UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

 

GAYLORD ENTERTAINMENT COMPANY

 

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 3, 2009

 

Dear Stockholder:

 

You are cordially invited to attend the 2009 Annual Meeting of Stockholders of Gaylord Entertainment Company at the Gaylord Opryland Resort and Convention Center in Nashville, Tennessee, on May 7, 2009 at 10:00 a.m. local time.

 

Details of the business that will be conducted at the Annual Meeting are given in the attached Notice of Annual Meeting, proxy statement and proxy card.

 

It is important that your shares be represented and voted at the Annual Meeting. If you do not plan to attend the Annual Meeting, please complete, sign, date and return the enclosed proxy card promptly in the accompanying reply envelope. If you received your Annual Meeting materials via email, the email contains voting instructions and links to the annual report and proxy statement on the Internet, which are both available at our website, www.gaylordentertainment.com/investorrelations/proxymaterials.htm. If you decide to attend the Annual Meeting and wish to change your proxy vote, you may do so by voting in person at the Annual Meeting.

 

We look forward to seeing you at the Annual Meeting.

 

Sincerely,

 

Colin V. Reed

Chief Executive Officer and

Chairman of the Board

 

GAYLORD ENTERTAINMENT COMPANY
One Gaylord Drive
Nashville, Tennessee 37214
(615) 316-6000

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

 

By Order of the Board of Directors,

 

CARTER R. TODD

Secretary

 

Nashville, Tennessee

April 3, 2009

PROXY STATEMENT

 

 

 

The Board of Directors of Gaylord Entertainment Company (“Gaylord,” the “Company,” “we” or “us”) is soliciting proxies for the 2009 Annual Meeting of Stockholders (the “Annual Meeting”) on May 7, 2009, and any postponements and adjournments of such meeting. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. A copy of our 2008 Annual Report to Stockholders, this Proxy Statement and accompanying proxy card are being mailed to our stockholders beginning on or about April 3, 2009.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS

 

The following proxy materials are available for you to review online at our website, www.gaylordentertainment.com/investorrelations/proxymaterials.htm:

 

 

In accordance with Securities and Exchange Commission rules, the foregoing website does not use “cookies,” track user moves or gather any personal information.

 

 

Table of Contents

 

 

At the Annual Meeting, stockholders will be asked to elect as directors the eleven (11) nominees named in this Proxy Statement to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. The stockholders will also be asked to vote on the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the 2009 fiscal year. The stockholders also will transact any other business that properly comes before the meeting.

 

You may vote if you were a holder of record of shares of our common stock at the close of business on March 24, 2009 (the record date). On the record date, there were 40,939,739 shares of common stock outstanding. On such date, the shares were held by 2,667 holders of record. You are entitled to one vote for each share of common stock held by you as of the record date.

 

If you hold the shares in your own name, you can vote in person at the meeting or by signing and dating each proxy card you receive and returning it in the enclosed prepaid envelope. If you vote by proxy, the proxies identified on the back of the proxy card will vote your shares in accordance with your instructions. If you submit a signed proxy card but do not mark the boxes showing how you wish to vote, the proxies will vote your shares FOR the proposals.

 

In addition, Gaylord stockholders can vote using the Internet or by phone. To use the Internet, log onto www.proxyvote.com to transmit your voting instructions up until 11:59 p.m. Eastern time on May 6, 2009 (for shares in Gaylord’s 401(k) Savings Plan, the voting deadline is 11:59 p.m. Eastern time on May 5, 2009). 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. To vote by phone, dial 1-800-690-6903 using a touch-tone telephone up until 11:59 p.m. Eastern time on May 6, 2009 (for shares in Gaylord’s 401(k) Savings Plan, the voting deadline is 11:59 p.m. Eastern time on May 5, 2009). Have your proxy card in hand when you call and then follow the instructions.

 

If you do not own your shares directly, but instead are the beneficial owner of shares held in “street name” by a broker, your broker, as the record holder of the shares, must vote those shares in accordance with your instructions. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. On non-discretionary items for which you do not give instructions, the shares will be treated as “broker non-votes.” A discretionary item is a proposal that is considered routine under the rules of the New York Stock Exchange. Shares held in street name may be voted by your broker on discretionary items in the absence of voting instructions given by you. The proposals to be presented at the Annual Meeting are considered routine and therefore may be voted upon by your broker if you do not give instructions for the shares held by your broker.

 

Participants in the Company’s 401(k) Savings Plan are entitled to vote the shares held under the 401(k) Savings Plan in their name. To do this you must sign and timely return the proxy card you received with this Proxy Statement. Your proxy card will be considered your confidential voting instructions, and the 401(k) Savings Plan trustee will direct your vote in the manner you indicate on the proxy card. In order to do this, the proxy results for the shares held in the 401(k) Savings Plan will be tabulated by our transfer agent for all plan participants and reported to the 401(k) Savings Plan trustee on an aggregate basis. The overall vote tallies will not show how individual participants voted. The trustee will vote the shares at the meeting through the custodian holding the shares. If a plan participant’s voting instructions are not received by our transfer agent

before the meeting, or if the proxy is revoked by the participant before the meeting, the shares held by that participant will be considered unvoted. All unvoted shares in the plan will be voted at the Annual Meeting by the 401(k) Savings Plan trustee in direct proportion to the voting results of 401(k) Savings Plan shares for which proxies are received.

 

Your proxy card represents all shares registered in your name with the transfer agent on the record date, including those shares owned pursuant to the Company’s 401(k) Savings Plan.

 

The holders of a majority of the shares of our common stock outstanding on the record date, or 20,469,870 shares, in person or by a valid proxy, must be present at the meeting for any business to be conducted, known as a “quorum.” Proxies received but marked as “withhold authority,” “abstain” and/or “broker non-votes” will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

 

If a quorum is not present at the scheduled time of the Annual Meeting, we may adjourn the Annual Meeting, either with or without a vote of the stockholders. If we propose to have the stockholders vote whether to adjourn the meeting, the people named in the enclosed proxy will vote all shares of our common stock for which they have voting authority in favor of the adjournment. We also may adjourn the meeting if for any reason we believe that additional time should be allowed for the solicitation of proxies. An adjournment will have no effect on the business that may be conducted at the Annual Meeting.

 

The Board recommends that you vote: FOR the election of the eleven (11) nominees to the Board of Directors; and FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2009.

 

You can revoke your proxy at any time before the meeting by:

 

 

Representatives of Broadridge will count the votes and act as the independent inspectors of the election.

 

If you send in a signed proxy but do not give any voting instructions, your shares will be: (a) voted FOR election of the eleven (11) nominees to the Board of Directors; and (b) voted FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2009.

 

We are not aware of any business to be considered at the Annual Meeting other than the proposals described in this proxy statement. If any other business is properly presented at the meeting, your signed proxy card authorizes Colin V. Reed, Ralph Horn and Carter R. Todd to use their discretion to vote on these other matters.

 

You have three choices on the Election of Directors proposal to be voted upon at the Annual Meeting. You may:

 

 

Pursuant to our Bylaws, directors must be elected by a plurality of the votes of the shares present (in person or by proxy) and entitled to vote for the election of directors. This means that the eleven (11) nominees receiving the greatest number of votes will be elected as directors. If you withhold authority to vote for a director, your withholding authority will have no effect on the outcome. Broker non-votes also will have no effect on the voting outcome of the election of directors.

 

For the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2009 and any other matter that properly comes before the meeting, the affirmative vote of the majority of the shares present in person or represented by proxy and entitled to vote on such matter is required. A proxy card marked “ABSTAIN” will not be counted “for” or “against” any such matter and, if the matter is non-discretionary, broker non-votes will not be counted “for” or “against” any such matter. If you abstain from voting on the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2009, your abstention will have the same effect as a vote against the proposal. As noted above, if any other matter properly comes before the meeting, your signed proxy card authorizes Colin V. Reed, Ralph Horn and Carter R. Todd to use their discretion to vote on any such matter.

 

Yes. All proxy cards and vote tabulations that identify an individual stockholder are kept confidential. Except to meet legal requirements, your vote will not be disclosed to us unless:

 

 

This policy does not prevent us from ascertaining which stockholders have voted or from taking actions designed to encourage stockholder voting.

 

We will bear the cost of soliciting proxies for the Annual Meeting. We have retained Broadridge to assist in the solicitation and will pay approximately $5,000 for its assistance. Our officers and employees may also solicit proxies by mail, telephone, e-mail or facsimile transmission. They will not be paid additional remuneration for their efforts. Upon request, we will reimburse brokers, dealers, banks and trustees, or their

nominees, for reasonable expenses incurred by them in forwarding proxy material to beneficial owners of shares of our common stock.

