount equal to the fair market value of the shares at the time
of receipt. Provided that the election is made in a timely
manner, when the restrictions on the shares lapse, the
participant will not recognize any additional income. When a
participant sells the shares, the participant will have
short-term or long-term capital gain or loss, as the case may
be, equal to the difference between the
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amount the participant received from the sale and the tax basis
of the shares sold. The tax basis of the shares generally will
be equal to the amount, if any, paid to the Company by the
participant for the shares plus the amount of taxable ordinary
income recognized by the participant at the time of grant, in
the case of a stock award that is not subject to restrictions,
or at the time the restrictions lapsed (or at the time of
election, if an election was made by the participant), in the
case of a restricted stock award. If the participant forfeits
the shares subject to a restricted stock award to the Company
(e.g., upon the participant’s termination prior to
expiration of the restricted period), the participant may not
claim a deduction with respect to the income recognized as a
result of the election. Any dividends paid with respect to
shares of restricted stock generally will be taxable as ordinary
income to the participant at the time the dividends are received.
A participant who receives restricted stock units will generally
recognize taxable ordinary income only when the shares of Common
Stock associated with those units are issued to the participant.
Performance Awards.
A participant will generally not
recognize taxable income upon the grant of a performance award
unless the award results in the deferral of compensation and
fails to satisfy the requirements of Section 409A of the
Code (see
Code Section 409A).
Upon the distribution
of cash, shares or other property to a participant pursuant to
the terms of a performance award, the participant will recognize
taxable ordinary income equal to the excess of the amount of
cash or the fair market value of any property transferred to the
participant over any amount paid to the Company by the
participant with respect to the award.
Stock Appreciation Rights.
A participant will generally
not recognize taxable income upon the grant of a stock
appreciation right unless the award results in the deferral of
compensation and fails to satisfy the requirements of
Section 409A of the Code (see
Code
Section 409A)
. Upon the distribution of cash, shares or
other property to a participant upon exercise of the right, the
participant will generally recognize taxable ordinary income
equal to the amount of cash or the fair market value of any
property transferred to the participant upon such exercise.
Tax Consequences to the Company.
In the foregoing cases,
the Company generally will be entitled to a deduction at the
same time and in the same amount as a participant recognizes
ordinary income, subject to the limitations imposed under
Section 162(m) of the Code.
Code Section 409A:
To the extent that any awards or
payments under the 2006 Plan result in the deferral of
compensation for purposes of Section 409A of the Code, the
design of the 2006 Plan is indented to satisfy the requirements
of Code Section 409A with respect to such deferred
compensation. In the event, however, that the 2006 Plan fails to
meet such requirements with respect to a particular award or
payment to a participant, Code Section 409A requires that
all of the participant’s deferred compensation under the
plan be immediately includible in the participant’s gross
income, and, regardless of the circumstances leading to the
plan’s failure to meet those requirements, that the
participant be subject to a 20% additional tax on this income
and an interest penalty at the underpayment rate used by the
Internal Revenue Service plus one percent for the period
beginning with the date of deferral. In the taxable year that a
participant recognizes income on his or her deferred amounts,
the Company will be entitled to a deduction equal to the amount
of income recognized by the participant.
Tax Withholding.
The Company may require a participant to
pay to the Company the amount of any income, employment or other
taxes that the Company is required to withhold with respect to
the grant, vesting, exercise, payment or settlement of any award
granted under the 2006 Plan. The plan administrator may, in its
discretion and subject to the 2006 Plan and applicable law,
permit the participant to satisfy withholding obligations, in
whole or in part, by paying cash, by electing to have the
Company withhold shares of Common Stock (up to the minimum
required federal tax withholding rate) or by transferring shares
of Common Stock already owned by the participant and held by the
participant for the period necessary to avoid a charge to the
Company’s earnings for financial accounting purposes. The
Company is authorized to withhold from any award granted under
the 2006 Plan or from any cash amounts otherwise due or to
become due from the Company to the participant. The Company may
also deduct from any award any other amounts due from the
participant to the Company.
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Equity Compensation Plan Information
The following information relates to plans under which equity
securities of the Company may be issued to employees, directors
or consultants.
Column A
Column B
Column C
Number of Securities
Number of Securities
Remaining Available for
to be Issued Upon
Weighted-Average
Future Issuance Under Equity
Exercise of
Exercise Price of
Compensation Plans
Outstanding Options,
Outstanding Options,
(Excluding Securities
Category
Warrants and Rights
Warrants and Rights
Reflected in Column A)
Equity compensation plans approved by security holders:
1998 Stock Incentive Plan
1,230,641
$
6.61
81,865
(1)
Equity compensation plans not approved by security holders:
-0-
-0-
-0-
Total
1,230,641
$
6.61
81,865
| (1) | No further grants will be made under the 1998 Stock Incentive Plan if the 2006 Stock Incentive Plan is approved by shareholders. |
OTHER MATTERS
Management is not aware at this time that any other matters are
to be presented for action at the meeting. The enclosed proxy
confers upon the persons designated to vote the shares
represented thereby authority to vote such shares in their
discretion with respect to all matters that may come before the
meeting in addition to the scheduled items of business,
including matters incident to the conduct of the meeting and any
shareholder proposal omitted from the Proxy Statement and form
of proxy pursuant to the rules of the Securities and Exchange
Commission. At the time this Proxy Statement went to press,
management was not aware of any other matter that may properly
be presented for action at the meeting.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders to be considered for inclusion in the
Proxy Statement and proxy for the Company’s 2007 Annual
Meeting of Shareholders must be received by the Company on or
prior to December 19, 2006.
A shareholder of record, who intends to submit a proposal at the
2007 Annual Meeting of Shareholders that is not eligible for
inclusion in the Proxy Statement or proxy, or who intends to
submit one or more nominations for directors at the meeting,
must provide prior written notice to the Company. Written notice
of any such proposal or nominations should be addressed to the
Corporate Secretary and received at the Company’s principal
executive offices not later than December 21, 2006. The
written notice must satisfy certain requirements specified in
the Company’s By-laws, which are included in the excerpt
from the By-Laws attached as Appendix B to this Proxy
Statement. A complete copy of the Company’s By-laws will be
sent to any shareholder upon written request to the
Company’s Corporate Secretary.
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ANNUAL REPORT ON
FORM
10-K
A copy of the Company’s 2005 Annual Report on
Form
10-K
for the
year ended December 31, 2005 as filed with the Securities
and Exchange Commission is being mailed with this Proxy
Statement to each shareholder of record. Shareholders not
receiving a copy of such Annual Report may obtain one without
charge by writing or calling the Company’s Corporate
Secretary, 201 W. North River Drive, Suite 100,
Spokane, Washington 99201 ((509) 459-6100).
| By Order of the Board of Directors | |
|
|
|
| Thomas L. McKeirnan | |
| Senior Vice President, General Counsel | |
| and Corporate Secretary | |
| Spokane, Washington | |
| April 20, 2006 |
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CORPORATE GOVERNANCE GUIDELINES
Approved November 18, 2005
The Board of Directors (the “Board”) of Red Lion
Hotels Corporation (the “Company”) has adopted the
following corporate governance principles (the
“Guidelines”) to assist the Board and its committees
in performing their respective duties in compliance with
applicable requirements. The Board shall review and, if
appropriate in connection with updated requirements or changes
in the corporate governance environment, revise these Guidelines
from time to time.
Director Responsibilities
The members of the Board have the responsibility to:
1. Represent the interests of the Company’s
shareholders in maintaining and enhancing the success of the
Company’s business, including optimizing long-term returns
to increase shareholder value.
2. Select and annually evaluate the Chief Executive Officer
of the Company (“CEO”) and select and annually
evaluate any member of senior management other than the CEO
| a) who is an “officer” within the meaning of Section 16 of the 1934 Act or an “executive officer” for purposes of Item 401(b) of Regulation S-K; | |
| b) whose compensation is required to be reported in the Company’s annual report or proxy statement; or | |
| c) who is designated by the CEO as the head of a division of the Company. |
The Board has delegated to its Compensation Committee such
responsibilities to annually evaluate such members of senior
management.
3. Oversee the CEO and interact with appropriate members of
senior management with respect to key aspects of the business,
including strategic planning, management development and
succession, operating performance and shareholder returns.
4. Provide general advice and counsel to the CEO and
appropriate members of senior management.
5. Adopt and oversee compliance in coordination with the
Audit Committee of the Company’s Code of Business Conduct
and Ethics, and promptly disclose as required by SEC rules any
waivers of the Code of Business Conduct and Ethics for the
Company’s directors or executive officers.
6. Select annually, as soon as is practical following the
annual meeting of shareholders of the Company, a Chairman of the
Board who shall be a director who is not an officer of the
Company (as that term is defined in
Rule
16a-1(f)
of
the Securities Act of 1933 (“Non Management Director”).
7. Hold executive sessions of all Non-Management Directors
following each regularly scheduled meeting of the Board. The
Chairman of the Board will chair such meetings (the
“Chairman”). Interested parties may communicate
directly with the Chairman by
e-mail
addressed to
chairman@redlion.com or by correspondence addressed to Chairman,
Red Lion Hotels Corporation, 201 W. North River Drive,
Suite 100, Spokane, WA 99201.
8. Formally evaluate the performance of the CEO each year
in at least one Non-Management Director executive session.
9. Hold each year at least one executive session of
Independent Directors (as that term is defined in
paragraph 4 of the following section).
10. Directors should make every effort to attend Board
meetings and meetings of Committees on which they serve. Meeting
materials should be reviewed in advance. In order to allow
Directors to fulfill their responsibilities, the date, time,
place and expected duration of each meeting will be established
by action of the members at the prior meeting or by notice as
provided in the Bylaws. Any notices of meetings or reminders of
meeting times may be made by
e-mail,
and shall
include information regarding any alternative
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teleconference link for participation in such meeting. All
notices of all committee meetings will go to all directors,
whether or not they are members of that committee.
11. In discharging the duties of a director, including
duties as a committee member, a director shall act: (1) in
good faith; (2) with the same care an ordinary prudent
person in a like position would exercise under similar
circumstances and (3) in a manner he or she believes to be
in the best interests of the Company.
Director Qualification Standards
1. The Nominating and Corporate Governance Committee is
responsible for recommending to the Board (1) nominees for
Board membership to fill vacancies or newly created positions
and (2) the persons to be nominated by the Board for
election at the Company’s annual meeting of shareholders.
2. In connection with the selection and nomination process,
the Nominating and Corporate Governance Committee shall review
the desired experience, mix of skills and other qualities to
assure appropriate Board composition, taking into account the
current Board members and the specific needs of the Company and
the Board. The Board will generally look for individuals who
have displayed high ethical standards, integrity and sound
business judgment. This process is designed to ensure that the
Board includes members with diverse backgrounds, skills and
experience, including appropriate financial and other expertise
relevant to the business of the Company.
