<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 (S) 240.14a-11(c) or (S) 240.14a-12
MERISTART 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[MERISTAR LOGO]
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of MeriStar Hospitality Corporation (the "Company"), which will be held at the
Hilton Arlington & Towers, 950 North Stafford Street, Arlington, Virginia
22203, on Thursday, May 18, 2000, 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 11, 2000, 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 will result in your shares not being counted for quorum purposes; however,
if a quorum is present, your failure to vote will have no effect. 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>
[MERISTAR LOGO]
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 18, 2000
----------------
To the Stockholders of MERISTAR HOSPITALITY CORPORATION:
Notice is hereby given that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of MeriStar Hospitality Corporation (the "Company") will be
held at the Hilton Arlington & Towers, 950 North Stafford Street, Arlington,
Virginia 22203, on Thursday, May 18, 2000, at 9:00 a.m., Eastern Time. The
Annual Meeting will be held for the following purposes:
1. 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 2003 and
until their successors have been duly elected and qualified;
2. To ratify the appointment of KPMG LLP as independent auditors for the
Company for the fiscal year ending December 31, 2000; and
3. 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 11, 2000, 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
will result in your shares not being counted for quorum purposes; however, if
a quorum is present, your failure to vote will have no effect. 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
April 12, 2000
<PAGE>
[MERISTAR LOGO]
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
----------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
THURSDAY, MAY 18, 2000
----------------
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 2000 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Hilton Arlington & Towers, 950 North
Stafford Street, Arlington, Virginia 22203, on Thursday, May 18, 2000, 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
18, 2000.
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 a majority of the shares present in
person or by proxy is required for each of the proposals. 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 11,
2000 shall be entitled to vote at the Annual Meeting. At the close of business
on April 12, 2000, the Company had 46,672,514 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.
PROPOSAL NO. 1
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
<PAGE>
date of the Annual Meeting in 2003 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>
<S> <C> <C>
Name, Principal Occupation Served as a
and Business Experience Director Since Age
- -------------------------- -------------- ---
STEVEN D. JORNS 1998 51
Steven D. Jorns has been Vice Chairman of the Board of Directors since
August 1998. 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 ("AGH") since April 1996. Mr. Jorns was also the founder of
American General Hospitality, Inc. 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 41
Daniel L. Doctoroff has been a director of the Company since August 1998.
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.
WILLIAM S. JANES 1998 46
William S. Janes has been a director of the Company since August 1998. Since
1990, Mr. Janes has served as a Principal, and currently serves as President,
of RMB Realty, Inc. which oversees the real estate investments of Keystone,
Inc. and related entities. 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 MAX FW, LLC, Brazos Asset Management, Brazos Fund, The Mendik
Company Inc., Carr Real Estate Services and American Skiing Company.
Directors Whose Terms Do Not Expire at the 2000 Annual Meeting
The following directors' terms do not expire in 2000 and therefore do not
stand for reelection at this Annual Meeting:
<CAPTION>
Name, Principal Occupation Served as a
and Business Experience Director Since Age
- -------------------------- -------------- ---
<S> <C> <C>
PAUL W. WHETSELL 1998 49
</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. Mr. Whetsell is also a Director of American Skiing
Company and STS Hotel Net, LLC.
2
<PAGE>
<TABLE>
<S> <C> <C>
Name, Principal Occupation Served as a
and Business Experience Director Since Age
- -------------------------- -------------- ---
H. CABOT LODGE III 1998 44
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. Mr. Lodge is an Executive Vice President of Starwood
Financial, Inc. which recently merged with ACRE Partners. 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. During 1997 and 1998, Mr. Lodge
was Chairman of Superconducting Core Technologies which 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 54
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.
BRUCE G. WILES 1998 48
Bruce G. Wiles has been a director, President and Chief Investment Officer
of the Company since August 1998 and his current term expires at the Annual
Meeting in 2002. 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., where he was responsible for AGHI's acquisition and
development activities.
JAMES F. DANNHAUSER 1998 47
James F. Dannhauser has been a director of the Company since August 1998 and
his current term expires at the Annual Meeting in 2002. 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. Mr. Dannhauser serves as a
Director of the International Association of Amusement Parks and Attractions.
MAHMOOD KHIMJI 1998 39
</TABLE>
Mahmood Khimji has been a director of the Company since August 1998 and his
current term expires at the Annual Meeting in 2002. 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.
