As filed with the Securities and Exchange Commission on May 28, 1999
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MERISTAR HOSPITALITY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Maryland 75-2648842
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
(202) 295-1000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
Paul W. Whetsell
Chairman of the Board and
Chief Executive Officer
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
(202) 295-1000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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copy to:
Richard S. Borisoff, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
(212) 373-3000
Approximate date of commencement of proposed sale to public: From time
to time or at one time after the effective date of this registration statement
as determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[X]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered(1) Per Share(2) Offering Price Fee
- --------------------------------------- ------------------- -------------------------- -------------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock,
$0.01 par value per share.............. 5,000,000 $21.81 $109,050,000 $30,315.90
- --------------------------------------- ------------------- -------------------------- -------------------------- -----------------
</TABLE>
(1) Plus such additional shares as may be issued by reason of stock splits,
stock dividends and similar transactions.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(c) of the rules and regulations under the
Securities Act of 1933, as amended. Pursuant to Rule 457, the proposed
maximum offering price per share of Common Stock of the registrant is based
upon the average of the high and low prices of the registrant's Common Stock
on May 26, 1999 on the New York Stock Exchange Composite Transaction Tape.
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PROSPECTUS
MERISTAR HOSPITALITY CORPORATION
DIVIDEND REINVESTMENT PLAN
5,000,000 SHARES OF COMMON STOCK
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We have established a distribution reinvestment plan to provide our
shareholders with a simple and convenient method of reinvesting cash
distributions in additional shares of our common stock. A participant in the
plan may purchase additional shares by reinvesting distributions relating to all
or part of the common stock of our company held by the participant. If plan
participants purchase shares of our common stock directly, we may offer a
discount on our stock price ranging from 0% to 5%. As of the date of this
document, there is no discount for purchases.
To enroll in the plan, simply complete the enclosed authorization form
and return it in the envelope provided. Enrollment in the plan is entirely
voluntary, and plan participants may terminate their participation at any time.
The shares of our common stock are listed on the New York Stock
Exchange under the symbol "MHX." On May 27, 1999, our closing stock price was
$21.44.
See "Risk Factors" beginning on page 3 for certain factors relevant to
an investment in our shares of common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
May 28, 1999
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THE COMPANY
We are a comprehensive real estate investment trust, which owns a
portfolio of primarily upscale, full service hotels, diversified by franchise
and brand affiliations, in the United States and Canada. All of our hotels and
our other assets are held by, and all of our operations are conducted by our
subsidiary, MeriStar Hospitality Operating Partnership, L.P. We are the sole
general partner of the operating partnership and control its operations. On
August 3, 1998, our predecessor, American General Hospitality Corporation,
completed a merger with CapStar Hotel Company pursuant to which we changed our
name to MeriStar Hospitality Corporation.
Prior to the merger, CapStar transferred specific assets and
liabilities to its subsidiary, MeriStar Hotels & Resorts, Inc., so that MeriStar
Hotels would own the hotel management and leasing business previously operated
by CapStar and its subsidiaries. CapStar then through a spin-off distributed to
its stockholders all of the outstanding stock of MeriStar Hotels. Immediately
following the merger, MeriStar Hotels acquired all of the partnership interests
in AGH Leasing, L.P., the third-party lessee that leased most of the hotels
American General owned. MeriStar Hotels also acquired most of the assets and
specific liabilities of American General Hospitality, Inc., the third-party
manager that managed most of the hotels American General owned. MeriStar Hotels
also leases and manages properties for other hotel owners. We share two key
officers and four board members with MeriStar Hotels. An intercompany agreement
aligns our interests with its interests, with the objective of benefiting both
companies' shareholders.
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Our executive offices are located at 1010 Wisconsin Avenue, N.W.,
Washington, D.C. 20007 and our telephone number is (202) 295-1000.
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RISK FACTORS
You should consider carefully the information below, as well as all the
other information included or considered to be part of this prospectus before
you decide to purchase shares of our common stock. Our actual results could
differ materially from those anticipated in forward-looking statements made in
this prospectus, including those described in the following risk factors and
elsewhere in this prospectus. Please refer to the section of this prospectus
entitled "Forward-Looking Statements."
We have significant debt, which may limit our ability to borrow, restrict the
use of our cash flows and exposes us to significant refinancing risks.
We currently have significant amounts of debt outstanding and,
accordingly, are exposed to the risks normally associated with debt financing,
including the risk that:
o our cash flow from operations will be insufficient to make
required payments of principal and interest;
o existing indebtedness, including secured indebtedness, may not
be refinanced; or
o the terms of any refinancing will not be as favorable as the
terms of existing indebtedness.
If we do not have sufficient funds to repay our indebtedness at
maturity, it may be necessary to refinance our indebtedness through additional
debt financing, private or public offerings of debt securities or additional
equity offerings. If, at the time of any of the refinancing, prevailing interest
rates or other factors result in higher interest rates on refinancings,
increases in interest expense could adversely affect cash flow, and,
consequently, cash available for distribution to stockholders. If we are unable
to refinance our indebtedness on acceptable terms, we might be forced to dispose
of hotels or other assets on disadvantageous terms, potentially resulting in
losses and adverse effects on cash flow from operating activities. If we are
unable to make required payments of principal and interest on indebtedness
secured by our hotels, the properties could be foreclosed upon by the lender
with a consequent loss of income and asset value.
Likewise our credit facility requirements could affect our financial
condition. We have in place a senior secured credit facility that, at inception,
provided for a maximum borrowing amount of up to $1.0 billion. The credit
facility is structured as a $300 million, five-year term loan facility; a $200
million, five- and-a-half year term loan facility; and a $500 million,
three-year revolving credit facility with two one-year optional extensions. Our
ability to borrow under the credit facility is limited by financial covenants,
including leverage and interest rate coverage ratios and minimum net worth
requirements. Our credit facility limits our ability to effect mergers, asset
sales and change of control events and limits dividends to the lesser of
o 90% of funds from operation; and
o 100% of funds from operations less a capital reserve equal to
4% of gross room revenues.
The credit facility also contains a cross-default provision which would be
triggered by a default or acceleration of
o $20 million or more of indebtedness secured by our assets, or
o $5 million or more of any other indebtedness.
We also have outstanding $205 million aggregate principal amount of
senior subordinated unsecured notes due 2007 that bear interest at an annual
rate of 8.75% and $175 million of outstanding convertible notes due 2004 that
bear interest at 4.75%. The indentures relating to these notes contain
limitations on our
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ability to effect mergers and change of control events. The indentures relating
to the $205 million of senior subordinated unsecured notes, and the indenture
relating to the outstanding and exchange notes contain financial covenants,
including:
o the limitation on incurring additional indebtedness and the
issuance of capital stock unless an interest coverage ratio is
met;
o limitations on the declaration and payment of dividends;
o limitations on the sale of our assets;
o limitations on transactions with our affiliates; and
o limitations on liens.
Our organizational documents do not limit the amount of indebtedness
which we may incur. As of the date of this prospectus, approximately 25% or our
hotel assets, based on the number of guest rooms, were encumbered by mortgage
debt.
Some of our borrowings bear interest at variable rates; therefore, our cash flow
may be adversely affected because we are exposed to the risk of rising interest
rates.
Some of our borrowings bear interest at variable rates, including
amounts outstanding under our credit facility. In addition, we may incur
indebtedness in the future that bears interest at a variable rate or we may be
required to retain our existing indebtedness at higher interest rates.
Accordingly, increases in interest rates could increase our interest expense and
adversely affect our cash flow.
We are dependent on the ability of our lessees to make rent payments to us under
the hotel leases.
Our revenues depend solely upon the ability of MeriStar Hotels and our
other hotel lessees to make rent payments under hotel leases. We receive both
base rent and a percentage of gross sales above a minimum level under our hotel
leases. As a result, we will participate in the economic operations of our
hotels only through our share of gross revenues. Any failure or delay by
MeriStar Hotels or our other hotel lessees in making rent payments would
adversely affect us. The failure or delay by MeriStar Hotels or our other hotel
lessees may be caused by reductions in revenue from the hotels they lease from
us.
External factors that affect our hotel lessees could affect our revenues.
MeriStar Hotels and our other hotel lessees will be affected by factors
beyond their control such as changes in the level of demand for rooms and
related services of our hotels, the ability of MeriStar Hotels and our other
lessees to maintain and increase gross revenues at our hotels and other factors
relating to the operations of our hotels. Although failure on the part of either
MeriStar Hotels or our other lessees to materially comply with the terms of a
hotel lease (including failure to pay rent when due) gives us the non-exclusive
right to terminate the lease, repossess the applicable hotel and enforce the
payment obligations under the lease, we would then be required to find another
lessee to lease the hotel because we cannot operate hotels directly due to
federal income tax restrictions. In addition, it is possible that we will be
unable to enforce the payment obligations under the leases following the
termination. We cannot assure you that we would be able to find another lessee
or that, if another lessee were found, we would be able to enter into a new
lease on terms favorable to us.
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There are possible conflicts of interest in our relationship with MeriStar
Hotels that could affect our revenues.
We share a number of board members and senior executives with MeriStar
Hotels, which may cause our interests to conflict.
We share four of the nine members of our board of directors, as well as
two senior executives, with MeriStar Hotels. Our relationship with MeriStar
Hotels is governed by an intercompany agreement, which restricts each party from
taking advantage of business opportunities without first presenting those
opportunities to the other party. We may have conflicting views with MeriStar
Hotels on the manner in which our hotels are operated and managed, and with
respect to lease arrangements, acquisitions and dispositions. As a result, our
directors and senior executives, who serve in similar capacities at MeriStar
Hotels, may well be presented with several decisions which provide them the
opportunity to benefit us to the detriment of MeriStar Hotels or benefit
MeriStar Hotels to our detriment. Similar inherent potential conflicts of
interest will be present in all of the numerous transactions between us and
MeriStar Hotels.
Our revenues could be affected by restrictions that prohibit MeriStar
Hotels from making investments that a real estate investment trust
could make unless we decline the opportunity in a particular situation.
