April 16, 2003

Dear Shareholder:

You are cordially  invited to attend the 2003 Annual Meeting of  Shareholders of
WestCoast  Hospitality  Corporation at 9:00 a.m. on Friday, May 16, 2003, at the
Red Lion Hotel at the Park, 303 W. North River Drive, Spokane, Washington.

The  accompanying  Notice of 2003 Annual Meeting of  Shareholders  and the Proxy
Statement describe the matters to be presented at the meeting.

Whether or not you plan to attend the meeting,  we hope you will have your stock
represented by completing,  signing, dating and returning your proxy card in the
enclosed postage-paid envelope as soon as possible.

                                                     Sincerely,


                                                     Donald K. Barbieri
                                                     Chairman of the Board

                                    IMPORTANT

A Proxy  Statement and proxy card are enclosed.  All  shareholders  are urged to
complete and mail the proxy card promptly.  The enclosed  envelope for return of
the proxy card  requires no postage.  Any  shareholder  of record  attending the
meeting may personally vote on all matters that are  considered,  in which event
the signed proxy will be revoked.

                    IT IS IMPORTANT THAT YOUR STOCK BE VOTED.

                  NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS


MAY 16, 2003

To the Shareholders:

The 2003 Annual Meeting of  Shareholders  of WestCoast  Hospitality  Corporation
will be held at 9:00 a.m. on Friday,  May 16, 2003, at the Red Lion Hotel at the
Park, 303 W. North River Drive, Spokane, Washington for the following purposes:

(1) To  elect  two  directors  to hold  office  until  the  expiration  of their
three-year  terms  and  until  their  respective   successors  are  elected  and
qualified;

(2) To ratify the  appointment  of BDO Seidman,  LLP as auditors  for  WestCoast
Hospitality Corporation for 2003; and

(3) To transact such other  business as may properly come before the meeting and
any adjournments thereof.

Nominees for directors are named in the enclosed Proxy Statement.

March  17,  2003  has  been  set  as the  record  date  for  the  meeting.  Only
shareholders of record at the close of business on that date will be entitled to
notice of and to vote at the meeting.

ALL  SHAREHOLDERS  ARE INVITED TO ATTEND THE MEETING IN PERSON,  BUT EVEN IF YOU
EXPECT TO BE PRESENT AT THE MEETING,  YOU ARE REQUESTED TO COMPLETE,  SIGN, DATE
AND RETURN THE ENCLOSED  PROXY CARD AS PROMPTLY AS POSSIBLE IN THE  POSTAGE-PAID
NVELOPE  PROVIDED  TO  ENSURE  YOUR  REPRESENTATION.   SHAREHOLDERS  OF  RECORD
ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF THEY HAVE  PREVIOUSLY SENT IN A
PROXY.

By Order of the Board of Directors

Richard L. Barbieri
General Counsel
Spokane, Washington


April 16, 2003

The 2002 Annual Report of WestCoast  Hospitality  Corporation  accompanies  this
Proxy Statement.

                        WESTCOAST HOSPITALITY CORPORATION

                              2003 PROXY STATEMENT

General

The  enclosed  proxy  is  solicited  by the  Board  of  Directors  of  WestCoast
Hospitality Corporation,  a Washington corporation,  (the "Company"), for use at
the 2003 Annual Meeting of Shareholders  to be held at 9:00 a.m. on Friday,  May
16, 2003, at the Red Lion Hotel at the Park, 303 W. North River Drive,  Spokane,
Washington,  and at any adjournments  thereof (the  "Meeting").  Only holders of
record of the  Company's  Common  Stock,  par value $0.01 per share (the "Common
Stock"),  at the close of  business on March 17, 2003 will be entitled to notice
of and to vote at the Meeting.  On that date, the Company had 12,994,163  shares
of Common  Stock  outstanding.  Each share of Common  Stock  outstanding  on the
record date is entitled to one vote.

The address of the Company's principal executive offices is 201 West North River
Drive, Suite 100, Spokane, Washington 99201.

This Proxy  Statement and the  accompanying  proxy are first being mailed to the
Company's shareholders on or about April 16, 2003.

Voting

Under Washington law, the Company's  Articles of Incorporation and By-Laws,  the
presence at the Meeting,  in person or by duly authorized proxy, of holders of a
majority of the outstanding  shares of Common Stock entitled to vote constitutes
a quorum for the transaction of business.

