UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14A
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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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only
(as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-12
MERISTAR HOTELS & RESORTS, INC.
(Name of Registrant as Specified In Its Certificate)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] 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:
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of MeriStar Hotels & Resorts, Inc. (the "Company"), which will be held at the
Hilton Crystal City @ National Airport, 2399 Jefferson Davis Highway,
Arlington, Virginia 22202, on June 14, 2001, at 9:00 a.m., Eastern Time. All
holders of the Company's outstanding common stock, par value $.01 per share, as
of the close of business on April 26, 2001, 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.
/s/ Paul W. Whetsell
-----------------------------------
Paul W. Whetsell
Chief Executive Officer and
Chairman of the Board
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 2001
----------------
To the Stockholders of MERISTAR HOTELS & RESORTS, INC.:
Notice is hereby given that the 2001 Annual Meeting of Stockholders (the
"Annual Meeting") of MeriStar Hotels & Resorts, Inc. (the "Company") will be
held at the Hilton Crystal City @ National Airport, 2399 Jefferson Davis
Highway, Arlington, Virginia 22202, on June 14, 2001 at 9:00 a.m., Eastern
Time. The Annual Meeting will be held for the following purposes:
1. To re-elect two members of the Board of Directors to serve for three-
year terms expiring on the date of the Annual Meeting in 2004 and until
their successors are duly elected and qualified;
2. To consider and vote upon ratification of the amendment of the
MeriStar Hotels & Resorts, Inc. Non-employee Director's Plan (the
"Directors Plan") to increase the maximum number of shares of Common Stock
that may be issued under the Directors Plan from 125,000 to 500,000 shares;
3. To consider and vote upon the amendment of the Company's Restated
Certificate of Incorporation to prohibit the ownership of more than 35
percent of the Company's Common Stock (based either on voting power or
total outstanding shares) by one or more persons who directly or indirectly
own more than 34.9 percent of the outstanding shares of Common Stock of
MeriStar Hospitality Corporation.
4. To consider and vote upon ratification of the appointment of KPMG LLP
as independent auditors for the Company for the fiscal year ending December
31, 2001; and
5. 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 26, 2001, 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 the effect of a vote against
Proposal No. 3 and will have no effect on the other proposals. If a proxy card
indicates an abstention on a particular matter, then the shares represented by
such proxy will be counted for quorum purposes and, if a quorum is present, an
abstention will have the effect of a vote against Proposal No. 3 and will have
no effect on the other proposals.
By Order of the Board of Directors
/s/ Christopher L. Bennett
----------------------------------
Christopher L. Bennett
Secretary
April [ ], 2001
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
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PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 14, 2001
----------------
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 2001 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Hilton Crystal City @ National Airport,
2399 Jefferson Davis Highway, Arlington, Virginia 22202, on June 14, 2001 at
9:00 a.m., Eastern Time, and at any adjournment thereof. This Proxy Statement
and the enclosed proxy are first being mailed to stockholders on or about
May [ ], 2001.
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 one-third 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 outstanding shares of
Common Stock is required to approve Proposal No. 3 (the amendment to the
Company's Certificate of Incorporation). The affirmative vote of a majority of
the votes cast is required for each of the other 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 or a broker non-vote will have the effect of a
vote against the amendment to the Company's Restated Certificate of
Incorporation and will have no effect on any of the other proposals.
Outstanding Shares and Voting Rights
Only holders of record of Common Stock at the close of business on April 26,
2001 shall be entitled to vote at the Annual Meeting. At the close of business
on April 26, 2001, the Company had [ ] shares of Common Stock outstanding. Each
outstanding share of Common Stock receives one vote with respect to matters to
be voted on at the Annual Meeting.
1
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of eight directors, divided into
three classes. At the Annual Meeting, two directors will be re-elected for
three-year terms expiring on the date of the Annual Meeting in 2004 and until
their successors have been duly elected and qualified. Properly executed
proxies will be voted as marked and, if not marked, will be voted in favor of
re-election. The Board of Directors has no reason to believe that any nominee
will be unable to serve if re-elected. In the event any nominee shall become
unavailable to stand for re-election, the individuals named as proxies in the
accompanying proxy may vote for the election of a substitute nominee designated
by the Board of Directors. Certain information concerning such nominees is set
forth below.
The Board of Directors is divided into three classes of directors. The terms
for the Directors in Class I are up for re-election this year, the terms for
Directors in Class II expire in 2002 and the terms for Directors in Class III
expire in 2003. All Directors are 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.
Directors Whose Terms Expire at the 2001 Annual Meeting
Name, Principal
Occupation Served as a
and Business Experience Director Since Age Class
- ----------------------- -------------- --- -----
STEVEN D. JORNS 1998 52 I
Steven D. Jorns has been Vice Chairman of the Board of Directors since August
1998 and is up for re-election for a three-year term expiring at the Annual
Meeting in 2004. Mr. Jorns has also been Vice Chairman of the Board of
Directors of MeriStar Hospitality Corporation since August 1998. Mr. Jorns was
Chief Operating Officer of the Company from August 1998 until January 1999.
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. and had served since its
formation in 1981 until August 1998 as its Chairman of the Board of Directors,
Chief Executive Officer and President.
DANIEL L. DOCTOROFF 1998 42 I
Daniel L. Doctoroff has been a director of the Company since August 1998 and
is up for re-election for a three-year term expiring at the Annual Meeting in
2004. 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 and Williams Scotsman, Inc.
2
Directors Whose Terms Do Not Expire at the 2001 Annual Meeting
The following directors' terms do not expire in 2001 and therefore are not
standing for re-election at this Annual Meeting:
Name, Principal Occupation Served as a
and Business Experience Director Since Age Class
- -------------------------- -------------- --- -----
S. KIRK KINSELL 1998 46 II
S. Kirk Kinsell has been a director of the Company since August 1998 and his
current term as a Class II director expires at the Annual Meeting in 2002. 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 43 II
David E. McCaslin has been a director and President of the Company since
August 1998 and his current term as a Class II director expires at the Annual
Meeting in 2002. Mr. McCaslin served as Chief Operating Officer of CapStar
Hotel Company from 1994 until August 1998. Mr. McCaslin joined CapStar in 1987
as a General Manager and was named Vice President of Operations in 1988.
JAMES B. McCURRY 1998 52 II
James B. McCurry has been a director of the Company since August 1998 and his
current term as a Class II director expires at the Annual Meeting in 2002. Mr.
McCurry has been Chief Executive Officer of Cerespan.com since May 2000. From
July 1997 until May 2000, Mr. McCurry was 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 58 III
Kent R. Hance has been a director of the Company since August 1998 and his
current term as a Class III director expires at the Annual Meeting in 2003.
Since 1994, Mr. Hance has been a law partner in the firm Hance, Scarborough &
Wright, L.L.P., in 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, Mr. Hance 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.
PAUL W. WHETSELL 1998 50 III
Paul W. Whetsell has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since August 1998 and his current term as a
Class III director expires at the Annual Meeting in 2003. 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.
3
Name, Principal Occupation Served as a
and Business Experience Director Since Age Class
- -------------------------- -------------- --- -----
JAMES R. WORMS 1998 55 III
James R. Worms has been a director of the Company since August 1998 and his
current term as a Class III director expires at the Annual Meeting in 2003. 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.
