<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
RFS HOTEL INVESTORS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
RFS HOTEL INVESTORS, INC.
850 RIDGE LAKE BOULEVARD, SUITE 220
MEMPHIS, TN 38120
------------------------
NOTICE OF ANNUAL MEETING ON APRIL 26, 2000
AND PROXY STATEMENT
------------------------
Dear Stockholder:
We invite you to attend our annual meeting of stockholders on April 26,
2000 at 9:00 a.m. at the Company's headquarters in Memphis, Tennessee. At the
meeting, you will hear a report on our operations and have a chance to meet a
number of the directors and officers of the Company.
This booklet includes the formal notice of the meeting and the Proxy
Statement. The Proxy Statement tells you about the agenda and procedures for the
meeting. It also describes how the Board operates, gives personal information
about our director candidates, and provides other information about the Company.
Even if you have only a few shares, we want your shares to be represented
at the meeting. I urge you to complete, sign, date, and return your proxy card
promptly in the enclosed envelope, even if you plan to attend the meeting.
Sincerely,
/s/ ROBERT M. SOLMSON
Robert M. Solmson
Chairman of the Board and
Chief Executive Officer
March 22, 2000
<PAGE> 3
RFS HOTEL INVESTORS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION......................................... 2
ELECTION OF DIRECTORS....................................... 3
Director Compensation....................................... 5
Board Committees............................................ 5
Executive Officers of RFS................................... 7
Director and Officer Stock Ownership........................ 8
Principal Stockholders...................................... 9
Compensation Committee Report on Executive Compensation..... 10
Executive Compensation Tables............................... 13
Section 16(a) Beneficial Ownership Reporting Compliance..... 15
Stock Performance Graph..................................... 16
ADDITIONAL INFORMATION...................................... 17
</TABLE>
i
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF RFS HOTEL INVESTORS, INC.
TIME: 9:00 A.M., Central Time
DATE: April 26, 2000
PLACE: RFS Hotel Investors, Inc. Corporate Office
850 Ridge Lake Boulevard, Suite 220
Memphis, Tennessee 38120
PURPOSE: - To elect three directors;
- To conduct other business that may properly be raised.
Only stockholders of record on March 14, 2000 may vote at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE, AND RETURN YOUR PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
Sincerely,
/s/ MICHAEL J. PASCAL
Michael J. Pascal
Secretary
March 22, 2000
1
<PAGE> 5
GENERAL INFORMATION
WHO MAY VOTE
RFS Common Stockholders and Series A Preferred Stockholders of record on
March 14, 2000, may vote at the meeting.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
HOW PROXIES WORK
The Board of Directors of RFS is asking for your proxy. Giving your proxy
to the persons named by us means you authorize them to vote your shares at the
meeting in the manner you direct. You may vote for all, some, or none of our
director candidates.
If you sign and return the enclosed proxy card but do not specify how to
vote, you shares will be voted FOR the election of all of our director
candidates.
You may receive more than one proxy or voting card depending on how you
hold your shares. Shares registered in your name are covered by one card. If you
also hold shares through someone else, such as a stockbroker, you may also get
material from them asking how you want to vote. We encourage you to respond to
all such requests.
REVOKING A PROXY
You may revoke your proxy before it is voted by submitting a new proxy with
a later date; by voting in person at the meeting; or by notifying RFS's
Secretary in writing at the address under "Questions".
QUORUM
In order to carry on the business of the meeting, we must have a quorum.
This means that at least a majority of the outstanding shares eligible to vote
must be represented at the meeting, either by proxy or in person.
VOTES NEEDED
The director candidates receiving the most votes will be elected to the
three seats on the Board to be filled at the meeting. Abstentions count for
quorum purposes but not for voting purposes.
BROKER NON-VOTES
No specific provisions of Tennessee law or our charter or bylaws address
broker non-votes. Under New York Stock Exchange Rules, if a broker holds your
shares as a nominee, the broker must vote those shares according to your
specific instructions, and, if the broker doesn't receive you instructions, the
broker may vote your shares on routine matters such as the election of our
directors. To ensure that your shares are voted at the meeting in accordance
with your instructions, we encourage you to provide instructions to your
brokerage firm by voting your proxy. If you don't vote your shares, your
brokerage firm may either: (i) vote your shares on the routine election of
directors, or (ii) leave your shares unvoted.
2
<PAGE> 6
ATTENDING IN PERSON
Only stockholders as of March 14, 2000, their proxy holders, and invited
guests may attend the meeting. If you wish to vote in person and your shares are
held by a stockbroker, you will need to obtain a proxy from the stockbroker
authorizing you to vote your shares held in the stockbroker's name.
ELECTION OF DIRECTORS
The Board of Directors of RFS has nominated the three director candidates
named below.
The Board of Directors oversees the management of the Company on your
behalf. The Board reviews RFS's long-term strategic plans and exercises direct
decision-making authority on key issues, such as the declaration of dividends.
