def14a
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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
CALCULATION OF FILING FEE
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Dear
Shareholder:
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April 15,
2011
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You are cordially invited to attend the 2011 Annual Meeting of
Shareholders of Red Lion Hotels Corporation at 8:00 a.m. on
Thursday, May 19, 2011, at the Red Lion Hotel at the Park,
Skyline Ballroom, West 303 North River Drive, Spokane,
Washington 99201.
The accompanying Notice of 2011 Annual Meeting of Shareholders
and Proxy Statement describe the matters to be presented at the
meeting. In addition, management will speak on our developments
of the past year and respond to comments and questions of
general interest to shareholders.
It is important that your shares be represented and voted
whether or not you plan to attend the annual meeting in person.
You may vote by completing and mailing the enclosed proxy card
or the form forwarded by your bank, broker or other holder of
record. Voting by written proxy will ensure your shares are
represented at the meeting.
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.
RED LION
HOTELS CORPORATION
NOTICE OF 2011 ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD ON MAY 19, 2011
To the Shareholders of Red Lion Hotels Corporation:
The 2011 Annual Meeting of Shareholders of Red Lion Hotels
Corporation will be held at 8:00 a.m. on Thursday,
May 19, 2011, at the Red Lion Hotel at the Park, Skyline
Ballroom, West 303 North River Drive, Spokane, Washington 99201
for the following purposes:
(1) Approval of a proposal to amend our Articles of
Incorporation in order to declassify our board of directors;
(2) Election of three individuals to the Board of Directors;
(3) Ratification of the selection of BDO USA, LLP as our
independent registered public accounting firm for 2011;
(4) Advisory (non-binding) vote on executive compensation;
(5) Advisory (non-binding) vote on the frequency of future
advisory votes on executive compensation;
(6) Transaction of such other business as may properly come
before the meeting and any adjournments thereof.
The foregoing items of business are more fully described in the
proxy statement accompanying this notice.
The Board of Directors has fixed March 31, 2011 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.
PLEASE SUBMIT A PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES
CAN BE VOTED AT THE MEETING IN ACCORDANCE WITH YOUR
INSTRUCTIONS. FOR SPECIFIC INSTRUCTIONS ON VOTING, PLEASE REFER
TO THE PROXY CARD OR THE INFORMATION PROVIDED BY YOUR BANK,
BROKER OR OTHER HOLDER OF RECORD. EVEN IF YOU VOTE YOUR PROXY,
YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BANK,
BROKER OR OTHER HOLDER OF RECORD AND YOU WISH TO VOTE IN PERSON
AT THE MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM
THE BANK, BROKER OR OTHER HOLDER OF RECORD.
By Order of the Board of Directors
Thomas L. McKeirnan
Secretary
Spokane, Washington
April 15, 2011
The 2010
Annual Report of Red Lion Hotels Corporation accompanies this
Proxy Statement.
TABLE OF
CONTENTS
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RED LION
HOTELS CORPORATION
201 West North River Drive,
Suite 100
Spokane, Washington 99201
2011 PROXY STATEMENT
INFORMATION
CONCERNING VOTING AND SOLICITATION
General
The enclosed proxy is solicited on behalf of the Board of
Directors (the Board) of Red Lion Hotels
Corporation, a Washington corporation, for use at the 2011
Annual Meeting of Shareholders to be held at 8:00 a.m.
local time on Thursday, May 19, 2011, and at any
adjournments thereof. The meeting will be held at the Red Lion
Hotel at the Park, Skyline Ballroom, West 303 North River Drive,
Spokane, Washington 99201. The following are directions to the
hotel from Interstate 90 East or West:
Take Exit 281 Division Street Exit. Follow
Division North approximately one mile. Cross the Spokane
River, turn left at the light (North River Drive), and drive
approximately one block. The hotel is located on the left side
of the street.
Proxies are solicited to give all shareholders of record an
opportunity to vote on matters properly presented at the
meeting. This proxy statement and the accompanying proxy card
are first being mailed on or about April 15, 2011 to all
shareholders entitled to vote at the meeting.
Who Can
Vote
You are entitled to vote at the meeting if you were a holder of
record of our common stock, $.01 par value, at the close of
business on March 31, 2011. Your shares may be voted at the
meeting only if you are present in person or represented by a
valid proxy.
For the ten days prior to the meeting, a list of shareholders
entitled to vote at the meeting will be available during
ordinary business hours for examination by any shareholder, for
any purpose germane to the meeting, at our principal executive
office at 201 West North River Drive, Suite 100,
Spokane, Washington 99201. This list will also be available at
the meeting.
Shares Outstanding
and Quorum
At the close of business on March 31, 2011, there were
18,993,267 shares of our common stock outstanding and
entitled to vote. A majority of the outstanding shares of our
common stock, present in person or represented by proxy, will
constitute a quorum at the meeting.
Proxy
Card and Revocation of Proxy
You may vote by completing and mailing the enclosed proxy card.
If you sign the proxy card but do not specify how you want your
shares to be voted, your shares will be voted by the proxy
holders named in the enclosed proxy (i) FOR the
proposal to amend our Articles of Incorporation to declassify
the Board; (ii) FOR election of the three
director nominees named below; (iii) FOR
ratification of the selection of BDO USA, LLP as our independent
registered public accounting firm for 2011;
(iv) FOR approval, on an advisory basis, of the
compensation of our named executive officers; and
(v) FOR an annual advisory vote on executive
compensation. If one or more of the director nominees should
become unavailable for election prior to the meeting, an event
that currently is not anticipated by the Board, the proxies may
be voted in favor of the election of a substitute nominee or
nominees proposed by the Board.
The proxy holders named in the enclosed proxy are authorized to
vote in their discretion on any other matters that may properly
come before the meeting or any adjournments thereof. At the time
this proxy statement went to
1
press, management was not aware of any matter that may properly
be presented for action at the meeting other than those
described in this proxy statement. In addition, no shareholder
proposal or director nomination was received on a timely basis,
so no such matters may be brought to a vote at the meeting.
If you vote by proxy, you may revoke that proxy at any time
before it is voted at the meeting. Shareholders of record may
revoke a proxy by delivering a written notice of revocation or a
duly executed proxy bearing a later date to our Secretary at our
principal executive office at 201 West North River Drive,
Suite 100, Spokane, Washington 99201, or by attending the
meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy. If your shares are held in the
name of a broker, bank or other holder of record, you may change
your vote by submitting new voting instructions to that holder
of record. Please note that if your shares are held of record by
a broker, bank or other holder of record, and you decide to
attend and vote at the meeting, your vote in person at the
meeting will not be effective unless you present a legal proxy
issued in your name from that holder of record.
Voting of
Shares
Shareholders of record as of the close of business on
March 31, 2011 are entitled to one vote for each share of
our common stock held on all matters to be voted upon at the
meeting. You may vote by attending the meeting and voting in
person or by completing and mailing the enclosed proxy card or
the form forwarded by your bank, broker or other holder of
record. If your shares are held by a bank, broker or other
holder of record, please refer to the instructions they provide
for voting your shares. All shares entitled to vote and
represented by properly executed proxies that are received
before the polls are closed at the meeting and are not revoked
or superseded will be voted at the meeting in accordance with
the instructions indicated on those proxies. YOUR VOTE IS
IMPORTANT.
Counting
of Votes
All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker
non-votes. Shares held by persons attending the meeting but not
voting, shares represented by proxies that reflect abstentions
on one or more proposals and broker non-votes will be counted as
present for purposes of determining a quorum. Abstentions will
not count as votes cast. A broker non-vote occurs
when a bank, broker or other holder of record holding shares for
a beneficial owner does not receive voting instructions from the
beneficial owner and does not have discretionary authority to
vote the shares without such instructions. The effect of
abstentions and broker non-votes on each of the proposals on the
agenda for the annual meeting is discussed below in the sections
discussing those proposals.
Solicitation
of Proxies
We will bear the expense of preparing, printing and distributing
proxy materials to our shareholders. We will also furnish copies
of the proxy materials to banks, brokers and other holders of
record holding in their names shares of our common stock that
are beneficially owned by others, so that the proxy materials
can be forwarded to those beneficial owners. We will reimburse
these banks, brokers and other holders of record for costs
incurred in forwarding the proxy materials to the beneficial
owners.
PROPOSAL 1
APPROVAL
OF AMENDMENTS TO OUR ARTICLES OF INCORPORATION
TO
DECLASSIFY OUR BOARD OF DIRECTORS
Under our current Articles of Incorporation and By-Laws, the
Board is divided into three classes. Each class consists, as
nearly as possible, of one-third of the total number of
directors, with members of each class serving for a three-year
term. Each year only one class of directors is subject to a
shareholder vote.
The Board has adopted amendments to Article Twelfth of our
Articles of Incorporation to declassify the Board and provide
for the annual election of directors. In order to become
effective, the amendments must be approved by our shareholders.
The text of the amendments is set forth in Appendix A to
this proxy statement. If our shareholders
2
approve the proposal to amend our Articles of Incorporation, a
declassified board structure will be phased in over the next
three years as follows:
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At this years annual meeting of shareholders, each
director whose term expires at the meeting will be elected to
hold office for a term expiring at next years annual
meeting of shareholders (or until such directors successor
is elected and qualified).
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At next years annual meeting of shareholders, the
successor of each director whose term expires at the meeting
will be elected to hold office for a term expiring at the 2013
Annual Meeting of Shareholders (or until such directors
successor is elected and qualified).
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Each director elected by the shareholders at and after the 2013
Annual Meeting of Shareholders will hold office for a term
expiring at the next annual meeting of shareholders (or until
such directors successor is elected and qualified).
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Any vacancy that occurs after the declassification amendment
becomes effective will be filled by the Board, and the person
appointed to fill the vacancy will serve until the next annual
meeting of shareholders.
Our By-Laws also contain provisions relating to a classified
Board. The Board has adopted amendments to Sections 3.2 and
3.9 of the By-Laws that will automatically become effective if
the proposal to amend our Articles of Incorporation is approved.
The text of the amendments is set forth in Appendix B to
this proxy statement.
The following are some of the arguments for and against a
classified board of directors:
Considerations
Favoring a Classified Board
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Classification of the Board tends to balance experience,
continuity and stability with the regular opportunity to add
valuable, fresh perspectives.
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It takes several years for a new director to become conversant
with the complexities of our business.
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Classification makes it more difficult and time-consuming to
change majority control of the Board which reduces the
vulnerability of our company to an unsolicited takeover
proposal. As a result, classification may encourage persons
attempting certain types of transactions involving an actual or
threatened change of control of our company to first seek to
negotiate with us, and may discourage pursuit of such
transactions on a non-negotiated basis.
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Considerations
Against a Classified Board
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Classification of the Board could make more difficult or
discourage the removal of incumbent directors, through a proxy
contest or otherwise, and the assumption of control by a holder
of a substantial block of our common stock, and could thus have
the effect of entrenching incumbent management.
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Classification could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to
obtain control of our company, even though such an attempt might
be beneficial to us and our shareholders.
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Some current directors whom the Board wishes to nominate for
re-election may be reluctant to commit to serving an additional
three years as director. If elected annually, directors would
not be required to make such a three-year commitment.
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Some institutional shareholders and commentators argue that
classification reduces directors accountability to
shareholders, since such a structure does not enable
shareholders to express a view on each directors
performance by means of an annual vote.
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The Board has carefully considered each of these arguments and
has determined that it is in the best interest of our company
and our shareholders that the Board be declassified.
Each share of common stock is entitled to one vote on the
proposal to amend the Articles of Incorporation to declassify
the Board and will be given the option to vote FOR
or AGAINST the proposal or to ABSTAIN.
3
Unless otherwise directed, it is the intention of the proxy
holders named in the enclosed proxy to vote the proxies received
by them FOR this proposal.
In order to approve this proposal, the affirmative vote of
holders of a majority of the outstanding shares of our common
stock is required. Abstentions will have the same effect as
votes cast against the proposal. Generally, brokers, banks and
other holders of record that do not receive instructions will be
entitled to vote on the proposal. Should broker non-votes occur,
they will have the same effect as votes cast against the
proposal.