 

On March 9, 2009, the Company entered into a settlement agreement (the “TRT Agreement”) with TRT Holdings, Inc., a Delaware corporation (“TRT”), which had previously submitted notice to the Company of its intention to nominate four individuals for election to the Company’s Board of Directors at the Annual Meeting and to solicit proxies for the election of such nominees.

 

The Company’s Board of Directors currently consists of nine directors. The TRT Agreement provides that, prior to the Annual Meeting, the Board of Directors will increase the size of the Board from nine to eleven directors. Under the terms of the TRT Agreement, TRT is entitled to name two directors for nomination by the Board and inclusion in the Company’s proxy statement for the Annual Meeting and each of the annual meetings of stockholders in 2010 and 2011. The TRT nominees for the Annual Meeting are Robert B. Rowling and David W. Johnson. The TRT Agreement also requires the Board of Directors to nominate seven incumbent directors and two additional independent directors identified by the Nominating and Corporate Governance Committee after consultation with the Company’s stockholders. The TRT Agreement provides that one TRT Nominee will serve on each of the Executive Committee (which is being increased in size to five directors), the Human Resources Committee and the Nominating and Corporate Governance Committee of the Board. In addition, the TRT Agreement provides that the Board will not increase the size of the Board to more than eleven directors prior to the Company’s 2012 annual meeting of stockholders.

 

By execution of the TRT Agreement, TRT withdrew its nominations to the Board that were set forth in TRT’s letter to the Company dated January 28, 2009 (subject to the Company’s compliance with certain terms of the TRT Agreement) and its demands for stockholder lists and certain books and records of the Company that were set forth in letters to the Company dated January 15, 2009, and January 23, 2009.

 

Pursuant to the terms of the TRT Agreement, the Company entered into an amended and restated rights agreement (the “Amended Rights Agreement”) with Computershare Trust Company, N.A, as rights agent, pursuant to which the Company amended the rights agreement previously entered into on August 12, 2008. Additionally, in accordance with the terms of the TRT Agreement, the Board adopted a resolution approving, for purposes of Section 203 of the Delaware General Corporation Law, the acquisition by TRT and its affiliates of additional shares of the Company’s common stock in excess of 15% of the outstanding stock of the Company and providing that TRT and its affiliates would not be an “interested stockholder” as defined by Section 203.

 

Under the terms of the TRT Agreement, TRT is obligated to vote its shares for the full slate of nominees recommended by the Board of Directors for election at the Annual Meeting and each of the 2010 and the 2011 annual meetings of stockholders of the Company. Additionally, TRT and its affiliates are required to vote their shares at the Annual Meeting, each of the annual meetings of stockholders in 2010 and 2011, and any other meeting of the Company’s stockholders prior to the termination date of the TRT Agreement (i) in accordance with the recommendation of the Board of Directors on any stockholder proposal that is put to a vote of stockholders, and (ii) in favor of any proposal made by the Company unless Mr. Rowling (or any other TRT nominee that is an affiliate of TRT) has voted against such proposal in his or her capacity as a member of the Board of Directors. These voting obligations will not, however, apply with respect to the voting of TRT’s shares in connection with an “extraordinary transaction” (as defined in the TRT Agreement).

 

The TRT Agreement includes a standstill provision restricting TRT from taking certain actions from the date of the TRT Agreement through the termination date of the agreement, including the following:

 

 

 

The TRT Agreement includes certain exceptions to the standstill provision, including if (i) TRT has been invited by the Board of Directors to participate in a process initiated related to the possible sale of the Company, (ii) TRT makes a Qualified Offer (as defined in the Amended Rights Agreement), or (iii) a third party has made an offer to acquire the Company under certain circumstances set forth in the TRT Agreement. The TRT Agreement also provides that each of the Company and TRT will not disparage the other party, subject to certain exceptions set forth in the TRT Agreement. The Company agreed to reimburse TRT for one-half of its expenses incurred in connection with the TRT Agreement, up to a maximum aggregate reimbursement of $200,000.

 

The termination date under the TRT Agreement is the earliest to occur of (i) the consummation of a “Qualified Offer” as defined in the Amended Rights Agreement, (ii) May 15, 2011, (iii) the date of the last resignation of a TRT nominee from the Board of Directors in accordance with the requirement under the TRT Agreement that TRT will not be entitled to any representation on the Board of Directors if TRT owns less than 5% of the Company’s stock, or (iv) a material breach of the TRT Agreement by the Company that is not cured by the Company within 30 days of notice of such breach by TRT (or, if such material breach or lack of cure is disputed by the Company, upon the rendering of an arbitral award finding such material breach or lack of cure).

 

On March 9, 2009, the Company entered into a letter agreement (the “GAMCO Agreement”) with GAMCO Asset Management, Inc. (“GAMCO”), which had previously submitted notice to the Company of its intention to nominate four individuals for election to the Board of Directors at the Annual Meeting.

 

Under the terms of the GAMCO Agreement, GAMCO is entitled to name two directors for nomination by the Board of Directors and inclusion in the Company’s proxy statement for the Annual Meeting. The GAMCO nominees for the Annual Meeting are Glenn J. Angiolillo and Robert S. Prather, Jr. In addition, the GAMCO Agreement provides that as long as any GAMCO nominee is a member of the Board of Directors, the Company will appoint a GAMCO nominee to each committee of the Board of Directors. By execution of the GAMCO Agreement, GAMCO withdrew (i) its nominations to the Board of Directors (subject to the Company’s compliance with the GAMCO Agreement) that were set forth in GAMCO’s letters to the Company dated February 3 and 5, 2009, and (ii) its stockholder proposal, dated August 18, 2008, recommending the redemption of the rights issued pursuant to the Company’s rights agreement.

 

The foregoing descriptions of the TRT and GAMCO Agreements are qualified in their entirety by reference to the full text of the agreements, copies of which the Company filed with the Securities and Exchange Commission as exhibits to a Current Report on Form 8-K filed on March 10, 2009.

 

The Company estimates that the various costs incurred in connection with preparing for a proxy contest, reaching agreements with the stockholders described above, and reimbursing certain expenses pursuant to the TRT Agreement as noted above total approximately $950,000. In addition, the Company estimates that it incurred costs of approximately $650,000 in connection with the settlement of the Company’s shareholder rights plan litigation, as described in the Company’s Current Report on 8-K filed with the SEC on March 10, 2009.

 

You may vote on the election of eleven (11) directors to the Board of Directors.

 

The current Board of Directors consists of nine (9) directors. All of our directors are elected annually. Effective immediately prior to the Annual Meeting, the Board of Directors will be expanded to consist of eleven (11) members. Eleven (11) directors will be elected at the Annual Meeting. All of the nominees with the exception of Messrs. Angiolillo, Johnson, Prather and Rowling are currently directors. The Board expects all of the nominees named below to be available for election. In case any nominee is not available, the person or persons voting the proxies may vote your shares for such other person or persons designated by the Board if you have submitted a proxy card.

 

Directors will be elected by a plurality of the shares present (in person or by proxy) and entitled to vote for the election of directors. Each of the nominees shall be elected to serve as a director until the annual meeting of stockholders in 2010 or until his or her respective successor is duly elected and qualified, or until his or her earlier resignation or removal.

 

Information concerning the nominees proposed by the Board for election as directors is set forth below.

 

 

Mr. Angiolillo is President of GJA Management Corp., a consulting and advisory firm specializing in wealth management, a position he has held since 1998. Previously, Mr. Angiolillo was a partner and member of the Management Committee in the law firm of Cummings & Lockwood, where he concentrated in the areas of corporate law, mergers and acquisitions and banking and finance. Mr. Angiolillo serves on the board of directors of insurance company NYMAGIC, Inc. and telecommunications provider LICT Corp., formerly known as Lynch Interactive Corp.

 

 

Mr. Bender is VP/Regional General Manager of retailer Wal-Mart Stores, Inc., with overall responsibility for a group of stores in the western United States, a position he has held since February 2009. From 2003 through 2007, Mr. Bender served as the President/General Manager of the Retail and Alternate Care business of healthcare retailer Cardinal Health. Prior to joining Cardinal Health, Mr. Bender was Vice President of Store Operations for clothing retailer Victoria’s Secret Stores. Mr. Bender also spent 14 years with beverage company PepsiCo in a variety of sales, finance and operating roles.

