UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
COMMISSION FILE NUMBER 333-63768
MERISTAR HOSPITALITY MERISTAR HOSPITALITY
OPERATING PARTNERSHIP, L.P. FINANCE CORP.
(Exact name of Registrant (Exact name of Registrant
as specified in its Charter) as specified in its Charter)
DELAWARE DELAWARE
(State of Incorporation) (State of Incorporation)
75-2648837 52-2321015
(IRS Employer Identification No.) (IRS Employer Identification No.)
1010 WISCONSIN AVENUE, N.W. 1010 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20007 WASHINGTON, D.C. 20007
(202) 965-4455 (202) 965-4455
(Address, including zip code, and (Address, including zip code, and
telephone number, including area code, telephone number, including area code,
of Principal Executive Offices) of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period than the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [_].
1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors of the Company, which is a Delaware limited
partnership. The General Partner of the Company is MeriStar Hospitality
Corporation which is a publicly traded real estate investment trust and trades
on the New York Stock Exchange under the symbol MHX. Additional information
regarding MeriStar Hospitality Corporation is on file with the Securities and
Exchange Commission.
THE EXECUTIVE OFFICERS
The only executive officers of the Company as of the date of this Annual
Report on Form 10-K/A are Messrs. Whetsell, Emery and Wiles. Their position and
office, business experience, term of office and age are described below.
Name, Principal
Occupation Served as
and Business Experience Director Since Age
----------------------- -------------- ---
PAUL W. WHETSELL 1998 51
Paul W. Whetsell has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since August 1998. Mr. Whetsell has also been
the Chairman of the Board of Directors and Chief Executive Officer of MeriStar
Hospitality Corporation and MeriStar Hotels & Resorts, Inc. since August 1998.
Prior to August 1998, Mr. Whetsell had been Chairman of the Board of Directors
of CapStar Hotel Company since 1996 and had served as President and Chief
Executive Officer of CapStar Hotel Company since its founding in 1987.
JOHN EMERY 2000 38
John Emery has been a director of the Company since May 2000. Mr. Emery has
served as President of the Company since September 2001 and Chief Operating
Officer of the Company since April 2000. He currently also serves as President
and Chief Operating Officer of MeriStar Hotels & Resorts, Inc. From August 1998
to April 2000, Mr. Emery was Chief Financial Officer of the Company. From June
1997 until August 1998, Mr. Emery served as Chief Financial Officer and
Secretary of CapStar Hotel Company, a predecessor of the Company. From March
1996 to June 1997, Mr. Emery served as Treasurer of CapStar Hotel Company. Prior
to that, from January 1987 to September 1995, he worked for Deloitte & Touche
LLP in various capacities, culminating in Senior Manager for the hotel and real
estate industries. Mr. Emery is also a director of MeriStar Hotels & Resorts,
Inc.
BRUCE G. WILES 1998 50
Bruce G. Wiles has been a director and Chief Investment Officer of the
Company since August 1998. Mr. Wiles was also President of the Company from
August 1998 until September 2001. Mr. Wiles has also been a director and Chief
Investment Officer of MeriStar Hospitality Corporation since August 1998, and
was President of MeriStar Hospitality from August 1998 until September 2001.
Since September 2001, Mr. Wiles has also been Chief Investment Officer of
MeriStar Hotels & Resorts, Inc., the manager of all of the Company's hotels.
Mr. Wiles was Executive Vice President of American General Hospitality
Corporation, a predecessor of the Company, from April 1996 until August 1998.
From 1989 to August 1998, Mr. Wiles served as Executive Vice President of
American General Hospitality, Inc., where he was responsible for acquisition and
development activities.
2
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company during
1999, 2000 and 2001 with respect to the Chief Executive Officer and the two
other executive officers (the "Named Executive Officers").