3
<PAGE>
MANAGEMENT--THE BOARD OF DIRECTORS AND ITS COMMITTEES
CapStar Hotel Company ("CapStar") and American General Hospitality
Corporation ("AGH") merged on August 3, 1998 (the "Merger") to create the
Company.
Between January 1, 1999 and December 31, 1999, the full Board of Directors
of the Company met five times. Each director attended all meetings of the
Board of Directors held while he was a director except for Messrs. Khimji,
Janes and Dannhauser who each attended four of the meetings.
Board of Directors Committees
The Board of Directors currently has five committees, an Audit Committee, a
Leasing Committee, a Compensation Committee, a REIT Modernization Act
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. Between January 1, 1999 and December
31, 1999, the Audit Committee met three 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. Between January 1,
1999 and December 31, 1999, 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). Between January 1, 1999 and December 31,
1999, the Compensation Committee met two times. The current members of the
Compensation Committee are Messrs. Doctoroff, Worms and Janes.
The REIT Modernization Act Committee consists of three Independent
Directors. The REIT Modernization Act Committee is responsible for reviewing
and making recommendations with respect to the REIT Modernization Act, which
will take effect on January 1, 2001, granting the Company the ability to hold
the leases to its properties within a taxable subsidiary. The REIT
Modernization Act was created in December 1999. The current members of the
REIT Modernization Act are Messrs. Lodge, Dannhauser 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. Between January 1, 1999 and December
31, 1999, the Investment Committee did not meet. 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
February 17, 2001 and March 19, 2001.
4
<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 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 35
</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. Mr. Emery serves as a director of STS Hotel
Net, LLC.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company during
1997, 1998 and 1999 with respect to the Chief Executive Officer and the two
executive officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term 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(2)..... 1999 $285,000 $250,900 $ 3,313 $1,133,656(1)(5) 375,000 --
Chief Executive Officer 1998 330,577 217,710 2,312 -- 353,743 --
and Chairman of the
Board 1997 251,988 251,988 206,412(4) -- 100,000 --
Bruce G. Wiles(3)....... 1999 300,000 219,000 8,400 1,116,131(1)(5) 250,000 -- (6)
President and Chief 1998 188,713 177,283 -- -- --
Investment Officer 1997 90,000 45,000 -- -- 237,796 --
John Emery(2)........... 1999 275,000 222,800 2,688 1,116,131(1)(5) 250,000 -- (6)
Chief Financial Officer 1998 250,509 170,050 2,000 -- 120,936 --
1997 165,715 132,000 4,200 -- 85,000 --
</TABLE>
- --------
(1) On February 4, 1999, pursuant to the MeriStar Incentive Plan (i) Mr.
Whetsell received 25,000 restricted shares of the Company, which vest over
five years, (ii) Mr. Wiles received 15,000 restricted shares of the
Company, which vest over five years, and (iii) Mr. Emery received 15,000
restricted shares of the Company, which vest over five years.
(2) Mr. Whetsell and Mr. Emery were officers of CapStar during 1997 and from
January 1, 1998 until August 3, 1998 (the date of the Merger).
(3) Mr. Wiles was an officer of AGH during 1997 and from January 1, 1998 until
August 3, 1998 (the date of the Merger).
(4) Mr. Whetsell received an additional bonus based upon the number of
acquisitions made by the Company during 1997.
(5) In December 1999, the Compensation Committee approved the grant of common
stock and other equity compensation to Messrs. Whetsell, Wiles and Emery
(the "Restricted Equity Award"). In January 2000, the Compensation
Committee determined that it would satisfy the Restricted Equity Award by
issuing a combination of common stock, which is subject to a three-year
vesting period beginning March 31, 2000 (the "Restricted Stock"), and a
new class of OP Units, which is subject to the satisfaction of certain
performance criteria ("POPs"). The stock portion of the Restricted Equity
Award is valued based on the closing price per share of the common stock
on the date of grant. Pursuant to the Restricted Equity Award, Mr.
Whetsell received 350,000 shares of common stock and other equity
compensation granted as follows (i) 37,500 shares of Restricted Stock on
December 31, 1999, (ii) 137,500 shares of Restricted Stock on March 31,
2000 (of which 62,500 will be issued on March 31, 2001 and 12,500 will be
issued on March 31, 2002), and (iii) 175,000 POPs on March 29, 2000.
