<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
PRIME HOSPITALITY CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
PRIME HOSPITALITY CORP.
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
April 13, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Prime Hospitality Corp. (the "Company") to be held on May 19, 1999, at 10:00
a.m., at the Sheraton Crossroads Hotel, One International Boulevard, Route 17
North, Mahwah, New Jersey 07495. This year we are asking you to elect two Class
I Directors of the Company to serve until the 2002 Annual Meeting of
Stockholders. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE TWO
NOMINEES.
At the Annual Meeting, the Board of Directors will also report on the
Company's affairs and a discussion period will be provided for questions and
comments. The Board of Directors appreciates and encourages stockholder
participation.
Whether or not you plan to attend the Annual Meeting, it is important that
your shares be represented. Accordingly, we request that you complete, sign,
date and promptly return the enclosed proxy in the enclosed postage prepaid
envelope in order to make certain that your shares will be represented at the
Annual Meeting.
Thank you for your cooperation.
Sincerely,
/s/ A. F. Petrocelli
A. F. PETROCELLI
Chairman of the Board of Directors
<PAGE> 3
PRIME HOSPITALITY CORP.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1999
------------------
To the Stockholders of
Prime Hospitality Corp.:
The Annual Meeting of Stockholders of Prime Hospitality Corp. (the
"Company") will be held on May 19, 1999 at 10:00 a.m., at the Sheraton
Crossroads Hotel, One International Boulevard, Route 17 North, Mahwah, New
Jersey 07495 for the following purposes:
1. To elect two Class I Directors of the Company to serve until the
2002 Annual Meeting of Stockholders;
2. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The close of business on April 5, 1999 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting or any adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting. If you
do not expect to be present, please promptly complete, sign and date the
enclosed proxy and mail it in the enclosed postage prepaid envelope. If you
attend the Annual Meeting, you may revoke your proxy and vote your shares in
person.
The Company's Proxy Statement is submitted herewith. The Board of Directors
recommends that you vote FOR the two Nominees.
The Company's Annual Report for the fiscal year ended December 31, 1998,
including financial statements, is also enclosed.
By Order of the Board of Directors,
/s/ Joseph Bernadino
JOSEPH BERNADINO
Secretary
Fairfield, New Jersey
April 13, 1999
YOUR VOTE IS IMPORTANT.
YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE
WITH YOUR WISHES.
<PAGE> 4
PRIME HOSPITALITY CORP.
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
------------------
PROXY STATEMENT
------------------
April 13, 1999
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Prime Hospitality Corp. (the "Company") for use at the Annual
Meeting of Stockholders to be held on May 19, 1999 at 10:00 a.m. at the Sheraton
Crossroads Hotel, One International Boulevard, Route 17 North, Mahwah, New
Jersey 07495 or any adjournments thereof (the "Annual Meeting"). This Proxy
Statement is being sent to all holders of record of the Company's common stock,
par value $.01 per share (the "Common Stock"), at the close of business on April
5, 1999 (the "Record Date"). Only stockholders of record on the Record Date will
be entitled to notice of, and to vote at, the Annual Meeting. Each share of
Common Stock outstanding on the Record Date will be entitled to one vote per
share on all matters to be voted upon at the Annual Meeting. Stockholders may
revoke the authority granted by their execution of proxies at any time prior to
their use by filing with the Secretary of the Company a written revocation or
duly executed proxy bearing a later date or by attending the Annual Meeting and
voting in person. Solicitation of proxies will be made principally through the
mails, but additional solicitation may be made by telephone or telegram by the
officers or regular employees of the Company without additional compensation.
The Company has retained Continental Stock Transfer and Trust Company to assist
with the solicitation at an estimated fee of $6,000 plus reimbursement of
out-of-pocket expenses. The Company may also enlist the aid of brokerage houses
in soliciting proxies. The Company will reimburse banks, brokers and other
custodians, nominees and fiduciaries for their costs in sending the proxy
material to the beneficial owners of the Common Stock. The expenses of
preparing, printing, mailing and soliciting will be paid by the Company. This
proxy statement, together with the Company's Annual Report for the fiscal year
ended December 31, 1998, are being mailed to stockholders on or about April 16,
1999.
As of the Record Date, there were 51,293,215 issued and outstanding shares
of Common Stock.
THE INTENTION OF THE PERSONS NAMED IN THE PROXY, UNLESS OTHERWISE
SPECIFICALLY INSTRUCTED IN THE PROXY, IS TO VOTE ALL PROXIES RECEIVED BY THEM
FOR THE ELECTION OF THE TWO NOMINEES NAMED HEREIN TO SERVE AS DIRECTORS FOR THE
TERMS SPECIFIED HEREIN AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED. ALL
SHARES REPRESENTED BY PROXY AT THE ANNUAL MEETING WILL BE VOTED. IF A
STOCKHOLDER SPECIFIES A CHOICE AS TO THE MATTERS TO BE ACTED UPON, THE SHARES
WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATION.
In the event that a quorum is present at the Annual Meeting but sufficient
votes to approve any of the proposals are not received, the persons named as
proxies may propose one or more adjournments of the Annual Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Annual Meeting
in person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies that they are entitled to vote FOR any proposal in favor of
an adjournment and will vote those proxies required to be voted AGAINST any such
proposal against any adjournment. A stockholder vote may be taken on one or more
of the proposals in the Proxy Statement prior to any adjournment if sufficient
votes have been received and it is otherwise appropriate. A quorum of
stockholders is constituted by the presence in person or by proxy of the holders
of a majority of the outstanding Common Stock of the Company entitled to vote at
the Annual Meeting. Brokers that do not receive instructions from the beneficial
owner or other persons entitled to vote shares are entitled, under the rules of
the New York Stock Exchange, to vote for the election of Directors and on each
of the proposals. For purposes of determining the presence of a quorum for
transacting business at the Annual Meeting, broker "non-votes" will be treated
as shares that are not present. Abstentions will be treated as shares that are
present and as votes cast against a particular proposal.
<PAGE> 5
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes (Class I, Class II and
Class III) serving staggered terms in accordance with the Company's Restated
Certificate of Incorporation. The number of the full Board of Directors is seven
and Directors were initially elected on July 31, 1992. Class I Directors were
elected at the Annual Meeting held on May 13, 1996. Class II Directors were
elected at the Annual Meeting held on May 12, 1997 and Class III Directors were
elected at the Annual Meeting held on May 13, 1998.
Election for two Class I directors will be held at the Annual Meeting.
