SCHEDULE 14A
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
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Check the
appropriate box:
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¨
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Preliminary Proxy Statement
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¨
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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x
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material pursuant to ss. 240.14a-12
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MHI Hospitality Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of filing fee (Check the appropriate box):
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x
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No fee required.
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¨
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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¨
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Fee paid previously with preliminary materials.
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¨
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount previously paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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MHI HOSPITALITY CORPORATION
March 20, 2012
Dear Stockholder:
On behalf of the board of directors and management of MHI Hospitality Corporation (the Company), I cordially invite you to
attend the 2012 Annual Meeting of Stockholders (the Annual Meeting) to be held at the William & Mary Alumni House, 1 Alumni Drive, Williamsburg, Virginia 23185, on Tuesday, April 17, 2012 at 9:00 a.m., local time. The
attached Notice of Annual Meeting and Proxy Statement describe the formal business to be transacted at the Annual Meeting. Directors and officers of the Company, as well as a representative of Witt Mares, PLC, certified public accountants, will be
present to respond to any questions that you may have.
You will be asked to elect eight (8) Company directors and to
ratify the appointment of Witt Mares, PLC as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2012. The board of directors has approved each of these proposals and recommends that you vote
FOR them.
Your vote is important. Regardless of the number of shares you own and regardless of whether you plan
to attend the Annual Meeting, I encourage you to read the enclosed proxy statement carefully and sign and return your enclosed proxy card, or follow the instructions to vote by internet or telephone, as promptly as possible because a failure to do
so could cause a delay in the Annual Meeting and additional expense to the Company. A postage-paid return envelope is provided for your convenience. This will not prevent you from voting in person, but it will assure that your vote will be counted
if you are unable to attend the Annual Meeting. If you do decide to attend the Annual Meeting and feel for whatever reason that you want to change your vote at that time, you will be able to do so. If you are planning to attend the Annual Meeting,
please let us know by marking the appropriate box on the proxy card.
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Sincerely yours,
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Andrew M. Sims
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Chairman and Chief Executive Officer
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410 West Francis Street, Williamsburg, Virginia 23185
MHI HOSPITALITY CORPORATION
410 WEST FRANCIS STREET
WILLIAMSBURG, VIRGINIA 23185
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 17, 2012
NOTICE IS HEREBY GIVEN
that the 2012 Annual Meeting of Stockholders (the Annual Meeting) of MHI Hospitality Corporation (the Company), will be held at the William &
Mary Alumni House, 1 Alumni Drive, Williamsburg, Virginia 23185, on Tuesday, April 17, 2012 at 9:00 a.m., local time, for the following purposes:
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1.
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To elect eight (8) directors to the board of directors of the Company;
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2.
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To ratify the appointment of Witt Mares, PLC as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2012; and
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3.
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To transact such other business as may properly come before the Annual Meeting and any adjournments thereof.
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The board of directors is not aware of any other business to come before the Annual Meeting. Stockholders of record at the close of
business on March 1, 2012 are the stockholders entitled to notice of and to vote at the Annual Meeting and any adjournments thereof. To obtain directions to attend the Annual Meeting and vote in person, please call Investor Relations at
(757) 229-5648.
A copy of the Companys 2011 Annual Report to Stockholders is enclosed.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WE ENCOURAGE YOU TO VOTE BY PROXY SO THAT YOUR SHARES WILL BE
REPRESENTED AND VOTED AT THE ANNUAL MEETING EVEN IF YOU CANNOT ATTEND. ALL STOCKHOLDERS OF RECORD CAN VOTE BY WRITTEN PROXY CARD, BY TELEPHONE AT 1-800-690-6903, OR OVER THE INTERNET AT WWW.PROXYVOTE.COM. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE
SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE IN PERSON AT THE ANNUAL MEETING. PURSUANT TO A NEW YORK STOCK EXCHANGE (NYSE) RULE APPLICABLE TO NYSE-MEMBER BROKERS, IF
YOUR SHARES ARE HELD BY YOUR BROKER AND YOU DO NOT GIVE YOUR BROKER VOTING INSTRUCTIONS, YOUR SHARES WILL NOT BE VOTED IN CONNECTION WITH MATTERS DEEMED BY THE NYSE TO BE DISCRETIONARY. SUCH MATTERS INCLUDE, BUT ARE NOT LIMITED TO, THE
ELECTION OF DIRECTORS.
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BY ORDER OF THE BOARD OF DIRECTORS
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WILLIAM J. ZAISER
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SECRETARY
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Williamsburg, Virginia
March 20, 2012
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 17, 2012
The proxy statement and annual report to security holders are available on our website at www.MHIHospitality.com.
IMPORTANT:
PLEASE READ THE PROXY STATEMENT AND THEN PROMPTLY INDICATE YOUR VOTING INSTRUCTIONS: (1) BY TELEPHONE BY CALLING 1-800-690-6903;
(2) OVER THE INTERNET AT WWW.PROXYVOTE.COM; OR (3) BY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT WITHOUT DELAY IN THE ENCLOSED ENVELOPE.
PROXY STATEMENT
OF
MHI
HOSPITALITY CORPORATION
410 WEST FRANCIS STREET
WILLIAMSBURG, VIRGINIA 23185
ANNUAL MEETING OF STOCKHOLDERS
APRIL 17, 2012
This Proxy Statement is furnished in connection with the solicitation of proxies by the board of directors (the board) of MHI
Hospitality Corporation (the Company) to be used at the 2012 Annual Meeting of Stockholders which will be held at the William & Mary Alumni House, 1 Alumni Drive, Williamsburg, Virginia 23185, on Tuesday, April 17, 2012 at
9:00 a.m., local time (the Annual Meeting). The accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement are being mailed to stockholders on or about March 20, 2012.
All properly executed written proxies that are delivered pursuant to this proxy statement will be voted on all matters that properly come
before the Annual Meeting for a vote. If your signed proxy specifies instructions with respect to matters being voted upon, your shares will be voted in accordance with your instructions. If no instructions are specified, your shares will be voted
(a) FOR the election as directors of the nominees named in Proposal I, (b) FOR Proposal II (ratification of independent registered public accounting firm) and (c) in the discretion of the proxy holders, as to
any other matters that may properly come before the Annual Meeting. Your proxy may be revoked at any time prior to being voted by: (i) filing with the Companys Corporate Secretary (William J. Zaiser, at 410 West Francis Street,
Williamsburg, Virginia 23185) written notice of such revocation; (ii) submitting a duly executed proxy bearing a later date; or (iii) attending the Annual Meeting and giving the Corporate Secretary notice of your intention to vote in
person. Voting by telephone, Internet or mail will not prevent you from later revoking that proxy and voting in person at the Annual Meeting.
VOTING SECURITIES AND VOTE REQUIRED
The board of directors has fixed the
close of business on March 1, 2012 (the Record Date) as the record date for the determination of stockholders who are entitled to notice of, and to vote at, the Annual Meeting. On the Record Date, there were 9,999,786 shares of the
Companys common stock, $0.01 par value, outstanding. Each stockholder of record on the Record Date is entitled to one vote for each share held.
The presence in person or by proxy of at least a majority of the outstanding shares of common stock entitled to vote is necessary to constitute a quorum at the Annual Meeting. Shares represented by
proxies received by the Company but marked as abstentions, if any, will be included in the calculation of the number of shares considered to be present at the meeting. Proxies received by the Company that reflect broker non-votes (i.e.,
proxies relating to shares held by brokers or other nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to which, on one or more but not all matters, the broker
or nominee does not have discretionary voting power to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction of business at the Annual Meeting. In the event there are not sufficient votes for a
quorum or to ratify any proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit the further solicitation of proxies.
We need your vote. Our stockholders are always encouraged to review the proxy materials and vote their shares. Under New York Stock Exchange (NYSE) Rule 452, brokers who are voting with
respect to shares held in street name have the discretion to vote such shares on routine matters but not on non-routine matters (so called discretionary matters), which include the election of directors. For purposes of the election of
directors, proxies received by the Company that reflect abstentions and broker non-votes, if any, will not be counted as
1
votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.
As to the election of directors, the enclosed proxy enables a stockholder to vote FOR the election of the nominees proposed
by the board of directors, or to withhold authority to vote for the nominee being proposed. Directors are elected by a plurality of votes of the shares present in person or represented by proxy at a meeting and entitled to vote in the election of
directors.
As to the ratification of the independent registered public accounting firm, which is submitted as Proposal II, a
stockholder may: (i) vote FOR the ratification; (ii) vote AGAINST the ratification; or (iii) ABSTAIN with respect to the ratification. Unless otherwise required by law, Proposal II and all other
matters shall be determined by a majority of votes cast affirmatively or negatively without regard to (a) broker non-votes or (b) proxies marked ABSTAIN as to that matter.
2
PRINCIPAL HOLDERS
The following table sets forth the beneficial ownership of shares of common stock as of March 1, 2012 for each person or group known
to us to be holding more than 5.0% of the common stock, for each director and named executive officer and for the directors and executive officers of the Company as a group. As of March 1, 2012, the Company had outstanding 9,999,786 shares of
its common stock, $0.01 par value per share. The table shows the number of shares of common stock and the number of partnership interests or units in the Companys operating partnership the person beneficially owns, as determined by
the rules of the SEC. The operating partnership is controlled by the Company as its sole general partner. The operating partnership is obligated to redeem each unit at the request of the holder thereof for the cash value of one share of common stock
or, at the Companys option, one share of common stock.