Annual Compensation Long- Term Compensation
-------------------------------- ----------------------------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name And Principal Position Year Salary Bonus Compensation Awards Options Compensation
--------------------------- ---- -------- ---------- ------------ ---------------- ---------- ------------
Paul W. Whetsell(6).......... 2001 $285,000 -- $621,522(5) $1,250,000(2) -- (4)
Chief Executive Officer and 2000 285,000 $ 220,100 471,780(5) 1,089,844(2) -- --
Chairman of the Board 1999 285,000 250,900 3,313 1,133,656(1)(2) 375,000 --
John Emery(6)................ 2001 230,000 -- 328,082(5) -- -- (4)
President, Chief Operating 2000 234,039 211,000 315,970(5) 697,500(2) -- --
Officer and Director 1999 275,000 222,800 2,688 1,116,131(1)(2) 250,000 (3)
Bruce G. Wiles(6)............ 2001 300,800 -- 249,703(5) -- -- --
Chief Investment Officer and 2000 300,000 190,300 220,500(5) 261,563(2) -- --
Director 1999 300,000 219,000 8,400 1,116,131(1)(2) 250,000 (3)
- --------
(1) On February 4, 1999, pursuant to the MeriStar Incentive Plan (i) Mr.
Whetsell received 25,000 restricted shares of the Company, which vest over
five years, and (ii) Messrs. Emery and Wiles each received 15,000
restricted shares of the Common Stock, which vest over five years.
(2) In December 1999, the Compensation Committee approved the grant of Common
Stock and other equity compensation to Messrs. Whetsell, Wiles and Emery
(the "Restricted Equity Award"). In January 2000, the Compensation
Committee determined that it would satisfy the Restricted Equity Award by
issuing a combination of Common Stock, which is subject to a three-year
vesting period beginning March 31, 2000 (the "Restricted Stock"), and a new
class of OP Units, which is subject to the satisfaction of certain
performance criteria ("POPs"). The stock portion of the Restricted Equity
Award is valued based on the closing price per share of the Common Stock on
the date of grant. Pursuant to the Restricted Equity Award, Mr. Whetsell
received 350,000 shares of Common Stock and other equity compensation
granted as follows (i) 37,500 shares of Restricted Stock on December 31,
1999, (ii) 137,500 shares of Restricted Stock on March 31, 2000 (of which
62,500 were issued on March 31, 2001 and 12,500 were issued on March 31,
2002), and (iii) 175,000 POPs on March 29, 2000. Pursuant to the Restricted
Equity Award, Mr. Emery received 175,000 shares of Common Stock and other
equity compensation granted as follows (i) 47,500 shares of Restricted
Stock on December 31, 1999, (ii) 40,000 shares of Restricted Stock on
March 31, 2000, and (iii) 87,500 POPs on March 29, 2000. Pursuant to the
Restricted Equity Award, Mr. Wiles received 125,000 shares of common stock
and other equity compensation granted as follows (i) 47,500 shares of
Restricted Stock on December 31, 1999, (ii) 15,000 shares of Restricted
Stock on March 31, 2000, and (iii) 62,500 POPs on March 29, 2000.
(3) In December 1999, prior to Messrs. Emery and Wiles becoming officers of
MeriStar Hotels & Resorts, Inc., the Compensation Committee approved the
grant by MeriStar Hotels & Resorts to (i) Mr. Wiles of options to purchase
50,000 shares of MeriStar Hotels & Resorts at $3.06 per share and
(ii) Mr. Emery of options to purchase 100,000 shares of MeriStar Hotels &
Resorts at $3.06 per share.
(4) In April 2001, the Compensation Committee approved the grant of 200,000
POPs to Mr. Whetsell and 150,000 POPs to Mr. Emery. These POPs vest equally
over three years.
(5) Represents dividends received on unvested restricted stock and
distributions on POPs.
(6) Messrs. Whetsell, Emery and Wiles are also officers of MeriStar Hotels &
Resorts, Inc. and are eligible to participate in the MeriStar Hotels &
Resorts, Inc. Incentive Plan. In addition, Messrs. Whetsell and Emery have
employment agreements with MeriStar Hotels & Resorts.
Stock Option Grants
Messrs. Whetsell, Wiles and Emery were not granted options in fiscal year
2001.
3
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of April 1, 2002 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
- ---------------------------------- --------- ----------
MeriStar Hospitality Corporation.................. 44,654,578 90.8%
John Emery(1)..................................... 310,838 *
Paul W. Whetsell(2)............................... 755,153 1.5%
Bruce G. Wiles(3)................................. 382,132 *
Executive officers as a group (3 persons)......... 1,448,123 2.9%
- --------
* Represents less than 1% of the class.
(1) Includes (i) 235,731 shares of Common Stock that have vested under options
granted and (ii) 35,168 shares of unvested restricted Common Stock that
constitute stock awards. On October 1, 2001, Mr. Emery terminated 205,936
options with exercise prices ranging from $21.38 to $29.44 per share.
