<PAGE>
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SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary]Proxy Statement
[_] Confidential,]For Use of the Commission Only (as Permitted by Rule 14a-
6(e)(2)
[X] Definitive]Proxy Statement
[_] Definitive]Additional Materials
[_] Soliciting]Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MeriStar Hospitality Corporation
(Name of Registrant as specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No]fee required.
[_] Fee]computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
0
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[_] Fee]paid previously with preliminary materials.
[_] Check]box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE>
[LOGO]
1010 WISCONSIN AVENUE,
N.W.WASHINGTON, D.C. 20007
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of MeriStar Hospitality Corporation (the "Company"), which will be held at the
Hilton Washington Embassy Row, 2015 Massachusetts Avenue, N.W., Washington,
D.C. 20036, on Tuesday, May 11, 1999, at 9:00 a.m., Eastern Time. All holders
of the Company's outstanding common stock, par value $.01 per share, as of the
close of business on April 6, 1999, are entitled to vote at the Annual
Meeting.
Enclosed for your information are copies of the Company's Proxy Statement
and Annual Report to Stockholders. We believe that you will find these
materials informative.
We hope you will be able to attend the Annual Meeting. Whether or not you
expect to attend, you are urged to complete, sign, date and return the
enclosed proxy card in the enclosed envelope as promptly as possible in order
to make certain that your shares will be represented at the Annual Meeting.
Failure to vote or to return your proxy card will have the same effect as a
vote against the proposal to authorize preferred stock. With regard to the
other proposals, if a proxy card indicates an abstention on a particular
matter, then the shares represented by such proxy will be counted for quorum
purposes and, if a quorum is present, an abstention will have the effect of a
vote against the matter.
/s/ Paul W. Whetsell
Paul W. Whetsell
Chief Executive Officer and
Chairman of the Board
<PAGE>
[LOGO]
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 11, 1999
----------------
To the Stockholders of MERISTAR HOSPITALITY CORPORATION:
Notice is hereby given that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of MeriStar Hospitality Corporation (the "Company") will be
held at the Hilton Washington Embassy Row, 2015 Massachusetts Avenue, N.W.,
Washington, D.C. 20036, on Tuesday, May 11, 1999 at 9:00 a.m., Eastern Time.
The Annual Meeting will be held for the following purposes:
1. To amend the Company's Second Amended and Restated Certificate of
Incorporation, as amended, to provide for authorization of 100,000,000
shares of preferred stock, par value $0.01 per share, of the Company to be
issued from time to time with such rights, preferences and priorities as
the Board of Directors shall designate; provided that such preferred stock
shall not be used for anti-takeover purposes and shall not have super-
majority voting rights;
2. To reelect three members of the Board of Directors to serve for a
three- year term expiring on the date of the Annual Meeting in 2002 and
until their successors have been duly elected and qualified;
3. To ratify the appointment of KPMG LLP as independent auditors for the
Company for the fiscal year ending December 31, 1999; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on April 6, 1999, as
the record date for the determination of Stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof.
All Stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend in person, it is requested that you
promptly fill in, sign and return the enclosed proxy card. Failure to vote or
to return your proxy card will have the same effect as a vote against the
proposal to authorize preferred stock. With regard to the other proposals, if
a proxy card indicates an abstention on a particular matter, then the shares
represented by such proxy will be counted for quorum purposes and, if a quorum
is present, an abstention will have the effect of a vote against the matter.
By Order of the Board of Directors
/s/ John Emery
John Emery
Secretary
March 18, 1999
<PAGE>
[LOGO]
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
----------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
To be Held on
Tuesday, May 11, 1999
----------------
INTRODUCTION
The Board of Directors (the "Board of Directors") of MeriStar Hospitality
Corporation, a Maryland corporation (the "Company"), is soliciting proxies
from holders of the Company's common stock, par value $.01 per share (the
"Common Stock"), to be voted at the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Hilton Washington Embassy Row, 2015
Massachusetts Avenue, N.W., Washington, D.C. 20036, on May 11, 1999 at 9:00
a.m. Eastern Time, and at any adjournment thereof. This Proxy Statement and
the enclosed proxy are first being mailed to Stockholders on or about
April 11, 1999.
Solicitation and Revocability of Proxies
The enclosed proxy is solicited on behalf of the Board of Directors for use
at the Annual Meeting. Any Stockholder giving a proxy for the meeting has the
power to revoke it any time prior to its use by (i) granting a subsequently
dated proxy, (ii) attending the Annual Meeting and voting in person, or (iii)
otherwise giving notice in person or in writing to the Secretary of the
Company. If a proxy in the accompanying form is duly executed and returned,
the shares represented thereby will be voted at the Annual Meeting and, where
a choice is specified, the proxy will be voted in accordance with such
specification. The representation in person or by proxy of a majority of the
shares entitled to vote shall constitute a quorum at the Annual Meeting.
Directors will be elected by a plurality of the votes cast. With respect to
the election of directors, votes may be cast in favor or withheld. Votes that
are withheld will be excluded entirely from the calculation of votes and will
have no effect. The affirmative vote of holders of record of not less than
two-thirds of the outstanding Common Stock on April 6, 1999 (the "Record
Date") is required for approval of Proposal 1. The affirmative vote of a
majority of the shares present in person or by proxy is required for each of
Proposals 2 and 3. If a proxy card indicates an abstention or a broker non-
vote on a particular matter, then the shares represented by such proxy will be
counted for quorum purposes. If a quorum is present, an abstention will have
the effect of a vote against the matter and broker non-votes will have no
effect.
Outstanding Shares and Voting Rights
Only holders of record of Common Stock at the close of business on April 6,
1999 shall be entitled to vote at the Annual Meeting. At the close of business
on March 26, 1999, the Company had 46,836,459 shares of Common Stock
outstanding. Each outstanding share of Common Stock receives one vote with
respect to matters to be voted on at the Annual Meeting.
1
<PAGE>
PROPOSAL NO. 1
AUTHORIZATION OF PREFERRED STOCK
By resolutions adopted on March 11, 1999, the Board of Directors approved
and declared advisable the adoption of an amendment and restatement of the
Company's Second Amended and Restated Certificate of Incorporation, as amended
(the "Charter") to provide for authorization of 100,000,000 shares of
preferred stock, par value $0.01 per share, of the Company to be issued from
time to time with such rights, preferences and priorities as the Board of
Directors shall designate; provided that such preferred stock shall not be
used for anti- takeover purposes and shall not have super-majority voting
rights.
If the Stockholders of the Company (the "Stockholders") approve the proposed
amendment, the Company's Charter will be amended and restated as proposed by
the Board of Directors.
Reasons for and Effect of the Proposed Amendment and Restatement
The proposed amendment and restatement of the Charter would (i) authorize
the Board of Directors to issue up to 100,000,000 shares of Preferred Stock
and (ii) authorize the Board of Directors to classify any unissued shares of
Preferred Stock and reclassify any previously classified but unissued shares
of Preferred Stock of any series from time to time. Prior to the issuance of
shares of each series, the Board of Directors will be required by the Maryland
General Corporation Law and Article V, Section 5 of the proposed amended and
restated Charter to set, subject to the provisions of the Charter regarding
the restrictions on transfer of stock, the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms or conditions of redemption for
each such class or series of Preferred Stock. Shares of Preferred Stock of any
such series will be available for issuance without further action by the
Stockholders (except as required by applicable laws or regulations, including
New York Stock Exchange rules).
The proposed amendment and restatement to authorize Preferred Stock does not
effect any change in the number or rights of authorized shares of Common Stock
except to the extent that any class or series of Preferred Stock authorized by
the Board of Directors may grant to the holders thereof preferential rights
that would grant to the holders of such class or series certain preferences or
priorities over the holders of the Common Stock, such as a liquidation or
dividend preference.