Just as important, the Board chooses the Chief Executive Officer, sets the scope
of his authority to manage the Company's day-to-day operations, and evaluates
his performance.
RFS's Charter requires that a majority of the Company's directors be
Independent Directors. Seven of RFS's eight directors, including all three of
the nominees, are Independent Directors. "Independent Directors" are not
officers or employees of RFS or any of its affiliates; or officers, employees or
affiliates of any lessee of property from RFS, any subsidiary of RFS, or any
partnership that is an affiliate of RFS.
RFS's Charter and Bylaws provide for three classes of directors, who serve
staggered three-year terms expiring at the annual meeting of stockholders three
years following their election.
The RFS Board has nominated for reelection each of the three persons
currently serving as Class I directors, whose terms are expiring at the 2000
annual meeting of stockholders. If elected, each of these persons will serve
until the annual meeting of stockholders in 2003. Personal information on each
of our nominees, and on each of the other directors who will continue to serve
on RFS's Board following the annual meeting, is given below.
The RFS Board of Directors met six times during 1999. In 1999, Messrs.
Solmson, Forsdick and Jenkins each attended more than 75% of the aggregate
number of meetings of the Board of Directors. Messrs. Campbell, Stokes and
Starnes each attended four of six and Mr. Phillips attended three of six
meetings of the Board of Directors.
If a director nominee becomes unavailable to serve before the election,
your proxy card authorizes the named proxies to vote for a replacement nominee
if the Board names one. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF EACH OF THE FOLLOWING NOMINEES FOR CLASS I DIRECTORS:
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
(TERMS EXPIRING IN 2003)
- --------------------------------------------------------------------------------
MICHAEL S. STARNES, age 54, is Chairman of the Board, President and Chief
Executive Officer of M.S. Carriers, Inc., a truckload carrier in Memphis,
Tennessee, positions he has held since 1986. He has been a director of RFS since
1993.
Committees: Compensation
3
<PAGE> 7
- --------------------------------------------------------------------------------
JOHN W. STOKES, JR., age 61, is Vice Chairman of Morgan Keegan Inc., an
investment firm in Memphis, TN, and its parent Morgan Keegan, Inc., a position
he has held since 1983. He has been an employee and director of Morgan Keegan
since 1970. He is also a director of Morgan Keegan, Inc. and O'Charley's, Inc.
He has been a director of RFS since 1993.
Committees: Audit
- --------------------------------------------------------------------------------
RICHARD REISS, JR., age 55, is the founder and chairman of Georgica Advisors
LLC, a New York based investment firm with public and private investments in the
communications, media and entertainment industries, a position he has held since
January 1997. From 1970 to 1978, Mr. Reiss served as managing partner of
Cumberland Associates and its three investment funds. From 1978 to 1996, Mr.
Reiss was the director of research at Shearson Hayden Stone, a predecessor
company of Salomon Smith Barney. He also is as a director of Grey Advertising,
the Lazard Funds, Inc., O'Charley's, and is a trustee of the Manhattan
Institute.
Committees: None
INCUMBENT DIRECTORS -- CLASS II
(TERMS EXPIRING IN 2001)
BRUCE E. CAMPBELL, JR., age 68, is Chairman of the Executive Committee of the
Board of Directors of National Commerce Bancorporation, a national bank holding
company. Mr. Campbell has held that position since 1993. Prior to 1993, Mr.
Campbell was Chairman and Chief Executive Officer of National Commerce
Bancorporation, positions he held since 1977. During such period, Mr. Campbell
was also Chairman and Chief Executive Officer of National Bank of Commerce,
Memphis, Tennessee, a wholly owned national banking subsidiary of National
Commerce Bancorporation. He has been a director of the RFS since 1993.
Committees: Audit, Compensation (Chairman)
- --------------------------------------------------------------------------------
H. LANCE FORSDICK, SR., age 60, was Chairman of the Board of RFS, Inc., lessee
of the Company's hotels, from 1974 until February 1996, when RFS, Inc. was
acquired by Doubletree Corporation. Prior to 1974, Mr. Forsdick held various
positions in the real estate and hotel development and management business. He
has been a director of RFS since 1993.
Committees: None
INCUMBENT DIRECTORS -- CLASS III
(TERMS EXPIRING IN 2002)
- --------------------------------------------------------------------------------
ROBERT M. SOLMSON, age 52, is Chairman and Chief Executive Officer of RFS. He
has been Chairman and Chief Executive Officer and a Board member since the
Company's formation in 1993 and President from 1993 to February 1996 and from
February 1998 to October 1998. He is also a director of Independent Bank and
Morgan Keegan, Inc.
