<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
MERISTAR HOTEL & RESORTS INC.
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(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 Hotels & Resorts, Inc. (the "Company"), which will be held at the
Hilton Arlington & Towers, 950 North Stafford Street, Arlington, Virginia
22208, on Thursday, May 18, 2000, at 11:00 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>
1
[MERISTAR LOGO]
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2000
----------------
To the Stockholders of MERISTAR HOTELS & RESORTS, INC.:
Notice is hereby given that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of MeriStar Hotels & Resorts, Inc. (the "Company") will be
held at the Hilton Arlington & Towers, 950 North Stafford Street, Arlington,
Virginia 22208, on Thursday, May 18, 2000 at 11:00 a.m., Eastern Time. The
Annual Meeting will be held for the following purposes:
1. To reelect six members of the Board of Directors; three of the reelected
members to serve for a two-year term expiring on the date of the Annual
Meeting in 2002 and until their successors have been duly elected and
qualified and three of the reelected members 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/ Christopher L. Bennett
Christopher L. Bennett
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 Hotels &
Resorts, Inc., a Delaware 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 11:00
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 31,729,335 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 six persons named below as members
of the Board of Directors; three of the reelected members to serve for a two-
year term expiring on the date of the Annual Meeting in 2002 and until their
successors have been duly elected and qualified and three of the reelected
members 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. 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.
<PAGE>
The Board of Directors is divided into three classes of directors. The terms
for the Directors of Class I expire in 2001, the terms for Directors in Class
II expire in 2002 and the terms for Directors in Class III expire in 2003.
Beginning with the Annual Meeting in 2001, all Directors will be elected for
three-year terms.
The Board of Directors unanimously recommends that you vote FOR the election
of each of the nominees identified below. Proxies solicited by the Board of
Directors will be so voted except where authority has been withheld. Proxies
cannot be voted for more people than the number of nominees named below.
<TABLE>
<CAPTION>
HAS
SERVED
AS A
DIRECTOR
OF THE
COMPANY
SINCE
NAME, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE AGE CLASS
-------------------------------------------------- -------- --- -----
<S> <C> <C> <C>
S. KIRK KINSELL 1998 45 II
S. Kirk Kinsell has been a director of the Company since
August 1998. Mr. Kinsell is currently President and CEO of
Micell Technologies in Raleigh, North Carolina. Mr. Kinsell
was the President and Chief Operating Officer of Apple
South, Inc. from 1997 until November 1998. Prior to Joining
Apple South, Mr. Kinsell served as President of the
Franchise Division of ITT Sheraton and its Four Point
Hotels from 1995 to 1997. Immediately prior to Joining ITT
Sheraton, Mr. Kinsell worked in various positions with
Holiday Inn Worldwide, from 1988 to 1995, culminating with
senior vice president in its Franchise division.
DAVID E. MCCASLIN 1998 42 II
David E. McCaslin has been a director and President of the
Company since August 1998. Mr. McCaslin has served as Chief
Operating Officer of CapStar from 1994 until August 1998.
Mr. McCaslin Joined CapStar in 1987 as a General Manager
and was named Vice President of Operations in 1988. From
1985 to 1987, Mr. McCaslin served as a General Manager for
Lincoln Hotels.
JAMES B. MCCURRY 1998 51 II
James B. McCurry has been a director of the Company since
August 1998. Since July 1997, Mr. McCurry has been a
Partner at Bain & Company, an international management
Consulting firm specializing in corporate strategy. Mr.
McCurry served from December 1994 through December 1996 as
Chief Executive Officer of NeoStar Retail Group, Inc.
("NeoStar"), a specialty retailer of consumer software.
NeoStar filed a voluntary petition under Chapter 11 of the
U.S. Bankruptcy Code in September 1996. From April 1983 to
December 1994, Mr. McCurry was the Chairman of Babbage's
Inc., a consumer software retailer, which merged with
Software Etc. Stores, Inc. in December of 1994 to form
NeoStar.