The Company's primary purpose in having Preferred Stock available for
issuance is to allow greater flexibility with respect to future financings or
acquisitions and in carrying out other corporate purposes. Since no Preferred
Stock has been issued, and the issuance of the same is not currently
contemplated, it is not possible to know whether or to what extent such
Preferred Stock, if issued, would have preference over the holders of Common
Stock in the distribution of any assets in the event of a liquidation.
If this amendment and restatement is approved by the Stockholders, the Board
of Directors would be authorized to issue Preferred Stock in one or more
series and to determine, at the time of creating each series, the distinctive
designation of, and the number of shares in, the series, its dividend rate,
the price and terms on which such shares may be redeemed, the terms of any
applicable sinking fund, the amount payable upon liquidation, dissolution or
winding up, the conversion rights, if any, and such other rights, preferences
and priorities of such series as the Board of Directors may be permitted to
fix under the laws of the State of Maryland as in effect at the time such
series is created.
The Board of Directors has ordered that the Preferred Stock will not be used
for anti-takeover purposes and that it will not have super-voting rights.
The affirmative vote of holders of record of not less than two-thirds of the
outstanding shares of Common Stock on the Record Date is required for approval
of the proposed amendment to the Charter. If the proposed amendment is
approved by the Stockholders, it will become effective upon the acceptance of
the Articles of Amendment and Restatement of the Company for record by the
State Department of Assessments and Taxation of Maryland, which is expected to
occur as soon as reasonably practicable after approval.
The Board of Directors unanimously recommends that you vote FOR the proposal
to authorize the issuance of Preferred Stock in the Company.
2
<PAGE>
PROPOSAL NO. 2
MANAGEMENT--ELECTION OF DIRECTORS
Properly executed proxies will be voted as marked and, if not marked, will
be voted in favor of the reelection of the three persons named below as
members of the Board of Directors to serve a three year term expiring on the
date of the Annual Meeting in 2002 and until their successors have been duly
elected and qualified. The Board of Directors has no reason to believe that
any nominee will be unable to serve if reelected. In the event any nominee
shall become unavailable to stand for reelection, the proxies named in the
accompanying proxy may vote for the election of a substitute nominee
designated by the Board of Directors. Certain information concerning such
nominees is set forth below.
The Board of Directors unanimously recommends that you vote FOR the election
of each of the nominees identified below. Proxies solicited by the Board of
Directors will be so voted except where authority has been withheld. Proxies
cannot be voted for more people than the number of nominees named below.
<TABLE>
<CAPTION>
Name, Principal Occupation Served as a
and Business Experience Director Since Age
- -------------------------- -------------- ---
<S> <C> <C>
BRUCE G. WILES 1998 47
Bruce G. Wiles has been a director, President and Chief Investment Officer
of the Company since August 1998. Mr. Wiles was Executive Vice President of
American General Hospitality Corporation from April 1996 until August 1998.
Mr. Wiles had also served from 1989 until August 1998 as Executive Vice
President of American General Hospitality, Inc. ("AGHI"), where he was
responsible for AGHI's acquisition and development activities.
JAMES F. DANNHAUSER 1998 46
James F. Dannhauser has been a director of the Company since August 1998.
Mr. Dannhauser has been the Chief Financial Officer of Premier Parks Inc.
since October 1995 and a member of the Board of Directors of Premier Parks
since December 1992. Premier Parks Inc. is a publicly-traded company listed on
the NYSE. From 1990 through June 1996, Mr. Dannhauser was a managing director
of Lepercq de Neuflize & Co. Incorporated, an investment banking firm. Mr.
Dannhauser is a member of the Board of Directors of Lepercq.
MAHMOOD KHIMJI 1998 38
Mahmood Khimji has been a director of the Company since August 1998. Mr.
Khimji has served as Senior Vice President of Highgate Hotels, Inc., an owner
and operator of hotel and commercial properties throughout North America,
since 1988. Prior to that, from 1986 to 1988, Mr. Khimji was an associate at
the law firm of Paul, Weiss, Rifkind, Wharton & Garrison. Mr. Khimji serves as
a Director of the Texas Hotel/Motel Association.
Directors Whose Terms Do Not Expire at the 1999 Annual Meeting
The following directors' terms do not expire in 1999 and therefore do not
stand for reelection at this Annual Meeting:
PAUL W. WHETSELL 1998 48
</TABLE>
Paul W. Whetsell has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since August 1998 and his current term
expires at the Annual Meeting in 2001. Mr. Whetsell has also been Chairman of
the Board of Directors and Chief Executive Officer of MeriStar Hotels &
Resorts, Inc. since August 1998. Prior to August 1998, Mr. Whetsell had been
Chairman of the Board of Directors of CapStar Hotel Company since 1996 and had
served as President and Chief Executive Officer of CapStar Hotel Company since
its founding in 1987.
3
<PAGE>
<TABLE>
<CAPTION>
Name, Principal Occupation Served as a
and Business Experience Director Since Age
- -------------------------- -------------- ---
<S> <C> <C>
STEVEN D. JORNS 1998 50
Steven D. Jorns has been Vice Chairman of the Board of Directors since
August 1998 and his current term expires at the Annual Meeting in 2000. Mr.
Jorns was also Chief Operating Officer of the Company from August 1998 until
January 1999. Mr. Jorns has also been Vice Chairman of the Board of Directors
of MeriStar Hotels & Resorts, Inc. since August 1998. Prior to August 1998,
Mr. Jorns had been the Chairman of the Board of Directors, Chief Executive
Officer and President of American General Hospitality Corporation since April
1996. Mr. Jorns was also the founder of AGHI and had served since its
formation in 1981 until August 1998 as its Chairman of the Board of Directors,
Chief Executive Officer and President.
DANIEL L. DOCTOROFF 1998 40
Daniel L. Doctoroff has been a director of the Company since August 1998 and
his current term expires at the Annual Meeting in 2000. Mr. Doctoroff is a
Managing Partner of Oak Hill Capital Management, Inc., the management company
for Oak Hill Capital Partners, L.P., a private investment partnership. Mr.
Doctoroff has been Managing Director of Oak Hill Partners, Inc., the
investment advisor to several private investment funds, and its predecessor
since August 1987; Vice President and Director of Acadia Partners MGP, Inc.
since March 1992; Vice President of Keystone, Inc. since March 1992; and a
Managing Partner of Insurance Partners Advisors, L.P. since February 1994. Mr.
Doctoroff is also a Director of MeriStar Hotels & Resorts, Inc., Bell & Howell
Company and William Scotsman, Inc.
H. CABOT LODGE III 1998 43
H. Cabot Lodge III has been a director of the Company since August 1998 and
his current term expires at the Annual Meeting in 2001. Mr. Lodge is the co-
founder of American Corporate Real Estate, Inc., a real estate investment bank
which, through its affiliate, Acre Partners, specializes in long-term net
leases with corporations. From August 1983 to August 1995, Mr. Lodge was a
Managing Director and Executive Vice President of W.P. Carey & Co. Mr. Lodge
is a member of the Board of Directors of TelAmerica Media, Inc., High Voltage
Engineering Corp. and Superconducting Core Technologies, Inc. Superconducting
Core Technologies filed a voluntary petition under Chapter 11 of the U.S.
Bankruptcy Code in September 1998. Mr. Lodge is also a principal of Carmel
Lodge, LLC, a New York-based investment firm.