Douglas Vicari and A.F. Petrocelli have been nominated for election as Class I
directors. A.F. Petrocelli is presently a Director, President, and Chief
Executive Officer of the Company. Douglas Vicari is presently Senior Vice
President and Chief Financial Officer of the Company. On August 18, 1998, the
Board of Directors filled the vacancy in Class II with the appointment of
Lawrence Friedland. The Board has determined that Mr. Petrocelli should stand
for election as a Class I director. The Board of Directors anticipates filling
the Class III vacancy resulting from Mr. Petrocelli's designation as a Class I
director promptly in accordance with the Company's By-laws. The persons named in
the accompanying proxy will vote all shares for which they have received proxies
for the election of A.F. Petrocelli and Douglas Vicari as Class I Directors,
unless authority to do so is withheld.
Approval of the nominees requires the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented by proxy at the
Annual Meeting, and entitled to vote thereon.
In the event that any of the nominees should become unable or unwilling to
serve as a Director, it is intended that the proxies will be voted for the
election of such other person, if any, as shall be designated by the Board of
Directors. It is not anticipated that any of the nominees will be unable or
unwilling to serve as a Director.
NOMINEES TO SERVE AS CLASS I DIRECTORS UNTIL THE 2002 ANNUAL MEETING OF
STOCKHOLDERS
<TABLE>
<S> <C>
A. F. Petrocelli..................... A. F. Petrocelli, age 55, was a Director since 1992 and a
member of the Compensation and Audit Committee from 1993 to
1998. Mr. Petrocelli has been the Chairman of the Board of
Directors, President and Chief Executive Officer of the
Company since 1998. Mr. Petrocelli has been the Chairman of
the Board of Directors and Chief Executive Officer of United
Capital Corp. for more than the past five years. He is also
a director of Nathan's Famous, Inc., Boyar Value Fund, Inc.
and Philips International Realty Corp.
Douglas W. Vicari.................... Douglas W. Vicari, age 39, became a Senior Vice President
and Chief Financial Officer of the Company in 1998. Prior to
that he had been a Vice President and the Treasurer of the
Company for more than five years.
</TABLE>
CLASS II DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<S> <C>
Herbert Lust, II..................... Herbert Lust, II, age 72, has been a Director since 1992 and
a member of the Compensation and Audit Committee of the
Company since 1993. Mr. Lust has been a private investor and
President of Private Water Supply Inc. for more than the
past five years. Mr. Lust is a director of BRT Realty Trust.
Jack H. Nusbaum...................... Jack H. Nusbaum, age 58, has been a Director since 1994. Mr.
Nusbaum is Chairman of the law firm of Willkie Farr &
Gallagher, where he has been a partner for more than the
past twenty-five years. He also is a director of Pioneer
Companies, Inc., W.R. Berkley Corporation, Strategic
Distributions, Inc., The Topps Company, Inc. and Fine Host
Corporation.
Lawrence Friedland................... Lawrence N. Friedland, age 76, has been a Director of the
Company since August 1998. Mr. Friedland has been a partner
in the law firm of Hoffinger Friedland Dobrish & Stern, P.C.
for more than the past 25 years. He has been a director of
the Apple Bank for Savings since 1990, a director of Lutron
Electronics Co., Inc. since 1961, a member of the Advisory
Committee of Brown Harris Stevens, LLC since 1995 and a
general partner, manager or director of numerous real estate
entities.
</TABLE>
2
<PAGE> 6
CLASS III DIRECTOR WHOSE TERM EXPIRES AT THE 2001 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<S> <C>
Howard M. Lorber..................... Howard M. Lorber, age 50, has been a Director of the Company
and a member since 1994 and Chairman since 1998 of the
Compensation and Audit Committee. Mr. Lorber has been
Chairman of the Board and Chief Executive Officer of
Nathan's Famous, Inc. for more than the past five years and
Chairman of the Board of Directors and Chief Executive
Officer of Hallman & Lorber Associates, Inc. for over five
years. He has been a director, President and Chief Operating
Officer of New Valley Corporation for more than five years.
He has been a director of and member of the Audit Committee
of United Capital Corp. for more than the past five years
and he has been a director of PLM International, Inc. since
January 1999.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF
THE TWO NOMINEES FOR DIRECTORS.
BOARD OF DIRECTORS COMPENSATION AND BENEFITS
Directors who are employees of the Company do not receive additional
compensation for serving on the Board of Directors. Non-employee Directors
receive $30,000 annually. In addition, each non-employee Director receives
$1,500 for each Board of Directors meeting attended, $1,500 for each committee
meeting attended and $500 for each telephonic meeting if such meeting extends
beyond a period of 15 minutes. The Chairman of the Compensation and Audit
Committee receives an additional $20,000 annually. The Directors' remuneration
is paid quarterly. All Directors are reimbursed for their expenses.
In addition, on the date of the Company's Annual Meeting of Stockholders,
each non-employee Director receives an automatic grant of options to purchase
10,000 shares of the Company's Common Stock in accordance with the Company's
1995 Non-Employee Director Stock Option Plan. The options vest one year from the
date of grant at an option price equal to the mean price of a share of the
Company's Common Stock on the New York Stock Exchange for the trading day
immediately prior to the date of grant. In February 1998 Messrs. Petrocelli,
Lust, Nusbaum and Lorber each received a discretionary grant of options for
45,000 shares of Common Stock and agreed to forgo receipt of his automatic grant
of options until the 2002 Annual Meeting.
On December 10, 1998 the Compensation and Audit Committee voted to reprice
certain outstanding stock options. Specifically, every employee and director of
the Company, who on December 10, 1998 had options with an original exercise
price in excess of $10.00 per share, had their options repriced to an exercise
price of $10.00 per share. The $10.00 exercise price was in excess of the fair
market value of the Company's Common Stock on December 10th. Options held by
members of the Board of Directors covering 270,000 shares were repriced in this
fashion. These options originally had exercise prices between $11.13 and $18.44
per share.
The Board of Directors held 9 meetings during 1998. All members of the
Board of Directors attended at least 75% of the aggregate number of meetings of
the Board of Directors and all committees of the Board of Directors on which
such member served.
COMPENSATION AND AUDIT COMMITTEE
The Compensation and Audit Committee presently consists of three
non-employee Directors: Messrs. Lorber (Chairman), Friedland and Lust. Prior to
his assuming the role of President and Chief Executive Officer of the Company,
Mr. Petrocelli was also a member of this Committee. Mr. Petrocelli resigned his
position on the Committee when he assumed his executive duties as an officer of
the Company. During 1998, the Committee held 7 meetings.
As part of its audit oversight, the Committee meets with representatives of
the Company's independent auditors and with representatives of senior
management. In addition, the Committee reviews the plans and
3
<PAGE> 7
results of the independent auditors, the scope and results of the Company's
internal auditing and procedures and systems of internal accounting and
financial control.