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Name of Beneficial
Owner
(1)
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Number of Shares
Beneficially Owned
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Number of Units
Beneficially Owned
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Total
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Percent
of
Class
(2)
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Ryan P. Taylor/Essex Illiquid, LLC/Richmond Hill Capital Partners, LP
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1,900,000
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(3)
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1,900,000
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16.0
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Andrew M. Sims
(4)
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736,055
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(5)
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571,997
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(6)
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1,308,052
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12.4
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Edmunds White Partners LLC
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918,761
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(7)
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918,761
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9.2
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Cheong Family
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368,168
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(8)
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364,086
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(8)
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732,254
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7.1
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Kim E. Sims
(4)
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110,250
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(6)
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506,997
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(6)
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617,247
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5.9
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Zayma Realty Holdings Inc.
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540,902
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(9)
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540,902
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5.4
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Edward S. Stein
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19,500
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(10)
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333,099
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(11)
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352,599
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3.4
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William J. Zaiser
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42,625
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(12)
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214,981
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(13)
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257,606
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2.5
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David R. Folsom
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223,806
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(14)
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223,806
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2.2
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James P. OHanlon
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50,250
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(15)
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50,250
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*
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General Anthony C. Zinni
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28,428
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(10)
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28,428
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*
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J. Paul Carey
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25,500
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(10)
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25,500
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*
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Patrick V. Fiel, Jr.
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25,000
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(16)
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25,000
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*
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Anthony E. Domalski
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13,000
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(17)
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13,000
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*
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David J. Beatty
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7,025
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(18)
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7,025
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*
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All executive officers and directors as a group (12 persons)
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3,181,439
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1,569,093
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4,750,532
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35.3
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*
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Represents less than 1% of the number of shares of common stock of the Company.
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(1)
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Unless otherwise indicated, the named stockholders have sole voting power with respect to all shares shown as being beneficially owned by them. Includes all restricted
stock grants, including those that will vest on December 31, 2012.
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(2)
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Assumes that all units of our operating partnership held by such person or group of persons are redeemed for common stock (regardless of when such units are
redeemable). Assumes that all warrants to purchase shares of the Companys common stock held by such person or group of persons are exercised (only if exercisable within 60 days). The total number of shares outstanding used in calculating the
ownership interest of the named holders of units in the operating partnership and the named holders of warrants to purchase shares of the Companys common stock is based on the deemed conversion or exercise of only the units or warrants, as
applicable, owned by such holder into shares of common stock.
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(3)
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Based on information set forth in two separate Schedule 13D/As filed with the Securities and Exchange Commission on December 27, 2011, Essex
Illiquid, LLC and Richmond Hill Capital Partners, LP have shared voting and dispositive power over 1,748,000 and 152,000 shares, respectively, through their ownership of warrants to purchase shares of the Companys common stock. Ryan P. Taylor,
our director, is affiliated with both Essex Illiquid, LLC and Richmond Hill Capital Partners, LP. Mr. Taylor disclaims beneficial ownership over the shares of the Companys common stock and the related warrants. Each of Essex Illiquid, LLC
and Richmond Hill Capital Partners, LP disclaim beneficial ownership of any securities
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held by the other. The address of both Essex Illiquid, LLC and Richmond Hill Capital Partners, LP is 375 Hudson Street, 12th Floor, New York, New York 10014.
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(4)
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Andrew M. Sims and Kim E. Sims are siblings.
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(5)
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Includes 58,500 shares of common stock granted under our 2004 Long-Term Incentive Plan, including 15,000 shares of our common stock granted pursuant to
Mr. Sims employment agreement with us that were fully vested on January 1, 2011. Includes 156,250 shares held by Susan L. Sims, Andrew M. Sims spouse. Includes 271,250 shares held by the family limited partnership of Andrew M.
Sims.
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(6)
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Andrew M. Sims and Kim E. Sims each received 605,166 units in connection with our initial public offering. On July 22, 2005, the family limited partnerships of
Andrew M. Sims and Kim E. Sims each received 23,850 units in connection with our acquisition of the Hilton Jacksonville Riverfront Hotel. Includes 57,981 units held by the Edgar Sims Irrevocable Trust for which Andrew M. Sims, Kim E. Sims and
Christopher L. Sims, a former director, serve as co-trustees. Andrew M. Sims redeemed 115,000 units for common stock on June 7, 2011. Kim E. Sims redeemed 80,000 units for common stock on March 1, 2007, 50,000 units for common stock on
August 28, 2007 and 50,000 units for common stock on October 3, 2011.
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(7)
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Based on information set forth in a Schedule 13G/A filed with the Securities and Exchange Commission on January 31, 2012, Edmunds White Partners LLC has voting and
dispositive power over 918,761 shares. The address of Edmunds White Partners LLC is 10831 Ridgefield Parkway, Richmond, Virginia 23233.
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(8)
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Represents 308,234 units held by Khersonese Investment (USA) Inc., 6,832 units held by IPAX and 49,020 units held by Phileo Land Company. Supreme Corp. redeemed 368,168
units for common stock on March 22, 2010. These entities are indirectly controlled by members of the Cheong Family, including Kee Cheok Cheong, Kee Fong Cheong, Kee Seong Cheong, Kee Lai Cheong and Kee Soon Cheong. The address of these four
entities is 13th Floor, Bangunan Pak Peng Box #1 No.75, Jalan Petaling, 50000 Kuala Lumpur, Malaysia.
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(9)
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Based on information set forth in a Schedule 13G/A filed with the Securities and Exchange Commission on February 9, 2010, Zayma Realty Holdings Inc. and Amin S.
Visram have shared voting and dispositive power over 540,902 shares. The address of Zayma Realty Holdings Inc. and Mr. Visram is 55 King Street West, Suite 801, Kitchener, Ontario, Canada N2G 4W1.
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(10)
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Includes 12,500 shares of restricted stock granted under our 2004 Long-Term Incentive Plan all of which were fully vested on December 31, 2011. Also includes 3,000
shares of restricted stock granted under our 2004 Long-Term Incentive Plan, which will vest on December 31, 2012.
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(11)
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Represents 333,099 units held by the Celia K. Krichman Charitable Trust, of which Edward S. Stein is a Trustee. Mr. Stein disclaims beneficial ownership of these
units.
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(12)
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Includes 23,075 shares of common stock granted under our 2004 Long-Term Incentive Plan.
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(13)
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The family limited partnership of William J. Zaiser received 206,830 units in connection with our initial public offering and an additional 8,151 units in connection
with the acquisition of the Hilton Jacksonville Riverfront Hotel on July 22, 2005.
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(14)
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Includes 76,863 shares of common stock granted under our 2004 Long-Term Incentive Plan, including 60,000 shares of our common stock granted pursuant to
Mr. Folsoms employment agreement with us that were fully vested on January 1, 2011.
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(15)
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Includes 10,500 shares of restricted stock granted under our 2004 Long-Term Incentive Plan, all of which were fully vested on December 31, 2011. Also includes
3,000 shares of restricted stock granted under our 2004 Long-Term Incentive Plan, which will vest on December 31, 2012. Includes 8,000 shares held by Claudia OHanlon, Mr. OHanlons spouse.
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(16)
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Includes 25,000 shares of common stock granted under our 2004 Long-Term Incentive Plan, including 7,000 shares of our common stock granted pursuant to
Mr. Fiels employment agreement with us that will vest on June 7, 2012 and 7,000 shares of our common stock that will vest on June 7, 2013.
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(17)
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Includes 6,750 shares of common stock granted under our 2004 Long-Term Incentive Plan.
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(18)
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Includes 1,500 shares of restricted stock granted under our 2004 Long-Term Incentive Plan all of which are fully vested. Also includes 3,000 shares of restricted stock
granted under our 2004 Long-Term Incentive Plan, which will vest on December 31, 2012.
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4
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors and executive officers and the beneficial
owners of more than 10.0% of the common stock to file reports of ownership and changes in ownership of equity securities of the Company with the Securities and Exchange Commission and to furnish the Company with copies of such reports. To the best
of our knowledge, all of the filings by the Companys directors and executive officers were made on a timely basis during the 2011 fiscal year. We are not aware of any beneficial owners of more than 10.0% of our common stock other than as
disclosed in the Principal Holders Table.
5
PROPOSAL IELECTION OF DIRECTORS
The directors of the Company are elected by the stockholders annually. The board of directors currently consists of
nine (9) members. Eight (8) directors are elected by holders of our common stock and the ninth (9
th
) director is elected by holders of our Series A Cumulative Redeemable Preferred Stock (the Preferred Stock). Each directors term of office expires at the Annual Meeting. Each of
the individuals named below has been nominated for election by holders of our common stock to the board of directors at the Annual Meeting to hold office until the 2013 annual meeting of stockholders and until their successors are elected and
qualified.
David J. Beatty, J. Paul Carey, David R. Folsom, James P. OHanlon, Andrew M. Sims, Kim E. Sims, Edward S.
Stein and General Anthony C. Zinni (the Nominees), have been nominated by the board of directors, as recommended by our nominating, corporate governance and compensation committee (the NC&C Committee), for terms of one
(1) year each.
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Name
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Position with the
Company
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Age as of the Annual
Meeting
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History of Service
as a Director
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David J. Beatty
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Director
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68
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2004 2007,
2011 present
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J. Paul Carey
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Director
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53
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2004 present
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David R. Folsom
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Director, President and
Chief Operating Officer
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47
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2011 present
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James P. OHanlon
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Director
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68
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2007 present
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Andrew M. Sims
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Chairman of the
Board of Directors and
Chief Executive Officer
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55
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2004 present
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Kim E. Sims
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Director
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57
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2004 present
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Edward S. Stein
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Director
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65
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2004 present
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Anthony C. Zinni
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Director
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68
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2004 present
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The persons named as proxies in the enclosed proxy card intend to vote FOR the election of
the Nominees, unless the proxy card is marked to indicate that such authorization is expressly withheld. Should one or more of the Nominees withdraw or be unable to serve (which the board of directors does not expect) or should any other vacancy
occur in the board of directors, it is the intention of the persons named in the enclosed proxy card to vote FOR the election of such persons as may be recommended by the board of directors. If there are no substitute nominees, the size
of the board of directors may be reduced.