4
<PAGE> 8
- --------------------------------------------------------------------------------
HARRY J. PHILLIPS, SR., age 70, was Chairman of the Executive Committee of the
Board of Directors of Browning-Ferris Industries, Inc., a waste disposal company
from 1988 to July 1999. Prior to 1988, Mr. Phillips was Chairman and Chief
Executive Officer of Browning-Ferris, positions he had held for several years.
He is also a director of National Commerce Bancorporation, Morgan Keegan, Inc.,
and Buckeye Technologies, Inc. He has been a director of RFS since January 1994.
Committees: Compensation
- --------------------------------------------------------------------------------
R. LEE JENKINS, age 69, was President of Plough, Inc. and Executive Vice
President-Consumer Operations of Schering-Plough Corporation from 1976 through
1989. He is a director of National Commerce Bancorporation and has been a
director of RFS since 1996.
Committees: None
DIRECTOR COMPENSATION
Each director who is not an employee of RFS has received 12,500 restricted
shares of Common Stock, except H. Lance Forsdick, who has received 7,500 shares,
and Richard Reiss, who has received 10,000 shares, subject to certain
restrictions on transfer prior to vesting, and options to acquire 25,000 shares
of Common Stock. Each non-employee director's rights in 10,000 and 2,500 shares
of such restricted Common Stock vest at the rates of 20% and 33 1/3%,
respectively, per year of service, beginning one year after the date of grant.
Each director is entitled to vote and receive dividends declared with respect to
the restricted shares of such Common Stock prior to vesting. The options vest at
the rate of 20% per year. Any unvested restricted shares or options at the time
a non-employee director ceases to be a director will be forfeited. In addition,
the Company reimburses directors for their out-of-pocket expenses in connection
with their service on the Board of Directors. The Directors do not receive
annual or per meeting cash compensation.
BOARD COMMITTEES
The Board appoints committees to help carry out its duties. In particular,
Board committees work on key issues in greater detail than would be practicable
at a full Board meeting. Each committee reviews the results of its meetings with
the full Board. Robert M. Solmson, the Chairman of the Board, is an ex-officio
member of all committees.
AUDIT COMMITTEE
The Board of Directors has established an Audit Committee, which currently
consists of Messrs. Campbell and Stokes. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants, the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls. The Audit Committee met
once in 1999, with both members in attendance at that meeting.
5
<PAGE> 9
COMPENSATION COMMITTEE
The Board of Directors has established a Compensation Committee, which
currently consists of Messrs. Campbell, Phillips and Starnes. Mr. Solmson and
Mr. Churchey act as a special non-board compensation committee for the purpose
of awarding compensation and benefits to Independent Directors. The Compensation
Committee determines compensation for the Company's executive officers and
administers the Plan as it relates to executive officers and key employees. The
Compensation Committee met twice in 1999, and all members were present.
6
<PAGE> 10
EXECUTIVE OFFICERS OF RFS
The current executive officers of RFS, their ages, positions held and
tenure is as follows:
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITION(S) WITH RFS SINCE
- ---- --- -------------------- -------
<S> <C> <C> <C>
Robert M. Solmsom................... 52 Chairman of the Board and Chief 1993
Executive Officer
Randy L. Churchey................... 39 President and Chief Operating 1999
Officer
Michael J. Pascal................... 41 Executive Vice President and Chief 1993
Financial Officer
Angie Mock.......................... 36 Executive Vice President Asset 1996
Management
Herb W. Cummings.................... 57 Vice President Renovation and Design 1999
Craig Hofer......................... 40 President, Centrafuse, a wholly 1995
owned subsidiary of RFS
</TABLE>
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
Information concerning the business experience of Mr. Solmson is set forth
under "Election of Directors".
Randy L. Churchey has served as President and Chief Operating Officer of
RFS since November 1999. From 1997 to 1999, he served as Senior Vice President
and Chief Financial Officer of FelCor Lodging Trust, Inc., a hotel real estate
investment trust. For approximately 15 years prior to joining FelCor, Mr.
Churchey held various positions with Coopers & Lybrand, L.L.P., most recently
serving as the Chairman of the Hospitality and Real Estate Practice of that firm
for the Southwestern United States.
Michael J. Pascal is Executive Vice President and Chief Financial Officer
of RFS and has held various positions with RFS since September 1991. He was
Chief Financial Officer of Dominion Hospitality Management, Inc., a hotel
management company from 1990 to 1991. From 1985 to 1990, Mr. Pascal was Chief
Financial Officer for the McDowell Company, a multi-faceted real estate
development firm.
Angie Mock joined RFS in 1996 as Vice President Asset Management and was
promoted to Executive Vice President Asset Management in 1999. Prior to joining
RFS, Ms. Mock held numerous marketing and finance positions with Harrah's
Entertainment and Promus Hotel Corporation including Director of Market Planning
and Research, Director of Strategic Planning, and Director of Internal Audit.
Herb W. Cummings has served as Vice President Renovation and Design of RFS
since October 1999. Previously, he was senior project manager and Vice President
of Construction with Bristol Hotels and Resorts and held various similar
positions with Davidson Hotel Company and United Inns, Inc.