3. Independent Directors must comprise a majority of the
Board.
4. A director will not be an “Independent
Director” if any of the following situations set forth in
the following categories apply:
| (a) the director has been an employee of the Company, or any of its consolidated subsidiaries, during the last three years, or the director has an Immediate Family Member who is, or who has been during the last 3 years, an executive officer of the Company; | |
| (b) the director or the director’s Immediate Family Member has received more than $100,000 per year in direct compensation from the Company, or any of its consolidated subsidiaries, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service) during any twelve-month period within the last three years; | |
| (c) (i) the director or the director’s Immediate Family Member is a current partner of a firm that is the Company’s independent auditor, (ii) the director is a current employee of such a firm, (iii) the director has an Immediate Family Member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice, or (iv) the director or an Immediate Family Member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time; | |
| (d) the director or the director’s Immediate Family Member is, or during the last three years, has been, part of an interlocking directorate in which a current executive officer of the Company, or any of its consolidated subsidiaries, served on the compensation committee of another company that concurrently employed the director (or any of his or her Immediate Family Members) as an executive officer; | |
| (e) the director is a current employee, or the director’s Immediate Family member is a current executive officer of a company that makes payments (exclusive of charitable contributions) to, or receives payments (exclusive of charitable contributions) from, the Company, or any of its consolidated subsidiaries, for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of the consolidated gross revenues of such other company; | |
| (f) the director has a material relationship with the Company, or any of its consolidated subsidiaries, either directly or as a partner, shareholder or officer of an organization that has a material relationship with the Company, or any of its consolidated subsidiaries. For this purpose, “material relationship” is defined as one in which the person, or an entity of which the director (or the director’s |
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| Immediate Family Member) is an employee, makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other entity’s consolidated gross revenues. |
5. In addition to satisfying all of the independence
criteria set forth in paragraph 4 of this Section, all
members of the Audit Committee must also meet the following
requirements:
| (a) A member of the Audit Committee may not receive consulting, advisory or other compensatory fees from the Company, or any of its consolidated subsidiaries, other than in his or her capacity as a member of the Audit Committee, the Board of Directors, or any other committee of the Board (compensatory fees do not include the receipt of fixed amounts under a retirement plan (including deferred compensation) for prior service with the Company or any of its consolidated subsidiaries, provided that such compensation is not contingent in any way on continued service). | |
| (b) No member of the Audit Committee may be an “affiliated person” of the Company, or any of its consolidated subsidiaries, as such term is defined by the Securities and Exchange Commission. |
6. The number of boards on which a director may sit may be
reviewed on a case-by-case basis by the Board.
7. The Board has not established term limits for directors.
Although term limits can promote the inclusion on the Board of
people with diverse perspectives, the process described in
paragraph 2 of this Section can achieve the same result.
Moreover, term limits have the disadvantage of causing the
Company to lose the contributions of directors who have been
able to develop, over a period of time, increasing insight into
the Company and its operations, thereby increasing their
contributions to the Company. However, in order to promote both
continuity and turnover, and to further the expectation that
Board members will be very actively involved in both the affairs
of the Company and the communities which the Company serves, the
Board will normally not nominate a person who would be serving
on the Board after the age of 75.
8. Each director shall be obligated to notify the Chairman
of the Board of the Company promptly upon learning of any fact
which causes such director not to be considered an Independent
Director, as set forth in paragraph 4 above, or if any
entity of which such director is an officer or director becomes
a competitor of the Company. The Nominating and Corporate
Governance Committee shall review the situation and make a
prompt recommendation to the Board.
Board Committees
1. The Board shall at all times have a Nominating and
Corporate Governance Committee, an Audit Committee and a
Compensation Committee, each comprised solely of Independent
Directors. Each committee will have its own charter.
2. The Board shall evaluate and determine the circumstances
under which to form new Committees.
3. All Directors are invited to attend, in person or by
teleconference, all committee meetings, with the sole exception
of when such attendance is specifically prohibited by applicable
law or regulation. Board members in attendance at committees of
which they are not a member shall not vote on committee
proceedings and the chairs of such committees are authorized to
limit discussion by or exclude non-committee members to the
extent the chair determines in his or her discretion that such
limitation or exclusion is necessary or appropriate to
accomplish committee business. It is expected that such a
determination would happen rarely, if at all. The minutes of
committee meetings shall specifically describe any such
determination by a committee chair. Notwithstanding the
foregoing, to give committee members a convenient opportunity to
discuss committee-related issues separately among themselves,
committees are expected to have brief separate sessions at the
end of each committee meeting which are only attended by
committee members. Committees may not take action in such
separate sessions unless the Chair has determined in his or her
discretion that the exclusion of other directors is necessary or
appropriate to accomplish committee business and such
determination is included in the minutes of the committee
meeting.
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Director Compensation
1. Non-Management Directors shall receive reasonable
compensation and benefits for their services, as may be
determined from time to time by the Board upon recommendation of
the Compensation Committee. Compensation and benefits for
Non-Management Directors shall be consistent with the market
practices of other similarly situated companies but shall not be
at a level or in a form that would call into question the
Board’s objectivity. The Compensation Committee of the
Board shall annually review and make recommendations to the
Board with respect to director compensation and benefits.
2. Directors who are officers of the Company receive no
additional pay for serving as Directors.
Director Access to Management and Independent Advisors
1. The Board is expected to be highly interactive with the
CEO and appropriate members of senior management. Directors are
granted access to the name, location, and phone number of all
employees of the Company.
2. It is Board policy that members of senior management who
are invited by the Board to be present at Board meetings be
present at such meetings. The Board encourages such individuals
to make presentations, or to include in discussions at Board
meetings managers and other employees who can provide insight
into the matters being discussed because of their functional
expertise and/or personal involvement in such matters.
3. Directors are authorized to consult with independent
advisors, as is necessary and appropriate, without consulting
management of the Company.
Director Orientation and Continuing Education
1. The Board shall implement and maintain an orientation
program for newly elected directors.
2. Directors are required to continue educating themselves
with respect to subject matters that will assist them in their
duties as a director of the Company.
Management Succession and CEO Compensation
1. The Board shall plan for succession to the position of
CEO. In the event of emergency or in the event of the incapacity
of the CEO, pending appointment of a successor by the Board, the
Board has determined that the management of the Company shall be
conducted by a group of certain members of senior management,
reporting to the Chairman, as such group is constituted from
time to time by the CEO in the reports of the CEO to the Board.
2. The Compensation Committee is responsible for reviewing
and approving corporate goals and objectives relevant to CEO
compensation and evaluating the performance of the CEO in light
of those goals and objectives. Based on such evaluation, the
Compensation Committee sets the CEO’s compensation and
reports the CEO’s compensation to the Board.
Annual Performance Evaluation of the Board
1. The Board and its Committees will conduct a
self-evaluation at least annually to determine whether it and
its committees are functioning effectively.
2. The Board will also review the Nominating and Corporate
Governance Committee’s periodic recommendations concerning
the performance and effectiveness of the Board and its
committees.
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APPENDIX B
By-Laws Provisions
Section 3.3 Nominations and Qualifications of
Directors.
(1) Nominations of candidates for election as directors at
an annual meeting of shareholders may only be made (i) by,
or at the direction of, the Board of Directors or (ii) by
any shareholder of the Corporation who is entitled to vote at
the meeting and who complies with the procedures set forth in
the remainder of this Section 3.3.
(2) If a shareholder proposes to nominate one or more
candidates for election as directors at an annual meeting, the
shareholder must have given timely notice thereof to the
Secretary of the Corporation. To be timely, a shareholder’s
notice must be delivered to, or mailed and received at, the
Principal Office (i) not less than one hundred twenty
(120) days prior to the first anniversary of the date that
the Corporation’s proxy statement was released to
shareholders in connection with the previous year’s annual
meeting; (ii) a reasonable time before the Corporation
begins to print and mail its proxy materials if the date of this
year’s annual meeting has been changed by more than thirty
(30) days from the date of the previous year’s
meeting; or (iii) not more than seven (7) days
following the delivery to shareholders of the notice of annual
meeting with respect to the current year’s annual meeting,
if the Corporation did not release a proxy statement to
shareholders in connection with the previous year’s annual
meeting, or if no annual meeting was held during such year.
(3) A shareholder’s notice to the Secretary under
Section 3.3(2) shall set forth, as to each person whom the
shareholder proposes to nominate for election as a director
(i) the name, age, business address and residence address
of such person, (ii) the principal occupation or employment
of such person, (iii) the number and class of shares of
stock of the Corporation that are beneficially owned on the date
of such notice by such person and (iv) if the Corporation
at such time has a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), any other information
relating to such person required to be disclosed in
solicitations of proxies with respect to nominees for election
as directors pursuant to Regulation 14A under the Exchange
Act, including but not limited to information required to be
disclosed by Schedule 14A of Regulation 14A, and any
other information that the shareholder would be required to file
with the Securities and Exchange Commission in connection with
the shareholder’s nomination of such person as a candidate
for director or the shareholder’s opposition to any
candidate for director nominated by, or at the direction of, the
Board of Directors. In addition to the above information, a
shareholder’s notice to the Secretary under
Section 3.3(2) shall (A) set forth (i) the name
and address, as they appear on the Corporation’s books, of
the shareholder and of any other shareholders that the
shareholder knows or anticipates will support any candidate or
candidates nominated by the shareholder and (ii) the number
and class of shares of stock of the Corporation that are
beneficially owned on the date of such notice by the shareholder
and by any such other shareholders and (B) be accompanied
by a statement in the form of a record, executed and
acknowledged by each candidate nominated by the shareholder,
that the candidate agrees to be so nominated and to serve as a
director of the Corporation if elected at the annual meeting.
(4) The Board of Directors, or a designated committee
thereof, may reject any shareholder’s nomination of one or
more candidates for election as directors if the nomination is
not made pursuant to a shareholder’s notice timely given in
accordance with the terms of Section 3.3(2). If the Board
of Directors, or a designated committee thereof, determines that
the information provided in a shareholder’s notice does not
satisfy the requirements of Section 3.3(3) in any material
respect, the Secretary of the Corporation shall notify the
shareholder of the deficiency in the notice. The shareholder
shall have an opportunity to cure the deficiency by providing
additional information to the Secretary within such period of
time, not to exceed five (5) days from the date such
deficiency notice is given to the shareholder, as the Board of
Directors or such committee shall reasonably determine. If the
deficiency is not cured within such period, or if the Board of
Directors or such committee determines that the additional
information provided by the shareholder, together with
information previously provided, does not satisfy the
requirements of Section 3.3(3) in any material respect,
then the Board of Directors or such committee may reject the
shareholder’s notice.