 

 

Mr. Gaylord served as the Company’s Chairman of the Board from May 1999 through April 2001. He served as interim President and Chief Executive Officer of the Company from July 2000 until September 2000, and as Vice-Chairman of the Board from May 1996 to May 1999. He was the President of the privately-held Oklahoma Publishing Company from June 1994 until December 2002. Mr. Gaylord has been Chairman of the privately-held sports management firm Gaylord Sports Management since January 2004 and Chairman of Medtrust Online, a privately-held healthcare services firm, since 2007. Mr. Gaylord is also a member of the Board of Trustees of the Scottsdale Healthcare Foundation.

 

 

Mr. Horn served as the Chairman of the Board of financial services company First Tennessee National Corporation (now First Horizon National Corporation) and First Tennessee Bank, National Association, its principal subsidiary, from 1996 until his retirement in December 2003. Mr. Horn served as Chief Executive Officer of First Tennessee National Corporation from 1994 through 2002 and as its President from 1991 through 2001. Mr. Horn is a director of Mid-America Apartment Communities, Inc., an owner of apartment communities.

 

Mr. Johnson is President and CEO of Aimbridge Hospitality, a privately-held hotel management company. Prior to joining Aimbridge as President and CEO in April 2003, Mr. Johnson spent 17 years at hospitality company Wyndham International in various capacities, including Executive Vice President/Chief Marketing Officer and President of Wyndham Hotels. He currently serves as a Director of the Juvenile Diabetes Research Foundation International and is a Director and Vice Chair of Development for Meeting Professionals International.

 

 

Ms. Levine is Editorial Director of Hearst Magazines, one of the world’s largest magazine publishers. Prior to assuming this role in 2006, Ms. Levine had served as Editor-in-Chief of the Hearst publication Good Housekeeping since 1994. In 2000, she was instrumental in founding O, The Oprah Magazine, and continues to serve as its Editorial Consultant. Ms. Levine also served as Editor-in-Chief of Redbook (1990-1994) and Woman’s Day (1982-1990) and as a Senior Editor of Cosmopolitan (1976-1982).

 

 

Mr. Prather has been President and Chief Operating Officer of Gray Television, Inc., a television broadcast company, since September 2002. He was an Executive Vice President of Gray Television, Inc. from 1996 until September 2002. Mr. Prather is also a director of Gray Television, Inc. Mr. Prather also has served as Chairman of the Board of Directors at Triple Crown Media, Inc., a publishing and communication company, since December 2005. He served as Chief Executive Officer and director of Bull Run Corporation, a sports and affinity marketing and management company, from 1992 until its merger into Triple Crown Media, Inc. in December 2005. Mr. Prather is also a member of the Board of Directors of GAMCO Investors, Inc., the parent company of GAMCO Asset Management, Inc.

 

 

Mr. Reed has served as Chief Executive Officer and a director of the Company since April 2001, and Mr. Reed was also elected Chairman of the Board of Directors of the Company in May 2005. From April 2001 until November 2008, Mr. Reed also served as President of the Company. Prior to joining the Company, Mr. Reed had served as a member of the three-executive Office of the President of gaming company Harrah’s Entertainment, Inc. since May 1999, and he had served as Harrah’s Chief Financial Officer since April 1997. Mr. Reed also was a director of Harrah’s from 1998 to May 2001. Mr. Reed served in a variety of other management positions with Harrah’s and its predecessor, hotel operator Holiday Corp., since 1977. Mr. Reed is a director of First Horizon National Corporation.

 

 

Mr. Rose served as Chairman of the Board of the Company from April 2001 through May 2005 and has served as Chairman of the Executive Committee of the Board of the Company since May 2005. Mr. Rose currently serves as Chairman of the Board of Directors of First Horizon National Corporation. Since 1998, Mr. Rose has been a private investor and Chairman of Midaro Investments, a privately held investment firm. In 1995, Mr. Rose became Chairman of the Board of both hotel operator Promus Hotel Corporation and Harrah’s Entertainment, Inc. when the two companies split into two publicly-traded companies. He retired from the Boards of Harrah’s in 1996 and Promus in 1997. Mr. Rose also served as Chairman from 1990 to 1995, and Chief Executive Officer from 1990 to 1994, of the Promus Companies, Incorporated. Mr. Rose is also a director of restaurant operator Darden Restaurants, Inc. and food manufacturer General Mills, Inc.

 

Mr. Roth is Chairman and Chief Executive Officer of The Interpublic Group of Companies, Inc., a global marketing services company. He was appointed Interpublic’s Chief Executive Officer in January of 2005. Prior to becoming Chairman of Interpublic in July 2004, Mr. Roth had been a member of Interpublic’s Board of Directors since 2002. Previously, Mr. Roth was Chairman of the Board and Chief Executive Officer of financial services company The MONY Group Inc. and its predecessor entities since 1997. Mr. Roth is also a director of office technology provider Pitney Bowes, Inc.

 

 

Mr. Rowling served as the Chairman of the Board of TRT Holdings, Inc., a privately-owned, diversified holding company with primary interests in hospitality, energy, fitness and real estate, from 1996 to 2009. Among the companies Mr. Rowling has built are Tana Oil & Gas Corporation (subsequently merged with Texaco), Teco Pipeline Company (subsequently merged with Pacific Gas & Electric) and Omni Hotels, which has expanded to include over 40 hotels and resorts since TRT Holdings, Inc.’s purchase of Omni Hotels in 1996. Mr. Rowling is also a director of financial services company Guaranty Financial Group Inc.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THESE NOMINEES. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.

 

Information concerning the current directors who are not standing for reelection is set forth below.

 

 

Mr. Martin is Chairman of RBM Venture Company, a private investment company. Prior to his retirement in 2007, Mr. Martin was Chief Executive Officer of clothing retailer Saks Incorporated and its predecessor companies, a position he had held since 1989. Mr. Martin is a director of Lululemon Athletica Inc., an athletic apparel retailer, First Horizon National Corporation, restaurant operator Ruby Tuesday, Inc. and clothing retailer Dillard’s Inc.

 

 

Mr. Gee is President of Ohio State University, a position he has held since October 2007. Previously, Mr. Gee was Chancellor of Vanderbilt University, a position he had held since August 2000. Mr. Gee was President of Brown University from January 1998 until January 2000 and was President of Ohio State University from September 1990 to January 1998. Mr. Gee is a member of the board of directors of toymaker Hasbro, Inc., mutual insurance company Grange Insurance Companies and coal producer Massey Energy Company.

 

Our business is managed under the direction of the Board of Directors. The Board of Directors delegates the conduct of the business to our senior management team. The Board of Directors held 14 meetings during 2008. All incumbent directors seeking reelection attended at least 75% of the Board meetings and meetings of the committees of the Board on which the directors served during their tenure on the Board.

 

Our non-management directors meet in regularly scheduled executive sessions, and they have selected Ralph Horn to serve as the presiding or lead director of these executive sessions. A description of the duties of the lead director is also posted on our web site at www.gaylordentertainment.com (under “Corporate Governance” on the Investor Relations page).

We have adopted Corporate Governance Guidelines governing the conduct of our Board of Directors. The charters of our Audit Committee, Human Resources Committee and Nominating and Corporate Governance Committee, as well as our Corporate Governance Guidelines, are all posted on our web site at www.gaylordentertainment.com (under “Corporate Governance” on the Investor Relations page).

 

We have also adopted a Code of Ethics which is applicable to all employees, officers and directors, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code of Ethics is available on our web site at www.gaylordentertainment.com (under “Corporate Governance” on the Investor Relations page). We intend to post amendments to or waivers from our Code of Ethics (to the extent applicable to our directors, chief executive officer, principal financial officer or principal accounting officer) at this location on our website.

 

We will provide a copy of our Corporate Governance Guidelines, our committee charters or our Code of Ethics (and any amendments or waivers) to any stockholder or other person upon receipt of a written request addressed to Gaylord Entertainment Company, Attn: Corporate Secretary, One Gaylord Drive, Nashville, Tennessee 37214.

 

 

We strongly encourage each member of the Board of Directors to attend the Annual Meeting of Stockholders. All of the directors then in office attended the 2008 Annual Meeting of Stockholders.