Craig Hofer has served as President of Centrafuse, a wholly owned RFS
subsidiary engaged in the sale of accounting services over the Internet, since
November 1999. Since July 1995, he has held various positions with RFS, most
recently Vice President of Financial Planning and Chief Information Officer.
The executive officers of RFS are elected annually by the RFS Board. Any
officer or agent of RFS may be removed by the RFS Board, but such removal will
not prejudice any contractual rights of the person removed.
7
<PAGE> 11
There are no family relationships among the executive officers. There are
no arrangements or understandings between any officer and any other person
pursuant to which that officer was selected.
DIRECTOR AND OFFICER STOCK OWNERSHIP
The following table shows how much RFS Common Stock was beneficially owned
on March 14, 2000, by each executive officer, each non-employee director and
nominee, and all directors and executive officers, as a group. Unless otherwise
indicated, each person owns directly the shares shown after his name in the
following table:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL
OWNERSHIP OF
COMMON PERCENT OF
NAME OF BENEFICIAL OWNER STOCK CLASS
- ------------------------ -------------------- ----------
<S> <C> <C>
Robert M. Solmson(1)........................................ 800,362 3.3%
Randy L. Churchey(2)........................................ 26,000 *
Michael J. Pascal(3)........................................ 190,833 *
Angie Mock(4)............................................... 58,483 *
Bruce E. Campbell, Jr.(5)................................... 95,000 *
H. Lance Forsdick, Sr.(5)(6)................................ 531,073 2.2%
Harry J. Phillips, Sr.(5)................................... 103,500 *
Michael S. Starnes(5)....................................... 104,100 *
John W. Stokes, Jr.(5)...................................... 55,980 *
R. Lee Jenkins(5)(7)........................................ 62,500 *
Richard Reiss, Jr.(8)....................................... 33,500 *
All Directors and Executive Officers as a Group (11
persons)(1)(2)(3)(4)(5)(6)(7)(8).......................... 2,061,331 8.4%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding Common Stock.
(1) Includes 7,086 shares issuable to a trust of which Mr. Solmson's children
are beneficiaries and over which Mr. Solmson has sole investment and voting
power, upon the exercise of rights to redeem units of partnership interest
in RFS Partnership, L.P. for shares of Common Stock (the "Redemption
Rights"). Also includes (i) 11,500 shares owned by trusts for the benefit of
his children, (ii) 15,500 shares owned by his children, (iii) 10,000 shares
owned by his wife, (iv) 24,000 shares of restricted Common Stock which vest
at a rate of 8,000 shares in each of October 2000 and 2001 and (v) 163,333
shares issuable pursuant to exercisable stock options. Prior to vesting, Mr.
Solmson is entitled to vote and receive distributions with respect to
unvested shares of restricted Common Stock.
(2) Includes 25,000 shares of restricted Common Stock which vest at a rate of
8,333 shares in each of November 2000 and 2001 and 8,334 shares in November
2002. Prior to vesting Mr. Churchey is entitled to vote and receive
distributions with respect to unvested shares of restricted Common Stock.
(3) Includes 16,000 shares of restricted Common Stock which vest at a rate of
8,000 shares in each of October 2000 and 2001 and 133,333 shares issuable
pursuant to exercisable stock options. Prior to vesting, Mr. Pascal is
entitled to vote and receive distributions with respect to unvested shares
of restricted Common Stock.
(4) Includes 14,000 shares of restricted Common Stock which vest 6,000 shares in
2000 and 2001 and 2,000 shares in 2002 and 38,333 shares issuable pursuant
to exercisable stock options. Prior to vesting,
8
<PAGE> 12
Ms. Mock is entitled to vote and receive distribution with respect to
unvested shares of restricted Common Stock.
(5) Includes 1,667 shares of restricted Common Stock which vest at a rate of 833
shares in October 2000 and 834 shares in October 2001. Prior to vesting,
each director is entitled to vote and receive distributions with respect to
unvested shares.
(6) Includes 20,573 shares issuable to Mr. Forsdick upon exercise of his
Redemption Rights.
(7) Includes 4,000 shares of restricted Common Stock which vest at a rate of
2,000 shares in each of September 2000 and 2001 and 10,000 shares issuable
pursuant to exercisable stock options. Prior to vesting, Mr. Jenkins is
entitled to vote and receive distributions with respect to unvested shares
of restricted Common Stock.
(8) Includes 10,000 shares of restricted Common Stock which vest at a rate of
2,000 shares in each October through 2004. Prior to vesting, Mr. Reiss is
entitled to vote and receive distributions with respect to unvested shares
of restricted Common Stock.