As part of its compensation oversight, the Committee administers the
Company's 1992 Stock Option Plan and the 1995 Employee Stock Option Plan and in
this capacity grants options to the Company's employees and officers. In
addition, the Committee makes recommendations to the Board of Directors
regarding compensation and approves the compensation paid to the Company's Chief
Executive Officer, other executive officers and other employees. The Committee
also administers the Company's 1995 Non-Employee Director Stock Option Plan
which provides for stock option grants to each non-employee Director.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names, ages and positions of the executive officers
of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
A. F. Petrocelli..................... 55 President, Chief Executive Officer and Chairman of the
Board of Directors
Paul H. Hower........................ 64 Executive Vice President
Joseph Bernadino..................... 52 Senior Vice President/Law, Secretary and General Counsel
Ethan Kramer......................... 42 Senior Vice President/Development
John H. Leavitt...................... 46 Senior Vice President/Sales and Marketing
Terry P. O'Leary..................... 43 Senior Vice President/Franchise Sales & Administration
Douglas W. Vicari.................... 39 Senior Vice President and Chief Financial Officer
Richard T. Szymanski................. 41 Vice President/Finance
</TABLE>
The following is a biographical summary of the experience of the executive
officers of the Company, other than Messrs. Petrocelli and Vicari who are
described above.
Paul H. Hower has been an Executive Vice President of the Company since
June 1993. Mr. Hower was President of Integrity Hospitality Services prior to
June 1993.
Joseph Bernadino has been a Senior Vice President, Secretary and General
Counsel of the Company since 1992.
Ethan Kramer has been a Senior Vice President of the Company since 1998, a
Vice President from 1996 to 1997 and a departmental director from 1995 to 1996.
Mr. Kramer was a Senior Vice President of Atterbury & Associates, Inc. from 1994
to 1995.
John H. Leavitt has been a Senior Vice President of the Company since 1992.
Terry P. O'Leary has been a Senior Vice President of the Company since 1998
and was Vice President since 1995. Mr. O'Leary was an area manager and corporate
director with B.F. Saul Co. from 1993 to 1995.
Richard T. Szymanski became Vice President -- Finance of the Company in
1998. Prior to that Mr. Szymanski had been a Vice President and Corporate
Controller of the Company for more than the past five years.
4
<PAGE> 8
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of March 15, 1999 for all executive officers, all Directors, all nominees to the
Board of Directors, and all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP CLASS(P)
------------------------------------ ----------------- ----------
<S> <C> <C>
A. F. Petrocelli(a)......................................... 989,997 1.93%
Lawrence Friedland(b)....................................... 11,000 *
Howard M. Lorber(c)......................................... 165,000 *
Herbert Lust, II(d)......................................... 113,151 *
Jack H. Nusbaum(e).......................................... 100,000 *
Paul H. Hower(f)............................................ 106,999 *
Douglas W. Vicari(g)........................................ 45,000 *
Joseph Bernadino(h)......................................... 54,366 *
Ethan Kramer(i)............................................. 11,286 *
John H. Leavitt(j).......................................... 47,955 *
Terry P. O'Leary(k)......................................... 18,666 *
Richard T. Szymanski(l)..................................... 42,000 *
John M. Elwood(m)........................................... 656,622 1.28%
David A. Simon(n)........................................... 868,946 1.70%
All directors, executive officers and certain former
officers as a group (14 persons)(o)....................... 6.31%
</TABLE>
- ---------------
* Less than 1.0%.
(a) Includes 45,000 shares owned by Mr. Petrocelli and 899,997 shares owned by
United Capital Corp. of which A. F. Petrocelli is Chairman of the Board of
Directors and Chief Executive Officer. Also includes options held by Mr.
Petrocelli to purchase 45,000 shares at an exercise price of $9.31 per
share as to 10,000 shares and $10.00 per share as to 35,000 shares.
(b) Includes 2,000 shares owned by Mr. Friedland, 7,000 shares owned by trusts
under which Mr. Friedland is the trustee and beneficiary and 2,000 shares
owned by trusts for the benefit of Mr. Friedland's grandchildren. Mr.
Friedland disclaims beneficial ownership of the shares owned by the trusts
for the benefit of his grandchildren.
(c) Includes 75,000 shares owned by Mr. Lorber. Also includes options to
purchase 90,000 shares with an exercise price of $7.25 per share as to
15,000 shares, $9.31 per share as to 10,000 shares, $9.50 per share as to
30,000 shares and $10.00 per share as to 35,000 shares.
(d) Includes 45,000 shares owned by Mr. Lust, and 23,151 shares held by a trust
under which Mr. Lust and his wife are co-trustees and beneficiaries. Also
includes options held by Mr. Lust to purchase 45,000 shares with an
exercise price of $9.31 per share as to 10,000 shares and $10.00 per share
as to 35,000 shares.
(e) Includes 10,000 shares owned by Mr. Nusbaum. Also includes options to
purchase 90,000 shares with an exercise price of $7.25 per share as to
15,000 shares, $9.31 per share as to 10,000 shares, $9.50 per share as to
30,000 shares and $10.00 per share as to 35,000 shares.
(f) Includes 1,000 shares owned by Mr. Hower. Also includes options to purchase
105,999 shares with an exercise price of $4.00 per share as to 20,000
shares, $7.63 per share as to 15,000 shares, $9.63 per share as to 36,000
shares and $10.00 per share as to 34,999 shares.
(g) Includes options to purchase 45,000 shares with an exercise price of $3.63
per share as to 5,000 shares, $7.63 per share as to 7,000 shares, $9.63 per
share as to 12,000 shares, $9.88 per share as to 5,000 shares and $10.00
per share as to 16,000 shares.
5
<PAGE> 9
(h) Includes 4,700 shares owned by Mr. Bernadino. Also includes options to
purchase 49,666 shares with an exercise price of $7.63 per share as to
8,000 shares, $9.63 per share as to 18,000 shares, $9.88 per share as to
5,000 shares and $10.00 per share as to 18,666 shares.
(i) Includes 700 shares owned by Mr. Kramer. Also includes options to purchase
10,586 shares with an exercise price of $9.63 per share as to 1,920 shares
and $10.00 per share as to 8,666 shares.
(j) Includes 1,623 shares owned by Mr. Leavitt. Also includes options to
purchase 46,332 shares with an exercise price of $7.63 per share as to
8,000 shares, $9.63 per share as to 18,000 shares and $10.00 per share as
to 20,332 shares.
(k) Includes options to purchase 18,666 shares with an exercise price of $9.63
per share as to 4,000 shares and $10.00 per share as to 14,666 shares.
