Pursuant to Rule 424(b)(3)
Registration File No. 333-84531
PROSPECTUS
5,776,112 Shares
MERISTAR HOTELS & RESORTS, INC.
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COMMON STOCK
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This prospectus relates to the offer and sale from time to time by some
of our stockholders, who are listed on pages 11 and 12 of this document, of up
to 5,776,112 shares of our common stock. We have or may issue these shares of
our common stock to the extent these stockholders exchange the units of limited
partnership interest in our subsidiary, MeriStar H&R Operating Company, L.P.,
held by them for an equal number of shares of our common stock.
These stockholders may sell the shares covered by this prospectus on
the New York Stock Exchange, in other markets where our common stock may be
traded or in privately negotiated transactions. They may sell their shares at
whatever prices which are current when particular sales take place or at other
prices to which they agree. These stockholders will pay any brokerage fees or
commissions relating to the sales by them. The registration of the stockholders'
shares does not necessarily mean that any of them will sell their shares.
Our company's shares of common stock are traded on the New York Stock
Exchange under the symbol "MMH." On August 12, 1999, our stock price was $3.31.
We will not receive any proceeds from the sale of any shares covered by
this prospectus. We are paying the costs of preparing and filing the
registration statement of which this prospectus is a part.
See "Risk Factors" beginning on page 2 for factors relevant to an
investment in our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the common stock to be issued in
connection with this document or determined that this document is accurate or
adequate. Any representation to the contrary is a criminal offense.
August 13, 1999
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THE COMPANY
We are the lessee, manager and operator of a portfolio of primarily
upscale, full-service hotels in the United States and Canada, diversified by
franchise and brand affiliations. Our subsidiary, MeriStar H&R Operating
Company, L.P., conducts all of our operations. We are the sole general partner
of MeriStar H&R and control its operations.
On August 3, 1998, American General Hospitality Corporation and CapStar
Hotel Company merged together to form MeriStar Hospitality Corporation, a real
estate investment trust. As part of the merger, CapStar formed our company to
become the lessee, manager and operator of substantially all of the hotels owned
or leased by American General and CapStar before the merger. At the time of the
merger, CapStar distributed all of the shares of our common stock to its
stockholders and we became a separate, publicly traded company.
We manage all of the hotels CapStar leased and/or managed for
third-party owners before the merger. Immediately after the merger, we acquired
all of the partnership interests in AGH Leasing, L.P., the third-party lessee
that leased most of the hotels American General owned. We also acquired
substantially all of the assets and some liabilities of American General
Hospitality, Inc., the third-party manager that managed most of the hotels
American General owned.
MeriStar Hospitality Corporation is a separate, but closely aligned
public company that also leases hotel properties to others. We share two key
officers and four board members with MeriStar Hospitality. An intercompany
agreement aligns our interests with the interests of MeriStar Hospitality, our
primary hotel lessor, with the objective of benefitting both companies'
stockholders.
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Our executive offices are located at 1010 Wisconsin Avenue, N.W.,
Washington, D.C. 20007 and our telephone number is (202) 965-4455.
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RISK FACTORS
You should consider carefully the following risk factors together with
all of the other information included or incorporated by reference in this
prospectus before you decide to purchase shares of our common stock. This
section includes or refers to forward-looking statements. You should refer to
the explanation of the qualifications and limitations on such forward-looking
statements discussed on page 9 of this document.
Dependence upon MeriStar Hospitality Corporation; Limited Resources for Growth
Through New Opportunities
Due to our restricted corporate purpose and the intercompany agreement,
we will rely on MeriStar Hospitality to provide us with opportunities described
in the intercompany agreement only if it is necessary for MeriStar Hospitality,
consistent with its status as a real estate investment trust, to enter into a
master lease arrangement and only if MeriStar Hospitality and our company
negotiate a mutually satisfactory master lease arrangement. If MeriStar
Hospitality fails in the future to qualify as a real estate investment trust,
such failure could have a substantial adverse effect on those aspects of our
business operations and business opportunities that are dependent upon MeriStar
Hospitality.
For example, the intercompany agreement remains effective even if
MeriStar Hospitality ceases to qualify as a real estate investment trust, with
our rights relating to lessee opportunities under the intercompany agreement
continuing to be based on MeriStar Hospitality's need to create a master lease
structure because of its status as a real estate investment trust. Accordingly,
if MeriStar Hospitality failed to qualify as a real estate investment trust and
thereafter acquired a property, it would have the right under the intercompany
agreement to lease the property to any person or entity or to operate the
property itself. We, however, would remain subject to all of the limitations on
our operations contained in our organizational documents and the intercompany
agreement.
In addition, although it is anticipated that any master lease
arrangement involving us generally will provide that our rights will continue
following a sale of the property or an assignment of the lease (with the
likelihood of a sale or assignment of lease possibly increasing if MeriStar
Hospitality fails to qualify as a real estate investment trust), we could lose
our rights under any such master lease arrangement upon the expiration of the
lease.
If MeriStar Hospitality presents us with an opportunity and we do not
negotiate a mutually satisfactory lease arrangement within 30 days after
MeriStar Hospitality provides us with written notice of the lessee opportunity,
MeriStar Hospitality may offer the opportunity to others for a period of one
year before it must again offer the opportunity to us.