PROPOSAL NO. 2
MERISTAR DIRECTORS PLAN
INCREASE IN AVAILABLE STOCK OPTIONS
By resolution adopted on April 24, 2001, the Board of Directors approved and
declared advisable the amendment of the Company's Non-employee Directors Plan
(the "Directors Plan") to increase the maximum number of shares of Common Stock
that may be issued under the Directors Plan from 125,000 to 500,000 shares.
If the Stockholders approve the proposed amendment, the Directors Plan will
be amended and restated as proposed by the Board of Directors.
Reasons For and Effect of the Proposed Amendment
The Board of Directors believes that the Company's Directors' Plan is
critical in order to attract experienced and knowledgeable persons to serve as
outside directors to the Company. There are no remaining awards available to be
issued under the Directors Plan. Pursuant to the terms of the Directors Plan,
the number of options that the Company was initially allowed to issue is no
more than 125,000 shares of Common Stock.
There are currently six members of the Board of Directors who are not
officers or employees of the Company or its subsidiaries (each an "Independent
Director"). Pursuant to the existing Directors Plan, each Independent Director
receives 7,500 options upon being elected as a director and 5,000 options at
each annual meeting of stockholders. In order to have shares of Common Stock
available to grant to Independent Directors pursuant to the Directors Plan, the
Board of Directors has determined that it is in the best interests of the
Company to increase the maximum number of shares of Common Stock that may be
issued under the Directors Plan from 125,000 to 500,000 shares.
Share Authorization
A maximum of 500,000 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 awards to be granted to each 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.
4
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 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. The closing price of the Common Stock on the record
date was $ [ ] per share.
Company Common Stock in Lieu of Fees
Independent Directors may elect to receive all or a portion of their annual
retainer in shares of Common Stock rather than cash. Unless an Independent
Director elects otherwise, fees paid in stock will be paid at the same time as
fees paid in cash.
Amendment and Termination
The Directors Plan provides that the Board of Directors may amend or
terminate the Directors Plan at any time. An amendment will not become
effective without stockholder approval if the amendment (i) materially
increases the number of shares that may be issued under the Directors Plan or
(ii) stockholder approval would be required for compliance with stock exchange
rules. No options may be granted under the Directors Plan after December 31,
2008.
Certain Federal Income Tax Consequences
Generally, an eligible director does not recognize any taxable income, and
the Company is not entitled to a deduction upon the grant of an option. Upon
the exercise of an option, the eligible director recognizes ordinary income
equal to the excess of the fair market value of the shares acquired over the
option exercise price, if any. The director will then take a basis in such
shares equal to their fair market value at the time of option exercise, and any
gain or loss subsequently recognized upon a sale or exchange of such shares
will be treated as capital gain or loss to such director. Special rules may
apply as a result of Section 16 of the Securities Exchange Act of 1934, as
amended. The Company is generally entitled to a deduction equal to the
compensation taxable to the eligible director as ordinary income. Eligible
directors may be subject to backup withholding requirements for federal income
tax. Options are generally non-transferable. However, the Directors Plan
authorizes the granting of options that are transferable to Permitted Family
Members.
The transfer of an option to a Permitted Family Member will have no immediate
tax consequences to the Company, the director or the Permitted Family Member.
Upon the subsequent exercise of the transferred option by the Permitted Family
Member, the director will realize ordinary income in an amount measured by the
difference between the option exercise price and the fair market value of the
shares on the date of exercise, and the employer will be entitled to a
deduction in the same amount. Any difference between such fair market value and
the price at which the Permitted Family Member may subsequently sell such
shares will be treated as capital gain or loss to the Permitted Family Member,
long-term or short-term depending on the length of time the shares have been
held by the Permitted Family Member.
5
Required Vote
The approval of the amendment to the Directors Plan to increase the maximum
number of shares of Common Stock that may be issued under the Directors Plan
from 125,000 to 500,000 shares of Common Stock requires an affirmative vote of
the holders of at least a majority of the total votes cast on the proposal at
the Annual Meeting in person or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO AUTHORIZE THE AMENDMENT TO THE DIRECTORS PLAN TO INCREASE THE MAXIMUM NUMBER
OF SHARES OF COMMON STOCK THAT MAY BE ISSUED UNDER THE DIRECTORS PLAN FROM
125,000 TO 500,000 SHARES OF COMMON STOCK.
PROPOSAL NO. 3
AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY
By resolution adopted on April 24, 2001, the Board of Directors approved and
declared advisable amendments to the Company's Restated Certificate of
Incorporation that would prohibit the ownership of more than 35 percent of the
Company's stock, based either on voting power or total outstanding shares, by
one or more persons who directly or indirectly own more than 34.9 percent of
the outstanding shares of stock of MeriStar Hospitality Corporation (the
"REIT"). A copy of the proposed amendment is attached as Annex 1 to this Proxy
Statement.
If the Stockholders approve the proposed amendment, the Company's Restated
Certificate of Incorporation will be amended as described in the preceding
paragraph upon the filing of a Certificate of Amendment with the Secretary of
State of the State of Delaware.
Reasons For and Effect of the Proposed Amendment
The REIT files federal income tax returns as a real estate investment trust.
A real estate investment trust generally is not subject to corporate income
taxation provided that it distributes its taxable income to its stockholders.
To maintain qualification as a real estate investment trust for federal income
tax purposes, at least 75 percent of the REIT's gross income for each taxable
year normally must be derived from investments relating to real property,
including rents from real property and certain other items. Several conditions
must be satisfied in order for rents received by the REIT and its subsidiary
entities to qualify as rents from real property, one of which usually requires
that the rents not be received from a tenant in which the REIT, or an owner of
10 percent or more of the REIT's shares, directly or indirectly owns an
interest of 10 percent or more. However, pursuant to federal tax legislation
that went into effect beginning January 1, 2001, the REIT now is permitted to
lease its hotel properties to taxable subsidiaries of the REIT if certain
statutory requirements are met. Rents received by the REIT under these leases
qualify as rents from real property if the hotel properties are managed on
behalf of the taxable subsidiaries by persons who meet specified Internal
Revenue Code requirements, including a requirement that the manager qualifies
as an "independent contractor" as defined in the relevant provisions of the
Internal Revenue Code. To qualify as an independent contractor, the manager
cannot own more than 35 percent of the shares of the REIT and not more than 35
percent of the total combined voting power of the shares of stock of the
manager (or 35 percent of the total shares of all classes of stock of the
manager) can be owned, directly or indirectly, by one or more persons who own
35 percent or more of the shares of the REIT.
The hotel leases between the REIT, as lessor, and subsidiary entities of the
Company, as lessee, were assigned to taxable subsidiaries of the REIT effective
as of January 1, 2001 and the REIT's taxable subsidiaries entered into
management agreements with subsidiary entities of the Company as of that date.
In order for the rents received by the REIT from its taxable subsidiaries to
qualify as rents from real property for purposes of the gross income test
described above, however, the Company must qualify as an independent contractor
during the period that the Company and its subsidiary entities manage the hotel
properties of the REIT and its subsidiary entities.
6
The proposed amendment to the Company's Restated Certificate of Incorporation
are intended to assist the Company in satisfying the share ownership
restrictions imposed by the Internal Revenue Code in order that the management
of the REIT's hotels by the Company and its subsidiary entities will not cause
the REIT to lose its status as a real estate investment trust.