 

 

Pursuant to our Corporate Governance Guidelines, the Board undertook its annual review of director independence in February 2009. Our Board of Directors determines the independence of its members through a broad consideration of all relevant facts and circumstances, including an assessment of the materiality of any relationship between the Company and a director. In making this assessment, the Board looks not only at relationships from the director’s standpoint, but also at relationships of persons or organizations with which the director has an affiliation. In making its determination, the Board of Directors adheres to the requirements of, and applies the standards set forth by, both the New York Stock Exchange (as set forth in Section 303A.02 of the listed company manual) and the Securities and Exchange Commission.

 

During this review, the Board considered transactions and relationships between each director, or any member of his or her immediate family, and the Company and its subsidiaries and affiliates. The Board also examined transactions and relationships between directors, or their affiliates, and members of the Company’s senior management or their affiliates. The purpose of this review was to determine whether any of these relationships or transactions were inconsistent with a determination that the director is independent. As a result of this review, the Board affirmatively determined that, with the exception of Colin V. Reed and Michael D. Rose, all of the current directors of the Company are independent of the Company and its management. The Board of Directors has also conducted a similar review with respect to Messrs. Angiolillo, Johnson, Prather and Rowling in connection with their nomination to the Board of Directors and has determined that all are independent of the Company and its management.

 

 

The Board maintains an Audit Committee, Human Resources Committee and Nominating and Corporate Governance Committee to facilitate and assist the Board in the execution of its responsibilities. The table below shows current membership for each of the standing Board committees:

 

 

 

 

In accordance with New York Stock Exchange listing standards, all the committees are comprised solely of non-employee, independent directors.

 

Following the Annual Meeting, the Board of Directors will appoint the members of each of the standing Board committees. Under the terms of the TRT Agreement, Mr. Rowling will be appointed to the Human Resources Committee, and Mr. Johnson will be appointed to the Nominating and Corporate Governance Committee. In addition, under the terms of the GAMCO Agreement, one of the GAMCO nominees (Messrs. Angiolillo and Prather) will be appointed to each of the standing committees of the Board of Directors.

 

The Audit Committee

 

The Audit Committee is responsible for:

 

 

The Board has determined that all the members of the Audit Committee are financially literate pursuant to the New York Stock Exchange rules. The Board also has determined that Mr. Martin, Chairman of the Audit Committee, is an “audit committee financial expert” within the meaning stipulated by the Securities and Exchange Commission.

 

In 2008, the Audit Committee met seven times.

 

The Human Resources Committee

 

The Human Resources Committee is responsible for:

 

 

The Committee has also delegated to the Chief Executive Officer the authority to make limited equity grants to new members of the Company’s management team to allow such grants to be made in a timely manner, as the Committee generally only meets on a quarterly basis. Equity grants under this delegation of authority may only be made as initial equity grants to newly hired executives (other than officers subject to Section 16 of the Securities Exchange Act of 1934) and on the same terms and conditions as were applied by the Committee in its most recent prior equity grants. In addition, equity grants under this delegation of authority to any one executive are limited to 12,500 shares granted as stock options (or similar awards such as

stock appreciation rights) or 6,250 restricted shares (or similar awards such as restricted stock units or performance shares).

 

For additional information regarding the Committee’s processes and procedures for considering and determining executive and director compensation, see “Compensation Discussion and Analysis” below. The Committee engages a competent executive compensation consultant, who is independent of conflicts with Board members or Company management. The compensation consultant assists the Committee in determining if its strategies and plans are advisable based on the Company’s current financial position and strategic goals, as well as developments in corporate governance and compensation design. Each year, at the Committee’s request, the compensation consultant performs several analyses, including internal pay equity, updating of the executive salary structure and modeling of executive compensation levels at different levels of Company performance, to assist the Committee in its review. In 2008, the Human Resources Committee met five times.

 

The Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee is responsible for:

 

 

In 2008, the Nominating and Corporate Governance Committee met four times.

 

A formal Board evaluation covering Board operations and performance, with a written evaluation from each Board member, is conducted annually by the Nominating and Corporate Governance Committee to enhance Board effectiveness. Recommended changes are considered by the full Board. In addition, each Board committee conducts an annual self-evaluation.

 

The Nominating and Corporate Governance Committee considers candidates for Board membership recommended by its members and other Board members, as well as by management and stockholders. To date the Committee has not engaged a third party to identify prospective nominees. The Committee will only consider stockholder nominees for Board membership submitted in accordance with the procedures set forth below in “Additional Information— Stockholder Nominations of Candidates for Board Membership.”

 

Once the Nominating and Corporate Governance Committee has identified a prospective nominee, the Committee makes an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the prospective nominee can satisfy the evaluation factors described below. If the Committee determines, in consultation with the Chairman of the Board and other Board members as appropriate, that additional consideration is warranted, it may request additional information about the prospective nominee’s background and experience. The Committee then evaluates the prospective nominee against the following standards and qualifications:

 

 

 

The Nominating and Corporate Governance Committee also considers such other relevant factors as it deems appropriate, including the current composition of the Board and the evaluations of other prospective nominees. In connection with this evaluation, the Committee determines whether to interview the prospective nominee, and if warranted, one or more members of the Committee, and others as appropriate, will interview prospective nominees in person or by telephone. After completing this evaluation and interview, the Committee makes a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Committee.

 

New directors participate in an orientation program that includes discussions with senior management, background materials on our strategic plan, organization and financial statements and visits to our facilities. We encourage each director to participate in continuing educational programs that are important to maintaining a director’s level of expertise to perform his or her responsibilities as a Board member.

 

The Human Resources Committee (which functions as our compensation committee) is comprised entirely of independent directors. In addition, there are no relationships among our executive officers, members of the Human Resources Committee or entities whose executives serve on the Board of Directors or the Human Resources Committee that require disclosure under applicable regulations of the Securities and Exchange Commission.

 

Summary of Compensation.  As described more fully below, this chart summarizes the annual compensation for the Company’s non-employee directors, as well as Mr. Rose (who serves as Chairman of the Executive Committee of the Board of Directors), during 2008:

 

 

 

 

 

Cash Compensation of Directors.  The Human Resources Committee reviews and recommends the compensation for directors. Directors who are not employees of the Company are compensated for their service as a director as follows:

 

 

In addition, each non-employee director receives a fee of $1,500 for each meeting of the Board of Directors attended.

 

Pursuant to the Company’s Director Deferred Compensation Plan, non-employee directors may defer the fees described above into this plan until their retirement or resignation from the Board. Earnings on fees deferred under this plan accrue based on either, at the participant’s election, the performance of the Company’s common stock or the performance of a pre-determined investment allocation. Currently three directors (Messrs. Gaylord, Horn and Martin) participate in this plan.

 

Directors who are employed by the Company do not receive cash compensation for their service as directors. As described above, Mr. Rose receives cash compensation pursuant to the terms of his agreement with the Company pursuant to which he agreed to serve as Chairman of the Executive Committee of the Board of Directors. All directors are reimbursed for expenses incurred in attending meetings.

 

Equity Compensation of Directors.  Each newly-elected non-employee director receives a grant of 3,000 restricted stock units, vesting fully on the first anniversary of the date of grant, pursuant to our 2006 Omnibus Incentive Plan, described below. In addition, each non-employee director as well as Mr. Rose receives, as of the date of the first board meeting following our annual meeting of stockholders, an annual grant of 1,500 restricted stock units, vesting fully on the first anniversary of the date of grant, pursuant to our 2006 Omnibus Incentive Plan.

 

Until restricted stock units vest and shares of common stock are issued in conversion of the restricted stock units, the director does not have any rights as a stockholder of the Company with respect to such shares, other than the right to receive a cash payment equal to any dividends paid on the common stock. The restricted stock units permit a director to defer the issuance of the common stock to be issued upon conversion of the restricted stock units to a specific date in the future or until the director’s date of retirement from the Board of Directors, whichever comes first. Shares of common stock issued upon conversion of restricted stock units must be held until six months after the conclusion of a director’s service on the Board of Directors.

 

Prior to 2007, newly-elected non-employee directors received a one-time grant of a non-qualified stock option to purchase 10,000 shares of common stock at an exercise price equal to the fair market value of our common stock on the grant date (as defined under the terms of the applicable equity incentive plan), vesting ratably over a four-year period, with one-fourth vesting annually beginning the first year after the date of grant. In addition, prior to 2007, each non-employee director received, as of the date of the first board meeting following our annual meeting of stockholders, an annual grant of a non-qualified stock option to purchase 5,000 shares of common stock, at an exercise price equal to the fair market value of our common stock on the grant date (as defined under the terms of the applicable equity incentive plan), vesting on the first anniversary of the award date. These options generally had a term of ten years.