JAMES R. WORMS 1998 53
James R. Worms has been a director of the Company since August 1998 and his
current term expires at the Annual Meeting in 2001. Mr. Worms has served since
August 1995 as a Managing Director of William E. Simon & Sons L.L.C., a
private investment firm and merchant bank, and President of William E. Simon &
Sons Realty, through which the firm conducts its real estate activities. Prior
to joining William E. Simon & Sons, Mr. Worms was employed in various
capacities since March 1987 by Salomon Brothers Inc, an international
investment banking firm, culminating with Managing Director. Mr. Worms is also
a Director of MeriStar Hotels & Resorts, Inc.
WILLIAM S. JANES 1998 45
</TABLE>
William S. Janes has been a director of the Company since August 1998 and
his current term expires at the Annual Meeting in 2000. Mr. Janes has served
as a Principal since 1990, and currently serves as President of RMB Realty,
Inc. since 1990. Prior to that, from 1984 to 1989, Mr. Janes served as
Regional General Partner of Lincoln Property Company. Mr. Janes serves as a
Director of Paragon Group, Inc., a publicly traded real estate investment
trust, as well as Brazos Asset Management, Brazos Fund, Paragon Property
Services, Inc. and Carr Real Estate Services. Mr. Janes maintains professional
affiliations as a member of the National Association of Real Estate Investment
Trusts, the Society of Industrial and Office Realtors and the Urban Land
Institute.
4
<PAGE>
MANAGEMENT--THE BOARD OF DIRECTORS AND ITS COMMITTEES
On August 3, 1998, CapStar Hotel Company ("CapStar") merged into American
General Hospitality Corporation ("AGH") to create the Company (the "Merger").
Each outstanding share of AGH common stock was converted into 0.8475 shares of
the Company and each outstanding share of CapStar common stock was converted
into 1.0 share of the Company. At the time of the Merger, CapStar stockholders
held approximately 56% of the outstanding shares of the Company and AGH
stockholders held approximately 44% of the outstanding shares of the Company.
During the five-month period beginning on August 3, 1998 and ending on
December 31, 1998, the full Board of Directors of the Company met three times.
Each director attended all meetings of the Board of Directors held while he
was a director except Mr. Doctoroff was absent from one Board of Directors
meeting.
Board of Directors Committees
The Board of Directors currently has four committees, an Audit Committee, a
Leasing Committee, a Compensation Committee and an Investment Committee.
The Audit Committee consists of three directors who are not employees of the
Company ("Independent Directors"). The Audit Committee is responsible for
making recommendations concerning the engagement of independent auditors,
reviewing with the independent auditors the plans and results of the audit
engagement, approving professional services provided by the independent
auditors, reviewing the independence of the independent auditors, considering
the range of audit and non-audit fees and reviewing the adequacy of the
Company's internal accounting controls. From the date of the Merger until
December 31, 1998, the Audit Committee met two times. The current members of
the Audit Committee are Messrs. Lodge, Dannhauser and Khimji.
The Leasing Committee consists of three Independent Directors. The Leasing
Committee is responsible for reviewing at least annually the compliance of the
Company's lessees with the terms of the related leases, reviewing and
approving the terms of any new leases between the Company and its lessees and
reviewing any material issues arising under such leases. From the date of the
Merger until December 31, 1998, the Leasing Committee met two times. The
current members of the Leasing Committee are Messrs. Janes, Dannhauser and
Lodge.
The Compensation Committee consists of three Independent Directors. The
Compensation Committee is responsible for the determination of compensation of
the Company's executive officers and the administration of the MeriStar
Incentive Plan (as defined herein). From the date of the Merger until December
31, 1998, the Compensation Committee met two times. The current members of the
Compensation Committee are Messrs. Doctoroff, Worms and Janes.
The Investment Committee consists of the Chairman of the Board and three
Independent Directors. The Investment Committee is responsible for reviewing
and approving all hotel acquisitions under $40 million and reviewing and
recommending to the Board of Directors: (i) all hotel acquisitions over $40
million; and (ii) non-hotel acquisitions. From the date of the Merger until
December 31, 1998, the Investment Committee met two times. The current members
of this committee are Messrs. Whetsell, Jorns, Doctoroff and Worms.
The entire Board of Directors acts as the nominating committee for directors
and will consider nominations by Stockholders for directors. The Board of
Directors would be pleased to receive suggestions from Stockholders about
persons it should consider as possible members of the Board of Directors. Any
such suggestion should be received by the Secretary of the Company between
January 12, 2000 and February 11, 2000.
5
<PAGE>
Compensation of Directors
Independent Directors of the Company will be paid an annual fee of $20,000.
In addition, each Independent Director will be paid $1,250 for attendance at
each meeting of the Board of Directors; $1,000 for attendance at each meeting
of a committee of the Board of Directors of which such director is a member
and $500 for each telephonic meeting of the Board of Directors or a committee
thereof of which such director is a member. Directors who are employees of the
Company will not receive any fees for their service on the Board of Directors
or a committee thereof. The Company will reimburse directors for their out-of-
pocket expenses in connection with their service on the Board of Directors.
Pursuant to the Company's Non-employee Directors' Incentive Plan (the
"Directors' Plan"), each Independent Director is awarded an option to purchase
7,500 shares of Common Stock upon initial commencement of service as a
director, whether by appointment or election. Thereafter, each Independent
Director is granted an option (a "Stock Option") to purchase 5,000 shares of
Common Stock on the first business day following each annual meeting of
Stockholders. The exercise price of option grants will be 100% of the fair
market value of the Common Stock on the date of grant, and options will vest
in three annual installments commencing one year after the date of grant. The
exercise price may be paid in cash, cash equivalents acceptable to the
Compensation Committee, Common Stock or a combination thereof. Options granted
under the Directors' Plan, once vested, are exercisable for ten years from the
date of grant. Upon termination of service as a director, options that have
not vested are forfeited and vested options may be exercised until they
expire. All options accelerate upon certain changes in control of the Company.
MANAGEMENT--THE EXECUTIVE OFFICERS
The name of the executive officer of the Company as of the date of this
Proxy Statement other than Messrs. Whetsell, Jorns and Wiles, who are also
members of the Board of Directors, his position and office, business
experience, term of office and age is as follows:
<TABLE>
<CAPTION>
Served as
Names, Positions and Offices, an Executive
and Business Experience Officer Since Age
- ----------------------------- ------------- ---
<S> <C> <C>
JOHN EMERY 1998 34
</TABLE>
John Emery has served as Chief Financial Officer of the Company since August
1998. From June 1997 until August 1998, Mr. Emery served as Chief Financial
Officer of CapStar Hotel Company. From March 1996 to June 1997, Mr. Emery
served as Treasurer and Secretary of CapStar Hotel Company. From September
1995 to March 1996, he served as Director of Finance of CapStar Hotel Company.
Prior to that, from January 1987 to September 1995, he worked for Deloitte &
Touche LLP in various capacities, culminating with Senior Manager for the
hotel and real estate industries.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company during
1998 with respect to the Chief Executive Officer and the three executive
officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------ ------------ Securities
Name And Principal Other Annual Restricted Underlying All Other
Position Year Salary Bonus Compensation Stock Awards Options Compensation
------------------ ---- ------ -------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul W. Whetsell(1)(6).. 1998 $330,577 $217,710 $ 2,312 -- (5) 353,743 --
Chief Executive Officer 1997 251,988 450,000 206,412(8) -- 100,000 --
and Chairman of the
Board 1996 215,081 -- 2,312 -- 150,000 --
Steven D. Jorns(2)(7)... 1998 188,013 199,060 -- -- 201,180 --
Vice Chairman of the
Board 1997 100,000 60,000 -- -- 250,000 --
1996 41,667 -- -- 532,500 225,000 --
Bruce G. Wiles(3)(7).... 1998 188,713 177,283 -- (5) -- --
President and Chief 1997 90,000 45,000 -- -- 237,796 --
Investment Officer 1996 37,500 -- -- 177,500 75,000 --
John Emery(4)(6)........ 1998 250,509 170,050 2,000 -- (5) 120,936 --
Chief Financial Officer 1997 165,715 132,000 4,200 -- 85,000 --
1996 114,139 20,000 -- -- 19,064 --
</TABLE>
- --------
(1) During 1998, Mr. Whetsell received (i) $210,000 between January 1, 1998
and August 2, 1998 while an employee of CapStar and (ii) $120,577 between
August 3, 1998 and December 31, 1999 while an employee of the Company.