Shares of Common Stock for which proxies are properly executed and returned will
be voted at the Meeting in accordance  with the directions  noted thereon or, in
the absence of directions to the contrary,  will be voted (i) "FOR" the election
of the two  nominees for the Board of Directors  named on the  following  pages,
provided that if any one or more of such nominees should become  unavailable for
election  for any reason,  such  shares  will be voted for the  election of such
substitute  nominee or nominees as the Board of Directors may propose;  and (ii)
"FOR" the  ratification of the  appointment of BDO Seidman,  LLP as auditors for
the Company for 2003.

The two nominees for the Board of Directors  who receive the greatest  number of
votes cast in the  election  of  directors  by the  shares  present in person or
represented  by proxy at the  Meeting  and  entitled  to vote  shall be  elected
directors.  The affirmative  vote of a majority of the votes cast by the holders
of shares  entitled  to vote and present in person or by proxy at the Meeting is
required  for  approval  of  any  other  matters  submitted  to a  vote  of  the
shareholders. Abstention from voting for a nominee for director may make it less
likely that the nominee will be one of the two nominees for director who receive
the greatest number of votes cast.  Abstention from voting on any other proposal
will have no  effect,  since  approval  is based  solely on the  number of votes
actually cast.

Brokerage  firms  and other  intermediaries  holding  shares of Common  Stock in
street  name for  customers  are  generally  required to vote such shares in the
manner  directed  by their  customers.  In the  absence  of  timely  directions,
brokerage firms and other intermediaries  generally will have discretion to vote
their  customers'  shares in the  election of  directors  and on the proposal to
ratify the  appointment of auditors.  If a brokerage firm or other  intermediary
votes its  customers'  shares on some but not all  proposals,  the effect of the
non-vote  will vary  depending  on the  proposal.  A non-vote  for a nominee for
director  will  make it less  likely  that  the  nominee  will be one of the two
nominees for director who receive the greatest  number of votes cast. A non-vote
on any other proposal will have no effect, since approval is based solely on the
number of votes actually cast.

The Company will bear the expense of preparing,  printing and distributing proxy
materials to its shareholders. In addition to solicitations by mail, a number of
regular  employees of the Company may solicit  proxies on behalf of the Board of
Directors in person or by telephone  and may also retain others on behalf of the
Board of Directors to assist in the solicitation of proxies by mail,  telephone,
e-mail and personal  interview.  The Company will also reimburse brokerage firms
and other  intermediaries  for their expenses in forwarding  proxy  materials to
beneficial owners of the Company's Common Stock.

Revocation

Any  shareholder  giving a proxy may revoke it at any time before it is voted by
delivering to the Company's  General Counsel a written notice of revocation or a
duly  executed  proxy  bearing a later  date,  or by  attending  the Meeting and
electing to vote in person.

                                     Page 1

                        PROPOSAL 1: ELECTION OF DIRECTORS

The Company's Board of Directors  currently  consists of seven members,  divided
into three classes with terms expiring as follows:

Class A (two positions with terms expiring in 2003):

         Peter F. Stanton
         Stephen R. Blank

Class B (three positions with terms expiring in 2004):

         Donald K. Barbieri
         Ronald R. Taylor
         Arthur M. Coffey

Class C (two positions with terms expiring in 2005):

         Richard L. Barbieri
         [Vacant]

                            COMPOSITION AND NOMINEES

The By-Laws of the Company  provide  that there shall be no fewer than three and
no more than thirteen members of the Board of Directors, as determined from time
to  time  by  the  Board.   In  addition,   the  Company   issued,   non-voting,
non-convertible,  preferred stock as part of its acquisition of Red Lion Hotels,
Inc.  Under certain  circumstances,  which do not now exist,  the holder of that
preferred stock would have the right to appoint two members to the Board.

At the Meeting,  two persons  will be elected to fill the Class A positions  for
terms of three years, to hold office until the annual meeting of shareholders in
the year their terms expire (2006) and until their  respective  successors  have
been  elected and shall have  qualified  as provided  by the  By-laws.  Peter F.
Stanton and Stephen R. Blank are present  directors of the Company and have been
nominated to continue as directors to fill the two Class A positions.