Lack of Dividends
We anticipate that for the foreseeable future our earnings, if any,
will be retained for use in the operation of our business and that no cash
dividends will be paid on our common stock. Declaration of dividends on our
common stock will depend upon, among other things, future earnings, our
operating and financial condition, our capital requirements and general business
conditions.
Limited Financial Resources
We have a $100 million credit facility, provided by MeriStar
Hospitality. CapStar Hotel Company initially capitalized our company with
approximately $48 million of cash, including approximately $18 million of
forgiveness of indebtedness and a $30 million draw on our credit facility. In
addition, we have drawn an additional $57 million from the revolving credit
facility. The rate on the revolving credit facility is 350 basis points over the
London Inter- Bank Offered Rate. There can be no assurance that we will be able
to satisfy our obligations under, or to pay amounts due under, such revolving
credit facility.
Conflict of Interest in our Relationship with MeriStar Hospitality Corporation
General Conflicts of Interest
We share four of the nine members of our boards of directors, as well
as two senior executives, with MeriStar Hospitality. Our relationship with
MeriStar Hospitality is governed by an intercompany agreement, which restricts
each party from taking advantage of business opportunities without first
presenting those opportunities to the other party. We may have conflicting views
with MeriStar Hospitality on the manner in which we operate and manage
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their hotels, and with respect to lease arrangements, their acquisitions and
dispositions of hotels. As a result, our directors and senior executives (who
serve in similar capacities at MeriStar Hospitality) may well be presented with
several decisions which provide them the opportunity to benefit our company to
the detriment of MeriStar Hospitality or benefit MeriStar Hospitality to our
detriment. Such inherent potential conflicts of interest will be present in all
of the numerous transactions between our company and MeriStar Hospitality.
Restrictions on MeriStar Hospitality's and Our Business and Future
Opportunities
Our certificate of incorporation provides that, for so long as the
intercompany agreement with MeriStar Hospitality remains in effect, we are
prohibited from engaging in activities or making investments that a real estate
investment trust could make unless MeriStar Hospitality is first given the
opportunity but elects not to pursue such activities or investments. Under the
intercompany agreement, we have, with limited exceptions, agreed not to acquire
or make (1) investments in real estate which, for purposes of the intercompany
agreement, include the provision of services related to real estate and
investment in hotel properties, real estate mortgages, real estate derivatives
or entities that invest in real estate assets, or (2) any other investments that
may be structured in a manner that qualifies under the federal income tax
requirements applicable to real estate investment trusts, unless in either case
we have notified MeriStar Hospitality of the acquisition or investment
opportunity, in accordance with the terms of the intercompany agreement, and
MeriStar Hospitality has determined not to pursue such acquisition or
investment.
We also have agreed to assist MeriStar Hospitality in structuring and
consummating any such acquisition or investment which it elects to pursue, on
terms determined by it. On the other hand, the intercompany agreement grants us
the right of first refusal to become the lessee of any real property that
MeriStar Hospitality acquires and is required, consistent with its status as a
real estate investment trust, to lease to a third party. This lessee opportunity
will be available to us only if MeriStar Hospitality determines that we are
qualified to be the lessee. Because of the provisions of the intercompany
agreement and our charter, the nature of our business and the opportunities we
may pursue are restricted.
Conflicts Relating to Sale of Hotels Subject to Leases
MeriStar Hospitality generally will be obligated under its leases with
us to pay us a lease termination fee if MeriStar Hospitality elects to sell a
hotel or if it elects not to restore a hotel after a casualty and does not
replace it with another hotel on terms that would create a leasehold interest in
such hotel with a fair market value equal to the fair market value of our
remaining leasehold interest under the lease to be terminated. When applicable,
the termination fee is equal to the fair market value of our leasehold interest
in the remaining term of the lease to be terminated. A decision to sell a hotel
may, therefore, have significantly different consequences for us and MeriStar
Hospitality.
No Arm's-Length Bargaining of Intercompany Agreement with MeriStar
Hospitality
We did not negotiate the terms of the intercompany agreement with
MeriStar Hospitality on an arm's-length basis. Because the two companies share
some of the same executive officers and directors, there is a potential conflict
of interest with respect to the enforcement and termination of the intercompany
agreement to our benefit to the detriment of MeriStar Hospitality or to benefit
MeriStar Hospitality to our detriment. Because of these conflicts, such
executive officers and directors may have conflicts of interest with respect to
their decisions relating to the enforcement of the intercompany agreement.
Tax Risks in Our Relationship with MeriStar Hospitality
A real estate investment trust generally is not subject to federal
corporate income taxes on that portion of its income distributed currently to
stockholders. Section 269B(a)(3) of the Internal Revenue Code of 1986 provides
that if the shares of a real estate investment trust are stapled with the shares
of any other entity, then the real estate investment trust and such other entity
will be treated as one entity for purposes of determining whether the real
estate investment trust qualifies as a real estate investment trust for federal
income tax purposes. If section 269B(a)(3) of the Internal Revenue Code applied
to us and MeriStar Hospitality, MeriStar Hospitality would not qualify as a real
estate investment trust under the Internal Revenue Code. MeriStar Hospitality
and our company are not stapled entities because our common stock was issued
independently of the shares of MeriStar Hospitality and is traded separately as
well. However, because some employees, members of management and directors of
our company and MeriStar Hospitality are the same, it is possible that the
Internal Revenue Service could seek to assert that we should be treated as an
agent of MeriStar Hospitality or that we and MeriStar Hospitality should be
treated
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as one entity for federal income tax purposes. If such assertion were
successful, MeriStar Hospitality would not qualify as a real estate investment
trust under the Internal Revenue Code.
