<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 under ss. 240.14a-12
WINSTON HOTELS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(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)(4) 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
WINSTON HOTELS, INC.
2626 GLENWOOD AVENUE, SUITE 200
RALEIGH, NORTH CAROLINA 27608
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 9, 2000
You are cordially invited to attend the Annual Meeting of Shareholders
of Winston Hotels, Inc. (the "Company") which will be held on May 9, 2000, at
10:00 a.m., local time, at the Hilton Garden Inn Hotel, 1500 RDU Center Drive,
Morrisville, North Carolina for the following purposes:
(1) To elect seven members to the Board of Directors;
(2) To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants for the Company for the year ending
December 31, 2000; and
(3) To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on March 15, 2000 are
entitled to notice of and to vote at the Annual Meeting and any and all
adjournments or postponements thereof.
IT IS DESIRABLE THAT YOUR SHARES OF STOCK BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING YOU
MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors,
Robert W. Winston, III
Chief Executive Officer
Raleigh, North Carolina
March 31, 2000
<PAGE> 3
WINSTON HOTELS, INC.
2626 Glenwood Avenue, Suite 200
Raleigh, North Carolina 27608
PROXY STATEMENT
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement and the accompanying proxy card are being mailed
to shareholders on or about March 31, 2000, by the Board of Directors of Winston
Hotels, Inc. (the "Company") in connection with the solicitation of proxies for
use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at
the Hilton Garden Inn Hotel, 1500 RDU Center Drive, Morrisville, North Carolina
on May 9, 2000, at 10:00 a.m., local time, and at all adjournments or
postponements thereof. The Company will pay all expenses incurred in connection
with this solicitation, including postage, printing, handling and the actual
expenses incurred by custodians, nominees and fiduciaries in forwarding proxy
material to beneficial owners. In addition to solicitation by mail, certain
officers and directors of the Company, who will receive no additional
compensation for their services, may solicit proxies by telephone, personal
communication or other means.
PURPOSES OF ANNUAL MEETING
The principal purposes of the Annual Meeting are to: (1) elect seven
members to the Board of Directors; (2) ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants for the Company for the
year ending December 31, 2000; and (3) transact such other business as may
properly come before the Annual Meeting or any adjournment or postponement
thereof. The Board of Directors knows of no other matters other than those
stated above to be brought before the Annual Meeting.
VOTING RIGHTS
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. If the proxy card is signed and returned, but voting
directions are not made, the proxy will be voted in favor of the proposals set
forth in the accompanying "Notice of Annual Meeting of Shareholders" and in such
manner as the proxyholders named on the enclosed proxy card in their discretion
determine upon such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof. Any proxy given pursuant to
this solicitation may be revoked by the person giving it at any time before it
is voted by (1) filing written notice of revocation with the Secretary of the
Company which is actually received prior to the vote of shareholders, (2) filing
a duly executed proxy bearing a later date with the Secretary of the Company
before the vote of shareholders or (3) attending the Annual Meeting and voting
in person.
The Board of Directors has fixed the close of business on March 15,
2000 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and all adjournments or
postponements thereof. As of the close of business on March 15, 2000, the
Company had outstanding 16,896,188 shares of Common Stock. On all matters to
come before the Annual Meeting, each holder of Common Stock will be entitled to
vote at the Annual Meeting and will be entitled to one vote for each share
owned. The representation in person or by proxy of a majority of the issued and
outstanding shares of Common Stock is necessary to provide a quorum for voting
at the Annual Meeting.
<PAGE> 4
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 15,
2000, regarding shares of Common Stock of the Company owned of record or known
to the Company to be owned beneficially by each director and nominee for
director, each executive officer named in the Summary Compensation Table in this
Proxy Statement and all directors and executive officers as a group. There are
no five-percent shareholders of the Company other than as indicated below.
Except as set forth in the footnotes to the table below, each of the
shareholders identified in the table below has sole voting and investment power
over the shares of Common Stock beneficially owned by such person.