KENT R. HANCE 1998 57 III
Kent R. Hance has been a director of the Company since
August 1998. Since 1994, Mr. Hance has been a law partner
in the firm Hance, Scarborough & Wright, L.L.P., Austin,
Texas, and from 1991 to 1994, he was a law partner in the
firm of Hance and Gamble. From 1985 to 1987, he was a law
partner with Boyd, Viegal and Hance. Mr. Hance also served
as a member of the Texas Railroad Commission from 1987
until 1991 and as its Chairman from 1989 until 1990. From
1979 to 1985, he served as a member of the United States
Congress. In addition, Mr. Hance served as a State Senator
in the State of Texas from 1975 to 1979 and was a professor
of business law at Texas Tech University from 1969 to 1973.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
HAS
SERVED
AS A
DIRECTOR
OF THE
COMPANY
SINCE
NAME, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE AGE CLASS
-------------------------------------------------- -------- --- -----
<S> <C> <C> <C>
PAUL W. WHETSELL 1998 49 III
Paul W. Whetsell has been Chairman of the Board of
Directors and Chief Executive Officer of the Company since
August 1998. Mr. Whetsell has also been Chairman of the
Board of Directors and Chief Executive Officer of MeriStar
Hospitality Corporation 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.
JAMES R. WORMS 1998 54 III
James R. Worms has been a director of the Company since
August 1998. 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
Hospitality Corporation.
</TABLE>
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:
<TABLE>
<CAPTION>
HAS
SERVED
AS A
DIRECTOR
OF THE
COMPANY
SINCE
NAME, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE AGE CLASS
-------------------------------------------------- -------- --- -----
<S> <C> <C> <C>
STEVEN D. JORNS 1998 51 I
Steven D. Jorns has been Vice Chairman of the Board of
Directors since August 1998 and his current term expires at
the Annual Meeting in 2001. 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 Hospitality Corporation
since August 1998. From April 1996 to August 1998, Mr.
Jorns was the Chairman of the Board of Directors, Chief
Executive Officer and President of American General
Hospitality Corporation. Mr. Jorns was also the founder of
American General Hospitality, Inc. ("AGHI") and had served
since its formation in 1981 until August 1998 as its
Chairman of the Board of Directors, Chief Executive Officer
and President.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
HAS
SERVED
AS A
DIRECTOR
OF THE
COMPANY
SINCE
NAME, PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE AGE CLASS
-------------------------------------------------- -------- --- -----
<S> <C> <C> <C>
DANIEL L. DOCTOROFF 1998 41 I
Daniel L. Doctoroff has been a director of the Company
since August 1998 and his current term expires at the
Annual Meeting in 2001. 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 Hospitality
Corporation, Bell & Howell Company and William Scotsman,
Inc.
</TABLE>
MANAGEMENT--THE BOARD OF DIRECTORS AND ITS COMMITTEES
All of the members of the Board of Directors were selected in connection
with the spin-off of the Company from CapStar Hotel Company ("CapStar") on
August 3, 1998 (the "Spin-off") which occurred in conjunction with and
immediately prior to the merger of CapStar and American General Hospitality
Corporation ("AGH") which created MeriStar Hospitality Corporation. CapStar
transferred or caused to be transferred certain assets and liabilities
constituting the hotel management and leasing business operated by CapStar and
its subsidiaries to the Company. Immediately following the Spin-off, the
Company acquired 100% of the partnership interests in the third party lessee
of most of the hotels owned by of AGH and substantially all of the assets and
certain liabilities of the third-party manager of most of the hotels owned by
AGH pursuant to an Acquisition Agreement, dated as of March 15, 1998. As a
result of these transactions, the Company became the lessee and manager of
more than 90% of hotels owned by MeriStar Hospitality Corporation.
Between January 1, 1999 and December 31, 1999, the full Board of Directors
met four times. Each director attended all meetings of the Board of Directors
held while he was a director except for Messrs. McCarthy and McCurry who each
attended three meetings.
Board of Directors Committees
The Board of Directors of the Company has five committees: an Audit
Committee, a Compensation Committee, an Investment Committee, a Leasing
Committee and a REIT Modernization Committee.
The Audit Committee consists of two 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. The Audit Committee met three times in
1999. The current members of the Audit Committee are Messrs. McCurry and
Kinsell.
The Compensation Committee consists of two Independent Directors. The
Compensation Committee is responsible for the determination of compensation of
the Company's executive officers and the administration of the Company's
employee incentive plans. The Compensation Committee met two times in 1999.
The current members of the Compensation Committee are Messrs. McCurry and
Hance.