PRINCIPAL STOCKHOLDERS
The following table shows how much RFS Common Stock was beneficially owned
on March 14, 2000, by each person known to RFS to beneficially own more than 5%
of its Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK SERIES A PREFERRED STOCK(4)
--------------------------------- ---------------------------------
NATURE OF PERCENT OF NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1) BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------ -------------------- ---------- -------------------- ----------
<S> <C> <C> <C> <C>
Boston Partners Asset
Management, L.P........................ 1,618,981(2) 6.6% -- --
28 State Street, 20th Floor
Boston, MA 02109
Snyder Capital Management, L.P........... 1,523,800(3) 6.2% -- --
350 California Street, Ste 1460
San Francisco, CA 94104
Hilton Hotels Corporation................ -- -- 973,684 100%
9336 Civic Center Drive
Beverly Hills, CA 90210
</TABLE>
- ---------------
(1) Based on shares outstanding on March 14, 2000.
(2) Based solely upon information contained in Amendment No. 4 to Schedule 13G
dated February 7, 2000 and filed with the SEC in February 2000. Boston
Partners Asset Management, L.P. reported that it has shared voting and
dispositive power with respect to the shares of Common Stock.
(3) Based solely upon information contained in Amendment No. 5 Schedule 13G
dated February 14, 2000 and filed with the SEC in February 2000. Snyder
Capital Management, Inc. reported that it has shared voting power with
respect to 1,329,000 shares of Common Stock and shared dispositive power
with respect to 1,523,800 shares of Common Stock.
(4) Each share of Series A Preferred Stock is entitled to one vote. The Series A
Preferred Stock and the Common Stock will vote together as a class on all
matters being submitted to shareholders at the Annual Meeting.
9
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Compensation Committee is responsible for setting and administering
compensation policies, fixing salaries, awarding performance bonuses and
determining awards of restricted stock and grants of stock options under the
Plan to officers and key employees. The Compensation Committee of the Board of
Directors is comprised of Messrs. Campbell, Phillips and Starnes, each of whom
is an Independent Director of the Company.
The Compensation Committee believes incentive compensation should provide a
meaningful portion of the Executive's total compensation. In addition to the
annual base cash compensation for 2000, each of the officers and key employees
will be entitled to a cash bonus at the discretion of the Compensation
Committee. It is expected that any cash bonus will be based upon performance
criteria including competitive factors. In addition, each of the officers and
key employees may be provided other incentive compensation, including, but not
limited to, grants of stock options and shares of restricted Common Stock, in
accordance with rules and criteria established by the Compensation Committee of
the Company.
Executive Compensation
The Compensation Committee approved employment agreements between RFS and
each of the officers and key employees with 2000 annual base cash compensation
for each of the officers and key employees as follows:
<TABLE>
<CAPTION>
2000 ANNUAL BASE
CASH COMPENSATION
-----------------
<S> <C>
Robert M. Solmson........................................... $260,000
Randy L. Churchey........................................... $225,000
Michael J. Pascal........................................... $195,000
Angie Mock.................................................. $175,000
Herb W. Cummings............................................ $120,000
Craig Hofer................................................. $150,000
</TABLE>
Other Incentive Compensation
The Compensation Committee believes that significant stock ownership by the
officers and key employees of RFS invokes a major incentive to adopt and follow
corporate strategies that enhance shareholder value.
In 1998 and 1999, the Compensation Committee approved the grant of 97,500
and 41,000 shares of restricted Common Stock to officers and key employees,
respectively. Also in 1998 and 1999, respectively, the Compensation Committee
approved the grant of 210,000 and 600,000 options to acquire Common Stock to
officers and key employees, respectively, at an exercise price equal to the
closing price of the Common Stock on The New York Stock Exchange on the date of
grant.
The Compensation Committee believes that grants of restricted Common Stock
and options should reward officers and key employees for sustaining increases in
shareholder value over an extended period, consequently, the restricted Common
Stock and options become exercisable at a rate of 20% to 33 1/3% per year and
expire if the officers and key employees leave RFS voluntarily or are discharged
for cause.
10
<PAGE> 14
Employment Agreements
Messrs. Solmson, Churchey and Pascal, Ms. Mock, and Mr. Hofer entered into
employment agreements (the "Employment Agreements") with RFS. Each Employment
Agreement provides for a three year term which is renewed for a new three year
term at the end of each year.
Under the Employment Agreements, in 2000 Messrs. Solmson, Churchey and
Pascal, Ms. Mock and Mr. Hofer will receive base salaries in the amounts of
$260,000, $225,000, $195,000, $175,000, and $150,000 respectively. In addition,
the Employment Agreements provide that each is entitled to a cash bonus payable
on or before April 1, 2001 at the discretion of the Compensation Committee. In
addition, each may receive other incentive compensation, including but not
limited to, grants of stock options and shares of restricted Common Stock.