 

Director Stock Ownership Guidelines.  In 2006, the Board of Directors adopted stock ownership guidelines for non-employee directors. The guidelines provide that directors must hold a minimum of

5,000 shares of our common stock, with a five-year time period from the date of adoption of the guidelines in which to comply with such requirement. Unvested shares of restricted stock or shares of common stock issuable upon conversion of outstanding restricted stock units will be credited toward this requirement.

 

Stockholders, employees and other parties interested in communicating directly with members of the Board of Directors (including our non-management directors) may do so by writing to Corporate Secretary, Gaylord Entertainment Company, One Gaylord Drive, Nashville, Tennessee 37214. As set forth in the Corporate Governance Guidelines, the Corporate Secretary reviews all such correspondence and regularly forwards to the Board a summary of all such correspondence and copies of all correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board or committees thereof or that he otherwise determines requires their attention. Directors may at any time review a log of all correspondence received by us that is addressed to members of the Board and request copies of any such correspondence. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of our internal audit department and handled in accordance with procedures established by the Audit Committee with respect to such matters. In addition, stockholders, employees and other interested parties may communicate directly with the lead non-management director (Mr. Ralph Horn), individual non-management directors or the non-management directors as group by email at boardofdirectors@gaylordentertainment.com.

 

The Audit Committee of the Board of Directors has established procedures for employees, stockholders, vendors or others to communicate concerns about our ethical conduct or business practices, including accounting, internal controls or financial reporting issues, to the Audit Committee, which has responsibility for these matters. Matters may be reported as follows:

 

 

Carter R. Todd
One Gaylord Drive
Nashville, TN 37214
615-316-6186

 

 

Since the beginning of the Company’s last fiscal year, there were no related person transactions that are required to be disclosed pursuant to Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, other than the settlement agreements with TRT Holdings, Inc. and GAMCO Asset Management, Inc. (each of which owns greater than five percent of the Company’s common stock), as described under “Agreements with respect to Director Nominations” above. These agreements were negotiated third-party transactions and were reviewed and negotiated by the Company’s legal department and approved by the Company’s full Board of Directors, including each member of the Audit Committee.

 

Our policies and procedures for the review, approval or ratification of related person transactions (including those required to be disclosed under Item 404(a) of Regulation S-K) are outlined in the charter of the Audit Committee of the Board of Directors and are as follows: Possible related person transactions are first screened by the Company’s legal department for materiality and then sent to the Audit Committee of the Board for review, discussion with the Company’s management and independent registered public accounting firm and approval. In its discretion, the Audit Committee may also consult with the Company’s legal department or external legal counsel. Audit Committee review and approval of related person transactions would be evidenced in the minutes of the applicable Audit Committee meeting.

 

The following table sets forth information regarding the beneficial ownership of our common stock as of March 24, 2009 (unless otherwise noted) for:

 

 

The percentages of shares outstanding provided in the table are based on 40,939,739 voting shares outstanding as of March 24, 2009. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Unless otherwise indicated, each person or entity named in the table has sole voting and investment power, or shares voting and investment power with his or her spouse, with respect to all shares of stock listed as owned by that person. The number of shares shown does not include the interest of certain persons in shares held by certain family members in their own right. Shares issuable upon the exercise of options that are exercisable within 60 days of March 24, 2009 or the vesting of restricted stock units which are scheduled to vest within 60 days of March 24, 2009 are considered outstanding for the purpose of calculating the percentage of outstanding shares of our common stock held by the individual, but not for the purpose of calculating the percentage of outstanding shares held by any other individual. Unless otherwise indicated, the address for each person listed in the table is our principal office.

 

 

 

 

 

 

The Human Resources Committee (the “Committee”) of the Board has responsibility for establishing, implementing and continually monitoring adherence to the Company’s compensation philosophy. The Committee ensures that the total compensation paid to the Company’s named executive officers and the other senior executive officers is fair, reasonable and competitive. The Committee is also responsible for overseeing the Board’s and management’s evaluation of the performance of the named executive officers and administering the Company’s cash- and equity-based incentive plans. The Committee undertakes these responsibilities pursuant to a written charter adopted by the Committee and the Board, which is reviewed at least annually by the Committee. The Committee’s charter may be viewed in full on the Company’s website, www.gaylordentertainment.com (under “Corporate Governance” on the Investor Relations page).

 

The Committee is comprised solely of “non-employee directors” as defined in Rule 16b-3 of the rules promulgated under the Securities and Exchange Act of 1934, as amended, “outside directors” for purposes of regulations promulgated pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, and “independent directors” as defined in Section 303A.02 of the New York Stock Exchange corporate governance listing standards, in each case as determined by our Board of Directors. In addition to a determination of independence, the Nominating and Governance Committee of our Board recommends Committee membership based on such knowledge, experience and skills that it deems appropriate in order to adequately perform the responsibilities of the Committee.

 

The Committee makes all compensation decisions for the Company’s named executive officers. The Company’s Chief Executive Officer annually reviews the performance of each named executive officer (other than the Chief Executive Officer, whose performance is reviewed by the Committee). Recommendations based on these reviews are discussed with the Committee. The Committee then discusses and approves compensation for each named executive officer, based on such factors as the compensation analysis performed by the Committee’s external compensation consultant, the Chief Executive Officer’s assessment of individual performance and the Company’s performance. Since 2007, the Committee has engaged Watson Wyatt & Company (“Watson Wyatt”) to assist the Committee and the Company in reviewing the Company’s compensation strategies and plans.

 

The process is similar for determining compensation for the Chief Executive Officer, except that the Chief Executive Officer does not provide the Committee with a recommendation. The Chief Executive Officer presents a self-assessment of his performance during the year to the Committee, which then meets in executive session to discuss and set his compensation, based on the compensation analysis performed by the Committee’s external compensation consultant and the Committee’s assessment of the Chief Executive Officer’s performance and the Company’s performance.

 

The Committee believes that the most effective executive compensation program is one that rewards the achievement of specific annual and long-term goals by the Company and which aligns the named executive officers’ interests with those of the stockholders by rewarding performance commensurate with achievement, with the ultimate objective of increasing long-term stockholder value. The Committee evaluates compensation to ensure that the Company maintains its ability to attract and retain superior employees in key positions, including each named executive officer, and that compensation provided to these employees is competitive in the marketplace. The principal objective of the Company is to maximize long-term stockholder value through the development and enhancement of the Company’s business.

To further that objective, the Company’s executive compensation program is designed to:

 

 

The Committee believes that a substantial portion of each named executive officer’s compensation should be based on the Company’s achievements, as well as the named executive officer’s own performance compared to relevant goals. The Committee’s compensation philosophy for each named executive officer, therefore, emphasizes an overall analysis of the executive’s performance for the year, projected role and responsibilities, required impact on execution of Company strategy, external pay practices and total cash and total direct compensation positioning, as well as other factors the Committee deems appropriate. Our philosophy also considers employee retention, vulnerability to recruitment by other companies and the difficulty and costs associated with replacing executive talent.

 

In view of the current economic and financial environment, the Committee also has been mindful, when reviewing the design and operation of the Company’s incentive compensation arrangements, of the relationship between the performance objectives and target levels used in connection with incentive awards and the Company’s risk management policies and practices. The Committee believes that the combination of cash and equity incentives reflected in the Company’s executive compensation program does not encourage our executives to take excessive or unnecessary risks that threaten the value of the Company.

 

In determining total compensation for 2008, the Committee relied on the results of its assessment of the performance, responsibilities, expectations and experience of each named executive officer. The Committee also reviewed data derived by Watson Wyatt from several broad-based market-wide studies prepared by Watson Wyatt and other third-party consultants in order to obtain a general understanding of current compensation practices. These market-wide studies were comprised of companies operating in various markets and industries (excluding financial companies) with a revenue size and other characteristics generally comparable to that of the Company. When preparing the data derived from these studies delivered to the Committee, Watson Wyatt used a regression analysis to adjust for differences in the size of the surveyed companies compared to the Company. In addition, for purposes of structuring the Company’s compensation program, the Committee also reviewed data compiled by Watson Wyatt regarding the structure of compensation programs at the following companies:

 

 

These companies were selected as peers for purposes of structuring the Company’s compensation program because of their industry classification and the existence of publicly available data with respect to such companies.