(2) Includes (i) 483,333 shares of Common Stock that have vested under options
granted and (ii) 68,000 shares of unvested restricted Common Stock that
constitute stock awards. On October 1, 2001, Mr. Whetsell terminated
453,743 options with exercise prices ranging from $21.38 to $29.44 per
share.
(3) Includes (i) 216,667 shares of Common Stock that have vested under options
granted, (ii) 26,834 shares of unvested restricted Common Stock that
constitute stock awards and (iii) 5,758 operating partnership units. On
October 1, 2001, Mr. Wiles terminated 265,095 options with exercise prices
ranging from $20.94 to $31.42 per share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationships among Officers and Directors
Messrs Whetsell and Emery are executive officers, directors and stockholders
of MeriStar Hotels & Resorts, Inc., manager of all of the Company's hotels. Mr.
Jorns is a director and stockholder of MeriStar Hotels & Resorts. Mr. Wiles is
an executive of MeriStar Hotels & Resorts and a holder of limited partnership
interests in the operating partnership of MeriStar Hotels & Resorts. In fiscal
2001, the Company paid an aggregate of $26.3 million in management fees to
MeriStar Hotels & Resorts. MeriStar Hotels & Resorts has a revolving credit
agreement with the Company under which the Company may lend MeriStar Hotels &
Resorts up to $50 million for general corporate purposes. As of January 1, 2002,
MeriStar Hotels and Resorts also owes the Company $13.1 million pursuant to a
Term Note.
4
COMPENSATION PLANS
THE INCENTIVE PLAN
The purpose of the Company's Incentive Plan (the "Incentive Plan") is to: (i)
attract and retain employees and other service providers with ability and
initiative, (ii) provide incentives to individuals whose efforts contribute to
the performance and success of the Company, 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 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. As of December 31, 2001, the class of Participants
consisted of approximately 116 persons.
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 MeriStar Hospitality Compensation
at the option price. The option price may be paid in cash, with shares of Common
Stock, or with a combination of cash and Common Stock. The option price will be
fixed by the Administrator at the time the option is granted, but the price
cannot be less than 100% for existing employees (85% in connection with the
hiring of new employees) of the shares' fair market value on the date of grant;
provided, however, no more than 10% of the shares under the Incentive Plan may
be granted at less than 100% of fair market value. The exercise price of an ISO
may not be less than 100% of the shares' fair market value on the date of grant
(110% of the fair market value in the case of an ISO granted to a 10%
Stockholder of the Company). Options may be exercised at such times and subject
to such conditions as may be prescribed by the Administrator but the maximum
term of an option is ten years in the case of an ISO or five years in the case
of an ISO granted to a 10% stockholder.
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
5
restricted, in whole or in part, for a period of at least three years; provided,
however, that the period will be at least one year in the case of a stock award
that is subject to objectives based on one or more of the foregoing performance
criteria. The maximum number of stock awards that may be granted to an
individual in any calendar year cannot exceed 50,000 shares of Common Stock.
Incentive Awards
Incentive awards also may be granted under the Incentive Plan. An incentive
award is an opportunity to earn a bonus, payable in cash, upon attainment of
stated performance objectives. The objectives may be stated with reference to
the fair market value of the Common Stock or on the Company's, a subsidiary's,
or an operating unit's return on equity, earnings per share, total earnings,
earnings growth, return on capital, funds from operations or return on assets or
other acceptable performance criteria. The period in which performance will be
measured will be at least one year. No Participant may receive an incentive
award payment in any calendar year that exceeds the lesser of (i) 100% of the
Participant's base salary (prior to any salary reduction or deferral election)
as of the date of grant of the incentive award or (ii) $250,000.
Performance Share Awards
The Incentive Plan also provides for the award of performance shares. A
performance share award entitles the Participant to receive a payment equal to
the fair market value of a specified number of shares of Common Stock if certain
standards are met. The Administrator will prescribe the requirements that must
be satisfied before a performance share award is earned. These conditions may
include, for example, a requirement that the Participant continue employment
with the Company for a specified period or that the Company or the Participant
achieve stated, performance-related objectives. The objectives may be stated
with reference to the fair market value of the Common Stock or on the Company's,
a subsidiary's or an operating unit's return on equity, earnings per share,
total earnings, earnings growth, return on capital, funds from operations or
return on assets or other acceptable performance criteria. To the extent that
performance shares are earned, the obligation may be settled in cash, in Common
Stock, or by a combination of the two. No Participant may be granted performance
shares for more than 12,500 shares of Common Stock in any calendar year.