Pursuant to NYSE Rule 452, if your shares are held by your broker and you do not
give your broker voting instructions, your shares will not be voted on Proposal I.
As set forth in the Companys
Articles Supplementary, the holders of the Companys Preferred Stock have the exclusive right, voting separately as a single class, to elect one (1) member of the Companys board of directors. The holders of the Preferred Stock have
designated Mr. Ryan P. Taylor to serve as a director on the Companys board of directors effective May 25, 2011. The holders of the Preferred Stock have indicated to the Company their intent to re-elect Mr. Taylor as of our
2012 annual meeting. Because Mr. Taylor will be elected by the holders of the Preferred Stock, his election will not be voted on by the holders of our common stock.
Biographical Information
The principal business experience of each
Nominee, director and executive officer of the Company is set forth below. The biographical information below also includes, for each Nominee, the particular experience, qualifications, attributes or skills that led the board of directors to
nominate such Nominee to serve as a director of the Company.
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Nominees for Directors
David J. Beatty
previously served as a director of the Company from the completion of our initial public offering in December 2004 until 2007 and resumed service as a director of the Company in
2011. He also serves as chairman of the Companys audit committee. He began his 40 plus year career in finance and real estate development as head of marketing operations for George Kaufman real estate development group in 1972. He was a
founder of Essex Commercial Mortgage in 1987 and founder and President of CENIT Commercial Mortgage Corp. in 1990. In 2001, Mr. Beatty founded TowneBank Commercial Mortgage, LLC, where he currently serves as President. TowneBank Commercial
Mortgage specializes in placing debt and equity for the lodging industry. He has been President of Guest Quarters, Inc., Treasurer and Chief Financial Officer of Guest Quarters Development Group and President of mortgage financing for Lawson-Essex,
Inc. Mr. Beatty received a bachelor of arts degree from Georgetown University and a master of business administration degree from the Darden School of Business at the University of Virginia.
The board of directors concluded that Mr. Beatty has the relevant professional experience and skills to serve as director of the
Company, as evidenced by Mr. Beattys former service as director of the Company, because of his corporate and financial leadership as president and chief financial officer of a hotel company as well as his current position of president at
TowneBank Commercial Mortgage, LLC.
J. Paul Carey
became a director prior to completion of the initial public offering
in December 2004. Mr. Carey is currently the Managing Partner for JPT Partners, a privately held investment partnership created to acquire and manage transaction-processing companies in the education and financial services industry, a position
he has held since October 2003. Prior to his position with JPT Partners, Mr. Carey served as the Chief Executive Officer of Enumerate Solutions, Inc., a venture backed software company, from November 2001 until October 2003. Mr. Carey also
served as the Executive Vice President for Sallie Mae and was responsible for financial reporting from August 1997 to April 2001, and as a partner with LCL Ltd., a financial advisory management and investment firm, from March 1993 to August 1997. He
serves on the Board of Trustees of the Stone Ridge School. Mr. Carey also serves on the board of directors of Campus Partners, a leading processor of campus based student loans. Mr. Carey received a master of business administration degree
from the University of Maryland and a bachelor of science degree from The Catholic University of America.
The board of
directors concluded that Mr. Carey has the relevant professional experience and skills to serve as director of the Company because of his significant financial expertise. Mr. Carey has twenty-six years of experience in finance and
financial services, holding principal executive officer positions in financial reporting, financial planning and analysis, budgeting, asset-liability management and other areas of financial management. During his time at Sallie Mae, in addition to
financial reporting, Mr. Carey was responsible for all investor and regulatory relations and management.
David R.
Folsom
is our president and chief operating officer. He was appointed to the position of president in January 2011 and to the position of chief operating officer in January 2006. Mr. Folsom was appointed as a Director in 2011.
Mr. Folsom assists the chief executive officer in the execution of our strategic business plan and coordinates our capital raising and borrowing efforts, as well as sourcing and conducting due diligence on potential acquisitions to facilitate
the companys growth. Prior to joining our company, Mr. Folsom was Vice President of Paragon Real Estate, a Cleveland-based early stage real estate venture focusing on distressed multi-family assets in 2005. From 2001 to 2005, he was an
investment banker with BB&T Capital Markets, where he served in the Real Estate Securities Group and Debt Capital Markets Groups. While at BB&T, Mr. Folsom participated in over 70 equity, debt and preferred stock underwritings, as well
as financial advisory transactions across many industries. He was a member of the lead underwriting team that took our company public in 2004. Mr. Folsom served as a commissioned officer in the U.S. Marine Corps, is a graduate of the U.S. Naval
Academy, and received a master of business administration degree from Georgetown University.
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The board of directors concluded that Mr. Folsom has the relevant professional
experience and skills to serve as director of the Company because of his current positions as president and chief operating officer of the Company as well as his past investment banking and real estate financing experience.
James P. OHanlon
became a director in March 2007 and serves on the NC&C Committee as well as the audit committee.
Mr. OHanlon retired from Dominion Energy in January 2003 after serving as President and Chief Operating Officer for three years. He previously served as Chief Operating Officer of Dominion Generation, a generating unit of Dominion
Resources, upon its formation in May 1999. Prior to his employment with Dominion Generation, Mr. OHanlon was with a subsidiary of Virginia Power since 1989 and served as Vice President-Nuclear Services, Vice President-Nuclear Operations
and subsequently, Senior Vice President-Nuclear. He is a Captain (retired) in the U.S. Naval Reserves. Since 2003, Mr. OHanlon has provided consulting services in the areas of management appraisals, budget reviews, and safety assessments.
Mr. OHanlon received a bachelor of science degree in Marine Engineering from the United States Naval Academy and completed studies in nuclear engineering at the U.S. Naval Nuclear Power School. He has also pursued postgraduate studies at
Penn State University and the University of Virginia, Darden School of Business.
The board of directors concluded that
Mr. OHanlon has the relevant professional experience and skills to serve as director of the Company because of his corporate leadership as president and chief operating officer at one of the nations largest energy generation
companies. Mr. OHanlons former positions provide a practical background of business and technical experience while serving in executive, management and supervisory positions.
Andrew M. Sims
is our chief executive officer and chairman of the board and has served in such capacity since our inception in
August 2004. In addition, Mr. Sims served as our president from our inception through December 31, 2010. He served as President of MHI Hotels Services from 1995 until August 2004 after serving for seven years as Vice President of Finance
and Development. As President of MHI Hotels Services, Mr. Sims oversaw company operations as well as the areas of accounting and finance, marketing, development and franchise relations. Andrew M. Sims is the brother of Kim E. Sims.
Mr. Sims serves as a director of MHI Hotels Services. Mr. Sims has a bachelor of science degree in commerce from Washington & Lee University.
The board of directors concluded that Mr. Sims has the relevant professional experience and skills to serve as director of the Company because he has spent over thirty years in the hospitality
industry and has experience operating, developing and owning hotel properties. Mr. Sims has held several positions in hotel management, including general manager and president of the hotel company, MHI Hotel Services. Most recently, as chief
executive officer, Mr. Sims has developed and expanded the Companys hotel portfolio and managed franchise, banking and third party service-provider relations. Mr. Sims employment agreement with us provides that we must nominate
him to serve as a director.
Kim E. Sims
became a director upon completion of our initial public offering in December
2004 and is the President and a director of MHI Hotels Services, a position he has held since December 2004. Mr. Sims served as Executive Vice President of Operations of MHI Hotels Services from 1995 until 2004 and has provided thirty years of
service at MHI Hotels Services. He has a bachelor of science degree in commerce from Washington & Lee University. Kim E. Sims is the brother of Andrew M. Sims.
The board of directors concluded that Mr. Sims has the relevant professional experience and skills to serve as director of the Company because of his more than thirty year experience in hotel
management and operations. As president of MHI Hotels Services, Mr. Sims has an expertise in the hospitality industry that enhances the dialogue of the board of directors. Under the terms of our strategic alliance agreement, MHI Hotels Services
has the right to nominate one (1) person for election to our board of directors at each annual meeting of stockholders for so long as Andrew M. Sims, Kim E. Sims, Christopher L. Sims, a former director, and their affiliates and families own, in
the aggregate, not less than 1.5 million units or shares of our common stock. MHI Hotels Services nominee for director is Kim E. Sims.
8
Edward S. Stein
became a director upon completion of our initial public offering in
December 2004 and is chairman of the NC&C Committee and is a member of the audit committee. He is a founding partner of the Norfolk, Virginia law firm of Weinberg and Stein. Mr. Stein has practiced law in the areas of real estate, estate
planning, probate, corporate law and business law since 1974. He is admitted to the Virginia Bar and is a member of the Norfolk and Portsmouth and Virginia Bar Associations. Mr. Stein received a bachelor of arts degree from Harvard University
and a juris doctor degree from the University of Virginia School of Law.
The board of directors concluded that Mr. Stein
has the relevant professional experience and skills to serve as director of the Company because he has spent more than thirty-five years practicing business, tax and corporate law and had served effectively as counsel for fourteen years to MHI
Hotels Services. Mr. Stein also has developed and rehabilitated real estate and has experience in venture capital transactions.