If our shareholders do not approve the proposal to amend the
Articles of Incorporation, the Board will remain classified and
the directors will continue to be elected to serve three-year
terms, subject to their earlier retirement, resignation,
disqualification, removal or death.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THIS PROPOSAL.
PROPOSAL 2
ELECTION
OF DIRECTORS
Current
Board Structure
Under our Articles of Incorporation and By-Laws, the Board
consists of from three to 13 directors, as determined from
time to time by resolution of the Board. The number of directors
that currently constitutes the Board is eight. The Board is
divided into three classes. Each class consists, as nearly as
possible, of one-third of the total number of directors, with
members of each class serving for a three-year term. The current
directors are as follows:
Class A
(two positions with terms expiring in 2012):
Ryland P. Skip Davis
Peter F. Stanton
Class B
(three positions with terms expiring in 2013):
Donald K. Barbieri
Ronald R. Taylor
Raymond R. Brandstrom
Class C
(three positions with terms expiring in 2011):
Richard L. Barbieri
Jon E. Eliassen
Melvin L. Keating
Nominees
for Director; Terms
Based upon the recommendation of the Nominating and Corporate
Governance Committee, Richard L. Barbieri, Jon E. Eliassen and
Melvin L. Keating are nominees for re-election as directors at
the annual meeting.
The Board has declared advisable and adopted, subject to
shareholder approval, amendments to our Articles of
Incorporation eliminating the classified board. See
Proposal 1 Approval of Amendments to our
Articles of Incorporation to Declassify our Board of
Directors. If this proposal is approved by the shareholders,
then the term of each director elected at the annual meeting
will expire at next years annual meeting of shareholders.
If this proposal is not approved by the shareholders, then the
Board will remain classified and the term of each director
elected at the annual meeting will expire at the annual meeting
of shareholders in 2014.
4
Voting
for Directors
Each share of common stock is entitled to one vote for each of
the three nominees and will be given the option to vote
FOR or AGAINST each nominee or to
ABSTAIN. Cumulative voting is not permitted. Unless
otherwise directed, it is the intention of the proxy holders
named in the enclosed proxy to vote the proxies received by them
FOR the election of the three nominees. If any nominee should
become unavailable for election prior to the meeting, an event
that currently is not anticipated by the Board, the proxies will
be voted in favor of the election of a substitute nominee or
nominees proposed by the Board or the number of directors may be
reduced accordingly. Each nominee has agreed to serve if elected
and the Board has no reason to believe that any nominee will be
unable to serve.
The three nominees for the Board 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 will be elected directors. An abstention from voting for
a nominee may make it less likely that the nominee will be one
of the three nominees who receive the greatest number of votes
cast. Brokers no longer have discretionary authority to vote in
the election of directors. If a broker holding shares for a
beneficial owner does not receive instructions from the
beneficial owner on how to vote in the election, the broker will
submit a non-vote, which also may make it less likely that a
nominee will be one of the three nominees who receive the
greatest number of votes cast.
Set forth below is biographical information for each nominee and
for each director whose term of office will continue after the
meeting. Except as disclosed in these biographies, there are no
family relationships among any of our directors or among any of
our directors and our executive officers.
Nominees
for Election at the Annual Meeting
Richard L. Barbieri, age 68, has been
a director since 1978. He is the brother of Donald K. Barbieri.
From 1994 until December 2003, he served as our full-time
General Counsel, first as Vice President, then Senior Vice
President and Executive Vice President. 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, where he chaired the
firms real estate practice group. 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. Barbieris professional experience in real estate
matters and in the hospitality industry, combined with his legal
training and institutional knowledge of the company, provide the
Board with important and relevant perspective on the
companys business.
Jon E. Eliassen, age 64, became our President
and Chief Executive Officer in February 2011, having served in
that capacity on an interim basis since January 2010. He has
been a director of the company since September 2003.
Mr. Eliassen was President and CEO of the Spokane Area
Economic Development Council from 2003 until 2007.
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 as Chairman of the Board of Directors
of Itron Corporation, serves as a member of the Board of
Directors of IT Lifeline, Inc, and is the principal of Terrapin
Capital Group, LLC. Mr. Eliassens 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. Mr. Eliassens experience as an
executive and as a board member of other public companies, his
operational experience in a variety of businesses and his
extensive financial expertise are of great value in his role as
a director of the company.
Melvin L. Keating, age 64, has been a
director since July 2010. Since November 2008, Mr. Keating
has been a private consultant, providing investment advice and
other services to private equity firms. From 2005 to October
5
2008, he was President and Chief Executive Officer of Alliance
Semiconductor Corporation, a worldwide manufacturer and seller
of semiconductors. From 2004 to 2005, he served as Executive
Vice President, Chief Financial Officer and Treasurer of Quovadx
Inc., a healthcare software company. Mr. Keating was
employed as a Strategy Consultant for Warburg Pincus Equity
Partners from 1997 to 2004, providing acquisition and investment
target analysis and transactional advice. He also was President
and Chief Executive Officer of Sunbelt Management Company, a
private, European-owned real estate development firm, from 1995
to 1997. From 1986 to 1995, he was Senior Vice President,
Financial Administration of Olympia & York Companies/
Reichmann International, responsible for joint ventures,
financial reporting and acquisitions. Mr. Keating is also a
director of API Techologies Corp., Crown Crafts, Inc., Integral
Systems, Inc. and Bitstream Inc. During the course of his
career, Mr. Keating has also served on the board of
directors of the following public companies: Integrated Silicon
Solutions Inc.: Plymouth Rubber Co.; Price Legacy Corp.;
InfoLogix, Inc.:, Tower Semiconductor Ltd.; LCC International,
Inc.; White Electronic Designs Corp.; and Aspect Medical Systems
Inc. Mr. Keating holds a B.A. degree from Rutgers
University, as well as an M.S. in Accounting and an M.B.A in
Finance, both from The Wharton School of the University of
Pennsylvania. Mr. Keatings experience as an executive
and as a board member of other public companies, together with
his real estate and financial acumen, are of great value in his
role as a director of the company.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE THREE
NAMED NOMINEES.
Directors
Continuing in Office Until the 2012 Annual Meeting of
Shareholders
Ryland P. Davis, age 70, has been a director
since May 2005. He has been the owner and principal of Amicus
Healthcare Solutions since 2007. He served as Chief Executive
Officer of Providence Strategic Ventures from 2008 until March
2009. Prior to that, he was Chief Executive Officer of
Providence Health Care, a five-hospital regional delivery
network, from 1999 to 2008 and Chief Executive Officer of Sacred
Heart Medical Center in Spokane, a Providence Health Care
medical center, from 1996 to 1999. 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 1975 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 1971 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 past Chair of the Spokane Area
Chamber of Commerce, is on the Boy Scouts of America Inland
Northwest Council Board, and is a member of the Washington State
University Presidents Advisory Council. He is also the
past Board Chair of the Institute for System Medicine and is a
board member of Providence Associated Medical Laboratories.
Mr. Davis years of experience as CEO of major
healthcare providers, combined with his operational and
financial expertise, make him an invaluable member of the Board.
Peter F. Stanton, age 54, has been a director
since April 1998. Mr. Stanton has served as the Chief
Executive Officer of Washington Trust Bank 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
Chairman of the Board of Directors 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 previously served as a
National Trustee for the Boys and Girls Club of
America and now chairs the Advisory Board for the Boys and
Girls Club of Spokane County. He is a member of the
Strategic Initiation Committee of the University of Washington
School of Medicine. Mr. Stanton is also a Trustee of
Gonzaga University and is on the Board of Trustees of Greater
Spokane Incorporated as well as the board of the Inland
Northwest Council, Boy Scouts of America.
Mr. Stantons executive level experience and his
extensive knowledge
6
of the banking industry and credit markets are all especially
beneficial to his role as a long-term director of our company.
Directors
Continuing in Office Until the 2013 Annual Meeting of
Shareholders
Donald K. Barbieri, age 65, has been a
director since 1978 and Chairman of the Board since 1996. He is
the brother of Richard L. Barbieri. He served as President and
Chief Executive Officer of our company from 1978 until April
2003. Mr. Barbieri joined our company in 1969 and was
responsible for our development activities in hotel,
entertainment and real estate areas. Mr. Barbieri is a past
Chair for the Spokane Regional Chamber of Commerce.
Mr. Barbieri served as President of the Spokane Chapter of
the Building Owners and Managers Association from 1974 to 1975
and served as President of the Spokane Regional Convention and
Visitors Bureau from 1977 to 1979. He also served on the
Washington Tourism Development Council from 1983 to 1985 and he
has served on the Washington Economic Development Board.
Mr. Barbieri chaired the State of Washingtons Quality
of Life Task Force from 1985 to 1989. Mr. Barbieris
many years of experience as the former CEO of the company and
his even lengthier experience as a member of the Board provide
him with experience and institutional knowledge of the
companys business that cannot be replicated. His long-term
leadership and extensive experience in the hospitality industry
provide ongoing value to the company and the Board.
Raymond R. Brandstrom, age 57, has been a
director since November 2009. Mr. Brandstrom has been an
advisor to Emeritus Corporation since December 2009. From
September 2007 to December 2009, he served as its Executive Vice
President Finance, Secretary and Chief Financial
Officer. Mr. Brandstrom, one of Emerituss founders,
has served as a director since Emeritus inception in 1993
and currently serves as its Vice Chairman. From 1993 to March
1999, Mr. Brandstrom also served as Emeritus
President and Chief Operating Officer. In March 2000,
Mr. Brandstrom was elected Vice President of Finance, Chief
Financial Officer and Secretary of Emeritus. From May 1992 to
October 1996, Mr. Brandstrom served as President of
Columbia Pacific Group, Inc. and Columbia Pacific Management,
Inc. From May 1992 to May 1997, Mr. Brandstrom served as
Vice President and Treasurer of Columbia Winery, a company that
is engaged in the production and sale of table wines.
Mr. Brandstrom adds outstanding operational and financial
acumen to the Board, as well as years of experience in real
estate development and as a public company director and chief
financial officer.
Ronald R. Taylor, age 63, 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). At Watson Pharmaceuticals, Inc.,
Mr. Taylor is a member of the Audit Committee and is
Chairman of the Compensation Committee. At ResMed, Inc., he is a
member of the Nominating and Corporate Governance Committees and
Chairman of the Compensation Committee. Mr. Taylor is also
Chairman of the Board of a privately held company. From 1998 to
2002, 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 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. Mr. Taylor brings to the Board valuable
experience from service on the boards of directors of other
public companies, along with executive level management
experience and his knowledge and expertise in operational,
financial and compensation matters.
Director
and Director Nominee Qualifications; Diversity
Our Nominating and Corporate Governance Committee assists the
Board in reviewing the business and personal background of each
of our directors with respect to our companys business and
business goals. The committee generally considers diversity as
one of several factors relating to overall composition when
making nominations to our Board. While we do not have a formal
policy governing how diversity is considered, the committee
generally considers diversity by examining the entire Board
membership and, when making nominations to our Board, by
reviewing the diversity of the entire Board. The committee
construes Board diversity broadly to include many factors. As a
result, the committee strives to ensure that our Board is
composed of individuals with a variety of different opinions,
perspectives, personal, professional and industry experience and
backgrounds, skills, and expertise.
7
In addition to the qualities described previously in the
individual director biographies, the following matrix summarizes
the skills and attributes of our directors and director nominees
for 2011 that we believe are essential to our business:
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Donald
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Richard
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Raymond
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Ryland
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Jon
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Melvin
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Pete
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Ronald
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Barbieri
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Barbieri
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Brandstrom
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Davis
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Eliassen
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Keating
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Stanton
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Taylor
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Senior leadership/ CEO/COO experience
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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Business development experience
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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Financial expertise/CFO
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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Outside public board experience
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ü
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ü
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ü
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ü
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Independence
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ü
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ü
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ü
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ü
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ü
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ü
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Industry Experience
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ü
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ü
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ü
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Marketing/sales expertise
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ü
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ü
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ü
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Government expertise
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ü
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ü
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Legal expertise
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ü
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Mergers and acquisitions
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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Demonstrated integrity- personal and professional
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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Real estate expertise
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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ü
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Banking expertise
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ü
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Franchising expertise
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ü
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ü
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We have concluded that all of our directors, including the
nominees for election at the annual meeting, have the skills,
experience, knowledge and personal attributes that are necessary
to effectively serve on our Board and to contribute to the
overall success of our company. We believe that the diverse
background of each of our Board members ensures that we have a
Board that has a broad range of industry-related knowledge,
experience and business acumen.