<TABLE>
<CAPTION>
Shares
of Common Stock
Name Beneficially Owned (1)(2) Percent of Class
---- ------------------------- ----------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Charles M. Winston (3)(11) 1,130,764 6.4%
Robert W. Winston, III (4) 1,960,167 10.8%
James D. Rosenberg (5) 166,500 *
Joseph V. Green (6) 152,500 *
Kenneth R. Crockett (7) 118,500 *
James H. Winston (8)(9)(11) 71,500 *
Thomas F. Darden, II (8)(11) 21,500 *
Richard L. Daugherty (8)(11) 24,500 *
Edwin B. Borden (8)(11) 44,000 *
David C. Sullivan (10)(11) 21,276 *
All directors and executive officers
as a group (10 persons) (12) 3,034,834 16.2%
</TABLE>
- -------------------------------
*Less than one percent
(1) Pursuant to the rules of the Securities and Exchange Commission,
certain shares of the Company's Common Stock which a person has the
right to acquire within 60 days of March 15, 2000 pursuant to the
exercise of stock options are deemed to be outstanding for the purpose
of computing the percentage ownership of such person but are not deemed
outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Assumes that all units of limited partnership interest (the "Units") in
WINN Limited Partnership (the "Partnership"), which are redeemable
within 60 days of March 15, 2000 for shares of the Company's Common
Stock, are redeemed for shares of Common Stock. The total number of
shares outstanding used in calculating the percentage ownership of such
person assumes that none of the Units held by other persons are
redeemed for shares of Common Stock.
(3) Includes 2,000 shares subject to stock options exercisable within 60
days of March 15, 2000. Also includes 105,643 shares issuable to Mr.
Winston upon exercise of redemption rights with respect to Units held
directly by Mr. Winston. Also includes 109,516 shares issuable upon
redemption of Units held by WJS - Perimeter, Inc., a corporation owned
33.33% by Mr. Winston; 606,413 shares issuable upon redemption of Units
held by Cary Suites, Inc., a corporation owned 23.33% by Mr. Winston,
2
<PAGE> 5
23.33% by Mr. Winston's spouse, 30% by Robert W. Winston, III, and
23.33% by Mr. Winston's daughter-in-law; and 69,960 shares issuable
upon redemption of Units held by RWW, Inc., a corporation owned 33.33%
by Mr. Winston, 33.33% by Mr. Winston's spouse and 33.33% by Robert W.
Winston, III. Also includes 10,000 shares owned by Mr. Winston's
spouse. Mr. Winston serves on the board of directors of the above
entities and thereby shares voting and investment power over the Units
held by these corporations but disclaims beneficial ownership of any
Company securities held by such corporations except to the extent of
his direct ownership interest in such corporations.
(4) Includes 215,000 shares subject to stock options exercisable within 60
days of March 15, 2000. Also includes 30,000 shares issued to Mr.
Winston under the Winston Hotels, Inc. Stock Incentive Plan (the
"Incentive Plan") in January 2000. These shares vest at a rate of 20%
per year beginning January 2000. Mr. Winston is entitled to vote and to
receive dividends paid on these shares prior to vesting. Also includes
297,500 shares issuable upon redemption of Units held by Hotel 1, Inc.,
a corporation owned 37% by Mr. Winston, and 63% by Mr. Winston's spouse
and trusts for the benefit of his minor children; 606,413 shares
issuable upon redemption of Units held by Cary Suites, Inc., a
corporation owned 30% by Mr. Winston, 23.33% by Mr. Winston's spouse,
23.33% by Charles M. Winston and 23.33% by Charles M. Winston's spouse;
69,960 shares issuable upon redemption of Units held by RWW, Inc., a
corporation owned 33.33% by Mr. Winston, 33.33% by Charles M. Winston
and 33.33% by Charles M. Winston's spouse; and 45,651 shares issuable
upon redemption of Units held by Hotel II, Inc., a corporation owned
60% by Mr. Winston, 20% by trusts for the benefit of his minor children
and 20% by Mr. Winston's sister. Mr. Winston serves on the board of
directors of the above entities and thereby shares voting and
investment power over the Units held by these corporations but
disclaims beneficial ownership of any Company securities held by such
corporations except to the extent of his direct ownership interest in
such corporations.
(5) Includes 20,000 shares issued to Mr. Rosenberg in January 1998. These
shares vest at a rate of 25% per year beginning January 1999. Also
includes 7,500 shares issued in January 1999 and 20,000 shares issued
in January 2000, which vest at a rate of 20% per year beginning January
1999 and January 2000, respectively. All shares were issued under the
Incentive Plan. Mr. Rosenberg is entitled to vote and to receive
dividends paid on these shares prior to vesting. Also includes 119,000
shares subject to stock options exercisable within 60 days of March 15,
2000.