The certificate of incorporation of MeriStar Hotels provides that, for
as long as the intercompany agreement with us remains in effect, MeriStar Hotels
is prohibited from engaging in activities or making investments that a real
estate investment trust could make unless we are first given the opportunity but
choose not to pursue those activities or investments. Under the intercompany
agreement, MeriStar Hotels has, with limited exceptions, agreed not to acquire
or make (1) investments in real estate which, for purposes of the intercompany
agreement, include the provision of services related to real estate and
investment in hotel properties, real estate mortgages, real estate derivatives
or entities that invest in real estate assets, or (2) any other investments that
may be structured in a manner that qualifies under the federal income tax
requirements applicable to real estate investment trusts, unless in either case
it has notified us of the acquisition or investment opportunity and we have
determined not to pursue the acquisition or investment. MeriStar Hotels also has
agreed to assist us in structuring and completing any acquisition or investment
which we do elect to pursue, on terms determined by us.
Our revenues could be affected by restrictions that require us to offer
lessee opportunities to MeriStar Hotels.
The intercompany agreement grants MeriStar the right of first refusal
to become the lessee of any real property that we acquire and are required,
consistent with our status as a real estate investment trust, to lease to a
third party. This lessee opportunity will be available to MeriStar Hotels only
if we determine that MeriStar Hotels is qualified to be the lessee. Because of
the provisions of the intercompany agreement and the MeriStar Hotels charter,
the nature of MeriStar Hotels' business and the opportunities it may pursue are
restricted.
Our operating income could be affected if we sell a hotel because we
generally have to pay a lease termination fee to MeriStar Hotels if we
do so.
We generally will be obligated under our leases with MeriStar Hotels to
pay a lease termination fee to MeriStar Hotels if we (1) elect to sell a hotel
or (2) elect not to restore a hotel after a casualty and do not replace it with
another hotel on terms that would create a leasehold interest in the hotel with
a fair market value equal to the fair market value of MeriStar Hotels's
remaining leasehold interest under the lease to be terminated. When applicable,
the termination fee is equal to the fair market value of MeriStar Hotels'
leasehold interest in the remaining term of the lease to be terminated. A
decision to sell a hotel may, therefore, have significantly different
consequences for us and for MeriStar Hotels.
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Our financial condition could be adversely affected because we lack
control over the management and operation of our owned hotels.
We are dependent on the ability of MeriStar Hotels and our other hotel
lessees to operate and manage our hotels. In order to maintain our real estate
investment trust status, we cannot operate our hotels or any subsequently
acquired hotels. As a result, we are unable to directly implement strategic
business decisions for the operation and marketing of our hotels, including
decisions with respect to the setting of room rates, food and beverage
operations and similar matters.
Our relationship with MeriStar Hotels could have a negative impact on
our acquisitions because other potential parties may not approach us.
Our relationship with MeriStar Hotels could negatively impact our
ability to acquire additional hotels because hotel management companies,
franchisees and others who would have approached us with acquisition
opportunities in hopes of establishing lessee or management relationships may
not do so knowing that we will rely primarily on MeriStar Hotels to lease and/or
manage the acquired properties. These persons may instead provide those
acquisition opportunities to hotel companies that will allow them to manage the
properties following the sale. This could have a negative impact on our
acquisition activities in the future.
There was no arm's-length bargaining of the intercompany agreement with
MeriStar Hotels.
The terms of the intercompany agreement with MeriStar Hotels were not
negotiated on an arm's- length basis. Because the two companies share some of
the same executive officers and directors, there is a potential conflict of
interest with respect to the enforcement and termination of the intercompany
agreement to our benefit to the detriment of MeriStar Hotels or to benefit
MeriStar Hotels to our detriment. Because of these conflicts, the executive
officers and directors may have conflicts of interest with respect to their
decisions relating to enforcement of the intercompany agreement.
Our franchise and license agreements may conflict with our business philosophy
and adversely affect our financial condition because the agreements set
standards for and limitations on the operations of the hotels at the discretion
of the franchisor.
Substantially all of our hotels are operated under existing franchise
or license agreements with nationally recognized hotel brands. The franchise
agreements generally contain specific standards for, and restrictions and
limitations on, the operation and maintenance of a hotel to maintain uniformity
within the franchisor system. Those limitations may conflict with our
philosophy, shared with MeriStar Hotels, of creating specific business plans
tailored to each hotel and to each market. Those standards often changed over
time, in some cases at the discretion of the franchisor, and may restrict a
franchisee's ability to make improvements or modifications to a hotel without
the consent of the franchisor. In addition, compliance with those standards
could require a franchisee to incur significant expenses or capital
expenditures. Action or inaction on our part, by MeriStar Hotels or by our other
third-party operators, could result in a breach of those standards or other
terms and conditions of the franchise agreements and could result in the loss or
cancellation of a franchise license.
Terminating a franchise or license agreement could adversely affect our
operations.
In connection with terminating or changing the franchise affiliation of
a hotel or a subsequently acquired hotel, we may be required to incur
significant expenses or capital expenditures. Moreover, the loss of a franchise
license could have a material adverse effect upon the operations or the
underlying value of the hotel covered by the franchise because of the loss of
associated name recognition, marketing support and centralized reservation
systems provided by the franchisor. The franchise agreements covering the hotels
expire or terminate, without specified renewal rights, at various times and have
differing remaining terms. As a condition to renewal, the franchise agreements
frequently contemplate a renewal application process, which may require
substantial capital improvements to be made to the hotel.
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Our results of operations and financial condition could be adversely affected by
the potential costs of compliance with environmental laws.
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in those property. Those laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of those
hazardous or toxic substances. In addition, the presence of contamination from
hazardous or toxic substances, or the failure to properly remediate the
contaminated property, may adversely affect the owner's ability to sell or rent
those real property or to borrow funds using that real property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of the
substances at the disposal or treatment facility, whether or not the facility is
or ever was owned or operated by that person.
The operation and removal of underground storage tanks are also
regulated by federal and state laws. In connection with the ownership and
operation of the hotels, we could be held liable for the costs of remedial
action with respect to regulated substances and storage tanks and claims related
to them. Activities have been undertaken to close or remove storage tanks
located on the property of several of the hotels.
All of our hotels have undergone Phase I environmental site
assessments, which generally provide a nonintrusive physical inspection and
database search, but not soil or groundwater analyses, by a qualified
independent environmental engineer. The purpose of a Phase I assessment is to
identify potential sources of contamination for which the hotels may be
responsible and to assess the status of environmental regulatory compliance. The
Phase I assessments have not revealed any environmental liability or compliance
concerns that we believe would have a material adverse effect on our results of
operation or financial condition, nor are we aware of any environmental
liability or concerns.
In addition, our hotels have been inspected to determine the presence
of asbestos. Federal, state and local environmental laws, ordinances and
regulations also require abatement or removal of asbestos- containing materials
and govern emissions of and exposure to asbestos fibers in the air.
Asbestos-containing materials are present in various building materials such as
sprayed-on ceiling treatments, roofing materials or floor tiles at some of the
hotels. Operations and maintenance programs for maintaining asbestos-containing
materials have been or are in the process of being designed and implemented, or
the asbestos-containing materials have been scheduled to be or have been abated,
at the hotels. Any liability resulting from non-compliance or other claims
relating to environmental matters could have a material adverse effect on our
results of operations or financial condition.
Our investments are in a single industry, which exposes us to greater financial
risks than if we had diversified investments.
Our current strategy is to acquire interests only in hospitality and
lodging properties. As a result, we are exposed to the risks inherent in
investing in a single industry. The effects on cash available for distribution
resulting from a downturn in the hotel industry may be more pronounced than if
we had diversified our investments.
There are various real estate investment trust tax risks that could adversely
affect our financial condition.
A loss of our qualification as a real estate investment trust could
require us to make significant tax payments, and we might have to
borrow funds to do so.
We have operated and intend to continue to operate in a manner designed
to permit us to qualify as a real estate investment trust for federal income tax
purposes. Qualification as a real estate investment trust involves the
application of highly technical and complex provisions of the Internal Revenue
Code of 1986, for which there are only limited judicial or administrative
interpretations. The determination of various
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factual matters and circumstances not entirely within our control may affect our
ability to continue to qualify as a real estate investment trust. The complexity
of these provisions and of the applicable income tax regulations under the
Internal Revenue Code is greater in the case of a real estate investment trust
that holds its assets through a partnership, as we do. Moreover, no assurance
can be given that legislation, new regulations, administrative interpretations
or court decisions will not change the tax laws with respect to qualification as
a real estate investment trust or the federal income tax consequences of that
qualification.
If we fail to qualify as a real estate investment trust in any taxable
year, we will not be allowed a deduction for distributions to our stockholders
in computing our taxable income and will have to pay federal income tax
(including any applicable alternative minimum tax) on our taxable income at the
applicable corporate rate. In addition, unless we were entitled to relief under
statutory provisions, we would be disqualified from treatment as a real estate
investment trust for the four taxable years following the year during which
qualification is lost. This disqualification would reduce our funds available
for repayment of indebtedness because of our additional tax liability for the
year or years involved.
If the Internal Revenue Service were successfully to determine that the
operating partnership, or any of the partnerships, joint ventures or limited
liability companies in which we or the operating partnership hold an interest,
is properly treated for federal income tax purposes as a corporation, rather
than as a partnership (or, in the case of some single-member limited liability
companies, disregarded as an entity separate from the member), we would cease to
qualify as a real estate investment trust. The imposition of a corporate tax on
the particular entity, with a concomitant loss of our real estate investment
trust status, would substantially reduce the amount of cash available for
distribution.
If we were to fail to qualify as a real estate investment trust, we no
longer would have the distribution requirements of the Internal Revenue Code. To
the extent that distributions to stockholders would have been made in
anticipation of our qualifying as a real estate investment trust, we might be
required to borrow funds or to liquidate assets to pay the applicable corporate
income tax. Although we currently operate in a manner designed to qualify as a
real estate investment trust, it is possible that future economic, market,
legal, tax or other considerations may cause us to decide to revoke the real
estate investment trust election.