PROPOSAL 3
RATIFICATION
OF SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected BDO USA, LLP to
serve as our independent registered public accounting firm for
2011 and has further directed that this selection be submitted
for ratification by our shareholders at the annual meeting. BDO
USA, LLP has audited our financial statements since 2001.
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 proxies solicited hereby will be voted for the
ratification of the selection of BDO USA, LLP as our independent
registered public accounting firm for 2011.
Shareholder ratification of the selection of BDO USA, LLP as our
independent registered public accounting firm is not required by
our By-Laws or otherwise. However, the Board is submitting the
selection of the firm to the shareholders for ratification as a
matter of good corporate practice. If the shareholders fail to
ratify the selection, the Audit Committee will reconsider
whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee in its discretion may select a
different accounting firm at any time during the year if the
Audit Committee determines that such a change would be in our
best interests and that of our shareholders.
Each share of common stock is entitled to one vote on the
proposal to ratify the selection of BDO USA, LLP and will be
given the option to vote FOR or AGAINST
the proposal or to ABSTAIN. Unless otherwise
directed, it is the intention of the proxy holders named in the
enclosed proxy to vote the proxies received by them FOR this
proposal.
8
Proposal 3 will be approved if the number of votes cast in
favor of the proposal exceeds the number of votes cast against
the proposal. Abstentions from voting and broker non-votes will
have no impact on the outcome of this proposal.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF
THE SELECTION OF BDO USA, LLP.
PROPOSAL 4
ADVISORY
VOTE ON EXECUTIVE COMPENSATION
As required by Section 14A of the Securities Exchange Act
of 1934, the Board is submitting a separate resolution, to be
voted on by shareholders in a non-binding vote, to approve on an
advisory basis the executive compensation of our named executive
officers. The text of the resolution is as follows:
RESOLVED, that the shareholders approve, on an advisory
basis, the compensation of the named executive officers as
disclosed in this proxy statement under the captions
Compensation Discussion and Analysis and
Executive Compensation.
As described in this proxy statement under Compensation
Discussion and Analysis, our compensation program is designed to
focus executives on the achievement of specific annual and
long-term goals. We structure the goals to align
executives interests with those of shareholders by
rewarding performance that maintains and improves shareholder
value.
The following features of the compensation structure reflect
this approach:
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Our executive compensation program has both short and long-term
components.
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The annual cash incentive component focuses on one or more
specific performance goals and allows for discretionary
compensation based on performance not otherwise measured by the
goals.
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Our total compensation program does not provide for guaranteed
bonuses.
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Our agreements with executives do not contain guarantees for
salary increases, non-performance-based bonuses or equity
compensation.
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The Board believes that the current executive compensation
program properly focuses our executives on the achievement of
specific annual, long-term and strategic goals. The Board also
believes that this program properly aligns the executives
interests with those of shareholders.
Shareholders are urged to read the Compensation Disclosure and
Analysis section of this proxy statement, which discusses in
greater detail how our compensation program advances the
specific goals that we set.
Each share of common stock is entitled to one vote on
Proposal 4 and will be given the option to vote
FOR or AGAINST the proposal or to
ABSTAIN. Unless otherwise directed, it is the
intention of the proxy holders named in the enclosed proxy to
vote the proxies received by them FOR this proposal.
Proposal 4 will be approved if the number of votes cast in
favor of the proposal exceeds the number of votes cast against
the proposal. Abstentions from voting and broker non-votes will
have no impact on the outcome of this proposal.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL, ON
AN ADVISORY BASIS, OF THE COMPENSATION OF THE NAMED EXECUTIVE
OFFICERS.
Although the advisory vote on Proposal 4 is non-binding, we
expect that the Board and the Compensation Committee will review
the results of the vote and, consistent with our record of
shareholder engagement, take the outcome of the vote into
consideration, along with other relevant factors, in making
determinations concerning future executive compensation.
9
PROPOSAL 5
ADVISORY
VOTE ON FREQUENCY OF
ADVISORY
VOTE ON EXECUTIVE COMPENSATION
As required by Section 14A of the Securities Exchange Act
of 1934, the Board is submitting a separate resolution, to be
voted on by shareholders in a non-binding vote, recommending
whether an advisory shareholder vote approving our executive
compensation should occur every one, two or three years. The
text of the resolution in respect of this Proposal 5 is as
follows:
RESOLVED, that the shareholders recommend, in a
non-binding vote, whether a non-binding shareholder vote to
approve the compensation of the named executive officers should
occur every one, two or three years.
The Board believes that giving the shareholders the right to
cast an advisory vote every year on their approval of the
executive compensation program is a good corporate practice and
is in the best interest of our shareholders.
Each share of common stock is entitled to one vote on
Proposal 5 and will be given the option to vote ONE
YEAR, TWO YEARS or THREE YEARS or
to ABSTAIN. Unless otherwise directed, it is
the intention of the proxy holders named in the enclosed proxy
to vote the proxies received by them for an annual advisory vote
on executive compensation.
With respect to Proposal 5, the frequency (every one, two
or three years) receiving the greatest number of votes will be
the frequency recommended by shareholders. Abstentions from
voting and broker non-votes will have no impact on the outcome
of Proposal 5.
THE BOARD RECOMMENDS A VOTE TO CONDUCT AN ADVISORY VOTE ON
EXECUTIVE COMPENSATION EVERY YEAR.
Although the advisory vote on Proposal 5 is non-binding, we
expect the Board and the Compensation Committee will review the
results of the vote and, consistent with our record of
shareholder engagement, take the outcome of the vote into
consideration, along with other relevant factors, in making a
determination concerning the frequency of future advisory votes
on executive compensation.
10
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of March 31,
2011 by: (i) each of our directors and nominees;
(ii) each of our executive officers; (iii) all of our
directors, nominees and executive officers as a group; and
(iv) each person known by us to beneficially own more than
5% of our common stock.
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Number of
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Percentage of
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Beneficial Owner
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Shares Owned (1)
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Common Stock (1)
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Columbia Pacific Opportunity Fund, LP (2)
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4,332,293
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22.8
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%
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Dimensional Fund Advisors LP (3)
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1,574,299
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8.3
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%
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Donald K. Barbieri (4)
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1,220,180
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6.4
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%
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BlackRock, Inc. (5)
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1,113,526
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5.9
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%
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Thomas L. McKeirnan (6)
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121,982
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*
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Richard L. Barbieri
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79,523
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*
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Ronald R. Taylor (7)
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57,921
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*
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George H. Schweitzer (8)
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56,494
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*
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Jon E. Eliassen (9)
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53,740
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*
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Peter F. Stanton (7)
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44,696
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*
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Ryland P. Davis
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33,068
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*
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Raymond R. Brandstrom
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12,591
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*
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Melvin L. Keating
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5,739
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*
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Harry G. Sladich (10)
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2,324
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*
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Dan Jackson
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0
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*
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All directors and executive officers as a group
(12 persons) (11)(12)
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1,688,258
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8.9
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%
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*
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Represents less than 1% of the
outstanding common stock.
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(1)
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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,
2011 is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage
ownership of any other person.
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(2)
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The address for this beneficial
owner is 1910 Fairview Avenue East, Suite 500, Seattle,
Washington 98102 . The shares shown for this beneficial owner
are based solely on the Form 4 filed by this beneficial
owner on March 31, 2011.
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(3)
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The address for this beneficial
owner is Palisades West, Building One, 6300 Bee Cave Road,
Austin, Texas 78746. The shares shown for this beneficial owner
are based solely on the Schedule 13G/A filed by this
beneficial owner on February 11, 2011.
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(4)
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Mr. Barbieris address is
820 North Post Street, Suite 603, Spokane, Washington
99201. Includes 22,418.5 shares that may be issued to
Mr. Barbieri if he elects to have Red Lion Hotels Limited
Partnership (RLHLP) redeem a like number of limited
partnership units (OP Units) that he holds in RLHLP.
Also includes 37,697 shares held in the DKB Trust, an
irrevocable trust with respect to which Mr. Barbieri has
sole voting and dispositive power, and 15,100 shares held
in the Barbieri Charitable Foundation, with respect to which
Mr. Barbieri has shared voting and dispositive power.
Mr. Barbieri disclaims beneficial ownership of the shares
held in the DKB Trust and the Barbieri Charitable Foundation.
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(5)
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The address for this beneficial
owner is 40 East 52nd Street, New York, New York 10022. The
shares shown for this beneficial owner are based solely on the
Schedule 13G filed by this beneficial owner on
February 8, 2011.
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(6)
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Includes 83,912 shares subject
to options exercisable, and 8,029 shares subject to
restricted stock units vesting, within 60 days after
March 31, 2011.
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(7)
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Includes 1,000 shares subject
to options exercisable within 60 days after March 31,
2011.
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(8)
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Includes 33,750 shares subject
to options exercisable, and 8,135 shares subject to
restricted stock units vesting, within 60 days after
March 31, 2011.
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(9)
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Includes 7,605 shares subject
to restricted stock units vesting within 60 days after
March 31, 2011.
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(10)
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Represents shares subject to
restricted stock units vesting within 60 days after
March 31, 2011.
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11
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(11)
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Includes 119,662 shares
subject to options exercisable, and 26,123 shares subject
to restricted stock units vesting, within 60 days after
March 31, 2011. Also includes 22,418.5 shares that may
be issued to a member of the group if he elects to have RLHLP
redeem a like number of OP Units that he holds in RLHLP.
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(12)
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We have no information regarding
any shares of our common stock that may be beneficially owned by
Anupam Narayan or Anthony F. Dombrowik, who were formerly
executive officers of our company. Accordingly, any such shares
that they may beneficially own are not included in the above
table.
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SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our executive officers and directors, and
persons who own more than 10% of our common stock (collectively,
Reporting Persons), to file reports of ownership and
changes in ownership of our common stock with the Securities and
Exchange Commission. Based solely on our review of the reports
filed by the Reporting Persons, and written representations from
certain Reporting Persons that no other reports were required
for those persons, we believe that, during the year ended
December 31, 2010, the Reporting Persons met all applicable
Section 16(a) filing requirements, except that Columbia
Pacific Opportunity Fund, LP, a beneficial owner of more than
10% of our common stock, filed four late reports on Form 4
disclosing four transactions in our common stock that were not
timely reported, and Jon E. Eliassen filed one late report on
Form 4 disclosing one transaction in our common stock that
was not timely reported.
CORPORATE
GOVERNANCE
Corporate
Governance Documents
The Board has adopted the following corporate governance
documents:
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Corporate Governance Guidelines;
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Code of Business Conduct and Ethics;
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Accounting and Audit Complaints and Concerns Procedures;
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Statement of Policy with respect to Related Party
Transactions; and
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charters for each of its standing committees, which include the
Audit Committee, the Compensation Committee and the Nominating
and Corporate Governance Committee.
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Copies of each of these corporate governance documents are
available online in the Investor Relations section of our
website at
www.redlion.com.1
We will provide copies of these documents to any shareholder
upon written request to our Secretary at our principal executive
office at 201 West North River Drive, Suite 100,
Spokane, Washington 99201.