Required Vote
The approval of the amendment to the Company's Restated Certificate of
Incorporation requires an affirmative vote of a majority of the outstanding
shares of Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
THE COMMITTEES OF THE BOARD OF DIRECTORS
Between January 1, 2000 and December 31, 2000 the full Board of Directors met
8 times. Each director attended all meetings of the Board of Directors held
while he was a director except for Mr. Worms who attended 7 meetings, Mr.
Kinsell who attended 5 meetings and Mr. Doctoroff who attended 4 meetings.
Board of Directors Committees
The Board of Directors of the Company has three committees: an Audit
Committee, a Compensation Committee, and an Investment Committee.
The Audit Committee consists of three 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
3 times in 2000. The current members of the Audit Committee are Messrs.
McCurry, Kinsell and Worms.
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 2 times in 2000. The
current members of the Compensation Committee are Messrs. McCurry and Hance.
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 2 times in 2000. The current members of the
Investment Committee are Messrs. Whetsell, Jorns, Doctoroff and Worms.
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 are compensated pursuant to the
Company's Directors Plan, which is described under Proposal 2 of this Proxy.
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:
7
Names,
Positions And
Offices, And
Business Served as an
Experience Officer Since Age
- ------------- -------------- ---
JOHN EMERY 2000 37
John Emery has served as Chief Investment Officer of the Company since April
2000. Mr. Emery has been Chief Operating Officer of MeriStar Hospitality
Corporation since April 2000 and was elected to MeriStar Hospitality's board of
directors on May 9, 2000. From August 1998 to April 2000, Mr. Emery was Chief
Financial Officer and Secretary of MeriStar Hospitality Corporation. From June
1997 to August 1998, Mr. Emery served as Chief Financial Officer and Secretary
of CapStar Hotel Company. From March 1996 to June 1997, Mr. Emery served as
Treasurer of CapStar. From September 1995 to March 1996, Mr. Emery served as
Director of Finance of CapStar. Prior to that, from January 1987 to September
1995, Mr. Emery worked for Deloitte & Touche LLP in various capacities,
culminating with Senior Manager for the hotel and real estate industries.
JAMES A. CALDER 1998 38
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 Hotel Company. From May 1995 to September
1997, Mr. Calder 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.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company during
2000 with respect to the Chief Executive Officer and its other most highly
compensated executive officers (the "Named Executive Officers").
Long-Term Compensation
-------------------------------------
Annual Compensation
------------------------------ Restricted Securities
Name And Principal Other Annual Stock Underlying All Other
Position Year Salary Bonus Compensation Awards Options Compensation
------------------ ---- -------- -------- ------------ ----------- ------------- ------------
Paul W. Whetsell........ 2000 $190,000 -- 23,044 -- -- --
Chief Executive 1999 190,000 $163,500 -- -- 125,000 --
Officer and Chairman 1998 82,480 63,540 2,312 -- -- --
of the Board
David E. McCaslin....... 2000 300,000 140,740 5,513 -- -- 212,100
President 1999 300,000 219,000 2,813 -- (/1/)(/2/) 100,000 287,850
1998 127,313 100,200 -- -- 87,500 --
James A. Calder......... 2000 200,000 87,300 1,676.48 -- -- 106,050
Chief Financial 1999 200,000 128,000 -- -- (/1/)(/2/) 75,000 143,925
Officer 1998 83,333 57,000 -- -- 47,500 --
John Emery.............. 2000 15,289 29,700 -- -- -- --
Chief Investment 1999 -- -- -- -- -- --
Officer 1998 -- -- -- -- -- --
- --------
(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
8
and (ii) Mr. Calder 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 and Calder
(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.
Stock Option Grants
Messrs. Whetsell, Emery, McCaslin and Calder were not granted options in
fiscal year 2000.
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 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
9
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 share's 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 share's fair market value on the date of grant
(110% of the fair market value in the case of an ISO granted to a 10%
stockholder of the Company). Options may be exercised at such times and subject
to such conditions as may be prescribed by the Administrator but the maximum
term of an option is ten years in the case of an ISO or five years in the case
of an ISO granted to a 10% stockholder.
ISOs may only be granted to employees; however, no employee may be granted
ISOs (under the 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.
10
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.
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 [ ], 2001, the closing price of a share of Common Stock on
the New York Stock Exchange was $[ ].
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
See Proposal No. 2 for a description of the MeriStar Hotels & Resorts, Inc.
Non-employee Directors Incentive Plan.
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.
11
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.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Paul W. Whetsell and
John Emery, dated as of April 1, 2000, and David E. McCaslin and James A.
Calder dated as of August 3,1998. With respect to Messrs. Whetsell and Emery,
the agreement is for an initial term of three and one-half years in the case of
Mr. Whetsell, and three years in the case of Mr. Emery, with the agreements
automatically renewing on a year-to-year basis thereafter unless terminated in
accordance with their 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. Emery receives a base salary of $120,000 per year
(Mr. Emery will receive a base salary of $230,000 per year as an employee of
MeriStar Hospitality Corporation), Mr. McCaslin receives a base salary of
$300,000 per year and Mr. Calder receives a base salary of $200,000 per year.
Annual Incentive Bonus
Each executive is eligible to receive an annual incentive bonus at the
following targeted amounts of base salary:
Maximum
Threshold Bonus
Target Target Amount
--------- ------ -------
Paul W. Whetsell....................................... 25% 125.0% 150.0%
John Emery............................................. 25% 112.5% 137.5%
David E. McCaslin...................................... 25% 100.0% 125.0%
James A. Calder........................................ 25% 85.0% 100.0%
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, Emery,
McCaslin, or Calder is terminated, he shall be entitled to receive the benefits
described below.
12
Termination by the Company Without Cause or by the Executive with Good
Reason. In the case of Messrs. Whetsell and Emery, if the executive is
terminated without cause or voluntarily terminates with "good reason," he is
entitled to a lump sum payment equal to the product of (x) the sum of (A) his
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
and one-half (2 1/2) in the case of Mr. Whetsell, and two (2) in the case of
Mr. Emery, 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 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 and one-half years in the case of Mr. Whetsell, or two years in
the case of Mr. Emery, or the remaining term of the employment agreement,
without further extension.
Messrs. McCaslin and Calder 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, (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 Messrs. Whetsell or Emery is
terminated without cause or voluntarily terminates with "good reason" within 24
months following a "Change in Control," the executive will receive the
following benefits: (i) a lump sum payment equal to the product of (x) the sum
of (A) his then annual base salary and (B) the amount of his bonus for the
preceding year or if the term of the employment agreement is terminated in its
initial year his target bonus for such year multiplied by (y) the greater of
(A) in the case of Mr. Whetsell, three and one-half (3 1/2) and in the case of
Mr. Emery, 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 Messrs.
McCaslin and Calder, 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.
13
Change in Control Payments. In the case of Messrs. Whetsell or Emery, 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.
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 2000 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 the REIT of REIT
common shares and partnership units in the REIT's subsidiary operating
partnership ("POPs") 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 POPs which were granted in March 2000 (see the Executive
Compensation table and, in
14
particular, Note 2 to the table). The POPs granted vest over three years and
are subject to the achievement of certain performance-based criteria. The
restricted stock granted vests over a three year period conditioned on
continued employment.