4
<PAGE>
The Investment Committee of the Company consists of the Chairman of the
Board and three other directors of the Company. The Company's Investment
Committee is responsible for the review and approval of investments proposed
by the Company. The Investment Committee met twelve times in 1999. The current
members of the Investment Committee are Messrs. Whetsell, Jorns, Doctoroff and
Worms.
The Leasing Committee consists of the Chairman of the Board and two
Independent Directors. The Leasing Committee is responsible for the review and
approval of leases to be entered into between the Company and third party real
property owners including MeriStar Hospitality Corporation and Winston Hotels,
Inc. The Leasing Committee met two times in 1999. The current members of the
Leasing Committee are Messrs. Whetsell, McCurry and Hance.
The REIT Modernization Act Committee consists of two 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, and will allow MeriStar Hospitality and other REIT
lessors to hold the leases to their properties within a taxable subsidiary.
The Committee was created in December 1999. The current members of the REIT
Modernization Act are Messrs. McCurry and Hance.
The entire Board of Directors of the Company acts as the nominating
committee for directors of the Company and considers 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 mailed to the
Secretary of the Company between 60 and 90 days before the Annual Meeting of
Stockholders in 2001.
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; $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 director, who is not an officer or employee of the
Company or its subsidiaries (each an "Independent Director"), was awarded an
option to purchase 7,500 shares of Common Stock upon initial commencement of
service after the Spin-off, whether by appointment or election. Thereafter,
each Independent Director will be granted an option to purchase 5,000 shares
of Common Stock on the first business day following the Company's 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. 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 which 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.
5
<PAGE>
MANAGEMENT--THE EXECUTIVE OFFICERS
The names of the executive officers of the Company as of the date of this
Proxy Statement other than Messrs. Whetsell and McCaslin, who are also members
of the Board of Directors, their positions and offices, business experience,
terms of office and ages are as follows:
<TABLE>
<CAPTION>
HAS
SERVED AS
AN
EXECUTIVE
OFFICER
NAMES, POSITIONS AND OFFICES, AND BUSINESS EXPERIENCE SINCE AGE
------------------------------------------------------ --------- ---
<S> <C> <C>
JAMES A. CALDER 1998 37
James A. Calder has served as Chief Financial Officer of the
Company since August 1998. From September 1997 until August
1998, Mr. Calder served as Senior Vice President of Finance of
CapStar. From May 1995 to September 1997, he served as Senior
Vice President and Corporate Controller of ICF Kaiser
International, Inc. Prior to that, from July 1984 to May 1995,
he worked for Deloitte & Touche LLP in various capacities,
culminating with Audit Senior Manager for the real estate
industry. He is a Certified Public Accountant.
JOHN E. PLUNKET 1998 43
John E. Plunket has served as Executive Vice President, Finance
and Development of the Company since August 1998. From November
1993 until August 1998, Mr. Plunket was Executive Vice
President, Finance and Development of CapStar. From September
1991 to October 1993, Mr. Plunket served as Vice President and
Principal Broker for CIG International, an investment and hotel
asset management company. From February 1988 to August 1991, Mr.
Plunket served as Managing Director of Cassidy & Pinkard Inc., a
Commercial real estate services company. From 1985 to 1987, Mr.
Plunket served as Senior Vice President for Oxford Development
Corporation.