American General Hospitality Corporation and CapStar Hotel Company
received an opinion of counsel in connection with the merger, providing in part
that (1) our company and MeriStar Hospitality were not stapled entities under
section 269B(a)(3) of the Internal Revenue Code and (2) based upon the
operations of each entity and other factors and upon representations made by our
company and MeriStar Hospitality, the separate corporate identities of our
company and MeriStar Hospitality would be respected and we would not be an agent
of MeriStar Hospitality for federal income tax purposes.
Paper-Clip Structure Risks
Pursuant to the intercompany agreement with MeriStar Hospitality, each
of us will provide the other with reciprocal rights to participate in certain
transactions entered into by MeriStar Hospitality. In particular, we will
generally have a right of first refusal to become the lessee of any real
property MeriStar Hospitality acquires if MeriStar Hospitality determines that,
consistent with its status as a real estate investment trust, it is required to
enter into such a lease arrangement. This is only the case, though, if MeriStar
Hospitality determines that we or an entity that we control are qualified to be
the lessee. This is known as the "paper-clip" real estate investment trust
structure. However, because of the independent trading of the two companies,
stockholders in each company may develop divergent interests which could lead to
conflicts of interest. This divergence of interests could also reduce the
anticipated benefits of the "paper-clip" real estate investment trust structure.
Adverse Effects Relating to the Lodging Industry
Operating Risks
Various factors could adversely affect our ability to generate revenues
and make lease payments to our lessors. Our business will be subject to all of
the operating risks inherent in the lodging industry. These risks include the
following:
o changes in general and local economic conditions;
o cyclical overbuilding in the lodging industry;
o varying levels of demand for rooms and related services;
o competition from other hotels, motels and recreational properties,
some of which may have greater marketing and financial resources than
MeriStar Hospitality or our company;
o dependence on business and commercial travelers and tourism, which
business may fluctuate and be seasonal;
o the recurring need for renovations, refurbishments and improvements
of hotel properties;
o changes in governmental regulations that influence or determine
wages, prices and construction and maintenance costs; and
o changes in interest rates and the availability of credit.
Demographic, geographic or other changes in one or more of our markets could
impact the convenience or desirability of the sites of some hotels, which would
in turn affect the operations of those hotels. In addition, due to the level of
fixed costs required to operate full-service hotels, significant expenditures
necessary for the operation of hotels generally cannot be reduced when
circumstances cause a reduction in revenue.
Seasonality
The lodging industry is seasonal in nature. Generally, hotel revenues
are greater in the second and third quarters than in the first and fourth
quarters although this may not be true for hotels in major tourist destinations.
Revenues for hotels in tourist areas generally are substantially greater during
tourist season than other times of the year. Seasonal variations in revenue at
the hotels we manage can be expected to cause quarterly fluctuations in our
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revenues. Quarterly earnings also may be adversely affected by events beyond our
control, such as extreme weather conditions, economic factors and other
considerations affecting travel.
Operational Limitations Associated with Franchise Agreements
We operate substantially all of our hotels pursuant to existing
franchise or license agreements with nationally recognized hotel brands. The
franchise agreements generally contain specific standards for, and restrictions
and limitations on, the operation and maintenance of a hotel in order to
maintain uniformity within the franchisor system. Those limitations may conflict
with our philosophy, shared with MeriStar Hospitality, of creating specific
business plans tailored to each hotel and to each market. Such standards are
often subject to change over time, in some cases at the discretion of the
franchisor, and may restrict a franchisee's ability to make improvements or
modifications to a hotel without the consent of the franchisor. In addition,
compliance with such standards could require a franchisee to incur significant
expenses or capital expenditures. Action or inaction on our part, by our lessors
or by third-party operators, could result in a breach of such standards or other
terms and conditions of the franchise agreements and could result in the loss or
cancellation of a franchise license.
In connection with terminating or changing the franchise affiliation of
a hotel or a subsequently acquired hotel, our company or the lessor may be
required to incur significant expenses or capital expenditures. Moreover, the
loss of a franchise license could have a material adverse effect upon the
operations or the underlying value of the hotel covered by the franchise because
of the loss of associated name recognition, marketing support and centralized
reservation systems provided by the franchisor. The franchise agreements
covering the hotels expire or terminate, without specified renewal rights, at
various times and have differing remaining terms. As a condition to renewal, the
franchise agreements frequently contemplate a renewal application process, which
may require substantial capital improvements to be made to the hotel.
Competition in the Lodging Industry
The lodging industry is highly competitive. There is no single
competitor or small number of competitors of our lessors and our company that
will be dominant in the industry. We will operate in areas that contain numerous
competitors, some of which may have substantially greater resources than us and
the ability to accept more risk than we will be able to manage. Competition in
the lodging industry is based generally on location, room rates and range and
quality of services and guest amenities offered. New or existing competitors
could significantly lower rates or offer greater conveniences, services or
amenities or significantly expand, improve or introduce new facilities in
markets in which we will compete, thereby adversely affecting our operations and
the number of suitable business opportunities.