Stock Options
Stock options, stock appreciation rights and restricted shares are granted to
officers and other key employees of the Company under the 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. 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. During 2000, the
Company did not grant options to the executive officers.
Chief Executive Officer Compensation
Mr. Whetsell's base salary as Chairman of the Board and Chief Executive
Officer of the Company for 2000 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 Internal Revenue 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. The Compensation Committee
has the authority to award compensation in excess of the $1 million limit,
regardless of whether that compensation will be deductible, if the Compensation
Committee determines in good faith that the compensation is appropriate to
incentivize and compensate the recipient.
The Compensation Committee
Kent R. Hance
James B. McCurry
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
At the Annual Meeting, the stockholders will vote on the ratification of the
appointment of KPMG, LLP ("KPMG"), certified public accountants, as independent
auditors to audit the accounts of the Company and its subsidiaries for the
fiscal year ending December 31, 2001.
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed KPMG to serve as our independent auditors for 2001, subject to the
approval of our stockholders. KPMG has been the independent auditors of the
Company since the merger of CapStar and American General Hospitality and was
the independent auditors of CapStar prior to the merger. A representative of
KPMG will be present at the Annual Meeting and will have an opportunity to make
a statement if he desires. He will be available to answer appropriate
questions.
15
The following fees were paid to KPMG, our independent accountants, for the
year ended December 31, 2000:
Audit Fees $255,000
Financial information systems design
And implementation fees $-0-
All other fees $143,974
========
Total Fees: $398,974
The Audit Committee evaluates and considers whether any financial information
systems design and implementation services and other non-audit services
provided by KPMG, LLP to the Company are compatible with maintaining KPMG LLP's
independence pursuant to Independence Standards Board Standard No. 1.
Required Vote
The approval of the ratification of the appointment of the independent
auditors requires an affirmative vote of the holders of at least a majority of
the total votes cast on the proposal at the Annual Meeting in person or by
proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
16
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is responsible for providing
independent, objective oversight of the Company's accounting functions and
internal controls. The Audit Committee is composed of three directors, each of
whom is independent as defined by the New York Stock Exchange listing
standards. The Audit Committee operates under a written charter approved by the
Board of Directors.
Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing
an independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes. In performing these responsibilities, the Audit Committee
necessarily relies on the work and assurances of the Company's management and
the independent accountants.
In connection with these responsibilities, the Audit Committee reviewed and
discussed with management and the independent accountants the December 31, 2000
financial statements. The Audit Committee also discussed with the independent
accountants the matters required by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Audit Committee also received the
written disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee discussed with the independent
accountants that firm's independence.
Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the
representations of management and the independent accountants, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000, filed with the Securities and Exchange
Commission.
The Audit Committee
S. Kirk Kinsell
James B. McCurry
James R. Worns
A copy of the charter is attached to this Proxy Statement as Annex 2.
17
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 Hilton Hotels Corporation, Marriott International Inc., Starwood
Hotels & Resorts, Prime Hospitality Corp. 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.
FISCAL YEAR ENDING
------------------------------------------------
COMPANY/INDEX MARKET 7/31/1998 12/31/1998 12/31/1999 12/29/2000
Meristar Hotel 100.00 87.50 118.75 87.50
Customer Selected Stock List 100.00 74.57 68.14 92.99
NYSE Market Index 100.00 106.53 116.65 119.43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ownership Interests in Certain Managed Hotels
As of December 31, 2000, Mr. Whetsell and corporations owned by him own,
directly or indirectly, minority equity interests in two hotels which the
Company manages. Mr. Whetsell exercises management control over the entities
that own the above mentioned interests in these hotels. Except as described
below, such interests were acquired prior to the formation of CapStar Hotel
Company, the Company's predecessor. For the year ended December 31, 2000, the
Company received approximately $204,422 in management fees from the Affiliated
Hotels.
18
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 and Mr.
Jorns is a director and stockholder of MeriStar Hospitality Corporation, the
owner of 105 hotels managed by the Company.
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.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of April 12, 2001 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.
Shares Beneficially Owned
------------------------------
Name & Address of Beneficial Owner Number Percentage
- ---------------------------------- --------------- --------------
Keystone, Inc. (1).............................. 6,511,629 17.5%
Wellington Management Company, LLP (2).......... 3,544,000 9.5
Franklin Resources, Inc. (3).................... 2,109,200 5.7
FMR Corp. (4)................................... 2,038,300 5.5
First Capital Alliance, LLP (5)................. 2,122,333 5.7
James A. Calder (6)............................. 94,431 *
Daniel L. Doctoroff (7)......................... 99,874 *
Kent R. Hance(8)................................ 27,117 *
Steven D. Jorns(9).............................. 1,242,264 3.3
S. Kirk Kinsell(8).............................. 6,667 *
David E. McCaslin(10)........................... 317,228 *
James B McCurry(8).............................. 2,500 *
John Emery(11).................................. 217,355 *
Paul W. Whetsell(12)............................ 824,986 2.2
James R. Worms(8)............................... 46,904 *
Executive officers and directors as a group (10
persons)....................................... 2,879,326 7.7
- --------
* 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,
19
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 December
19, 2000.
(2) Beneficial ownership information is based on the Schedule 13G/A filed by
Wellington Management Company, LLP (located at 75 State Street, Boston
Massachusetts 02109), filed on February 13, 2001.
(3) Beneficial ownership information is based on Schedule 13G/A jointly filed
by Franklin Advisers, Inc., 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 2,
2001.
(4) Beneficial ownership information is based on a Schedule 13G/A jointly
filed by Edward C. Johnson, Abigail P. Johnson and Fidelity Management &
Research Company (all located at 82 Devonshire Street, Boston,
Massachusetts 02109) dated February 14, 2001.
(5) Beneficial ownership information is based on Schedule 13G filed by First
Capital Alliance Limited Partnership, First Capital Alliance, LLC, Richard
Newman and Henry Chu (all located at 440 S. LaSalle Street, Suite 1614,
Chicago, Illinois 60605) dated February 1, 2001.
(6) Includes 84,167 shares of Common Stock subject to vested options.
(7) Mr. Doctoroff's beneficial holdings include 21,667 shares of common stock
that have vested under options granted.
(8) Includes 6,667 shares of common stock subject to vested options.
(9) Includes 168,334 shares of common stock subject to vested options.
(10) Includes 229,167 shares of common stock subject to vested options.
(11) Includes 151,355 shares of common stock subject to vested options.
(12) Includes (i) 216,667 shares of Common Stock subject to vested options and
(ii) shares held by entities over which Mr. Whetsell has beneficial
ownership within the meaning of Rule 13d-3.
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. 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 2000.
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.
20
Annual Report
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 2000 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 2002. In addition,
any stockholder intending to present a proposal for consideration at the next
Annual Meeting of Stockholders must also comply with certain provisions of the
Company's current Certificate of Incorporation and By-Laws.
Other Matters
The Board does not know of any business to be presented for consideration at
the Annual Meeting or any adjournment thereof other than as stated in the
Notice of Annual Meeting of Stockholders. The affirmative vote of the holders
of a majority of the shares of Common Stock represented at the Annual Meeting
or any adjournment thereof and actually voted would be required with respect to
any such other matter that is properly presented and brought to a stockholder
vote.