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(5) Notwithstanding the procedures set forth in
Section 3.3(4), if a shareholder proposes to nominate one
or more candidates for election as directors at an annual
meeting, and neither the Board of Directors nor any committee
thereof has made a prior determination of whether the
shareholder has complied with the procedures set forth in this
Section 3.3 in connection with such nomination, then the
chairman of the annual meeting shall determine and declare at
the annual meeting whether the shareholder has so complied. If
the chairman determines that the shareholder has so complied,
then the chairman shall so state and ballots shall be provided
for use at the meeting with respect to such nomination. If the
chairman determines that the shareholder has not so complied,
then, unless the chairman, in his or her sole and absolute
discretion, determines to waive such compliance, the chairman
shall state that the shareholder has not so complied and the
defective nomination shall be disregarded.
(6) All directors of the Corporation shall be at least
twenty-one years of age. Directors need not be shareholders or
residents of the State of Washington. At each meeting of
shareholders for the election of directors at which a quorum is
present, the persons receiving a plurality of the votes cast
shall be elected directors.
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APPENDIX C
RED LION HOTELS CORPORATION
2006 STOCK INCENTIVE PLAN
| 1. | PURPOSE; ELIGIBILITY. |
1.1
Name of Plan; General Purposes.
The name of this
plan is the Red Lion Hotels Corporation 2006 Stock Incentive
Plan (the “Plan”). The purposes of the Plan are
(a) to enable Red Lion Hotels Corporation, a Washington
corporation (the “Company”), and any Affiliate to
obtain and retain the services of the types of Employees,
Consultants and Directors who will contribute to the
Company’s long-term success, and (b) to provide
incentives that are linked directly to increases in share value,
which will inure to the benefit of all shareholders of the
Company.
1.2
Eligible Award Recipients.
The persons eligible
to receive Awards are Employees, Directors and, subject to the
limitations of Section 5.4, Consultants.
1.3
Available Awards.
The Plan will afford eligible
recipients of Awards an opportunity to benefit from increases in
value of the Common Stock through the granting of one or more of
the following types of Awards: (a) Incentive Stock Options,
(b) Nonstatutory Stock Options, (c) Restricted Awards,
(d) Performance Awards and (e) Stock Appreciation
Rights.
| 2. | DEFINITIONS. |
2.1
“409A Award”
means an Award that is
considered “nonqualified deferred compensation” within
the meaning of Section 409A of the Code and Section 8
of this Plan.
2.2
“Administrator”
means whichever of the
Board or the Committee is from time to time authorized by
Section 3.1 to administer the Plan.
2.3
“Affiliate”
means any parent
corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in
Sections 424(e) and 424(f), respectively, of the Code.
2.4
“Award”
means any right granted under
the Plan, including an Incentive Stock Option, a Nonstatutory
Stock Option, a Restricted Award, a Performance Award and a
Stock Appreciation Right.
2.5
“Award Agreement”
means a written
agreement between the Company and a holder of an Award
evidencing the terms and conditions of an individual Award
grant. Each Award Agreement shall be subject to the terms and
conditions of the Plan.
2.6
“Beneficial Owner”
has the meaning
assigned to such term in
Rule
13d-3
and
Rule
13d-5
under
the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is
used in Section 13(d)(3) of the Exchange Act), such
“person” shall be deemed to have beneficial ownership
of all securities that such “person” has the right to
acquire by conversion or exercise of other securities, whether
such right is currently exercisable or is exercisable only after
the passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding meaning.
2.7
“Board”
means the Board of Directors
of the Company.
2.8
“Business Combination”
has the meaning
set forth in Section 2.11(e).
2.9
“Cashless Exercise”
has the meaning
set forth in Section 6.4.
2.10
“Cause”
means (a) in the case of
a Participant who is subject to an employment or service
agreement or employment policy manual of the Company or one of
its Affiliates that provides a definition of “Cause,”
“Cause” as defined therein, and (b) in the case
of all other Participants (i) the commission of, or plea of
guilty or no contest to, a felony or a crime involving moral
turpitude or the commission of any other act involving willful
malfeasance or material breach of a fiduciary duty with respect
to the Company or an
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Affiliate, (ii) conduct tending to bring the Company into
substantial public disgrace, or disrepute, (iii) gross
negligence or willful misconduct with respect to the Company or
an Affiliate or (iv) material violation of state or federal
securities laws. The Administrator, in its absolute discretion,
shall determine the effect of all matters and questions relating
to whether a Participant has been discharged for Cause.
2.11
“Change in Control”
means:
| (a) The direct or indirect sale, transfer, conveyance or other disposition (other than by way of a Business Combination), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act); | |
| (b) The Incumbent Directors ceasing for any reason to constitute at least a majority of the Board; | |
| (c) The adoption of a plan relating to the liquidation or dissolution of the Company; | |
| (d) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becoming, without the approval, recommendation or authorization of the Board, the Beneficial Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); or | |
| (e) The consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: 50% or more of the total voting power of (i) the entity that survives or results from the Business Combination (the “Surviving Entity”), or (ii) the ultimate parent entity (the “Parent Entity”) that directly or indirectly controls the Surviving Entity, is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares or other securities into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination. |
The foregoing notwithstanding, a transaction shall not
constitute a Change in Control if (A) its sole purpose is
to change the state of the Company’s incorporation or to
create a holding company that will be owned in substantially the
same proportions by the persons who held the Company’s
securities immediately before such transaction; or (B) it
constitutes a secondary public offering that results in any
security of the Company being listed (or approved for listing)
on any securities exchange or designated (or approved for
designation) as a national market security on an interdealer
quotation system.
2.12
“Code”
means the Internal Revenue
Code of 1986, as amended.
2.13
“Committee”
has the meaning set forth
in Section 3.1.
2.14
“Common Stock”
means the common
stock, $0.01 par value per share of the Company.
2.15
“Company”
means Red Lion Hotels
Corporation, a Washington corporation.
2.16
“Consultant”
means any person,
including an advisor (a) who is engaged by the Company or
an Affiliate to render consulting or advisory services and who
is compensated for such services or who provides bona fide
services to the Company or an Affiliate pursuant to a written
agreement or (b) who is a member of the Board of Directors
of an Affiliate; provided that, except as otherwise permitted in
Section 5.4(b) hereof, such person is a natural person and
such services are not in connection with the offer or sale of
securities in a capital raising transaction and do not directly
or indirectly promote or maintain a market for the
Company’s securities.
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2.17
“Continuous Service”
means that the
Participant’s service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant’s Continuous
Service shall not be deemed to have terminated merely because of
a change in the capacity in which the Participant renders
service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no
interruption or termination of the Participant’s Continuous
Service. For example, a change in status from an Employee of the
Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The
Administrator or its delegate, in its sole discretion, may
determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other
personal or family leave of absence.
2.18
“Covered Employee”
means the chief
executive officer and the four other highest compensated
officers of the Company for whom total compensation is or would
be required to be reported to shareholders under the Exchange
Act, as determined for purposes of Section 162(m) of the
Code.
2.19
“Date of Grant”
means the date on
which the Administrator adopts a resolution, or takes other
appropriate action, expressly granting an Award to a Participant
that specifies the key terms and conditions of the Award and
from which the Participant begins to benefit from or be
adversely affected by subsequent changes in the Fair Market
Value of the Common Stock or, if a different date is set forth
in such resolution, or determined by the Administrator, as the
Date of Grant, then such date as is set forth in such resolution.
2.20
“Director”
means a member of the
Board.
2.21
“Disability”
means that the
Optionholder is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or
mental impairment; provided, however, for purposes of
determining the term of an Incentive Stock Option pursuant to
Section 6.10 hereof, the term Disability shall have the
meaning ascribed to it under Code Section 22(e)(3). The
determination of whether an individual has a Disability shall be
determined under procedures established by the Administrator.
Except in situations where the Administrator is determining
Disability for purposes of the term of an Incentive Stock Option
pursuant to Section 6.10 hereof within the meaning of Code
Section 22(e)(3), the Administrator may rely on any
determination that a Participant is disabled for purposes of
benefits under any long-term disability plan maintained by the
Company or any Affiliate in which a Participant participates.
2.22
“Effective Date”
means April 7,
2006, the date the Board adopted the Plan.
2.23
“Employee”
means any person employed
by the Company or an Affiliate.
2.24
“Exchange Act”
means the Securities
Exchange Act of 1934, as amended.
2.25
“Fair Market Value”
means, as of any
date, the value of the Common Stock as determined in good faith
by the Administrator; provided, however, that (a) if the
Common Stock is admitted to trading on a national securities
exchange or the Nasdaq National Market or Nasdaq Small Cap
Market, the Fair Market Value on any date shall be the closing
selling price reported for the Common Stock on such exchange or
system for such date or, if no sales were reported for such
date, for the most recent date on which such a sale was
reported, and (b) if the Common Stock is not admitted to
trading on a national securities exchange or the Nasdaq National
Market or Nasdaq Small Cap Market, but is admitted to quotation
on an over the counter market or any interdealer quotation
system, the Fair Market Value on any given date shall be the
average of the highest bid and lowest asked prices of the Common
Stock reported for such date or, if no bid and asked prices were
reported for such date, for the last day preceding date for
which such prices were reported.
2.26
“Form
S-8”
has the meaning set forth in Section 5.4(b).
2.27
“Free Standing Rights”
has the
meaning set forth in Section 7.3(a).
2.28
“Good Reason”
means, with respect to
a Participant, the occurrence in connection with a Change in
Control, without the Participant’s express written consent,
of one of the following events or conditions:
| (a) A material reduction in the level of the Participant’s responsibilities in comparison to the level thereof at the time of the Change in Control; |
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| (b) The assignment to the Participant of a job title that is not of comparable prestige and status as the Participant’s job title at the time of the Change in Control; | |
| (c) The assignment to the Participant of any duties inconsistent with the Participant’s position at the time of the Change in Control, other than pursuant to the Participant’s promotion; | |
| (d) A material reduction in the Participant’s salary level; | |
| (e) A material reduction in the overall level of employee benefits or perquisites available to the Participant at the time of the Change in Control, or the Participant’s right to participate therein, unless such reduction is nondiscriminatory as to the Participant; | |
| (f) Requiring the Participant to be based anywhere more than fifty (50) miles from the business location to which the Participant normally reported for work at the time of the Change in Control, other than for required business travel not significantly greater than the Participant’s business travel obligations at the time of the Change in Control; or | |
| (g) Occurrence of any of the foregoing events and conditions before consummation of the Change in Control if the Participant reasonably demonstrates that such occurrence was at the request of a third party or otherwise arose in connection with or in anticipation of the Change in Control (for purposes of such demonstration, references in the foregoing events and conditions to the time of the Change in Control shall be deemed to refer to the time of commencement of discussions regarding the Change in Control). |
2.29
“Incentive Stock Option”
means an
Option intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
2.30
“Incumbent Directors”
means
individuals who, on the Effective Date, constitute the Board,
provided that any individual becoming a Director subsequent to
the Effective Date whose election or nomination for election to
the Board was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote
or by approval without objection to such nomination of the proxy
statement of the Company in which such person was named as a
nominee for Director) shall be an Incumbent Director. No
individual initially elected or nominated as a director of the
Company as a result of an actual or threatened election contest
with respect to Directors or as a result of any other actual or
threatened solicitation of proxies by or on behalf of any person
other than the Board shall be an Incumbent Director.