Potential Costs of Compliance with Environmental Laws
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. In addition, the presence of contamination from
hazardous or toxic substances, or the failure to properly remediate such
contaminated property, may adversely affect an owner's ability to sell or rent
such real property or to borrow funds using such real property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment facility, whether or not such facility
is or ever was owned or operated by such person.
The operation and removal of certain underground storage tanks are also
regulated by federal and state laws. In connection with the ownership and
operation of the hotels, our lessors could be held liable for the costs of
remedial action with respect to such regulated substances and storage tanks and
claims related thereto. Activities have been undertaken to close or remove
storage tanks located on the property of several of the hotels owned by our
lessors.
All of the hotels MeriStar Hospitality owns have undergone Phase I
environmental site assessments, which generally provide a nonintrusive physical
inspection and database search, but not soil or groundwater analyses, by a
qualified independent environmental engineer. The purpose of a Phase I is to
identify potential sources of contamination for which the hotels may be
responsible and to assess the status of environmental regulatory
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compliance. The Phase Is have not revealed, and we are not aware of, any
environmental liability or compliance concerns that we believe would have a
material adverse effect on our results of operation or financial condition.
In addition, the hotels MeriStar Hospitality owns have been inspected
to determine the presence of asbestos. Federal, state and local environmental
laws, ordinances and regulations also require abatement or removal of
asbestos-containing materials ("ACMs") and govern emissions of and exposure to
asbestos fibers in the air. ACMs are present in various building materials such
as sprayed-on ceiling treatments, roofing materials or floor tiles at some of
the hotels. Operations and maintenance programs for maintaining ACMs have been
or are in the process of being designed and implemented, or the ACMs have been
scheduled to be or have been abated, at such hotels. Any liability resulting
from non-compliance or other claims relating to environmental matters could have
a material adverse effect on our results of operations or financial condition.
Governmental Regulation
A number of states regulate the licensing of hotels and restaurants,
including liquor license grants, by requiring registration, disclosure
statements and compliance with specific standards of conduct. We believe that we
are substantially in compliance with these requirements. Managers of hotels are
also subject to laws governing their relationship with hotel employees,
including minimum wage requirements, overtime, working conditions and work
permit requirements. Compliance with, or changes in, these laws could reduce the
revenue and profitability of the hotels owned by the lessors and could otherwise
adversely affect our results of operations or financial condition.
Under the Americans with Disabilities Act, all public accommodations
are required to meet requirements related to access and use by disabled persons.
These requirements became effective in 1992. Although significant amounts have
been and continue to be invested in ADA required upgrades to hotels owned by our
lessors, a determination that one of our lessors is not in compliance with the
ADA could result in a judicial order requiring compliance, imposition of fines
or an award of damages to private litigants. Our lessors are likely to incur
additional costs of complying with the ADA.
Adverse Effects Relating to the Operation of Real Estate
MeriStar Hospitality owns many of the hotels that we lease, manage and
operate. Our lease arrangements with MeriStar Hospitality gives them the right
to terminate a hotel lease upon the sale of a hotel to a third party or if we
fail to meet established performance criteria. The underlying value of our
operations and income will be dependent upon our ability to operate the hotels
in a manner sufficient to maintain or increase revenues and to generate
sufficient revenue in excess of operating expenses to make lease payments to
MeriStar Hospitality. Many of these risks are beyond our control and the effects
of these risks are likely to be more pronounced than if we had diversified
operations.
Dependence on Key Personnel
We place substantial reliance on the lodging industry knowledge and
experience and the continued services of our senior management, led by Paul W.
Whetsell, Steven D. Jorns and David E. McCaslin. Our future success and ability
to manage future growth depend in large part upon the efforts of these persons
and on our ability to attract and retain other highly qualified personnel.
Competition for such personnel is intense, and there can be no
assurance that we will be successful in attracting and retaining such personnel.
Our inability to attract and retain other highly qualified personnel may
adversely affect our results of operations and financial condition. We have
employment agreements with Messrs. Whetsell and Jorns for terms of five years,
and with Mr. McCaslin for a term of three years, in each case with automatic
renewals on a year-to-year basis thereafter. While such contracts contain
non-compete clauses, such clauses may not be enforceable in all jurisdictions.
Adverse Effects on Market Price of Common Stock Arising from Shares Available
for Future Sale
No prediction can be made as to the effect, if any, that any future
sales of shares, or the availability of shares for future sale, will have on the
market prices for our common stock. Sales of substantial amounts of our common
stock (including outstanding stock options or the exchange or sale of units of
limited partnership interests in MeriStar H & R Operating Company, L.P.) or the
perception that such sales could occur could adversely affect the
then-prevailing market price for our common stock.