/s/ Christopher L. Bennett
-----------------------------------
Christopher L. Bennett
Secretary
April , 2001
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE COMPANY'S FISCAL
YEAR ENDED DECEMBER 31, 2000, 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.
21
ANNEX 1
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
MERISTAR HOTELS & RESORTS, INC.
----------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
----------------
MeriStar Hotels & Resorts, Inc., a Delaware corporation (the "Corporation"),
does hereby certify as follows:
FIRST: Article X of the Corporation's Restated Certificate of Incorporation
is hereby amended to read in its entirety as set forth below:
OWNERSHIP AND TRANSFER RESTRICTIONS
A. Definitions.
For the purposes of this Article the following terms shall have the following
meanings:
"Beneficial Ownership" shall mean ownership of Shares or MeriStar REIT
Equity Stock, as applicable, by a Person either directly or under the
constructive ownership rules of section 318(a) of the Code, as modified by
section 856(d)(5) of the Code. The terms "Beneficial Owner," "Beneficially
Owns," "Beneficially Own" and "Beneficially Owned" shall have the
correlative meanings.
"Charitable Beneficiary" shall mean an organization or organizations
described in sections 170(b)(1)(A) and 170(c) of the Code and identified by
the Board as the beneficiary or beneficiaries of the Excess Share Trust.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Covered Person" shall mean (i) a Person, who or which (ii) Beneficially
Owns both outstanding shares of MeriStar REIT Equity Stock and Shares;
provided that (A) during such time as the MeriStar REIT Common Stock is
regularly traded, within the meaning of section 856(d)(3) of the Code, on
the Exchange, clause (ii) of this definition shall be applied in the case
of MeriStar REIT Common Stock by including only Persons who Beneficially
Own outstanding shares of MeriStar REIT Common Stock in excess of 5% of the
total outstanding shares of MeriStar REIT Common Stock and (B) during such
time as the Common Stock of the Corporation is regularly traded, within the
meaning of section 856(d)(3) of the Code, on the Exchange, clause (ii) of
this definition shall be applied in the case of Common Stock of the
Corporation by including only Persons who Beneficially Own outstanding
shares of such Common Stock in excess of 5% of the total outstanding shares
of Common Stock of the Corporation. A Person shall also be treated as a
Covered Person if such Person does not Beneficially Own any Shares, but a
Transfer or attempted Transfer of Shares to such Person would have been
prohibited by this Article if such Person had already owned any Shares.
i
"Excess Shares" shall mean Shares resulting from an event described in
Section C of this Article.
"Excess Share Trust" shall mean the trust created pursuant to Section C
and Section K of this Article.
"Excess Share Trustee" shall mean a person, who shall be unaffiliated
with the Corporation, any Purported Beneficial Transferee and any Purported
Record Transferee, identified by the Board as the trustee of the Excess
Share Trust.
"Exchange" shall mean the New York Stock Exchange.
"Fair Market Value" shall mean the last reported sales price on the
Exchange for Shares of the relevant class or series on the trading day
immediately preceding the relevant date, or if not then traded on the
Exchange, the last reported sales price for such Shares on the trading day
immediately preceding the relevant date as reported on any exchange or
quotation system over or through which such Shares may be traded, or if not
then traded over or through any exchange or quotation system, then the
market price of such Shares on the relevant date as determined in good
faith by the Board.
"MeriStar REIT Common Stock" shall mean all outstanding shares of common
stock, par value $.01 per share, of MeriStar Hospitality Corporation,
including such shares that are held as Shares-in-Trust in accordance with
Article V of the charter of MeriStar Hospitality Corporation (or any
successor provision of such charter).
"MeriStar REIT Equity Stock" shall mean all outstanding shares of stock
of MeriStar Hospitality Corporation, including, without limitation,
MeriStar REIT Common Stock, and shall include shares of stock of MeriStar
Hospitality Corporation that are held as Shares-in-Trust in accordance with
Article V of the charter of MeriStar Hospitality Corporation (or any
successor provision of such charter).
"Ownership Limit" shall mean 35%, of either (i) the total combined voting
power of all outstanding Shares entitled to vote or (ii) the total
outstanding Shares. The number and voting power of the outstanding Shares
of any class or series of the Corporation shall be determined by the Board
in good faith, which determination shall be conclusive for all purposes
hereof.
"Person" shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under section 401(a) or 501(c)(17) of
the Code), portion of a trust permanently set aside for or to be used
exclusively for the purposes described in section 642(c) of the Code, joint
stock company or other entity and also includes a group as that term is
used for purposes of section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
"Purported Beneficial Transferee" shall mean, with respect to any Excess
Shares, the Person who would have been the beneficial holder of the Shares,
if the Shares had not been transferred to the Excess Share Trust.
"Purported Record Transferee" shall mean, with respect to any purported
Transfer which results in Excess Shares, the Person who would have been the
record holder of the Shares, if the Shares had not been transferred to the
Excess Share Trust.
"REIT" shall mean a real estate investment trust under section 856 of the
Code.
"Restriction Termination Date" shall mean such date as may be determined
by the Board as the date on which the ownership and transfer restrictions
set forth in this Article should cease to apply; provided that such date
may not be prior to the date on which MeriStar Hospitality Corporation
makes a public announcement that neither MeriStar Hospitality Corporation
nor any affiliate of MeriStar Hospitality Corporation that, directly or
indirectly, has in effect any management agreement or other similar service
contract pursuant to which the Corporation or any affiliate of the
Corporation manages or operates any lodging or related facility of MeriStar
Hospitality Corporation or any of its affiliates, intends to qualify as a
REIT.
"Shares" shall mean the shares of the Corporation as may be authorized
and issued from time to time pursuant to Article IV.
ii
"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Shares (including (a) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Shares, (b) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Shares and (c)
any transfer or other disposition of any interest in Shares as a result of
a change in the marital status of the holder thereof), whether voluntary or
involuntary, whether of record, constructively or beneficially and whether
by operation of law or otherwise. The terms "Transfers" and "Transferred"
shall have the correlative meanings.
B. Ownership Limitation.
Subject to Clause 3 of this Section B, on any date prior to the Restriction
Termination Date, one or more Covered Persons who or which Beneficially Own
outstanding shares of MeriStar REIT Equity Stock in excess of 34.9% of the
total outstanding shares of MeriStar REIT Equity Stock may not Beneficially Own
Shares in excess of the Ownership Limit;
Subject to Clause 3 of this Section B, until the Restriction Termination
Date, any Transfer that, if effective, would result in one or more Covered
Persons, who or which Beneficially Own outstanding shares of MeriStar REIT
Equity Stock in excess of 34.9% of the total outstanding shares of MeriStar
REIT Equity Stock, Beneficially Owning Shares in excess of the Ownership Limit
shall be void ab initio as to the Transfer of such Shares that would otherwise
be Beneficially Owned by any Covered Person or Persons as a result of such
Transfer and would result in one or more Covered Persons Beneficially Owning
Shares in excess of the Ownership Limit and the intended transferee or
transferees shall acquire no rights in such Shares; and
Nothing contained in this Article shall preclude the settlement of any
transaction entered into through the facilities of the Exchange. The fact that
the settlement of any transaction occurs shall not negate the effect of any
other provision of this Article and any transferee in such a transaction shall
be subject to all of the provisions and limitations set forth in this Article.