Pursuant to the Restricted Equity Award, Mr. Wiles received 125,000 shares
of common stock and other equity compensation granted as follows (i)
47,500 shares of Restricted Stock on December 31, 1999, (ii) 15,000 shares
of Restricted Stock on March 31, 2000, and (iii) 62,500 POPs on March 29,
2000. Pursuant to the Restricted Equity Award, Mr. Emery received 175,000
shares of common stock and other equity compensation granted as follows
(i) 47,500 shares of Restricted Stock on December 31, 1999, (ii) 40,000
shares of Restricted Stock on March 31, 2000, and (iii) 87,500 POPs on
March 29, 2000.
(6) In December 1999, the Compensation Committee approved the grant by
Meristar Hotels & Resorts, Inc. to (i) Mr. Wiles of options to purchase
50,000 shares of Meristar Hotels & Resorts, Inc. at $3.06 per share and
(ii) Mr. Emery of options to purchase 100,000 shares of Meristar Hotels &
Resorts, Inc. at $3.06 per share.
6
<PAGE>
Stock Option Grants
The following table sets forth certain information with respect to the options
granted to the Named Executive Officers during 1999.
Option Grants In Fiscal Year 1999
<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) 1999 Fiscal Year Base Price Date 5% 10%
---- ----------- ---------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Paul W. Whetsell........ 250,000 16.9 $19.19 2/4/09 $ 3,017,122 $ 7,645,979
125,000 8.5 14.88 12/14/09 1,169,744 2,964,361
Bruce G. Wiles.......... 150,000 10.2 19.19 2/4/09 1,810,273 4,587,588
100,000 6.8 14.88 12/14/09 935,795 2,371,489
John Emery.............. 150,000 10.2 19.19 2/4/09 1,810,273 4,587,588
100,000 6.8 14.88 12/14/09 935,795 2,371,489
</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"). The Administrator may from
time to time grant stock options, stock awards, incentive awards or
performance shares to Participants. As of April 12, 2000, the class of
Participants consisted of approximately 175 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 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.
7
<PAGE>
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 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,
8
<PAGE>
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.
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
April 11, 2000, the closing price of a share of Common Stock on the New York
Stock Exchange was $19.1875.
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 PROFITS-ONLY OPERATING PARTNERSHIP UNITS ("POPS") PLAN
As of March 29, 2000, the Board of Directors adopted the MeriStar
Hospitality Corporation Profits-Only Operating Partnership Units Plan (the
"POPs Plan"). The purpose of the POPs Plan is to (i) attract and retain
officers, directors, employees and consultants of the Company and its
participating affiliates and (ii) enable such individuals to acquire an equity
interest in and participate in the long-term growth and financial success of
MeriStar Hospitality Operating Partnership, L.P. (the "Operating Company").
Profits-Only Operating Partnership units
Pursuant to the POPs Plan, officers, directors, employees and consultants of
the Company are eligible to receive restricted Profits-Only OP Units ("POPs")
of the Operating Company. A holder of POPs normally will be entitled to
receive special allocations of gain on specified dispositions of operating
partnership property (including gain on revaluations of partnership property)
until such time as the partnership capital account attributable to each unit
is equivalent to the value of a regular OP unit at the time the POPs were
issued; thereafter, the holder will receive allocations of gain and loss on
specified dispositions and upon partnership revaluations based on the holder's
percentage interest in the operating partnership attributable to the units. A
holder of POPs will be entitled to regular distributions, in the discretion of
the Company as general partner of the operating partnership and subject to the
distribution priorities for other classes of partnership interests, equal to
the holder's percentage interest of the proceeds from the sale of partnership
property with respect to which allocations are made to such holder. POPs are
subject to the transfer restrictions contained in the operating partnership
agreement as well as to those additional transfer restrictions described below
that are imposed by the POPs Plan and the agreement pursuant to which the POPs
are granted. Holders of POPs will be entitled to exchange the POPs held by
them for cash or, at the option of the Company, for shares of the Company,
based upon an exchange formula and the satisfaction of other conditions
contained in an exchange rights agreement entered into by such holders and the
Company.
Administration
The POPs Plan is administered by the Compensation Committee. The
Compensation Committee may delegate to one or more officers or managers of the
Company or an affiliate of the Company, or to a committee of such officers or
managers, its authority to administer the POPs Plan. As used in this summary,
the term "Administrator" means the Compensation Committee or its delegate, as
appropriate.
Eligibility
Each officer, director, employee or consultant of the Company or a
participating affiliate of the Company is eligible to participate in the POPs
Plan ("Participants"). The Administrator may from time to time grant
restricted units to Participants. As of April 12, 2000, the class of
Participants consisted of approximately 175 persons.