The income distribution requirements applicable to real estate
investment trusts could cause us to distribute amounts that otherwise
would be spent on future acquisitions, unanticipated capital
expenditures or repayment of debt which would require us to borrow
funds or to sell assets to fund the cost of those items.
To obtain the favorable tax treatment accorded to real estate
investment trusts under the Internal Revenue Code, we generally will be required
each year to distribute to our stockholders at least 95% of our real estate
investment trust taxable income. We will have to pay income tax on any
undistributed real estate investment trust taxable income and net capital gain,
and a 4% nondeductible excise tax on the amount, if any, by which distributions
we pay with respect to any calendar year are less than the sum of:
o 85% of our ordinary income for the calendar year;
o 95% of our capital gain net income for that year; and
o 100% of our undistributed income from prior years.
We intend to make distributions to our stockholders to comply with the
distribution provisions of the Internal Revenue Code and generally to avoid
federal income taxes and the nondeductible 4% excise tax. Our income will
consist primarily of our share of income of the operating partnership and our
cash flow will consist primarily of our share of distributions from the
operating partnership. It is possible, however, that differences in timing
between the receipt of income and the payment of expenses in arriving at our
taxable income or the taxable income of the operating partnership and the effect
of nondeductible capital expenditures, the creation of reserves or required debt
amortization payments could in the future require us
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to borrow funds directly or through the operating partnership on a short or
long-term basis to meet the distribution requirements that are necessary to
continue to qualify as a real estate investment trust and avoid federal income
taxes and the 4% nondeductible excise tax. In those circumstances, we might need
to borrow funds directly to avoid adverse tax consequences even if we believe
that the then-prevailing market conditions generally are not favorable for
borrowing or that borrowing is not advisable in the absence of those tax
considerations.
Distributions by the operating partnership will be determined by us and
are dependent on a number of factors, including:
o the amount of cash available for distribution;
o the operating partnership's financial condition;
o our decision to reinvest funds rather than to distribute the
funds;
o the operating partnership's capital expenditure requirements;
and
o the annual distribution requirements under the real estate
investment trust provisions of the Internal Revenue Code.
However, the limited partnership agreement of the operating partnership
generally authorizes us, as the general partner of the operating partnership, to
take any steps necessary to cause the operating partnership to distribute to its
partners an amount needed to meet the real estate investment trust minimum
distribution requirements. Accordingly, although we intend to continue to
satisfy the annual distribution requirement to avoid corporate income taxation
on the earnings that we distribute, we cannot assure you that we will be able to
do so.
There are potential conflicts relating to our "paper-clip" structure, which may
be detrimental to our interests.
Under the intercompany agreement with MeriStar Hotels, each of us will
provide the other with reciprocal rights to participate in specific transactions
entered into by us. In particular, MeriStar Hotels will generally have a right
of first refusal to become the lessee of any real property we acquire if we
determine that, consistent with our status as a real estate investment trust, we
are required to enter into a specific lease arrangement. This is only the case,
though, if we determine that MeriStar Hotels or an entity that it controls is
qualified to be the lessee. This is known as the "paper-clip" real estate
investment trust structure. However, because of the independent trading of the
stock of two companies, stockholders in each company may develop divergent
interests which could lead to conflicts of interest. This divergence of
interests could also reduce the anticipated benefits of the "paper-clip" real
estate investment trust structure.
Our operations could be adversely affected because we are dependent on key
personnel.
We place substantial reliance on the lodging industry knowledge and
experience and the continued services of our senior management, led by Paul W.
Whetsell. While we believe that, if necessary, we could find replacements for
Mr. Whetsell, the loss of his services could have a material adverse effect on
our operations. In addition, Mr. Whetsell is currently engaged, and in the
future will continue to engage, in the management of MeriStar Hotels. Mr.
Whetsell may experience conflicts of interest in allocating management time,
services and functions between us and MeriStar Hotels.
There could be adverse effects from an increase in market interest rates on
prices for common stock
One of the factors that may influence the prices for the shares of our
common stock in public trading markets will be the annual yield from our
distributions on the shares of MeriStar common stock as compared to yields on
other financial instruments. An increase in market interest rates will result in
higher
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yields on some financial instruments, which could adversely affect the market
prices for the shares of our common stock.
Provisions of Maryland law and of our charter and bylaws may limit the ability
of our stockholders to realize the full value of their MeriStar shares.
Provisions of Maryland law and of our charter and bylaws may have the
effect of discouraging a third party from making an acquisition proposal for us
and could delay, defer or prevent a change in control or other transaction under
circumstances that could give shareholders the opportunity to realize a premium
over the then-prevailing market prices of our common stock. Such provisions
include the following:
To maintain our qualification as a real estate investment trust, there
are ownership limits placed on our shareholders.
In order for us to maintain our qualification as a real estate
investment trust under the Internal Revenue Code, not more than 50% in value of
our outstanding shares of stock may be owned, directly or indirectly, by five or
fewer individuals at any time during the last half of our taxable year.
Furthermore, if any of our stockholders own, actually or otherwise, 10% or more
of MeriStar Hotels, MeriStar Hotels could become a related party tenant to us,
which would result in our loss of real estate investment trust status.
Our charter prohibits direct or indirect ownership, taking into account
applicable ownership provisions of the Internal Revenue Code, of more than 9.8%
of any class of our outstanding stock by any person, subject to an exception
that permits mutual funds and other entities to own as much as 15% of any class
of our stock in appropriate circumstances. Generally, the stock owned by
affiliated owners will be aggregated for purposes of the stock ownership
limitation.
In addition, our charter prohibits any of our stockholders from owning
shares of our common stock if such ownership would cause us to own, actually or
otherwise, 10% or more of the ownership interests in a tenant of our real
property or in a tenant of MeriStar Hospitality Operating Partnership's or a
subsidiary partnership's real property. The above ownership limitations could
have the effect of delaying, deferring or preventing a change in control or
other transaction in which holders of some or a majority of the shares of our
common stock might receive a premium for their shares of common stock over the
then-prevailing market price or which such holders might believe to be otherwise
in their best interests.
Our staggered board and super-majority vote requirements may delay or
prevent any change of control of our company.
Our board of directors is divided into three classes. The term of the
first class expires in 2000; the terms of the second and third classes expire in
2001 and 1999, respectively. Directors of each class are elected for three-year
terms. A director may be removed, with or without cause, by the affirmative vote
of 75% of the votes entitled to be cast for the election of directors. The
staggered terms of directors and the super-majority vote may have the effect of
delaying, deferring or preventing a change in control or other transaction even
though a change in control might be in the best interests of our stockholders.
Maryland law prohibits certain activities by stockholders of 10% or
more of our company.
Under the Maryland General Corporation Law, certain "business
combinations" (including certain issuances of equity securities) between a
Maryland corporation such as us and an interested stockholder which is any
person who owns 10% or more of the voting power of the corporation's shares or
an affiliate of such person, are prohibited for five years after the most recent
date on which the interested stockholder became an interested stockholder.
Thereafter, any such business combination must be approved by two super-majority
votes unless, among other conditions, the shareholders receive a minimum price
determined by Maryland law for their stock and the consideration is received in
cash or in the same form by the interested stockholder previously paid for its
shares.
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The Maryland "control share" acquisition statute, which limits the
voting rights of shares acquired in a control share acquisition, could
have the effect of preventing or otherwise discouraging investments in
our company.
Maryland law provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes eligible under the statute
to be cast on the matter. "Control shares" are voting shares of stock, which, if
aggregated with all other such shares of stock previously acquired by the
acquiror or in respect of which the acquiror is able to exercise or direct the
exercise of voting power (except solely by virtue of a revocable proxy), would
entitle the acquiror to exercise voting power in electing directors within one
of the following ranges of voting power:
o one-fifth or more but less than one-third;
o one-third or more but less than a majority; or
o a majority of all voting power.
Control shares do not include shares that the acquiring person is then entitled
to vote as a result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control shares, subject to
certain exceptions.
Our bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions by any persons of our shares of
stock. There can be no assurance that such provision will not be amended or
eliminated at any point in the future. If the foregoing exemption in the bylaws
is rescinded, the control share acquisition statute could have the effect of
delaying, deferring, preventing or otherwise discouraging offers to acquire us
and of increasing the difficulty of consummating any such offer.
There are risks related to potential Year 2000 compliance problems that could
adversely affect our results of operations and financial condition.
We are in the process of conducting a review of our computer systems to
identify the systems that could be affected by the "Year 2000" problem and have
initiated an implementation plan to address the problem. The Year 2000 problem
is the result of computer programs being written using two digits rather than
four to define the applicable year. Any of our programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If not corrected, this could result in a major systems failure or
miscalculations.
Our leased and managed hotel properties contain various information
technology and embedded technology systems. Both types of systems contain
microprocessors and microcontrollers that must be assessed for Year 2000
compliance. We have developed a comprehensive implementation plan to address the
potential Year 2000 problems caused by such systems. This plan involves six
stages:
o increase awareness of issue;
o assign responsibility for coordinating response to issue;
o information collection;
o analysis;
o modification, repair or replacement; and
o testing.
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We are currently in our analysis stage and expect to complete this
stage in May 1999. The following stages are expected to be completed as follows:
modification, repair or replacement--August 1999; and testing--September 1999.
As an additional part of our implementation plan to address the Year 2000
problem, we have also initiated communications with third parties with which we
have material relationships to determine the extent of potential Year 2000
problems with these parties' services provided to us.
The most critical of these services involve such items as reservations
systems for our hotels. Without such systems, we could suffer a material decline
in business at many of our properties. We expect to complete our communications
and assessment of third parties' services by May 1999.
We anticipate completing our Year 2000 implementation plan no later
than September 1999. As of December 31, 1998, historical costs incurred to
address the Year 2000 problem approximate $0.8 million. We have not yet
developed a final cost estimate related to fixing Year 2000 issues, but an
initial estimate of these remediation costs for our properties is $10-15
million. This cost estimate is based on our preliminary assessment, and will be
refined and adjusted as we continue to complete the stages of our implementation
plan to address the potential Year 2000 problems.