(6) Includes 7,500 shares issued to Mr. Green in January 1999 and 15,000
shares issued in January 2000, which vest at a rate of 20% per year
beginning January 1999 and January 2000, respectively. All shares were
issued under the Incentive Plan. Mr. Green is entitled to vote and to
receive dividends paid on these shares prior to vesting. Also includes
130,000 shares subject to stock options exercisable within 60 days of
March 15, 2000.
(7) Includes 5,000 shares issued to Mr. Crockett in May 1998. These shares
vest at a rate of 20% per year beginning in May 1998 and continuing
each January 1, from January 1, 1999 through 2002. Includes an
additional 5,000 shares issued to Mr. Crockett in January 1999, and
12,000 shares issued in January 2000, which vest at a rate of 20% per
year beginning January 1999 and January 2000, respectively. All shares
were issued under the Incentive Plan. Mr. Crockett is entitled to vote
and to receive dividends paid on these shares prior to vesting. Also
includes 96,000 shares subject to stock options exercisable within 60
days of March 15, 2000.
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<PAGE> 6
(8) Includes 7,500 shares issued to each director, other than Charles M.
Winston and Robert W. Winston, III, serving in June 1994 under the
Winston Hotels, Inc. Directors' Stock Incentive Plan (the "Directors'
Plan"). Such shares began vesting in 1994 with each director at the
rate of 20% per year and were fully vested as of May 18, 1999. Each
director is entitled to vote and receive the dividends paid on such
shares.
(9) Includes 1,000 shares held by Mr. Winston's wife.
(10) Includes 2,275 shares issued to Mr. Sullivan in January 1998 under the
Directors' Plan.
(11) Includes 7,000 shares issued to each director, other than Robert W.
Winston, III, in May 1999 under the Incentive Plan. Such shares vest at
a rate of 20% per year beginning in May 1999. Each director is entitled
to vote and receive the dividends paid on such shares. Also includes
2,000 shares subject to stock options exercisable within 60 days of
March 15, 2000, granted to each director, other than Robert W. Winston,
III, in May 1999. These options were 100% vested on the grant date.
(12) Includes 624,750 shares subject to stock options exercisable within 60
days of March 15, 2000, and 1,234,683 shares issuable upon redemption
of all outstanding Units redeemable within 60 days of March 15, 2000,
held by executive officers and directors.
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<PAGE> 7
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at seven. The
seven persons named below are nominated to serve on the Board of Directors until
the 2001 Annual Meeting of Shareholders (or until such time as their respective
successors are elected and qualified). Each nominee is currently a director of
the Company. The Board of Directors has no reason to believe that the persons
named below as nominees for directors will be unable or will decline to serve if
elected. In the event of death or disqualification of any nominee or the refusal
or inability of any nominee to serve as a director, the proxy may be voted with
discretionary authority for a substitute or substitutes as shall be designated
by the Board of Directors. Pursuant to North Carolina law, the seven candidates
who receive the highest number of votes as directors will be elected as
directors of the Company. Abstentions and shares held in street name that are
not voted in the election of directors will not be included in determining which
nominees received the highest number of votes.
NOMINEES FOR ELECTION AS DIRECTORS
CHARLES M. WINSTON - Charles Winston, age 70, has served as Chairman of
the Board of Directors since March 15, 1994. Mr. Winston is a native of North
Carolina and a graduate of the University of North Carolina at Chapel Hill with
an A.B. degree. Mr. Winston has more than 36 years of experience in developing
and operating full service restaurants. Mr. Winston is Robert Winston's father
and James Winston's brother.
ROBERT W. WINSTON, III - Robert Winston, age 38, has served as Chief
Executive Officer and director of the Company since March 15, 1994. Mr. Winston
served as President of the Company for the period beginning March 15, 1994 and
ending January 14, 1999. Mr. Winston is a native of North Carolina and a
graduate of the University of North Carolina at Chapel Hill with a B.A. degree
in economics. Mr. Winston is Charles Winston's son and James Winston's nephew.
JAMES H. WINSTON - James Winston, age 66, has been a director of the
Company since May 25, 1994. Mr. Winston is the President of Omega Insurance
Company, a property and casualty insurance company doing business mainly in the
State of Florida and throughout five southeastern states, and has served in that
capacity for more than the past five years. He is also President of LPMC, Inc.,
a real estate investment firm. Mr. Winston is a native of North Carolina and
graduated Phi Beta Kappa from the University of North Carolina at Chapel Hill.