C. Excess Shares.
If, notwithstanding the other provisions contained in this Article, at any
time prior to the Restriction Termination Date, there is a purported Transfer
such that one or more Covered Persons, who or which Beneficially Own
outstanding shares of MeriStar REIT Equity Stock in excess of 34.9% of the
total outstanding shares of MeriStar REIT Equity Stock, would Beneficially Own
Shares in excess of the Ownership Limit (a "Prohibited Transfer"), then Shares
Beneficially Owned by the Covered Person or Persons who or which would
otherwise be the Beneficial Owner of Shares as a result of the Prohibited
Transfer shall be automatically designated as Excess Shares (without
reclassification) until no one or more Covered Persons, who or which
Beneficially Own outstanding shares of MeriStar REIT Equity Stock in excess of
34.9% of the total outstanding shares of MeriStar REIT Equity Stock,
Beneficially Own Shares in excess of the Ownership Limit. The designation of
such Shares as Excess Shares shall be effective as of the close of business on
the business day prior to the date of the purported Transfer. If, after
designation of such Shares owned directly by a Covered Person as Excess Shares,
one or more Covered Persons still Beneficially Own Shares in excess of the
Ownership Limit, Shares Beneficially Owned by such Covered Person
constructively as a result of the Prohibited Transfer shall be designated as
Excess Shares until no one or more Covered Person or Persons, who or which
Beneficially Own outstanding shares of MeriStar REIT Equity Stock in excess of
34.9% of the total outstanding shares of MeriStar REIT Equity Stock,
Beneficially Own Shares in excess of the Ownership Limit. Where a Covered
Person Beneficially Owns Shares constructively through one or more Persons and
the Shares held by such other Persons must be designated as Excess Shares, the
designation of Shares held by such other Persons as Excess Shares shall be pro
rata.
If, at any time prior to the Restriction Termination Date, an event other
than a purported Transfer (an "Event") occurs as a result of which one or more
Covered Persons, who or which Beneficially Own outstanding shares of MeriStar
REIT Equity Stock in excess of 34.9% of the total outstanding shares of
MeriStar REIT Equity Stock, would Beneficially Own Shares in excess of the
Ownership Limit (a "Prohibited Event"), then Shares Beneficially Owned by each
such Covered Person who or which would be otherwise the
iii
Beneficial Owner of Shares as a result of the Prohibited Event shall be
automatically designated as Excess Shares to the extent necessary to eliminate
such excess ownership. The designation of Shares as Excess Shares shall be
effective as of the close of business on the business day prior to the date of
the Event. In determining which Shares are designated as Excess Shares, Shares
Beneficially Owned by any Covered Person who caused the Event to occur shall be
designated as Excess Shares before any Shares not so held are designated. Where
several similarly situated Covered Persons exist, the designation of Shares as
Excess Shares shall be pro rata. If Shares held by any Covered Person are
required to be designated as Excess Shares pursuant to this Clause 2 of this
Section C of this Article, Shares beneficially held by such Covered Person
shall first be designated before Shares Beneficially Owned constructively are
designated. Where such Covered Person Beneficially Owns Shares constructively
through one or more Persons and the Shares held by such other Persons must be
designated as Excess Shares, the designation of Shares held by such other
Persons as Excess Shares shall be pro rata.
D. Prevention of Transfer. If the Board or its designee shall at any time
determine in good faith that a Transfer has taken place in violation of Section
B of this Article or that a Person intends to acquire or has attempted to
acquire Beneficial Ownership (determined without reference to any rules of
attribution) of any Shares in violation of Section B of this Article, the Board
or its designee shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer, including, but not limited to, refusing
to give effect to such Transfer on the books of the Corporation or instituting
proceedings to enjoin such Transfer; provided, however, that any Transfers or
attempted Transfers in violation of Section B of this Article shall
automatically result in the designation and treatment described in Section C of
this Article, irrespective of any action (or non-action) by the Board.
E. Notice to Corporation. Any Person who acquires or attempts to acquire
Shares in violation of Section B of this Article, or any Covered Person who is
a transferee such that Excess Shares result under Section C of this Article,
shall immediately give written notice or, in the event of a proposed or
attempted Transfer, give at least 15 days prior written notice, to the
Corporation of such event. Such Person shall also provide to the Corporation
such other information as the Corporation may request in order to determine the
effect, if any, of such Transfer or attempted Transfer on the status of
MeriStar Hospitality Corporation or any affiliate of MeriStar Hospitality
Corporation as a REIT and shall execute and deliver such instruments and
provide such further cooperation and assistance as the Board deems advisable to
preserve the status of MeriStar Hospitality Corporation or any affiliate of
MeriStar Hospitality Corporation as a REIT.
F. Information for Corporation. Until the Restriction Termination Date, each
Covered Person who is a Beneficial Owner of Shares and each Covered Person
(including the stockholder of record) who is holding Shares for a Beneficial
Owner shall provide to the Corporation in writing such information with respect
to direct, indirect and constructive ownership of Shares as the Board deems
reasonably necessary to comply with the provisions of the Code applicable to
the status of MeriStar Hospitality Corporation or any of its affiliates as a
REIT, to determine the status of MeriStar Hospitality Corporation or any of its
affiliates as a REIT, or to comply with the requirements of any taxing
authority or governmental agency or to determine any such compliance.
G. Other Action by Board. Subject to Section B of this Article, nothing
contained in this Article shall limit the authority of the Board to take such
other action as it deems necessary or advisable to protect the status of
MeriStar Hospitality Corporation or any affiliate of MeriStar Hospitality
Corporation as a REIT.
H. Ambiguities. In the case of an ambiguity in the application of any of the
provisions of this Article, including any definition contained in Section A,
the Board shall have the power to determine the application of the provisions
of this Article with respect to any situation based on the facts known to it.
In the event this Article requires or permits an action by the Board and the
Certificate of Incorporation fails to provide specific guidance with respect to
such action, the Board shall have the power to determine the action to be taken
so long as such action is not contrary to the provisions of this Article.
iv
I. Legend. Each certificate for Shares shall bear substantially the following
legend:
The securities represented by this certificate are subject to
restrictions on ownership and transfer. This description is a summary only,
and is qualified in its entirety by reference to the full transfer
restrictions in the Certificate of Incorporation of MeriStar Hotels &
Resorts, Inc. (the "Corporation"), a copy of which will be supplied free of
charge at any stockholder's request. Except as otherwise provided pursuant
to the Certificate of Incorporation of the Corporation, one or more Covered
Persons, who or which Beneficially Own outstanding shares of MeriStar REIT
Equity Stock in excess of 34.9% of the total outstanding shares of MeriStar
REIT Equity Stock, may not Beneficially Own outstanding shares of the
Corporation in excess of 35% of either (i) the total combined voting power
of all outstanding shares entitled to vote or (ii) the total outstanding
shares of the Corporation. Any Person who attempts or proposes to, alone or
in combination with other Persons, Beneficially Own shares of the
Corporation that would result in a violation of the above limitations must
notify the Corporation in writing at least 15 days prior to such proposed
or attempted Transfer. All capitalized terms not defined in this legend
have the meanings defined in the Certificate of Incorporation of the
Corporation, a copy of which, including the restrictions on transfer, will
be furnished to each stockholder on request and without charge. If the
restrictions on transfer are violated, the securities represented hereby
which are in excess of the above limitations will be designated and treated
as Excess Shares which will be held in trust by the Excess Share Trustee
for the benefit of the Charitable Beneficiary.