                 NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
                        CLASS A (TERMS TO EXPIRE IN 2006)

Peter F.  Stanton,  age 46, has been a Director of the Company since April 1998.
Mr.  Stanton is the Chairman and Chief  Executive  Officer of  Washington  Trust
Bank. Mr. Stanton has been with  Washington  Trust Bank since 1982. He served as
its President  from 1990 to March of 2000 and has served as its Chief  Executive
Officer  since  1993 and its  Chairman  since  1997.  Mr.  Stanton is also Chief
Executive Officer,  President and a Director of W.T.B.  Financial Corporation (a
bank holding  company).  In addition to serving on numerous  civic  boards,  Mr.
Stanton was President of the Washington  Bankers  Association  from 1995 to 1996
and served as State  Chairman of the American  Bankers  Association  in 1997 and
1998.

Stephen R. Blank,  age 57, has been a Director of the Company since May of 1999.
Mr. Blank is presently Senior Fellow,  Finance, for the Urban Land Institute,  a
non-profit  education  and  research  institute  that  studies land use and real
estate  development  policy  and  practice,  where  he is  responsible  for  the
Institute's real estate capital markets information and education programs.  Mr.
Blank  earned a B.A.  in History at  Syracuse  University  and  continued  on in
graduate school at Adelphi  University  where he earned an MBA in Finance.  From
November 1993 to November 1998, Mr. Blank was the Managing Director, Real Estate
Investment Banking, for CIBC Oppenheimer Corp in New York. From 1989 to 1993, he
was Managing Director,  Real Estate Investment Banking, for Cushman & Wakefield,
Inc.  and from 1979 to 1989 he was  Managing  Director,  Real Estate  Investment
Banking,  for  Kidder,  Peabody  & Co.,  Inc.  Mr.  Blank is a  Director  of the
Ramco-Gershenson  Properties Trust, BNP Residential  Properties,  Inc., Atlantic
Realty  Trust and America  First  Mortgage  Investments,  Inc. Mr. Blank is also
adjunct  Professor  of Real Estate in the  Executive  MBA  program for  Columbia
University's Graduate School of Business.

                                     Page 2

           CONTINUING DIRECTORS - NOT STANDING FOR ELECTION THIS YEAR
                        CLASS B (TERMS TO EXPIRE IN 2004)

Donald K.  Barbieri,  age 57, has been a Director of the Company  since 1978 and
Chairman of the Board since 1996.  He served as  President  and Chief  Executive
Officer of the  Company  from 1978 until  April 2003.  Mr.  Barbieri  joined the
Company in 1969 and is responsible for the Company's  development  activities in
hotel,  entertainment  and real estate areas. Mr. Barbieri is currently a member
of the Washington Economic Development Commission. Mr. Barbieri is the immediate
past Chair for the Spokane Regional Chamber of Commerce.  Mr. Barbieri served as
President of the Spokane Chapter of the Building Owners and Managers Association
from 1974 to 1975 and served as President of the Spokane Regional Convention and
Visitors  Bureau  from 1977 to 1979.  He also served on the  Washington  Tourism
Development  Council from 1983 to 1985 and the Washington  Economic  Development
Board while chairing the State of  Washington's  Quality of Life Task Force from
1985 to 1989. Mr. Barbieri is the brother of Richard L. Barbieri.

Ronald R. Taylor,  age 55, has been a Director of the Company  since April 1998.
He has been a private  investor since 2002. He is currently a Director of Watson
Pharmaceuticals,  Inc. (a pharmaceutical  manufacturer),  and is Chairman of the
Board of two  privately  held  companies.  From 1998 to 2002,  Mr.  Taylor was a
General  Partner of Enterprise  Partners,  a venture  capital firm. From 1996 to
1998,  Mr. Taylor worked as an  independent  business  consultant.  From 1987 to
1996, Mr. Taylor was Chairman,  President and Chief  Executive  Officer of Pyxis
Corporation (a health care service provider), which he founded in 1987. Prior to
founding  Pyxis,  he was an executive  with both  Allergan  Pharmaceuticals  and
Hybritech,  Inc. Mr. Taylor  received a B.A. from the University of Saskatchewan
and an M.A. from the University of California, Irvine.

Arthur M. Coffey,  age 47, has been a Director of the Company since 1990. He was
appointed  President and Chief Executive Officer of the Company in April 2003 to
succeed Donald K. Barbieri. He also has served as Chief Financial Officer of the
Company since  June 1997,  and will continue to serve in that capacity pending a
search for a successor.  Mr. Coffey served as Executive Vice President from June
1997 until April 2003 and as Chief Operating Officer of the Company from 1990 to
June 1997. Additionally, he served as President of WestCoast Hotels in 2002. Mr.
Coffey has been in the hotel business since 1971 and joined the Company in 1981.
Mr. Coffey is currently a Director of the  Association  of Washington  Business,
served as a  trustee  of the  Spokane  Area  Chamber  of  Commerce,  served as a
Director of the Washington State Hotel  Association from 1996 to 1997, served as
Director of the Spokane  Regional  Convention  and Visitors  Bureau from 1982 to
1985 and served as President of the Spokane Hotel Association from 1989 to 1990.