Anthony C. Zinni
became a director in December 2004 upon completion of our initial public offering and is a member of the NC&C Committee. General Zinni has been a director at BAE Systems since
2001 and served as Chief Executive Officer on an interim basis during 2009. General Zinni also served as a director of DynCorp International from 2006-2008 and served as the Executive Vice President of DynCorp International from July 2008-December
2008. He retired from the U.S. Marine Corps after 39 years of service in October 2000. During his military career, General Zinni served as the Commanding General, First Marine Expeditionary Force from 1994 to 1996, and as Commander-in-Chief, U.S.
Central Command from 1997 to 2000. General Zinni has participated in numerous humanitarian operations and Presidential diplomatic missions. In November 2001, General Zinni was appointed senior adviser and U.S. envoy to the Middle East by Secretary
of State Colin Powell. Since November 2000, General Zinni has consulted in the areas of defense, military, national security, foreign policy and regional issues. Since 2008, he has served as a professor at Cornell University. In 2008, he also served
as a professor at Duke University. General Zinni received a bachelor of arts degree in economics from Villanova University. He also earned a master of arts degree in international relations from Salve Regina College, a master of science degree in
management and supervision from Central Michigan University, and honorary doctorate degrees from both the College of William and Mary and the Marine Maritime Academy.
The board of directors concluded that General Zinni has the relevant professional experience and skills to serve as director of the Company because he is a skilled and experienced leader who has a strong
background in corporate governance. General Zinnis leadership experience includes almost forty years in the U.S. Marine Corps and, most recently, as a director and executive officer of BAE Systems and DynCorp International, two (2) large
global security and defense public companies. General Zinni has served on four (4) private company boards in addition to his public company board involvement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE NOMINEES.
Director Elected by Holders of the Companys Preferred Stock
Ryan P. Taylor
became a director in 2011. He is the Managing Partner of Richmond Hill Investment Co., LP (Richmond Hill), an investment firm launched in December 2010 that is dedicated
to the preservation and growth of capital through disciplined, long-term value investing. In addition, Mr. Taylor is a Managing Director of Essex Equity Capital Management, LLC (Essex Equity) where he joined in June 2008 and is
primarily responsible for the firms investment activities, including sourcing, researching, monitoring and portfolio management. The entities have combined assets under management of approximately $500 million. Prior to joining Essex Equity,
Mr. Taylor spent 10 years at Greenhill & Co., Inc. most recently as a Principal. Mr. Taylor joined Greenhill & Co., Inc. in 1998. Mr. Taylor earned a B.B.A. in Finance with Honors from the University of Texas at
Austin in 1998.
The board of directors concluded that Mr. Taylor has the relevant professional experience and skills to
serve as director of the Company because of his investment banking and real estate financing experience. As set forth
9
in the Articles Supplementary, the holder(s) of the Companys Preferred Stock have the exclusive right, voting separately as a single class, to elect one (1) member of the
Companys board of directors. The holders of the Preferred Stock have designated Mr. Ryan P. Taylor to serve as a director on the Companys board of directors.
Executive Officers of the Company Who Are Not Directors
Anthony E.
Domalski,
50, is our vice-president and chief accounting officer. He joined our Company in May 2005 and was appointed an officer by the board of directors in July 2006. A certified public accountant, he is responsible for financial and tax
reporting. From 2001 to 2005, Mr. Domalski served as Chief Financial Officer for SwissFone, Inc., a Washington, DC based telecommunications company, where he assisted in a management-led buyout of the U.S. international wholesale division from
Swisscom, AG. Prior to his tenure at SwissFone, Inc., Mr. Domalski held several other senior financial positions in the telecommunications and hospitality industry and spent nine years at a local public accounting firm. Mr. Domalski is a
member of the American Institute of Certified Public Accountants. Mr. Domalski received a bachelor of science degree in accounting and finance from the University of Maryland.
Patrick V. Fiel, Jr.
, 36, is our vice president and general counsel. He was appointed to these positions in June 2010.
Mr. Fiel is responsible for overseeing the Companys legal and corporate compliance requirements. Prior to joining us, from 2008 to 2009, Mr. Fiel acted as Assistant General Counsel for Bank of America Corporation where he provided
legal coverage for the Global Corporate & Investment Banking, Global Mortgage Products and Corporate Treasury groups and specifically advised in the areas of mortgage finance, structured products and securitization. Prior to his tenure at
Bank of America Corporation, from 2005 to 2008, Mr. Fiel was an associate at the law firm of Hunton & Williams LLP, where he specialized in capital markets and structured finance transactions. Mr. Fiel was also an associate at the
law firm of Lewis, King, Krieg, & Waldrop, P. C., from 2004 to 2005. Mr. Fiel is a graduate of the College of William and Mary and received his juris doctor degree, with a concentration in business transactions, from the University of
Tennessee College of Law, where he was Editor-in-Chief of the Tennessee Journal of Business Law.
William J. Zaiser
,
66, is our executive vice president, chief financial officer, treasurer and corporate secretary, positions he has held since our inception in August 2004. A certified public accountant licensed in the State of Maryland, he is responsible for
financial analysis, cash management, insurance, investment, risk management and financial reporting. Mr. Zaiser began his career with MHI Hotels Services as a computer consultant, and became the first corporate controller for MHI Hotels
Services. In 1990, he was elected to the board of directors and was promoted to Vice President of Accounting, a position he held until August 2004. As Vice President of Accounting, Mr. Zaiser was responsible for financial analysis, cash
management, insurance, investment and financial reporting. Mr. Zaiser serves as a director of MHI Hotels Services. Before joining the hospitality industry, Mr. Zaiser was an instructor of mathematics at the University of Maryland,
Montgomery College, and several high schools. Mr. Zaiser is a member of the American Institute of Certified Public Accountants and the Hospitality Financial and Technology Professionals. Mr. Zaiser received a master of arts degree in
applied mathematics from the University of Maryland and a bachelor of arts degree in mathematics and physics from Ohio Wesleyan University.
Meetings and Certain Committees of the Board of Directors
The board of directors conducts its business through meetings of the board of directors and through its committees. The board has two (2) standing committees: the NC&C Committee and an audit
committee. During the fiscal year ended December 31, 2011, the board of directors of our Company held four (4) regular meetings and four (4) special meetings. No director of the Company attended fewer than 75% of the total meetings of
the board of directors and committee meetings on which such board member served during this period. Five (5) of the then current seven (7) directors attended the Companys 2011 annual meeting of stockholders. In addition, current
director David J. Beatty attended the Companys 2011 annual meeting of stockholders. Further, current director David R. Folsom, in his capacities as the Companys president and chief operating officer, attended the Companys 2011
annual meeting of stockholders.
10
Independent Directors
All of the members of the audit committee and the NC&C Committee and a majority of the Companys board of
directors must meet the test of independence as defined by the listing standards of the NASDAQ
®
Stock Market or NASDAQ. The NASDAQ standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the board of directors has a responsibility to make an affirmative determination
that a director has no relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) that would interfere with the exercise of independent judgment. Our board of
directors has determined that each of Messrs. Beatty, Carey, OHanlon, Stein, Taylor and Zinni satisfies the bright-line criteria and that none has a relationship with the Company that would interfere with such persons ability to exercise
independent judgment as a member of the board of directors. Therefore, we believe that each of such directors is independent under the NASDAQ rules.
The NC&C Committee is currently comprised of directors Stein, OHanlon and Zinni. All members of the NC&C Committee are independent in accordance with the listing standards of the NASDAQ.
This standing committee determines the salary for the chief executive officer, executive vice-president and chief financial officer and the president and chief operating officer. The purpose of the NC&C Committee is to make recommendations to
the board of directors regarding corporate governance policies and practices, recommend criteria for membership on the board of directors, make recommendations to the board of directors of potential director nominees, make recommendations to the
board of directors concerning the membership, size and responsibilities of each of the committees, develop general policies relating to compensation and benefits, determine compensation for, and evaluate the performance of, our executive officers
and administer our 2004 Long-Term Incentive Plan, which we refer to as our Long-Term Incentive Plan. The NC&C Committee met two (2) times during fiscal year 2011. The NC&C Committee has adopted a written charter that was amended on
October 17, 2011 and sets forth the specific functions and responsibilities of the committee. The amended NC&C Committee charter is available on our website at
www.MHIHospitality.com
.
The audit committee, a standing committee, is currently comprised of directors Beatty, Stein and OHanlon. The board of directors
has determined that David J. Beatty, chairman of the audit committee, qualifies as an audit committee financial expert as defined in Item 407(d)(5) of Regulation S-K. All members of the audit committee are independent in accordance
with the listing standards of the NASDAQ. The audit committee meets with the independent registered public accounting firm, Witt Mares, PLC, to discuss the annual audit and any related matters. The audit committee is further responsible for internal
controls over financial reporting. The audit committee met ten (10) times in fiscal year 2011. The audit committee has adopted a written charter that was amended on October 17, 2011 and sets forth the specific functions and
responsibilities of the committee. The amended audit committee charter is available on our website at
www.MHIHospitality.com
.
Risk
Oversight
The chief financial officer has responsibility for the day-to-day risk management functions of the Company and
reports directly to the audit committee regarding issues related to risk management for the audit committees review and assessment. The audit committee meets with the chief financial officer to review and discuss the Companys risk
management and related policies and procedures. The audit committee meets as often as and to the extent that the audit committee deems necessary or appropriate, but at least annually in connection with the audit of each fiscal years financial
statements.
Additionally, the charters of the boards committees delegate to the committees various elements of the
boards risk oversight responsibility. For example, our audit committee is responsible for periodically inquiring of management, the members of the internal audit department and the independent auditors about the Companys major financial
risks or exposures; discussing the steps management has taken to monitor and control such exposures; and discussing guidelines and policies with respect to risk assessment and risk management. Our NC&C Committee oversees risks associated with
our corporate governance guidelines; our executive
11
compensation plans and arrangements; and our code of business conduct, including compliance with listing standards for independent directors, committee assignments and conflicts of interest. All
these risks are discussed with the entire board of directors as often as and to the extent that the committees deem necessary or appropriate.