Director
Independence
The Board has determined that each of the following six members
of the Board is independent within the meaning of
applicable listing standards of the New York Stock Exchange (the
NYSE): Richard L. Barbieri, Raymond R. Brandstrom,
Ryland P. Davis, Melvin L. Keating, 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 our
company, either directly or as a partner, shareholder or officer
of an organization that has a relationship with our company. Our
Corporate Governance Guidelines contain categorical standards to
assist the Board in making determinations of independence. A
copy of these categorical standards is included in
Appendix C to this proxy statement. The Board has made an
affirmative determination that each of the six directors named
above satisfies these categorical standards.
1 This
website is not intended to function as a hyperlink, and the
information contained on the website is not intended to be part
of this proxy statement.
12
Meetings
of the Board of Directors
The Board met seven times in 2010. All directors attended at
least 75% of the total number of meetings of the Board and its
committees on which they serve.
We encourage all of our directors to attend each annual meeting
of shareholders. All of our directors attended our 2010 annual
meeting of shareholders.
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 Donald K. Barbieri, generally
meet in executive session without Mr. Eliassen or other
members of management. Donald K. Barbieri, as Chairman of the
Board, serves as the presiding director for these executive
sessions. In addition, 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.
Committees
of the Board of Directors
Audit
Committee
The Audit Committee engages our 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 our financial statements, reviews
our compliance with laws and regulations, receives and reviews
complaints relating to accounting or auditing matters, considers
the adequacy of our internal accounting controls, and produces a
report for inclusion in our annual proxy statement. The members
of the Audit Committee are Peter F. Stanton, Chairman, Raymond
R. Brandstrom, Ryland P. Davis and Ronald R. Taylor.
The Board 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. 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.
Compensation
Committee
The Compensation Committee discharges the responsibilities of
the Board relating to compensation and evaluation of our
President and Chief Executive Officer, or CEO, and other
executive officers, makes recommendations to the Board regarding
the compensation of directors, oversees the administration of
our equity incentive plans and produces an annual report on
executive compensation for inclusion in our annual proxy
statement. The members of the Compensation Committee are Ronald
R. Taylor, Chairman, Ryland P. Davis and Peter F. Stanton.
The processes and procedures of the Compensation Committee for
considering and determining compensation for our executive
officers and directors are as follows:
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Compensation for our executive officers is generally determined
annually in February.
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The Compensation Committee reviews director compensation and
benefits annually and makes recommendations to the Board with
respect thereto.
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With respect to our CEO, during the first calendar quarter of
each year, the Compensation Committee generally reviews and
approves performance goals for the current year, evaluates his
performance in light of the goals established for the prior
year, considers competitive market data and establishes his
compensation based on this evaluation. As part of the evaluation
process, the Compensation Committee Chairman solicits comments
from other Board members. Final determinations regarding our
CEOs performance and compensation are made during an
executive session of the Compensation Committee and reported to
the Board.
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13
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Our Compensation Committee determines compensation for the other
executive officers based on the recommendations of our CEO and
competitive market data. Final determinations of their
compensation are made during an executive session of the
Compensation Committee and reported to the Board.
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During 2006, the Compensation Committee directly engaged Towers
Perrin, an independent compensation consulting firm, to review
total compensation levels for our directors and senior
management, including our executive officers. The firm reviewed
various sources of available data regarding the compensation
practices of hospitality industry and other companies, assessed
the competitiveness of our compensation in comparison to that of
the other companies, and provided the Compensation Committee
with a written report and recommendations.
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During 2008, at the request of the Compensation Committee,
Towers Perrin updated the portion of its prior report and
recommendations relating to compensation for our executive
officers.
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The Compensation Committee has no authority to delegate any of
the functions described above to any other persons.
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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 our Corporate Governance
Guidelines, 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 our Corporate Governance
Guidelines and overseeing the evaluation of the Board and
management. The members of the Nominating and Corporate
Governance Committee are Ryland P. Davis, Chairman, Richard L.
Barbieri, Peter F. Stanton and Ronald R. Taylor.
Directors may be nominated by the Board or by shareholders in
accordance with our By-Laws. The Nominating and Corporate
Governance Committee will review all proposed nominees for the
Board, including those recommended by shareholders, in
accordance with its charter, our By-Laws and our 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 our 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 our business.
While the committee is authorized to retain a third party to
assist in the nomination process, we have 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 our By-Laws. Any shareholder of record who wishes to submit a
nomination should review the requirements in the By-Law for
nominations by shareholders, which are included in the excerpt
from the By-Laws attached as Appendix D to this proxy
statement. Any nomination should be sent to our Secretary at our
principal executive office, 201 West North River Drive,
Suite 100, Spokane, Washington 99201. Any recommendations
from shareholders regarding director nominees should be sent to
the Nominating and Corporate Governance Committee in care of our
Secretary at the same address.
Leadership
Structure
We believe it is the CEOs responsibility to lead the
company and it is the responsibility of the Chairman of the
Board to lead the Board. As directors continue to have more
oversight responsibilities than ever before, we believe it is
beneficial to have a separate chairman whose sole job is leading
the Board. Accordingly, our Corporate Governance Guidelines
currently provide that the Chairman of the Board cannot be an
officer of the company. The Board retains the authority to
modify this structure as and when appropriate to best address
our companys unique circumstances and to advance the best
interests of all shareholders.
14
Boards
Role in Risk Oversight
The Boards role in overseeing our companys risk is
to satisfy itself, directly or through Board committees,
that
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there are adequate processes designed and implemented by
management such that risks have been identified and are being
managed;
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the risk management processes function as intended to ensure
that our companys risks are taken into account in
corporate decision making; and
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the risk management system is designed to ensure that material
risks to our company are brought to the attention of the Board
or an appropriate committee of the Board.
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Each of our companys risk management processes is reviewed
periodically (but at least once a year) by either the Board or
an appropriate committee. Committee chairs regularly report on
committee meetings at the meetings of the full Board.
The Board has reviewed our companys current risk
management systems and processes and concluded that the current
allocation of oversight responsibilities between the Board and
its committees is adequate, so long as the committees continue
to coordinate their risk oversight responsibilities, share
information appropriately with the other members of the Board,
and provide timely and adequate reports to the full Board. The
Board will continually evaluate its risk oversight role.
Communications
with the Board of Directors
Our annual meeting of shareholders provides an opportunity each
year for shareholders to ask questions of, or otherwise
communicate directly with, members of the Board on appropriate
matters. Shareholders or other interested parties may contact
the Chairman of the Board at any time by sending an
e-mail to
chairman@redlion.com. In addition, shareholders may
communicate in writing with any particular director, any
committee of the Board, or the directors as a group, by sending
a written communication to our Secretary at our principal
executive office, 201 West North River Drive,
Suite 100, Spokane, Washington 99201. Copies of written
communications received at such address will be provided to the
Board or the relevant director unless such communications are
considered, in the reasonable judgment of our Secretary, to be
inappropriate for submission to the intended recipient(s).
Examples of shareholder communications that would be considered
inappropriate for submission to the Board include, without
limitation, customer complaints, solicitations, communications
that do not relate directly or indirectly to our business or
communications that relate to improper or irrelevant topics.
Communications concerning potential director nominees submitted
by any of our shareholders will be forwarded to the Chairman of
the Nominating and Corporate Governance Committee.
15
Compensation
Committee
Report2
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis provided below with
management, and based on the review and discussions, recommended
to the Board that the Compensation Discussion and Analysis be
included in this proxy statement and incorporated by reference
into our Annual Report on
Form 10-K.
Respectfully submitted,
Compensation Committee of the Board of Directors
Ronald R. Taylor, Chairman
Ryland P. Davis
Peter F. Stanton
March 29, 2011
Compensation
Committee Interlocks and Insider Participation
We have a banking relationship with Washington Trust Bank.
One of the members of the Compensation Committee, Peter F.
Stanton, is a director and the chief executive officer of this
bank. We have the following related party transactions with this
bank:
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We had various amounts of cash on deposit and other investments
with the bank ranging during 2010 from approximately $55,000 to
$516,000 in the aggregate.
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At the beginning of 2010, the bank held a promissory note
secured by commercial real estate in the principal amount of
approximately $1,436,000. During 2010, we made principal and
interest payments on this note of approximately $799,000. The
principal amount owed on the note at the end of 2010 was
approximately $702,000. The bank continues to hold this note and
we will make principal and interest payments on the note in the
future.
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COMPENSATION
DISCUSSION AND ANALYSIS
This section discusses the compensation of our executive
officers. Compensation for the executive officers is determined
by the Compensation Committee of our Board. The Compensation
Committee is composed entirely of independent directors, as
defined under NYSE rules, and none of its members is a current
or former employee of our company. All decisions of the
Compensation Committee are reported to our Board.
There are no material differences in the compensation policies
or decisions with respect to the executive officers, except that
our compensation for our President and Chief Executive Officer,
or CEO, is determined exclusively by the Compensation Committee,
while the compensation of the other executive officers is
determined by the Compensation Committee based on similar
criteria, but also takes into account the recommendations of our
CEO.
Compensation
Program Objectives and Rewards
We believe that our executive compensation program should:
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Attract, motivate and retain highly qualified executives by
paying them competitively, consistent with our success and their
contributions to this success; and
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2 The
material in this report is not soliciting material, is not
deemed filed with the Securities and Exchange Commission and is
not incorporated by reference in any of our filings under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, whether made on, before, or after the
date of this proxy statement and irrespective of any general
incorporation language in such filing.
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Pay for performance by rewarding and encouraging superior
company and individual performance, on both a short- and
long-term basis, in a way that promotes alignment with long-term
shareholder interests.
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All of the compensation and benefits for our executive officers
have as a primary purpose our need to attract, retain and
motivate the highly talented individuals who will engage in the
behaviors necessary to enable us to succeed in our mission while
upholding our values in a highly competitive marketplace. Beyond
that, different elements are designed to engender different
behaviors.
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Base salary and benefits are designed to attract and retain
executives over time.
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Annual cash awards under the Executive Officers Variable Pay
Plan (VPP) are designed to focus executives on one
or more specific performance goals established each year by the
Compensation Committee. Executive officers may also receive
discretionary bonuses based on performance not otherwise
measured by the VPP or for other reasons.
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Long-term equity incentives stock options and
restricted stock units (RSUs) under the
shareholder-approved 2006 Stock Incentive Plan focus
executives efforts on the behaviors within their control
that they believe are necessary to ensure our long-term success,
as reflected in increases to our stock price over a period of
years.
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Severance and change of control arrangements are designed to
facilitate our ability to attract and retain executives as we
compete for talent in a marketplace where such protections are
commonly offered. These arrangements ease an executives
transition due to an unexpected employment termination. In the
event of rumored or actual fundamental corporate changes, these
arrangements will also allow executives to remain focused on our
business interests.
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We do not believe that there are any of our compensation
policies and practices that are reasonably likely to have a
material adverse effect on our company. With respect to our
compensation policies and practices for executive officers, we
believe that our allocation of overall compensation among base
salary and annual and long-term incentives encourages our
executive officers to deliver strong results for our
shareholders without taking excessive risks. The base salaries
of our executive officers provide them assured cash compensation
at levels that our Compensation Committee deems appropriate
taking into account their respective job duties and
responsibilities. We believe these base salaries, taken together
with their at-risk annual and long-term incentives, motivate the
executive officers to perform at a high level. With respect to
annual cash awards under the VPP, we believe that our use of one
or more objective company financial performance goals, together
with the Compensation Committees discretion to disqualify
an executive officer from receiving an award that might
otherwise be payable, serves to mitigate against undue
risk-taking. We also believe that our use of multi-year vesting
schedules for our long-term equity incentives encourages our
executive officers to deliver value to our shareholders while
mitigating risk.
Elements
of Our Compensation Program
Base
Salaries
The Compensation Committee determines base salaries for the
executive officers early each year, based on its assessment of
all facts and circumstances that it considers relevant, which
typically include most or all of the following factors:
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individual performance;
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job responsibilities;
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tenure with the company as well as prior experience;
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economic conditions;
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retention considerations; and
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the competitive labor market, including regional salary levels
and those of executives at other hospitality companies.
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In determining the base salaries of executive officers other
than the CEO, the Compensation Committee also takes into
consideration recommendations made by the CEO.