                        CLASS C (TERM TO EXPIRE IN 2005)

Richard L.  Barbieri,  age 61, is  currently  an Executive  Vice  President  and
General  Counsel of the Company.  Mr.  Barbieri has been a Vice President of the
Company and full-time  General  Counsel of the Company since 1994 and a Director
of the  Company  since 1978.  From 1978 to 1995,  Mr.  Barbieri  served as legal
counsel and  Secretary of the  Company,  during which time he was engaged in the
private practice of law at Edwards and Barbieri, a Seattle law firm, and then at
Riddell Williams,  a Seattle law firm, where he chaired the real estate practice
group.  Mr.  Barbieri has also served as Chairman of various  committees  of the
State and County Bar  Association  and as a member of the governing board of the
County  Bar  Association.  He also  served  as Vice  Chairman  of the  Citizens'
Advisory  Committee  to the Major  League  Baseball  Stadium  Public  Facilities
District in Seattle in 1996 and 1997.  Mr.  Barbieri is the brother of Donald K.
Barbieri.

There is  currently a vacancy in the second  directorship  of Class C, which the
Board of  Directors  intends  to fill as soon as it  identifies  an  appropriate
candidate.

Meetings of the Board of Directors

The Board of Directors met four times in 2002.  All directors  attended at least
75% of the meetings of the Board of Directors  and its  committees on which they
serve.

                                     Page 3

Committees of the Board of Directors

The Company has established four standing  committees of its Board of Directors,
each of which are composed of independent  directors (as independence is defined
in Sections  303.01(B)(2)(a)  and (3) of the New York Stock  Exchange's  listing
standards).  They are an Audit Committee, a Compensation  Committee, a Committee
of  the  Independent  Directors,  and  a  Nominating/Governance  Committee.  The
functions performed by these Committees are summarized below:

Audit Committee.  The Audit Committee is responsible for making  recommendations
concerning the engagement of the Company's independent auditors,  reviewing with
the  independent  auditors  the  plans  and  results  of the  audit  engagement,
approving   professional   services   provided  by  the  independent   auditors,
considering  the range of audit and non-audit fees and reviewing the adequacy of
the Company's internal accounting  controls.  The members of the Audit Committee
are Peter F. Stanton, Chairman, Ronald R. Taylor and Stephen R. Blank. The audit
committee  met six times  during  2002.  The Board of  Directors  has  adopted a
written  charter  for the  Audit  Committee,  a copy of which  was  attached  as
Appendix A to the Proxy  Statement  for the  Company's  2002  annual  meeting of
shareholders.

Compensation   Committee.   The  Compensation  Committee  establishes  salaries,
incentives and other forms of  compensation  for  directors,  officers and other
executives of the Company. This Committee also administers the Company's various
incentive  compensation  and benefit plans and recommends the  establishment  of
policies  relating to such plans. The members of the Compensation  Committee are
Ronald R. Taylor, Chairman, and Stephen R. Blank. The Compensation Committee met
twice in 2002.

Committee of Independent  Directors.  The Committee of Independent Directors was
established to reinforce the role of independent directors in providing guidance
to the  Company.  The members of the  Committee  of  Independent  Directors  are
Stephen R. Blank,  Ronald R.  Taylor,  and Peter F.  Stanton.  The  Committee of
Independent  Directors  plans to meet  separately  from the other  directors  in
connection  with each  meeting of the full Board of  Directors  and at any other
time  that it  deems it  appropriate  to meet.  The  Committee  met once in 2002
following its formation in August of 2002.

Governance/Nominating   Committee.  The   Governance/Nominating   Committee  was
established to assist the Board in complying with evolving governance  standards
under New York Stock  Exchange  and  Securities  and Exchange  Commission  (SEC)
requirements,  and to nominate  suitable  candidates to serve on the Board.  The
members of the  Governance/Nominating  Committee are Stephen R. Blank, Chairman,
and Peter F. Stanton.  The Committee has not met separately from the Board since
its formation in August of 2002.