Report of the Audit Committee
For the fiscal year ended December 31, 2011, the audit committee: (i) reviewed and discussed the audited financial statements with management, (ii) discussed with the Companys
independent registered public accounting firm, Witt Mares, PLC, all matters required to be discussed by the Statement on Auditing Standards No. 61, as modified and superseded (AICPA,
Professional Standards
, Vol. 1. AU section 380), as
adopted by the Public Company Accounting Oversight Board in Rule 3200T, and (iii) received the written disclosures and letter from Witt Mares, PLC required by the applicable requirements of the Public Company Accounting Oversight Board
regarding Witt Mares, PLCs communications with the audit committee concerning independence and discussed with Witt Mares, PLC its independence. Based on the foregoing review and discussions, the audit committee recommended to the board of
directors that the audited financial statements be included in the Companys annual report on Form 10-K for the fiscal year ended December 31, 2011 for filing with the Securities and Exchange Commission.
Audit Committee:
David J. BeattyChairman
Edward S. Stein
James P. OHanlon
Director Nomination Process
The board of directors is responsible for assembling for stockholder consideration a group of nominees (other than the director to be elected by the holder(s) of the Companys Preferred Stock) that,
taken together, have the experience, qualifications, attributes and skills appropriate for functioning effectively as a board. The NC&C Committee works with the board of directors to determine the appropriate characteristics, skills and
experiences for the board as a whole and its individual members with the objective of having a board with a diverse background and experiences and makes recommendations to the board of potential nominees. When recommending candidates, the NC&C
Committee assesses the boards size and composition; corporate governance policies; applicable listing standards and laws; individual director performance, expertise and willingness to serve actively; the number of other public and private
company boards on which a director candidate serves; consideration of director nominees proposed or recommended by stockholders and related policies and procedures; and other appropriate factors. Characteristics expected of all directors include
integrity, high personal and professional ethics, strong professional reputation and record of achievement, constructive and collegial personal attributes, sound business judgment and the ability and commitment to devote sufficient time and energy
to board service. There are no minimum qualifications that the NC&C Committee has established for a candidate recommended to the board of directors by the NC&C Committee. The NC&C Committee does not have a diversity policy; however, the
NC&C Committee seeks to include on the board a complementary mix of individuals with diverse backgrounds and skills reflecting the broad set of challenges that the board confronts. In evaluating the suitability of individual board members, the
NC&C Committee takes into account many factors, including general understanding of marketing and finance; understanding of our business; education and professional background; personal accomplishment; diversity of viewpoint; business expertise;
and industry knowledge. The board of directors, through the NC&C Committee, evaluates each individual in the context of the board as a whole, with the objective of recommending a group that can best perpetuate the success of our business and
represent stockholder interests through the exercise of sound judgment using its diversity of experience. The NC&C Committee evaluates each incumbent director to determine whether such person should be nominated to stand for re-election, based
on the types of criteria outlined above as well as the directors contributions to the board during the current term.
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In recommending candidates to the board of directors, the NC&C Committee will consider
nominees recommended by stockholders so long as the recommendation is submitted to our corporate secretary within the timeframe required to request a proposal that will be included in the proxy materials for our next annual meeting of stockholders.
However, the NC&C Committee may, in its sole discretion, reject any such recommendation for any reason.
Under the terms
of our strategic alliance agreement, MHI Hotels Services, LLC (MHI Hotels Services) has the right to nominate one (1) person for election to our board of directors at each annual meeting of stockholders for so long as Andrew M.
Sims, Kim E. Sims, Christopher L. Sims, a former director, and their affiliates and families own, in the aggregate, not less than 1.5 million units or shares of our common stock. MHI Hotels Services nominee for director is Kim
E. Sims. Kim E. Sims is not considered independent under the corporate governance standards of the NASDAQ.
In
addition, as set forth in the Articles Supplementary, the holder(s) of the Companys Preferred Stock have the exclusive right, voting separately as a single class, to elect one (1) member of the Companys board of directors. The
holders of the Preferred Stock have designated Mr. Ryan P. Taylor to serve as a director on the Companys board of directors.
Further, Andrew M. Sims employment agreement with us provides that we must nominate him to serve as a director. The nomination right afforded to MHI Hotels Services and that provided for under
Andrew M. Sims employment agreement are subject to the determination of the NC&C Committee, in connection with each annual or special meeting of stockholders at which directors will be elected, that the nominee satisfies the standards
established by the committee for service on the board. If Andrew M. Sims fails to be nominated to our board of directors or is involuntarily removed from our board of directors, unless for cause or vote by the stockholders, he will receive,
among other things, a severance payment equal to three (3) times his combined salary base and actual bonus compensation for the preceding fiscal year. Andrew M. Sims is not independent under the corporate governance standards of the
NASDAQ.
The board of directors believes that its procedures comply with the requirements of the NASDAQ and provide adequate
assurance that nominations are approved by independent directors.
Leadership Structure
Our board of directors remains committed to maintaining strong corporate governance and appropriate independent oversight of management.
The board has given careful consideration to our Companys leadership structure and has determined that our Company and our stockholders currently are best served by having Andrew M. Sims serve as both chairman of the board of directors and
chief executive officer. This structure enables Andrew M. Sims to ensure that (i) the boards agenda reflects our strategic challenges and opportunities; (ii) the board is presented with information required for it to fulfill its
responsibilities; and (iii) board meetings are as productive and effective as possible. In the view of the board, the combined role of chairman and chief executive officer promotes unified leadership and direction for the board and executive
management and it allows for a single, clear focus for the chain of command to execute the Companys strategic initiatives and business plan. The board believes that this leadership structure is also appropriate given the size of the Company.
The Company has only nine (9) employees and a board of nine (9) directors. Due to the size of our Company, it would not be financially and strategically prudent to have separate leadership roles. Andrew M. Sims has spent his career in
leadership positions at the Company and our management company, MHI Hotels Services. His superior knowledge of all aspects of the Company, the hotel management company and the hospitality industry makes him the most qualified person to serve both
roles for the Company.
The board of directors and its committees oversee the effectiveness of management policies and
decisions, including the execution of key strategic initiatives. Each of the boards committees is composed entirely of independent directors. Consequently, independent directors directly oversee such critical matters as the
13
compensation of executive management, including Andrew M. Sims compensation, the selection and evaluation of directors and the development and implementation of corporate governance
programs. The independent directors conduct an annual performance review of the chairman and chief executive officer, assessing the Companys financial and non-financial performance and the quality and effectiveness of Andrew M. Sims
leadership. In addition, the NC&C Committee oversees the processes by which Andrew M. Sims is evaluated. The board believes that the Companys corporate governance documents, which are available on the Companys Web site, help ensure
that strong and independent directors will continue to play the central oversight role necessary to maintain the Companys commitment to the highest quality corporate governance. Pursuant to these governance principles, independent board
members meet as often as and to the extent that the independent directors deem necessary or appropriate at executive sessions without management present.
Our board of directors has designated Edward S. Stein, the chairman of the NC&C Committee, to serve as the lead independent director. The lead independent director serves as chairman of meetings of
the independent directors. The lead independent director, a separate and independent position from the chairman, calls meetings, supervises the conduct of meetings of the independent directors, records the minutes and reports meeting results and any
decisions of the independent directors to our chairman and facilitates communication between the independent directors, the chairman and management. The position held by Edward S. Stein ensures effective corporate governance for our Company.
Stockholder Communications
The board of directors does not have a formal process for stockholders to send communications to the board. In view of the infrequency of stockholder communications to the board of directors, the board
does not believe that a formal process is necessary. Written communications received by our Company from stockholders are shared with the full board no later than the next regularly scheduled board meeting. The board encourages, but does not
require, directors to attend the annual meeting of stockholders.
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DIRECTOR AND EXECUTIVE COMPENSATION
The NC&C Committee is responsible for developing our policies relating to compensation and benefits, determining compensation for,
and evaluating the performance of, certain of our executive officers, and administering our Long-Term Incentive Plan. The NC&C Committee determines compensation for our three (3) most highly paid executive officers: the chief executive
officer, the executive vice-president and chief financial officer and the president and chief operating officer. We refer to these three (3) executive officers as our principal executive officers.
The NC&C Committees principal objective in establishing compensation policies is to develop and administer a comprehensive
program designed to attract and retain outstanding managers. The NC&C Committees guidelines for compensation of our principal executive officers are designed to provide fair and competitive levels of total compensation while linking
elements of compensation with performance. A further objective of our compensation policies is to provide incentives and reward each principal executive officer for his contribution to our Company. To that end, the NC&C Committee believes
executive compensation packages provided by us to the principal executive officers should include both cash and stock-based compensation that reward performance as measured against established goals.
Elements of our Compensation Plan
Elements of compensation for our principal executive officers consist principally of base salary, performance bonuses and awards of shares of common stock under our Long-Term Incentive Plan. In
determining each element of compensation for each principal executive officer, the NC&C Committee primarily considers:
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market data relating to an identified peer group;
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company performance in light of specified goals and guidance;
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recommendations of the chief executive officer;
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individual performance of the principal executive officer; and
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the terms of each principal executive officers employment agreement.
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Base Salary
The original base salary amounts of the principal executive officers were provided for in their employment agreements and are subject to adjustment pursuant to the terms of those agreements. In setting
base salaries, and annually considering adjustments, the NC&C Committee uses an evaluation process considering the principal executive officers position, level and scope of responsibility and an evaluation of base salaries and other
benefits of other executive officers of comparable companies, including an analysis of our Companys current operating results.