2.31
“Inducement Award”
means the grant of
an Award as a material inducement to a person being hired by the
Company or any of its Affiliates, or being rehired following a
bona fide period of interruption of employment. Inducement
Awards include grants to new Employees in connection with a
merger or acquisition.
2.32
“Market Stand-Off”
has the meaning
set forth in Section 15.
2.33
“Non-Employee Director”
means a
Director who is a “non-employee director” within the
meaning of
Rule
16b-3.
2.34
“Nonstatutory Stock Option”
means an
Option not intended to qualify as an Incentive Stock Option.
2.35
“Option”
means an Incentive Stock
Option or a Nonstatutory Stock Option granted pursuant to the
Plan.
2.36
“Optionholder”
means a person to whom
an Option is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Option.
2.37
“Outside Director”
means a Director
who is an “outside director” within the meaning of
Section 162(m) of the Code and Treasury Regulations
Section 1.162-27(e)(3).
2.38
“Participant”
means a person to whom
an Award is granted pursuant to the Plan or, if applicable, such
other person who holds an outstanding Award.
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2.39
“Performance Award”
means Awards
granted pursuant to Section 7.2, which may be
share-or
cash-denominated.
2.40
“Permitted Transferee”
of a Holder
means any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in
-law,
father-in
-law,
son-in
-law,
daughter-in
-law,
brother-in
-law, or
sister-in
-law of the
Holder (including any such relative by adoption); any person
sharing the Holder’s household (other than a tenant or
employee); a trust in which these persons have more than fifty
percent (50%) of the beneficial interest; and any other
non-charitable entity in which these persons (or the Holder) own
more than fifty percent (50%) of the voting interests.
2.41
“Plan”
means this Red Lion Hotels
Corporation 2006 Stock Incentive Plan.
2.42
“Related Rights”
has the meaning set
forth in Section 7.3(a).
2.43
“Restricted Award”
means any Award
granted pursuant to Section 7.1.
2.44
“Restricted Period”
has the meaning
set forth in Section 7.1.
2.45
“Rule
16b-3”
means Rule
16b-3
promulgated under the Exchange Act or any successor to
Rule
16b-3,
as in
effect from time to time.
2.46
“SAR Amount”
has the meaning set
forth in Section 7.3(h).
2.47
“SAR Exercise Price”
has the meaning
set forth in Section 7.3(b).
2.48
“Securities Act”
means the Securities
Act of 1933, as amended.
2.49
“Stock Appreciation Right”
means the
right pursuant to an award granted pursuant to Section 7.3.
2.50
“Stock for Stock Exchange” has the
meaning set forth in Section 6.4.
2.51
“Ten Percent Shareholder”
means a
person who owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates.
| 3. | ADMINISTRATION. |
3.1
Administration by Committee or Board.
The Plan
shall be administered by the Compensation Committee of the Board
unless the Board delegates administration to a different
committee of the Board (the Compensation Committee or such other
committee, as the case shall be, shall be referred to as the
“Committee”) or determines to administer the Plan
itself.
3.2
Powers of Administrator.
The Administrator shall
have the power and authority to select Participants and grant
them Awards pursuant to the terms of the Plan.
3.3
Specific Powers.
In particular, the
Administrator shall have the authority: (a) to construe and
interpret the Plan and apply its provisions; (b) to
promulgate, amend, and rescind rules and regulations relating to
the administration of the Plan; (c) to authorize any person
to execute, on behalf of the Company, any instrument required to
carry out the purposes of the Plan; (d) to delegate its
authority to one or more officers of the Company with respect to
awards that do not involve Covered Employees or
“insiders” within the meaning of Section 16 of
the Exchange Act; (e) to determine when Awards are to be
granted under the Plan; (f) from time to time to select,
subject to the limitations set forth in this Plan, those
Participants to whom Awards shall be granted; (g) to
determine the number of shares of Common Stock to be made
subject to each Award; (h) to determine whether an Option
is to be an Incentive Stock Option or a Nonstatutory Stock
Option; (i) to prescribe the terms and conditions of each
Award, including, without limitation, the exercise price and
medium of payment and vesting provisions, and to specify the
provisions of the Award Agreement relating to such Award;
(j) subject to Section 13.5, to amend any outstanding
Awards, including for the purpose of modifying the time or
manner of vesting, the purchase price or exercise price, or the
term of any outstanding Award; (k) to determine the
duration and purpose of leaves of absences that may be granted
to a Participant without constituting termination of his or her
employment for purposes of the Plan, which
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periods shall be no shorter than the periods generally
applicable to Employees under the Company’s employment
policies; and (l) to exercise discretion to make any and
all other determinations that it determines to be necessary or
advisable for administration of the Plan.
3.4
Decisions Final.
All decisions made by the
Administrator pursuant to the provisions of the Plan shall be
final and binding on the Company and the Participants and any
other person having any interest in an Award, unless such
decisions are determined by a court having jurisdiction to have
been arbitrary and capricious.
3.5
The Committee.
If the Plan is administered by a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers that the Board would
possess if it were administering the Plan, including the power
to delegate to a subcommittee or, to the extent permitted by
applicable law, to the chairman of the Committee any of the
administrative powers the Committee is authorized to exercise
(and references in this Plan to the Administrator shall
thereafter be to such subcommittee or chairman), subject,
however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by
the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan. The members
of the Committee shall be appointed by and serve at the pleasure
of the Board. From time to time, the Board may increase or
decrease the size of the Committee, add additional members to,
remove members (with or without cause) from, appoint new members
in substitution therefor, and fill vacancies, however caused, in
the Committee. The Committee shall act pursuant to a vote of the
majority of its members or, in the case of a Committee comprised
of only two members, the unanimous consent of its members,
whether present or not, or by the unanimous written consent of
its members and minutes shall be kept of all of its meetings and
copies thereof shall be provided to the Board. Subject to the
limitations prescribed by the Plan and the Board, the Committee
may establish and follow such rules and regulations for the
conduct of its business as it may determine to be advisable.
| 4. | SHARES SUBJECT TO THE PLAN. |
4.1
Share Reserve.
Subject to the provisions of
Section 12.1 relating to adjustments upon changes in Common
Stock, the shares that may be issued pursuant to Awards shall
consist of the Company’s authorized but unissued Common
Stock, and the maximum aggregate amount of such Common Stock
that may be issued upon exercise of all Awards under the Plan
shall be 1,000,000 shares, all of which may be used for
Incentive Stock Options but no more than 500,000 of which may be
used for Restricted Awards. If any payment required in
connection with an Award (whether on account of the exercise
price for an Option or Award, the satisfaction of withholding
tax liabilities in connection with the Award or otherwise) is
satisfied through the tendering of shares of Common Stock
(either by actual tender or by attestation) or by the
withholding of shares of Common Stock, only the number of shares
of Common Stock issued by the Company, net of the shares
tendered or withheld, shall be counted for purposes of
determining the number of shares of Common Stock available for
issuance under the Plan. Shares of Common Stock that are subject
to tandem Awards shall be counted only once.
4.2
Reversion of Shares to the Share Reserve.
If any
Award shall for any reason expire or otherwise terminate, in
whole or in part, the shares of Common Stock not acquired under
such Award shall revert to and again become available for
issuance under the Plan. If shares of Common Stock issued under
the Plan are reacquired by the Company pursuant to the terms of
any forfeiture provision, such shares shall again be available
for purposes of the Plan.
4.3
Source of Shares.
The shares of Common Stock
subject to the Plan may be authorized but unissued Common Stock.
| 5. | ELIGIBILITY. |
5.1
Eligibility for Specific Awards.
Incentive Stock
Options may be granted only to Employees. Awards other than
Incentive Stock Options may be granted to Employees, to
Directors and, subject to the limitations of Section 5.4,
to Consultants.
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5.2
Ten Percent Shareholders.
A Ten Percent
Shareholder shall not be granted an Incentive Stock Option
unless the exercise price of such Option is at least 110% of the
Fair Market Value of the Common Stock at the Date of Grant and
the Option is not exercisable after the expiration of five years
from the Date of Grant.
5.3
Section 162(m) Limitation.
Subject to the
provisions of Section 12.1 relating to adjustments upon
changes in the shares of Common Stock, no Employee shall be
eligible to be granted Options or Stock Appreciation Rights
covering more than 250,000 shares during any fiscal year,
or Performance Awards that could result in such Employee
receiving more than 250,000 shares of Common Stock in the
case of share-denominated Performance Awards.
5.4
Consultants.
A Consultant shall not be eligible
for the grant of an Award if, at the time of grant, a
Form
S-8
Registration Statement under the Securities Act
(“Form
S-8”)
is not available to register either the offer or the sale of the
Company’s securities to such Consultant because of the
nature of the services that the Consultant is providing to the
Company (i.e., capital raising), or because the Consultant is
not a natural person, or as otherwise provided by the rules
governing the use of
Form
S-8,
unless
the Company determines both (a) that such grant
(i) shall be registered in another manner under the
Securities Act (e.g., on a
Form
S-3
Registration Statement) or (ii) does not require
registration under the Securities Act in order to comply with
the requirements of the Securities Act, if applicable, and
(b) that such grant complies with the securities laws of
all other relevant jurisdictions.
| 6. | OPTION PROVISIONS. |
Each Option shall be in such form and shall contain such terms
and conditions as the Administrator shall deem appropriate;
provided, however, that no Option shall contain a
“reload” feature automatically entitling the
Optionholder to receive an additional Option upon exercise of
the original Option. All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the
time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common
Stock purchased on exercise of each type of Option.
Notwithstanding the foregoing, the Company shall have no
liability to any Participant or any other person if an Option
designated as an Incentive Stock Option fails to qualify as such
at any time or if an Option is determined to constitute
“nonqualified deferred compensation” within the
meaning of Section 409A of the Code and the terms of such
Option do not satisfy the additional conditions applicable to
nonqualified deferred compensation under Section 409A of
the Code and Section 8 of the Plan. The provisions of
separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference
in the Option or otherwise) the substance of each of the
following provisions, to the extent applicable:
6.1
Term.
Subject to the provisions of
Section 5.2 regarding Ten Percent Shareholders, no
Incentive Stock Option shall be exercisable after the expiration
of 10 years from the date it was granted.
6.2
Exercise Price of an Incentive Stock Option.
Subject to the provisions of Section 5.2 regarding Ten
Percent Shareholders, the exercise price of each Incentive Stock
Option shall be not less than 100% of the Fair Market Value of
the Common Stock subject to the Option on the Date of Grant of
the Option Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in
a manner satisfying the provisions of Section 424(a) of the
Code.