Mr. Whetsell received 353,743 Options on August 3, 1998 in connection
with the Merger.
(2) During 1998, Mr. Jorns received (i) $72,917 between January 1, 1998 and
August 2, 1998 while an employee of AGH and (ii) $115,097 between August
3, 1998 and December 31, 1999 while an employee of the Company. Mr. Jorns
received 201,180 Options on August 3, 1998 in connection with the Merger.
(3) During 1998, Mr. Wiles received (i) $64,167 between January 1, 1998 and
August 2, 1998 while an employee of AGH and (ii) $188,713 between August
3, 1998 and December 31, 1999 while an employee of the Company.
(4) During 1998, Mr. Emery received (i) $134,163 between January 1, 1998 and
August 2, 1998 while an employee of CapStar and (ii) $116,346 between
August 3, 1998 and December 31, 1999 while an employee of the Company.
Mr. Emery received 120,936 Options on August 3, 1998 in connection with
the Merger.
(5) On February 4, 1999, pursuant to the MeriStar Incentive Plan (i) Mr.
Whetsell received options to purchase 250,000 shares of the Company,
which vest over three years, and 25,000 restricted shares of the Company,
which vests over five years, (ii) Mr. Wiles received options to purchase
150,000 shares of the Company, which vest over three years, and 15,000
restricted shares of the Company, which vests over five years, and (iii)
Mr. Emery received options to purchase 150,000 shares of the Company,
which vests over three years, and 15,000 restricted shares of the
Company, which vest over five years.
(6) Mr. Whetsell and Mr. Emery were officers of CapStar during 1996, 1997 and
from January 1, 1998 until August 2, 1998.
(7) Mr. Jorns and Mr. Wiles were officers of AGH during 1996, 1997 and from
January 1, 1998 until August 2, 1998.
(8) Mr. Whetsell received an additional bonus based upon the number of
acquisitions made by the Company during 1997.
7
<PAGE>
Stock Option Grants
The following table sets forth certain information with respect to the
options granted to the Named Executive Officers during 1998.
Option Grants In Fiscal Year 1998
<TABLE>
<CAPTION>
Potential Value at
Number of Assumed Annual Rates of
Securities % Of Total Stock Price Appreciation
Underlying Options Granted For Option Term(2)
Options to Employees in Exercise or Expiration --------------------------
Name Granted (1) 1998 Fiscal Year Base Price Date 5% 10%
---- ----------- ---------------- ----------- ---------- -- ------------
<S> <C> <C> <C> <C> <C> <C>
Paul W. Whetsell........ 353,743 37.1% $21.375 8/3/08 $ 2,601,787 $ 8,311,007
Steven D. Jorns......... 201,180 21.1 32.08 1/2/08 (836,123) 2,084,840
Bruce G. Wiles.......... -- -- -- -- -- --
John Emery.............. 120,936 12.7 21.375 8/3/08 889,487 2,841,328
</TABLE>
- --------
(1) All of these options vest in equal installments over three years.
(2) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or "options spreads" that would exist
for the respective options based on assumed rates of annual compound
stock price appreciation of 5% and 10% from the date the options were
granted over the full option term.
COMPENSATION PLANS
The MeriStar Incentive Plan
The purpose of the MeriStar Incentive Plan is to (i) attract and retain
employees, directors and other service providers with ability and initiative,
(ii) provide incentives to those deemed important to the success of the
Company and related entities, and (iii) align the interests of these
individuals with the interests of the Company and its Stockholders through
opportunities for increased stock ownership.
Administration
The MeriStar Incentive Plan is administered by the Compensation Committee.
The Compensation Committee may delegate its authority to administer the
MeriStar Incentive Plan. The Compensation Committee may not, however, delegate
its authority with respect to grants and awards to individuals subject to
Section 16 of the Exchange Act. As used in this summary, the term
"Administrator" means the Compensation Committee or its delegate, as
appropriate.
Eligibility
Each employee of the Company or of an affiliate of the Company or any other
person whose efforts contribute to the Company's performance, including an
employee who is a member of the Board of Directors, is eligible to participate
in the MeriStar Incentive Plan ("Participants"). Notwithstanding the
foregoing, as a result of the Merger, CapStar options were converted into
options in the Company (the "CapStar Options"), whether or not the option
holders were to be employed by the Company. The CapStar Options terminate upon
the earlier of the tenth anniversary of their issuance or the conclusion of
the employees employment with MeriStar Hotels & Resorts, Inc. The
Administrator may from time to time grant stock options, stock awards,
incentive awards or performance shares to Participants. As of March 26, 1999,
the class of Participants consisted of approximately 200 persons.
Options
Options granted under the MeriStar Incentive Plan may be incentive stock
options ("ISOs") or nonqualified stock options. An option entitles a
Participant to purchase shares of Common Stock from the Company at the
8
<PAGE>
option price. The option price may be paid in cash with shares of Common
Stock, or with a combination of cash and Common Stock. The option price will
be fixed by the Administrator at the time the option is granted, but the price
cannot be less than 100% for existing employees (85% in connection with the
hiring of new employees) of the shares' fair market value on the date of
grant; provided, however, no more than 10% of the shares under the MeriStar
Incentive Plan will be granted at less than 100% of fair market value. The
exercise price of an ISO may not be less than 100% of the shares' fair market
value on the date of grant (110% of the fair market value in the case of an
ISO granted to a 10% Stockholder of the Company). Options may be exercised at
such times and subject to such conditions as may be prescribed by the
Administrator but the maximum term of an option is ten years in the case of an
ISO or five years in the case of an ISO granted to a 10% Stockholder.
ISOs may only be granted to employees; however, no employee may be granted
ISOs (under the MeriStar Incentive Plan or any other plan of the Company) that
are first exercisable in a calendar year for Common Stock having an aggregate
fair market value (determined as of the date the option is granted) exceeding
$100,000. In addition, no Participant may be granted options in any calendar
year for more than 750,000 shares of Common Stock.
Stock Awards
Participants also may be awarded shares of Common Stock pursuant to a stock
award. A Participant's rights in a stock award will be nontransferable or
forfeitable or both unless certain conditions prescribed by the Administrator
are satisfied. These conditions may include, for example, a requirement that
the Participant continue employment with the Company for a specified period or
that the Company or the Participant achieve stated, performance-related
objectives. The objectives may be stated with reference to the fair market
value of the Common Stock or the Company's, a subsidiary's, or an operating
unit's return on equity, earnings per share, total earnings, earnings growth,
return on capital, funds from operations or return on assets or other
acceptable performance criteria. A stock award, no portion of which is
immediately vested and nonforfeitable, will be restricted, in whole or in
part, for a period of at least three years; provided, however, that the period
will be at least one year in the case of a stock award that is subject to
objectives based on one or more of the foregoing performance criteria. The
maximum number of stock awards that may be granted to an individual in any
calendar year cannot exceed 50,000 shares of Common Stock.