Jon E. Eliassen, our current CEO, was appointed on an interim
basis in January 2010. Given his interim status, the
Compensation Committee determined it was appropriate to
compensate him for his services as CEO solely by means of an
annual salary, which was set at $360,000 based on the
committees consideration of the factors described above as
well as the fact that he was not expected to be eligible to
receive any annual or long-term incentives. He also remained
entitled to compensation for his services as a member of the
Board on the same basis as the non-employee directors.
Commencing September 2010, Mr. Eliassen voluntarily reduced
his salary to $324,000
During 2010, we hired two other executive officers: Dan Jackson,
who succeeded our previous chief financial officer, and Harry G.
Sladich, who was appointed to a new executive position. The
Compensation Committee established their base salaries at
$210,000 and $165,000, respectively, based on its consideration
of the factors described above.
The 2010 salaries of our other executive officers were based on
the salary levels originally set by the Compensation Committee
in 2008 based on its consideration of the factors described
above. Due to the difficult economic environment, the salaries
of these executive officers were not increased during either
2009 or 2010. Instead, the salaries of all of our salaried
employees, including these executive officers, were reduced by
5% during both of these years.
Under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the Code), base salaries paid to
executive officers are deductible for federal income tax
purposes except to the extent that they exceed $1 million.
No executive received base salary in excess of $1 million
in 2010.
VPP
and Other Annual Cash Awards
Early each year, the Compensation Committee generally
establishes one or more performance goals for each executive
officer under the VPP, as well as the various levels of cash
awards that each executive will receive based on the extent to
which his goals are achieved. Historically, there has been a mix
of company and individual performance goals under the VPP.
Company goals have generally related to our companys
overall financial performance. Individual goals have been
subjective or objective, but they have generally been based on
performance in areas of our business that the Compensation
Committee believed were important to our success. The goals and
award levels are initially proposed by the CEO, and the final
goals and award levels are determined following a dialogue
between the Compensation Committee and the CEO. Award levels are
specified as a percentage of base salary. The Compensation
Committee determines the award levels that are potentially
available under the VPP based on the same factors that it
considers in determining base salaries.
As described above, the Compensation Committee determined that
Mr. Eliassen would not participate in the VPP during 2010,
given that he was serving as CEO on an interim basis.
In early 2010, the Compensation Committee determined that, for
each of the other executive officers, there would be two company
goals and no individual goals for 2010. The company goals
related to achievement of specified levels of EBITDA and net
income. At the same time, award levels were established as set
forth in the table below. When Messrs. Jackson and Sladich
were hired later in the year, the Compensation Committee
determined that they would be eligible to participate in the VPP
as shown in the table.
VPP Award
Levels for 2010
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Percentage of Base Salary
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Award Payouts ($)
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Threshold (1)
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Target
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Maximum
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Threshold (1)
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Target
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Maximum
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Actual
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George H. Schweitzer
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0
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%
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30
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%
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100
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%
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0
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63,000
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210,000
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0
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Dan Jackson (2)
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0
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%
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30
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%
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100
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%
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0
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10,356
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34,521
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0
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Harry G. Sladich (2)
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0
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%
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30
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%
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100
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%
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0
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32,955
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109,849
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0
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Thomas L. McKeirnan
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0
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%
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30
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%
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100
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%
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0
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62,700
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209,000
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0
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(1) |
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Potential award payouts for 2010 under the VPP were based on
multiple company performance goals, so we did not consider the
VPP to have any Threshold award level. |
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Messrs. Jackson and Sladich became executive officers of
the company on November 2, 2010 and May 3, 2010,
respectively. Their potential award payouts have been prorated
to reflect their respective partial years of service in 2010. |
The 2010 targets for the company goals were EBITDA of
$30.5 million and net income of $2 million.
Under the VPP, there is an overriding discretionary analysis of
each executives eligibility to receive variable pay. For
example, if an executive fails to follow company policy and
procedures, exposes the company to legal liability, or exhibits
behavior inappropriate for a leadership position, he may be
disqualified from receiving his variable pay, even if his
specified performance goals are achieved.
There will be no awards under the VPP for 2010.
In addition to awards under the VPP, the Compensation Committee
has on occasion granted discretionary bonuses to executive
officers based on performance not otherwise measured by the VPP
or for other reasons. No discretionary bonuses were granted for
2010.
We generally intend that executive officer compensation be fully
deductible for federal income tax purposes, taking into account
Section 162(m) of the Code, provided that other
compensation objectives are met. We have not sought shareholder
approval of the VPP, which would ensure deductibility under the
Code, because we anticipate that, for the foreseeable future, no
executive officer will have aggregate base salary and annual
incentive awards of more than $1 million during any
calendar year.
Long-Term
Equity Incentives
We provide long-term incentives to our executive officers in the
form of stock options and restricted stock units
(RSUs), typically with a vesting period of four
years. This combination of equity incentives is intended to
benefit shareholders by enabling us to better attract and retain
top talent in a marketplace where such incentives are prevalent.
Both stock options and RSUs closely align our executives with
the achievement of our longer-term financial objectives that
enhance shareholder value.
The Compensation Committee each year determines the grants of
equity incentives that will be made to our executive officers
based on the same factors that it considers in determining base
salaries. For 2010, in order not to unduly deplete the pool of
shares available under our 2006 Stock Incentive Plan, and
recognizing the trend at many companies to rely more heavily on
RSUs because they provide more stable incentives for executives,
the Compensation Committee determined to grant all of that
years long-term incentives in the form of RSUs. In May
2010 Mr. Eliassen was awarded RSUs with a grant date value
equal to 60% of his base salary. The other persons who were then
serving as executive officers received RSUs with a grant date
value equal to approximately 40% of their respective base
salaries. All of these RSUs will vest in equal annual increments
over a period of four years from the date of grant. When
Mr. Jackson was hired later in the year, he received RSUs
with a grant date value equal to approximately 30% of his base
salary, which will vest in full on the first anniversary of the
date of grant.
Stock
Options
Stock options provide for financial gain derived from the
potential appreciation in stock price from the date that the
option is granted until the date that the option is exercised.
The exercise price of our stock options is set at fair market
value, which is the closing selling price of our common stock on
the NYSE on the grant date. The vesting provisions of the stock
options we have granted in the past have varied. Although no
stock options were granted to executive officers in 2010, stock
options granted to the executive officers in prior years have
generally vested in equal annual increments over a period of
four years from the date of grant.
Under the shareholder-approved 2006 Stock Incentive Plan, we may
not grant stock options at a discount to fair market value or
with a so-called reload feature, and we may not
reduce the exercise price of outstanding stock
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options except in the case of a stock split or other similar
event. We do not lend funds to employees to enable them to
exercise stock options.
We do not backdate options or grant options retroactively. In
addition, we do not plan to coordinate grants of options so that
they are made before announcement of favorable information, or
after announcement of unfavorable information. Our options are
granted at fair market value on a fixed date or event, with all
required approvals obtained in advance of or on the actual grant
date. All grants to executive officers require the approval of
the Compensation Committee.
Our long-term performance ultimately determines the value of
stock options, because gains from stock option exercises are
entirely dependent on the long-term appreciation in the price of
our common stock. As a result, we believe stock option grants
encourage executives and other employees to focus on behaviors
and initiatives that should lead to an increase in the price of
our common stock, which benefits all our shareholders.
Under Section 162(m) of the Code, we generally may not
deduct compensation paid to an executive officer in a calendar
year if it exceeds $1 million. Certain compensation that is
considered performance-based is deductible without
regard to this $1 million limitation. We believe that any
compensation attributable to stock options held by our executive
officers will be considered performance-based, so
Section 162(m) of the Code should not limit our ability to
deduct it for federal income tax purposes.
Restricted
Stock Units
RSU grants provide for the issuance of shares of our common
stock if the recipient has met certain continued service
requirements. Under all of the RSUs granted to our executive
officers in 2010, other than the RSUs granted to
Mr. Jackson, an executive will receive one-fourth of the
shares subject to his award on each of the first four
anniversaries of the date of grant so long as he remains
continuously employed with us until the applicable anniversary.
Mr. Jackson will receive all of the shares subject to his
RSU award on the first anniversary of the date of grant so long
as he remains continuously employed with us until that time.
Unlike stock options, RSUs may have value even if the price of
our common stock does not increase. Nevertheless, we award RSUs
because they promote retention and we believe they also create
incentives for executives to focus on increased share prices so
that the common stock subject to the award will be as valuable
as possible when it is eventually issued. Although we do not
impose any restriction on the sale of common stock issued
pursuant to RSUs, we expect that our executives will continue to
hold some if not all of the shares issued, which will also keep
their interests aligned with those of our shareholders.
Our RSUs do not qualify as performance-based compensation under
Section 162(m) of the Code. As a result, the value of
common stock ultimately issued to an executive officer pursuant
to an RSU will not be deductible to the extent that value in any
year, when aggregated with the executive officers other
compensation for that year that is subject to
Section 162(m), exceeds $1 million.