Although we are in the process of modifying our existing software and
converting to new software, if such modifications and conversions are not
completed timely, the Year 2000 problem could have a material impact on our
financial position and operations. Our operations are highly dependent upon
participating lease revenue earned from the lessees of our properties. These
participating lease revenue amounts are based upon revenues generated at the
leased properties. To the extent that the Year 2000 problems materially affect
the conduct of operations at those properties, it is likely that those lessee's
revenues would be affected, and that our participating lease revenues would
ultimately be affected.
FORWARD-LOOKING STATEMENTS
Any statements in this prospectus about our expectations, beliefs,
plans, objectives, assumptions or future events or performance are not
historical facts and are forward-looking statements. These statements are often,
but not always, made through the use of words or phrases such as "will likely
result," "expect," "will continue," "anticipate," "estimate," "intend," "plan,"
"projection," "would" and "outlook." Accordingly, these statements involve
estimates, assumptions and uncertainties which could cause actual results to
differ materially from those expressed in them. Any forward-looking statements
are qualified in their entirety by reference to the factors discussed throughout
this prospectus. These factors are discussed in "Risk Factors" and elsewhere in
this document.
Because the risk factors referred to above could cause actual results
or outcomes to differ materially from those expressed in any forward-looking
statements made by us, you should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks only
as of the date on which it is made and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for us to predict which will arise. In addition, we cannot assess the
impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
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DESCRIPTION OF THE PLAN
The following, in question and answer form, are the provisions of the
dividend reinvestment plan. Those stockholders who are not participants in the
plan will continue to receive cash distributions, if and when authorized and
declared, as usual.
Purposes and Advantages
1. What are the Purposes of the Plan?
The purpose of the plan is to provide participants with a simple and
convenient method of investing in shares of our common stock. In addition, the
plan will provide us with an economical and flexible mechanism to raise equity
capital through sales of shares of our common stock under the plan. To the
extent that shares of common stock are purchased directly from us under the
plan, we will receive additional funds for general corporate purposes. See "Use
of Proceeds." We will not receive any proceeds from shares of our common stock
that Continental Stock Transfer and Trust Company, the plan administrator,
purchases in the open market or in negotiated transactions with third parties.
2. How May Stockholders Purchase Shares of Common Stock under the
Plan?
Stockholders may have cash distributions received on all or a portion
of the shares of our common stock registered in their name automatically
reinvested in additional MeriStar shares. Beneficial owners of shares of our
common stock registered in the name of a broker, bank or other nominee or
trustee may participate in the plan either by having their shares of MeriStar
common stock transferred into their own names or by making appropriate
arrangements with their record holder to participate on their behalf, as
described in Question 5.
3. What are Some of the Advantages and Disadvantages of
Participation in the Plan?
We may decide to allow plan participants to purchase shares of our
common stock at a discount from the market price of our common stock by
reinvesting all or a portion of the cash distributions received on shares of our
common stock in additional shares. However, at this time, no discount for
purchases is being offered. Participants in the plan are not required to pay
brokerage commissions or service charges in connection with the purchase of
shares of common stock newly issued by us under the plan. The plan also permits
fractional shares of our common stock as well as whole shares of our common
stock to be purchased.
In addition, distributions on all whole and fractional shares of common
stock purchased under the plan are automatically reinvested in additional shares
of our common stock. Participants also avoid the necessity for safe-keeping
certificates evidencing the shares of common stock purchased pursuant to the
plan and have increased protection against loss, theft or destruction of those
certificates because such shares are held by Continental Stock in an individual
account for the participant. Furthermore, certificates for underlying shares of
our common stock may be deposited for safe keeping as described in Question 18.
A regular statement for each account provides the participant with a record of
each transaction.
The plan has certain disadvantages as compared to purchases of shares
of our common stock through brokers or otherwise. No interest will be paid by us
or Continental Stock on distributions held pending reinvestment.
If shares purchased pursuant to the plan are not purchased from us, but
are instead purchased on the open market or in negotiated transactions with
third parties, Continental Stock, not the participant, will determine the timing
of investments, as described in Question 10. Accordingly, the purchase price for
the shares of our common stock may vary from that which would otherwise have
been obtained by directing a purchase through a broker or in a negotiated
transaction, and the actual number of shares the participant acquired will not
be known until after Continental Stock has purchased the shares of common stock,
as
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described in Question 10. To the extent Continental Stock purchases shares of
our common stock in the open market, brokerage commissions or mark-ups, and any
other fees or expenses charged by the broker-dealer or broker-dealers involved,
will be paid out of the total amount to be invested and therefore will be paid
by the participants in the plan on a pro rata basis.
Eligibility and Participation
4. Who is Eligible to Become a Participant?
Any shareholder who has reached the age of majority may elect to
participate in the plan. If a beneficial owner has shares of our common stock
registered in a name other than his or her own, such as that of a broker, bank
or other nominee or trustee, the beneficial owner may participate in the plan
either by having its shares of common stock transferred into the owner's own
name or by making appropriate arrangements with his or her record holder to
participate on the owner's behalf, as described in Question 5.
Beneficial owners should consult directly with the entity holding their
shares of MeriStar common stock to determine if they can enroll in the plan. If
not, the beneficial owner should request his or her broker, bank or other
nominee or trustee to transfer some or all of the shares of MeriStar common
stock into the beneficial owner's own name in order to participate directly.
Stockholders who are citizens or residents of a country other than the
United States, its territories and possessions should make certain that their
participation does not violate local laws governing taxes, currency and exchange
controls, share registration, foreign investments and related matters.
5. How Does an Eligible Person Become a Participant?
Beneficial owners of our common stock desiring to participate in the
plan should (1) contact the holder of record who holds the shares of common
stock on behalf of such beneficial owners, (2) have such holder of record become
a participant in the plan by completing an authorization form and returning it
to Continental Stock, and (3) have such holder of record sign and return a
beneficial owner authorization form, as described below. We may establish other
or additional requirements that apply to participants who desire to participate
in the plan on behalf of beneficial owners of our common stock.
An eligible person may elect to become a participant in the plan at any
time, subject to our right to modify, suspend, terminate or refuse participation
in the plan. To become a participant, complete an authorization form and mail it
to Continental Stock Transfer & Trust Company, MeriStar Hospitality Corporation,
Dividend Reinvestment and Common Stock Purchase Plan, Two Broadway, 19th Floor,
New York, New York 10004. Authorization forms may be requested by calling, toll
free, 1-800-509-5586, exten sion 525. The "submission deadline" for
authorization forms and beneficial owner authorization forms is 5:00 p.m. on the
business day immediately preceding the record date for the relevant distribution
payment. A "business day" means a day other than a Saturday, a Sunday or a day
on which banking institutions are not required to be open in the State of New
York.
In addition to the foregoing, a broker, bank or other nominee or
trustee, all of whose shares of MeriStar common stock are beneficially owned by
others, who desires to participate in the plan on behalf of such beneficial
owners, may participate in the plan, subject to our right to modify, suspend,
terminate or refuse participation in the plan, by signing and returning a
beneficial owner authorization form listing such beneficial owners and their
social security numbers or Federal tax identification numbers to Continental
Stock Transfer & Trust Company, MeriStar Hospitality Corporation, Dividend
Reinvestment and Common Stock Purchase Plan, Two Broadway, 19th Floor, New York,
New York 10004. Beneficial owner authorization forms may be requested by
calling, toll free, 1-800-509-5586, extension 525. A separate beneficial owner
authorization form must be submitted each time the participant desires to
participate in the plan on behalf of such beneficial owners. Such beneficial
owner authorization form must be submitted prior to each submission deadline.
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6. What Does the Authorization Form Provide?
The authorization form authorizes Continental Stock to apply any
distributions received on shares of our common stock registered in the
participant's name, less applicable fees, to the purchase of shares of our
common stock for the participant's account under the plan. The authorization
form offers the following investment options:
o Full distribution reinvestment. To reinvest automatically all
cash distributions received on all shares of our common stock
registered in the participant's name.
o Partial distribution reinvestment. To reinvest automatically
only the cash distributions received on a specified number of
shares of our common stock registered in the participant's
name and to receive distributions on any remaining shares of
common stock in cash.
A participant may change his or her election by completing and signing
a new authorization form and returning it to Continental Stock. Any election or
change of election concerning the reinvestment of distributions must be received
by Continental Stock by the submission deadline in order for the election or
change to become effective with that distribution. If a participant signs and
returns an authorization form without checking a desired option, or checks a
partial distribution reinvestment option without specifying a number of shares,
the participant will be deemed to have selected the full distribution
reinvestment option.
Regardless of which method of plan participation is selected, all cash
distributions paid on participating whole or fractional shares of common stock
will be reinvested automatically.
Reinvestment of Distributions
7. When Will Distributions be Reinvested?
If a properly completed authorization form specifying "full
distribution reinvestment" or "partial distribution reinvestment" is received by
Continental Stock by the submission deadline established for a particular
distribution payment, reinvestment of distributions will begin with that
distribution payment. If the authorization form is received after the submission
deadline established for a particular distribution payment, that distribution
will be paid in cash and reinvestment of distributions will not begin until the
next succeeding distribution payment. In the past, quarterly distribution record
and payment dates for the shares of our common stock have ordinarily occurred on
or about the following dates:
Record Date Payment Date
October 15, 1998 October 30, 1998
December 29, 1998 January 30, 1999
April 15, 1999 April 30, 1999
Inquiries regarding upcoming quarterly distribution record and payment
dates for the shares of our common stock should be directed to Continental Stock
at 1-800-509-5586, extension 239. We anticipate that the next distribution
payment date will be July 30, 1999, with a record date of July 15, 1999.