Under each Employment Agreement, termination without cause or for death or
disability requires a payment to the officers of their annual base salary for
the remainder of the three year term. In the event of voluntary termination or
termination with cause, the officer will remain subject to the noncompete clause
in the Employment Agreement (described below). Termination for cause includes
the officer's conviction of a crime involving some act of dishonesty or moral
turpitude, theft or embezzlement or malicious infliction of damage to the
Company's property or business opportunity, material and intentional breach of
the noncompete covenant, continuous neglect of duties or refusal to follow
unambiguous duly adopted written direction of the Board of the Company or abuse
of alcohol, drugs or other substances.
Each Employment Agreement terminates upon the death or disability of the
officer, and the officer is entitled to certain benefits in the event of a
termination resulting from disability. Each Employment Agreement provides that,
in the event of a termination of the officer's employment for cause or the
officer's voluntary termination, the officer may not own any interest in a hotel
property other than properties owned by the Company or manage or in any other
capacity engage in the acquisition, development, operation or management of any
hotel property located within 20 miles of any hotel property owned by the
Company for a period of two years.
Under each Employment Agreement, in the event of the Company's termination
of an officer's employment or the officer's resignation for good reason ("Good
Reason"), as defined below, following a change in control of the Company, as
defined below ("Change of Control"), the officer will be entitled to a cash
amount equal to the sum of: (i) three times the officer's annual base salary for
the year in which the change of control occurs, and, (ii) the average cash bonus
for the fiscal year in which the Change of Control occurs and the two preceding
fiscal years. In addition, if the excise tax on "excess parachute payments", as
defined in section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), will be imposed on the officer under Code section 4999 as a result of a
Change of Control payment or any other payment, benefit or compensation which
the officer receives or has the right to receive from the Company or any of
their affiliates, the Company will indemnify the officer and hold him harmless
against all claims, losses, damages, penalties, expenses and excise taxes. In
addition, any unvested stock options or restricted stock granted to the officer
under the Plan will vest and become immediately exercisable upon a Change of
Control.
A Change of Control is generally defined in the Employment Agreements to
mean (i) the acquisition by any person of securities representing 50% or more of
the Company's outstanding voting securities, (ii) a change in the majority of
the Board of Directors of the Company, unless the change is previously approved
by at least 80% of the members of the Board of Directors of the Company, (iii)
the merger of the Company with another corporation where immediately after such
merger, the persons holding a majority of the combined voting power of the
then-outstanding securities of the Company prior to the merger hold less than a
majority
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<PAGE> 15
of the combined voting power of such company, (iv) the sale by the Company of
all or substantially all of its assets to another corporation or person where
immediately after such sale, the persons holding a majority of the combined
voting power of the Company, (v) the sale or transfer by the Company to a
non-affiliated business of the operations or assets that generated at least
two-thirds of the consolidated revenues of the Company and its subsidiaries for
the prior four quarters and (vi) the filing of a Form 8-K by the Company with
the SEC disclosing that a change in control has occurred. For purposes of the
Employment Agreements, "Good Reason" is generally defined as (i) a change in the
officer's status, position or responsibilities that does not represent a
promotion, (ii) a reduction in the officer's base salary or bonus, (iii) a
required relocation to a location more than thirty miles away from the Company's
principal executive offices, (iv) failure to continue to provide benefits to the
officer substantially similar to material benefits enjoyed by material breach of
the Employment Agreement by the Company and (v) the failure of the Company to
assume the Employment Agreement following the Change of Control.
RFS also maintains a 401(k) Plan, health insurance and other benefits
generally available to all employees. During 1999, RFS adopted a deferred
compensation plan that is available only to directors, officers and key
employees. RFS makes no matching or other contributions to this plan, other than
the payment of its operating and administrative expenses.
This report has been furnished by the current members of the Compensation
Committee.
Bruce E. Campbell, Jr. (Chairman)
Harry J. Phillips, Sr.
Michael S. Starnes
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<PAGE> 16
EXECUTIVE COMPENSATION TABLES
The following tables show the compensation of RFS's Chief Executive Officer
and the five other most highly paid executives. See the Compensation Committee
Report for an explanation of our compensation philosophy.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL --------------------------------
COMPENSATION RESTRICTED SECURITIES
------------------- STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(4) ($) OPTIONS (#)
- --------------------------- ---- -------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Robert M. Solmson................... 1999 $250,000 $ 10,000 100,000(7)
Chairman of the Board 1998 231,750 124,463 $285,000(6) 50,000
and Chief Executive Officer 1997 225,000 112,500 -- 75,000
Randy L. Churchey................... 1999(1) $ 37,500 $ 80,000 $298,438(5) 100,000(7)
President and Chief Operating
Officer
J. William Lovelace................. 1999(2) $125,000 -- -- --
Former President 1998 195,700 $146,775 $285,000 50,000
1997 190,000 95,000 -- 50,000
Michael J. Pascal................... 1999 $185,000 $ 10,000 75,000(7)
Executive Vice President 1998 169,950 109,812 $285,000(6) 40,000
and Chief Financial Officer 1997 165,000 82,500 -- 75,000
Angie Mock.......................... 1999 $150,000 $ 10,000 $ 67,500(5) 75,000(7)
Executive Vice President 1998 110,000 30,000 106,875(6) 25,000
Asset Management.................. 1997 100,000 25,000 -- 25,000
Herb Cummings....................... 1999(3) $ 30,000 $ 2,500 25,000(7)
Vice President Renovation and
Design
Craig Hofer......................... 1999 $120,000 $ 7,500 -- 65,000(7)
President, Centrafuse 1998 107,500 20,000 $ 89,063(6) 40,000
1997 100,000 15,000 -- --
</TABLE>
- ---------------
(1) For the period November 1, 1999 (date of hire) to December 31, 1999.