Mr. Winston serves on the boards of directors of Stein Mart, Inc., FRP
Properties, Inc. and a number of community organizations in the Jacksonville,
Florida area. Mr. Winston is the brother of Charles Winston and the uncle of
Robert Winston.
THOMAS F. DARDEN, II - Thomas Darden, age 45, has been a director of
the Company since May 25, 1994. Mr. Darden is the Chairman of Cherokee
Investment Partners, LLC, a private equity investment fund, where he has been
employed for more than the past five years. Mr. Darden graduated with highest
honors from the University of North Carolina at Chapel Hill with a B.A. degree
in 1976 and graduated from Yale Law School with a J.D. degree in 1981. In 1991,
Mr. Darden was appointed by the Governor of North Carolina to the board of the
North Carolina Department of Transportation, and was subsequently appointed to
the Triangle Transit Authority Board of Trustees. In 1992, Mr. Darden received a
Master's Degree in City and Regional Planning from the University of North
Carolina at Chapel Hill. Mr. Darden serves or has served on a variety of
community, charitable and college boards. Mr. Darden serves as a director of
Waste Industries, Inc. and BTI Telecom Corporation.
RICHARD L. DAUGHERTY - Richard Daugherty, age 64, has been a director
of the Company since May 25, 1994. Mr. Daugherty serves as Executive Director of
the North Carolina State University Research Corporation. Until 1994 Mr.
Daugherty was Vice President of Worldwide Manufacturing for the IBM PC
5
<PAGE> 8
Company in Research Triangle Park, North Carolina, where he had been employed
for more than five years. At the time of his retirement in 1994, Mr. Daugherty
was the senior IBM executive for the State of North Carolina. He serves on
various community and business boards of directors, including the boards of
Wachovia Bank & Trust Company, N.A., and Carolina Power & Light Company.
EDWIN B. BORDEN - Edwin Borden, age 65, has been a director of the
Company since May 25, 1994. Mr. Borden is President and Chief Executive Officer
of The Borden Manufacturing Company, Inc. a textile manufacturing company, where
he has been employed for more than the past five years. Mr. Borden is a native
of North Carolina and a graduate of the University of North Carolina at Chapel
Hill. He serves on the boards of directors of Carolina Power & Light Company,
Jefferson-Pilot Corporation and Ruddick Corp.
DAVID C. SULLIVAN - David Sullivan, age 60, has been a director of the
Company since January 1, 1998. Mr. Sullivan serves as Chairman of the Board of
Directors of Resort Quest International, Inc., a resort property management
company. From 1990 until 1997 Mr. Sullivan served in various positions with
Promus Hotel Corporation, a franchisor of over 900 Hampton Inns, Embassy Suites,
Homewood Suites and Hampton Inn and Suites hotels. Mr. Sullivan served as
director, Executive Vice President and Chief Operating Officer for Promus from
April 1995 until December 1997. Between 1993 and 1995 Mr. Sullivan held the
position of Executive Vice President and Chief Operating Officer of the Hotel
Division of The Promus Companies Incorporated. He also serves on the board of
directors of John Q. Hammons Hotels, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES.
6
<PAGE> 9
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held five meetings during 1999. All incumbent
directors attended more than 75% of the aggregate number of meetings of the
Board of Directors and its committees on which they served in 1999. The Board of
Directors has an Audit Committee and a Compensation Committee. The Board of
Directors does not have a nominating committee. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews the plans and results of the audit engagement with the independent
public accountants, 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. Directors Borden, Darden
and Sullivan are members of the Audit Committee. During 1999, the Audit
Committee met two times. The Compensation Committee administers the Incentive
Plan and is responsible for determining compensation for the Company's executive
officers. Directors Daugherty, Darden and Borden make up the Compensation
Committee. During 1999, the Compensation Committee met two times.