20
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth summary information concerning
the compensation awarded to, paid to or earned by our named
executive officers for all services rendered in all capacities
to us in 2008, 2009 and 2010.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($) (2)
|
|
($) (2)
|
|
($)
|
|
($) (3)
|
|
($)
|
|
Jon Eliassen (4)
|
|
|
2010
|
|
|
|
321,231
|
|
|
|
0
|
|
|
|
216,003
|
|
|
|
0
|
|
|
|
0
|
|
|
|
52,929
|
|
|
|
590,163
|
|
President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George H. Schweitzer
|
|
|
2010
|
|
|
|
192,308
|
|
|
|
0
|
|
|
|
80,003
|
|
|
|
0
|
|
|
|
0
|
|
|
|
18,351
|
|
|
|
290,662
|
|
Executive Vice
|
|
|
2009
|
|
|
|
208,461
|
|
|
|
0
|
|
|
|
77,362
|
|
|
|
0
|
|
|
|
0
|
|
|
|
22,365
|
|
|
|
308,188
|
|
President and Chief
|
|
|
2008
|
|
|
|
148,615
|
|
|
|
0
|
|
|
|
37,497
|
|
|
|
138,995
|
|
|
|
0
|
|
|
|
18,241
|
|
|
|
343,348
|
|
Operating Officer,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan R. Jackson (5)
|
|
|
2010
|
|
|
|
24,231
|
|
|
|
0
|
|
|
|
63,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,115
|
|
|
|
89,346
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry G. Sladich (6)
|
|
|
2010
|
|
|
|
101,539
|
|
|
|
0
|
|
|
|
66,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,445
|
|
|
|
172,986
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Sales and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas L. McKeirnan
|
|
|
2010
|
|
|
|
191,392
|
|
|
|
0
|
|
|
|
79,619
|
|
|
|
0
|
|
|
|
0
|
|
|
|
8,316
|
|
|
|
279,327
|
|
Senior Vice President,
|
|
|
2009
|
|
|
|
207,469
|
|
|
|
0
|
|
|
|
76,991
|
|
|
|
0
|
|
|
|
0
|
|
|
|
8,463
|
|
|
|
292,923
|
|
General Counsel and
|
|
|
2008
|
|
|
|
206,808
|
|
|
|
0
|
|
|
|
20,688
|
|
|
|
52,140
|
|
|
|
0
|
|
|
|
7,702
|
|
|
|
287,338
|
|
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anupam Narayan (7)
|
|
|
2010
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,215,307
|
|
|
|
1,215,307
|
|
Former President and
|
|
|
2009
|
|
|
|
357,363
|
|
|
|
0
|
|
|
|
331,543
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,051
|
|
|
|
694,957
|
|
Chief Executive
|
|
|
2008
|
|
|
|
345,715
|
|
|
|
0
|
|
|
|
89,550
|
|
|
|
247,324
|
|
|
|
0
|
|
|
|
5,496
|
|
|
|
688,085
|
|
Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony F. Dombrowik (8)
|
|
|
2010
|
|
|
|
144,231
|
|
|
|
0
|
|
|
|
66,669
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,566
|
|
|
|
217,466
|
|
Former Senior Vice President,
|
|
|
2009
|
|
|
|
173,718
|
|
|
|
0
|
|
|
|
72,525
|
|
|
|
0
|
|
|
|
0
|
|
|
|
8,463
|
|
|
|
254,706
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
|
164,980
|
|
|
|
0
|
|
|
|
17,323
|
|
|
|
43,658
|
|
|
|
0
|
|
|
|
7,702
|
|
|
|
233,663
|
|
|
|
|
(1) |
|
Due to the timing of the companys payroll periods, there
were 27 pay dates in 2009 and 25 in 2010. |
|
(2) |
|
Represents the grant date fair value of these stock awards and
option awards. See Note 14 to our consolidated financial
statements in our Annual Report on
Form 10-K
for the year ended December 31, 2010 for information
regarding the assumptions underlying the valuation of these
equity awards. |
|
(3) |
|
Amounts shown for 2010 include or represent the following
discounts accorded the executive officers from contributions
otherwise required for participation in our self-insured
medical, dental and vision plan: Mr. Eliassen, $0;
Mr. Schweitzer, $8,316; Mr. Jackson, $1,500;
Mr. Sladich, $5,445; Mr. McKeirnan, $8,316; and
Mr. Dombrowik, $6,566. The amounts shown for
Mr. Eliassen for 2010 represent the grant date fair value
of stock awarded to him as compensation for his services on the
Board. The amounts shown for Mr. Schweitzer and
Mr. Jackson for 2010 also include $10,035 and $615,
respectively, in commuting expenses that we paid on their
behalf. The total value of all other perquisites and personal
benefits received by each other executive officer in 2010 was
less than $10,000. |
|
(4) |
|
Mr. Eliassen became our Interim President and Chief
Executive Officer on January 13, 2010 and was appointed
President and Chief Executive Officer (removing the interim
status) on February 14, 2011. |
|
(5) |
|
Mr. Jackson was hired effective November 2. 2010. |
|
(6) |
|
Mr. Sladich was hired effective May 3, 2010. |
21
|
|
|
(7) |
|
Mr. Narayans employment terminated effective
January 13, 2010. The compensation shown for him for 2010
represents cash severance payments of $727,693; a non-cash
charge of $59,200 related to modification of certain of his
stock options; a non-cash charge of $407,807 related to
acceleration of his restricted stock units; and life, health and
insurance benefits having a value of $20,607. |
|
(8) |
|
Mr. Dombrowiks employment terminated effective
October 13, 2010. |
2010
Grants of Plan-Based Awards
The following table sets forth summary information regarding all
grants of plan-based awards made to our named executive officers
for the year ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Date Fair
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
of Shares
|
|
Value of
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards (1)
|
|
of Stock
|
|
Stock
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Awards
|
Name
|
|
Type of Award
|
|
Grant Date (2)
|
|
($) (3)
|
|
($)
|
|
($)
|
|
(#) (4)
|
|
($)
|
|
Jon E. Eliassen
|
|
Restricted Stock Award
|
|
|
5/19/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,423
|
|
|
|
216,003
|
|
George H. Schweitzer
|
|
Annual Incentive Award
|
|
|
|
|
|
|
0
|
|
|
|
63,000
|
|
|
|
210,000
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Award
|
|
|
5/19/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,268
|
|
|
|
80,003
|
|
Dan Jackson (5)
|
|
Restricted Stock Award
|
|
|
11/15/10
|
|
|
|
|
|
|
|
10,356
|
|
|
|
34,521
|
|
|
|
8,400
|
|
|
|
63,000
|
|
Harry G. Sladich (5)
|
|
Restricted Stock Award
|
|
|
5/19/10
|
|
|
|
|
|
|
|
32,955
|
|
|
|
109,849
|
|
|
|
9,296
|
|
|
|
66,002
|
|
Thomas L. McKeirnan
|
|
Annual Incentive Award
|
|
|
|
|
|
|
0
|
|
|
|
62,700
|
|
|
|
209,000
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Award
|
|
|
5/19/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,214
|
|
|
|
79,619
|
|
Anupam Narayan (6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony F. Dombrowik (7)
|
|
Annual Incentive Award
|
|
|
|
|
|
|
0
|
|
|
|
52,500
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Award
|
|
|
5/19/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,390
|
|
|
|
66,669
|
|
|
|
|
(1) |
|
These represent the Threshold, Target
and Maximum award payouts that were available for
the 2010 performance period under our Executive Officers
Variable Pay Plan (the VPP). This plan is further
discussed under the caption VPP and Other Annual Cash
Awards in Compensation Discussion and Analysis. Had
there been actual award payouts, they would have been reported
in the Non-Equity Incentive Plan Compensation column
of the Summary Compensation Table. |
|
(2) |
|
The closing market price of our common stock on May 19,
2010 was $7.10. It was $7.50 on November 15, 2010. |
|
(3) |
|
Potential award payouts for 2010 under the VPP were based on
multiple company performance goals, so we did not consider the
VPP to have any Threshold award level. |
|
(4) |
|
These awards are restricted stock units awarded under our 2006
Stock Incentive Plan. All of Mr. Jacksons units will
vest on November 15, 2011, subject to continuous service
with us or one of our affiliates. All of the other units will
vest in equal installments on the first four anniversaries of
the grant date, subject to continuous service with us or one of
our affiliates. When restricted stock units vest, we will issue
one share of our common stock for each unit that vests as soon
as is administratively practicable. |
|
(5) |
|
Messrs. Jackson and Sladich became executive officers of
the company on November 2, 2010 and May 3, 2010,
respectively. Their potential award payouts under the VPP have
been prorated to reflect their respective partial years of
service in 2010. |
|
(6) |
|
Mr. Narayans employment terminated effective
January 13, 2010 and received no plan-based awards in 2010.. |
|
(7) |
|
Mr. Dombrowiks employment terminated effective
October 15, 2010. |
22
2010
Outstanding Equity Awards at Fiscal Year End
The following table sets forth summary information regarding the
outstanding equity awards held by each of our named executive
officers at December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
Stock Awards(1)
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($) (2)
|
|
Jon E. Eliassen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,423
|
(3)
|
|
|
242,776
|
|
George H. Schweitzer
|
|
|
22,500
|
|
|
|
22,500
|
(4)
|
|
|
8.80
|
|
|
|
4/1/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,131
|
(5)
|
|
|
17,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,849
|
(6)
|
|
|
102,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,268
|
(3)
|
|
|
89,919
|
|
Dan Jackson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,400
|
(7)
|
|
|
67,032
|
|
Harry G. Sladich
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,296
|
(3)
|
|
|
74,183
|
|
Thomas L. McKeirnan
|
|
|
10,451
|
|
|
|
0
|
|
|
|
5.98
|
|
|
|
7/1/13
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
5.10
|
|
|
|
11/19/14
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
0
|
|
|
|
7.46
|
|
|
|
11/10/15
|
|
|
|
|
|
|
|
|
|
|
|
|
11,447
|
|
|
|
0
|
|
|
|
12.21
|
|
|
|
11/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
9,761
|
|
|
|
3,253
|
(8)
|
|
|
13.00
|
|
|
|
5/17/17
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
|
11,000
|
(9)
|
|
|
8.74
|
|
|
|
5/22/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
366
|
(10)
|
|
|
2,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,196
|
(11)
|
|
|
9,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,787
|
(6)
|
|
|
102,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,214
|
(3)
|
|
|
89,488
|
|
Anupam Narayan (12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony F. Dombrowik (13)
|
|
|
6,511
|
|
|
|
|
|
|
|
12.21
|
|
|
|
11/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
6,936
|
|
|
|
|
|
|
|
13.00
|
|
|
|
5/17/17
|
|
|
|
|
|
|
|
|
|
|
|
|
9,211
|
|
|
|
|
|
|
|
8.74
|
|
|
|
5/22/18
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The vesting of unvested options and
restricted stock units is subject to continuous service with us
or one of our affiliates through the respective scheduled dates
of vesting disclosed in the footnotes to this table. Under
certain circumstances, these vesting dates may be accelerated.
See Employment Agreements; Severance and Change
of Control Arrangements.
|
|
(2)
|
|
The value of these restricted stock
units is calculated by multiplying the number of unvested units
by $7.98, the closing market price of our common stock on
December 31, 2010.
|
|
(3)
|
|
Each of these restricted stock unit
awards will vest in four equal installments on May 19, 2011
and the next three anniversaries of that date.
|
|
(4)
|
|
This option vested as to
11,250 shares on April 1, 2011 and will vest as to the
remaining shares on April 1, 2012.
|
|
(5)
|
|
This restricted stock unit award
will vest as to 1,065 shares on April 1, 2011 and will
vest as to the remaining shares on April 1, 2012.
|
|
(6)
|
|
Each of these restricted stock unit
awards will vest in three equal installments on May 21,
2011 and the next two anniversaries of that date.
|
|
(7)
|
|
This restricted stock unit award
will vest in full on November 15, 2011.
|
|
(8)
|
|
This option will vest as to the
remaining shares on May 17, 2011.
|
|
(9)
|
|
This option will vest as to the
remaining shares in two equal installments on May 22, 2011
and May 22, 2012.
|
|
(10)
|
|
This restricted stock unit award
will vest on May 17, 2011.
|
|
(11)
|
|
This restricted stock unit award
will vest in two equal installments on May 22, 2011 and
May 22, 2012.
|
|
(12)
|
|
Mr. Narayans employment
terminated effective January 13, 2010. He had no equity
awards at December 31, 2010.
|
|
(13)
|
|
Mr. Dombrowiks
employment terminated effective October 15, 2010. All of
the option awards shown in the above table expired unexercised
in accordance with their terms.
|
23
2010
Option Exercises and Stock Vested
The following table summarizes the option exercises and vesting
of stock awards for each of our named executive officers for the
year ended December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Acquired
|
|
|
Value Realized
|
|
|
Acquired
|
|
|
Value Realized
|
|
|
|
on Exercise
|
|
|
on Exercise
|
|
|
on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($) (1)
|
|
|
Jon E. Eliassen
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
George H. Schweitzer
|
|
|
0
|
|
|
|
0
|
|
|
|
5,347
|
|
|
|
36,368
|
|
Thomas L. McKeirnan
|
|
|
0
|
|
|
|
0
|
|
|
|
5,552
|
|
|
|
37,696
|
|
Dan Jackson
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Harry G. Sladich
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Anupam Narayan (2)
|
|
|
80,000
|
|
|
|
162,187
|
|
|
|
84,433
|
|
|
|
407,811
|
|
Anthony F. Dombrowik (3)
|
|
|
15,025
|
|
|
|
22,486
|
|
|
|
4,775
|
|
|
|
32,115
|
|
|
|
|
(1) |
|
All of these stock awards were restricted stock units. The value
of the shares of common stock acquired upon vesting of these
units is calculated by multiplying the number of shares by the
closing market price of our common stock on the date the units
vested. |
|
(2) |
|
Mr. Narayans employment terminated effective
January 13, 2010. |
|
(3) |
|
Mr. Dombrowiks employment terminated effective
October 15, 2010. |
Employment
Agreements; Severance and Change of Control
Arrangements
President
and Chief Executive Officer
On January 13, 2010, Jon E. Eliassen was appointed to serve
as our interim President and Chief Executive Officer. He was
appointed President and Chief Executive Officer (removing the
interim status) on February 14, 2011. Under an at-will
unwritten employment agreement, Mr. Eliassens current
annual base salary is $330,000. He is also entitled to receive
quarterly grants of shares of our common stock worth $7,125. In
addition, as soon as reasonably practical after each annual
meeting of our shareholders, he will receive a grant of shares
of our common stock worth $23,750. Mr. Eliassen is not
entitled to any severance upon termination of his employment.
Messrs. Jackson
and Sladich
Dan Jackson and Harry G. Sladich are at-will employees whose
current annual base salaries are $210,000 and $200,000,
respectively. Mr. Jackson is entitled to receive a lump sum
severance payment equal to one year of his base salary if his
employment is terminated without cause within six months
following a change of control of our company.