6.3
Exercise Price of a Nonstatutory Stock Option.
The exercise price of each Nonstatutory Stock Option shall be
not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Date of Grant of the Option.
Notwithstanding the foregoing, a Nonstatutory Stock Option may
be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
6.4
Consideration.
The exercise price of Common
Stock acquired pursuant to an Option shall be paid, to the
extent permitted by applicable statutes and regulations, either
(a) in cash or by certified or bank check
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at the time the Option is exercised or (b) in the
discretion of the Administrator, upon such terms as the
Administrator shall approve, the exercise price may be paid:
| (i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the exercise price due for the number of shares being acquired, or by means of attestation whereby the Participant (A) identifies for delivery specific shares of Common Stock that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) and that have a Fair Market Value on the date of attestation equal to the exercise price and (B) receives a number of shares of Common Stock equal to the difference between the number of shares thereby purchased and the number of identified attestation shares of Common Stock (a “Stock for Stock Exchange”); | |
| (ii) during any period when the Common Stock is publicly traded, by a copy of instructions to a broker directing such broker to sell the Common Stock for which such Option is exercised, and to remit to the Company the aggregate Exercise Price of such Option (a “Cashless Exercise”); or | |
| (iii) in any other form of legal consideration that may be acceptable to the Administrator, including without limitation with a full-recourse promissory note. |
Notwithstanding the foregoing, during any period when the Common
Stock is publicly traded, a Cashless Exercise, exercise with a
promissory note or other transaction by a Director or executive
officer that involves or may involve a direct or indirect
extension of credit or arrangement of an extension of credit by
the Company or an Affiliate in violation of Section 402(a)
of the Sarbanes-Oxley Act (codified as Section 13(k) of the
Exchange Act) shall be prohibited with respect to any Award
under this Plan. Unless otherwise specified in the Award
Agreement, payment of the exercise price by a Participant who is
an officer, director or other “insider” subject to
Section 16(b) of the Exchange Act in the form of a Stock
for Stock Exchange is subject to pre-approval by the
Administrator, in its sole discretion. Any such pre-approval
shall be documented in a manner that complies with the
specificity requirements of
Rule
16b-3,
including the name of the Participant involved in the
transaction, the nature of the transaction, the number of shares
to be acquired or disposed of by the Participant and the
material terms of the Option involved in the transaction. The
Administrator may require some or all Participants to use one or
more brokers designated by the Administrator to sell Common
Stock in connection with a Cashless Exercise.
6.5
Transferability of an Option.
Except as provided
in Section 6.6, an Option shall not be transferable except
by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the
Optionholder.
6.6
Discretionary Transferability of Nonstatutory Stock
Option.
The Administrator in its discretion may provide,
either in the Award Agreement for a Nonstatutory Stock Option or
by a subsequent determination, that the Option may be
transferred as provided in the next sentence. In such event,
except to the extent limited by the Administrator, the original
Optionholder may transfer the Option to any Permitted
Transferee, so long as the transfer is without value, and the
Permitted Transferee may transfer the Option without value to
any other Permitted Transferee of the original Optionholder.
Neither (a) a transfer under a domestic relations order in
settlement of marital property rights, nor (b) a transfer
to an entity in which more than fifty percent (50%) of the
voting interests are owned by Permitted Transferees (or the
original Optionholder) in exchange for an interest in that
entity, will constitute a transfer for value.
6.7
Vesting Generally.
The Option may, but need not,
vest and therefore become exercisable in periodic installments
that may, but need not, be equal. The Option may be subject to
such other terms and conditions on the time or times when it may
be exercised (which may be based on performance or other
criteria) as the Administrator may deem appropriate. The vesting
provisions of individual Options may vary. No Option may be
exercised for a fraction of a share of Common Stock. The
Administrator in its discretion may provide, either in the Award
Agreement for an Option or by a subsequent determination, for
acceleration of the vesting and exercisability of the Option at
any time. Unless otherwise specified in an Award Agreement
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for an Option, each Option granted pursuant to the terms of the
Plan shall become exercisable at the rate of 25% per year
over the four-year period commencing on the date the Option is
granted
6.8
Termination of Continuous Service.
Unless
otherwise specified in an Award Agreement for an Option or in an
Optionholder’s employment agreement, if the
Optionholder’s Continuous Service terminates (other than
upon the Optionholder’s death or Disability or termination
by the Company for Cause), the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination), but only
during the period ending on the earlier of (a) the date
three months following the termination of the
Optionholder’s Continuous Service, or (b) the
expiration of the term of the Option as set forth in its Award
Agreement. To the extent the Option is not exercised within that
period, it shall terminate. Unless otherwise specified in an
Award Agreement for an Option or in an Optionholder’s
employment agreement, or as otherwise provided in
Sections 6.10 and 6.11 of this Plan, outstanding Options
that are not exercisable at the time the Optionholder’s
Continuous Service terminates for any reason other than for
Cause (including an Optionholder’s death or Disability)
shall be forfeited and expire at the close of business on the
date of such termination. If the Optionholder’s Continuous
Service terminates for Cause, all outstanding Options shall be
forfeited (whether or not vested) and expire as of the beginning
of business on the date of such termination for Cause.
6.9
Extension of Termination Date.
Unless otherwise
specified in an Award Agreement for an Option, if exercise of
the Option following termination of the Optionholder’s
Continuous Service is prohibited because the issuance of shares
of Common Stock would violate the Securities Act or any other
state or federal securities or other laws or the rules of any
securities exchange or interdealer quotation system, then the
Option shall terminate upon the expiration of a period after
termination of the Participant’s Continuous Service that is
three months after the end of the period during which the
exercise of the Option would be in violation of such laws or
rules. In addition, unless otherwise specified in an Award
Agreement for an Option, if upon exercise of the Option
following termination of the Optionholder’s Continuous
Service, the Optionholder would be prohibited by the
Company’s insider trading policy from immediately selling
the shares of Common Stock issuable upon such exercise, then the
Option shall terminate upon expiration of a period after
termination of the Participant’s Continuous Service that is
three months after the end of the period during which such sale
would be prohibited by the Company’s insider trading policy.
6.10
Disability of Optionholder.
Unless otherwise
specified in an Award Agreement for an Option or in an
Optionholder’s employment agreement, if the
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s Disability, the Optionholder may
exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of
termination), but only during the period ending on the earlier
of (a) the date 12 months following such termination
or (b) the expiration of the term of the Option as set
forth in its Award Agreement. To the extent the Option is not
exercised within that period, it shall terminate.
6.11
Death of Optionholder.
Unless otherwise
specified in an Award Agreement for an Option or in an
Optionholder’s employment agreement, if the
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s death, then the Option may be exercised
(to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s
estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only during the period
ending on the earlier of (a) the date 12 months
following the date of death or (b) the expiration of the
term of such Option as set forth in its Award Agreement. To the
extent the Option is not exercised within that period, it shall
terminate.
6.12
Incentive Stock Option $100,000 Limitation.
To
the extent that the aggregate Fair Market Value (determined at
the time of grant) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of
the Company and its Affiliates) exceeds $100,000, the Options or
portions thereof that exceed such limit (according to the order
in which they were granted) shall be treated as Nonstatutory
Stock Options.
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| 7. | PROVISIONS OF AWARDS OTHER THAN OPTIONS. |
7.1
Restricted Awards.
A Restricted Award is an
Award of actual shares of Common Stock (so-called
“restricted stock”) or hypothetical Common Stock units
(so-called “restricted stock units”) having a value
equal to the Fair Market Value of an identical number of shares
of Common Stock, which may, but need not, provide that such
Restricted Award may not be sold, assigned, transferred or
otherwise disposed of, pledged or hypothecated as collateral for
a loan or as security for the performance of any obligation or
for any other purpose for such period (the “Restricted
Period”) as the Administrator shall determine. The terms
and conditions of the Restricted Award may change from time to
time, and the terms and conditions of separate Restricted Awards
need not be identical, but each Restricted Award shall include
(through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following
provisions, to the extent applicable:
| (a) Purchase Price. The purchase price of Restricted Awards, if any, shall be determined by the Administrator, and may be stated as cash, property or services. | |
| (b) Consideration. The cash consideration, if any, for Common Stock acquired pursuant to the Restricted Award shall be paid either: (i) in cash at the time of purchase; or (ii) in any other form of legal consideration that may be acceptable to the Administrator in its discretion including, without limitation, a recourse promissory note, property or a Stock for Stock Exchange, or services that the Administrator determines have a value at least equal to the Fair Market Value of such Common Stock. | |
| (c) Vesting. Shares of Common Stock acquired under or subject to the Restricted Award may, but need not, be subject to a Restricted Period during which such shares or the right to acquire such shares will be forfeited to the Company if the specified restrictions or conditions for the Restricted Award are not satisfied. The Administrator in its discretion may provide, either in the Award Agreement for a Restricted Award or by a subsequent determination, for acceleration of the end of the Restricted Period at any time, in which event all such restrictions and conditions shall lapse or be deemed satisfied, as the case may be. | |
| (d) Termination of Participant’s Continuous Service. Unless otherwise provided in the Award Agreement for a Restricted Award or in the employment agreement of the Participant holding the Restricted Award, if the Participant’s Continuous Service terminates for any reason, the Participant shall forfeit the unvested portion of a Restricted Award acquired in consideration of prior or future services, and all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the Restricted Award shall be forfeited and the Participant shall have no further rights with respect to the unvested portion of the Award. | |
| (e) Transferability. Rights to acquire shares of Common Stock under the Restricted Award shall be transferable by the Participant only upon such terms and conditions as are set forth in the Award Agreement, as the Administrator shall determine in its discretion, so long as Common Stock awarded under the Restricted Award remains subject to the terms of the Award Agreement. | |
| (f) Concurrent Tax Payment. The Administrator, in its sole discretion, may (but shall not be required to) provide for payment of a concurrent cash award in an amount equal, in whole or in part, to the estimated after tax amount required to satisfy applicable federal, state or local tax withholding obligations arising from the receipt and deemed vesting of restricted stock for which an election under Section 83(b) of the Code may be required. | |
| (g) Lapse of Restrictions. Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Administrator, the restrictions applicable to the Restricted Award shall lapse and a stock certificate for the number of shares of Common Stock with respect to which the restrictions have lapsed shall be delivered, free of any restrictions except those that may be imposed by law, the terms of the Plan or the terms of a Restricted Award, to the Participant or the Participant’s estate, as the case may be, unless such Restricted Award is subject to a deferral condition that complies with the 409A Award requirements that may be allowed or required by the Administrator in its sole discretion. The Company shall not be required to deliver any fractional share of |
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| Common Stock but will pay, in lieu thereof, the Fair Market Value of such fractional share in cash to the Participant or the Participant’s estate, as the case may be. Unless otherwise subject to a deferral condition that complies with the 409A Award requirements, the Common Stock certificate shall be issued and delivered and the Participant shall be entitled to the beneficial ownership rights of such Common Stock not later than (i) the date that is 2 1 / 2 months after the end of the Participant’s taxable year for which the Restricted Period ends and the Participant has a legally binding right to such amounts; (ii) the date that is 2 1 / 2 months after the end of the Company’s taxable year for which the Restricted Period ends and the Participant has a legally binding right to such amounts, whichever is later; or (iii) such earlier date as may be necessary to avoid application of Code Section 409A to such Award. |
7.2
Performance Awards.