DIRECTOR COMPENSATION
The primary means of compensating directors is the grant of restricted
stock to each director. At the time of the initial public offering, the Company
issued to each initial director, other than Charles and Robert Winston, 7,500
shares of Common Stock, subject to certain restrictions. Upon his appointment as
a director of the Company on January 1, 1998, Mr. Sullivan was issued 5,687
shares of restricted Common Stock. These shares of restricted Common Stock
vested at the rate of 20% per year beginning on the date of their issuance. All
shares were 100% vested on May 18, 1999, except for Mr. Sullivan's. On May 18,
1999, the Company issued an additional 7,000 shares of Common Stock to each
director, other than Robert Winston. Mr. Sullivan's unvested 3,412 shares were
terminated upon the new grant of 7,000 shares to him. These shares vest at the
rate of 20% per year beginning on the date of their issuance. Directors who
cease to be directors will forfeit any shares not previously vested. Each
director is entitled to vote and receive the distributions paid on such shares
of Common Stock prior to vesting. Also on May 18, 1999, the Company granted each
director, other than Robert Winston, options to purchase 2,000 shares of Common
Stock. These options were 100% vested on the grant date. The Company also pays
each director $1,500 per Board of Directors' meeting and $500 per committee
meeting attended. In addition, the Company will reimburse all directors for
their out-of-pocket expenses incurred in connection with their service on the
Board of Directors. Robert Winston receives no compensation as a director, other
than reimbursement for any out-of-pocket expenses incurred in connection with
his service on the Board of Directors.
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<PAGE> 10
EXECUTIVE COMPENSATION
The following tables set forth a summary of annual and long-term
compensation paid or accrued by the Company for services rendered, for the
fiscal years indicated, by the Company's Chief Executive Officer and the
executive officers (the "named executive officers") whose total salary and bonus
exceeded $100,000 individually during the year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
------------------- ----------------------
No. Of
Restricted Securities
Name and Stock Underlying
Principal Position Year Salary Bonus Awards Options
------------------ ---- ------ ----- ------ -------
<S> <C> <C> <C> <C> <C>
Robert W. Winston, III 1999 $225,000 $100,000 -- 100,000
Chief Executive Officer 1998 $210,000 -- -- 100,000
1997 $200,000 -- -- --
James D. Rosenberg 1999 $222,000 $100,000 $ 65,625(1) 110,000
President, Chief Operating 1998 $180,000 $ 75,000 $263,750(2) 150,000
Officer and Secretary
Joseph V. Green 1999 $222,000 $ 75,000 $ 65,625(3) 100,000
Executive Vice President, 1998 $210,000 $ 75,000 -- 150,000
Chief Financial Officer
Kenneth R. Crockett 1999 $172,000 $ 40,000 $ 43,750(4) 40,000
Executive Vice President 1998 $160,000 $ 40,000 $ 61,875(5) 50,000
of Development 1997 $150,000 $ 30,000 -- --
</TABLE>
(1) During 1999, James D. Rosenberg received a grant of 7,500 shares of
restricted stock with a value of $60,938 as of December 31, 1999. The
restricted stock vests at a rate of 20% per year beginning January 14,
1999. Dividends are paid on the restricted stock.
(2) During 1998, James D. Rosenberg received a grant of 20,000 shares of
restricted stock with a value of $162,500 as of December 31, 1999. The
restricted stock vests at a rate of 25% per year beginning January 2,
1999. Dividends are paid on the restricted stock.
(3) During 1999, Joseph V. Green received a grant of 7,500 shares of
restricted stock with a value of $60,938 as of December 31, 1999. The
restricted stock vests at a rate of 20% per year beginning January 14,
1999. Dividends are paid on the restricted stock.
(4) During 1999, Kenneth R. Crockett received a grant of 5,000 shares of
restricted stock with a value of $40,625 as of December 31, 1999. The
restricted stock vests at a rate of 20% per year beginning January 14,
1999. Dividends are paid on the restricted stock.
(5) During 1998, Kenneth R. Crockett received a grant of 5,000 shares of
restricted stock with a value of $40,625 as of December 31, 1999. The
restricted stock vests 20% per year beginning May 5, 1998, and
continuing each January 1, from January 1, 1999 through 2002. Dividends
are paid on the restricted stock.