Cash Bonus Plan
Under our employment agreements with the principal
executive officers, each principal executive officer is eligible to receive a cash bonus in amounts between 20%-30% of base salary. The NC&C Committee has reviewed these agreements and has determined in the best interests of the Company to
structure a cash bonus plan that may award above or below the 20%-30% range indicated in the agreements subject to consideration of the following metrics:
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achieving the Company goal for funds from operations (FFO);
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stock performance relative to our company peer group; and
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realizing personal and other Company goals established by our board of directors based on recommendations from our chief executive officer.
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The NC&C Committee has determined that for 2012, the annual target bonus for which our chief executive
officer, our chief financial officer and our chief operating officer is eligible to receive will be an amount between twenty percent (20%) and thirty percent (30%) of each such executives base salary.
Long-Term Stock Bonus Program
The NC&C Committee formulated, and the board of directors adopted, a Long Term Stock Bonus Program, as amended, for the five year period 2007-2011, which is implemented in conjunction with our
Long-Term Incentive Plan, discussed below. Currently, the program covers our chief executive officer, our executive vice-president and chief financial officer and our president and chief operating officer. When the Long-Term Stock Bonus Program was
established, the NC&C Committee determined the appropriate target amounts of stock awards for each principal executive officer by reviewing market data relating to compensation programs for senior executives in the Companys peer group. At
that time, the NC&C Committee confirmed they had identified appropriate targets and metrics with its compensation consultants, HVS Executive Search.
On February 1, 2010, the board of directors amended the Long-Term Stock Bonus Program as applied to Andrew M. Sims annual target stock bonus wherein the annual target amount was increased to
the level described below.
The Long-Term Stock Bonus Program covers a five-year period, with annual targets of 15,000 shares
for award to our chief executive officer, 4,000 shares for award to our executive vice president and chief financial officer and 2,000 shares for award to our president and chief operating officer. For Andrew M. Sims, 5,000 of those shares will be
deemed earned each year if Andrew M. Sims has been continuously employed by the Company for the full year. For William J. Zaiser and David R. Folsom, fifty percent (50%) of the targeted amount of shares will be deemed earned each year if the
principal executive officer has been continuously employed by the Company for the full year. The remaining shares for Andrew M. Sims and fifty percent (50%) of the shares for William J. Zaiser and David R. Folsom each year may be awarded
based on the Companys and/or the principal executive officers performance in four (4) areas:
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FFO, as compared with projections;
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shareholder return for the year as compared with our companys peer group;
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absolute shareholder return, comprised of stock appreciation from the first of each year, together with dividends paid during the year, with 12% as the
annual target; and
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a subjective determination of the achievement of individual goals.
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At an upcoming meeting of the Companys board of directors, the NC&C Committee will recommend for adoption parameters of the Long Term Stock Bonus Plan beyond calendar year 2011.
Tax Considerations
Section 162(m) of the Internal Revenue Code generally sets a limit of $1.0 million on the amount of annual compensation paid to an executive officer (other than certain enumerated categories of
compensation, including performance-based compensation) that may be deducted by a publicly-held company. It is the policy of the board of directors and the NC&C Committee to seek to qualify executive compensation for deductibility to the extent
that such policy is consistent with our overall objectives and executive compensation policy. None of the principal executive officers received compensation in 2011 in excess of the limits imposed under Section 162(m).
16
Summary Compensation Table
The following table sets forth the cash and non-cash compensation awarded to or earned by Andrew M. Sims, William J. Zaiser and David R.
Folsom during the past two (2) fiscal years.
Summary Compensation Table
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Name and Principal Position
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Year
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Salary
($)
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Bonus
($)
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Stock
Awards
($)
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All Other
Compensation
($)
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Total
($)
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Andrew M. Sims,
CEO
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2011
2010
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$
$
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401,570
342,169
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$
$
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75,864
50,000
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$
$
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24,000
17,780
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(1)
(2)
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$
$
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10,955
(3)
10,955
(4)
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$
$
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512,389
424,334
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William J. Zaiser,
CFO, Executive Vice President and Secretary
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2011
2010
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$
$
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233,896
217,141
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$
$
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42,456
25,000
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$
$
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14,400
6,350
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(1)
(2)
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$
$
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12,315
(3)
12,315
(4)
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$
$
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303,067
262,031
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David R. Folsom,
COO and President
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2011
2010
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$
$
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218,764
173,757
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$
$
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39,680
35,000
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$
$
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15,600
12,700
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(1)
(2)
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$
$
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13,215
(3)
13,215
(4)
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$
$
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287,259
237,122
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(1)
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Represents the dollar value of restricted stock awards calculated by multiplying the closing market price of our common stock of $2.40 on February 2, 2012, the
date of the grant, as reported on the NASDAQ, by the number of shares of restricted stock awarded. The stock awards were accounted for in 2011.
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(2)
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Represents the dollar value of restricted stock awards calculated by multiplying the closing market price of our common stock of $2.54 on March 22, 2011, the date
of the grant, as reported on the NASDAQ, by the number of shares of restricted stock awarded. The stock awards were accounted for in 2010.
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(3)
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Includes the Company contributions to the 401(k) plan in the amount of $9,800 for each of Andrew M. Sims, William J. Zaiser and David R. Folsom,
respectively, in 2011. Also includes insurance premiums paid by our Company for life insurance policies for the principal executive officers in the amount of $1,155 for Mr. Sims, $2,515 for Mr. Zaiser and $3,415 for Mr. Folsom in
2011.
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(4)
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Includes the Company contributions to the 401(k) plan in the amount of $9,800 for each of Andrew M. Sims, William J. Zaiser and David R. Folsom, respectively, in 2010.
Also includes insurance premiums paid by our Company for life insurance policies for the principal executive officers in the amount of $1,155 for Mr. Sims, $2,515 for Mr. Zaiser and $3,415 for Mr. Folsom in 2010.
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No other compensation has been awarded to, earned by or paid to any of our principal executive officers which is required to be
reported in the above tables.
On February 2, 2012, we granted 10,000 shares of stock to Andrew M. Sims, 6,000 shares of
stock to William J. Zaiser and 6,500 shares of stock to David R. Folsom under our 2004 Long-Term Incentive Plan.
2011 Base
Salary
For 2011, Andrew M. Sims and William J. Zaiser received a 2.5% increase to their base salaries over 2010, in
addition to certain base salary increases provided for in their respective employment agreements. For 2011, David R. Folsom received a base salary increase pursuant to his employment agreement.
2011 Bonuses Awarded
The NC&C Committee awarded cash bonuses to the principal executive officers for fiscal year 2011 of $75,864, $42,456 and $39,680 to Andrew M. Sims, William J. Zaiser and David R. Folsom, respectively.
In making its decisions, the NC&C Committee considered the factors described above under the caption
Cash Bonus Program.
17
Stock Awards Granted
Pursuant to the Long-Term Stock Bonus Program, the NC&C Committee awarded shares of our Companys stock to the principal
executive officers for fiscal year 2011 of 10,000, 6,000 and 6,500 vested shares to Andrew M. Sims, William J. Zaiser and David R. Folsom, respectively, based on performance in fiscal year 2011. In making its decision, the NC&C Committee
considered the factors described above under the caption
Long-Term Stock Bonus Program.
Employment
Agreements
Our employment agreements with Andrew M. Sims, our chief executive officer, William J. Zaiser, our executive
vice president and chief financial officer, and David R. Folsom, our president and chief operating officer, provide for each executives annual salary and possible additional compensation in the form of cash bonus and restricted stock awards.
Each executive will receive customary benefits, including a term life insurance policy of $1 million and disability insurance in an amount so that each executive will receive the same monthly payments as under such executives respective
employment agreement in the event of disability. As described below, the employment agreements provide our executives with severance benefits if such executives employment ends under certain circumstances including a change in control. We
believe that the employment agreements will benefit us by helping to retain Mr. Sims, Mr. Zaiser and Mr. Folsom and by allowing such executives to focus on their duties without the distraction of the concern for their personal
situation in the event of a possible change in control of our Company.
Our employment agreements with Mr. Sims,
Mr. Zaiser and Mr. Folsom contain provisions providing for substantial payments to these executives in the event of a change of control of our company. Specifically, if we terminate these executives employment without cause or the
executive resigns with good reason, which in the case of Mr. Sims includes a failure to nominate Andrew M. Sims to our board of directors or his involuntary removal from our board of directors, unless for cause or by vote of the stockholders,
or if there is a change of control, each of these executives is entitled to the following:
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any accrued but unpaid salary and bonuses;
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vesting of any previously issued stock options and restricted stock;
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payment of the executives life, health and disability insurance coverage for a period of five (5) years following termination;
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any unreimbursed expenses; and
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a severance payment equal to three (3) times for Andrew M. Sims and David R. Folsoms and two (2) times for William J.
Zaisers respective combined salary and actual bonus compensation for the preceding fiscal year will be paid within five (5) days of the executive officers last day of employment.
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18
DIRECTOR COMPENSATION
The following table sets forth the cash and non-cash compensation awarded to certain of our independent, non-employee directors during
the year ended December 31, 2011.
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Name
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Fees
Earned
or Paid
in Cash
($)
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Stock
Awards
($)
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Total
($)
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David J. Beatty
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$
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13,000
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$
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3,600
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(1)
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$
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16,600
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J. Paul Carey
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$
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23,500
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$
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7,620
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(2)
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$
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31,120
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James P. OHanlon
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$
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22,875
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$
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7,620
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(2)
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$
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30,495
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Edward S. Stein
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$
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27,875
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$
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7,620
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(2)
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$
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35,495
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Anthony C. Zinni
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$
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18,750
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$
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7,620
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(2)
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$
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26,370
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(1)
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Represents the dollar value of the stock award calculated by multiplying the closing market price of our common stock of $2.40 on February 2, 2012, the date of
grant, as reported on the NASDAQ, by the number of shares of stock awarded.