(2) For the period January 1, 1999 to June 30, 1999 (date of resignation).
(3) For the period October 1, 1999 (date of hire) to December 31, 1999.
(4) At December 31, 1999, an aggregate of 170,500 shares of restricted Common
Stock were held by the named officers, with an aggregate value at such date
(based on the closing market price of the Common Stock at December 31, 1999
of $10.4375) of $1,779,594 as follows: Mr. Solmson, 74,000 shares valued at
$772,375; Mr. Churchey, 25,000 shares valued at $260,938; Mr. Pascal, 44,000
shares valued at $459,250, Ms. Mock, 20,000 shares valued at $208,750 and
Mr. Hofer, 7,500 shares valued at $78,281. Prior to vesting, the recipients
are entitled to vote and receive distributions with respect to unvested
shares of restricted Common Stock.
(5) In 1999, 25,000 and 6,000 shares of restricted Common Stock were granted to
Mr. Churchey and Ms. Mock respectively, subject to vesting at a rate of
33 1/3% per year starting in November 2000 and
13
<PAGE> 17
September 2000, respectively. The value is based on the closing market price
of the Common Stock on the date granted of $11.9375 and $11.25,
respectively.
(6) In 1998, 24,000, 24,000, 9,000, 7,500, shares of restricted Common Stock
were granted to Messrs. Solmson, Pascal, Ms. Mock and Mr. Hofer
respectively, subject to vesting at a rate of 33 1/3% per year starting in
October 1999. The value is based on the closing market price of the Common
Stock on the date granted such date of $11.875.
(7) See "Option Grants" below.
The executive officers receive health and disability insurance benefits
which do not exceed 10% of their respective salaries. These benefits are also
made available to other employees of the Company.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SHARES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------------
GRANTED FISCAL YEAR SHARE(1) DATE 5% 10%
---------- ------------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Solmson...... 100,000 20% $12.4375 7/8/09 $ 782,000 $ 1,982,000
Randy L. Churchey...... 100,000 20 11.25 10/31/09 708,000 1,793,000
Michael J. Pascal...... 75,000 16 12.4375 10/27/08 586,500 1,486,500
Angie Mock............. 50,000 10 12.4375 10/27/08 391,000 991,000
Angie Mock............. 25,000 5 11.25 9/26/09 177,000 448,250
Herb W. Cummings....... 25,000 5 11.50 10/4/09 180,750 458,250
Craig Hofer............ 40,000 9 12.4375 11/1/09 312,800 792,800
Craig Hofer............ 25,000 5 10.50 12/1/09 165,000 418,250
</TABLE>
- ---------------
(1) The exercise price per share is the closing price for the Common Stock on
the New York Stock Exchange on the effective date of grant.
(2) Represents potential realizable value at assumed annual rates of stock price
appreciation over the exercise price for the options for the option term.
14
<PAGE> 18
The unexpired stock options to purchase the Company's Common Stock held by
the named executive officers at December 31, 1999 are as follows:
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert M. Solmson........................ 261,667 163,333 -- --
Randy L. Churchey........................ -- 100,000 -- --
Michael J. Pascal........................ 133,333 131,667 -- --
Angie Mock............................... 38,333 111,667 -- --
Herb W. Cummings......................... -- 25,000 -- --
Craig Hofer.............................. 14,667 80,333 -- --
</TABLE>
- ---------------
(1) Based on the difference between the option exercise price and the closing
sales prices for the Common Stock on the New York Stock Exchange on December
31, 1999, which was $10.4375 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires officers and directors, and
persons who beneficially own more than ten percent (10%) of the Company's stock,
to file initial reports of ownership and reports of changes in ownership with
the SEC. Officers, directors and greater than ten percent (10%) beneficial
owners are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies furnished to the Company and
representations from the officers and directors, the Company believes that all
section 16(a) filing requirements for the year ended December 31, 1999
applicable to its officers, directors and greater than ten percent (10%)
beneficial owners were satisfied, except that Mr. Churchey and Ms. Mock each
filed one late Form 4 reflecting a single purchase of Common Stock.