8. What Limitations Apply to Reinvestment of Distributions?
Generally, for our company to maintain its qualification as a real
estate investment trust under the Internal Revenue Code, not more than 50% in
value of the outstanding shares of our capital stock may be owned, directly or
indirectly, by five or fewer persons at any time during the last half of our
company's taxable year, other than the first taxable year for which our election
to be treated as a REIT was made. Our charter generally provides that no person
may own more than 9.8% of the outstanding shares of our common stock.
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Purchases
9. What is the Source of Shares of Common Stock Purchased under
the Plan?
Purchases of shares of our common stock by Continental Stock for the
plan may be made, at our option, either (1) directly from us out of our
authorized but unissued shares of common stock or (2) in the open market or in
negotiated transactions with third parties.
10. When Will Shares of Common Stock be Purchased for a
Participant's Account?
Purchases of shares of our common stock directly from our company will
be made on the relevant distribution payment date. Purchases in the open market
will begin on the relevant distribution payment date in months having
distributions payable and otherwise on the fifteenth (15th) of each month, and
in either situation will be completed no later than 30 days after the applicable
date, except when completion at a later date is necessary or advisable under any
applicable securities laws or regulations.
The exact timing of open market purchases, including (1) determining
the number of shares of our common stock, if any, to be purchased on any day or
at any time on that day, (2) the prices paid for those shares of our common
stock, (3) the markets on which the purchases are made and (4) the persons
(including brokers and dealers) from or through which the purchases are made,
will be determined by Continental Stock or the broker selected by it for that
purpose. Neither our company nor Continental Stock will be liable when
conditions, including compliance with the rules and regulations of the
Securities and Exchange Commission, prevent the purchase of shares of our common
stock or interfere with the timing of the purchases. Continental Stock may
purchase shares of our common stock in advance of a distribution payment date or
otherwise for settlement on or after that date.
Notwithstanding the above, funds will be returned, without interest, to
participants if not used to purchase shares of our common stock within 30 days
of the distribution payment date for distribution reinvestments.
In making purchases for a participant's account, Continental Stock may
commingle the participant's funds with those of other participants in the plan.
11. What is the Purchase Price of Shares of Common Stock Purchased
by Participants Under the Plan?
Shares of our common stock purchased by Continental Stock directly from
us under the plan in connection with the reinvestment of distributions may be
purchased at the average of the high and low sale prices of the shares of common
stock on the New York Stock Exchange on the relevant distribution payment date,
less a discount (ranging from 0% to 5%) from such market price.
As of the date of this prospectus, there is no discount for purchases,
but this may be changed or eliminated by us without prior notice to participants
at any time. The discount on our shares shall not exceed 5% of the closing price
for the shares of our common stock as reported on the New York Stock Exchange on
any relevant distribution payment date. The discount feature of the plan applies
only to shares of our common stock Continental Stock purchases directly from us
and not to open market purchases of our stock.
The price of shares of our common stock purchased in the open market or
in negotiated transactions with third parties will be the weighted-average cost,
including any trading fees or commissions with respect to shares of our common
stock purchased under the plan for a single cash distribution.
We may change our determination as to the method by which shares of our
common stock will be purchased, whether by Continental Stock directly from our
company or by Continental Stock in the open market or in negotiated
transactions, without prior notice to participants.
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12. How Many Shares of Common Stock Will be Purchased for a
Participant?
The number of shares of our common stock to be purchased for a
participant's account as of any distribution payment date or otherwise will be
equal to the total dollar amount to be invested for the participant, less any
applicable fees, divided by the applicable purchase price computed to the fourth
decimal place. For a participant who has elected to reinvest distributions
received on shares of our common stock registered in his or her name, the total
dollar amount to be invested as of any distribution payment date will be the sum
of all or the specified portion of the cash distributions received on shares of
our common stock registered in the participant's own name and all cash
distributions received on shares of our common stock previously purchased by the
participant under the plan.
The amount to be reinvested for a participant with reinvested cash
distributions will also be reduced by any amount we are required to deduct for
Federal tax withholding purposes.
Plan Administration
13. Who Administers the Plan?
Continental Stock & Transfer Company, as agent for the participants,
administers the plan, keeps records, sends statements of account to participants
and performs other duties relating to the plan. All costs of administering the
plan are paid by us, except as provided in this document.
The following address may be used to obtain information about the plan:
MeriStar Hospitality Corporation, 1010 Wisconsin Avenue, N.W. 20007,
Attention: Nicole Watson, Director of Corporate Communications, or call
202-229-1000.
14. What Reports are Sent to Participants in the Plan?
After an investment is made for a participant's plan account, the
participant will be sent a statement which will provide a record of the costs of
the shares of our common stock purchased for that account, the purchase date and
the number of shares of common stock in that account. These statements should be
retained for income tax purposes. In addition, each participant will be sent our
annual report, notice of annual meeting and proxy statement and income tax
information for reporting distributions received.
All reports and notices from Continental Stock to a participant will be
addressed to the participant's last known address. Participants should notify
Continental Stock promptly in writing of any change of address.
15. What is the Responsibility of MeriStar and Continental Stock
Under the Plan?
Our company and Continental Stock, in administering the plan, are not
liable for any act done in good faith or for any good faith omission to act,
including, without limitation, any claim of liability:
o with respect to the prices and times at which shares of our
common stock are purchased or sold for a participant;
o with respect to any fluctuation in market value before or
after any purchase or sale of shares of our common stock; or
o arising out of any failure to terminate a participant's
account upon that participant's death prior to Continental
Stock's receipt of notice in writing of the death.
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Neither our company nor Continental Stock can provide any assurance of
a profit, or protect a participant from a loss, on shares of our common stock
purchased under the plan. These limitations of liability do not affect any
liabilities arising under the Federal securities laws, including the Securities
Act of 1933.
Continental Stock may resign as administrator of the plan at any time,
in which case we will appoint a successor administrator. In addition, we may
replace Continental Stock with a successor administrator at any time.
Common Stock Certificates
16. Will We Issue Certificates to Participants for Shares of
Common Stock Purchased under the Plan?
We will issue to a plan participant a certificate for any number of
whole shares of our common stock purchased by such participant under the plan or
deposited with Continental Stock for safe-keeping upon written request by the
participant to Continental Stock. These requests will be handled by Continental
Stock, normally within two weeks, at no charge to the participant. Any remaining
whole shares of our common stock and any fractional shares of common stock will
continue to be held in the participant's plan account. We will not issue
certificates for fractional shares of our common stock under any circumstances.
17. What is the Effect on a Participant's Plan Account if a
Participant Requests a Certificate for Whole Shares of Common
Stock Held in the Account?
If a participant requests a certificate for whole shares of our common
stock held in his or her account, distributions on those shares will continue to
be reinvested under the plan in the same manner as prior to the request so long
as the shares of common stock remain registered in the participant's name.
18. May Shares of Common Stock Held in Certificate Form be
Deposited in a Participant's Plan Account?
Yes, whether or not the participant has previously authorized
reinvestment of distributions, certificates registered in the participant's name
may be surrendered to Continental Stock for deposit in the participant's plan
account. We will automatically reinvest all distributions on any shares of our
common stock evidenced by certificates deposited in accordance with the plan.
The participant should contact Continental Stock for the proper procedure to
deposit certificates.
Withdrawal from the Plan
19. May a Participant Withdraw from the Plan?
Yes, by providing written notice instructing Continental Stock to
terminate the participant's plan account.
20. What Happens when a Participant Terminates an Account?
If a participant's notice of termination is received by Continental
Stock at least five business days prior to the record date for the next
distribution payment, reinvestment of distributions will cease as of the date
the notice of termination is received by Continental Stock. If Continental Stock
receives the notice of termination later than five business days prior to the
above date, the termination may not become effective until after the
reinvestment of any distributions on that distribution payment date.
As soon as practicable after notice of termination is received,
Continental Stock will send to the participant (1) a certificate evidencing all
whole shares of our common stock held in the account and (2) a check
representing the value of any fractional shares of our common stock held in the
account. After an
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account is terminated, we will pay all distributions for the terminated account
to the participant unless the participant re-elects to participate in the plan.
When terminating an account, the participant may request that all
shares of our common stock, both whole and fractional, held in the plan account
be sold, or that certain of the shares of such common stock be sold and a
certificate be issued for the remaining shares. Continental Stock will remit to
the participant the proceeds of any sale of shares of our common stock, less any
related trading fees, transfer tax or other fees incurred by it allocable to the
sale of those shares of common stock.
21. When May a Former Participant Re-Elect to Participate in the
Plan?
Generally, any former participant may re-elect to participate at any
time. However, Continental Stock reserves the right to reject any authorization
form on the grounds of excessive joining and withdrawing. This reservation is
intended to minimize unnecessary administrative expense and to encourage use of
the plan as a long-term investment service.
Sale of Shares of Common Stock
22. May a Participant Request that Shares of Common Stock Held in
a Plan Account be Sold?
Yes, a participant may request that all or any number of shares of our
common stock held in a plan account be sold, either when an account is being
terminated, as described in Question 20, or without terminating the account.
However, we will not sell fractional shares of our common stock unless all
shares of MeriStar common stock held in the account are sold.
Within seven days after receipt of a participant's written request to
sell shares of our common stock held in a plan account, Continental Stock will
place a sell order through a broker or dealer designated by it. The participant
will receive the proceeds of the sale, less any trading fees, transfer tax or
other fees incurred by Continental Stock allocable to the sale of those shares
of common stock. No participant will have the authority or power to direct the
date or price at which shares of our common stock may be sold. Proceeds of the
sale will be forwarded by Continental Stock to the participant within 30 days
after receipt of the participant's request to sell.
Other Information
23. May a Participant Pledge or Transfer Shares of Common Stock
Held in the Plan?
A participant may not pledge, sell or otherwise transfer shares of our
common stock held in the plan, and any such purported pledge or sale will be
void. A participant who wishes to pledge, sell or transfer shares of our common
stock must request that a certificate for those shares first be issued in the
participant's name.
24. What Happens if We Make a Distribution of Shares of Common
Stock or Split Our Shares?
If there is a distribution payable in shares of our common stock or a
common stock split, Continental Stock will receive and credit to the
participant's plan account the applicable number of whole and/or fractional
shares of common stock based on the number of shares of common stock held in the
participant's plan account.