Incentive Awards
Incentive awards also may be granted under the MeriStar Incentive Plan. An
incentive award is an opportunity to earn a bonus, payable in cash, upon
attainment of stated performance objectives. The objectives may be stated with
reference to the fair market value of the Common Stock or on the Company's, a
subsidiary's, or an operating unit's return on equity, earnings per share,
total earnings, earnings growth, return on capital, funds from operations or
return on assets or other acceptable performance criteria. The period in which
performance will be measured will be at least one year. No Participant may
receive an incentive award payment in any calendar year that exceeds the
lesser of (i) 100% of the Participant's base salary (prior to any salary
reduction or deferral election) as of the date of grant of the incentive award
or (ii) $250,000.
Performance Share Awards
The MeriStar Incentive Plan also provides for the award of performance
shares. A performance share award entitles the Participant to receive a
payment equal to the fair market value of a specified number of shares of
Common Stock if certain standards are met. The Administrator will prescribe
the requirements that must be satisfied before a performance share award is
earned. These conditions may include, for example, a requirement that the
Participant continue employment with the Company for a specified period or
that the Company or the Participant achieve stated, performance-related
objectives. The objectives may be stated with reference to the fair market
value of the Common Stock or on the Company's, a subsidiary's or an operating
unit's return on equity, earnings per share, total earnings, earnings growth,
return on capital, funds from operations or return on assets or other
acceptable performance criteria. To the extent that performance shares are
earned, the obligation
9
<PAGE>
may be settled in cash, in Common Stock, or by a combination of the two. No
Participant may be granted performance shares for more than 12,500 shares of
Common Stock in any calendar year.
Transferability
Awards granted under the MeriStar Incentive Plan are generally
nontransferable. The Compensation Committee may, however, grant awards other
than ISOs, which are transferable to Permitted Family Members.
Share Authorization
At any given time, the maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the MeriStar Incentive Plan will be
the total of (i) ten (10%) percent of the number of shares of Common Stock
that were outstanding as of the end of the immediately preceding calendar year
(rounded downward if necessary to eliminate fractional shares), minus (ii) the
number of shares subject to awards that were granted under the MeriStar
Incentive Plan through the last day of the immediately preceding calendar
year, plus (iii) as of the last day of the immediately preceding calendar
year, the number of shares with respect to which previously granted awards
have expired. In addition to the foregoing, in no event may the total number
of shares of Common Stock covered by outstanding ISOs granted under the
MeriStar Incentive Plan, plus the number of shares of Common Stock issued
pursuant to the exercise of ISOs, whenever granted under the Amended and
Restated Plan, exceed approximately 1.4 million shares. All awards made under
the MeriStar Incentive Plan will be evidenced by written agreements between
the Company and the Participant. The share limitation and the terms of
outstanding awards will be adjusted, as the Compensation Committee deems
appropriate, in the event of a stock dividend, stock split, combination,
reclassification, recapitalization or other similar event. As of March 26,
1999, the closing price of a share of Common Stock on the New York Stock
Exchange was $16 7/8.
Termination and Amendment
No option or stock award may be granted and no performance shares may be
awarded under the MeriStar Incentive Plan more than ten years after the
earlier of the date that the MeriStar Incentive Plan is adopted by the Board
of Directors or the date that it is approved by the Stockholders. The Board of
Directors may amend or terminate the MeriStar Incentive Plan at any time, but,
except as set forth in the immediately preceding paragraph, an amendment will
not become effective without Stockholder approval if the amendment materially
(i) increases the number of shares of Common Stock that may be issued under
the MeriStar Incentive Plan (other than an adjustment as described above),
(ii) changes the eligibility requirements, or (iii) increases the benefits
that may be provided under the MeriStar Incentive Plan.
The MeriStar Directors' Plan
The purpose of the MeriStar Hospitality Corporation Non-employee Directors'
Incentive Plan (the "Directors' Plan") is to attract and retain experienced
and knowledgeable persons to serve as outside directors to the Company. The
Directors' Plan initially provided for a one-time grant of options to each
outside director and an annual grant of shares equal in value to approximately
one-half of the director's annual retainer.
Share Authorization
A maximum of 125,000 shares of Common Stock (which includes 57,256 shares
remaining available under the existing Directors' Plan) may be issued under
the Directors' Plan. The share limitation and terms of outstanding awards will
be adjusted, as the Compensation Committee deems appropriate, in the event of
a stock dividend, stock split, combination, reclassification, recapitalization
or other similar event.
Eligibility
The Directors' Plan provides for the grant of options to purchase Common
Stock to each director who is not an officer or employee of the Company or its
subsidiaries (each an "Independent Director").
10
<PAGE>
Independent Director Compensation
Independent Directors of the Company will be paid an annual fee of $20,000.
In addition, each Independent Director will be paid $1,250 for attendance at
each meeting of the Board of Directors; $1,000 for attendance at each meeting
of a committee of the Board of Directors of which such director is a member
and $500 for each telephonic meeting of the Board of Directors or a committee
thereof of which such director is a member. Directors who are employees of the
Company will not receive any fees for their service on the Board of Directors
or a committee thereof. The Company will reimburse directors for their out-or-
pocket expenses in connection with their service on the Board of Directors.
Options
Pursuant to the Directors' Plan, each Independent Director is awarded an
option to purchase 7,500 shares of Common Stock upon initial commencement of
service as a director, whether by appointment or election. Thereafter, each
Independent Director is granted an option (a "Stock Option") to purchase 5,000
shares of Common Stock on the first business day following each annual meeting
of stockholders. The exercise price of option grants will be 100% of the fair
market value of the Common Stock on the date of grant, and options will vest
in three annual installments commencing one year after the date of grant. The
exercise price may be paid in cash, cash equivalents acceptable to the
Compensation Committee, Common Stock or a combination thereof. Options granted
under the Directors' Plan, once vested, are exercisable for ten years from the
date of grant. Upon termination of service as a director, options that have
not vested are forfeited and vested options may be exercised until they
expire. All options accelerate upon a change in control of the Company.
MeriStar Common Stock in Lieu of Fees
Independent Directors may elect to receive all or a portion of their annual
retainer in shares of Common Stock rather than cash. Unless an Independent
Director elects otherwise, fees paid in stock will be paid at the same time as
fees paid in cash.
Amendment and Termination
The Directors' Plan provides that the Board of Directors may amend or
terminate the Directors' Plan at any time. An amendment will not become
effective without stockholder approval if the amendment (i) materially
increases the number of shares that may be issued under the Directors' Plan or
(ii) stockholder approval would be required for compliance with stock exchange
rules. No options may be granted under the Directors' Plan after December 31,
2008.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Paul W. Whetsell, Steven
D. Jorns, Bruce G. Wiles and John Emery as of August 3, 1998. With respect to
Messrs. Whetsell and Jorns, each agreement has an initial term of five years
with automatic renewals on a year-to-year basis thereafter unless terminated
in accordance with its terms. The other employment agreements are for an
initial term of three years, with automatic renewals on a year-to-year basis
thereafter, unless terminated in accordance with their respective terms.
Certain material terms of these agreements are as follows:
Base Salary
Mr. Whetsell receives a base salary of $285,000 per year (Mr. Whetsell will
also receive a base salary of $190,000 per year as an employee of MeriStar
Hotels & Resorts, Inc.). Mr. Jorns received a base salary of $285,000 per year
from August 3, 1998 until January 1, 1999 after which he receives a salary of
$135,000 per year (Mr. Jorns also receives a salary of $90,000 per year as an
employee of MeriStar Hotels & Resorts, Inc.). Mr. Wiles receives a base salary
of $300,000 per year and Mr. Emery receives a base salary of $275,000 per
year. Each base salary will be subject to review annually.