                                     Page 4

                          REPORT OF THE AUDIT COMMITTEE

On  June  25,   2001,   the   Company   ended   its  audit   relationship   with
PricewaterhouseCoopers  LLP, the Company's independent  accountants (the "Former
Accountants"). The decision to change was prompted when the Company was notified
that the staff and partners  responsible  for the  Company's  relationship  were
transferring  to BDO Seidman,  LLP ("BDO").  The Company  engaged BDO as its new
principal  independent  accountants  effective June 28, 2001. The reports of the
Former  Accountants  on the  financial  statements  for the  fiscal  year  ended
December 31, 2000  contained no adverse  opinion or disclaimer  of opinion,  and
were not  qualified or modified as to  uncertainty,  audit scope or,  accounting
principles.

The decision to dismiss the Former  Accountants  and engage BDO as the principal
independent  accountants  for the Company was approved by the Audit Committee of
the Board of Directors of the Company. During the fiscal year ended December 31,
2000 and the interim  period  ended June 25, 2001,  there were no  disagreements
with the Former Accountants on any matter of accounting principles or practices,
financial  statement   disclosure,   or  auditing  scope  or  procedure,   which
disagreements,  if not resolved to the  satisfaction of the Former  Accountants,
would  have  caused  them to make  reference  thereto  in  their  report  on the
financial  statements for such year or the fiscal year  containing  such interim
period.  During the fiscal year ended  December 31, 2000 and through the interim
period ended June 25, 2001, there were no "reportable events" as defined by Item
304 (a)(1)(v) of Regulation  S-K. The former  accountants  furnished the Company
with a letter  addressed  to the SEC  stating  that they  agreed  with the above
statements.  Neither  the Company  nor anyone on its behalf  consulted  with BDO
prior to its engagement of BDO.

The Audit Committee has reviewed and discussed the audited financial  statements
with  management.  The Audit Committee has discussed with BDO Seidman,  LLP, the
Company's  independent  auditors,  the matters  required to be  discussed  under
Statement on Auditing Standards No.61 (SAS 61). The Audit Committee has received
the  written  disclosures  and the letter  from BDO  Seidman,  LLP  required  by
Independence  Standards Board Standard No. 1 and has discussed with BDO Seidman,
LLP its independence.

Based upon the review and discussions of the Audit Committee with respect to the
items  listed  above,  the  Audit  Committee  has  recommended  to the  Board of
Directors  that the audited  financial  statements  be included in the Company's
2002 Annual  Report on Form 10-K for filing with the SEC. The Committee has also
recommended,  subject to shareholder approval, the selection of BDO Seidman, LLP
as the Company's independent auditors for 2003.

Respectfully submitted,

Peter F. Stanton (Chairman)
Ronald R. Taylor
Stephen R. Blank

                                     Page 5

                            COMPENSATION OF DIRECTORS

Directors  who are  employees  of the  Company do not receive any fees for their
service on the Board of Directors  or any  committee  thereof.  The Company pays
each of its  non-employee  directors  an annual  fee equal to  $12,000,  payable
one-half  in cash and  one-half in shares of Common  Stock.  In  addition,  each
non-employee  director  annually  receives an option to purchase 1,000 shares of
the stock of the  Company at the  closing  stock price on the date of the annual
shareholder  meeting. In addition,  each non-employee  director is paid $500 for
attendance at each meeting of the Board of Directors and $250 for  attendance at
each meeting of a committee of the Board of Directors of which such  director is
a member. The Company also reimburses directors for their out-of-pocket expenses
incurred in connection with their service on the Board of Directors.

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth the beneficial  ownership of the Common Stock as
of March  17,  2003,  by (i) each  shareholder  known by the  Company  to be the
beneficial  owner of more than 5% of the  outstanding  Common  Stock,  (ii) each
director, (iii) each Named Executive Officer (as defined in SEC regulations) and
(iv) all directors and executive officers as a group.