</TABLE>
6
<PAGE>
Executive Compensation
The following table sets forth all compensation paid by the Company during
1999 with respect to the Chief Executive Officer and the four most highly
compensated executive officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
------------------ ---- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul W. Whetsell........ 1999 $190,000 $163,500 -- -- 125,000 --
Chief Executive Officer 1998 82,480 63,540 2,312 -- -- --
and Chairman of the
Board
David E. McCaslin....... 1999 300,000 219,000 2,813 --(1)(2) 100,000 287,850(1)(2)
President 1998 127,313 100,200 -- -- 87,500 --
James A. Calder......... 1999 200,000 128,000 -- --(1)(2) 75,000 143,925(1)(2)
Chief Financial Officer 1998 83,333 57,000 -- -- 47,500 --
John E. Plunket......... 1999 250,000 38,000 -- --(1)(2) 75,000 143,925(1)(2)
Executive Vice 1998 83,500 46,170 -- -- 10,000 --
President, Finance and
Development
Robert Karch............ 1999 146,161 -- 370,000(3) -- -- --
Executive Vice 1998 71,500 57,006 -- -- -- --
President, Operations-
Hotel Division
</TABLE>
- --------
(1) On February 4, 1999, the Compensation Committee approved the grant by
MeriStar Hospitality Corporation to (i) Mr. McCaslin of options to
purchase 150,000 shares of MeriStar Hospitality Corporation at $19.19 per
share, which vest over three years, and 15,000 restricted shares of
MeriStar Hospitality Corporation, which vests over five years, pursuant to
the MeriStar Hospitality Corporation Incentive Plan and (ii) Mr. Calder
and Mr. Plunket of options to purchase 75,000 shares of MeriStar
Hospitality Corporation at $19.19 per share, which vest over three years,
and 7,500 restricted shares of MeriStar Hospitality Corporation, which
vests over five years, pursuant to the MeriStar Hospitality Corporation
Incentive Plan.
(2) In December 1999, the Compensation Committee approved the grant by
MeriStar Hospitality Corporation of MeriStar Hospitality Corporation
common stock and other equity compensation to Messrs. McCaslin, Calder and
Plunket (the "Restricted Equity Award"). The Restricted Equity Award is
satisfied by issuing a combination of MeriStar Hospitality Corporation
common stock, which is subject to a three-year vesting period beginning
March 31, 2000 (the "Restricted Stock"), and a new class of partnership
units in the subsidiary operating partnership of MeriStar Hospitality
Corporation, 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. McCaslin
received options to purchase 50,000 shares of MeriStar Hospitality
Corporation at $14.88 per share and 125,000 shares of common stock and
other equity compensation granted as follows (i) 62,500 shares of
Restricted Stock on March 31, 2000, and (ii) 62,500 POPs on March 29,
2000. Pursuant to the Restricted Equity Award, Mr. Calder received options
to purchase 25,000 shares of MeriStar Hospitality Corporation at $14.88
per share and 62,500 shares of common stock and other equity compensation
granted as follows (i) 31,250 shares of Restricted Stock on March 31,
2000, and (ii) 31,250 POPs on March 29, 2000. Pursuant to the Restricted
Equity Award, Mr. Plunket received options to purchase 25,000 shares of
MeriStar Hospitality Corporation at $14.88 per share and 25,000 shares of
common stock and other equity compensation granted as follows (i) 12,500
shares of Restricted Stock on March 31, 2000, and (ii) 12,500 POPs on
March 29, 2000.
(3) Mr. Karch terminated his employment with the Company on July 23, 1999 and
received a severance payment of $370,000.
7
<PAGE>
Stock Option Grants
The following table sets forth certain information with respect to the
options in the Company granted to the Named Executive Officers during 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1999
-------------------------------------------
POTENTIAL VALUE
AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED APPRECIATE FOR
UNDERLYING TO EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS 1999 FISCAL OR BASE EXPIRATION -----------------
GRANTED YEAR PRICE DATE 5% 10%
NAME ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul W. Whetsell........ 125,000 11.1 $3.06 12/14/09 $240,552 $609,606
David E. McCaslin....... 100,000 8.9 3.06 12/14/09 192,442 487,685
James A. Calder......... 75,000 6.7 3.06 12/14/09 144,331 365,764
John E. Plunket......... 75,000 6.7 3.06 12/14/09 144,331 365,764
Robert Karch............ -- -- -- -- -- --
</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 EMPLOYEE INCENTIVE PLAN
The purpose of the MeriStar Hotels & Resorts, Inc. Incentive Plan (the
"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 Incentive Plan is administered by the Compensation Committee. The
Compensation Committee may delegate its authority to administer the 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, excluding an
employee who is a member of the Board of Directors, is eligible to participate
in the Incentive Plan ("Participants"). The Administrator may, from time to
time, grant stock options, stock awards, incentive awards, or performance
shares to Participants.
Options
Options granted under the 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 a cash equivalent, 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 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
8
<PAGE>
market value in the case of an ISO granted to a 10% stockholder of the
Company). Options may be exercised at such times and subject to such
conditions as may be prescribed by the Administrator but the maximum term of
an option is ten years in the case of an ISO or five years in the case of an
ISO granted to a 10% stockholder.