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25. What Happens if We Have a Rights Offering?
If we have a rights offering in which separately tradable and
exercisable rights are issued to registered holders of shares of our common
stock, we will transfer the rights attributable to whole shares of our common
stock held in a participant's plan account to the plan participant as promptly
as practicable after the rights are issued.
26. How are the Participant's Shares of Common Stock Voted at
Stockholder Meetings?
Shares of common stock held for a participant in the plan will be voted
at stockholder meetings as that participant directs by proxy. Participants will
receive proxy materials from us. Shares of our common stock held in a
participant's plan account may also be voted in person at the meeting.
27. May We Suspend or Terminate the Plan?
While we expect to continue the plan indefinitely, we may suspend or
terminate the plan at any time. We also reserve the right to modify, suspend,
terminate or refuse participation in the plan to any person at any time.
28. May We Amend the Plan?
We may amend or supplement the plan at any time. Any amendment or
supplement will only be effective upon mailing appropriate written notice at
least 30 days prior to the effective date thereof to each participant. Written
notice is not required when an amendment or supplement is necessary or
appropriate to comply with the rules or policies of the Securities and Exchange
Commission, the Internal Revenue Service or other regulatory authority or law,
or when an amendment or supplement does not materially affect the rights of
participants. The amendment or supplement will be deemed to be accepted by a
participant unless, prior to the effective date thereof, Continental Stock
receives written notice of the termination of a participant's plan account. Any
amendment may include an appointment by Continental Stock or by us of a
successor bank or agent, in which event we are authorized to pay that successor
bank or agent for the account of the participant all distributions and
distributions payable on shares of our common stock held by the participant for
application by that successor bank or agent as provided in the plan.
29. What Happens if We Terminate the Plan?
If the plan is terminated, each participant will receive (1) a
certificate for all whole shares of our common stock held in the participant's
plan account and (2) a check representing the value of any fractional shares of
our common stock held in the participant's plan account and any uninvested
distributions held in the account.
30. Who Interprets and Regulates the Plan?
We are authorized to issue such interpretations, adopt such regulations
and take such action as we may deem reasonably necessary to effectuate the plan.
Any action we or Continental Stock take to effectuate the plan in the good faith
exercise of our judgment will be binding on participants.
31. What Law Governs the Plan?
The laws of the State of Maryland, our company's state of formation,
govern the terms and conditions of the plan and its operation.
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THE INTERCOMPANY AGREEMENT AND LEASES
The Intercompany Agreement
Rights of First Refusal
Pursuant to the intercompany agreement, MeriStar Hotels & Resorts has a
right of first refusal to become the lessee of any real property we acquire if
we determine that, consistent with our status as a real estate investment trust,
we are required to enter into a lease. This is only the case, though, if
MeriStar Hotels or an entity controlled by it is qualified to be the lessee
based on experience in the industry and financial and legal qualifications.
As to opportunities for MeriStar Hotels to become the lessee of any
assets we acquire, the intercompany agreement provides that we must provide
MeriStar Hotels with written notice of the lessee opportunity. During the 30
days following such notice, MeriStar Hotels has a right of first refusal with
regard to the offer to become a lessee and the right to negotiate with us on an
exclusive basis regarding the terms and conditions of the lease. If a mutually
satisfactory agreement cannot be reached within the 30-day period, or if
MeriStar Hotels indicates that it is not interested in pursuing the lessee
opportunity, we may offer the opportunity to others for a period of one year
thereafter, at a price and on terms and conditions that are not more favorable
to such other parties than the price and terms and conditions we proposed to
MeriStar Hotels. After such one-year period, if the asset has not yet been
leased, we must again offer the opportunity to MeriStar Hotels in accordance
with the procedures specified above.
Each company has established a leasing committee which reviews all
hotel leases that we will enter into. Our leasing committee consists of MeriStar
directors that are not also directors of MeriStar Hotels and MeriStar Hotels'
leasing committee consists of directors of MeriStar Hotels that are not also our
directors.
MeriStar Hotels agreed not to acquire or make (1) investments in real
estate, which, for purposes of the intercompany agreement, includes the
provision of services related to real estate and investments in hotel
properties, real estate mortgages, real estate derivatives or entities that
invest in real estate assets or (2) any other investments that may be structured
in a manner that qualifies under the federal income tax requirements applicable
to real estate investment trusts unless (a) they have notified us of the
material terms and conditions of the acquisition or investment opportunity, and
(b) we have determined not to pursue such acquisitions or investments either by
(x) providing written notice to MeriStar Hotels rejecting the opportunity within
20 days from the date of receipt of notice of the opportunity or (y) by allowing
such 20-day period to lapse. MeriStar Hotels also agreed to assist us in
structuring and consummating any such acquisition or investment which we elect
to pursue, on terms determined by us.
We have structured our intercompany agreement with MeriStar Hotels to
provide us with a symbiotic relationship so that investors in both companies may
enjoy the economic benefit of the entire enterprise. This is commonly known as
the "paper-clip" real estate investment trust structure.
However, investors should be aware that because of the independent
trading of our shares and the shares of MeriStar Hotels, stockholders of each
company may develop divergent interests which could lead to conflicts of
interest. This divergence of interests could also reduce the anticipated
benefits of the relationship between the two companies. See "Risk
Factors--Potential Conflicts Relating to Paper-Clip Structure."
Provision of Services
MeriStar Hotels provides us with certain services as we may reasonably
request from time to time, including administrative, corporate, accounting,
financial, insurance, legal, tax, data processing, human resources and
operational services. We compensate MeriStar Hotels for services provided in an
amount determined in good faith by MeriStar Hotels as the amount an unaffiliated
third party would charge us for comparable services.
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Equity Offerings
If either of the two companies desires to engage in a securities
issuance, such issuing party will give notice to the other party as promptly as
practicable of its desire to engage in a securities issuance. Any such notice
will include the proposed material terms of such issuance, to the extent
determined by the issuing party, including (1) whether such issuance is proposed
to be pursuant to public or private offering, (2) the amount of securities
proposed to be issued and (3) the manner of determining the offering price and
other terms thereof. The non-issuing party will cooperate with the issuing party
in every way to effect any securities issuance of the issuing party by assisting
in the preparation of any registration statement or other document required in
connection with such issuance and providing the issuing party with such
information as may be required to be included in such registration statement or
other document.
Term
The intercompany agreement will terminate upon the earlier of (1)
August 3, 2008, and (2) a change in ownership or control of MeriStar Hotels.
The Leases
We have entered into a lease for each of our hotels. MeriStar Hotels
leases and operates substantially all of our hotels on the following terms and
conditions.
Term
Each lease of an applicable hotel provides for an initial term of 12
years commencing on the date on which the hotel was acquired. Each lease
provides the lessee with three renewal options of five years each (except in the
case of properties with ground leases having a remaining term of less than 40
years), except that:
o the lessee will not have the right to a renewal if a change in
the tax law has occurred that would permit us to operate the
hotel directly;
o if the lessee has elected not to renew a lease for any
applicable hotel, then we will have the right to reject the
exercise of a renewal right on a lease of a comparable hotel;
and
o the rent for each renewal term will be adjusted to reflect the
then fair market rental value of the hotel. If we are unable
to agree upon the then fair market rental value of a hotel,
the lease will terminate upon the expiration of the then
current term and MeriStar Hotels will then have a right of
first refusal to lease the hotel from us on such terms as we
may have agreed upon with a third-party lessee.
Base Rent; Participating Rent; Additional Charges
Each lease requires the lessee to pay:
o fixed monthly base rent:
o on a monthly basis, the excess of participating rent over base
rent, with participating rent based on percentages of room
revenue, food and beverage revenue and telephone and other
revenue at each hotel; and
o other amounts, including interest accrued on any late payments
or charges.
Base rent and participating rent departmental thresholds (departmental revenue
on which the rent percentage is based) are increased annually by a percentage
equal to the percentage increase in the consumer price index (the consumer price
index percentage increase plus 0.75% in the case of the participating rent
departmental revenue threshold) compared to the previous year. In addition, a
reduced percentage rate may apply to the revenues attributable to "discounted
rates" that the lessee may offer. Base rent is payable monthly in
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arrears. Participating rent is payable in arrears based on a monthly schedule
adjusted to reflect the seasonal variations in the hotel's revenue.
Other than real estate and personal property taxes and assessments,
rent payable under ground leases, casualty insurance, including loss of income
insurance, capital impositions and capital replacements and refurbishments, that
are our obligations, the leases require the lessee to pay rent, liability
insurance, all costs and expenses and all utility and other charges incurred in
the operation of the hotels. The leases also provide for rent reductions and
abatements in the event of damage or destruction or a partial taking of any
hotel.
The leases also provide for a rental adjustment under circumstances in
the event of (a) a major renovation of the hotel, or (b) a change in the
franchisor of the hotel.
Lessee Capitalization
The leases require MeriStar Hotels' lessee (or MeriStar Hotels as
guarantor of the leases) to maintain a book net worth of not less than $40
million. Further, for so long as the tangible net worth of MeriStar Hotels'
lessee (or MeriStar Hotels as guarantor of the leases during this period) is
less than the greater of (a) $10,000,000 or (b) 17.5% of the aggregate rents
payable under the leases for the prior calendar year, MeriStar Hotels' lessee
(or MeriStar Hotels as guarantor of the leases during this period) is prohibited
from paying dividends or making distributions other than dividends or
distributions made for the purpose of permitting the partners of MeriStar
Hotels' lessee to pay taxes on the taxable income of MeriStar Hotels' lessee
attributable to its partners plus any required preferred distributions existing
to partners.