Messrs. Schweitzer
and McKeirnan
We have written employment agreements with George H. Schweitzer
and Thomas L. McKeirnan under which their current annual base
salaries are $250,000 and $210,000, respectively. The following
is a summary of the other material terms of these employment
agreements:
Term
of Agreements; Restrictive Covenants
Each of these executives will serve in his current position
through December 31, 2011, unless his agreement terminates
earlier in accordance with its terms. Thereafter, the agreement
with Mr. McKeirnan 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
2011 or any later calendar year. The agreement with
Mr. Schweitzer will also automatically renew on
December 31, 2011 if a Non-renewal Notice is not given, but
it will thereafter terminate
24
automatically on May 31, 2012. Following termination of an
agreement for any reason, the executive will generally be
prohibited from competing with us for a period of one year or
soliciting any of our employees for a period of two years.
Annual
Bonuses
If an executive officer attains the target performance measures
determined under our VPP for a particular year, he must be
eligible, subject to any discretion accorded the Compensation
Committee under the terms of the VPP to withhold a bonus
otherwise payable, to receive a bonus equal to at least 30%
percent of his base salary for that year.
No bonuses will be awarded under the VPP for 2010. The maximum
bonuses available under the VPP for 2011, measured as a
percentage of base salary, are 100% for each of
Messrs. Schweitzer and McKeirnan.
Severance
Arrangements
If we deliver a Non-Renewal Notice to Mr. Schweitzer or
McKeirnan or terminate his agreement without cause, or if one of
these executives terminates his agreement for good reason within
six months following the occurrence of the event that
constitutes good reason, then:
|
|
|
|
|
any stock options held by the executive will immediately vest
and be exercisable, except that, in the case of
Mr. Schweitzer, this will not apply to any stock option for
which the exercise price is more than 10% higher than the
closing market price of our common stock on the date of
termination;
|
|
|
|
any stock granted to the executive will immediately vest, all
restrictions on restricted stock issued to the executive will
terminate, and any restricted stock awarded but not yet issued
to the executive will be issued;
|
|
|
|
we must provide a lump-sum severance payment equal to cash
compensation for the prior year (but not less than his total
annual base salary rate), plus the target award amount available
under the VPP for the year in which the termination occurs
(prorated for the portion of the year elapsed at the time of
termination), plus a continuation of all life, health and
insurance benefits for a one-year period; and
|
|
|
|
to the extent that the foregoing severance payments or benefits
received by an executive are deemed excess parachute
payments within the meaning of Section 280G(b)(1) of
the Internal Revenue Code of 1986, as amended (the
Code), and thereby result in the imposition upon the
executive of the excise tax imposed by Section 4999 of the
Code, we must pay the executive an additional amount (the
Gross-Up
Payment) such that the net amount retained by the
executive, after deduction of (i) any excise tax payable on
such excess parachute payments and the
Gross-Up
Payment, and (ii) any federal, state and local income and
employment taxes payable on the
Gross-Up
Payment, is the same as it would have been if such excise tax
had not been imposed.
|
The circumstances that constitute good reason
entitling an executive to severance benefits following a
voluntary termination of employment generally relate to:
(i) assignment to the executive of duties materially
inconsistent with the executives positions and
responsibilities as described in the agreement; (ii) the
removal of the executive from such positions; (iii) any
material continuing breach of the agreement;
and/or
(iv) a change in our headquarters office location. However,
the executive will not have good reason unless the executive
gives us written notice that the specified conduct or event has
occurred giving rise to his having good reason, and we fail to
cure such conduct or event within 30 days after receipt of
such notice.
If the employment of Messrs. Schweitzer and McKeirnan had
terminated immediately following the end of our fiscal year
ended December 31, 2010 under circumstances entitling them
to the severance benefits described above, the lump-sum
severance payments payable to the executive officers, and the
value of the other severance benefits they would have received,
would have been as shown in the following table (due to the fact
that there would have
25
been no excess parachute payments on the assumed date of
termination, no
Gross-Up
Payments would have been payable with respect to such
terminations):
Table of
Severance Payments and Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
Accelerated
|
|
Life, Health
|
|
|
|
|
Severance
|
|
Stock
|
|
Restricted
|
|
and Insurance
|
|
|
Name
|
|
Payment (1)(2)
|
|
Options (3)
|
|
Stock Units (4)
|
|
Benefits (5)
|
|
Total (6)
|
|
George H. Schweitzer
|
|
$
|
210,000
|
|
|
$
|
0
|
|
|
$
|
209,459
|
|
|
$
|
15,307
|
|
|
$
|
434,766
|
|
Thomas L. McKeirnan
|
|
$
|
209,000
|
|
|
$
|
0
|
|
|
$
|
203,993
|
|
|
$
|
15,307
|
|
|
$
|
428,300
|
|
|
|
|
(1) |
|
The severance payment for each of Messrs. Schweitzer and
McKeirnan equals his total cash compensation for 2010 (but not
less than his total annual base salary rate without taking into
account the 5% reduction in salaries that was effective in 2010). |
|
(2) |
|
If the termination of employment entitling an executive officer
to a severance payment and other severance benefits occurs other
than at the beginning of a fiscal year, the executive officer
will receive, in addition to the amount set forth in this
column, the target award amount available to him under the VPP
for the year in which the termination occurs (prorated for the
portion of the year elapsed at the time of termination). The
target award amounts available to the executive officers for
2010 were as follows: Mr. Schweitzer, $63,000; and
Mr. McKeirnan, $62,700. |
|
(3) |
|
The acceleration of the stock options would have resulted in no
value to the executive officers, because the exercise prices of
all of their stock options was greater than $7.98, the closing
market price of our common stock on December 31, 2010. |
|
(4) |
|
The value of the accelerated restricted stock units is
calculated by multiplying the number of unvested units by $7.98,
the closing market price of our common stock on
December 31, 2010. |
|
(5) |
|
The value of the continuation of benefits under our self-insured
medical, dental and vision plan is estimated based on the
average per-employee cost of that plan for various categories of
employees in 2010. |
|
(6) |
|
Assumes that no amounts described in footnote 2 to this table
are paid in connection with the termination of employment
entitling the executive officers to severance payments and other
severance benefits. |
Change
of Control Arrangements
If our company undergoes a change of control as defined in the
respective employment agreements of Messrs. Schweitzer and
McKeirnan, then all of the stock options held by
Mr. McKeirnan, and any of the stock options held by
Mr. Schweitzer for which the exercise price is not more
than 10% higher than the closing market price of our common
stock on the date of the change of control, will vest and become
exercisable; any stock granted to the executives will
immediately vest; all restrictions on restricted stock issued to
the executives will terminate; and any restricted stock awarded
but not yet issued to the executives will be issued. If a change
of control had occurred on December 31, 2010, the value of
the acceleration of these equity awards would have been as shown
in the above Table of Severance Payments and Benefits.
DIRECTOR
COMPENSATION
We pay our Chairman of the Board an annual retainer of $70,000.
We also pay or reimburse him for the cost of his office space
and provide coverage to him and his domestic partner under our
self-insured medical, dental and vision plan. We pay each of our
other non-employee directors an annual retainer of $30,000. The
chair of the Audit Committee receives an additional annual fee
of $20,000. The chairs of each of the Compensation Committee and
the Nominating and Corporate Governance Committee receive an
additional annual fee of $15,000. Non-chair members of these
committees receive an additional $5,000 annual fee for each
committee on which they serve.
All director fees are payable in advance in equal quarterly
installments and are currently paid via shares of our common
stock based on the closing market price on the regularly
scheduled quarterly payment date.
26
In addition to annual fees, each non-employee director is
entitled to receive, at or following each annual meeting of
shareholders, a grant of our common stock valued at $25,000.
In line with our operating strategy, and as with all salaried
employees including senior management, the directors have
accepted since the second quarter of 2009 a 5% reduction in the
amount of the fees and stock grants described above.
In addition to the annual fees and stock grants, it is our
policy to reimburse directors for their
out-of-pocket
expenses incurred in connection with their service on the Board
and its committees.
2010 Director
Compensation Table
The following table shows compensation of the non-employee
members of our Board for 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
Fees Earned
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
|
or Paid in
|
|
|
or Paid in
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
Cash ($)
|
|
|
Stock ($)
|
|
|
($) (1)
|
|
|
($)
|
|
|
($)
|
|
|
Donald K. Barbieri
|
|
|
0
|
|
|
|
66,485
|
|
|
|
23,750
|
|
|
|
23,339
|
(2)
|
|
|
113,574
|
|
Richard L. Barbieri
|
|
|
0
|
|
|
|
31,419
|
|
|
|
23,750
|
|
|
|
0
|
|
|
|
55,169
|
|
Raymond R. Brandstrom
|
|
|
0
|
|
|
|
32,044
|
|
|
|
23,750
|
|
|
|
0
|
|
|
|
55,794
|
|
Ryland P. Davis
|
|
|
0
|
|
|
|
48,671
|
|
|
|
23,750
|
|
|
|
0
|
|
|
|
72,421
|
|
Melvin L. Keating (3)
|
|
|
0
|
|
|
|
12,851
|
|
|
|
19,782
|
|
|
|
0
|
|
|
|
32,633
|
|
Peter F. Stanton
|
|
|
0
|
|
|
|
56,990
|
|
|
|
23,750
|
|
|
|
0
|
|
|
|
80,740
|
|
Ronald R. Taylor
|
|
|
0
|
|
|
|
52,232
|
|
|
|
23,750
|
|
|
|
0
|
|
|
|
75,982
|
|
|
|
|
(1) |
|
The amounts shown in this column represent the grant date fair
value of these stock awards. We recognized the full value of
these awards as compensation expense in 2010 for financial
reporting purposes. |
|
(2) |
|
Represents $13,200 that we paid or reimbursed Mr. Barbieri
for the cost of his office space during 2010 plus $10,139 as the
estimated value of coverage under our self-insured medical,
dental and vision plan. |
|
(3) |
|
Mr. Keating became a director on July 19, 2010. |
REPORT OF
THE AUDIT
COMMITTEE3
The Audit Committee oversees our companys 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 discussed with BDO USA, LLP the matters required
to be discussed by the Statement on Auditing Standards
No. 114, as adopted by the Public Company Accounting
Oversight Board in Rule 3200T.
The committee also received the written disclosures and the
letter from BDO USA, LLP required by applicable requirements of
the Public Company Accounting Oversight Board regarding the
independent accountants communications with the committee
concerning independence, and has discussed with BDO USA, LLP the
committees independence.
3 The
material in this report is not soliciting material, is not
deemed filed with the Securities and Exchange Commission and is
not incorporated by reference in any of our filings under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, whether made on, before, or after the
date of this Proxy Statement and irrespective of any general
incorporation language in such filing.
27
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, 2010 for filing with the
Securities and Exchange Commission. The committee and the Board
have also recommended, subject to shareholder ratification, the
selection of BDO USA, LLP as our independent registered public
accounting firm for 2011.
Respectfully submitted,
Audit Committee of the Board of Directors
Peter F. Stanton, Chairman
Raymond R. Brandstrom
Ryland P. Davis
Ronald R. Taylor
March 29, 2011
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Fees
Paid
BDO USA, LLP billed our company the amounts shown in the table
below for professional services performed during 2009 and 2010:
|
|
|
|
|
|
|
|
|
Services Rendered
|
|
2009
|
|
|
2010
|
|
|
Audit Fees (1)
|
|
$
|
526,000
|
|
|
$
|
526,000
|
|
Audit-Related Fees (2)
|
|
|
106,000
|
|
|
|
111,000
|
|
|
|
|
|
|
|
|
|
|
Total Audit and Audit-Related Fees
|
|
|
632,000
|
|
|
|
637,000
|
|
Tax Fees (3)
|
|
|
173,006
|
|
|
|
125,885
|
|
All Other Fees (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
805,006
|
|
|
$
|
762,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The audit fees covered the annual audit of our financial
statements, Sarbanes-Oxley compliance work and quarterly reviews. |
|
(2) |
|
The audit-related fees covered audit and attest services for
entities we consolidate that are required by agreement but not
by statute or a regulatory body, as well as the audit of certain
hotel properties. They also covered the audit of our employee
benefit plan. The audit related fees for 2010 also covered
review of an SEC comment letter. |
|
(3) |
|
The tax fees covered tax returns, year-end tax planning and tax
advice. They also covered a cost segregation study in 2009. |
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(4) |
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BDO USA, LLP did not bill us for any other professional services
rendered during 2009 or 2010, and it did not provide our company
during either of those years 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 selecting, setting
compensation and overseeing the work of our 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.