 

The components of total executive compensation for 2008 are described in detail below. The primary components of the 2008 program were cash compensation, consisting of a mix of base salary and annual cash incentive plan compensation, as well as long-term performance-based equity incentives. The Company also provides retirement benefits and certain perquisites and other personal benefits.

 

Target Total Compensation.  In 2008, the Committee attempted to provide a total compensation package to each named executive officer that was competitive based on current compensation practices and that was generally between the 50th and 75th percentile of total compensation based on the data derived from the market-wide studies noted above (using a regression analysis to adjust for differences between the size of the surveyed companies and the Company). In certain cases the Committee identified an individual named executive officer as deserving of a more competitive level of total compensation based on individual performance or upon the need to retain the executive. In assessing individual performance for each named executive officer, the Committee establishes strategic goals specific to that officer’s role with the Company. The Board of Directors creates the overall strategic direction for the Company, and then the Committee establishes individual strategic objectives of the Chief Executive Officer. Individual strategic goals for each of the other named executive officers are then established by the Committee, with the input of the Chief Executive Officer, to support the overall Company goals, but tailored to the officer’s area of control. These strategic goals may include financial goals or qualitative goals such as specific operational achievements.

 

In 2008, each named executive officer’s total compensation package consisted of three primary elements:

 

 

There is no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation. Rather, the Committee reviews information provided by its compensation consultant to determine the appropriate level and mix of incentive compensation. Income from such incentive compensation is realized only as a result of the performance of the Company or the individual, depending on the type of award, compared to established goals. Historically, the Committee has granted a majority of total compensation to the Company’s executive officers in the form of incentive compensation.

 

Base Salary.  We seek to provide base salaries for our named executive officers that provide a secure level of guaranteed cash compensation in accordance with their experience, professional status and job responsibilities. The 2008 base salary compensation of the Company’s named executive officers was based on the factors described above. Base salaries were adjusted by the Committee, however, to reflect other factors such as an individual named executive officer’s achievement of individual performance objectives and base salary during the prior year. Base salaries for 2008 were as follows:

 

 

 

Annual Cash Incentive Compensation.  The Company’s named executive officers and other employees participate in the Company’s cash incentive plan in accordance with stockholder-approved criteria specified in our omnibus incentive plans. In 2008, the annual cash incentive plan was designed to motivate the named executive officers by directly linking the payment of cash incentive compensation to the attainment of designated Company earnings per share (“EPS”) levels. The Committee also could determine whether adjustments should be made to reflect non-recurring or extraordinary items affecting the Company’s EPS calculated in accordance with applicable accounting rules. The annual cash incentive compensation for all of the named executive officers other than Mr. Caparella in 2008 was based solely on the level of achievement of Company adjusted EPS.

 

Mr. Caparella’s annual cash incentive compensation in 2008 was based 50% on the level of achievement of designated financial goals for our Gaylord Hotels operating division, 25% on the level of achievement of Company adjusted EPS and 25% on the level of achievement of designated net room night booking goals for our Gaylord Hotels operating division. However, Mr. Caparella was not eligible to receive the portions of his annual cash incentive compensation based on Gaylord Hotels net room nights booking goals and Company adjusted EPS if our Gaylord Hotels division did not meet the “threshold” achievement level of the Gaylord Hotels financial goals designated by the Committee.

 

When awarding annual cash incentive compensation in 2008, the Committee also considered whether the named executive officer’s individual strategic objectives were met, as well as certain economic and operating factors related to the Company as noted below. The Committee has the policy that an executive officer is not eligible for annual cash incentive compensation unless he or she achieves a “meets” expectations or greater individual annual performance rating. The Committee has the discretion under the Company’s cash incentive plan to lower a participant’s annual cash bonus in the event the Committee is not satisfied that the individual satisfied his or her annual performance objectives.

 

The Committee approved the specific financial performance goals for the Company and each division and the amounts of the bonus pools to be established upon attainment of these goals for 2008. The Committee also approved the following potential bonus award opportunities (set as a percentage of base salary) for each named executive officer for 2008:

 

 

 

 

The Company’s “threshold” performance goal is the goal established by the Committee meriting the payment of the minimum cash incentive award opportunity established by the Committee. The Company’s

“target” goal is the goal established by the Committee meriting the payment of the target cash incentive award opportunity established by the Committee. The Company’s “stretch” performance goal is the goal established by the Committee meriting the payment of the maximum cash incentive award opportunity established by the Committee. The percentage of salary awarded for performance falling between the “threshold” and “target” goals and the “target” and “stretch” goals is based on actual results achieved using straight-line interpolation.

 

The actual adjusted EPS performance goals for 2008 were established by the Committee as follows:

 

 

 

 

With respect to Mr. Caparella, the Committee established the following financial goals for our Gaylord Hotels operating division:

 

 

 

 

For the annual financial and operating objectives in 2008 for our named executive officers under our cash incentive plan, the Committee set the adjusted EPS “target” performance goal at our projected adjusted EPS

level for 2008 (and in the case of Mr. Caparella the Committee set the Gaylord Hotels division CCF and net room nights booking targets at the projected “target” performance goals for 2008), as the Committee believed that achieving these goals would represent a significant step in meeting the Company’s long-term strategic and financial objectives. In making determinations of the desired “threshold,” “target” and “stretch” performance goals for these financial and operational measures, the Committee also considered the general economic climate and the specific market conditions that the Company was likely to face in the applicable time period. The Committee also attempted to set the “threshold,” “target” and “stretch” performance goals to ensure that the relative level of difficulty of achieving these levels was generally consistent from year to year.

 

The Company’s actual adjusted EPS determined by the Committee for 2008 was $0.18. This level of adjusted EPS achievement was slightly above the “threshold” adjusted EPS performance goal established by the Committee. However, the Committee concluded that even though the Company’s adjusted EPS, as determined by the Committee, achieved the “threshold” performance goal, the Company’s overall performance was not fully up to its expectations for “threshold” performance-level awards. Among the factors considered by the Committee in making this determination were the challenging economic outlook impacting the Company and the performance of the Gaylord National since its opening in April 2008. Accordingly, the Committee determined that the awards made to the named executive officers (other than Mr. Caparella) would be set at approximately 90% of the “threshold” level of award opportunity, and the following cash incentive plan compensation was awarded in February 2009: Colin V. Reed ($400,000); David C. Kloeppel ($200,000); Mark Fioravanti ($50,000); and Carter Todd ($55,000). In connection with her resignation, Ms. Buffington did not receive any cash incentive plan compensation for 2008.

 

The Gaylord Hotels operating division CCF for 2008 was $229.6 million. This level of achievement was below the “threshold” performance goal established by the Committee. As described above, the terms of the cash incentive plan applicable to Mr. Caparella provided that Mr. Caparella would not be eligible to receive the other components of his cash incentive compensation plan if the “threshold” Gaylord Hotels operating division CCF performance goal was not met. However, the Committee determined that in light of the difficult operating environment facing Gaylord Hotels in 2008, the fact that one of the Gaylord Hotels properties exceeded its threshold operating goal and the job performance of Mr. Caparella in 2008, it would award Mr. Caparella a $50,000 discretionary bonus for 2008.

 

Long-Term Equity Incentive Compensation.  The Committee believes that a powerful way to align the long-term interests of the named executive officers with those of stockholders is to award equity-based compensation, which may take the form of stock options, restricted stock, restricted stock unit awards or other equity-based awards pursuant to the terms of the Company’s omnibus incentive plans. Further, a significant percentage of each named executive officer’s targeted total compensation is allocated to incentive compensation, including equity-based incentive compensation. The equity-based incentive compensation currently utilized by the Committee is described below.

 

During 2007, the Committee undertook a detailed study of long-term incentive compensation to the Company’s senior executives, including the named executive officers, with the assistance of Watson Wyatt, focusing on the 2008 through 2011 fiscal years. The impetus for this review was the Committee’s belief that it was important to consider the elements of a new long-term incentive plan given several factors, including the vesting in early 2008 of restricted stock unit awards previously granted under the PARSUP Program, and the level of merger and acquisition activity in the Company’s industry, which significantly reduced the number of companies in the Company’s peer group and increased opportunities for the Company’s senior executive officers for enhanced compensation levels in competitive positions. Based on its review, in November 2007 the Committee designed a long-term incentive plan intended to meet the objectives expressed in “— Compensation Philosophy and Objectives” above. Specifically, the Committee wanted to:

 

 

 

Initially, the Committee determined that the most appropriate equity-based component of the long-term incentive plan would be stock options with vesting based on a combination of elapsed time from grant and Company performance in terms of annual growth rate in consolidated cash flow and cumulative cash earnings per share. The Committee believed that this component would most properly ensure effective alignment with shareholders’ interests and would facilitate control of accounting costs associated with the longer term incentive opportunities.