Termination
We have the right to terminate the applicable lease upon the sale of a
hotel to a third party or, upon our determination not to rebuild after a
casualty, upon payment to the lessee of the fair market value of the leasehold
estate (except for hotels identified at the time of the lease to be sold). The
fair market value of the leasehold estate is determined by discounting to
present value at a discount rate of 10% per annum the cash flow for each
remaining year of the then current lease term, which cash flow will be deemed to
be the cash flow the lessee has realized under the applicable lease for the
12-month period preceding the termination date. We receive as a credit against
any such termination payments an amount equal to any outstanding "New Lease
Credits," which means the projected cash flow (determined on the same basis as
the termination payment) of any new leases entered into between us and MeriStar
Hotels or MeriStar Hotels' lessee for the initial term of such new lease
amortized on a straight-line basis over the initial term of the new lease.
Performance Standards
We have the right to terminate the applicable lease if, in any calendar
year, the gross revenues from a hotel are less than 95% of the projected gross
revenues for such year as set forth in the applicable budget unless (a) the
lessee can reasonably demonstrate that the gross revenue shortfall was caused by
general market conditions beyond the lessee's control or (b) the lessee "cures"
the shortfall by paying to us the difference between the rent that would have
been paid to us had the property achieved gross revenues of 95% of the budgeted
amounts and the rent paid based on actual gross revenues. The lessee shall not
have such cure right for more than two consecutive years.
The leases also require that the lessee spend in each calendar year at
least 95% of the amounts budgeted for marketing expenses and for repair and
maintenance expenses.
Assignment and Subleasing
The lessee does not have the right to assign a lease or sublet a hotel
without our prior written consent. For purposes of the lease, a change in
control of MeriStar Hotels or the lessee shall be deemed an assignment of the
lease and shall require our consent, which may be granted or withheld in our
sole discretion.
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FEDERAL INCOME TAX CONSEQUENCES
OF PARTICIPATION IN THE PLAN
The following is a summary of the principal United States federal
income tax consequences to holders of shares of our common stock of
participation in the plan. It is based upon current law and is not tax advice.
This discussion does not address all aspects of federal income taxation with
respect to the plan that may be relevant to particular stockholders in light of
their personal investment or tax circumstances, or to stockholders subject to
special treatment under the federal income tax laws, such as insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States, nor does it discuss any state, local or foreign tax considerations. This
discussion is based in part on various rulings of the Internal Revenue Service
regarding dividend reinvestment plans. No ruling, however, has been issued by or
will be requested from the Internal Revenue Service with respect to the plan.
Each prospective participant in the plan is encouraged to consult its
tax advisor regarding the specific tax consequences to it of such participation,
including state, local and foreign tax consequences and the effects of any
changes in law.
Treatment of Reinvested Distributions
In the case of shares of our common stock purchased by Continental
Stock from us on behalf of a participant in our distribution reinvestment plan,
such participant will be treated for United States federal income tax purposes
as having received a distribution equal to the fair market value, on the
relevant distribution date, of the shares of our common stock purchased with
reinvested distributions. In the case of such shares of common stock purchased
by Continental Stock in the open market or in negotiated transactions with third
parties, the amount of the distribution will include the fair market value of
the shares of our common stock purchased with reinvested distributions.
While the matter is not free from doubt, we intend to take the position
that administrative expenses of the plan paid by us are not constructive
distributions to participants.
The amount of any distribution will constitute a dividend to the extent
of our current or accumulated earnings and profits. Dividends paid to corporate
stockholders will not be eligible for the dividends-received deduction for
corporations. To the extent that such distributions are in excess of our current
and accumulated earnings and profits, such distributions will first be treated
as a tax-free return of capital, reducing the stockholder's tax basis in its
shares of our common stock and distributions in excess of tax basis will be
taxable as an amount realized from the sale of such shares of common stock.
A participant's tax basis in shares of our common stock acquired under
the plan generally will equal the total amount of distributions a participant is
treated as receiving plus any brokerage commissions paid by the participant. A
participant's holding period in such shares of our common stock will begin on
the day following the date on which such shares are credited to the
participant's plan account. A whole share resulting from the acquisition of two
or more fractional shares on different dates will have a split holding period,
with the holding period for each fraction beginning on the date after such
fraction was acquired.
Receipt of Share Certificates and Cash
A participant in the plan will not realize any income upon the receipt
of certificates for whole shares of our common stock held in such participant's
plan account. Any cash received for a fractional share of our common stock held
in a plan account will be treated as an amount realized on the sale of the
fractional share. The participant therefore will recognize gain or loss in an
amount equal to the difference between the amount of cash received for such
fractional share of our common stock and the participant's tax basis in such
fractional share. Upon the sale of shares (including any fractional shares) of
our common stock acquired under the plan by the holder or by Continental Stock,
a participant also will recognize gain or loss in an amount equal to the
difference between the amount realized on such sale and the holder's tax basis
in such shares. Gain or loss recognized on the disposition of shares of our
common stock (including fractional shares) acquired under the plan generally
will be treated for federal income tax purposes as capital gain or loss if such
shares of our common stock are held as capital assets.
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Backup Withholding Tax
Under certain circumstances, holders of shares of our common stock may
be subject to backup withholding at a rate of 31% with respect to distributions
paid. Backup withholding will apply only if the stockholder:
o fails to furnish its taxpayer identification number (which, for an
individual, is such individual's Social Security number),
o furnishes an incorrect taxpayer identification number,
o is notified by the Internal Revenue Service that it has failed properly
to report payments of interest and dividends, or
o under circumstances, fails to certify, under penalty of perjury, that
it has furnished a correct taxpayer identification number and has not
been notified by the Internal Revenue Service that it is subject to
backup withholding for failure to report interest and dividend
payments. Backup withholding will not apply with respect to payments
made to exempt recipients, such as corporations and tax-exempt
organizations. Stockholders should consult their tax advisor regarding
their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption.
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USE OF PROCEEDS
We will use the net proceeds from the sale of newly issued shares of
our common stock issued under the plan to increase working capital and for other
general purposes. We have no basis for estimating either the number of shares of
our common stock that ultimately will be sold pursuant to the plan or prices at
which such shares will be sold.
We will not receive any funds under the plan from shares of our common
stock that Continental Stock purchases in the open market.
PLAN OF DISTRIBUTION
Subject to the discussion below, we will distribute newly issued shares
of our common stock sold under the plan, rather than through an underwriter,
broker or dealer. There are no brokerage commissions or service charges
allocated to participants in the plan in connection with their purchases of such
newly issued shares of common stock. To the extent Continental Stock purchases
shares of our common stock in the open market or in negotiated third-party
transactions, brokerage commissions or mark-ups, and any other fees or expenses
charged by the broker-dealer or broker-dealers involved, will be paid out of the
total amount to be invested and therefore will be paid by the participants in
the plan on a pro rata basis.
Participants in the plan may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 and subject to obligations (including an
obligation to deliver a prospectus) and liabilities thereunder. Shares of our
common stock purchased by such a participant may be sold in one or more
transactions (which may include block transactions)
o on a relevant stock exchange;
o in the over-the-counter market;
o in privately negotiated transactions; or
o through the writing of options on the stock (whether such options are
listed on an options exchange or otherwise)
Our shares may also be sold through a combination of such methods of resale and
(1) at market prices prevailing at the time of resale and (2) at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such participant
and/or the purchasers of any such shares of our common stock. Any profit made on
any such resale and commissions or concessions received by any such participants
maybe deemed to be underwriting compensation under the Securities Act of 1933.
Participants that request the sale of any of their shares of common
stock held in the plan must pay a fee initially equal to $5 per transaction plus
any applicable taxes and, if the sale is through a broker-dealer, a commission.
Shares of our common stock may not be available under the plan in all
states. This prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any shares of our common stock or other securities in any
state or any other jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
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EXPERTS
The consolidated financial statements and supplementary schedule of our
company and our subsidiaries as of December 31, 1998 and 1997, and for each of
the years in the three-year period ended December 31, 1998, have been
incorporated by reference in this document and the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference in this document, and upon the authority of said firm
as experts in accounting and auditing.
LEGAL MATTERS
Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland, will issue
an opinion about the legality of the MeriStar common stock offered by this
prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document that we file at the Securities and Exchange Commission's
Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. Please
call 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. Reports, proxy statements and other information regarding
issuers that file electronically with the Securities and Exchange Commission,
including our filings, are also available to the public from the Securities and
Exchange Commission's Web site at "http://www.sec.gov."
Our common stock is listed on the New York Stock Exchange and these
reports, proxy statements and other information can also be inspected at the
office of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 under the Securities Act of 1933. This
prospectus is a part of this registration statement of our company and
constitutes a prospectus of our company for the shares of our common stock to be
sold under the plan. As allowed by the Securities and Exchange Commission rules,
this prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important business and financial information about us to you that is not
included in or delivered with this prospectus by referring you to those
documents.
The information incorporated by reference is considered to be part of
this prospectus, and information that we file later with the Securities and
Exchange Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any filing we will make
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 following the date of this
prospectus and prior to the termination of the offering of our company's shares
of common stock:
1. Our Annual Report on Form 10-K filed by us for the fiscal year ended
December 31, 1998;
2. Our Quarterly Report on Form 10-Q filed by us for the fiscal quarter
ended March 31, 1999; and
3. Our Definitive Proxy Statement on Schedule 14A filed by us on April 2,
1999.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
John Emery, Chief Financial Officer
MeriStar Hospitality Corporation
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Telephone requests may be directed to (202) 295-1000.
We have not authorized anyone to give any information or make any
representation about our company that differs from or adds to the information in
this prospectus or in our documents or the documents that we publicly file with
the Securities and Exchange Commission. Therefore, if anyone does give you
different or additional information, you should not rely on it.
The information contained in this prospectus speaks only as of its date
unless the information specifically indicates that another date applies.
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================================================================================
No dealer, salesperson or other individual has been 5,000,000 Shares
authorized to give any information or make any
representations not contained in this prospectus in
connection with the offering covered by this
prospectus. If given or made, such information or
representation must not be relied upon as having
been authorized by our company. This prospectus MERISTAR HOSPITALITY
does not constitute an offer to sell, or a solicitation CORPORATION
of an offer to buy, our common stock in any
jurisdiction where, or to any person to whom, it is
unlawful to make such offer or solicitation.