(l) Includes options to purchase 42,000 shares with an exercise price of $3.63
per share as to 5,000 shares, $7.63 per share as to 7,000 shares, $9.63
per share as to 12,000 shares, $9.88 per share as to 5,000 shares and
$10.00 per share as to 13,000 shares.
(m) Includes 61,622 shares owned by Mr. Elwood. Also includes options to
purchase 595,000 shares with an exercise price of $3.81 per share as to
20,000 shares, $3.20 per share as to 45,000 shares, $7.38 per share as to
50,000 shares, $9.25 per share as to 80,000 shares, $15.13 per share as to
80,000 shares, $17.88 per share as to 80,000 shares and $18.44 per share as
to 240,000 shares.
(n) Includes 217,287 owned by David A. Simon, 50,000 shares owned by a limited
partnership in which he is general partner and his children are limited
partners, 613 shares owned by his wife, and 1,046 shares held by Mr. Simon
as custodian for his children. Mr. Simon disclaims beneficial ownership of
the shares owned by his wife, owned by the limited partnership and held by
Mr. Simon as custodian for his children. Also includes options to purchase
600,000 shares with an exercise price of $9.75 per share as to 100,000
shares, $18.00 per share as to 100,000 shares, $18.38 per share as to
100,000 shares and $18.44 per share as to 300,000 shares.
(o) With the exception of Mr. A.F. Petrocelli, who owns 1.93% of the
outstanding Common Stock, Mr. David Simon, who owns 1.70% of the
outstanding Common Stock, and Mr. John Elwood, who owns 1.28% of the
outstanding Common Stock, the other current directors and executive
officers each owns less than 1% of the outstanding Common Stock and
collectively own approximately 6.31% of the outstanding Common Stock as a
group. Percentages were based on 51,220,358 shares outstanding as of March
15, 1999.
PRINCIPAL HOLDERS OF SECURITIES
The following entities were known to the Company to be the beneficial
holders of more than 5% of the Common Stock as of March 15, 1999.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF CLASS
----------------- --------
<S> <C> <C>
Franklin Resources, Inc. (a)................................ 3,997,492 7.80%
777 Mariners Island Boulevard
San Mateo, California 94404
Neuberger & Berman, LLC (b)................................. 3,700,493 7.22%
605 Third Avenue
New York, New York 10158-3698
</TABLE>
- ---------------
(a) Franklin Resources, Inc. filed a Schedule 13G, dated January 22, 1999, with
the SEC reporting ownership of 3,997,492 shares of Common Stock, sole
voting power with respect to 3,892,700 shares and sole dispositive power
with respect to 3,997,492 shares. Inclusive in these shares are 3,854,000
held by Franklin Advisors, Inc., a subsidiary of Franklin Resources, Inc.,
in which that subsidiary has sole voting and dispositive power with respect
to 3,854,000 shares, 104,792 shares held by Franklin Management, Inc., a
subsidiary of Franklin Resources, Inc., in which that subsidiary has sole
dispositive power with respect to 104,792 shares and 38,700 shares held by
Templeton Global Advisors Limited, a subsidiary of
6
<PAGE> 10
Franklin Resources, Inc., in which that subsidiary has sole voting and
dispositive power with respect to 38,700 shares.
(b) Neuberger & Berman, LLC filed a Schedule 13G, dated February 12, 1999 with
the SEC reporting ownership of 3,700,493 shares of Common Stock, with sole
voting power with respect to 2,254,043 shares, shared voting power with
respect to 846,000, and with shared dispositive power with respect to
3,700,493 shares.
ITEM 2. SELECTION OF AUDITORS
Upon the recommendation of the Compensation and Audit Committee, the Board
of Directors has selected Arthur Andersen LLP, independent auditors, to serve as
independent accountants for the Company. Arthur Andersen LLP will audit the
Company's consolidated financial statements for the fiscal year ending December
31, 1999; perform audit-related services; and act as consultants in connection
with various accounting and financial reporting matters. Arthur Andersen LLP
provided those services to the Company for the fiscal year ended December 31,
1998.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement, if they
desire to do so, and are expected to be available to respond to appropriate
questions.
ITEM 3. OTHER BUSINESS
The Company is not aware of any business to be acted upon at the Annual
Meeting other than that which is explained in this Proxy Statement. In the event
that any other business calling for a vote of the stockholders is properly
presented at the Annual Meeting, the holders of the proxies will vote your
shares in accordance with their best judgment.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to the
persons who were, at December 31, 1998, the Company's Chief Executive Officer
and the four other most highly compensated executive officers of the Company
(the "named executive officers"). In addition, the Summary Compensation Table
also reflects information with respect to Messrs. David A. Simon and John M.
Elwood, who would have been among the named executive officers but for the fact
that they resigned prior to December 31, 1998. The information shown reflects
compensation for services in all capacities awarded to, earned by or paid to
these persons for the years ending December 31, 1996, 1997 and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
A. F. Petrocelli................. 1998 $ 94,231 $204,167 $ -0- 1,795,000 $ -0-
President and Chief 1997 -0- -0- -0- 10,000 -0-
Executive Officer 1996 -0- -0- -0- 10,000 -0-
Paul H. Hower.................... 1998 231,753 110,000 -0- 35,000 4,408(1)
Executive Vice President 1997 221,541 100,000 -0- 35,000 2,202
1996 209,000 60,000 -0- 35,000 2,253
Joseph Bernadino................. 1998 165,567 70,000 -0- 21,000 2,752(2)
Senior Vice President, 1997 160,664 50,000 -0- 21,000 1,888
Secretary and General 1996 143,864 36,000 -0- 17,500 1,226
Counsel
John H. Leavitt.................. 1998 170,000 48,000 -0- 21,000 2,296(3)
Senior Vice President 1997 160,047 34,000 -0- 26,000 1,774
1996 148,294 19,000 -0- 17,500 1,702
Douglas W. Vicari................ 1998 158,927 60,000 -0- 21,000 1,765(4)
Senior Vice President 1997 143,843 42,000 -0- 18,000 1,633
and Chief Financial Officer 1996 125,037 26,000 -0- 15,000 1,633
David A. Simon................... 1998 287,956 369,644 -0- 300,000 1,368,789(5)
Former officer 1997 369,556 359,540 -0- 100,000 1,774
1996 353,816 243,253 -0- 100,000 1,536
John M. Elwood................... 1998 248,675 287,941 -0- 240,000 1,123,333(6)
Former officer 1997 303,290 280,000 -0- 80,000 1,708
1996 280,000 191,075 -0- 80,000 1,336
</TABLE>
- ---------------
(1) Represents $2,808 for premiums of Company-provided life insurance and $1,600
related to 401k matching contributions.
(2) Represents $1,152 for premiums for Company-provided life insurance and
$1,600 related to 401k matching contributions.