Number of Percentage of Beneficial Owner Shares Owned(1) Common Stock(1) ------------------------------------------- ----------------------- --------------------------- Donald K. Barbieri (2) 3,483,786 26.8 201 W. North River Dr., Ste.100 Spokane, Washington, 99201 WM Advisors, Inc. (3) 1,723,185 13.3 1201 Third Avenue, 22nd Floor Seattle, Washington, 98101 Dimensional Fund Advisors Inc.(4) 1,069,900 8.2 1299 Ocean Ave., 11th Floor, Santa Monica, California 90401 DKB and HHB Unity Trust (5) 960,379 7.4 201 W. North River Dr., Ste.100 Spokane, Washington, 99201 Wellington Management Company, LLP (6) 1,175,000 9.0 75 State Street, Boston, Massachusetts, 02109 Richard L. Barbieri 533,427 4.1 Arthur M. Coffey 11,538 * Peter F. Stanton (7) 12,664 * Ronald R. Taylor (7) 27,664 * Stephen R. Blank (8) 6,373 * Sharon Sanchez 1,840 * All directors and executive officers as a 4,077,292 31.4 group (seven persons) (9)
* Represents less than 1% of Common Stock outstanding. (1) For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of shares of Common Stock if such person or group has the right to acquire beneficial ownership of such shares within 60 days. For purposes of computing the percentage of outstanding shares held by each person or group of persons named above on a given date, any security which such person or persons has the right to acquire within 60 days after such date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. (2) Includes shares of Common Stock held by the DKB & HHB Unity Trust, an irrevocable trust, of which Donald K. Barbieri and his spouse Heather Barbieri are co-trustees and for which Donald K. Barbieri exercises voting power, and of which they otherwise disclaim beneficial ownership. (3) Reported ownership for this entity is based solely on the Schedule 13G filed on February 3, 2003 for this owner. (4) Reported ownership for this entity is based solely on the Schedule 13G filed on February 13, 2003 for this owner. (5) These shares are also included in the number of shares beneficially owned by Donald K. Barbieri. Mr. Barbieri disclaims beneficial ownership of these shares. (6) Reported ownership for this entity is based solely on the Schedule 13G filed on February 14, 2003 for this owner. (7) Includes 8,000 shares subject to options that are exercisable within 60 days of March 17, 2003. (8) Includes 4,000 shares subject to options that are exercisable within 60 days of March 17, 2003. (9) Includes 20,000 shares subject to options that are exercisable within 60 days of March 17, 2003. SECTION 16(a) Page 6 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Based on the Company's review of Forms 3, 4 and 5 and any amendments thereto furnished to it pursuant to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and written representations by the Company's officers and directors regarding compliance with applicable filing requirements, the Company believes that all filing requirements under Section 16 applicable to its officers, directors and greater than ten percent shareholders were complied with in 2002, with the exception of one late filing of a Form 3 by Sharon Sanchez, one late filing of a Form 4 by Donald K. Barbieri reporting a single sale transaction and one late filing of a Form 4 by Peter F. Stanton. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company has periodically entered into agreements with Inland Northwest Corporation, ("INC") and Huckleberry Bay Company, ("HBC") (former subsidiaries of the Company that were spun off to shareholders prior to its initial public offering) to provide development, accounting and other administrative services to INC and HBC in exchange for fees and costs incurred by the Company in connection with providing such services. The agreements are subject to termination annually. During 2002, the Company recorded fees and other income from the INC and HBC agreements in the amount of $183,000. Certain executive officers hold approximate ownership interests in HBC as follows: Donald K. Barbieri, 38%; DKB/HHB Unity Trust (Donald K. Barbieri, Trustee), 14%; Richard L. Barbieri, 8%. These executive officers also hold the following approximate ownership interests in INC: Donald K. Barbieri, 19%; DKB/HHB Unity Trust (Donald K. Barbieri, Trustee), 7%; Richard L. Barbieri, 4%. With respect to material transactions (or series of related transactions) between the Company and related parties, the Company has implemented a policy requiring any such transaction to be approved by a majority of the non-employee directors, upon such directors' determination that the terms of the transaction are no less favorable to the Company than those that could be obtained from unrelated third parties. EXECUTIVE COMPENSATION The following table discloses compensation received by the Company's Named Executive Officers for services rendered to the Company for the three years ended December 31, 2002.
Annual Compensation Long Term Compensation Awards Name and Principal Position Year Salary Bonus Other Annual Restricted Securities All Other ($) ($)(1) Compensation Stock Awards Underlying Compensation ($) ($) Options (#) ($)(2) Donald K. Barbieri (4) 2002 209,065 9,450 - - - 8,415 Chief Executive Officer, 2001 167,321 71,436 - - 20,942 5,741 President and Chairman 2000 161,345 24,030 - - - 3,240 Arthur M. Coffey (4) 2002 199,261 5,400 - - (3) - 8,759 Chief Financial Officer, 2001 165,846 70,830 - - 20,758 6,020 Executive Vice President 2000 159,461 19,575 - - 9,624 11,602 and Director Sharon Sanchez (4) 2002 156,308 10,080 29,662 (5) - - 2,944 Executive Vice President, 2001 - - - - - - Hotel Operations 2000 - - - - - - Richard L. Barbieri 2002 159,700 7,200 - - - 4,627 Executive Vice President, 2001 145,115 60,638 - - 12,109 3,709 General Counsel and Director 2000 139,181 31,500 - - 8,421 2,221