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<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of options
to purchase shares of Common Stock to the Company's named executive officers
during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term (3)
------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year(2) Per Share Date 5% 10%
---- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Winston, III (1) 100,000 26% $8.75 01/14/09 $ 550,283 $1,394,525
James D. Rosenberg (1) 110,000 28% $8.75 01/14/09 $ 605,311 $1,533,978
Joseph V. Green (1) 100,000 26% $8.75 01/14/09 $ 550,283 $1,394,525
Kenneth R. Crockett (1) 40,000 10% $8.75 01/14/09 $ 220,113 $ 557,810
</TABLE>
(1) The options granted are nonqualified stock options. The options were
granted effective January 14, 1999, and vest 20% per year over four
years with the first vesting occurring on January 14, 1999. The options
expire 10 years from the effective date of grant, or if sooner, upon
termination of employment, unless employment is terminated because of
death or permanent and total disability, in which case the options
remain exercisable for one year following the termination or the
remainder of the option period, if shorter.
(2) Options to purchase an aggregate of 390,000 shares of Common Stock were
granted to the Company's employees during 1999.
(3) Potential realizable value of each grant is calculated assuming that
the market price of the underlying security appreciates at annualized
rates of 5% and 10%, respectively, over the term of the grant. The
assumed annual rates of 5% and 10% would result in the price of the
Common Stock increasing $5.50283 and $13.94525 per share, respectively,
for the options expiring January 14, 2009.
9
<PAGE> 12
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table provides information about the stock options held
by the named executive officers on December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End Fiscal Year-End(1)
---------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert W. Winston, III 152,500 162,500 -- --
James D. Rosenberg 59,500 200,500 -- --
Joseph V. Green 80,000 170,000 -- --
Kenneth R. Crockett 78,000 62,000 -- --
</TABLE>
(1) On December 31, 1999, the aggregate fair market value of the
unexercised options did not exceed the aggregate exercise price of the
options.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors, a committee
composed entirely of non-officer and non-employee directors, is responsible for
determining the compensation of the Company's executive officers and
administering the Company's Incentive Plan.
Executive Compensation. The Company is committed to implementing a scheme of
executive compensation which will contribute to the achievement of the Company's
business objectives. The Compensation Committee's policy is to implement a
scheme of executive compensation so that the compensation paid to executive
officers shall be commensurate with their positions and determined with
reference to compensation paid to similarly situated officers of companies which
the Board of Directors deems to be comparable to the Company.
The Compensation Committee establishes ranges for executive
compensation using regional and national surveys of comparable companies.
Companies included in these salary surveys are not necessarily the same as the
companies used for purposes of the performance graph included in this Proxy
Statement, but instead include a broader set of companies with which the Company
competes for qualified personnel.
Executive compensation consists of three components: base salary,
annual incentive and long-term incentive compensation. These components provide
elements of fixed income and variable compensation that is linked to the
achievement of individual and corporate goals and enhanced shareholder value.
Base salary represents the fixed component of the Company's executive
compensation package. Executives receive a salary that is within a range
established by the Compensation Committee for their respective positions based
on the comparative analysis described above. The determination of where an
executive's salary falls within the salary range is based on a determination of
the level of experience that the executive brings to the position and how
successful the executive has been in achieving set goals. Adjustments to
salaries are based on a similar evaluation and a comparison of adjustments made
by competitors and any necessary inflationary adjustments.
10
<PAGE> 13
Annual incentives exist in the form of bonuses which are provided for
each executive officer as a means of linking compensation to objective
performance criteria that are within the control of the executive officer. At
the beginning of each year the Compensation Committee establishes a target bonus
for each executive and identifies performance goals for each executive to meet
to receive the full bonus. The actual amount of incentive bonus received by each
of the Company's executive officers is determined by the Compensation Committee
after the end of the applicable year. Where an executive's performance is not
easily fixed to objective standards, the Compensation Committee will exercise
its subjective judgment in determining the extent to which goals are achieved.
The third component of executive compensation is targeted toward
providing rewards for long-term performance. The Compensation Committee believes
that long-term incentives are important to motivate and reward executives and
employees of the Company for maximizing shareholder value. Long-term incentives
are provided primarily pursuant to the Incentive Plan, which is administered by
the Compensation Committee. The purpose of the Incentive Plan is to (i) attract
and retain employees, and other service providers with ability and initiative;
(ii) provide incentives to those deemed important to the success of the Company;
and (iii) associate the interests of these individuals with the interests of the
Company and its shareholders through opportunities for increased stock
ownership. Awards of stock options and restricted stock under the Incentive Plan
are based on comparisons to incentives offered at other comparable companies and
serve as a means of retaining valued employees.