(3) Represents $696 for premiums for Company-provided life insurance and $1,600
related to 401k matching contributions.
(4) Represents $165 for premiums for Company-provided life insurance and $1,600
related to 401k matching contributions.
(5) Represents $522 for premiums for Company-provided life insurance, $1,600
related to 401k matching contributions and $1,366,667 in severance payments.
8
<PAGE> 12
(6) Represents $340 for premiums for Company-provided life insurance, $1,600
related to 401k matching contributions and $1,123,333 in severance payments.
STOCK OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
The following table sets forth information concerning individual grants of
stock options made during the year ending December 31, 1998 to each of the named
executive officers. The Company did not grant any stock appreciation rights
during such period.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZED
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION
OPTIONS IN FISCAL PRICE PER EXPIRATION --------------------------------
NAME GRANTED YEAR SHARE DATE 0% 5% 10%
- ---- ---------- ---------- --------- ---------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
A. F. Petrocelli..... 1,750,000(1) 39.7% $5.910 10/14/2008 $ -0- $6,504,343 $16,483,281
A. F. Petrocelli..... 45,000(2) 1.0% 10.000 2/20/2008 -0- 283,003 717,184
David A. Simon....... 300,000(3) 6.8% 18.438 9/30/1999 -0- 3,478,573 8,815,388
John M. Elwood....... 240,000(4) 5.5% 18.438 10/23/1999 -0- 2,782,859 7,052,310
Paul H. Hower........ 35,000(5) .8% 4.720 10/9/2008 -0- 103,893 263,286
Joseph Bernadino..... 21,000(5) .5% 4.720 10/9/2008 -0- 62,336 157,972
John H. Leavitt...... 21,000(5) .5% 4.720 10/9/2008 -0- 62,336 157,972
Douglas W. Vicari.... 21,000(5) .5% 4.720 10/9/2008 -0- 62,336 157,972
</TABLE>
- ---------------
(1) These stock options vest with respect to 200,000 options on each of
September 14, 1999, 2000, 2001, 2002 and 2003 and will continue to be
exercisable until October 14, 2008. Of the remaining 750,000 options,
250,000 options become exercisable when the Company's stock price reaches
$20.00 per share, another 250,000 options become exercisable when the stock
price reaches $25.00 per share and the final 250,000 options become
exercisable when the stock price reaches $30.00 per share. In the event the
price of the stock does not reach $20.00, $25.00 or $30.00 per share, the
entire 750,000 options will become exercisable on October 14, 2006 and will
continue to be exercisable through October 14, 2008. These options become
immediately exercisable upon a change in control of the Company.
(2) These stock options vest with respect to one third of the grant on each of
February 20, 1999, 2000 and 2001 and will continue to be exercisable through
February 20, 2008. These options become immediately exercisable upon a
change in control of the Company.
(3) These stock options vested on September 30, 1998 in accordance with the
terms of the Settlement and Release agreement entered into between David
Simon and the Company. These options continue to be exercisable through
September 30, 1999.
(4) These stock options vested on October 23, 1998 in accordance with the terms
of the Settlement and Release agreement entered into between John Elwood and
the Company. These options continue to be exercisable through October 23,
1999.
(5) These stock options vest with respect to one third of the grant on each of
October 9, 1999, 2000 and 2001 and will continue to be exercisable through
October 9, 2008. These options become immediately exercisable upon a change
in control of the Company.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END AT FY-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David A. Simon................. -0- $-0- 600,000 -0- $118,750 $ -0-
John M. Elwood................. -0- $-0- 595,000 -0- 803,863 -0-
A.F. Petrocelli................ -0- $-0- 45,000 1,780,000 49,063 8,826,250
Paul H. Hower.................. -0- $-0- 105,999 70,001 268,499 250,426
Joseph Bernadino............... -0- $-0- 49,666 40,834 72,937 149,162
John H. Leavitt................ -0- $-0- 46,332 44,168 69,186 152,288
Douglas W. Vicari.............. -0- $-0- 45,000 38,000 95,813 146,505
</TABLE>
EMPLOYMENT AGREEMENTS
A. F. Petrocelli
Mr. Petrocelli and the Company executed an employment agreement dated as of
September 14, 1998 (the "Agreement") under which Mr. Petrocelli agreed to serve
as President and Chief Executive Officer of the Company. The Agreement provides
for a term of three (3) years. The Agreement provides for an annual base salary
of $700,000, a discretionary annual bonus based on the attainment of performance
objectives set by the Compensation Committee, a life insurance policy in an
amount equal to $2,000,000, an automobile and other customary welfare and fringe
benefits. The Agreement also provides that, to the extent payments made by the
Company for life insurance or use of an automobile are subject to federal, state
or local taxes, the Company will pay Mr. Petrocelli the amount of such
additional taxes plus such additional amount as will be reasonable to hold him
harmless from the obligation to pay such taxes.
Pursuant to the Agreement, Mr. Petrocelli was granted a stock option on
October 14, 1998 to purchase 1,750,000 shares of Common Stock, having a term of
10 years. The per share exercise price for the option is $5.91, which represents
the fair market value of the Common Stock as of October 14, 1998. The option
will vest in two tranches. Tranche A covers 1,000,000 shares of Common Stock and
will vest and become exercisable in increments of 200,000 shares on each
anniversary from the date of grant beginning September 14, 1999 through
September 13, 2003. Tranche B covers 750,000 shares of Common Stock and will
vest and become exercisable upon the earlier of September 14, 2006 or the
attainment of the following price targets for the Company's Common Stock: (I)
250,000 shares on the date that the closing price for the Common Stock on the
New York Stock Exchange reaches or exceeds $20 per share; (ii) 250,000 shares on
the date that the closing price for the Common Stock on the New York Stock
Exchange reaches or exceeds $25 per share; and (iii) 250,000 shares on the date
that the closing price for the Common Stock on the New York Stock Exchange
reaches or exceeds $30 per share. All vesting is contingent on Mr. Petrocelli's
continuing status as an employee on the vesting date.
The Agreement may be terminated by the Company at any time, with or without
cause. If the Agreement is terminated by the Company prior to the expiration of
the three year term without cause, or if Mr. Petrocelli resigns because of
circumstances amounting to constructive termination of employment, severance
would be paid in a single lump sum equal to one year's base salary, or, if
greater, the base salary that would have been payable over the remainder of the
term and benefits would be continued for the greater of one year or the
remainder of the term. Any bonus awarded for the year would not be prorated. In
addition, if Mr. Petrocelli is terminated without cause or if at the end of the
three year period the Agreement is not renewed by the Company for any additional
period, the unvested portion of Tranche A of the option shall become immediately
fully vested. If the Agreement is terminated by the Company for cause (as such
term is defined in the Agreement) or if Mr. Petrocelli resigns under
circumstances not amounting to a constructive termination of employment, no
benefits are payable other than accrued but unpaid salary and any unpaid bonus
earned but unpaid prior to such termination or resignation.