(1) Awards of bonuses pursuant to the Company's Annual Bonus Plan are made by the Compensation Committee. Bonuses are included in this table for the year in which they were earned. (2) Represents matching contributions made by the Company for the Named Executive Officers under the Company's 401(k) Savings Plan. (3) A prior award of 3,000 restricted shares held by Mr. Coffey vested in 2002. These shares were repurchased by the Company in 2002 for $21,870. Mr. Coffey had no other restricted shares as of December 31, 2002. (4) Mr. Donald K. Barbieri served as President and Chief Executive Officer from 1978 until April 2003. Mr. Coffey was appointed to President and Chief Executive Officer in April 2003 to succeed Mr. Donald K. Barbieri. Mr. Coffey will continue to serve as Chief Financial Officer until a successor is appointed. Ms. Sanchez joined the Company on December 31, 2001 following the Company's acquisition of Red Lion Hotels, Inc. (5) Includes relocation costs paid by the Company for Ms. Sanchez of $25,352. Page 7 OPTION GRANTS IN LAST FISCAL YEAR The Company made no option grants to the Named Executive Officers in 2002. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values (1)
Number of Securities Value of Unexercised Underlying Unexercised In-The-Money Options Options at Fiscal Year-End at Fiscal Year-End Name # of Shares Value Exercisable Unexercisable Exercisable Unexercisable Acquired on Realized Exercise Donald K. Barbieri - - 624 21,565 - - Arthur M. Coffey - - 526 35,908 - - Sharon Sanchez - - - 15,445 - - Richard L. Barbieri - - 420 25,950 - -
(1) No options were exercised in 2002. REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION The Compensation Committee, which consists of non-employee directors, implements and endorses the goals of the Company's executive compensation program, which reflect three guiding principles: (i) to provide compensation and benefits that allow the Company to maintain competitive compensation to attract and retain executives with the skills critical to the Company's long-term success, (ii) to reward performance in attaining business objectives and maximizing shareholder value and (iii) to encourage Company stock ownership through officer ownership guidelines that are monitored by the Committee on an ongoing basis. During 2002, the Compensation Committee's compensation policies with regard to the Company's executive officers were as follows: (1) The base 2001 salary of the executive officers was increased as reflected in the executive compensation tables to maintain a competitive base compensation. The Compensation Committee retained Towers Perrin in 1999 to review and make recommendations for the compensation of the executive officers. The Compensation Committee adopted these recommendations and has annually reviewed the general guidance from Towers Perrin and current economic trends in its evaluation of the appropriate compensation package for all executive officers. (2) the Committee established a target incentive bonus for the year based on a target bonus of 30% of 2002 base salary upon achieving earnings per share, divisional performance and individual goals. Respectfully submitted, Ronald R. Taylor, Chairman Peter F. Stanton Stephen R. Blank Page 8 EMPLOYMENT CONTRACTS, TERM OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS Employment Agreements The Company has employment agreements with Arthur M. Coffey and Richard L. Barbieri that provided for 2002 base salaries of $200,000 in the case of Arthur M. Coffey and $160,000 in the case of Richard L. Barbieri, subject, in each case, to periodic increases. Each executive officer is eligible to receive annual bonuses as determined by the Compensation Committee and is entitled to participate in all existing or future benefit plans of the Company, on the same basis as other senior officers of the Company. The employment agreements with these two executive officers (as used below, each an "Executive") are substantially similar and provided as follows: Each Executive shall serve in the position described above through December 31, 2003, unless terminated earlier in accordance with the terms of such agreement. Thereafter, each agreement automatically renews for additional one-year periods, unless terminated by either party upon 120-days' notice prior to the end of the initial or any renewal period. The agreements may be terminated by the Company for Cause (as defined in such agreement) or by the Executive (i) for Good Reason (as defined in such agreement) or (ii) within six months of a Change of Control of the Company (as defined in such agreement). If the Executive terminates the agreement for Good Reason (or the Company terminates the agreement without Cause) or, after the initial term ends, unilaterally determines to not renew such Executive's agreement, the Executive will receive a severance payment equal to two times such Executive's total compensation in the prior year, plus a continuation of all benefits for