Potential Antitakeover Effect of Provisions of Delaware Law and of Our Charter
and By-Laws
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Provisions of Delaware law and of our charter and by-laws may have the
effect of discouraging a third party from making an acquisition proposal for our
company. These provisions could delay, defer or prevent a transaction or a
change in control of our company under circumstances that could otherwise give
the holders of our common stock the opportunity to realize a premium over the
then-prevailing market prices of our common stock. Provisions of our charter and
by-laws and of Delaware law, have the effect of making more difficult an
acquisition of control of our company in a transaction not approved by our board
of directors. These provisions include:
o a provision for a classified board, with only approximately one-third
of the board to be elected in any year, to serve for three-year
terms;
o a requirement that directors be removed only for cause upon the
affirmative vote of holders of at least 662/3% of the total voting
power;
o a requirement that actions of stockholders be taken at a meeting of
stockholders, rather than by written consent;
o a prohibition on the stockholders' ability to call a special meeting;
o an advance notice requirement for stockholders to make nominations of
candidates for directors or to bring other business before an annual
meeting of stockholders;
o a requirement that some amendments to our charter and by-laws be
approved by the affirmative vote of 662/3% of total voting power; and
o a provision that the chair of any meeting of stockholders shall have
the power to adjourn such meeting.
Risk Factor Relating to Year 2000 Issue
We are in the process of conducting a review of our computer systems to
identify the systems that could be affected by the "Year 2000" problem and have
initiated an implementation plan to address the problem. The Year 2000 problem
is the result of computer programs being written using two digits rather than
four to define the applicable year. Any of our programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If not corrected, this could result in a major systems failure or
miscalculations.
Our leased and managed hotel properties contain various information
technology and embedded technology systems. Both types of systems contain
microprocessors and microcontrollers that must be assessed for Year 2000
compliance. We have developed a comprehensive implementation plan to address the
potential Year 2000 problems caused by such systems. This plan involves six
stages:
o increase awareness of issue;
o assign responsibility for coordinating response to issue;
o information collection;
o analysis;
o modification, repair or replacement; and
o testing.
We are currently in the modification, repair or replacement stage. We expect to
complete this stage and the testing stage in October 1999. As an additional part
of our implementation plan to address the Year 2000 problem, we have also
initiated communications with third parties with which we have material
relationships to determine the extent of potential Year 2000 problems with these
parties' services provided to us.
The most critical of these services involve such items as reservations
systems for our hotels. Without such systems, we could suffer a material decline
in business at many of our properties. We expect to complete our communications
and assessment of third parties' services in September 1999. In addition, we
expect to develop
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contingency plans in 1999 to allow for manual or other alternative operation of
particular computerized systems, in the event that modification, repair or
replacement efforts are not completed timely.
We anticipate completing our Year 2000 implementation plan no later
than October 31, 1999, which is prior to any anticipated impact on our operating
systems. As of June 30, 1999, historical costs incurred to address the Year 2000
problem approximate $0.3 million. We expect that essentially all of the future
expenditures required to modify, repair and replace computerized systems at our
leased and managed hotel properties will be the financial responsibility of the
owners of those properties. We estimate that the remediation costs for all of
our leased and managed properties (including those properties leased from
MeriStar Hospitality) will be $10-12 million. This cost estimate is based on our
current assessment, and will be refined and adjusted as we continue to complete
the stages of our implementation plan to address the potential Year 2000
problems.
Based on our preliminary assessment, we believe that our risks of Year
2000 non-compliance (that is, our "most reasonably likely worst case scenario"),
with modifications to existing software and converting to new software, will not
pose significant operational problems for our computer systems as so modified
and converted. If, however, these modifications and conversions are not
completed timely, the Year 2000 problem could have a material impact on our
financial position and operations. Our operations are highly dependent upon
efficient operating systems at our properties. To the extent that the Year 2000
problems materially affect the conduct of operations at those properties, it is
likely that our ability to efficiently manage operations would be materially
affected. Also, as discussed above, the vast majority of expenditures related to
Year 2000 problems at our leased and managed properties will be the financial
responsibility of the owners of those properties. To the extent that those
owners are unable or unwilling to modify, repair and replace systems with
potential Year 2000 problems, we could suffer material adverse financial
consequences.
FORWARD-LOOKING INFORMATION
Information both included and incorporated by reference in this
prospectus may contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, and as such may involve risks and uncertainties. Forward-looking
statements, which are based on assumptions and describe our future plans,
strategies and expectations are generally identifiable by use of the words
"may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend"
or "project" or comparable terminology. Actual results, performance or
achievements of our company may differ materially from future results,
performance or achievements expressed or implied by such forward-looking
statements. You should carefully review all information included or incorporated
by reference into this document in evaluating any forward- looking statements
contained or incorporated by reference in this document.
THE INTERCOMPANY AGREEMENT AND LEASES
The Intercompany Agreement
Rights of First Refusal
Pursuant to the intercompany agreement, we have a right of first
refusal to become the lessee of any real property MeriStar Hospitality acquires
if MeriStar Hospitality determines that, consistent with its status as a real
estate investment trust, it is required to enter into a lease. This is only the
case, though, if we or an entity we control is qualified to be the lessee based
on experience in the industry and financial and legal qualifications.
As to opportunities for us to become the lessee of any assets under a
lease, the intercompany agreement provides that we must provide MeriStar
Hospitality with written notice of the lessee opportunity. During the 30 days
following such notice, we have a right of first refusal with regard to the offer
to become a lessee and the right to negotiate with MeriStar Hospitality on an
exclusive basis regarding the terms and conditions of the lease. If a mutually
satisfactory agreement cannot be reached within the 30-day period, or if we
indicate that we are not interested in pursuing the lessee opportunity, MeriStar
Hospitality may offer the opportunity to others for a period of one year
thereafter, at a price and on terms and conditions that are not more favorable
to such other parties than the price and terms and conditions MeriStar
Hospitality proposed to us. After that time, MeriStar Hospitality must again
offer the opportunity to us in accordance with the procedures specified above.