 

However, after the Committee’s November 2007 meeting, there were increasing signs that the United States economy was slowing considerably, as problems in the mortgage-backed securities market began to result in a notable tightening of credit availability. This hastened the decline of key real estate markets following the significant growth in the domestic real estate market from 2000 to 2007. Over the period of time from October 31, 2007 to January 31, 2008, the Dow Jones Industrial Average lost over nine percent of its value, and certain major hospitality stocks declined by 12%-25% over this period. In addition, the Company’s stock price had seen a similar decline in value over the same period. The Committee believed these changes were a prolonged sector correction for the lodging industry but did not believe that the Company’s stock price accurately reflected its actual value. As a result, at its meeting on February 4, 2008 the Committee elected to implement a long-term incentive compensation program for senior management which utilized a combination of performance-based restricted stock units and time-vested non-qualified stock options.

 

The Committee designed the performance-based restricted stock unit grants to reinforce retention and motivate the Company’s senior management team to achieve long-term stockholder value. The restricted stock units will vest and shares of common stock will be issued in conversion thereof on the fourth anniversary of the date of grant, based on a combination of the Company’s cumulative cash earnings per share compound annual growth rate (“Cash EPS CAGR”) over the 2008 through 2011 fiscal years and its consolidated cash flow compound annual growth rate (“CCF CAGR”) over the 2008 through 2011 fiscal years. Specifically, the units will vest on the fourth anniversary of the date of grant in an amount equal to the percentage determined according to the chart below based on the combination of the Company’s Cash EPS CAGR and CCF CAGR over the 2008 through 2011 fiscal years:

 

 

 

 

Any performance-based restricted stock units that do not vest according to the above vesting schedule will be forfeited, and the units are not eligible for early vesting. Until the performance-based restricted stock units vest and shares of common stock are issued in conversion thereof, the holder will not have any rights as a stockholder of the Company with respect to such shares, other than the right to receive dividends or other distributions (if made). The performance-based restricted stock units permit the holder to defer the issuance of the common stock to be issued upon conversion of the restricted stock units to a specific date in the future or until the holder’s termination of employment, whichever comes first. Set forth below are the restricted stock unit awards granted to each named executive officer on February 4, 2008:

 

 

In addition, the Committee also made awards of stock options to the named executive officers consistent with the philosophy described above. Specifically, the stock options have a delayed vesting schedule in order to encourage retention of the executives through the 2011 fiscal year. The stock options vest over four years as follows:

 

 

In addition, the exercise price of the stock options was not determined using the fair market value on the date of grant, as determined by the 2006 Omnibus Incentive Plan, but rather was set at an exercise price which was higher than the fair market value on the date of grant. This reflected the Committee’s belief that the Company’s stock price was then currently undervalued as well as the Committee’s belief that stock options, which provide no value to the holder unless the underlying stock price increases over time, were inherently performance-based and would serve to align the executives’ interests to those of the Company’s stockholders. In view of the unusual market conditions in existence at the time of the option grants, the Committee further enhanced the performance-oriented nature of the grants by incorporating a “premium” strike price of $38.00 per share. The closing market price on the NYSE of the Company’s common stock on the date of grant, February 4, 2008, was $31.19 per share. Set forth below are the stock option awards granted to each named executive officer on February 4, 2008:

 

Each option award is evidenced by a written agreement between the Company and the employee. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents.

 

See “Potential Payments on Termination or Change of Control” for a description of the vesting and exercise provisions of each named executive officer’s stock option awards and restricted stock unit awards in connection with the termination of each named executive officer’s employment with the Company.

 

Employment Agreements.  The Committee also determined that, as part of its objective to retain the existing senior management team, including the named executive officers, through 2011, the Company should enter into new employment agreements with each member of its senior executive team, including each named executive officer, in place of the employment agreements previously entered into with such individuals. Accordingly, in February 2008 the Company entered into revised employment agreements with each member of the Company’s senior executive team, including each named executive officer. Generally, these employment agreements have an initial two-year term, with automatic renewal terms of two years each (unless either party provides the other with prior notice of non-renewal). The terms of the employment agreement for each named executive officer, including a description of required severance and/or change of control payments in designated circumstances, are more fully described under “Potential Payments on Termination or Change of Control” below.

 

Retirement Plans.  The Company currently maintains a tax-qualified 401(k) retirement savings plan (the “401(k) Savings Plan”). The 401(k) Savings Plan enables our employees to contribute a portion of their annual salary, subject to a limit prescribed by the Internal Revenue Service (the “IRS”), to the 401(k) Savings Plan on a before-tax basis. The Company’s named executive officers, along with certain other highly compensated employees, may contribute the lesser of up to 40% of annual salary on a before-tax basis or an IRS-prescribed limit. The Company makes matching contributions of 100% of each participant’s contributions, up to five percent of the participant’s pay. All Company matching contributions are fully vested upon contribution.

 

Participants in the 401(k) Savings Plan may choose to invest their account balances from an array of investment options as selected by plan fiduciaries from time to time, plus a Company stock fund. Participants can daily change their investment selections prospectively by contacting the 401(k) Savings Plan’s trustee.

 

In addition to the 401(k) Savings Plan, the named executive officers, in addition to certain other eligible executive officers, are entitled to participate in an unfunded, unsecured deferred compensation plan (the “Supplemental Deferred Compensation Plan”). Deferrals of compensation under the Supplemental Deferred Compensation Plan by each named executive officer and Company matching obligations are discussed in further detail under “Nonqualified Deferred Compensation” below. The Company believes that this plan provides an important retirement savings vehicle for senior executive officers.

 

The Company has also agreed to pay Mr. Reed a supplemental executive retirement benefit (“SERP”). This benefit, which is discussed in more detail under “Nonqualified Deferred Compensation” below, was in the Committee’s view essential to attracting Mr. Reed to employment with the Company and has proved valuable in securing his extended employment as well.

 

In early November 2008, Mr. Reed began discussions with the Company regarding his desire to increase his personal investment in the Company’s common stock given Mr. Reed’s belief that, at then current trading prices, the Company’s common stock was substantially undervalued. Specifically, Mr. Reed expressed his desire that he be allowed to choose an investment in the Company’s common stock as an investment alternative for the SERP benefit established pursuant to his employment agreement (Mr. Reed at the time had the right to designate one or more mutual funds as the investment alternative for his SERP benefit). The Committee discussed Mr. Reed’s request and the extent which the Committee might be willing to accommodate such request given the Company’s goals of limiting dilution and mitigating any impact on the Company’s results of operations as a result of changes in value in the common stock. At the conclusion of this discussion, the Committee expressed its view that it would be willing to consider an amendment to Mr. Reed’s employment agreement pursuant to which Mr. Reed would be offered the opportunity to elect that the SERP benefit would be invested in shares of Company common stock through open market purchases of common

stock by a rabbi trust. The Board of Directors later discussed the deliberations of the Committee and noted their support for the possible amendment. On December 18, 2008, following approval by the Committee and the Board of Directors, the Company and Mr. Reed entered into an amendment to Mr. Reed’s employment agreement. The amendment provided Mr. Reed with the option of making an irrevocable election to invest his SERP benefit in Company common stock, which election Mr. Reed has since made. The investment was subsequently made by a rabbi trust to which the Company transferred cash in an amount equal to the then current balance of the SERP benefit. In January 2009, the independent trustee of the rabbi trust purchased a total of 385,242 shares of Company common stock in the open market, at an average price of approximately $11.91 per share, in compliance with applicable law.

 

Perquisites and Other Personal Benefits.  The Company provides the named executive officers with a limited number of perquisites and other personal benefits whose primary purpose is to minimize distractions from the executives’ attention to important Company initiatives. The Company and the Committee believe the perquisites and other personal benefits provided to the named executive officers are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions.

 

We provide the following perquisites to the named executive officers, all of which are quantified in the Summary Compensation Table below:

 

 

At its February 4, 2009 meeting, the Committee reviewed the compensation to be paid to the named executive officers for the 2009 fiscal year in light of the economic recession and equity market decline that adversely affected the Company’s stock price and operating results in 2008 and that, the Committee believes, will continue to do so in 2009. These events have significantly affected the Company’s stockholders, as well as our named executive officers who, due to the emphasis in our compensation program on performance-based equity compensation and the accumulation and holding of prior equity grants, have substantial holdings in our stock. While the Committee took into account the Company’s efforts to proactively respond to the market downturn by reducing expenses and spending, the Committee also took into account its belief that the difficult financial market and poor economic outlook will not improve in the short term.