Based on representations from the officers and directors, the Company
believes that no other Form 5 for directors, officers and greater than ten
percent (10%) beneficial owners were required to be filed with the SEC for the
period ended December 31, 1999.
15
<PAGE> 19
STOCK PERFORMANCE GRAPH
Annual total returns to RFS shareholders are shown in the performance graph
below. The graph compares the yearly percentage change in the Company's
shareholder return on the Common Stock for the period December 31, 1994 through
December 31, 1999, with the changes in the Standard and Poor's 500 Stock Index
(the "S&P 500 Index") and the SNL Securities Hotel REIT Index for the same
period, assuming a base share price of $100 for the Common Stock and each index
for comparison purposes. Total return equals appreciation in stock price plus
dividends paid, and assumes that all dividends are reinvested. The performance
graph is not necessarily indicative of future investment performance.
The Hotel REIT Index is comprised of fourteen publicly traded REITs which
focus on investments in hotel properties.
RFS HOTEL INVESTORS, INC.
STOCK PRICE PERFORMANCE
<TABLE>
<CAPTION>
RFS HOTEL INVESTORS, INC. S&P 500 SNL HOTEL REITS
------------------------- ------- ---------------
<S> <C> <C> <C>
12/31/94 100.00 100.00 100.00
12/31/95 113.89 137.58 131.64
12/31/96 158.75 169.03 201.14
12/31/97 173.29 225.44 263.71
12/31/98 116.23 289.79 130.39
12/31/99 112.04 350.78 101.27
</TABLE>
16
<PAGE> 20
ADDITIONAL INFORMATION
OTHER BUSINESS
RFS's Board does not intend to bring, and knows of no one intending to
bring, any matter before the annual meeting other than voting with respect to
the director nominees. If any other matter is properly brought before the
meeting, the persons named as proxies will vote them in accordance with the
direction of the RFS Board.
OUTSTANDING SHARES
On March 14, 2000, a total of 24,559,046 shares of RFS Common Stock and
973,684 shares of Series A Preferred Stock was outstanding. Each share of Common
Stock and Series A Preferred Stock is entitled to one vote.
ANNUAL REPORT
RFS's 1999 Annual Report to Stockholders and Form 10-K are enclosed with
this Proxy Statement.
HOW WE SOLICIT PROXIES
In addition to this mailing, RFS employees may solicit proxies personally,
electronically, or by telephone. RFS pays the costs of soliciting the proxies.
We also reimburse brokers and other nominees for their expenses in sending these
materials to you and getting your voting instructions.
SHAREHOLDER PROPOSALS FOR 2001
The Board of Directors will make provision for presentation of appropriate
proposals by shareholders at the 2001 annual meeting of shareholders, provided
that such proposals are submitted by eligible shareholders who have complied
with the relevant regulations of the SEC. Shareholder proposals intended to be
submitted for presentation at the 2001 annual meeting of shareholders of the
Company must be in writing and must be received by the Company at its executive
offices on or before December 1, 2000 for inclusion in the Company's proxy
statement and the form of proxy relating to the 2001 annual meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers, LLP has served as auditors for RFS
during 1999 and will serve in that capacity for 2000, unless the board
subsequently determines that a change is desirable. A representative of the
auditors is expected to be at RFS's 2000 Annual Meeting of Stockholders to
respond to appropriate questions and to make a statement if desired.
17
<PAGE> 21
QUESTIONS
If you have questions or need more information about the annual meeting,
you may write to:
Corporate Secretary
RFS Hotel Investors, Inc.
850 Ridge Lake Blvd., Suite 220
Memphis, TN 38120
or call us at 901-767-7005 and ask for stockholder communications.
We also invite you to visit RFS's Internet site at www.rfshotel.com.
18
<PAGE> 22
PROXY NO. OF SHARES ______
RFS HOTEL INVESTORS, INC.
850 RIDGE LAKE BOULEVARD, SUITE 220, MEMPHIS, TENNESSEE 38120
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert M. Solmson and Michael J. Pascal, or
either of them, as proxies, each with the power to appoint such person's
substitute, and hereby authorizes each of them to vote, as designated below, all
the shares of capital stock of RFS Hotel Investors, Inc. held of record by the
undersigned on March 14, 2000, at the Annual Meeting of Shareholders to be held
on April 26, 2000, or any adjournment thereof as specified below.
1. ELECTION OF DIRECTORS
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name below)
[ ] FOR ALL NOMINEES LISTED BELOW
CLASS I -- TERM EXPIRING 2003 -- MICHAEL S. STARNES, JOHN W. STOKES, JR.,
RICHARD REISS, JR.
[ ] WITHHOLD AUTHORITY to vote for all nominees
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR.
DATED: , 2000
---------------------
Please sign exactly as name
appears in left. When shares
are held by joint tenants,
both should sign. When signing
as attorney, as executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
------------------------------
Signature
------------------------------
Signature if held jointly