ISOs may only be granted to employees; however, no employee may be granted
ISOs (under the 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 and no more than 30%
of the shares available under the Incentive Plan may be issued in the form of
Stock Awards.
Incentive Awards
Incentive awards also may be granted under the 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 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 Incentive Plan are generally nontransferable. The
Compensation Committee may, however, grant awards other than ISOs, which are
transferable to Permitted Family Members.
9
<PAGE>
Share Authorization
In no event may the total number of shares of Common Stock covered by
outstanding ISOs granted under the Incentive Plan, plus the number of shares
of Common Stock issued pursuant to the exercise of ISOs, whenever granted
under the Incentive Plan, exceed fifteen (15%) percent of the number of shares
of Common Stock. All awards made under the 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 $2.875.
Termination and Amendment
No option or stock award may be granted and no performance shares may be
awarded under the Incentive Plan more than ten years after the earlier of the
date that the Incentive Plan is adopted by the Board of Directors or the date
that it is approved by the Company's stockholders. The Board of Directors may
amend or terminate the 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 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
Incentive Plan.
THE DIRECTORS' INCENTIVE PLAN
The purpose of the MeriStar Hotels & Resorts, Inc. 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-of-
pocket expenses in connection with their service on the Board of Directors.
Options
Pursuant to the Directors' Plan, each Independent Director is awarded an
option to purchase 7,500 shares of Common stock upon initial commencement of
service as a director, whether by appointment or election. Thereafter, each
Independent Director is granted an option (a "Stock Option") to purchase 5,000
shares of
10
<PAGE>
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 option may be granted under the Directors' Plan after December 31,
2008.
STOCK PURCHASE PLAN
Each employee of the Company customarily employed at least 20 hours or more
per week by the Company or an affiliate (as defined in the Company's stock
purchase plan (the "Stock Purchase Plan")), other than an employee who owns
beneficially 5% or more of the outstanding Common Stock, is eligible to
participate in the Stock Purchase Plan. Under the Stock Purchase Plan,
participating employees may elect to authorize the Company to withhold a
minimum of $200 per quarter and a maximum of 8% or $25,000 (whichever is less)
of the participating employee's base pay, which amounts will be used to
purchase Common Stock from the Company on a monthly basis. The purchase price
of Common Stock will equal a designated percentage from 85% to 100% of the
closing sales price for Common Stock as reported on the Composite Transactions
Tape of the NYSE (except as described below) on the first trading day of the
month or on the last trading day of the month, whichever is less. The
designated percentage will be established annually by the Compensation
Committee which is responsible for the administration of the Stock Purchase
Plan.
Common Stock purchased under the Stock Purchase Plan is held in custodial
accounts until sold or distributed at the participant's request. The custodian
may charge a fee for the execution of any such sale or for the delivery of
share certificates. The participant may not elect to purchase stock under the
Stock Purchase Plan for three months after a withdrawal or sale of Common
Stock under the Stock Purchase Plan. Shares purchased under the Stock Purchase
Plan may not be sold for six months after their purchase. Any cash dividends
paid on Common Stock held in a participant's account will be reinvested in
additional Common Stock (at 100% of fair market value). Non-cash distributions
on Common Stock held in a participant's account will be distributed to the
participant.
The Company has reserved 1,500,000 shares of Common Stock for issuance under
the Stock Purchase Plan. Such shares may be from authorized and unissued
shares, treasury shares or a combination thereof. The Stock Purchase Plan will
remain in effect until terminated by the Board, or until all shares authorized
for issuance thereunder have been issued. The Stock Purchase Plan may be
amended from time to time by the Board. No amendment will increase the
aggregate number of shares of Common Stock that may be issued and sold under
the Stock Purchase Plan (except for authorizations pursuant to the anti-
dilution provisions of the Stock Purchase Plan) without further approval by
the Company's shareholders.
11
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Paul W. Whetsell,
David E. McCaslin, James A. Calder and John E. Plunket dated as of August
3,1998. With respect to Mr. Whetsell, the agreement is for an initial term of
five years with automatic renewals on a year-to-year basis thereafter unless
terminated in accordance with its terms. The other employment agreements are
for an initial term of three years, with automatic renewals on a year-to-year
basis thereafter, unless terminated in accordance with their respective terms.