Each company has established a leasing committee which reviews all
hotel leases that we will enter into. Our leasing committee consists of
directors of our company that are not also directors of MeriStar Hospitality and
MeriStar Hospitality's leasing committee consists of directors of MeriStar
Hospitality that are not also our directors.
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We agreed not to acquire or make (1) investments in real estate, which,
for purposes of the intercompany agreement, includes the provision of services
related to real estate and investments in hotel properties, real estate
mortgages, real estate derivatives or entities that invest in real estate assets
or (2) any other investments that may be structured in a manner that qualifies
under the federal income tax requirements applicable to real estate investment
trusts unless (a) we have notified MeriStar Hospitality of the material terms
and conditions of the acquisition or investment opportunity, and (b) MeriStar
Hospitality has determined not to pursue such acquisitions or investments either
by (x) providing written notice to us rejecting the opportunity within 20 days
from the date of receipt of notice of the opportunity or (y) by allowing such
20-day period to lapse. We also agreed to assist MeriStar Hospitality in
structuring and consummating any such acquisition or investment which it elects
to pursue, on terms determined by MeriStar Hospitality.
Provision of Services
We provide MeriStar Hospitality with services as it may reasonably
request from time to time, including administrative, corporate, accounting,
financial, insurance, legal, tax, data processing, human resources, acquisition
identification and due diligence, and operational services. MeriStar Hospitality
compensates us for services provided in an amount determined in good faith by us
as the amount an unaffiliated third party would charge MeriStar Hospitality for
comparable services.
Equity Offerings
If either of the two companies desires to engage in a securities
issuance, such issuing party will give notice to the other party as promptly as
practicable of its desire to engage in a securities issuance. Any such notice
will include the proposed material terms of such issuance, to the extent
determined by the issuing party, including (1) whether such issuance is proposed
to be pursuant to public or private offering, (2) the amount of securities
proposed to be issued and (3) the manner of determining the offering price and
other terms thereof. The non-issuing party will cooperate with the issuing party
in every way to effect any securities issuance of the issuing party by assisting
in the preparation of any registration statement or other document required in
connection with such issuance and providing the issuing party with such
information as may be required to be included in such registration statement or
other document.
Term
The intercompany agreement will terminate upon the earlier of (1)
August 3, 2008, and (2) a change in ownership or control of our company.
USE OF PROCEEDS
The selling stockholders listed below will receive all of the proceeds
from the sale of the shares of our common stock offered by this document. We
will not receive any proceeds from the sale of such shares.
9
<PAGE>
THE SELLING STOCKHOLDERS
The selling stockholders listed in the table below are persons who
either have received or may receive shares of our common stock in exchange for
units of limited partnership interests in MeriStar H & R Operating Company, L.P.
We list below with respect to the selling stockholders, as of July 1,
1999, (1) the number of shares of our common stock beneficially owned, (2) the
maximum number of shares which may be sold in the offering covered by this
prospectus and (3) the number of shares which will be beneficially owned after
the offering, assuming the sale of all the shares set forth in (2) above.
<TABLE>
<CAPTION>
Shares Maximum Number of Shares Percentage to
Beneficially Number of to Be Beneficially Be Beneficially
Owned Prior to Shares Which Owned After this Owned After
Name this Offering(1) May Be Sold Offering(2) this Offering(2)
- -------------------------------------------- ------------------ ------------------ ---------------------- -------------------
<S> <C> <C> <C> <C>
Acock Associates Arch 2,959 2,959 0 0
Catherine C. Alfred 2,613 2,613 0 0
B. Charles Ames(3) 50,119 50,119 0 0
Marvin C. Amos 6,655 6,655 0 0
Mark M. Anderson 2,583 2,583 0 0
Christopher R. Anderson 2,504 2,504 0 0
The Anderson Grandchild Trust 1,959 1,959 0 0
Andres Family Limited Partnership 5,588 5,588 0 0
Howard F. Andrews 21,559 21,559 0 0