11
<PAGE>
Annual Incentive Bonus
Each executive is eligible to receive an annual incentive bonus at the
following targeted amounts of base salary:
<TABLE>
<CAPTION>
Threshold Maximum
Target Target Bonus Amount
--------- ------ ------------
<S> <C> <C> <C>
Paul W. Whetsell.................................. 25% 125% 150%
Steven D. Jorns................................... 25% 125% 150%
Bruce G. Wiles.................................... 25% 100% 125%
John Emery........................................ 25% 100% 125%
</TABLE>
The amount of the annual bonus is based on the achievement of predefined
operating or performance goals and other criteria to be established by the
Compensation Committee of the Board of Directors.
Long-Term Incentives
Each executive is eligible to participate in the MeriStar Incentive Plan.
Awards are made in the discretion of the Compensation Committee.
Certain Severance Benefits
If at any time during the term of their respective employment agreements or
any automatic renewal period, the employment of Messrs. Whetsell, Jorns, Wiles
or Emery is terminated, he shall be entitled to receive the benefits described
below.
Termination by the Company Without Cause or by the Executive with Good
Reason. In the case of Messrs. Whetsell and Jorns, if such executive is
terminated without cause or voluntarily terminates with "good reason," he is
entitled to a lump-sum payment equal to the product of (x) the sum of (A) his
then annual base salary and (B) the amount of his bonus for the preceding
year, or if the term of the employment agreement is terminated in its initial
year his target bonus for such year, multiplied by (y) the greater of (A) two
and (B) a fraction, the numerator of which is the number of days remaining in
the term of the employment agreement, without further extension, and the
denominator of which is 365. In addition, all of the executive's options and
restricted stock will immediately vest and become exercisable for a period of
one year thereafter and shares of restricted stock previously granted to the
executive will become free from all contractual restrictions, effective as of
the termination date. In addition, the Company will continue in effect certain
benefits under the employment agreement, including, but not limited to, life
and health insurance plans, or their equivalent for a period equal to the
greater of two years or the remaining term of the employment agreement,
without further extension. In the event the other executives are terminated
without cause or voluntarily terminate their employment agreements with "good
reason" they will be entitled to receive (i) a lump-sum payment equal to one
time their then annual base salary, (ii) the amount of their bonus for the
preceding year, (iii) immediate vesting and exercisability of all unvested
stock options and restricted stock awards and (iv) the continuance of certain
benefits under their employment agreements, but only until the earlier of (x)
one year from the end of the term of their respective employment agreements or
(y) the date on which the executive obtains health insurance coverage from a
subsequent employer.
Termination Due to Death or Disability. Upon termination due to death or
disability, the executive or his estate will receive a lump-sum payment equal
to the executive's base salary, plus the pro rata portion of his bonus for the
fiscal year in question, in addition to payment for one year of any other
compensation due the executive pursuant to his employment contract. Any
unvested portion of such executive's stock options and restricted stock will
vest immediately and become exercisable for a period of one year thereafter,
and the shares of restricted stock previously granted to the executive will
become free from all contractual restrictions.
Voluntary Termination or Termination for Cause. Upon voluntary termination
or termination for "cause" by the Company, the executive will receive the
accrued and unpaid of his base salary through the termination
12
<PAGE>
date. Any unvested options will terminate immediately, and any vested options
held by the executive will expire ninety (90) days after the termination date.
Termination Following a Change in Control. If Mr. Whetsell or Mr. Jorns is
terminated without cause or voluntarily terminates with "good reason" within
24 months following a "Change in Control," the executive will receive the
following benefits: (i) a lump-sum payment equal to the product of (x) the sum
of (A) his then annual base salary and (B) the amount of his bonus for the
preceding year, or if the term of the employment agreement is terminated in
its initial year his target bonus for such year, multiplied by (y) the greater
of (A) three and (B) a fraction, the numerator of which is the number of days
remaining in the term of the employment agreement, without further extension,
and the denominator of which is 365; and (ii) all unvested stock options and
shares of restricted stock held by the executive will immediately vest and be
exercisable for a period of one year thereafter and shares of restricted stock
previously granted to the executive will become free from contractual
restrictions; and (iii) the continuance of certain benefits under the
employment agreement, including, but not limited to, life and health insurance
plans, or their equivalent for a period equal to the greater of two years or
the remaining term of the employment agreement, without further extension. In
the case of the other executives, they would each be entitled to the same type
of benefits provided the termination occurred within 18 months of the Change
in Control, except their lump-sum payment will only be two times the sum of
their then-annual base salary plus bonus, and the total payments would be
limited to the amount which is deductible under Section 280G of the Code; but
only if, by reason of such limitation, the net after tax benefit of the
executive shall exceed the net after tax benefit if such limitation were not
made.
Change in Control Payments. In the case of Messrs. Whetsell and Jorns, in
the event that any accelerated vesting of such executive's rights with respect
to stock options, restricted stock or any other payment, benefit or
compensation results in the imposition of an excise tax payable by the
executive under Section 4999 of the Code, or any successor or other provision
with respect to "excess parachute payments" within the meaning of Section
280G(b) of the Internal Revenue Code, MeriStar will make a cash payment to the
executive in the amount of such excise tax (the "Excise Tax Payment") and
shall also make a cash payment to the executive in an amount equal to the
total of federal, state and local income and excise taxes for which the
executive may be liable on account of such Excise Tax Payment.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program provides competitive levels of
compensation designed to integrate pay with the Company's annual and long-term
performance goals. Underlying this objective are the following concepts:
supporting an individual pay-for-performance policy that differentiates
compensation levels based on corporate and individual performance; motivating
key senior officers to achieve strategic business objectives and rewarding
them for that achievement; providing compensation opportunities which are
competitive to those offered in the marketplace, thus allowing the Company to
compete for and retain talented executives who are critical to the Company's
long term success; and, aligning the interest of executives with the long-term
interests of the Company's Stockholders.
In the interest of balancing all key Stockholder interests, the Compensation
Committee believes that the compensation of the executive officers of the
Company, along with the compensation of other officers, should be comprised of
a combination of base salary, short-term annual incentive bonus under the
employment agreements and long-term stock options under the MeriStar Incentive
Plan. While these elements are balanced in total in comparison to other
comparable organizations, the Compensation Committee believes that potential
compensation in the form of performance-related variable compensation should
be emphasized. Variable compensation will be both short-term and long- term
based. The resulting total package has been designed to reward officers for
the creation of long-term Stockholder value in excess of other comparable
organizations.
13
<PAGE>
Base Salary
In determining the appropriate amount of fixed base pay for officers, the
Compensation Committee compared the officers' base salaries with those paid to
other executives in the hotel industry.
Incentive Bonus
Pursuant to employment agreements, certain employees of the Company are
eligible to receive cash bonuses upon fulfillment of predetermined corporate
and individual goals. Each of the executive officers received bonuses for
fiscal 1998 in accordance with the terms of his employment agreement. Full
bonus payouts will be made only if the Company's performance goals are
exceeded. Bonuses will not be available if minimum performance goals are not
met.
Stock Options
Stock options, stock appreciation rights and restricted shares are granted
to officers and other key employees of the Company under the MeriStar
Incentive Plan as incentives to promote long-term growth and to increase
Stockholder value. The Compensation Committee believes that the grant of
options focuses attention on managing the Company from the perspective of an
owner with an equity stake in the business. At the time of the Merger, the
Company granted certain executive officers options to purchase up to 474,679
shares of Common Stock. All options granted were at the fair market value as
of the Merger, which was $21.375. Since the value of an option bears a direct
relationship to the Company's stock price, it serves as an effective long-term
incentive, which is highly compatible with the interests of Stockholders, and
is therefore an important element of the Company's compensation policy.