10
<PAGE> 14
David A. Simon
Mr. Simon and the Company executed an employment agreement dated August 1,
1995 (the "1995 Agreement"). The 1995 Agreement was terminated by Mr. Simon and
the Company as of February 19, 1998 and a new agreement was executed on February
20, 1998 (the "1998 Agreement") providing for a term of three (3) years.
The 1998 Agreement provided for an annual base salary of $400,000, a
discretionary annual bonus based on attainment of performance objectives set by
the Board of Directors, a life insurance policy in an amount not less than
$1,000,000, an automobile and other customary welfare benefits, including
medical and disability insurance. The agreement also provided that, to the
extent payments made by the Company for disability insurance, life insurance and
the use of the automobile are subject to federal, state or local income taxes,
the Company would pay Mr. Simon the amount of such additional taxes plus such
additional amount as would be reasonable to hold him harmless from the
obligation to pay such taxes.
Pursuant to the 1998 Agreement, on February 20, 1998 Mr. Simon was granted
an option to purchase 300,000 shares of Common Stock, with an exercise price
equal to the fair market value of the shares on such date. Such option was
exercisable as to one-third of the grant on the first, second and third
anniversaries of the option grant date, provided his employment was not
terminated by such date. The fair market value of the Company's Common Stock on
February 20, 1998 was $18.44.
The 1998 Agreement was terminable by the Company at anytime, with or
without cause. If the agreement was terminated by the Company prior to the
expiration of the three-year term without cause, or if Mr. Simon resigned
because of circumstances amounting to constructive termination of employment,
severance would be paid in a single lump sum equal to one-year's base salary or,
if greater, the base salary that would have been payable over the remainder of
the term. All stock options would become fully vested. Any bonus awarded for the
year of termination would not be prorated. If the agreement was terminated by
the Company for cause (as such term is defined in the employment agreement), or
if Mr. Simon resigned voluntarily under circumstances not amounting to a
constructive termination of employment, no benefits were payable other than
accrued but unpaid salary and any unpaid bonus earned prior to such termination
or resignation.
Effective September 30, 1998, the Company terminated the 1998 Agreement and
executed a Settlement and Release agreement with Mr. Simon. Pursuant to the
terms of the Settlement and Release agreement, Mr. Simon was paid the balance of
the salary due him under the 1998 Agreement ($966,667) plus his 1998 bonus of
$400,000. Additionally, per the terms of the Settlement and Release agreement,
Mr. Simon will continue to be provided with the fringe benefits specified in the
1998 Agreement, principally life insurance coverage and the use of a Company
car, until February 19, 2001. The Settlement and Release agreement also provided
that all unvested options to purchase the common stock of the Company were
vested immediately and that all of Mr. Simon's stock options are exercisable
until September 30, 1999 after which time all unexercised options will expire.
John M. Elwood
Mr. Elwood and the Company executed an employment agreement dated May 15,
1995 (the "1995 Agreement"). The 1995 Agreement was terminated by Mr. Elwood and
the Company as of February 19, 1998 and a new contract was executed on February
20, 1998 (the "1998 Agreement") providing for a term of three (3) years.
The 1998 Agreement provided for an annual base salary of $310,000, a
discretionary annual bonus based on attainment of performance objectives set by
the Board of Directors, a life insurance policy in the amount of $1,000,000, an
automobile, and other customary welfare benefits, including medical and
disability insurance. The agreement also provided that, to the extent payments
made by the Company for disability insurance, life insurance and the use of the
automobile are subject to federal, state or local income taxes, the company
would pay Mr. Elwood the amount of such additional taxes plus such additional
amount as would be reasonable to hold him harmless from the obligation to pay
such taxes.
11
<PAGE> 15
Pursuant to the 1998 Agreement, on February 20, 1998 Mr. Elwood was granted
an option to purchase 240,000 shares of Common Stock with an exercise price
equal to the fair market value of the shares on such date. Such option was
exercisable as to one-third of the grant on the first, second and third
anniversaries of the option grant date, provided his employment was not
terminated by such date. The fair market value of the Company's Common Stock on
February 20, 1998 was $18.44.
The 1998 Agreement was terminable by the Company at anytime, with or
without cause. If the agreement was terminated by the Company prior to the
expiration of the three-year term without cause, or if Mr. Elwood resigned
because of circumstances amounting to constructive termination of employment,
severance would be paid in a single lump sum equal to one-year's base salary or,
if greater, the base salary that would have been payable over the remainder of
the term. All stock options would become fully vested. Any bonus awarded for the
year of termination would not be prorated. If the agreement was terminated by
the Company for cause (as such term is defined in the employment agreement), or
if Mr. Elwood resigned voluntarily under circumstances not amounting to a
constructive termination of employment, no benefits were payable other than
accrued but unpaid salary and any unpaid bonus earned prior to such termination
or resignation.
Effective October 23, 1998, the Company terminated the 1998 Agreement and
executed a Settlement and Release agreement with Mr. Elwood. Pursuant to the
terms of the Settlement and Release agreement, Mr. Elwood was paid the balance
of the salary due him under the 1998 Agreement ($723,333) plus his 1998 bonus of
$400,000. Additionally, per the terms of the Settlement and Release agreement,
Mr. Elwood will continue to be provided with the fringe benefits specified in
the 1998 Agreement, principally life insurance coverage and the use of a Company
car, until February 19, 2001. The Settlement and Release agreement also provided
that all unvested options to purchase the common stock of the Company were
vested immediately and that all of Mr. Elwood's stock options are exercisable
until October 23, 1999 after which time all unexercised options will expire.
CHANGE IN CONTROL AGREEMENTS
The Company has executed change in control agreements with 22 of the
Company's employees, including each named executive officer. The agreements with
the named executive officers provide that, if within two years of a change in
control of the Company, the officer's employment with the Company is terminated
by the Company without cause or if the officer resigns for good reason (as
defined in the agreements), the Company will pay the officer two and one-half
times the aggregate cash compensation earned by the officer during the fiscal
year immediately preceding the termination of employment. Such payments are to
be reduced, however, to the extent necessary to avoid characterization as
"excess parachute payments" within the meaning of Section 280G of the Internal
Revenue Code. In addition, any outstanding options to purchase shares of the
Company held by the officer will vest and become exercisable as of the date of
the change in control. An agreement with one (1) additional officer provides for
the same level of benefits. The agreements with the other employees provide for
a lesser level of benefits ranging from a low of (a) the greater of 2 weeks
salary for each full year of employment or 6 months salary to a high of (b) one
and one-half times the aggregate cash compensation earned by the officer during
the fiscal year immediately preceding the termination of employment.