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(2)
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Represents the dollar value of restricted stock awards calculated by multiplying the closing market price of our common stock of $2.54 on March 22, 2011, the date
of grant, as reported on the NASDAQ, by the number of shares of restricted stock awarded. The restricted stock awards were fully vested on December 31, 2011.
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The NC&C Committee reviews the level of compensation of our non-employee directors on an annual basis. To determine how appropriate
the current level of compensation for our non-employee directors is, the NC&C Committee has historically obtained data from a number of different sources including publicly available data describing director compensation in peer companies.
We compensate certain of our independent, non-employee directors for their services as directors through a mixture of cash
and equity-based compensation. Independent, non-employee directors receive annual compensation of $15,000, plus a fee of $750 (plus out-of-pocket expenses) for attendance in person at each meeting of the board of directors, and $750 for each
committee meeting attended in person. Directors who attend meetings telephonically receive a fee of $375. Directors who are also officers or employees of our Company or are affiliated with MHI Hotels Services, Richmond Hill or Essex Equity are not
paid any director fees. Directors Edward S. Stein and David J. Beatty each receive an additional $5,000 per year for their services as chair of the NC&C Committee and audit committee, respectively.
On an annual basis, the NC&C Committee makes a recommendation to the board of directors for awards of restricted stock to certain
independent, non-employee directors for its consideration and approval. On February 2, 2012, each independent non-employee director named above received 3,000 shares that will vest on December 31, 2012. In addition, on February 2,
2012, David J. Beatty received 1,500 unrestricted shares for his service as a director during calendar year 2011. On February 3, 2011, each independent non-employee director named above, except David J. Beatty, received 3,000 shares that were
fully vested on December 31, 2011. Although distributions are paid on all restricted stock, whether or not vested, at the same rate and on the same date as on shares of our common stock, these holders will be prohibited from selling such shares
until they vest. To date, the stock awards have been restricted until the last day of the fiscal year in which they were granted.
Long-Term Incentive Plan
We have established our Long-Term Incentive Plan for the purpose of recruiting and retaining our and our affiliates executive
officers, employees, non-employee directors and consultants. The Long-Term Incentive Plan authorizes the issuance of options to purchase shares of common stock and the grant of stock awards, deferred shares, performance shares and performance units.
19
Administration of the Long-Term Incentive Plan is carried out by the NC&C Committee. The
NC&C Committee may delegate a portion of its authority under the Long-Term Incentive Plan to one or more officers.
Our
officers and employees and those of our Operating Partnership and other subsidiaries are eligible to participate in the Long-Term Incentive Plan. Our non-employee directors and other persons that provide consulting services to us and our
subsidiaries are also eligible to participate in the Long-Term Incentive Plan.
20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with our audit committee charter and procedures established by the audit committee, our audit committee is responsible for
reviewing and approving the terms and conditions of all related party transactions. Any transaction, in which the amount involved exceeds $120,000, and in which a director or executive officer of our Company or a member of
the immediate family of a director or officer has a direct or indirect material interest, would need to be approved by our audit committee prior to our Company entering into such transaction. The procedures for review and approval of certain
relationships and related transactions are contained in our audit committee charter which is available on our website at
www.MHIHospitality.com
.
All new related party transactions that were not previously approved were reviewed and approved by our audit committee in 2011, unless otherwise indicated.
Transactions with MHI Hotels Services, LLC
MHI Hotels Services is currently the management company for each of our hotels.
MHI Hotels Services, our management company, is owned and controlled by individuals including Andrew M. Sims, our chairman and chief
executive officer, Kim E. Sims, a current director, Christopher L. Sims, a former director, and William J. Zaiser, our executive vice president and chief financial officer. One (1) of our current directors and a former director, Kim E. Sims and
Christopher L. Sims, respectively, are currently officers and employees of MHI Hotels Services. Andrew M. Sims, Kim E. Sims, Christopher L. Sims and William J. Zaiser are also directors of MHI Hotels Services.
Strategic Alliance Agreement
On December 21, 2004, we entered into a ten-year strategic alliance agreement with MHI Hotels Services pursuant to which (i) MHI Hotels Services agrees to refer to us (on an exclusive basis)
hotel acquisition opportunities in the United States presented to MHI Hotel Services and (ii) unless a majority of our independent directors in good faith concludes for valid business reasons that another management company should manage a
hotel owned by us, we agree to offer MHI Hotels Services or its subsidiaries the right to manage hotel properties that we acquire in the United States. Pursuant to the strategic alliance agreement, the Crowne Plaza Jacksonville Riverfront, acquired
in July 2005, the Sheraton Louisville Riverside, opened in May 2008, the Crowne Plaza Hampton Marina, acquired in April 2008, and the Crowne Plaza Tampa Westshore, opened in March 2009, are managed by MHI Hotels Services.
In addition, during the term of the agreement, MHI Hotels Services has the right to nominate one (1) person for election to our
board of directors at our annual meeting of stockholders, subject to the approval of such nominee by our NC&C Committee for so long as certain of our officers and directors, Andrew M. Sims, Kim E. Sims, Christopher L. Sims, a former director,
and their families and affiliates, hold, in the aggregate, not less than 1.5 million units or shares of our common stock. MHI Hotels Services nominee for director is Kim E. Sims.
Management Agreements
Pursuant to the terms of a master management
agreement, we have engaged MHI Hotels Services as the property manager for eight (8) of our wholly-owned hotels. Certain of our executive officers and certain of our directors are also directors of MHI Hotels Services.
The master management agreement has a term of ten (10) years for our six (6) initial hotels and a term of ten (10) years
for each hotel we acquire in the future that becomes subject to such agreement, including the Crowne Plaza Jacksonville Riverfront and the Crowne Plaza Hampton Marina. During the third quarter of 2006, we sold the Holiday Inn Downtown Williamsburg
and purchased the former Louisville Ramada Riverfront Inn,
21
now the Sheraton Louisville Riverside, substituting the Louisville property for the Williamsburg property pursuant to the terms of the master management agreement. MHI Hotels Services benefits
from the payment of management fees by us pursuant to our master management agreement. MHI Hotels Services receives a base management fee equal to a percentage of each hotels revenues (2.0% for the first year, 2.5% for the second year and 3.0%
thereafter). Pursuant to the master management agreement, MHI Hotels Services receives an incentive fee equal to 10% of the amount by which gross operating profit of the hotels on an aggregate basis for a given year exceeds gross operating profits
for the same hotels, on an aggregate basis, for a prior year, subject to a maximum amount of 0.25% of the aggregate gross revenue of the hotels.
In January 2008, the master management agreement was amended to revise certain provisions relating to payment by our TRS Lessee to MHI Hotels Services of a project management fee equal to five percent
(5%) of the total project costs associated with the management, coordination, planning and execution of a major repositioning or product improvement plan for a company hotel, subject to certain conditions.
In January 2009, we entered into a new management agreement with MHI Hotels Services solely for the management of the Crowne Plaza Tampa
Westshore. The audit committee reviewed and approved this new management agreement in January 2009. The agreement changes certain provisions from those contained in the master management agreement for our other eight (8) wholly-owned
properties. Specifically, if we terminate the management agreement for convenience, we will pay MHI Hotels Services base and incentive management fees through the end of the initial year of the agreement or ninety (90) days, whichever is
greater, as opposed to terms of the master management agreement which provides that MHI Hotels Services must be paid the base and incentive fees for the remainder of the initial or renewal term. The provisions of the new agreement related to base
management and incentive management fees are the same as those contained in the master management agreement, except that the incentive fee is calculated on a stand-alone basis for the Crowne Plaza Tampa Westshore, and not on an aggregate basis with
the other eight (8) properties. In addition, provisions relating to the submission and approval of the operating budgets were amended.
Any amendment, supplement or modification of the master management agreement and the Tampa management agreement must be in writing signed by all parties and approved by a majority of our independent
directors. If the master management agreement terminates as to all of the hotels covered in connection with a default under the master management agreement, the strategic alliance agreement will also terminate.
For the years ended December 31, 2011 and 2010, the Company paid MHI Hotels Services approximately $2.5 million and $2.1 million,
respectively, in management fees.
MHI Hotels Services also provides construction services for the Company under the terms of
the master management agreement. In 2011, the Company paid $0 in construction management fees to MHI Hotels Services. In 2010, the Company paid $208,400 in construction management fees to MHI Hotels Services.
Shell Island Resort
In connection with the Shell Island Resort, we entered into sublease arrangements with MHI Hotels LLC and MHI Hotels Two, Inc., affiliates of our management company, MHI Hotels Services. Under the
sublease arrangements, MHI Hotels LLC and MHI Hotels Two, Inc. paid us a fixed annual rent of $640,000. Consequent to the cancellation of the management companys contract to manage the condominium rental program and expiration of the
underlying leases in December 2011, our operating partnership will continue to receive a reduced set of minimum payments through December 2013.
Employee Medical Benefits
We purchase employee medical benefits through Maryland Hospitality, Inc. (d/b/a MHI Health), an affiliate of MHI Hotels Services. For the years ended December 31, 2011 and 2010, the Company paid
$2,448,431 and $2,185,475, respectively, for benefits.