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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 USA, LLP are
compatible with maintaining its independence.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Under our written Statement of Policy with respect to Related
Party Transactions, a related party transaction (as defined
below) may be consummated or may continue only if the Audit
Committee of our Board, or in certain cases the full Board,
approves or ratifies the transaction in accordance with the
guidelines set forth in the policy. The policy applies to the
following related parties:
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our directors;
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any of our executive or other officers who are required by
Section 16(a) of the Securities Exchange Act of 1934, as
amended, to file reports of ownership and changes in ownership
of our common stock with the Securities and Exchange Commission;
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any person who is the beneficial owner of more than 5% of our
common stock;
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any immediate family member, as defined in the policy, of any of
the foregoing persons; and
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any entity that is owned or controlled in substantial part by
any of the foregoing persons.
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Related party transaction is defined in the policy
as a transaction between us and any of the foregoing persons.
Under the policy, the following transactions are deemed to be
automatically pre-approved:
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any compensation paid to a related party that has been approved
by the Compensation Committee;
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any charitable contribution, grant or endowment by us to a
charitable organization, foundation or university at which a
related partys only relationship is as an employee (other
than an executive officer) or a director, if the aggregate
amount involved does not exceed the lesser of $50,000 or two
percent of the charitable organizations total annual
receipts;
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any transaction where the related partys interest arises
solely from the ownership of our common stock and all holders of
our common stock receive the same benefit on a pro rata basis
(e.g. dividends);
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any transaction where the related partys interest arises
solely from participation in an employee benefit plan maintained
by us for the general benefit of all of our employees; and
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any transaction with a related party involving services as a
bank depositary of funds, transfer agent, registrar, trustee
under a trust indenture, or similar services.
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Transactions
with Related Parties
Information is set forth below regarding certain related party
transactions that occurred during 2010 or that are anticipated
to occur during or following 2011. All of such transactions were
reviewed and approved or ratified in accordance with our
Statement of Policy with respect to Related Party Transactions.
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Goodale &
Barbieri Company
Goodale & Barbieri Company (G&B) was
previously a wholly owned subsidiary of ours through which we
conducted the management, leasing, brokerage and development
portion of our former real estate division. In 2006, Thomas M.
Barbieri, the brother of Donald K. Barbieri and Richard L.
Barbieri, and another individual acquired G&B from us in a
transaction approved by independent directors.
During 2010 we paid G&B approximately $36,000 for
management of the Kalispell Center and $34,000 for the
management, leasing and development of certain other properties.
In addition, we paid G&B approximately $62,000 in
connection with a successful appeal of the assessed value of the
Kalispell Center. We expect to pay G&B additional similar
fees in the future. We believe that Thomas M. Barbieri owns 90%
of G&B, so that the approximated dollar value of his
interest in all of these transactions between G&B and us
would be 90% of the respective total amounts disclosed.
David
Barbieri
David Barbieri serves as our Senior Vice President, Information
Technology. He has been with our company since 1996. He was
previously a Manufacturing Engineer at Exabyte Corporation in
Boulder, Colorado from 1993 to 1996 after graduating from the
University of Colorado with a degree in Mechanical Engineering.
He is the son of Donald K. Barbieri. The aggregate amount of
salary and bonus that we paid David Barbieri for 2010 was
$135,236. His 2011 base salary is $130,468 and his target bonus
opportunity for 2011 is 30% of this salary.
30
PROPOSALS OF
SHAREHOLDERS
Proposals of shareholders to be considered for inclusion in the
proxy statement and proxy for our 2012 Annual Meeting of
Shareholders must be received by us on or prior to December 16,
2011.
A shareholder of record, who intends to submit a proposal at the
2012 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 us prior written notice. Written notice of any such
proposal or nominations should be addressed to our Secretary and
received at our principal executive office at 201 West
North River Drive, Suite 100, Spokane, Washington 99201 not
later than December 16, 2011. The written notice must satisfy
certain requirements specified in our By-Laws, which are
included in the excerpt from the By-Laws attached as
Appendix D to this proxy statement. A complete copy of our
By-Laws will be sent to any shareholder upon written request to
our Secretary.
ANNUAL
REPORT ON
FORM 10-K
A copy of our Annual Report on
Form 10-K
for the year ended December 31, 2010 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 our Secretary, 201 West North
River Drive, Suite 100, Spokane, Washington 99201 ((509)
459-6100).
By Order of the Board of Directors
Thomas L. McKeirnan
Secretary
Spokane, Washington
April 15, 2011
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APPENDIX A
PROPOSED AMENDMENTS TO ARTICLES OF INCORPORATION
[text struck out is to be deleted; text in bold face is to be
added]
TWELFTH: The number of directors of the
Corporation which shall constitute the entire Board of Directors
shall be such as from time to time shall be determined by a
majority of the then authorized number of directors, but in no
case shall the number be less than 3 nor more than 13.
The directors shall be classified with respect to the time for
which they severally hold office into classes, as nearly equal
in number as possible (but with not less than one director in
each class), as determined by the Board of Directors, one class
to be elected for a term expiring at the first three
nor more than 13. At the 2011 annual meeting of shareholders
to be held after its election, another class to be
elected for a term expiring at the second annual meeting of
shareholders to be held after its election, and another class to
be elected for a term expiring at the third annual meeting of
shareholders to be held after its election, with the members of
each class to hold office until their successors have been
elected and qualified. At each annual meeting of shareholders,
the successors of the members of the class of directors
, the successor of each director whose term expires at
that meeting shall be elected to hold office for a term expiring
at the 2012 annual meeting of shareholders, or until such
directors successor is elected and qualified. At the 2012
annual meeting of shareholders, the successor of each director
whose term expires at that meeting shall be elected to hold
office for a term expiring at the 2013 annual meeting of
shareholders, or until such directors successor is elected
and qualified. Each director elected by the shareholders at and
after the 2013 annual meeting of shareholders held
in the third year following the year of their election.
shall hold office for a term expiring at the next
annual meeting of shareholders, or until such directors
successor is elected and qualified. Except as otherwise
provided in these Articles of Incorporation, any newly
created directorships directorship
resulting from any increases increase in
the number of directors and any
vacanciesvacancy on the Board of
Directors resulting from death, resignation,
disqualification, removal or other cause
shall may be filled by the affirmative
vote of a majority of the remainingdirectors
then in office, even if such majority is less than a quorum of
the Board of Directors, and the person appointed thereto shall
serve hold office until the next annual
meeting of shareholders, at which annual meeting the
term of the position filled by vote of the directors shall
expire and the newly created position or vacancy shall be filled
by election of the shareholders for a term corresponding to that
of the vacancy being filled or of the newly created position
or until such directors successor is elected
and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of
any incumbent director.
A-1
APPENDIX B
AMENDMENTS TO SECTIONS 3.2 AND 3.9 OF BY-LAWS
[text struck out is to be deleted; text in bold face is to be
added]
Section 3.2 Number;
Board of Directors Divided in
ClassesTerms. The number of directors of
the Corporation which shall constitute the entire Board of
Directors shall be such as from time to time shall be determined
by a majority of the then authorized number of directors, but in
no case shall the number be less than 3 nor more than
13. The directors shall be classified with respect to the time
for which they severally hold office into classes, as nearly
equal in number as possible (but with not less than one director
in each class), as determined by the Board of Directors, one
class to be elected for a term expiring at the first annual
meeting of shareholders to be held after its election, another
class to be elected for a term expiring at the second annual of
shareholders to be held after its election, and another class to
be elected for a term expiring at the third annual meeting of
shareholders to be held after its election, with the members of
each class to hold office until their successors have been
elected and qualified. At each annual meeting of shareholders,
the successors of the members of the class of directors
three nor more than 13. At the 2011 annual meeting
of shareholders, the successor of each director whose term
expires at that meeting shall be elected to hold office for a
term expiring at the annual meeting of shareholders held
in the third year following the year of their election.
2012 annual meeting of shareholders, or until such
directors successor is elected and qualified. At the 2012
annual meeting of shareholders, the successor of each director
whose term expires at that meeting shall be elected to hold
office for a term expiring at the 2013 annual meeting of
shareholders, or until such directors successor is elected
and qualified. Each director elected by the shareholders at and
after the 2013 annual meeting of shareholders shall hold office
for a term expiring at the next annual meeting of shareholders,
or until such directors successor is elected and
qualified.
Section 3.9 Vacancies. Except
as otherwise provided in these By-Laws, any newly created
directorshipsdirectorship resulting from
any increases increase in the number of
directors and anyvacancies vacancy on
the Board of Directors resulting from death,
resignation,disqualification, removal or other
cause shall may be filled by the
affirmative vote of a majority of the remaining
directors then in office, even if such majority is less
than a quorum of the Board of Directors, or by a sole
remaining director. The term of office of any director so
elected by the directors to fill a vacancy resulting from an
increase in the number of directors or otherwise shall expire at
the next meeting of shareholders at which directors are elected.
The term of office of any director elected by the shareholders
to succeed a director elected by the other directors (or to fill
a vacancy on the Board of Directors which had not been filled by
the vote of such other directors) shall expire at the
and the person appointed thereto shall hold office
until the next annual meeting of shareholders at
which the term of the class of which, or until
such director is a member shall
expire.s successor is elected and qualified.
No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent
director.
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APPENDIX C
Corporate Governance Guidelines Regarding Director
Qualifications
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 our companys 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 our 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 our 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 our 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 our company;
(b) the director or the directors Immediate Family
Member has received more than $120,000 per year in direct
compensation from our 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 is a current partner or employee
of a firm that is our companys independent auditor,
(ii) the director has an immediate Family Member who is a
current partner of such a firm, (iii) the director has an
Immediate Family Member who is a current employee of such a firm
and personally works on our companys audit, 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 our companys audit
within that time;
(d) the director or the directors Immediate Family
Member is, or during the last three years, has been, part of an
interlocking directorate in which a current executive officer of
our 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
directors Immediate Family member is a current executive
officer of a company that makes payments to, or receives
payments (exclusive of charitable contributions that the Company
discloses on its website or in its annual proxy statement) from,
our 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 our
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 our 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
directors Immediate Family Member) is an employee, makes
payments to, or receives payments from, our 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
entitys consolidated gross revenues.
C-1
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 our
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 our 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 our 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 our
company to lose the contributions of directors who have been
able to develop, over a period of time, increasing insight into
our company and its operations, thereby increasing their
contributions to our 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 our company and the communities which our 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 our 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 our company. The Nominating and Corporate
Governance Committee shall review the situation and make a
prompt recommendation to the Board.
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APPENDIX D
Provisions of By-Laws Regarding Director Nominations
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 shareholders
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 Corporations proxy statement was released to
shareholders in connection with the previous years annual
meeting; (ii) a reasonable time before the Corporation
begins to print and mail its proxy materials if the date of this
years annual meeting has been changed by more than thirty
(30) days from the date of the previous years
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 years annual meeting,
if the Corporation did not release a proxy statement to
shareholders in connection with the previous years annual
meeting, or if no annual meeting was held during such year.
(3) A shareholders 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 shareholders nomination of such person as a candidate
for director or the shareholders opposition to any
candidate for director nominated by, or at the direction of, the
Board of Directors. In addition to the above information, a
shareholders notice to the Secretary under
Section 3.3(2) shall (A) set forth (i) the name
and address, as they appear on the Corporations 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 shareholders nomination of one or
more candidates for election as directors if the nomination is
not made pursuant to a shareholders 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 shareholders 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
shareholders notice.
(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
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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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