Certain material terms of these agreements are as follows:
Base Salary
Mr. Whetsell receives a base salary of $190,000 per year (Mr. Whetsell will
receive a base salary of $285,000 per year as an employee of MeriStar
Hospitality Corporation). Mr. McCaslin receives a base salary of $300,000 per
year, Mr. Calder receives a base salary of $200,000 per year and Mr. Plunket
receives a base salary of $250,000 per year.
Annual Incentive Bonus
Each executive is eligible to receive an annual incentive bonus at the
following targeted amounts of base salary:
<TABLE>
<CAPTION>
MAXIMUM
THRESHOLD BONUS
TARGET TARGET AMOUNT
--------- ------ -------
<S> <C> <C> <C>
Paul W. Whetsell.................................... 25% 125% 150%
David E. McCaslin................................... 25% 100% 125%
James A. Calder..................................... 25% 85% 100%
John E. Plunket..................................... (1) (1) (1)
</TABLE>
- --------
(1) Mr. Plunket receives a bonus based on the Company's performance and the
growth of the Company's timeshare division.
The amount of the annual bonus is based on the achievement of predefined
operating or performance goals and other criteria to be established by the
Compensation Committee of the Board of Directors.
Long-Term Incentives
Each executive is eligible to participate in the 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, McCaslin,
Calder or Plunket 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 he 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 total 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 (2) and (B) a fraction,
the numerator of which is the number of days remaining in the Term of the
employment agreements, 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
12
<PAGE>
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. The other
executives will receive (i) a lump sum payment equal to one times their then
annual base salary, (ii) the amount of their bonus for the preceding year, and
(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 one year thereafter, and shares of
restricted stock previously granted shall 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 any
accrued and unpaid 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," he 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 (3) 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; (ii) all unvested stock options held by the executive will
immediately vest and be exercisable for the period of one (1) year thereafter
and shares of restricted stock previously granted to the executive will become
free from all contractual restrictions; and (iii) the continuance of certain
benefits under the employment agreement, including, but not limited to, life
and health insurance plans, or their equivalent for a period equal to the
greater of two years or the remaining term of the employment agreement,
without further extension. In the case of the other executives, they would
each be entitled to the same type of benefits provided the termination
occurred within 18 months of the Change in Control, except their lump sum
payment will only be two (2) 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 the 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, the Company 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.
13
<PAGE>
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 compensation. 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
The Compensation Committee has approved of the grant by MeriStar Hospitality
Corporation (the "REIT") of REIT common shares and partnership units in the
REIT's subsidiary operating partnership ("OP Units") to officers and other key
employees of the Company. In 1999, the Committee retained the services of an
independent outside compensation consulting firm to conduct an executive
compensation study to determine the competitiveness of its officer's total
compensation package. As part of the study, the Committee approved of the
grant by the REIT of restricted stock and OP Units which were granted on
December 31, 1999 and in March 2000 (see the Executive Compensation table and,
in particular, Note 2 to the table). The OP Units 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 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 375,000 shares of Common Stock at the fair market
value as of the date of grant. 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.
14
<PAGE>
Chief Executive Officer Compensation
Mr. Whetsell's compensation as Chairman of the Board and Chief Executive
Officer of the Company for 1999 was $190,000 per year (Mr. Whetsell will also
receive a base salary of $285,000 per year as an employee of MeriStar
Hospitality Corporation), 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 2001 will be
$190,000 per year (Mr. Whetsell will also receive a base salary of $285,000
per year as an employee of MeriStar Hospitality Corporation), 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
Kent R. Hance
James B. McCurry
15
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative annual return of the Common
Stock since August 3, 1998, 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 3, 1998, with all dividends reinvested. The Peer
Group consists of Bristol Hotels & Resorts, Inc., Hilton Hotels Corporation,
Marriott International Inc., Starwood Hotels & Resorts and Interstate Hotels
Corporation. The Company believes that the Peer Group represents the Company's
principal competitors in the hotel ownership and management segment of the
hospitality industry. In addition, the Peer Group is comprised of publicly
traded Companies whose market capitalizations and principal lines of business
are comparable to those of the Company.