| (a) Nature of Performance Awards. A Performance Award is an Award entitling the recipient to acquire cash, actual shares of Common Stock or hypothetical Common Stock units having a value equal to the Fair Market Value of an identical number of shares of Common Stock upon the attainment of specified performance goals. The Administrator may make Performance Awards independent of or in connection with the granting of any other Award under the Plan. Performance Awards may be granted under the Plan to any Participant, including those who qualify for awards under other performance plans of the Company. The Administrator in its sole discretion shall determine whether and to whom Performance Awards shall be made, the performance goals applicable under each Award, the periods during which performance is to be measured, and all other limitations and conditions applicable to the awarded cash or shares. Performance goals shall be based on a pre-established objective formula or standard that specifies the manner of determining the amount of cash or the number of shares under the Performance Award that will be granted or will vest if the performance goal is attained. Performance goals will be determined by the Administrator prior to the time 25% of the service period has elapsed and may be based on one or more business criteria that apply to a Participant, a business unit or the Company and its Affiliates. Such business criteria may include, by way of example and without limitation, revenue, earnings before interest, taxes, depreciation and amortization (EBITDA), funds from operations, funds from operations per share, operating income, pre-tax or after-tax income, cash available for distribution, cash available for distribution per share, net earnings, earnings per share, return on equity, return on assets, return on capital, economic value added, share price performance, improvements in the Company’s attainment of expense levels, and implementing or completion of critical projects, or improvement in cash-flow (before or after tax). A performance goal may be measured over a performance period on a periodic, annual, cumulative or average basis and may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, subsidiaries, acquired businesses, minority investments, partnerships or joint ventures. More than one performance goal may be incorporated in a performance objective, in which case achievement with respect to each performance goal may be assessed individually or in combination with each other. The Administrator may, in connection with the establishment of performance goals for a performance period, establish a matrix setting forth the relationship between performance on two or more performance goals and the amount of the Performance Award payable for that performance period. The level or levels of performance specified with respect to a performance goal may be established in absolute terms, as objectives relative to performance in prior periods, as an objective compared to the performance of one or more comparable companies or an index covering multiple companies, or otherwise as the Administrator may determine. Performance goals shall be objective and, if the Company is publicly traded, shall otherwise meet the requirements of Section 162(m) of the Code. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants. A Performance Award to a Participant who is a Covered Employee shall (unless the Administrator determines otherwise) provide that, if the Participant’s Continuous Service terminates prior to the end of the performance period for any reason, such Award will be payable only (i) if the applicable performance objectives are achieved and (ii) to the extent, if any, the Administrator shall determine. Such objective performance goals are not required to be based on increases in a specific business criteria, but may be based on maintaining the status quo or limiting economic losses. |
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| (b) Restrictions on Transfer. Performance Awards and all rights with respect to such Performance Awards may not be sold, assigned, transferred, pledged or otherwise encumbered. | |
| (c) Rights as a Shareholder. A Participant receiving a Performance Award that is denominated in shares of Common Stock or hypothetical Common Stock units shall have the rights of a shareholder only as to shares actually received by the Participant under the Plan and not with respect to shares subject to the Award but not actually received by the Participant. A Participant shall be entitled to receive a stock certificate evidencing the acquisition of shares of Common Stock under a Performance Award only upon satisfaction of all conditions specified in the written instrument evidencing the Performance Award (or in a performance plan adopted by the Administrator). The Common Stock certificate shall be issued and delivered and the Participant shall be entitled to the beneficial ownership rights of such Common Stock not later than the later of (i) the date that is 2 1 / 2 months after the end of the Participant’s taxable year for which the Administrator certifies that the Performance Award conditions have been satisfied and the Participant has a legally binding right to such amounts, or (ii) the date that is 2 1 / 2 months after the end of the Company’s taxable year for which the Administrator certifies that the Performance Award conditions have been satisfied and the Participant has a legally binding right to such amounts, or such other date as may be necessary to avoid application of Section 409A to such Awards. | |
| (d) Termination. Except as may otherwise be provided by the Administrator at any time, a Participant’s rights in all Performance Awards shall automatically terminate upon the Participant’s termination of employment (or business relationship) with the Company and its Affiliates for any reason. | |
| (e) Acceleration, Waiver, Etc. At any time prior to the Participant’s termination of employment (or other business relationship) with the Company and its Affiliates, the Administrator may in its sole discretion accelerate, waive or, subject to Section 13, amend any or all of the goals, restrictions or conditions imposed under any Performance Award. The Administrator in its discretion may provide, either in the Award Agreement for a Performance Award or by a subsequent determination, for acceleration of vesting of the Performance Award at any time. | |
| (f) Certification. Following the completion of each performance period, the Administrator shall certify in writing, in accordance with the requirements of Section 162(m) of the Code, whether the performance objectives and other material terms of a Performance Award have been achieved or met. Unless the Administrator determines otherwise, Performance Awards shall not be settled until the Administrator has made the certification specified under this Section 7.2(f). |
7.3
Stock Appreciation Rights.
| (a) General. Stock Appreciation Rights may be granted either alone (“Free Standing Rights”) or, provided the requirements of Section 7.3(b) are satisfied, in tandem with all or part of any Option granted under the Plan (“Related Rights”). In the case of a Nonstatutory Stock Option, Related Rights may be granted either at or after the time of the grant of such Option. In the case of an Incentive Stock Option, Related Rights may be granted only at the time of the grant of the Incentive Stock Option. | |
| (b) Grant Requirements. A Stock Appreciation Right may only be granted if the Stock Appreciation Right: (i) does not provide for the deferral of compensation within the meaning of Section 409A of the Code; or (ii) satisfies the requirements of Section 7.3(h) and Section 8 hereof. A Stock Appreciation Right does not provide for a deferral of compensation if: (A) the value of the Common Stock the excess over which the right provides for payment upon exercise (the “SAR Exercise Price”) may never be less than the Fair Market Value of the underlying Common Stock on the date the right is granted, (B) the compensation payable under the Stock Appreciation Right can never be greater than the difference between the SAR exercise price and the Fair Market Value of the Common Stock on the date the Stock Appreciation Right is exercised, (C) the number of shares of Common Stock subject to the Stock Appreciation Right are fixed on the date of grant of the Stock Appreciation Right, and (D) the right does not include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the right. |
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| (c) Exercise and Payment. Upon exercise thereof, the holder of a Stock Appreciation Right shall be entitled to receive from the Company, an amount equal to the product of (i) the excess of the Fair Market Value, on the date of such written request, of one share of Common Stock over the SAR Exercise Price per share specified in such Stock Appreciation Right or its related Option, multiplied by (ii) the number of shares for which such Stock Appreciation Right shall be exercised. Payment with respect to the exercise of a Stock Appreciation Right that satisfies the requirements of Section 7.3(b)(i) shall be made on the date of exercise in shares of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Administrator in its sole discretion) valued at Fair Market Value on the date of exercise. Payment with respect to the exercise of a Stock Appreciation Right that does not satisfy the requirements of Section 7.3(b)(i) shall be paid at the time specified in the Award in accordance with the provisions of Section 7.3(h) and Section 8. Payment may be made in the form of shares of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Administrator in its sole discretion), cash or a combination thereof, as determined by the Administrator. | |
| (d) Exercise Price. The SAR Exercise Price of a Free Standing Stock Appreciation Right shall be determined by the Administrator, but shall not be less than 100% of the Fair Market Value of one share of Common Stock on the Date of Grant of such Stock Appreciation Right. A Related Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of Common Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price per share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless the Administrator determines that the requirements of Section 7.3(b)(i) are satisfied. The Administrator in its discretion may provide, either in the Award Agreement for a Stock Appreciation Right or by a subsequent determination, for acceleration of the exercisability of the Stock Appreciation Right at any time. | |
| (e) Reduction in the Underlying Option Shares. Upon any exercise of a Stock Appreciation Right, the number of shares of Common Stock for which any related Option shall be exercisable shall be reduced by the number of shares for which the Stock Appreciation Right shall have been exercised. The number of shares of Common Stock for which a Stock Appreciation Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common Stock for which such Option shall have been exercised. | |
| (f) Written Request. Unless otherwise determined by the Administrator in its sole discretion and only if permitted in the Stock Appreciation Right’s Award Agreement, any exercise of a Stock Appreciation Right for cash may be made only by a written request filed with the Corporate Secretary of the Company during the period beginning on the third business day following the date of release for publication by the Company of quarterly or annual summary statements of earnings and ending on the twelfth business day following such date. Within 30 days of the receipt by the Company of a written request to receive cash in full or partial settlement of a Stock Appreciation Right or to exercise such Stock Appreciation Right for cash, the Administrator shall, in its sole discretion, either consent to or disapprove, in whole or in part, such written request. A written request to receive cash in full or partial settlement of a Stock Appreciation Right or to exercise a Stock Appreciation Right for cash may provide that, if the Administrator shall disapprove such written request, such written request shall be deemed to be an exercise of such Stock Appreciation Right for shares of Common Stock. | |
| (g) Disapproval by Administrator. If the Administrator disapproves in whole or in part any election by a Participant to receive cash in full or partial settlement of a Stock Appreciation Right or to exercise such Stock Appreciation Right for cash, such disapproval shall not affect such Participant’s right to exercise such Stock Appreciation Right at a later date, to the extent that such Stock Appreciation Right shall be otherwise exercisable, or to elect the form of payment at a later date, provided that an |
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| election to receive cash upon such later exercise shall be subject to the approval of the Administrator. Additionally, such disapproval shall not affect such Participant’s right to exercise any related Option. | |
| (h) Additional Requirements under Section 409A. A Stock Appreciation Right that is not intended to or fails to satisfy the requirements of Section 7.3(b)(i) shall satisfy the requirements of this Section 7.3(h) and the additional conditions applicable to nonqualified deferred compensation under Section 409A of the Code, in accordance with Section 8 hereof. The requirements herein shall apply if any Stock Appreciation Right under this Plan is granted with an SAR Exercise Price less than Fair Market Value of the Common Stock underlying the Award on the date the Stock Appreciation Right is granted (regardless of whether or not such SAR Exercise Price is intentionally or unintentionally priced at less than Fair Market Value, or is materially modified at a time when the Fair Market Value exceeds the SAR Exercise Price), provides that it is settled in cash, or is otherwise determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code. Any such Stock Appreciation Right may provide that it is exercisable at any time permitted under the governing written instrument, but such exercise shall be limited to fixing the measurement of the amount, if any, by which the Fair Market Value of a share of Common Stock on the date of exercise exceeds the SAR exercise price (the “SAR Amount”). However, once the Stock Appreciation Right is exercised, the SAR Amount may only be paid on the fixed time, payment schedule or other event specified in the governing written instrument or in Section 8.1 hereof. |
| 8. | ADDITIONAL CONDITIONS APPLICABLE TO NONQUALIFIED DEFERRED COMPENSATION UNDER SECTION 409A OF THE CODE. |
If any Award under this Plan is granted with an exercise price
less than Fair Market Value of the Common Stock subject to the
Award on the Date of Grant (regardless of whether or not such
exercise price is intentionally or unintentionally priced at
less than Fair Market Value, or such Award is materially
modified and deemed a new Award at a time when the Fair Market
Value exceeds the exercise price), or is otherwise determined to
constitute a 409A Award, the following additional conditions
shall apply and shall supersede any contrary provisions of this
Plan or the terms of any Award Agreement for the 409A Award.