Kenneth E. Barr 79,268 79,268 0 0
Hanna Bartlett 1,977 1,977 0 0
Charlotta E. Barton 2,654 2,654 0 0
Garfield R. Beckstead 4,491 4,491 0 0
Timothy R. Bogott(4) 48,867 48,867 0 0
Curtis W. Bostick 30,705 30,705 0 0
Peter C. Buhler 5,928 5,928 0 0
Margaret Callinan 6,533 6,533 0 0
Kathleen E. Campbell 2,372 2,372 0 0
CapStar Management
Company, L.L.C. 801,680 801,680 0 0
Charles M. Carroll 1,655 1,655 0 0
The Gerald A. Conway Trust 1,973 1,973 0 0
Eileen A. Courtney 6,192 6,192 0 0
Willo Cox and W.T. Cox, Jr.(5) 1,959 1,959 0 0
The W.T. Cox, Jr. Revocable Trust 21,314 21,314 0 0
Carl D'Aquila 12,576 12,576 0 0
Frances F. Dickenson 5,779 5,779 0 0
Robert Eisenach 10,165 10,165 0 0
Sandra Z. Fishman(6) 1,724 1,724 0 0
Edwin H. Fowler 1,977 1,977 0 0
The Herman F. Froeb and 0
Helen L. Froeb Revocable Trust 2,129 2,129 0
Robert A. Garda 8,493 8,493 0 0
Edward E. Hanlon 1,796 1,796 0 0
David Hertz 8,632 8,632 0 0
Barbara Hertz 1,977 1,977 0 0
David Holtzman 2,331 2,331 0 0
Income Opportunity Fund, LP 5,791 5,791 0 0
James B. Oswald Company 1,961 1,961 0 0
Donald L. Johnson 3,593 3,593 0 0
Steven D. Jorns 1,073,929 1,073,929 0 0
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares Maximum Number of Shares Percentage to
Beneficially Number of to Be Beneficially Be Beneficially
Owned Prior to Shares Which Owned After this Owned After
Name this Offering(1) May Be Sold Offering(2) this Offering(2)
- -------------------------------------------- ------------------ ------------------ ---------------------- -------------------
<S> <C> <C> <C> <C>
Stephen P. Kaufman 9,237 9,237 0 0
Margaret P. Kensicki 3,077 3,077 0 0
Gordon Kiddoo(7) 4,675 4,675 0 0
Lois F. Kiddoo(8) 4,675 4,675 0 0
L.C. & M.C. Partnership L 5,389 5,389 0 0
Fred W. Lachotzki 1,942 1,942 0 0
Robert E. Lamalie Revocable Trust 5,928 5,928 0 0
Landbel, Inc. 139,677 139,677 0 0
Patricia H. Lannigan 1,959 1,959 0 0
Ann Lee Trust 17,966 17,966 0 0
Floyd H. Lee Trust 8,983 8,983 0 0
H. John P. Maley 6,908 6,908 0 0
The Marlowe Family Limited 0
Partnership 1,977 1,977 0
Gerald C. McDonough 3,937 3,937 0 0
George McElroy, Jr. 3,593 3,593 0 0
Beverly H. McNew(9) 1,633 1,633 0 0
Elizabeth A. McNew Irrevocable Trust 1,633 1,633 0 0
I.W. Miller 2,018 2,018 0 0
F.I. Nebhut, Jr. 1,633 1,633 0 0
Donna Nevins 1,796 1,796 0 0
Anne M. Niche Trust 1,955 1,955 0 0
Margaret M. Patton 16,332 16,332 0 0
Norman T. Patton 3,125 3,125 0 0
Elizabeth M. Pfriem 7,833 7,833 0 0
Whitney S. Powers 4,943 4,943 0 0
Paul J. Powers & Barbara A. Powers 1,633 1,633 0 0
Lawrence A. Raimondi and Sharon L.
Raimondi 3,327 3,327 0 0
Douglas M. Reid 1,968 1,968 0 0
Edward H. Richard 3,593 3,593 0 0
Jean Rothstein 4,042 4,042 0 0
Neil T. Ruddock 6,467 6,467 0 0
Sanibel Lending Group, LP 6,994 6,994 0 0
Carole Carrington Shaw 175,684 175,684 0 0
Lewis W. Shaw, II 430,257 430,257 0 0
Kenneth W. Shaw 4,573 4,573 0 0
Jeffrey Glen Shaw GS-Trust 250,000 250,000 0 0
James E. Sowell 1,065,335 1,065,335 0 0
Robert M. Taylor 161,790 161,790 0 0
Linda Taylor 7,186 7,186 0 0
Allen G. Ten Broek 131,091 131,091 0 0
Ten Broek Family Trust 5,749 5,749 0 0
Ellen B. Thomas 1,969 1,969 0 0
Martin D. Walker Trust 3,266 3,266 0 0
Helen T. West 4,899 4,899 0 0
Jo Ann Wigglesworth 3,686 3,686 0 0
Bruce G. Wiles 335,823 335,823 0 0
Winston Hospitality, Inc. 643,333 643,333 0 0
Peter C. Yesawich 1,633 1,633 0 0
South Seas Properties, Co. 2,030 2,030 0 0
</TABLE>
11
<PAGE>
- ----------------------
(1) Beneficial ownership as of July 1, 1999, based upon information provided
by the selling stockholder. Unless otherwise noted in the following
footnotes, the shares of our common stock set forth in this column with
respect to the selling stockholder have not also been attributed to the
shareholders, limited partners or general partners of such stockholder.
(2) Assumes sale of all shares of our common stock registered hereunder, even
though the selling stockholder is under no obligation known to our company
to sell any shares of our common stock at this time. Assumes that all
units of limited partnership interests in MeriStar H&R Operating Company,
L.P. held by or attributable to the person are exchanged for shares of our
common stock. The total number of shares of our common stock outstanding
used in calculating this percentage assumes that none of the operating
partnership units held by other persons are exchanged for shares of our
common stock.
(3) In his capacity as settlor under a Trust Agreement dated July 25, 1982.
(4) In his capacity as trustee under a Trust dated September 23, 1996, for the
benefit of Timothy R. Bogott.
(5) In their capacities as trustees under the Money Purchase Pension Trust for
the benefit of Employees.