Instead of the foregoing legend, the certificate may state that the
Corporation will furnish a full statement about certain restrictions on
transferability to a stockholder on request and without charge.
J. Severability. If any provision of this Article or any application of any
such provision is determined to be void, invalid or unenforceable by any court
having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall be affected only to the extent necessary to comply
with the determination of such court.
K. Transfer of Excess Shares. Upon any purported Transfer that results in
Excess Shares pursuant to Section C of this Article, such Excess Shares shall
be automatically transferred to the Excess Share Trustee, as trustee of a
special trust for the exclusive benefit of the Charitable Beneficiary. The
Corporation shall name a Charitable Beneficiary, if one does not already exist,
within five days of the discovery of any designation of any Excess Shares;
however, the failure to so name a Charitable Beneficiary shall not affect the
designation of Shares as Excess Shares or the transfer thereof to the Excess
Share Trustee. Excess Shares so held in trust shall be issued and outstanding
Shares. The Purported Record Transferee shall have no rights in such Excess
Shares except as expressly provided in this Article.
L. Distributions on Excess Shares. Any dividends (whether taxable as a
dividend, return of capital or otherwise) on Excess Shares shall be paid to the
Excess Share Trust for the benefit of the Charitable Beneficiary. Upon
liquidation, dissolution or winding up, the Purported Record Transferee shall
receive, for each Excess Share, the lesser of (1) the amount per share of any
distribution made upon liquidation, dissolution or winding up and (2) the price
paid by the Purported Record Transferee for the Excess Shares, or if the
Purported Record Transferee did not give value for the Excess Shares, the Fair
Market Value of the Excess Shares on the day of the event causing the Excess
Shares to be held in trust. Any such dividend or distribution paid to the
Purported Record Transferee in excess of the amount provided in the preceding
sentence prior to the discovery by the Corporation that the Shares with respect
to which the dividend or distribution was made had been designated as Excess
Shares shall be repaid, upon demand, to the Excess Share Trust for the benefit
of the Charitable Beneficiary.
M. Voting of Excess Shares. The Excess Share Trustee shall be entitled to
vote the Excess Shares on behalf of the Charitable Beneficiary on any matter.
Subject to Delaware law, any vote cast by a Purported Record Transferee with
respect to the Excess Shares prior to the discovery by the Corporation that the
Excess Shares were held in trust will be rescinded ab initio; provided,
however, that if the Corporation has already
v
taken irreversible action with respect to a merger, reorganization, sale of all
or substantially all the assets, dissolution of the Corporation or other action
by the Corporation, then the vote cast by the Purported Record Transferee shall
not be rescinded. The owner of the Excess Shares will be deemed to have given
an irrevocable proxy to the Excess Share Trustee to vote the Excess Shares for
the benefit of the Charitable Beneficiary.
Notwithstanding the provisions of this Article, until the Corporation has
received notification that Excess Shares have been transferred into an Excess
Share Trust, the Corporation shall be entitled to rely on its share transfer
and other stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority of proxies
and otherwise conducting votes of stockholders.
N. Non-Transferability of Excess Shares. Excess Shares shall be transferable
only as provided in this Section N. At the direction of the Board, the Excess
Share Trustee shall transfer the Shares held in the Excess Share Trust to a
Person or Persons whose ownership of such Shares will not violate the Ownership
Limit. If such a transfer is made to such a Person or Persons, the interest of
the Charitable Beneficiary shall terminate and the designation of such Shares
as Excess Shares shall thereupon cease. The Purported Record Transferee shall
receive the lesser of (1) the price paid by the Purported Record Transferee for
the Excess Shares or, if the Purported Record Transferee did not give value for
the Excess Shares, the Fair Market Value of the Excess Shares on the day of the
event causing the Excess Shares to be held in trust, and (2) the price received
by the Excess Share Trust from the sale or other disposition of the Excess
Shares. Any proceeds in excess of the amount payable to the Purported Record
Transferee will be paid to the Charitable Beneficiary. The Excess Share Trustee
shall be under no obligation to obtain the highest possible price for the
Excess Shares. Prior to any transfer of any Excess Shares by the Excess Share
Trustee, the Corporation must have waived in writing its purchase rights under
Section O. It is expressly understood that the Purported Record Transferee may
enforce the provisions of this Section against the Charitable Beneficiary.
If any of the foregoing restrictions on transfer of Excess Shares is
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Corporation, to have acted as an agent of the Corporation in acquiring
such Excess Shares in trust and to hold such Excess Shares on behalf of the
Corporation.
O. Call by Corporation on Excess Shares. Excess Shares shall be deemed to
have been offered for sale to the Corporation, or its designee, at a price
equal to the lesser of (a) the price paid by the Purported Record Transferee
for the Excess Shares or, if the Purported Record Transferee did not give value
for the Excess Shares, the Fair Market Value of the Excess Shares on the day of
the event causing the Excess Shares to be held in trust and (b) the Fair Market
Value of the Excess Shares on the date the Corporation, or its designee,
accepts such offer (the "Redemption Price"). The Corporation shall have the
right to accept such offer for a period of ninety days after the later of (x)
the date of the purported Transfer which resulted in such Excess Shares and (y)
the date the Board determines in good faith that a purported Transfer resulting
in Excess Shares has occurred, if the Corporation does not receive a notice of
such purported Transfer pursuant to Section E of this Article, but in no event
later than a permitted Transfer pursuant to and in compliance with the terms of
Section N of this Article. Unless the Board determines that it is in the
interests of the Corporation to make earlier payments of all of the amount
determined as the Redemption Price in accordance with the preceding sentence,
the Redemption Price may be payable at the option of the Board at any time up
to but not later than the date five years after the date the Corporation
accepts the offer to purchase the Excess Shares. The Corporation shall pay
interest at the applicable federal rate under section 1274(d) of the Code, or
any successor provision, to the Purported Record Transferee.
P. Underwritten Offerings. The Ownership Limit shall not apply to the
acquisition of Shares or rights, options or warrants for, or securities
convertible into, Shares by an underwriter in a public offering, provided that
(i) the underwriter makes a timely distribution of such Shares or rights,
options or warrants for, or securities convertible into, Shares and (ii) the
underwriter, alone or in combination with one or more other Covered Persons,
does not Beneficially Own outstanding shares of MeriStar REIT Equity Stock in
excess of 34.9% of the total outstanding shares of MeriStar REIT Equity Stock.
vi
Q. Enforcement. The Corporation is authorized specifically to seek equitable
relief, including injunctive relief, to enforce the provisions of this Article.
R. Non-Waiver. No delay or failure on the part of the Corporation or the
Board in exercising any right hereunder shall operate as a waiver of any right
of the Corporation or the Board, as the case may be, except to the extent
specifically waived in writing.
S. Amendment. Notwithstanding any other provision of this Certificate of
Incorporation or the By-laws, the provisions of this Article shall not be
amended, altered, changed or repealed without the affirmative vote of all of
the directors of the Corporation who are not officers or employees of the
Corporation or any affiliate of the Corporation."