8.1
Exercise and Distribution.
No 409A Award shall
be exercisable or distributable earlier than upon one of the
following:
| (a) Specified Time. A specified time or a fixed schedule set forth in the written instrument evidencing the 409A Award, but not later than after the expiration of 10 years from the Date of Grant. If the written grant instrument does not specify a fixed time or schedule, such time shall be the date that is the fifth anniversary of the Date of Grant. | |
| (b) Separation from Service. Separation from service (within the meaning of Section 409A of the Code) by the 409A Award recipient; provided, however, if the 409A Award recipient is a “key employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) and any of the Company’s stock is publicly traded on an established securities market or otherwise, exercise or distribution under this Section 8.1(b) may not be made before the date that is six months after the date of separation from service. | |
| (c) Death. The date of death of the 409A Award recipient. | |
| (d) Disability. The date the 409A Award recipient becomes disabled (within the meaning of Section 8.4(b) hereof). | |
| (e) Unforeseeable Emergency. The occurrence of an unforeseeable emergency (within the meaning of Section 8.4(c) hereof), but only if the net value (after payment of the exercise price) of the number of shares of Common Stock that become issuable does not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the exercise, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s other assets (to the extent such liquidation would not itself cause severe financial hardship). |
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| (f) Change in Control Event. The occurrence of a Change in Control Event (within the meaning of Section 8.4(a) hereof), including the Company’s discretionary exercise of the right to accelerate vesting of such Award upon a Change in Control Event or to terminate the Plan or any 409A Award granted hereunder within 12 months of the Change in Control Event. |
8.2
Term.
Notwithstanding anything to the contrary
in this Plan or the terms of any 409A Award agreement, the term
of any 409A Award shall expire and such Award shall no longer be
exercisable on the date that is the later of:
(a) 2
1
/
2
months
after the end of the Company’s taxable year in which the
409A Award first becomes exercisable or distributable pursuant
to Section 8 hereof and is not subject to a substantial
risk of forfeiture; or
(b) 2
1
/
2
months after the end of the 409A Award
recipient’s taxable year in which the 409A Award first
becomes exercisable or distributable pursuant to Section 8
hereof and is not subject to a substantial risk of forfeiture,
but not later than the earlier of (i) the expiration of
10 years from the date the 409A Award was granted, or
(ii) the term specified in the 409A Award agreement.
8.3
No Acceleration.
A 409A Award may not be
accelerated or exercised prior to the time specified in
Section 8 hereof, except in the case of one of the
following events:
| (a) Domestic Relations Order. The 409A Award may permit the acceleration of the exercise or distribution time or schedule to an individual other than the Participant as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code). | |
| (b) Conflicts of Interest. The 409A Award may permit the acceleration of the exercise or distribution time or schedule as may be necessary to comply with the terms of a certificate of divestiture (as defined in Section 1043(b)(2) of the Code). | |
| (c) Change in Control Event. The Administrator may exercise the discretionary right to accelerate the vesting of such 409A Award upon a Change in Control Event or to terminate the Plan or any 409A Award granted thereunder within 12 months of the Change in Control Event and cancel the 409A Award for compensation. In addition, the Administrator may exercise the discretionary right to accelerate the vesting of such 409A Award provided that such acceleration does not change the time or schedule of payment of such Award and otherwise satisfies the requirements of this Section 8 and the requirements of Section 409A of the Code. |
8.4
Definitions.
Solely for purposes of this
Section 8 and not for other purposes of the Plan, the
following terms shall be defined as set forth below:
| (a) “Change in Control Event” means the occurrence of a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company (as defined in Proposed Regulations Section 1.409A-3(g)(5) and any subsequent guidance interpreting Code Section 409A). For example, a Change in Control Event will occur if: |
| (i) a person or more than one person acting as a group: |
| (A) acquires ownership of stock that brings such person’s or group’s total ownership in excess of 50% of the outstanding stock of the Company; or | |
| (B) acquires ownership of 35% or more of the total voting power of the Company within a 12 month period; or |
| (ii) acquires ownership of assets from the Company equal to 40% or more of the total value of the Company within a 12 month period. |
| (b) “Disabled” means a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering Employees. |
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| (c) “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. |
| 9. | COVENANTS OF THE COMPANY. |
9.1
Availability of Shares.
During the terms of the
Awards, the Company shall keep available at all times the number
of shares of Common Stock required to satisfy such Awards.
9.2
Securities Law Compliance.
Each Award Agreement
shall be subject to the condition, whether or not expressly
stated therein, that no shares of Common Stock shall be issued
or sold thereunder unless and until (a) any then applicable
requirements of state and federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the
Company and its counsel and (b) if required to do so by the
Company, the Participant shall have executed and delivered to
the Company a letter of investment intent in such form and
containing such provisions as the Administrator may require. The
Company shall use reasonable efforts to seek to obtain from each
regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to grant Awards and to
issue and sell shares of Common Stock pursuant to the Awards;
provided, however, that this undertaking shall not require the
Company to register under the Securities Act the Plan, any Award
or any Common Stock issued or issuable pursuant to any such
Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to
issue and sell Common Stock pursuant to Awards unless and until
such authority is obtained.
| 10. | USE OF PROCEEDS FROM SALE OF STOCK. |
Proceeds from the sale of Common Stock pursuant to Awards shall
constitute general funds of the Company.
| 11. | MISCELLANEOUS. |
11.1
Acceleration of Exercisability and Vesting.
The
Administrator shall have the power to accelerate the time at
which an Award may first be exercised or the time during which
an Award or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Award stating the
time at which it may first be exercised or the time during which
it will vest.
11.2
Shareholder Rights.
No Participant shall be
deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to
such Award unless and until such Participant has satisfied all
requirements for exercise of the Award pursuant to its terms and
no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions of other rights for which the record date is prior
to the date such Common Stock certificate is issued, except as
provided in Section 12.1 hereof.
11.3
No Employment or Other Service Rights.
Nothing
in the Plan or any instrument executed or Award granted pursuant
thereto shall confer upon any Participant any right to continue
to serve the Company or an Affiliate in the capacity in effect
at the time the Award was granted or shall affect the right of
the Company or an Affiliate to terminate (a) the employment
of an Employee with or without notice and with or without Cause,
(b) the service of a Consultant pursuant to the terms of
such Consultant’s agreement with the Company or an
Affiliate or (c) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the
Company or the Affiliate is incorporated, as the case may be.
11.4
Transfer, Approved Leave of Absence.
For
purposes of the Plan, no termination of employment by an
Employee shall be deemed to result from either (a) a
transfer to the employment of the Company from an
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Affiliate or from the Company to an Affiliate, or from one
Affiliate to another; or (b) an approved leave of absence
for military service or sickness, or for any other purpose
approved by the Company, if the Employee’s right to
re-employment is guaranteed either by a statute or by contract
or under the policy pursuant to which the leave of absence was
granted or if the Administrator otherwise so provides in writing.
11.5
Investment Assurances.
The Company may require
a Participant, as a condition of exercising or acquiring Common
Stock under any Award, (a) to give written assurances
satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced
in financial and business matters and that he or she is capable
of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Award;
and (b) to give written assurances satisfactory to the
Company stating that the Participant is acquiring Common Stock
subject to the Award for the Participant’s own account and
not with any present intention of selling or otherwise
distributing the Common Stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares of Common
Stock upon the exercise or acquisition of Common Stock under the
Award has been registered under a then currently effective
registration statement under the Securities Act or (ii) as
to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in
the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to,
legends restricting the transfer of the Common Stock.
11.6
Withholding Obligations.
Each Participant must
satisfy all federal, state and local tax withholding obligations
relating to the exercise or acquisition of Common Stock under an
Award. To the extent permitted by the terms of an Award
Agreement or by the Administrator, in its discretion, the
Participant may satisfy federal, state or local tax withholding
obligations relating to the exercise or acquisition of Common
Stock under an Award by any of the following means (in addition
to the Company’s right to withhold from any compensation
paid to the Participant by the Company) or by a combination of
such means: (a) tendering a cash payment;
(b) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common
Stock under the Award, provided, however, that no shares of
Common Stock are withheld with a value exceeding the minimum
amount of tax required to be withheld by law;
(c) delivering to the Company previously owned and
unencumbered shares of Common Stock of the Company or
(d) by execution of a recourse promissory note by a
Participant who is not a Director or executive officer. Unless
otherwise specified in an Award Agreement, payment of the tax
withholding by a Participant who is an officer, director or
other “insider” subject to Section 16(b) of the
Exchange Act by delivering previously owned and unencumbered
shares of Common Stock of the Company or in the form of share
withholding is subject to pre-approval by the Administrator, in
its sole discretion. Any such pre-approval shall be documented
in a manner that complies with the specificity requirements of
Rule
16b-3,
including the name of the Participant involved in the
transaction, the nature of the transaction, the number of shares
to be acquired or disposed of by the Participant and the
material terms of the Options involved in the transaction.
| 12. | ADJUSTMENTS UPON CHANGES IN STOCK. |
12.1
Capitalization Adjustments.
If any change is
made in the Common Stock subject to the Plan, or subject to any
Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), then (a) the aggregate
number of shares of Common Stock or class of shares that may be
purchased pursuant to Awards granted hereunder; (b) the
aggregate number of shares of Common Stock or class of shares
that may be purchased pursuant to Incentive Stock Options
granted hereunder; (c) the aggregate number of shares of
Common Stock or class of shares that may be issued pursuant to
Restricted Awards granted hereunder; (d) the number and/or
class of shares of Common Stock covered by outstanding Options
and Awards; (e) the maximum number of shares of
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Common Stock with respect to which Awards may be granted to any
single Optionholder during any calendar year; and (f) the
exercise price of any Award in effect prior to such change shall
be proportionately adjusted by the Administrator to reflect any
increase or decrease in the number of issued shares of Common
Stock or change in the Fair Market Value of such Common Stock
resulting from such transaction; provided, however, that any
fractional shares resulting from the adjustment shall be
eliminated. The Administrator shall make such adjustments, and
its determination shall be final, binding and conclusive. The
conversion of any securities of the Company that are by their
terms convertible shall not be treated as a transaction
“without receipt of consideration” by the Company.