(6) In her capacity as trustee under a Revocable Grantor Trust.
(7) In his capacity as trustee under a Trust dated October 27, 1987.
(8) In her capacity as trustee under a Trust dated October 27, 1987.
(9) In her capacity as trustee under the will of Laurel McNew.
12
<PAGE>
PLAN OF DISTRIBUTION
We are registering 5,776,112 shares of our common stock on behalf of
the selling stockholders who are listed above.
The selling stockholders, or their pledges, donees, transferees or
other successors in interest, may choose to sell their shares from time to time
on the New York Stock Exchange, at market prices prevailing at the time of the
sale, at prices related to the then-prevailing market prices, in privately
negotiated transactions or through a combination of these methods. In addition,
these selling stockholders, or their pledges, donees, transferees or other
successors in interest, may choose one or more of the following alternatives:
o a block trade in which a broker or dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal in order to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus; and
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
We will pay all costs, expenses and fees in connection with the
registration of the shares of our common stock offered by this prospectus. The
selling stockholders will pay brokerage commissions and similar selling
expenses, if any, attributable to the sale of shares of our common stock offered
by this document.
The selling stockholders and any broker-dealers who act in connection
with the sale of their shares of our common stock under this prospectus may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933 and any commissions received by them and profit on any
resale of their shares of our common stock as principals might be deemed to be
underwriting discounts and commissions under the Securities Act. We have agreed
to indemnify the selling stockholders against liabilities under the Securities
Act as underwriters or otherwise. The selling stockholders may also agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares of our common stock offered by this document
against such liabilities.
When a selling stockholder elects to make a particular offer of the
shares which are the subject of this prospectus, a prospectus supplement, if
required, will be distributed which will identify any underwriters, dealers or
agents and any discounts, commissions and other terms constituting compensation
from such selling stockholder and any other required information.
EXPERTS
The consolidated financial statements of our company and our
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, have been incorporated by reference
in this document and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by reference
in this document, and upon the authority of said firm as experts in accounting
and auditing.
LEGAL MATTERS
Paul, Weiss, Rifkind, Wharton & Garrison will issue an opinion about
the legality of the shares of our common stock being offered by this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document that we file at the Securities and Exchange
13
<PAGE>
Commission's Public Reference Room at 450 Fifth Street N.W., Washington, D.C.
20549. Please call 1-800-SEC- 0330 for further information on the operation of
the Public Reference Room. Reports, proxy statements and other information
regarding issuers that file electronically with the Securities and Exchange
Commission, including our filings, are also available to the public from the
Securities and Exchange Commission's Web site at "http://www.sec.gov."
Our common stock is listed on the New York Stock Exchange and such
reports, proxy statements and other information can also be inspected at the
office of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 under the Securities Act of 1933. This
prospectus is a part of the registration statement and constitutes a prospectus
of our company for the shares of our common stock to be sold by the selling
stockholders. As allowed by the Securities and Exchange Commission rules, this
prospectus does not contain all the information you can find in the registration
statement or the exhibits to the registration statement.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important business and financial information about us to you that is not
included in or delivered with this prospectus by referring you to those
documents.
The information incorporated by reference is considered to be part of
this prospectus, and information that we file later with the Securities and
Exchange Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any filing we will make
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 following the date of this
prospectus and prior to the termination of the offering of our company's shares
of common stock:
1. Our Annual Report on Form 10-K filed by us for the fiscal year ended
December 31, 1998;
2. Our Quarterly Report on Form 10-Q filed by us for the fiscal quarter
ended March 31, 1999;
3. Our Definitive Proxy Statement on Schedule 14A filed by us on April 1,
1999; and
4. The description of our common stock contained in our registration
statement on Form 8-A.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Christopher L. Bennett, Vice President,
Legal and Secretary
MeriStar Hotels & Resorts, Inc.
1010 Wisconsin Avenue, N.W.
Washington, D.C. 20007
Telephone requests may be directed to (202) 965-4455.
We have not authorized anyone to give any information or make any
representation about our company that differs from or adds to the information in
this prospectus or in our documents or the documents that we publicly file with
the Securities and Exchange Commission. Therefore, if anyone does give you
different or additional information, you should not rely on it.
The information contained in this prospectus speaks only as of its
date unless the information specifically indicates that another date applies.
14
<PAGE>
================================================================================
No dealer, salesperson or other individual has been authorized to give any
information or make any representations not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by our company or the selling stockholders described in this document. This
prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, shares of our common stock in any jurisdiction where, or to any person
to whom, it is unlawful to make such offer or solicitation. Neither the delivery
of this prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has not been any change in the facts set forth
in this prospectus or in the affairs of our company since the date of this
prospectus.
TABLE OF CONTENTS
Prospectus
Page
----
The Company...................................................................1
Risk Factors..................................................................2
Forward-Looking Information...................................................9
The Intercompany Agreement and Leases.........................................9
Use of Proceeds..............................................................10
The Selling Stockholders.....................................................11
Plan of Distribution.........................................................14
Experts......................................................................14
Legal Matters................................................................14
Where You Can Find More Information..........................................15
- --------------------------------------------------------------------------------
5,776,112 Shares
MERISTAR HOTELS &
RESORTS, INC.
Common Stock
----------
PROSPECTUS
----------
August 13, 1999
================================================================================