22
Transactions with Richmond Hill Investment Co., LP, Essex Equity Capital Management, LLC and their
affiliates
On April 18, 2011, the Company entered into a Securities Purchase Agreement (the Purchase
Agreement) with Essex Illiquid, LLC and Richmond Hill (collectively, the Investors), under which the Company issued and sold to the Investors in a private placement 25,000 shares of the Companys Preferred Stock and a warrant
(the Warrant) to purchase 1,900,000 shares of the Companys common stock, par value $0.01 per share, for a purchase price of $25.0 million. On December 21, 2011, the Company amended the terms of the Warrant. Pursuant to the
Warrant amendment, the exercise price per share of common stock covered by the Warrant will be adjusted from time to time in the event of cash dividends upon common stock by deducting from such exercise price the per-share amount of such cash
dividends.
Mr. Ryan P. Taylor is a director and Managing Partner of Richmond Hill and a Managing Director of Essex
Equity, an affiliate of Essex Illiquid, LLC and Essex Equity High Income Joint Investment Vehicle, LLC. As set forth in the Articles Supplementary, the holder(s) of the Companys Preferred Stock have the exclusive right, voting separately as a
single class, to elect one (1) member of the Companys board of directors. The holders of the Preferred Stock have designated Mr. Ryan P. Taylor to serve as a director on the Companys board of directors.
On April 18, 2011, the Company entered into a Note Agreement with Essex Equity High Income Joint Investment Vehicle, LLC (the
Note Agreement). Pursuant to the terms of the Note Agreement, the Company has the right to borrow up to $10.0 million on or before December 31, 2011. The principal amount borrowed under the Note Agreement bears interest at the rate
of 9.25% per annum, payable quarterly in arrears. On December 21, 2011, the Company entered into an amendment to the Note Agreement to extend the lenders loan commitment by 17 months through May 31, 2013. As of December 31,
2011, the Company had $5.0 million of availability on its bridge loan amount.
23
PROPOSAL IIRATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Witt Mares, PLC was the Companys independent registered public accounting firm for the 2011 fiscal year. The board of directors has
appointed Witt Mares, PLC to be the Companys independent accountants for the fiscal year ending December 31, 2012, subject to ratification by our stockholders. The engagement of Witt Mares, PLC was approved in advance by the audit
committee. A representative of Witt Mares, PLC is expected to be present at the Annual Meeting to respond to stockholders questions and will have the opportunity to make a statement if the representative so desires. If the stockholders fail to
ratify the appointment, the audit committee will reconsider its selection.
Audit Fees
. The aggregate fees billed by
Witt Mares, PLC for professional services rendered for the audit of the Companys annual consolidated financial statements, for the review of the consolidated financial statements included in the Companys quarterly reports on Form 10-Q
and for audits of acquisitions, consents and the review of Company filings with the Securities and Exchange Commission for the fiscal years ended December 31, 2011 and December 31, 2010 were $215,000 and $210,951, respectively.
Audit-Related Fees
. The aggregate fees billed by Witt Mares, PLC for fees associated with audit services not required by statute
or regulation and services related to the audit of the annual financial statements and to the review of the quarterly financial statements for the fiscal years ended December 31, 2011 and December 31, 2010 were $4,773 and $20,050,
respectively.
Tax Fees
. The aggregate fees billed by Witt Mares, PLC for professional services rendered for tax
compliance, tax advice or tax planning for the years ended December 31, 2011 and December 31, 2010 were $81,301 and $83,427, respectively.
All Other Fees
. The aggregate fees billed by Witt Mares, PLC for professional services rendered for services or products other than those listed under the captions Audit Fees,
Audit-Related Fees, and Tax Fees for the years ended December 31, 2011 and December 31, 2010 were $0 and $4,600, respectively, and consisted of assistance in accounting matters, communications with the Securities
and Exchange Commission and issues relating to the Companys internal controls.
It is the audit committees policy
to pre-approve all audit and non-audit services prior to the engagement of the Companys independent auditor to perform any service. All of the services listed above for 2011 and 2010 were approved by the audit committee prior to the service
being rendered.
Ratification of the appointment of the independent registered public accounting firm requires the affirmative
vote of a majority of the votes cast by the stockholders of the Company at the Annual Meeting.
THE BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF WITT MARES, PLC AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2012 FISCAL YEAR.
24
STOCKHOLDER PROPOSALS
Stockholder Proposals for the 2013 Annual Meeting
. Stockholders interested in presenting a proposal for consideration at the
Companys annual meeting of stockholders in 2013 may do so by following the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the Companys bylaws. To be eligible for inclusion in the proxy
statement, a stockholder proposal must be received by the Companys Corporate Secretary no later than November 20, 2012, which is 120 calendar days prior to the anniversary of the mailing of this proxy statement. Any such proposal should
be mailed to the Company at 410 West Francis Street, Williamsburg, VA 23185.
Stockholders interested in presenting a proposal
or nomination of a candidate for election as a director at the Companys 2013 annual meeting of stockholders outside the procedures prescribed in Rule 14a-8 (e.g., a proposal to be presented at the annual meeting of stockholders in 2013 but not
included in the Companys proxy statement) must do so in accordance with the advance notice provisions of the Companys bylaws, and the nomination or proposal must be received by the Companys Corporate Secretary no earlier than
November 20, 2012 and no later than December 20, 2012 to be considered timely, which is 120 and 90 calendar days, respectively, prior to the anniversary of the mailing of this proxy statement. Any such proposal should be mailed to the
Company at 410 West Francis Street, Williamsburg, VA 23185.
OTHER MATTERS
The board of directors is not aware of any business to come before the Annual Meeting other than those matters described above in this
Proxy Statement. However, if any other matters should properly come before the Annual Meeting, it is intended that proxies in the accompanying form will be voted in respect thereof in accordance with the judgment of the person or persons voting the
proxies.
25
MISCELLANEOUS
The cost of soliciting proxies will be borne by the Company. The Company will reimburse brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of Company common stock. In addition to solicitations by mail, directors, officers and regular employees of the Company may solicit proxies
personally or by telephone without additional compensation.
The Companys 2011 Annual Report to Stockholders accompanies
this proxy statement. Such Annual Report is not to be treated as a part of the proxy solicitation material or as having been incorporated herein by reference. A copy of the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2011 will be furnished without charge to stockholders as of the Record Date upon written request to the Corporate Secretary, MHI Hospitality Corporation, 410 West Francis Street, Williamsburg, Virginia 23185.
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BY ORDER OF THE BOARD OF DIRECTORS
|
|
/s/ W
ILLIAM
J.
Z
AISER
|
WILLIAM J. ZAISER
|
SECRETARY
|
Williamsburg, Virginia
March 20, 2012
26
ANNUAL MEETING OF STOCKHOLDERS OF
MHI HOSPITALITY CORPORATION
April 17, 2012
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 17, 2012
The proxy statement and annual report to security holders
are available on our website at www.MHIHospitality.com.
Please sign, date and
mail
your proxy card in the
envelope provided as soon
as possible.
i
Please detach along perforated line and mail in the envelope provided.
i
Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting:
The Notice & Proxy Statement, Annual Report is/are available at
www.proxyvote.com
.
MHI HOSPITALITY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
This proxy is being solicited on behalf of the Board of Directors.
April 17, 2012
The
undersigned hereby appoints the board of directors of MHI Hospitality Corporation (the Company), or its designee, with full powers of substitution, to act as attorneys and proxies for the undersigned, to vote all shares of common stock
of the Company which the undersigned is entitled to vote at the 2012 Annual Meeting of Stockholders (the Annual Meeting), to be held at the William & Mary Alumni House, 1 Alumni Drive, Williamsburg, Virginia 23185 on Tuesday,
April 17, 2012, at 9:00 a.m., local time, and at any and all adjournments thereof, in the following manner:
THIS SIGNED PROXY WILL BE
VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
Address change/comments:
Continued and to be signed on the reverse side
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in
hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail
or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any
touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your
proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR
BLACK INK AS FOLLOWS:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Directors recommends that you vote
FOR the following:
1. Election of Directors
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The Board of Directors recommends
you vote FOR the following proposal(s):
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FOR
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AGAINST
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ABSTAIN
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Nominees
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NOMINEES:
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2.
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To ratify the appointment of Witt Mares, PLC, as independent registered public accounting firm for the Company for the fiscal year ending December 31, 2012.
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FOR ALL
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WITHHOLD ALL
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FOR ALL EXCEPT
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David J. Beatty
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J. Paul Carey
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David R. Folsom
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James P. OHanlon
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Andrew M. Sims
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Kim E. Sims
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Edward S. Stein
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Gen. Anthony C.
Zinni
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NOTE:
The election of the directors of the nominees listed above is for terms to expire at the 2013 Annual Meeting of
Stockholders. Should the above signed be present and elect to vote at the Annual Meeting, or at any adjournments thereof, and after notification to the Corporate Secretary of the Company at the Annual Meeting of the stockholders decision to
terminate this proxy, the power of said attorneys and proxies shall be deemed terminated and of no further force and effect. The undersigned may also revoke this proxy by filing a subsequently dated proxy or by written notification to the Corporate
Secretary of the Company of his or her decision to terminate this proxy. The above signed acknowledges receipt from the Company prior to the execution of this proxy of an annual report, a Notice of Annual Meeting of Stockholders and a proxy
statement dated March 20, 2012.
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INSTRUCTIONS:
To withhold authority to vote for any individual
nominee(s), mark FOR ALL EXCEPT and write the number(s) of the nominees(s) on the line
below:
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Yes No
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Please indicate if you plan to attend this
meeting.
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For address change/comments, mark here.
(see reverse for instructions)
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Signature [PLEASE SIGN
WITHIN BOX]
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Date:
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Signature (Joint Owners)
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Date:
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Note:
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary,
please give full title as such. Joint owners should
each sign personally. All holders must sign. If a corporation or
partnership, please sign in full corporate or partnership name, by authorized officer.
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