a two-year period, and all outstanding options of such Executive shall become fully vested. If the Executive terminates the agreement following a Change of Control, the severance payment will be equal to three times such Executive's total compensation for the prior year. The Company has also agreed to reimburse the Executive for any federal, state or local excise taxes ("Excise Tax"), and any additional taxes to which he may be subject, on any payments to the Executive from the Company as a result of accelerated vesting of his options, up to a maximum reimbursement equal to two times the amount of such Excise Tax. Page 9 STOCK PRICE PERFORMANCE The following graph depicts the Company's Common Stock price performance relative to the performance of the Russell 2000 Composite Index and the Standard & Poor's Lodging Index. TABLE The graph above assumes an investment of $100 in the Company's Common Stock, the Russell 2000 Composite Index, and the Standard & Poor's Lodging Index, and assumes a reinvestment of all dividends. The Company has not paid cash dividends on its Common Stock. Note that the Company's Common Stock price performance on the graph above is not necessarily indicative of future stock price performance. Page 10 PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS The Board of Directors recommends a vote "FOR": the ratification of the appointment of BDO Seidman, LLP as auditors for the Company for 2003. Unless instructed to the contrary, it is intended that votes be cast pursuant to the accompanying proxy for the ratification of the appointment of BDO Seidman, LLP as auditors for the Company for 2003. BDO Seidman, LLP has audited the accounts for the Company since 2001, when it was appointed to replace the firm of PricewaterhouseCoopers, LLP at the time it closed the office which formerly served the account of the Company. Representatives of BDO Seidman, LLP are expected to attend the Meeting and will have an opportunity to make a statement and/or respond to appropriate questions from shareholders. In the event that the ratification of the appointment of auditors is not made by a majority of the shares cast on this proposal, the selection of other auditors will be considered by the Board of Directors. Audit Fees The fees billed for professional services by BDO Seidman, LLP for the audit of the Company's financial statements and the fiscal year reviews of the quarterly financial statements for 2002 were $142,000. Financial Information and Systems Design and Implementation Fees During 2002, BDO Seidman, LLP did not provide the Company any professional services described in paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X. All Other Fees The fees billed by BDO Seidman, LLP for all other professional services rendered to the Company during 2002 were $218,306. These services related to (1) tax and assurance work related to the acquisition of Red Lion Hotels, Inc. ($130,096), income tax compliance ($60,060), other assurance services of $8,500 and other tax services of $19,650. Auditor Independence The Audit Committee of the Board of Directors has considered whether the other professional services provided by BDO Seidman, LLP are compatible with maintaining its independence. OTHER MATTERS Management is not aware at this time that any other matters are to be presented for action at this meeting. The enclosed proxy confers upon the persons designated to vote the shares represented thereby authority to vote such shares in their discretion with respect to all matters that may come before the meeting in addition to the scheduled items of business, including matters incident to the conduct of the meeting and any shareholder proposal omitted from the Proxy Statement and form of proxy pursuant to the rules of the Securities and Exchange Commission. At the time this Proxy Statement went to press, management was not aware of any other matter that may properly be presented for action at the meeting. PROPOSALS OF SHAREHOLDERS Proposals of shareholders to be considered for inclusion in the Proxy Statement and proxy for the Company's 2004 Annual Meeting of Shareholders must be received by the Company on or prior to December 19, 2003. A shareholder of record, who intends to submit a proposal at the 2004 Annual Meeting that is not eligible for inclusion in the Proxy Statement or proxy, or who intends to submit one or more nominations for directors at the meeting, must provide prior written notice to the Company. The notice should be addressed to the Secretary and received at the Company's principal executive offices not later than December 19, 2003. The written notice must satisfy certain requirements specified in the Company's By-laws. A copy of the Company's By-laws will be sent to any shareholder upon written request to the Company's Secretary. ANNUAL REPORT AND ANNUAL REPORT ON FORM 10-K A copy of the Company's 2002 Annual Report on Form 10-K for the year ended December 31, 2002 as filed with the Securities and Exchange Commission is being mailed with this Proxy Statement to each shareholder of record. Shareholders not receiving a copy of such Annual Report may obtain one without charge by writing or calling Stephen Barbieri, 201 West North River Drive, Suite 100, Spokane, Washington 99201, (509) 459-6100. By Order of the Board of Directors Richard L. Barbieri General Counsel Spokane, Washington April 16, 2003 Page 11