9
<PAGE>
Restricted Units
A Participant's rights in a POPs 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. Generally, if any conditions remain unfilled with respect to any
units awarded to a Participant at the time that Participant's employment with
the Company and its participating affiliates is terminated, those units will
be forfeited. The Compensation Committee may, however, provide for complete or
partial exceptions to this forfeiture provision.
Transferability
Awards granted under the POPs Plan are generally nontransferable. The
Administrator may, however, permit transfers to a Participant's immediate
family and certain other permitted transferees.
Unit Authorization
At any given time, the maximum number of POPs that may be granted under the
POPs Plan is one million. This limitation and the terms of outstanding awards
will be adjusted, as the Administrator deems appropriate, in the event of a
dividend or other distribution by the Operating Company or recapitalization,
merger, consolidation, issuance or exchange of POPs or other ownership
interests of the Operating Company or other similar event.
Termination and Amendment
The Administrator may amend, alter, suspend, discontinue or terminate the
POPs Plan at any time provided that no such action which would materially
adversely effect the rights of any Participant shall be effective without the
written consent of the affected Participant.
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.
Share Authorization
A maximum of 125,000 shares of Common Stock 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").
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.
10
<PAGE>
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, Bruce
G. Wiles and John Emery as of August 3, 1998. With respect to Messr. Whetsell
, the agreement has an initial term of five years with automatic renewal 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. 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.
Annual Incentive Bonus
Each executive is eligible to receive an annual incentive bonus at the
following targeted amounts of base salary:
<TABLE>
<CAPTION>
Threshold
Target Maximum
Target Bonus Amount
--------- ------ ------------
<S> <C> <C> <C>
Paul W. Whetsell.................................. 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.
11
<PAGE>
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, 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 Mr. Whetsell, 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 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 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
12
<PAGE>
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 Internal Revenue 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 Mr. Whetsell, 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 Internal Revenue 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, stock appreciation rights
and restricted stock under the MeriStar Incentive Plan and restricted POPs
under the POPs 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.
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 1999 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.
Restricted Stock and OP Units
Restricted shares may be granted to officers and other key employees of the
Company under the MeriStar Incentive Plan. The Compensation Committee believes
that the grant of restricted shares focuses attention on
13
<PAGE>
managing the Company from the perspective of an owner with an equity stake in
the business. Since the value of a restricted share or a restricted POP 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.
In 1999, the Committee retained the services of an independent outside
compensation consulting firm to conduct an executive compensation study (i) to
determine the competitiveness of the Company's total compensation package and
(ii) to further link incentive plans with shareholder interests. As part of
the study, restricted stock and POPs were granted on December 31, 1999 and in
March 2000 (see the Executive Compensation table and, in particular, Note 5 to
the table). The POPs granted vest over three years and are subject to the
achievement of certain performance-based criteria. The restricted stock
granted vests over a three year period conditioned on continued employment.
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. During 1999, the Company granted
certain executive officers options to purchase up to 875,000 shares of Common
Stock. All options granted were at the fair market value on the date of grant,
which was $19.19 with respect to 550,000 options granted on February 4, 1999
and $14.88 with respect to 325,000 options granted on December 14, 1999. 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 1999 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 2000 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 1999 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 20, 1996, the date CapStar began trading on the New York
Stock Exchange, 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 August 20, 1996, with all dividends reinvested. The Peer Group
consists of Boykin Lodging Inc., Felcor Lodging Trust Inc., Host Marriott
Corporation, InnKeepers USA Trust, and RFS Hotel Investors, Inc. The Company
believes that the Peer Group represents the Company's principal competitors in
the hotel ownership 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.
[PERFORMANCE CHART APPEARS HERE]
08/20/96 09/30/96 12/31/96 03/31/97 06/30/97
-------- -------- -------- -------- --------
Meristar Hospitality Corp. $100.00 $ 93.75 $109.03 $155.56 $175.69
Peer Group Index 100.00 106.21 120.10 124.42 130.38
NYSE Market Index 100.00 104.66 111.89 113.87 132.28
09/30/97 12/31/97 03/31/98 06/30/98 09/30/98
-------- -------- -------- -------- --------
Meristar Hospitality Corp. $186.46 $190.63 $192.71 $155.56 $ 94.78
Peer Group Index 159.53 141.86 138.65 128.89 93.52
NYSE Market Index 142.94 147.33 165.55 167.82 146.22
12/31/98 03/31/99 06/30/99 09/30/99 12/31/99
-------- -------- -------- -------- --------
Meristar Hospitality Corp. $103.11 $101.06 $124.67 $ 85.44 $ 88.89
Peer Group Index 104.14 90.39 96.68 81.53 75.45
NYSE Market Index 174.16 177.43 190.69 174.33 192.09
- --------
(1) Index calculations for the period from August 20, 1996 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 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.