[PERFORMANCE CHART APPEARS HERE]
07/31/98 09/30/98 12/31/98 03/31/99
-------- -------- -------- --------
Meristar Hotels &
Resorts, Inc. $100.00 $ 91.67 $ 87.50 $ 91.67
Peer Group Index 100.00 72.07 74.63 79.70
NYSE Market Index 100.00 89.43 106.53 108.53
06/30/99 09/30/99 12/31/99
-------- -------- --------
Meristar Hotels &
Resorts, Inc. $114.58 $ 97.92 $118.75
Peer Group Index 86.11 68.83 68.36
NYSE Market Index 116.64 106.63 117.49
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ownership Interests in Certain Managed Hotels
As of December 31, 1999, Mr. Whetsell and corporations owned by him own,
directly or indirectly, minority equity interests in three hotels which the
Company manages (the "Affiliated Hotels"). Mr. Whetsell exercises management
control over the entities that own the above mentioned interests in the
Affiliated Hotels. Except as described below, such interests were acquired
prior to the formation of CapStar. For the year ended December 31, 1999, the
Company received approximately $153,081 in management fees from the Affiliated
Hotels.
Stock Ownership
Daniel L. Doctoroff, a director of the Company, is a principal stockholder
of Oak Hill Capital Partners, L.P. which is an affiliate of Keystone, Inc., a
principal stockholder of the Company. See "Principal Stockholders."
Relationships among Officers and Directors
Mr. Whetsell is an executive officer, director and security holder of
MeriStar Hospitality Corporation, the owner of 108 hotels leased by the
Company. Mr. Jorns is a director and stockholder of MeriStar Hospitality
Corporation and of beverage corporations (the "Beverage Corporations") that
sublease from the Company the portion of 24 hotels, which are leased and
managed by the Company, where alcoholic beverages are sold.
16
<PAGE>
Ownership of Holiday Inn in Madison, Wisconsin
The 202-room Holiday Inn in Madison, Wisconsin managed by the Company was
owned by a private partnership of which Mr. Jorns was a partner. This hotel
was purchased by MeriStar Hospitality Corporation in January 1999 in an arms
length transaction.
The Beverage Corporations
In order to facilitate compliance with state and local liquor laws and
regulations, the Company subleases those areas of certain hotels that comprise
the restaurant and other areas where alcoholic beverages are served to the
Beverage Corporations, 24 of which are wholly owned by Mr. Jorns. In
accordance with the terms of certain sublease agreements, each Beverage
Corporation is obligated to pay to the Company rent payments equal to 30% of
each such corporation's annual gross revenues generated from the sale of food
and beverages generated from such areas.
Purchase of Promissory Notes
A partnership indirectly controlled by Mr. Whetsell sold promissory notes
due from the owners of two properties managed by the Company to the Company on
March 11, 1999 in exchange for $343,650 which represented the current balance
due under the promissory notes. One of the promissory notes was paid in full
to the Company during January 2000.
Sale of Partnership Units
On December 31, 1999, the Company sold three partnership units in a
partnership which owns a hotel managed by the Company to a partnership
indirectly controlled by Mr. Whetsell. The three units were sold for $145,500
which was the fair market value of the units at the time of sale.
17
<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> <C>
Keystone, Inc.(1).................................... 6,515,696 20.5%
Franklin Resources, Inc.(2).......................... 2,104,500 6.6
Wellington Management Company, LLP(3)................ 2,044,200 6.4
James A. Calder(4)................................... 40,568 *
Daniel L. Doctoroff(5)............................... 4,012,606 12.6
Kent R. Hance(6)..................................... 22,950 *
Steven D. Jorns(7)................................... 1,157,264 3.5
S. Kirt Kinsell(6)................................... 2,500 *
David E. McCaslin(8)................................. 238,062 *
James B McCurry(6)................................... 2,500 *
John E. Plunket(9)................................... 154,360 *
Paul W. Whetsell(10)................................. 749,986 2.3
James R. Worms(6).................................... 42,737 *
Executive officers and directors as a group (10
persons)............................................ 6,423,533 19.2
</TABLE>
- --------
* Represents less than 1% of the class.