REPORT ON REPRICING OF OPTIONS
At a meeting of the Compensation and Audit Committee held on December 10,
1998, the Committee members noted that, due to a number of factors,
uncontrollable by management, the share price of the Common Stock had dropped to
a level which was sufficiently below the exercise price of certain options to
abrogate the positive incentivising effect of the options and create a
detrimental effect on employee morale. The Committee voted to adopt a resolution
which caused the exercise price of any option held by an employee of the Company
on December 10, 1998 to be reduced to $10.00 per share if the option was
originally granted with an exercise price in excess of $10.00 per share. At the
time, the market price of the Common Stock was $9.31 per share. All of the other
terms and conditions of the original grants remained in effect.
12
<PAGE> 16
The repricing affected the following Executive Officers of the Company.
<TABLE>
<CAPTION>
NUMBER OF MARKET PRICE LENGTH OF ORIGINAL
SECURITIES OF STOCK AT EXERCISE PRICE NEW OPTION TERM
UNDERLYING TIME OF AT TIME OF EXERCISE REMAINING AT DATE OF
NAME DATE OPTIONS REPRICED REPRICING REPRICING PRICE REPRICING (YEARS)
- ---- -------- ---------------- ------------ -------------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
A. F. Petrocelli........ 12/10/98 10,000 $9.31 $15.06 $10.00 7.4
12/10/98 10,000 9.31 18.06 10.00 8.4
12/10/98 45,000 9.31 18.44 10.00 9.2
Paul Hower.............. 12/10/98 35,000 9.31 16.63 10.00 7.6
12/10/98 35,000 9.31 19.09 10.00 8.8
Joe Bernadino........... 12/10/98 17,500 9.31 16.63 10.00 7.6
12/10/98 21,000 9.31 19.09 10.00 8.8
Ethan Kramer............ 12/10/98 8,000 9.31 16.63 10.00 7.6
12/10/98 10,000 9.31 19.09 10.00 8.8
John Leavitt............ 12/10/98 17,500 9.31 16.63 10.00 7.6
12/10/98 26,000 9.31 19.09 10.00 8.8
Terry O'Leary........... 12/10/98 12,000 9.31 16.63 10.00 7.6
12/10/98 20,000 9.31 19.09 10.00 8.8
Doug Vicari............. 12/10/98 15,000 9.31 16.63 10.00 7.6
12/10/98 18,000 9.31 19.09 10.00 8.8
Richard Szymanski....... 12/10/98 12,000 9.31 16.63 10.00 7.6
12/10/98 15,000 9.31 19.09 10.00 8.8
</TABLE>
COMPENSATION AND AUDIT COMMITTEE
HOWARD M. LORBER (CHAIRMAN)
Lawrence N. Friedland
Herbert Lust, II
COMPENSATION AND AUDIT COMMITTEE REPORT ON EXECUTIVE COMPENSATION
All members of the Compensation and Audit Committee are independent,
non-employee Directors.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In contemplation of the expiration of Mr. Simon's previous employment
agreement during 1998, the Compensation and Audit Committee entered into
negotiations with Mr. Simon for a new employment agreement early in 1998. On
February 20, 1998 the Company and Mr. Simon executed a new employment agreement
(the "New Simon Agreement") in which Mr. Simon agreed to remain as the Chief
Executive Officer of the Company (the terms of the New Simon Agreement are more
fully described under the heading herein entitled "Employment Agreements"). The
New Simon Agreement contained terms and conditions substantially similar to Mr.
Simon's previous employment agreement with the exception of his base salary and
option grant. The Compensation and Audit Committee determined to increase Mr.
Simon's annual salary to $400,000 and grant an option to purchase 300,000 shares
of Common Stock based on Mr. Simon's achievements and the Company's overall
growth during the prior year, including the closing of the acquisition of the
HomeGate Studios & Suites brand, the Company's 41% increase in EBITDA and the
50% increase in operating cash flow.
On September 30, 1998, the Company terminated the New Simon Agreement and
Mr. Simon resigned as Chairman and Chief Executive Officer. In connection
therewith, the Company and Mr. Simon executed a settlement and release agreement
pursuant to which Mr. Simon was paid the balance of the salary due him under the
New Simon Agreement ($966,667) and his 1998 bonus of $400,000. The settlement
and release agreement also provided that all unvested options held by Mr. Simon
were to become immediately vested and remain exercisable until September 30,
1999.
13
<PAGE> 17
As a result of Mr. Simon's termination of employment, the Company appointed
Mr. Petrocelli to the position of Chairman and Chief Executive Officer. In
connection therewith, the Company entered into an employment agreement with Mr.
Petrocelli, dated September 14, 1998 (the "Petrocelli Agreement") (the terms of
the Petrocelli Agreement are more fully described under the heading herein
entitled "Employment Agreements"). The Petrocelli Agreement contains terms and
conditions substantially similar to the New Simon Agreement with the exception
of base salary and option grant. The Petrocelli Agreement provides for an annual
base salary of $700,000 and an option grant covering 1,750,000 shares of Common
Stock. In order to incentivise Mr. Petrocelli to increase shareholder value,
early vesting with respect of 750,000 shares of the option is tied to the
attainment of certain price targets for the Common Stock. The terms of the
Petrocelli Agreement were the result of an arms length negotiation between the
Company and Mr. Petrocelli. The bonus earned by Mr. Petrocelli in 1998 was based
on the overall performance of the Company.
COMPENSATION POLICIES
The Company's compensation policy with respect to all executive officers
(including the Chief Executive Officer) is designed to help the Company achieve
its business objectives by:
- setting levels of compensation designed to attract and retain qualified
executives in a highly competitive business environment;
- providing incentive compensation that is directly linked with both the
Company's financial performance and individual initiative and achievement
contributing to such performance; and
- linking compensation to improvements in the Company's annual and
long-term share performance.
The Compensation and Audit Committee increased the base salaries for the
executive officers for 1998 based on the Company's overall performance during
fiscal year 1997, including the increase in EBITDA and operating cash flow.
Bonuses earned by the executive officers in 1998 and paid in 1999 were based on
the Company's overall performance in 1998.
As a part of the Company's policy to provide incentive compensation that is
directly linked to long-term share performance, the Compensation and Audit
Committee granted to its executive officers (other than Mr. Petrocelli, Mr.
Simon and Mr. Elwood) during fiscal year 1998 options to purchase an aggregate
155,000 shares of Common Stock pursuant to the Company's 1995 Employee Stock
Option Plan.