Steven D. Jorns, a Director of the Company, and Mr. Wiles and their
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 units in the Company's operating partnership ("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, the Company 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
restricted stock and 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 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 a 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. Mr.
Emery is a stockholder 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 April 12, 2000 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>
Franklin Resources,
Inc.(1)................ 7,117,648 15.3%
AXA Financial, Inc.(2).. 4,566,484 9.8
LaSalle Investment
Management Inc.(3)..... 2,851,716 6.1
James F. Dannhauser(4).. 2,500 *
Daniel L. Doctoroff(5).. 324,995 *
John Emery(6)........... 325,628 *
William S. Janes(7)..... 26,645 *
Steven D. Jorns(8)...... 787,769 1.7
Mahmood Khimji(9)....... 819,180 1.7
H. Cabot Lodge III(10).. 11,557 *
Paul W. Whetsell(11).... 1,103,209 2.3
James R. Worms(10)...... 16,003 *
Bruce G. Wiles(12)...... 427,003 *
Executive officers and
directors as a group
(10 persons)........... 3,844,489 7.9
</TABLE>
- --------
* Represents less than 1% of the class.
(1) 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 January 28, 2000.
(2) Beneficial ownership information is based on the Schedule 13G/A jointly
filed by AXA Financial, 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 15, 2000.
(3) Beneficial Ownership information is based on Schedule 13G/A jointly
filed by LaSalle Investment Management Inc, LaSalle Advisors Capital
Management, Inc. and LaSalle Invesment Management (Securities), L.P.
(all located at 100 East Pratt Street, Baltimore, Maryland 21202), dated
February 11, 2000.
(4) Includes 2,500 shares of Common Stock that have vested under options
granted.
(5) Includes 53,068 shares held by Cherwell Investors, Inc. ("Cherwell"),
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. Mr.
Doctoroff's beneficial holdings also include 17,500 shares of Common
Stock that have vested under options granted.
(6) Includes (i) 166,044 shares of Common Stock that have vested under
options granted and (ii) 113,236 shares of restricted Common Stock that
constitute stock awards.
17
<PAGE>
(7) Includes 17,500 shares of Common Stock that have vested under options
granted.
(8) Includes (i) 484,454 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.
(9) Includes (i) 801,680 OP Units held by Mr. Khimji and (ii) 17,500 shares
of Common Stock that have vested under options granted.
(10) Includes 10,975 shares of Common Stock that have vested under options
granted.
(11) Includes (i) 225,786 shares of restricted Common Stock that constitute
stock awards, (ii) 417,916 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.
(12) Includes (i) 77,500 shares of restricted Common Stock that constitute
stock awards, (ii) 258,595 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 except for the Forms 4s filed on (i) November 5, 1999 by
James F. Dannhauser, William S. Janes, Steven D. Jorns, H. Cabot Lodge, III
and James R. Worms, (ii) December 8, 1999 by Mahmood Khimji, (iii) September
10, 1999 by Messrs. Whetsell, Wiles and Emery.
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, 2000. KPMG has been the independent auditors
of the Company since the Merger and was the independent auditors of CapStar
prior to the Merger. 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, 1999, 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
February 17, 2001 and March 19, 2001. 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
April 12, 2000
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE COMPANY'S FISCAL
YEAR ENDED DECEMBER 31, 1999, 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>
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 11, 2000 at the Annual Meeting of Stockholders to
be held on May 18, 2000 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) Re-election of Steven D. Jorns, FOR WITHHOLD VOTE
Daniel L. Doctoroff and William S. ALL NOMINEES FOR ALL NOMINEES
Janes as directors of the Company [_] [_]
to serve three-year terms expiring
on the date of the Annual Meeting (To withhold voting for any
in 2003 and until their successors individual nominee, strike through
have been duly elected and the name of such nominee)
qualified.
(2) Ratifying the appointment of KPMG FOR [_] AGAINST [_] ABSTAIN [_]
LLP as independent auditors for the
Company for the fiscal year ending
December 31, 2000.
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:_______________, 2000
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT. ___________________________
(SIGNATURE)
___________________________
(SIGNATURE)