(1) Beneficial ownership information is based on the Schedule 13D/A filed by
Keystone, Inc., Oak Hill Capital Partners, L.P., Oak Hill Capital
Management Partners, L.P., Cherwell Investors, Inc., Group 31, Inc., MHX
Investors, L.P., Arbor REIT, L.P., FW Hospitality, L.P., Capital
Partnership, J. Taylor Crandall and Robert M. Bass (all located at 201
Main Street, Suite 3100, Fort Worth, Texas 76012) and MC Investment
Corporation, Penobscot Partners, L.P., and PTJ Merchant Banking Partners,
L.P. (all located at 65 E. 55th Street, New York, New York 10022), filed
on February 2, 2000.
(2) Beneficial ownership information is based on Schedule 13A jointly filed by
Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and
Franklin Advisers, Inc. (all located at 777 Mariners Island Boulevard, San
Mateo, California 94404), dated February 3, 2000.
(3) Beneficial ownership information is based on the Schedule 13G filed by
Wellington Management Company, LLP (located at 75 State Street, Boston
Massachusetts 02109), filed on February 14, 2000.
(4) Includes 34,168 shares of Common Stock that have vested under options
granted.
(5) Includes 3,545,454 shares held by Oak Hill Capital Partners, L.P., 90,910
shares held by Oak Hill Management Partners, L.P., 61,912 shares held by
Cherwell Investors, Inc. ("Cherwell"), 87,803 shares held by Penobscot
Partners, L.P. ("Penobscot"), 116,666 shares held by PTJ Merchant Banking
Partners, L.P. ("PTJ Merchant") and 14,154 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 Oak Hill
Capital Partners, L.P. and 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 2,500 shares of Common Stock that have vested under options
granted.
(7) Includes 1,073,930 OP Units held by Mr. Jorns and 83,334 shares of Common
Stock that have vested under options granted.
(8) Includes 150,001 shares of Common Stock that have vested under options
granted.
(9) Includes 90,464 shares of Common Stock that have vested under options
granted.
(10) Includes (i) 216,667 shares of Common Stock that have vested under
options granted and (ii) shares held by entities over which Mr. Whetsell
has beneficial ownership within the meaning of Rule 13d-3.
18
<PAGE>
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 1999 except for the Form 4s filed on (i) November 5, 1999
by Kent R. Hance, Steven D. Jorns, S. Kirk Kinsell, Joseph McCarthy, James
McCurry and James R. Worms, (ii) April 10, 2000 by Messrs. Whetsell, McCaslin
and Calder and (iii) April 12, 2000 by James R. Worms.
PROPOSAL NO. 2
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, as independent auditors
to audit the accounts of the Company and its subsidiaries for the fiscal year
ending December 31, 2000. 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.
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: Christopher L. Bennett, Secretary,
between 60 and 90 days before the Annual Meeting of Shareholders in 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.
19
<PAGE>
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/ Christopher L. Bennett
Christopher L. Bennett
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 CHRISTOPHER L. BENNETT, SECRETARY, MERISTAR HOTELS & RESORTS, INC.,
1010 WISCONSIN AVENUE, N.W., WASHINGTON, D.C. 20007.
20
<PAGE>
MERISTAR HOTELS AND RESORTS, INC.
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, David E. McCaslin and
Christopher L. Bennett, 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 Hotels & Resorts, Inc. (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 (i) S. Kirk Kinsell, FOR WITHHOLD VOTE
David E. McCaslin and James B. ALL NOMINEES FOR ALL NOMINEES
McCurry to serve two-year terms [_] [_]
expiring on the date of the Annual
Meeting in 2002 and until their (To withhold voting for any
successors have been duly elected individual nominee, strike through
and qualified and (ii) Kent R. the name of such nominee)
Hance, Paul W. Whetsell and James
R. Worms to serve three-year terms
expiring on the date of the Annual
Meeting in 2003 and until their
successors have been duly elected
and qualified.
(2) Ratifying the appointment of KPMG
LLP as independent auditors for the
Company for the fiscal year ending
December 31, 2000.
FOR [_] AGAINST [_] ABSTAIN [_]
Please sign exactly as
name appears hereon. Joint
owners should each sign.
Executors, administrators,
trustees, guardians or
other fiduciaries should
give full title as such.
If signing for a
corporation, please sign
in full corporate name by
a duly authorized officer.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT.
Dated:_______________, 2000
___________________________
(SIGNATURE)
___________________________
(SIGNATURE)