POLICY REGARDING SECTION 162(m)
Section 162(m) of the Internal Revenue Code imposes a one million dollar
ceiling on tax-deductible remuneration paid to each of the Chief Executive
Officer and the four next most highly compensated executive officers of a
publicly-held corporation. The limitation does not apply to qualified
"performance based" remuneration payable solely on account of the attainment of
one or more performance goals approved by an independent compensation committee,
nor to compensation attributable to certain options granted under
shareholder-approved stock option plans. The 1995 Employee Stock Option Plan is
structured to comply with this exception. All compensation paid to the executive
officers for the Company's 1998 fiscal year was fully deductible.
COMPENSATION AND AUDIT COMMITTEE
HOWARD M. LORBER (Chairman)
Lawrence N. Friedland
Herbert Lust, II
COMPENSATION AND AUDIT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Audit Committee for the fiscal year
1998 were Howard M. Lorber (Chairman), Lawrence N. Friedland, Herbert Lust, II
and, until his resignation from the Committee,
14
<PAGE> 18
A. F. Petrocelli. Mr. Petrocelli and Mr. Lorber have certain business
relationships with the Company, which are described under the heading "Certain
Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. F. Petrocelli, President, Chief Executive Officer and Chairman of the
Board of Directors of the Company, is also the Chairman of the Board and Chief
Executive Officer of United Capital Corp., and Howard M. Lorber, a Director of
the Company, is a Director of United Capital Corp. In March 1994, the Company
entered into management agreements with the corporate owners of two hotels who
are affiliates of United Capital Corp. The Company received $138,448 in
management fees for the fiscal year ended 1998.
The Company has a note receivable from John H. Leavitt, Senior Vice
President of Sales and Marketing, with a balance of approximately $34,076 at
December 31, 1998. The note bears interest at 8.5% and is due in 2011.
The Company has retained Willkie Farr & Gallagher as its legal counsel
involving certain matters during its last fiscal year and anticipates it will
continue such relationship with the firm in this fiscal year. Mr. Nusbaum, a
Director of the Company, is the Chairman of the firm.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers, and persons who own more
than ten percent of the Common Stock, to file reports of beneficial ownership
with the SEC, the New York Stock Exchange and the Company. Based solely upon its
review of the copies of such forms received by it, the Company believes that,
during fiscal year 1998, all filing requirements applicable to such persons were
complied with.
15
<PAGE> 19
PERFORMANCE GRAPH
The SEC requires the Company to present a graph comparing the cumulative
total stockholder return on its Common Stock with the cumulative total
stockholder return (a) of a broad equity market index and (b) of a published
industry index or peer group. The graph compares the Common Stock with (a) the
Dow Jones Equity Market Index and (b) the Dow Jones Lodging Index. Furthermore,
the following graph assumes an investment of $100 on December 31, 1993 in each
of the Common Stock, the stocks comprising the Dow Jones Equity Market Index and
the Dow Jones Lodging Index.
COMPARISON OF 1994 THROUGH 1998 CUMULATIVE TOTAL RETURN
COMPARISON 1994 THROUGH 1998
<TABLE>
<CAPTION>
COMPANY STOCK INDEX INDUSTRY GROUP INDEX
------- ----------- --------------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 125.00 98.00 103.00
'1995' 167.00 131.00 127.00
'1996' 269.00 158.00 153.00
'1997' 340.00 209.00 212.00
'1998' 182.00 264.00 160.00
</TABLE>
16
<PAGE> 20
FINANCIAL STATEMENTS
The Company's annual report to stockholders for the year ended December 31,
1998, including audited financial statements, is being mailed to stockholders
concurrently with this Proxy Statement. The annual report is on file with the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 and the New York Stock
Exchange.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (excluding exhibits) is available without charge to any
stockholder of the Company who requests a copy in writing. Requests for copies
of the Report should be directed to the Secretary, Prime Hospitality Corp., 700
Route 46 East, Fairfield, New Jersey 07004.
STOCKHOLDER PROPOSALS
It is presently anticipated that the 2000 Annual Meeting will be held on or
about May 19, 2000. Proposals of stockholders submitted for consideration at the
2000 annual meeting of stockholders must be received by the Company not later
than December 10, 1999 in order to be included in the Company's proxy statement
for that meeting. A stockholder desiring to submit a proposal must be a record
or beneficial owner of at least 1% of the outstanding shares or $1,000 in market
value of shares entitled to be voted at the annual meeting and must have held
such shares for at least one year. Further, the stockholder must continue to
hold such shares through the date on which the meeting is held. Documentary
support regarding the foregoing must be provided along with the proposal. There
are additional requirements regarding proposals of the stockholders, and a
stockholder contemplating submission of a proposal is referred to Rule 14a-8
promulgated under the Exchange Act. In addition, the bylaws of the Company
require, among other things, that notice of proposals of stockholders be
delivered to or mailed and received at the principal executive offices of the
Company not less than fifty (50) days nor more than seventy-five (75) days prior
to the meeting; provided, however, that in the event that less than sixty-five
(65) days' notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the fifteenth (15th) day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs.
By Order of the Board of Directors,
/s/ Joseph Bernadino
JOSEPH BERNADINO
Secretary
17
<PAGE> 21
PRIME HOSPITALITY CORP.
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING MAY 19, 1999
The undersigned hereby constitutes and appoints A. F. Petrocelli, Douglas W.
Vicari and Joseph Bernadino, and each of them, his true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Stockholders of Prime Hospitality Corp. to be held at the
Sheraton Crossroads Hotel, One International Boulevard, Route 17 North, Mahwah,
New Jersey 07495, on Wednesday, May 19, 1999, at 10:00 a.m., and any
adjournments thereof, on all matters coming before said meeting.
DIRECTORS RECOMMEND A VOTE "FOR" ELECTION OF BOTH NOMINEES.
1. ELECTION OF TWO CLASS I DIRECTORS.
FOR nominees listed below [ ] [ ] WITHHOLD authority to vote for nominees.
A.F. PETROCELLI AND DOUGLAS W. VICARI
FOR except vote withheld from the following nominee __________ .
(continued and to be signed, on other side)
<PAGE> 22
(continued from other side)
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. You are encouraged to specify
your choices by marking the appropriate boxes, but you need not mark any boxes
if you wish to vote in accordance with the Board of Directors' recommendations.
The Proxy cannot vote your shares unless you sign and return this card in the
enclosed postage prepaid envelope.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR BOTH NOMINEES.
Dated: , 1999
--------------------------------
SIGNATURE
--------------------------------
SIGNATURE IF HELD JOINTLY
NOTE: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such.
The signer hereby revokes all
proxies heretofore given by the
signer to vote at said meeting
or any adjournments thereof.
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