During the year ended December 31, 1999, the Company issued a total of
390,000 non-qualified stock options to the Company's executive officers. All
such options were issued at an exercise price which equaled the closing price of
the Company's Common Stock on the date of grant. Of the total of 390,000 shares
issuable pursuant to these options, Mr. Winston received options to purchase
100,000 shares, Mr. Rosenberg received options to purchase 110,000 shares, Mr.
Green received options to purchase 100,000 shares and Mr. Crockett received
options to purchase 40,000 shares. The options vest 20% immediately and 20% on
the anniversary date of the grant over the next four years. Since these options
have exercise prices equal to the fair market value of the Company's Common
Stock on the date of grant, the stock options have value only if the stock price
appreciates from the value on the date the options were granted. This feature is
intended to focus executives on the enhancement of shareholder value over the
long-term and to encourage equity ownership in the Company. In addition, during
the year ended December 31, 1999, the Company granted awards of restricted stock
to Messrs. Rosenberg, Green and Crockett totaling 7,500, 7,500 and 5,000 shares,
respectively. All shares of restricted Common Stock vest at a rate of 20% per
year beginning January 14, 1999. Dividends are paid on the restricted stock.
Chief Executive Officer Compensation. The Compensation Committee has adopted the
policies described above with respect to Mr. Winston's compensation. Mr.
Winston's salary and bonus for 1999 were $225,000 and $100,000, respectively.
Mr. Winston was granted options to purchase 100,000 shares of Common Stock in
1999. The Company believes this compensation is competitive with compensation
paid to chief executive officers in the hotel industry.
11
<PAGE> 14
This report is submitted by the following members of the Compensation
Committee of the Board of Directors:
COMPENSATION COMMITTEE
Richard L. Daugherty (Chairman)
Edwin B. Borden
Thomas F. Darden, II
EMPLOYMENT AGREEMENT
The Company has an employment agreement with Mr. Crockett, the
Company's Executive Vice President of Development. The agreement has a
three-year term that commenced on July 31, 1997 and automatically renews for
subsequent one-year terms. The Board of Directors increased Mr. Crockett's base
salary to $172,000 in 1999. Mr. Crockett is eligible to participate in any bonus
programs the Company has or may create for persons of Mr. Crockett's level and
is eligible to receive stock options and restricted stock awards under the
Company's Incentive Plan. The employment agreement is terminable by either party
giving 90 days notice to the other party. If the Company terminates the
agreement upon such notice it shall pay Mr. Crockett a lump sum amount equal to
two years of his then current salary plus a bonus for each of the two years
based on the average of the bonus paid for the preceding two years. The Company
may also terminate the agreement immediately for death, disability or for cause
as defined in the agreement. If the Company terminates the agreement for cause
it shall pay Mr. Crockett the amount of salary due at that time. Mr. Crockett
may terminate the agreement upon notice in the event of a change in control
unless after the change in control Mr. Crockett retains his position and the
principal executive offices of the acquiring company remain within a 30-mile
radius of Raleigh, North Carolina. If Mr. Crockett elects to terminate upon a
change in control he shall be entitled to continue to receive medical and health
insurance for a period of two years and shall receive a bonus equal to two years
of his then current salary plus his most recent bonus if he agrees to stay with
the Company for a period of six months following the change in control.
12
<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph prepared by SNL Securities, LLC compares the
cumulative total shareholder return on the Company's Common Stock from December
31, 1994 through December 31, 1999, with the cumulative total return for the
same period on the Standard & Poor's 500 Stock Index (the "S&P 500"), the
National Association of Real Estate Investment Trust Equity REIT Index (the
"NAREIT All Equity REIT Index"), and the SNL Securities Hotel REIT Index (the
"SNL Hotel REIT Index"). The graph assumes that, at the beginning of the period
indicated, $100 was invested in the Company's Common Stock and the stock of the
companies comprising each index and that all dividends were reinvested.
The NAREIT All Equity REIT Index is currently comprised of 167 real
estate investment trusts ("REITs") which own a wide variety of real estate
assets, including regional shopping malls, shopping centers, apartments, self
storage facilities, industrial properties and manufactured housing communities.
The SNL Hotel REIT Index is currently comprised of 15 publicly traded hotel
REITs, organized for purposes substantially similar to that of the Company.