Chief Executive Officer Compensation
Mr. Whetsell's compensation as Chairman of the Board and Chief Executive
Officer of the Company for 1998 was $285,000 per year (Mr. Whetsell will also
receive a base salary of $190,000 per year as an employee of MeriStar Hotels &
Resorts, Inc.), which is comparable to compensation for other chief executive
officers in the hotel industry. This compensation was established by the
Compensation Committee. Mr. Whetsell's compensation for 1999 will be $285,000
per year (Mr. Whetsell will also receive a base salary of $190,000 per year as
an employee of MeriStar Hotels & Resorts, Inc.), which will continue to be
comparable with other chief executive officers in the hotel industry. This
compensation was established by the Compensation Committee.
Tax Deductibility of Compensation
Section 162(m) of the Code, generally limits the deductibility on the
Company's tax return of compensation over $1 million to any of the officers of
the Company unless the compensation is paid pursuant to a plan which is
performance-related, non-discriminatory and has been approved by the Company's
Stockholders. The Compensation Committee's policy with respect to Section
162(m) is to make every reasonable effort to ensure that compensation is
deductible to the extent permitted, while simultaneously providing the
Company's officers with appropriate rewards for their performance. The Company
did not pay any compensation during 1998 that would be subject to Section
162(m).
The Compensation Committee
Daniel L. Doctoroff
James R. Worms
William S. Janes
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative annual return of the Common
Stock since August 3, 1998, the date of the Merger, with the cumulative total
return of the New York Stock Exchange Market Value Index ("NYSE Market Index")
and the Company's peer group (the "Peer Group") index over the same period,
assuming an initial investment of $100 on December 31, 1997, with all
dividends reinvested. The Peer Group consists of Boykin Lodging Inc., Felcor
Lodging Trust Inc., Host Marriott Corporation, Patriot American Hospitality,
Inc. and Sunstone Hotel Investors, Inc. The Company believes that the Peer
Group represents the Company's principal competitors in the hotel ownership
and management segment of the hospitality industry. In addition, the Peer
Group is comprised of publicly traded Companies whose market capitalizations
and principal lines of business are comparable to those of the Company.
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
---------------------------------------------------
COMPANY/INDEX/MARKET 12/31/1997 3/31/1998 6/30/1998 9/30/1998 12/31/1998
-------------------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
MeriStar Hospitality
Corporation(/1/)......... 100.00 101.09 81.60 49.72 54.09
Peer Group................ 100.00 108.94 96.39 65.28 76.90
NYSE Market Index......... 100.00 112.37 113.91 99.25 118.21
</TABLE>
- --------
(1) Index calculations for the period from December 31, 1997 to August 3,
1998 relate to the stock price of CapStar Hotel Company.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisitions
One member of the syndicate of lenders of the Company's $150,000 million of
subordinated indebtedness is Oak Hill Securities Fund, L.P. ("Oak Hill
Securities") which holds $50 million of the indebtedness. The investment
advisor to Oak Hill Securities is Oak Hill Advisors, Inc., one of the
principal stockholders of which is Daniel L. Doctoroff, a director of the
Company.
One or more of Messrs. Jorns and Wiles and their respective affiliates owned
equity interests relating to the Courtyard by Marriott in Durham, North
Carolina acquired by American General Hospitality Corporation ("AGH") in
November 1997. Such persons and affiliates received an aggregate of 13,650
operating partnership units in AGH's operating partnership ("AGH OP Units") in
exchange for such interests in the Durham hotel which converted at the Merger
to 11,568 OP Units. The OP Units were converted into 11,568 shares of Common
Stock in December 1998. In addition, in connection with the acquisition of the
Courtyard by Marriott Durham, AGH paid an additional $132,000 to such persons
as consideration for entering into an indemnification agreement for
representations and warranties relating to the partnership that owned the
interest in the hotel.
In January 1999, AGH completed the purchase of the 202-room Holiday Inn in
Madison, Wisconsin for an aggregate purchase price of approximately $11.9
million payable through a combination of cash and the issuance of AGH OP
Units. The hotel was owned by a private partnership of which a member of Mr.
Jorns' family and Mr. Wiles were partners. In connection with the sale of the
hotel to the Company, the member of Mr. Jorns' family received 11,837 shares
of restricted stock and Mr. Wiles received 5,758 units in the Company's
operating partnership ("OP Units") which are convertible into 5,758 shares of
Common Stock.
Relationships among Officers and Directors
Mr. Whetsell is an executive officer, director and Stockholder of MeriStar
Hotels & Resorts, Inc. the lessee and manager of a majority of the Company's
hotels. Mr. Jorns is an executive officer, director and a holder of limited
partnership interests in the operating partnership ("OP Unitholder") of
MeriStar Hotels & Resorts, Inc. Mr. Wiles is an OP Unitholder of MeriStar
Hotels & Resorts, Inc.
Purchase of Personal Property
In order for AGH to qualify as a REIT, AGH's operating partnership sold
certain personal property relating to certain of the hotels acquired by AGH in
connection with its initial public offering to AGH Leasing, L.P. (which has
since come under the control of MeriStar Hotels & Resorts, Inc.) for $315,000,
which amount was paid by issuance of a promissory note to AGH's operating
partnership. The promissory notes are recourse to AGH Leasing, L.P. and bear
interest at the rate of 10.0% per annum and require the payment of quarterly
installments of principal and interest of approximately $20,000 that will
fully amortize the notes over a five-year period ending on July 31, 2001.
16
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 15, 1999 by (i) all persons known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each
director who is a Stockholder, (iii) each of the Named Executive Officers, and
(iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares
Beneficially Owned
--------------------
Name & Address of
Beneficial Owner Number Percentage
- ----------------- --------- ----------
<S> <C> <C>
The Equitable Companies
Incorporated(1)........ 6,272,765 11.6%
Franklin Resources,
Inc.(2)................ 6,369,042 11.8
ABKB/LaSalle Securities
Limited(3)............. 1,493,414 2.8
James F. Dannhauser..... -- *
Daniel L. Doctoroff(4).. 322,534 *
John Emery(5)........... 112,536 *
William S. Janes(6)..... 24,145 *
Steven D. Jorns(7)...... 412,456 *
Mahmood Khimji(8)....... 816,680 1.5
H. Cabot Lodge III(9)... 6,231 *
Paul W. Whetsell(10).... 642,192 1.2
James R. Worms(11)...... 7,659 *
Bruce G. Wiles(12)...... 150,646 *
Executive officers and
directors as a group
(10 persons)........... 2,495,079 4.6
</TABLE>
- --------
* Represents less than 1% of the class.
(1) Beneficial ownership information is based on the Schedule 13G/A jointly
filed by Equitable Companies, Inc. and the Equitable Life Assurance
Society of the United States (both located at 1290 Avenue of the
Americas, New York, New York 10104), AXA (located at 9 Place Vendome,
75001 Paris France), AXA Assurances I.A.R.D. Mutuelle and AXA Assurances
Vie Mutuelle (both located at 21, rue de Chateaudun, 75009 Paris
France), AXA Conseil Vie Assurance Mutuelle (located at 100-101 Terrasse
Boieldieu, 92042 Paris La Defense France), and AXA Courtage Assuance
Mutuelle (located at 26, rue Louis le Grand, 75002 Paris France), dated
February 16, 1999.
(2) Beneficial Ownership information is based on Schedule 13G/A jointly
filed by Franklin Resources, Inc., Charles B. Johnson, Rupert H.
Johnson, Jr. and Franklin Advisers, Inc. (all located at 777 Mariners
Island Boulevard, San Mateo, California 94404), dated February 1, 1999.