12.2
Dissolution or Liquidation.
In the event of a
dissolution or liquidation of the Company, then all outstanding
Awards shall terminate immediately prior to such event.
12.3
Change in Control — Asset Sale, Merger,
Consolidation or Reverse Merger.
| (a) In the event of a Change in Control or any other corporate separation or division (including, but not limited to, a split-up, a split-off or a spin-off), merger or consolidation in which the Company is not the Surviving Entity, or a reverse merger in which the Company is the Surviving Entity, but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then the Company, to the extent permitted by applicable law, but otherwise in the sole discretion of the Administrator may provide for: (i) the continuation of outstanding Awards by the Company (if the Company is the Surviving Entity); (ii) the assumption of the Plan and such outstanding Awards by the Surviving Entity or its parent; (iii) the substitution by the Surviving Entity or its parent of Awards with substantially the same terms (including an award to acquire the same consideration paid to the shareholders in the transaction described in this Section 12.3) for such outstanding Awards and, if appropriate, subject to the equitable adjustment provisions of Section 12.1 hereof (Awards continued, assumed or granted in substitution for outstanding Awards under any of the preceding clauses (i) through (iii) will be referred to as “Continuing Awards”); (iv) the cancellation of such outstanding Awards in consideration for a payment equal in value to the fair market value of vested Awards, or in the case of an Option, the difference between the Fair Market Value and the exercise price for all shares of Common Stock subject to exercise (i.e., to the extent vested) under any outstanding Option; or (v) the cancellation of such outstanding Awards without payment of any consideration. If vested Awards will be canceled without consideration, the Participant shall have the right, exercisable during the 10-day period ending on the fifth day prior to such Change in Control, other corporate separation or division, merger or consolidation or 10 days after the Administrator provides the Award holder a notice of cancellation, whichever is later, to exercise such Awards in whole or in part without regard to any installment exercise provisions in the Award Agreement. | |
| (b) If there are one or more Continuing Awards following a Change in Control, and the Continuous Service of a Participant holding one or more Continuing Awards is terminated without Cause within a period of one (1) year following the consummation of the Change in Control, or if the Participant voluntarily terminates his or her Continuous Service for Good Reason during such period, then (i) the vesting and exercisability of all outstanding Options held by the Participant shall accelerate in full; (ii) the end of the Restricted Period for all outstanding Restricted Awards held by the Participant shall accelerate, and all restrictions and conditions of the Restricted Awards shall lapse or be deemed satisfied, as the case may be; (iii) the vesting of all outstanding Performance Awards held by the Participant shall accelerate in full; and (iv) all outstanding Stock Appreciation Rights held by the Participant shall become exercisable in full. |
| 13. | AMENDMENT OF THE PLAN AND AWARDS. |
13.1
Amendment of Plan.
The Board at any time, and
from time to time, may amend or terminate the Plan. However,
except as provided in Section 12.1, no amendment shall be
effective unless approved by the shareholders of the Company to
the extent shareholder approval is necessary to satisfy any
applicable law or any Nasdaq or securities exchange listing
requirements. At the time of such amendment, the Board shall
determine, upon advice from counsel, whether such amendment will
be contingent on shareholder approval.
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13.2
Shareholder Approval.
The Board may, in its
sole discretion, submit any other amendment to the Plan for
shareholder approval, including, but not limited to, amendments
to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from
the limit on corporate deductibility of compensation paid to
certain executive officers.
13.3
Contemplated Amendments.
It is expressly
contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible
Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options or to the
nonqualified deferred compensation provisions of
Section 409A of the Code and/or to bring the Plan and/or
Awards granted under it into compliance therewith.
13.4
No Impairment of Rights.
Rights under any Award
granted before amendment of the Plan shall not be impaired by
any amendment of the Plan unless (a) the Company requests
the consent of the Participant and (b) the Participant
consents in writing. However, an amendment of the Plan that
results in a cancellation of an Award where the Participant
receives a payment equal in value to the fair market value of
the vested Award or, in the case of an Option, the difference
between the Fair Market Value and the exercise price for all
shares of Common Stock subject to the Option, shall not be an
impairment of the Participant’s rights that requires
consent of the Participant.
13.5
Amendment of Awards.
The Administrator at any
time, and from time to time, may amend the terms of any one or
more Awards; provided, however, that (a) if any such
amendment impairs a Participant’s rights or increases a
Participant’s obligations under his or her Award or creates
or increases a Participant’s federal income tax liability
with respect to an Award, such amendment shall also be subject
to the Participant’s consent (provided, however, a
cancellation of an Award where the Participant receives a
payment equal in value to the fair market value of the vested
Award or, in the case of vested Options, the difference between
the Fair Market Value of the Common Stock subject to an Option
and the exercise price, shall not constitute an impairment of
the Participant’s rights that requires consent); and
(b) except for adjustments made pursuant to
Section 12, no such amendment shall, unless approved by the
shareholders of the Company (i) reduce the exercise price
of any outstanding Option, or (ii) cancel or amend any
outstanding Option for the purpose of repricing, replacing or
regranting such Option with an exercise price that is less than
the original exercise price thereof (as adjusted pursuant to
Section 12). An amendment to the Plan described in the last
sentence of Section 13.4 shall not be an impairment of the
Participant’s rights under the Participant’s Award
that requires consent of the Participant.
| 14. | GENERAL PROVISIONS. |
14.1
Other Compensation Arrangements.
Nothing
contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable
only in specific cases.
14.2
Recapitalizations.
Each Award Agreement shall
contain provisions required to reflect the provisions of
Section 12.1.
14.3
Delivery.
Upon exercise of a right granted
under this Plan, the Company shall issue Common Stock or pay any
amounts due within a reasonable period of time thereafter.
Subject to any statutory or regulatory obligations the Company
may otherwise have, for purposes of this Plan, 30 days
shall be considered a reasonable period of time.
14.4
Other Provisions.
The Award Agreements
authorized under the Plan may contain such other provisions not
inconsistent with this Plan, including, without limitation,
restrictions upon the exercise of the Awards, as the
Administrator may deem advisable.
14.5
Disqualifying Dispositions.
Any Participant who
shall make a “disposition” (as defined in
Section 424 of the Code) of all or any portion of shares of
Common Stock acquired upon exercise of an Incentive Stock Option
within two years from the Date of Grant of such Incentive Stock
Option or within one year after the issuance of the shares of
Common Stock acquired upon exercise of such Incentive Stock
Option shall be required to immediately advise the Company in
writing as to the occurrence of the sale and the price realized
upon the sale of such shares of Common Stock.
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| 15. | MARKET STAND-OFF. |
Each Award Agreement shall be subject to the condition, whether
or not expressly stated therein, that, in connection with any
underwritten public offering by the Company of its equity
securities pursuant to an effective registration statement filed
under the Securities Act, the Participant shall agree not to
sell, make any short sale of, loan, hypothecate, pledge, grant
any option for the repurchase of, transfer the economic
consequences of ownership or otherwise dispose or transfer for
value or otherwise agree to engage in any of the foregoing
transactions with respect to any Common Stock without the prior
written consent of the Company or its underwriters, for such
period of time from and after the effective date of such
registration statement as may be requested by the Company or
such underwriters (the “Market Stand-Off”). In order
to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the shares of Common
Stock acquired under this Plan until the end of the applicable
stand-off period. If there is any change in the number of
outstanding shares of Common Stock by reason of a stock split,
reverse stock split, stock dividend, recapitalization,
combination, reclassification, dissolution or liquidation of the
Company, any corporate separation or division (including, but
not limited to, a split-up, a split-off or a spin-off), a merger
or consolidation; a reverse merger or similar transaction, then
any new, substituted or additional securities that are by reason
of such transaction distributed with respect to any shares of
Common Stock subject to the Market Stand-Off, or into which such
shares of Common Stock thereby become convertible, shall
immediately be subject to the Market Stand-Off.
| 16. | EFFECTIVE DATE OF PLAN. |
The Plan shall become effective as of the Effective Date.
However, except in the case of an Inducement Award, no Award may
be granted under the terms of the Plan unless and until the Plan
has been approved by the shareholders of the Company, which
approval shall be within 12 months after the Effective
Date. If the shareholders fail to approve the Plan within
12 months after the Effective Date, no additional Awards,
including Inducement Awards, shall be made thereafter under the
Plan.
| 17. | TERMINATION OR SUSPENSION OF THE PLAN. |
The Plan shall terminate automatically on the day before the
10th anniversary of the Effective Date. No Award shall be
granted pursuant to the Plan after such date, but Awards
theretofore granted may extend beyond that date. The Board may
suspend or terminate the Plan at any earlier date pursuant to
Section 13.1 hereof. No Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.
| 18. | CHOICE OF LAW. |
The law of the State of Washington shall govern all questions
concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of law rules.
| 19. | EXECUTION. |
To record the adoption of the Plan by the Board, the Company has
caused its authorized officer to execute the Plan as of the date
specified below.
IN WITNESS WHEREOF,
upon authorization of the Board of
Directors, the undersigned has caused the Red Lion Hotels
Corporation 2006 Stock Incentive Plan to be executed effective
as of Effective Date.
| RED LION HOTELS CORPORATION |
| By | /s/ Arthur M. Coffey |
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| Arthur M. Coffey | |
| President and Chief Executive Officer |
C-20
Table of Contents
ANNUAL MEETING OF SHAREHOLDERS OF
RED LION HOTELS CORPORATION
May 18, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
your proxy card in the
envelope provided as soon
as possible.
ê
Please
detach along perforated line and mail in the envelope
provided.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x |
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Signature of Shareholder
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Date: |
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Signature of Shareholder |
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Date: |
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Note: |
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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Table of Contents
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PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
RED
LION HOTELS CORPORATION
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby constitutes and appoints Thomas L. McKeirnan and
Anupam Narayan, and each of them, the undersigned’s true and lawful agents and proxies with full power of
substitution in each, to represent and to vote, in such manner as in their discretion shall be deemed appropriate to carry out the authority as designated on the reverse side, all
shares of Common Stock of Red Lion Hotels Corporation that the undersigned would be entitled to vote if present in person at the Annual Meeting of Shareholders of Red Lion Hotels
Corporation to be held on May 18, 2006, at 9:00 a.m. local time at the Red Lion River Inn, 700 N. Division, Spokane, Washington and at any adjournments thereof, on all matters, that
may come before the meeting, including matters incident to the conduct of the meeting and any shareholder proposal omitted from the proxy statement and this proxy pursuant to the
rules of the Securities and Exchange Commission.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of
Directors’ recommendations.
(Continued and to be signed on reverse side)
COMMENTS:
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14475 n |