[CHART]
<TABLE>
<CAPTION>
PERIOD ENDING
--------------------------------------------------------------
INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Winston Hotels, Inc. 100.00 129.85 161.23 168.18 116.76 131.71
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
NAREIT All Equity REIT Index 100.00 115.27 155.92 187.51 154.69 147.54
SNL Hotel REITs 100.00 131.64 201.14 263.71 130.39 101.27
</TABLE>
13
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a REIT that through the Partnership owned 28 limited
service hotels, 11 extended stay hotels and 11 full service hotels as of March
23, 2000. The Company currently has a 92.83% interest in the Partnership and is
its sole general partner. In order for the Company to qualify as a REIT, neither
the Company nor the Partnership can operate hotels.
COMPLIANCE WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Based on a
review of the report forms that were filed, the Company believes that during
1999 all filing requirements applicable to its officers and directors were
fulfilled.
14
<PAGE> 17
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP as
independent accountants for fiscal year 2000. Although shareholder approval is
not required, the Company desires to obtain from the shareholders an indication
of their approval or disapproval of the Board's action in appointing
PricewaterhouseCoopers LLP as the independent accountants of the Company. If the
shareholders do not ratify this appointment, such appointment will be
reconsidered by the Audit Committee and the Board of Directors.
A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting and will be afforded an opportunity to make a statement and to
respond to questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP FOR FISCAL YEAR
2000.
MISCELLANEOUS
SHAREHOLDERS MAY OBTAIN A COPY OF THE COMPANY'S 1999 ANNUAL REPORT ON
FORM 10-K WITHOUT CHARGE UPON WRITTEN REQUEST TO JAMES D. ROSENBERG, PRESIDENT
AND CHIEF OPERATING OFFICER, WINSTON HOTELS, INC., 2626 GLENWOOD AVENUE, SUITE
200, RALEIGH, NORTH CAROLINA 27608.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposals which shareholders intend to present for a vote of
shareholders at the 2001 Annual Meeting of Shareholders and which such
shareholders desire to have included in the Company's Proxy Statement and form
of proxy relating to that meeting must be sent to the Company's principal
executive offices, marked to the attention of the Secretary of the Company, and
received by the Company at such offices on or before December 1, 2000. The
determination by the Company of whether it will oppose inclusion of any proposal
in its Proxy Statement and form of proxy will be made on a case-by-case basis in
accordance with its judgment and the rules and regulations promulgated by the
Securities and Exchange Commission. Proposals received after December 1, 2000,
will not be considered for inclusion in the Company's proxy materials for its
2001 Annual Meeting of Shareholders.
In addition, if a shareholder intends to present a matter for a vote at
the 2001 Annual Meeting of Shareholders, other than by submitting a proposal for
inclusion in the Company's Proxy Statement for that meeting, the shareholder
must give timely notice in accordance with Securities and Exchange Commission
rules. To be timely, a shareholder's notice must be received by the Secretary of
the Company at its principal office, 2626 Glenwood Avenue, Suite 200, Raleigh,
North Carolina 27608, on or before February 15, 2001.
By Order of the Board of Directors,
Robert W. Winston, III
Chief Executive Officer
March 31, 2000
15
<PAGE> 18
PROXY
WINSTON HOTELS, INC.
COMMON STOCK PROXY FOR
ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert W. Winston, III and James D.
Rosenberg and each of them as attorney and proxy of the undersigned, each with
the full power of substitution, to represent the undersigned and to vote all of
the shares of Common Stock in Winston Hotels, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held on May 9,
2000, at 10:00 a.m., local time, at the Hilton Garden Inn Hotel, 1500 RDU Center
Drive, Morrisville, North Carolina, and any adjournments or postponements
thereof (1) as hereinafter specified upon the proposals listed below and as more
particularly described in the Company's Proxy Statement, receipt of which is
hereby acknowledged; and (2) in their discretion upon such other matters as may
properly come before the meeting and any adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS LISTED
BELOW.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the
contrary).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Charles M. Winston, Robert W. Winston, III, James H. Winston,
Thomas F. Darden, II, Richard L. Daugherty, Edwin B. Borden
and David C. Sullivan
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED
BELOW:
--------------------------------------------------------------
(Continued on other side)
<PAGE> 19
(Continued from other side)
2. RATIFY APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign.
Date , 2000
------------------------
(Be sure to date Proxy)
------------------------------------
Signature and title, if applicable
------------------------------------
Signature if held jointly
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign the full
corporate name by the president or
other authorized officer. If a
partnership, please sign in the
partnership name by an authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