 

Base Salary.  In light of the evaluation described above, and in light of the increases in base salary recently enacted with respect to Messrs. Kloeppel, Fioravanti and Todd, the Committee assessed the base salary to be paid to the named executive officers for the 2009 fiscal year. As a result of this assessment, the Committee determined that the base salaries of the named executive officers should not be increased for 2009.

 

Cash Incentive Compensation.  At its February 4, 2009 meeting, the Committee also established criteria for 2009 cash incentive plan compensation pursuant to Section 11 of the 2006 Omnibus Incentive Plan. With the exception of Mr. Caparella, each named executive officer will have the opportunity to earn cash incentive compensation equal to the percentage of his 2009 salary set forth in the table below based upon achievement of designated Company earnings per share (“EPS”) performance goals established by the Committee.

Mr. Caparella will have the opportunity to earn cash incentive compensation equal to the percentage of his 2009 salary set forth in the table below based 50% on the level of achievement of designated financial goals for our Gaylord Hotels operating division, 25% on the level of achievement of Company EPS and 25% on the level of achievement of designated net room night booking goals for our Gaylord Hotels operating division. However, Mr. Caparella will not be eligible to receive the portions of his annual cash incentive compensation based on Gaylord Hotels net room nights booking goals and Company EPS if our Gaylord Hotels division does not meet the “threshold” achievement level of the Gaylord Hotels financial goals designated by the Committee.

 

 

For the annual financial and operating objectives in 2009 for our named executive officers under our cash incentive plan, the Committee set the EPS “target” performance goal at our projected EPS level for 2009 (and in the case of Mr. Caparella the Committee set the Gaylord Hotels division CCF and net room nights booking targets at the projected “target” performance goals for 2009), as the Committee believes that achieving these goals will represent a significant step in meeting the Company’s long-term strategic and financial objectives. In making determinations of the desired “threshold,” “target” and “stretch” performance goals for these financial and operational measures, the Committee also considered the general economic climate and the specific market conditions that the Company was likely to face in the applicable time period. The Committee has attempted to set the “threshold,” “target” and “stretch” performance goals to ensure that the relative level of difficulty of achieving these levels was generally consistent from year to year.

 

When awarding annual cash incentive compensation in 2009, the Committee will continue to consider whether the named executive officer’s individual strategic objectives were met. The Committee also will continue to adhere to the policy that an executive officer is not eligible for annual cash incentive compensation unless he or she achieves a “meets” expectations or greater individual annual performance rating. The Committee continues to have the discretion to lower a participant’s annual cash incentive compensation in the event the Committee is not satisfied that the individual satisfied his or her annual performance objectives.

 

Long-Term Equity Incentive Compensation.  As described in “Compensation Programs for 2008 — Long-Term Equity Incentive Compensation” above, in February 2008 the Committee designed a long-term equity incentive compensation plan with the goals of reinforcing retention and motivating the Company’s senior management team to achieve superior returns in the 2008 through 2011 fiscal years. This plan provided for the “front-loading” of restricted stock unit awards and stock options which normally would have been granted over the 2008 through 2011 fiscal years. Accordingly, based on these factors, and the other factors discussed above, the Committee determined that no additional equity incentive compensation awards should be made to the named executive officers for 2009.

 

Equity Compensation.  The Company makes stock option awards pursuant to the 2006 Omnibus Incentive Plan, and prior to adoption of this plan, the Company made such awards pursuant to the Company’s 1997 Omnibus Stock Option and Incentive Plan. Annual stock option award levels vary among participants based on their positions within the Company and are granted at the Committee’s regularly scheduled February meeting. Eligible newly hired executives receive awards of stock options as of the first business day of the month following their hire date, while eligible newly promoted employees receive awards of stock options or restricted stock at the next regularly scheduled Committee meeting on or following their promotion date. Options are awarded at an exercise price equal to the fair market value of the Company’s common stock on the grant date (defined under the terms of the Company’s equity incentive plans). With the exception of the grants to our senior executive officers made on February 4, 2008 (the exercise price of which grants exceeded the fair market value of our common stock on the grant date, as described above), the Committee has never

granted options with an exercise price determined in any manner other than as set forth above. During 2006, the Company’s internal audit staff undertook a review of the Company’s historical grant practices which confirmed the Company’s consistent adherence to this principle.

 

Each option award is evidenced by a written agreement between the Company and the employee. Stock options awarded generally vest ratably over a four-year period, with one-fourth vesting annually beginning on the first anniversary of the date of grant, and have a 10-year term. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents.

 

The Company may also from time to time make grants of restricted stock awards pursuant to the 2006 Omnibus Incentive Plan, and prior to adoption of this plan, the Company made such awards pursuant to the Company’s 1997 Omnibus Stock Option and Incentive Plan. These awards are primarily made in connection with an employee’s promotion or assumption of additional job duties. Restricted stock awards, when made, generally vest over a four year period, with one-fourth vesting annually beginning on the first anniversary of the date of grant. Prior to vesting, the holder of a restricted stock award would have rights as a stockholder with respect to shares (including as to dividends or other distributions), but may not sell or otherwise dispose of such shares. In addition, the Company has also granted performance-based vesting restricted stock unit awards.

 

Stock Ownership Guidelines.  To directly align the interests of senior executive officers with the interests of the stockholders and to ensure that they maintain a significant portion of their long-term equity incentive awards, the Committee requires that the Company’s senior executives, including the named executive officers, maintain a minimum ownership interest in the Company. The value of the Company’s stock (as a multiple of the named executive officers’ base salary) required to be owned is as follows:

 

 

The named executive officers are required to achieve these ownership requirements by December 31, 2011 (five years from the adoption of the requirement). Shares that are either owned directly (including restricted shares of common stock or restricted stock units, whether vested or not) or indirectly through savings plans sponsored by the Company are included in determining whether an individual attains the minimum ownership guidelines. Shares that are subject to unexercised stock options are not included.

 

Deductibility of Executive Compensation.  As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1,000,000 that is paid to certain individuals. The Company believes that compensation paid under the management incentive plans (except for time-based vesting restricted stock and the currently outstanding time-based vesting restricted stock unit awards) is generally fully deductible for federal income tax purposes. The Committee also believes that the terms of the new employment agreements for its senior management, including each named executive officer, comply with recent Internal Revenue Service guidance, including Revenue Ruling 2008-13, with respect to the deductibility of qualified performance-based compensation payable upon retirement or termination of employment. However, in certain situations, the Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for its executive officers.

 

Nonqualified Deferred Compensation.  On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law, changing the tax rules applicable to nonqualified deferred compensation arrangements. The final regulations under this Act became effective on January 1, 2009, and we believe we are operating the Supplemental Deferred Compensation Plan in good faith compliance with the statutory provisions and the final regulations.

 

Accounting for Stock-Based Compensation.  Beginning on January 1, 2006, the Company began accounting for stock-based payments, including all stock option, restricted stock and restricted stock unit awards, in accordance with the requirements of SFAS 123(R).

 

The following Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this Report by reference therein.

 

The Human Resources Committee, comprised of independent directors, reviewed and discussed the above Compensation Discussion and Analysis with the Company’s management. Based on its review and these discussions, the Human Resources Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in these proxy materials.

 

HUMAN RESOURCES COMMITTEE:

 

MICHAEL I. ROTH, CHAIRMAN

RALPH HORN

E. GORDON GEE

ELLEN LEVINE

 

The following Summary Compensation Table shows compensation information for Colin V. Reed, our principal executive officer; David C. Kloeppel, our principal financial officer; John P. Caparella, Mark Fioravanti and Carter Todd, who are the three most highly compensated executive officers other than Mr. Reed and Mr. Kloeppel; and Melissa Buffington, our former Senior Vice President of Human Resources and Communications, who resigned on October 24, 2008.

 

 

 

 

 

 

 

 

 

The following table provides information on awards pursuant to the Company’s incentive plan to each of the Company’s named executive officers. The ratable amount of the stock, stock unit and option awards expensed in 2008 is included in “Stock Awards” or “Option Awards” column, as applicable, in the 2008 Summary Compensation Table set forth above.