SECOND: The foregoing amendment was duly adopted in accordance with Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, MeriStar Hotels & Resorts, Inc. has caused this
certificate to be duly executed in its corporate name this day of , 2001.
MERISTAR HOTELS & RESORTS, INC.
By: /s/ Christopher L. Bennett
---------------------------------
Name: Christopher L. Bennett
Title: Vice President, Legal and
Secretary
vii
ANNEX 2
AUDIT COMMITTEE CHARTER
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
. Monitor the integrity of the Company's financial reporting process and
systems of the internal controls regarding finance, accounting, and legal
compliance.
. Monitor the independence and performance of the Company's independent
auditors.
. Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
. Report to the Board of Directors.
. Encourage adherence to, and continuous improvement of, the Company's
policies, procedures, and practices at all levels.
. Review areas of potential significant risk to the Company.
. Monitor compliance with legal and regulatory requirements.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, special legal, accounting,
or other consultants or experts it deems necessary in the performance of its
duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the requirement of the New York Stock
Exchange. The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent nonexecutive
directors, free from any relationship that would interfere with the exercise of
his or her independent judgment. All members of the Committee shall have a
basic understanding of finance and accounting and be able to read and
understand fundamental financial statements, and at least one member of the
Committee shall have accounting or related financial management expertise.
Audit Committee members shall be appointed by the Board on recommendation of
the Nominating Committee. If an Audit Committee Chair is not designated or
present, the members of the Committee may designate a Chair by majority vote of
the Committee membership.
The Committee shall meet at least three times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or approve
an agenda in advance of each meeting. The Committee should meet privately in
executive session at least annually with management, the independent auditors,
and as a committee to discuss any matters that the Committee or each of these
groups believe should be discussed. In addition, the Committee, or at least its
Chair, should communicate with management and/or the independent auditors
quarterly to review the Company's financial statements and significant findings
based upon the auditors limited review procedures.
III. Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually. Submit
the charter to the Board of Directors for approval and have the document
published at least every three years in accordance with the SEC regulations.
i
2. Review the Company's annual audited financial statements prior to filing
or distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices, and judgments.
3. In consultation with management and the independent auditors, consider the
integrity of the Company's financial reporting processes and controls. Inquire
of management and the independent auditors about significant financial
reporting risks or exposures and consider steps management has taken to
minimize such risks. Review significant findings prepared by the independent
auditors together with management's responses.
4. Discuss any significant changes to the Company's accounting principles and
any items required to be communicated by the independent auditors in accordance
with SAS 61 on a quarterly basis. The Chair of the Committee may represent the
entire Audit Committee for purposes of this review.
5. Review the policies and procedures in effect for the review of officers'
expenses and perquisites.
Independent Auditors
6. The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. The Audit Committee shall review the independence
and performance of the auditors and annually recommend to the Board of
Directors the appointment of the independent auditors or approve any discharge
of auditors when circumstances warrant.
7. Approve the fees and other significant compensation to be paid to the
independent auditors.
8. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the Company
that could impair the auditors' independence.
9. Review the independent auditors' audit plan--discuss scope, reliance upon
management, and general audit approach.
10. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors.
11. Discuss certain matters required to be communicated to audit committees
in accordance with SAS 61.
12. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
Internal Audit Department and Legal Compliance
13. Review the activities, organizational structure and qualifications of the
internal audit function.
14. On at least an annual basis, review with the Company's counsel, any legal
matters that could have a significant impact on the Company's financial
statements, the Company's compliance with applicable laws and regulations, and
inquires received from regulators or governmental agencies.
Other Audit Committee Responsibilities
15. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's annual
proxy statement.
16. Perform any other activities consistent with this Charter, the Company's
by-laws, and governing law, as the Committee or the Board deems necessary or
appropriate.
17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
ii
PROXY
MERISTAR HOTELS & RESORTS, INC.
1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of MeriStar Hotels & Resorts, Inc, a Delaware
corporation (the "Company") hereby appoints Paul W. Whetsell and Christopher L.
Bennett, or either of them, as proxies for the undersigned, with full power of
substitution in each of them, to attend the Annual Meeting of Stockholders of
the Company to be held at the Hilton Crystal City at National Airport, 2399
Jefferson Davis Highway, Arlington, Virginia 22202, June 14, 2001, at 9:00 a.m.,
local time, and any adjournment or postponement thereof, to cast on behalf of
the undersigned all votes that the undersigned is entitled to cast at such
meeting and otherwise to represent the undersigned at the meeting with all
powers as if physically present at the meeting. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and of the
accompanying Proxy Statement and revokes any proxy heretofore given with respect
to such meeting.
The votes entitled to be cast by the undersigned will be cast as instructed
below. If this Proxy is executed but no instruction is given, the votes
entitled to be cast by the undersigned will be cast for each of the nominees for
director and for each of the other proposals as described in the Proxy Statement
and in the discretion of the Proxy holder on any other matter that may properly
come before the meeting or any adjournment of postponement thereof. The Board
of Directors has no reason to believe that any nominee will be unable to serve
if reelected. In the event any nominee is unable to serve or for good cause
will not serve, the proxies may vote for the election of a substitute nominee
designated by the Board of Directors.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY. YOU MAY USE THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
CONTINUED AND TO BE SIGNED
ON REVERSE SIDE. SEE REVERSE SIDE
The Board of Directors recommends votes "FOR ALL NOMINEES" and "FOR" each other
proposal, all as more fully set forth in the accompanying Proxy Statement.
[X] Please mark votes as in this example.
(1) Re-election as directors of the Company FOR WITHHOLD VOTE
of Steven D. Jorns and Daniel Doctoroff ALL NOMINEES FOR ALL NOMINEES
to serve three-year terms expiring at the [_] [_]
Annual Meeting in 2004.
(To withhold voting for any
individual nominee, mark here [_]
and strike through the name of
such nominee to the left).
(2) Ratifying the amendment of the MeriStar FOR [_] AGAINST [_] ABSTAIN [_]
Hotels & Resorts, Inc. Non-Employee Director's
Plan (the "Directors Plan") to increase the
maximum number of shares of Common Stock
that may be issued pursuant to awards granted
under the Directors Plan from 125,000 to
500,000 shares.
(4) Amending the Company's charter to prohibit FOR [_] AGAINST [_] ABSTAIN [_]
the ownership of more than 35 % of the Company's
Common Stock (based either on voting power or
total outstanding shares) by one or more
persons who directly or indirectly own more than
34.9% of the outstanding shares of Common Stock
of MeriStar Hospitality Corporation.
(5) Ratifying the appointment of KPMG LLP FOR [_] AGAINST [_] ABSTAIN [_]
as independent auditors for the Company
for the fiscal year ending December 31, 2001.
(6) To vote and otherwise represent the FOR [_] AGAINST [_] ABSTAIN [_]
undersigned on any other matter that may
properly come before the meeting or any
adjournment or postponement thereof in
the discretion of the Proxies
[_] CHECK HERE ONLY IF YOU PLAN TO
ATTEND THE MEETING IN PERSON.
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 or other entity, please
sign in full entity name by a duly
authorized officer.
Dated: _______________, 2001
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT. ___________________________
(SIGNATURE)
___________________________
(SIGNATURE)