(3) Beneficial Ownership information is based on Schedule 13G/A filed by
LaSalle Advisors Capital Management, Inc. (located at 100 East Pratt
Street, Baltimore, Maryland 21202), dated February 16, 1999.
(4) Includes 53,068 shares held by Cherwell Investors, Inc. ("Cherwell"), 39
shares held by MC Investment Corporation ("MC"), 75,260 shares held by
Penobscot Partners, L.P. ("Penobscot"), 100,000 shares held by PTJ
Merchant Banking Partners, L.P. ("PTJ Merchant") and 12,132 shares held
by Oak Hill Partners, Inc., as to which shares Mr. Doctoroff disclaims
beneficial ownership except to the extent of his pecuniary interest
therein. Mr. Doctoroff is Managing Director of Oak Hill Partners, Inc.,
the principal business of which is serving as an investment consultant
to Acadia Partners, L.P., which is the sole shareholder of Cherwell. Mr.
Doctoroff is also the Executive Vice President of PTJ, Inc., which is
the managing general partner of PTJ Merchant. PTJ Merchant is the sole
general partner of Penobscot, which is the sole stockholder of MC. Mr.
Doctoroff's beneficial holdings also include 15,000 shares of Common
Stock that have vested under options granted.
(5) Includes (i) 41,042 shares of Common Stock that have vested under
options granted and (ii) 25,146 shares of restricted Common Stock that
constitute stock awards.
(6) Includes 15,000 shares of Common Stock that have vested under options
granted.
(7) Includes (i) 109,141 shares of Common Stock that have vested under
options granted, (ii) 30,000 shares of restricted Common Stock that
constitute stock awards and (iii) 11,837 shares of restricted Common
Stock.
17
<PAGE>
(8) Includes (i) 801,680 OP Units held by Mr. Khimji and (ii) 15,000 shares
of Common Stock that have vested under options granted.
(9) Includes 5,649 shares of Common Stock that have vested under options
granted.
(10) Includes (i) 49,375 shares of restricted Common Stock that constitute
stock awards, (ii) 133,333 shares of Common Stock that have vested under
options granted and (iii) shares held by entities over which Mr.
Whetsell has beneficial ownership within the meaning of Rule 13d-3.
(11) Includes 5,649 shares of Common Stock that have vested under options
granted.
(12) Includes (i) 23,475 shares of restricted Common Stock that constitute
stock awards, (ii) 39,789 shares of Common Stock that have vested under
options granted and (iii) 5,758 OP Units held by Mr. Wiles.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors and executive officers
of the Company, and persons who own more than 10% of the issued and
outstanding shares of Common Stock, to file reports of beneficial ownership
and changes in beneficial ownership with the Securities and Exchange
Commission ("SEC"). Directors, executive officers and greater than 10%
Stockholders are required by SEC regulation to furnish the Company copies of
all Section 16(a) forms they file.
Based on a review of the copies of the forms furnished to the Company or
representations by reporting persons, all of the filing requirements
applicable to its officers, directors and greater than 10% Stockholders were
met for fiscal year 1998.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
At the Annual Meeting, the Stockholders will vote on the ratification of the
appointment of KPMG LLP, certified public accountants ("KPMG"), as independent
auditors to audit the accounts of the Company and its subsidiaries for the
fiscal year ending December 31, 1999. Prior to the Merger, KPMG was the
independent auditor of CapStar and PricewaterhouseCoopers LLP
("Pricewaterhouse") was the independent auditor of AGH. Both KPMG and
Pricewaterhouse pursued appointment as the independent auditors of the
Company. The Audit Committee of the Board of Directors recommended the
appointment of KPMG as the Company's independent auditors. A representative of
KPMG will be present at the Annual Meeting and will have an opportunity to
make a statement if he desires. He will be available to answer appropriate
questions.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of the independent auditors.
18
<PAGE>
MISCELLANEOUS
Proxy Solicitation
The cost of soliciting proxies will be borne by the Company. In addition to
soliciting proxies by mail, directors, executive officers and employees of the
Company, without receiving additional compensation, may solicit proxies by
telephone, by telegram or in person. Arrangements will also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares of the Common Stock,
and the Company will reimburse such brokerage firms and other custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by
them in connection with forwarding such materials.
Annual Report
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1998, is being forwarded to each Stockholder
with this Proxy Statement.
Stockholder's Proposals for Next Annual Meeting
If any Stockholder of the Company intends to present a proposal for
consideration at the next Annual Meeting of Stockholders and wishes to have
such proposal in the proxy statement and form of proxy distributed by the
Board of Directors with respect to such meeting, such proposal must be
received at the Company's principal executive offices, 1010 Wisconsin Avenue,
N.W., Washington, D.C. 20007, Attention: John Emery, Secretary, between
January 12, 2000 and February 11, 2000. In addition, any Stockholder intending
to present a proposal for consideration at the next Annual Meeting of
Stockholders must also comply with certain provisions of the Company's current
Certificate of Incorporation and By-Laws.
Other Matters
The Board does not know of any business to be presented for consideration at
the Annual Meeting or any adjournment thereof other than as stated in the
Notice of Annual Meeting of Stockholders. The affirmative vote of the holders
of a majority of the shares of Common Stock represented at the Annual Meeting
or any adjournment thereof and actually voted would be required with respect
to any such other matter that is properly presented and brought to a
Stockholder vote.
/s/ John Emery
John Emery
Secretary
March 29, 1999
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE COMPANY'S FISCAL
YEAR ENDED DECEMBER 31, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN
REQUEST TO JOHN EMERY, SECRETARY, MERISTAR HOSPITALITY CORPORATION, 1010
WISCONSIN AVENUE, N.W., WASHINGTON, D.C. 20007.
19
<PAGE>
Dear Stockholder:
Please take note of the important information enclosed in this mailing.
There are a number of issues related to the operation of the Company that
require your immediate attention.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
MeriStar Hospitality Corporation
1
<PAGE>
MERISTAR HOSPITALITY CORPORATION
PROXY _____________________________________________________________________PROXY
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Paul W. Whetsell, Bruce G. Wiles and John
Emery, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all shares of
common stock of MeriStar Hospitality Corporation (the "Company") held of record
by the undersigned on April 6, 1999 at the Annual Meeting of Stockholders to be
held on May 11, 1999 and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR
SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE>
[X] Please mark votes as in this example.
(1) To amend the Company's Second Amended and Restated Certificate of
Incorporation, as amended, to provide for authorization of 100,000,000
shares of preferred stock, par value $0.01 per share, of the Company to be
issued from time to time with such rights, preferences and priorities as
the Board of Directors shall designate; provided that such preferred stock
shall not be used for anti-takeover purposes and shall not have super-
majority voting rights.
FOR [_] AGAINST [_] ABSTAIN [_]
(2) Re-election of Bruce G. Wiles, James
F. Dannhauser, Mahmood Khimji as
directors of the Company to serve
three year terms expiring on the
date of the Annual Meeting in 2002
and until their successors have been
duly elected and qualified.
FOR [_] AGAINST [_] ABSTAIN [_]
(3) Ratifying the appointment of KPMG
LLP as independent auditors for the
Company for the fiscal year ending
December 31, 1999.
FOR [_] AGAINST [_] ABSTAIN [_]
Please sign exactly as
name appears hereon. Joint
owners should each sign.
Executors, administrators,
trustees, guardians or
other fiduciaries should
give full title as such.
If signing for a
corporation, please sign
in full corporate name by
a duly authorized officer.
Dated:_______________, 1999
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT.
___________________________
(SIGNATURE)
___________________________
(SIGNATURE)