Neither the delivery of this prospectus nor any sale Common Stock
made hereunder shall, under any circumstances,
create an implication that there has not been any
change in the facts set forth in this prospectus or in
the affairs of our company since the date hereof.
__________________
TABLE OF CONTENTS PROSPECTUS
__________________
Prospectus
Page
The Company............................................2
Risk Factors...........................................3
Forward-Looking Statements............................12
Description of the Plan...............................13
The Intercompany Agreement and Leases.................21
Federal Income Tax Consequences
of Participation in the Plan.....................24
Use of Proceeds.......................................26
Plan of Distribution..................................26
Experts...............................................27
Legal Matters.........................................27
Where You Can Find More Information...................27 May 28, 1999
================================================================================
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of the fees
and expenses (other than underwriting commissions and discounts) payable by the
Registrant in connection with the issuance and distribution of the shares of
common stock.
Securities and Exchange Commission, registration fee....................$ 30,316
Printing and mailing expenses........................................... 2,000
Accounting fees and expenses............................................ 3,000
Legal fees and expenses................................................. 25,000
Miscellaneous expenses.................................................. 1,500
Total.....................................................$ 61,816
Item 15. Indemnification of Directors and Officers
The Maryland General Corporation Law ("MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money damages
except for liability resulting from (a) actual receipt of an improper benefit or
profit in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. Our
charter contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.
Our charter obligates us, to the maximum extent permitted by Maryland
law, to indemnify and to pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to any person (or the estate of any person)
who is or was a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding whether or not by or
in the right of our Company, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was a
director or officer of our Company, or is or was serving at the request of our
Company as a director, officer, trustee, partner, member, agent or employee of
another corporation, partnership, limited liability company, association, joint
venture, trust or other enterprise. Our charter also permits us to indemnify and
advance expenses to any person who served a predecessor of our Company in any of
the capacities described above and to any employee or agent of our Company or a
predecessor of our Company.
The Maryland General Corporation Law requires a Maryland corporation
(unless its charter provides otherwise, which our charter does not) to indemnify
a director or officer who has been successful, on the merits or otherwise, in
the defense of any Maryland proceeding to which he is made a party by reason of
his service in that capacity. The Maryland General Corporation Law permits a
corporation to indemnify its present and former directors and officers, among
others, against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service in those or other capacities unless it
is established that (a) the act or omission of the director or officer was
material to the matter giving rise to the proceeding and (i) was committed in
bad faith or (ii) was the result of active and deliberate dishonesty, (b) the
director or officer actually received an improper personal benefit in money,
property or services or (c) in the case of any criminal proceeding, the director
or officer had reasonable cause to believe that the act or omission was
unlawful. However, a Maryland corporation may not indemnify for an adverse
judgment in a suit by or in the right of the corporation. In addition, the
Maryland General Corporation Law requires us, as a condition to advancing
expenses, to obtain (a) a written affirmation by the director or officer of his
good faith belief
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that he has met the standard of conduct necessary for indemnification by us as
authorized by the Bylaws and (b) a written statement by or on his behalf to
repay the amount paid or reimbursed by us if it shall ultimately be determined
that the standard of conduct was not met.
We have purchased director and officer liability insurance for the
purpose of providing a source of funds to pay any indemnification described
above.
Item 16. Exhibits
A list of exhibits included as part of this registration statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
a prospectus pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offering therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
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employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Washington, District of Columbia, on the 28th day of
May, 1999.
MERISTAR HOSPITALITY CORPORATION
a Maryland corporation (Registrant)
By: /s/ Paul W. Whetsell
--------------------
Paul W. Whetsell
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Paul W. Whetsell and Steven D. Jorns and each or either of them, his
true and lawful attorney-in-fact with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement (or any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933) and to cause the same to be filed, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby granting to said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing whatsoever requisite or desirable to be done in and about the premises, as
fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things that said
attorneys-in-fact and agents, or either of them, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the dates indicated.
SIGNATURE TITLE DATE
/s/ Paul W. Whetsell Chairman of the Board, Chief May 28, 1999
- -------------------- Executive Officer and Director
Paul W. Whetsell
/s/ Steven D. Jorns Vice Chairman of the Board May 28, 1999
- -------------------
Steven D. Jorns
/s/ Bruce G. Wiles President, Chief Investment Officer May 28, 1999
- ------------------ and Director
Bruce G. Wiles
II-4
<PAGE>
SIGNATURE TITLE DATE
/s/ John Emery Chief Financial Officer May 28, 1999
- -------------- (Principal Financial and Accounting
John Emery Officer)
/s/ Daniel L. Doctoroff Director May 28, 1999
- -----------------------
Daniel L. Doctoroff
/s/ William S. Janes Director May 28, 1999
- --------------------
William S. Janes
/s/ James F. Dannhauser Director May 28, 1999
- -----------------------
James F. Dannhauser
/s/ Mahmood Khimji Director May 28, 1999
- ------------------
Mahmood Khimji
/s/ James R. Worms Director May 28, 1999
- ------------------
James R. Worms
/s/ H. Cabot Lodge III Director May 28, 1999
- ----------------------
H. Cabot Lodge III
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 -- Amended and Restated Articles of Incorporation of the Registrant
(Articles of Merger between American General Hospitality Corporation
and CapStar Hotel Company) (incorporated by reference to Exhibit 3.1
to our Registration Statement on Form S-3, File No. 333-66229).
3.2 -- Amended and Restated By-laws of the Registrant (incorporated by
reference to Exhibit 3.2 to our Registration Statement on Form S-3,
File No. 333-66229).
4.1 -- Form of Share Certificate (filed as Exhibit 4.1 to our Registration
Statement on Form S-11 (File No. 333-4568) and incorporated herein
by reference).
5.1 -- Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
23.1 -- Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1).
23.2 -- Consent of KPMG LLP.
24.1 -- Power of Attorney (included on signature page hereto).
II-6
Exhibit 5.1
[Letterhead of Ballard Spahr Andrews & Ingersoll, LLP]
FILE NUMBER
872414
May 28, 1999
MeriStar Hospitality Corporation
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Re: Registration Statement on Form S-3:
5,000,000 Shares of Common Stock
Ladies and Gentlemen:
We have served as Maryland counsel to MeriStar Hospitality Corporation,
a Maryland corporation (the "Company"), in connection with certain matters of
Maryland law arising out of the registration of up to 5,000,000 shares (the
"Shares") of common stock, $.01 par value per share, of the Company (the "Common
Shares"), covered by the above-referenced Registration Statement and all
amendments thereto (the "Registration Statement"), as filed by the Company under
the Securities Act of 1933, as amended (the "1933 Act").
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (collectively, the "Documents"):
A. The Registration Statement, including the related form of prospectus
included therein, in the form in which it was transmitted by the Company to the
Securities and Exchange Commission (the "Commission") under the 1933 Act;
B. The charter of the Company (the "Charter"), certified as of a recent
date by the State Department of Assessments and Taxation of Maryland (the
"SDAT");
<PAGE>
MeriStar Hospitality Corporation
May 28, 1999
Page 2
C. The Amended and Restated Bylaws of the Company, certified as of the
date hereof by an officer of the Company;
D. Resolutions adopted by the Board of Directors of the Company, or a
duly authorized committee thereof, relating to the issuance and registration of
the Shares (the "Resolutions"), certified as of the date hereof by an officer of
the Company;
E. A certificate of the SDAT as of a recent date as to the good
standing of the Company;
F. A certificate executed by an officer of the Company, dated as of the
date hereof; and
G. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so far
as is known to us there are no facts inconsistent with, the following:
A. Each individual executing any of the Documents, whether on behalf of
such individual or any other person, is legally competent to do so.
B. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
C. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms.
D. Any Documents submitted to us as originals are authentic. The form
and content of any Documents submitted to us as unexecuted drafts do not differ
in any respect relevant to this opinion from the form and content of such
Documents as executed and delivered. Any Documents submitted to us as certified
or photostatic copies conform to the original documents. All signatures on all
Documents are genuine. All public records reviewed or relied upon by us or on
our behalf are true and complete. All statements and information contained in
the Documents are true and complete. There has been no oral or written
modification of or amendment to any of the Documents, and there has been no
waiver of any provision of any of the Documents, by action or omission of the
parties or otherwise.
E. The Shares will not be transferred in violation of any restriction
or limitation contained in the Charter.
<PAGE>
MeriStar Hospitality Corporation
May 28, 1999
Page 3
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing under
and by virtue of the laws of the State of Maryland and is in good standing with
the SDAT.
2. The Shares are duly authorized and, when and if issued and delivered
against payment therefor and otherwise in the manner described in the
Resolutions and the Registration Statement, will be (assuming that upon any such
issuance the total number of Common Shares issued and outstanding will not
exceed the total number of Common Shares that the Company is then authorized to
issue under the Charter) validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the substantive laws of the State
of Maryland and we do not express any opinion herein concerning any other law.
We express no opinion as to the applicability or effect of any federal or state
securities (or "blue sky") laws, including the securities laws of the State of
Maryland, any federal or state laws regarding fraudulent transfers, or any real
estate syndication laws of the State of Maryland. To the extent that any matter
as to which our opinion is expressed herein would be governed by any
jurisdiction other than the State of Maryland, we do not express any opinion on
such matter.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the Commission
as an exhibit to the Registration Statement and, accordingly, may not be relied
upon by, quoted in any manner to, or delivered to any other person or entity
(except Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Company)
without, in each instance, our prior written consent.
<PAGE>
MeriStar Hospitality Corporation
May 28, 1999
Page 4
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
1933 Act.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Exhibit 23.2
[Letterhead of KPMG LLP]
Accountants' Consent
We consent to the use of our report on the consolidated financial statements and
schedule of MeriStar Hospitality Corporation and subsidiaries as of December 31,
1998 and 1997 and for each of the years in the three-year period ended December
31, 1998 incorporated herein by reference and to the reference to our firm under
the heading "Experts" in the prospectus.
/s/ KPMG LLP
------------
KPMG LLP
Washington, D.C.
May 28, 1999