Transferability
Awards granted under the Incentive Plan are generally nontransferable. The
Company may, however, grant awards, other than ISOs, which are transferable to
certain Permitted Family Members (as defined in the Incentive Plan).
Share Authorization
At any given time, the maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the Incentive Plan will be the total of
(i) 12.5% of the number of shares of Common Stock that were outstanding as of
the end of the immediately preceding calendar year (rounded downward if
necessary to eliminate fractional shares), minus (ii) the number of shares
subject to awards that were granted under the Incentive Plan through the last
day of the immediately preceding calendar year, plus (iii) as of the last day of
the immediately preceding calendar year, the number of shares with respect to
which previously granted awards have expired. All awards made under the
Incentive Plan will be evidenced by written agreements between the Company and
the Participant. The share limitation and the terms of outstanding awards will
be adjusted, as the Compensation Committee deems appropriate, in the event of a
stock dividend, stock split, combination, reclassification, recapitalization or
other similar event. As of April 11, 2002, the closing price of a share of
Common Stock on the New York Stock Exchange was $18.30.
Certain Federal Income Tax Consequences
In general, a Participant will not recognize taxable income upon the grant or
exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair
market value of the shares received on the date of exercise
6
over the exercise price of the shares will be treated as an adjustment to
alternative minimum taxable income. When a Participant disposes of shares
acquired by exercise of an ISO, the Participant's gain (the difference between
the sale proceeds and the price paid by the Participant for the shares) upon the
disposition will be taxed as capital gain provided the Participant does not
dispose of the shares within two years after the date of grant nor within one
year after the date of exercise, and exercises the option while an employee of
the Company or of a subsidiary of the Company or within three months after
termination of employment for reasons other than death or disability, or within
one year in the case of death or disability. If the first condition is not met,
the Participant generally will realize ordinary income in the year of the
disqualifying disposition. If the second condition is not met, the Participant
generally will recognize ordinary income upon exercise of the ISO.
In general, a Participant who receives a nonqualified stock option will
recognize no income at the time of the grant of the option. Upon exercise of a
nonqualified stock option, a Participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. Special timing rules may apply
to a Participant who is subject to Section 16(a) of the Securities Exchange Act
of 1940, as amended (the "Exchange Act").
A Participant will recognize income on account of the settlement of a
performance share award or incentive award. A Participant will recognize income
equal to any cash that is paid and with respect to performance share awards,
which are settled in shares, will recognize the fair market value of Common
Stock (on the date that the shares are first transferable or not subject to a
substantial risk of forfeiture) that is received in settlement of the award.
The employer (either the Company or its affiliate) will be entitled to claim
a federal income tax deduction on account of the exercise of a nonqualified
option, the vesting of a restricted share award, payment under an incentive
award and the settlement of a performance share award. The amount of the
deduction will be equal to the ordinary income recognized by the Participant.
The employer will not be entitled to a federal income tax deduction on account
of the grant or the exercise of an ISO. The employer may claim a federal income
tax deduction on account of certain disqualifying dispositions of Common Stock
acquired upon the exercise of an ISO.
The transfer of a nonqualified stock option to a Permitted Family Member will
have no immediate tax consequences to the Company, the Participant or the
Permitted Family Member. Upon the subsequent exercise of the transferred option
by the Permitted Family Member, the Participant 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- or short-term depending on the length of time the shares have been
held by the Permitted Family Member. If transfers of other awards are permitted,
Participants will be directed to consult their own tax advisors.
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
limitation of $1,000,000 on the amount of compensation payable to each of the
named executive officers in the table under "Executive Compensation" that the
Company may deduct for federal income tax purposes. The limit does not apply to
certain performance-based compensation paid under a plan that meets the
requirements of the Code and regulations promulgated thereunder. While the
Incentive Plan generally complies with the requirements for performance-based
compensation, options granted at less than 100% of fair market value and stock
awards granted under the Incentive Plan will not satisfy those requirements.
Termination and Amendment
No option or stock award may be granted and no performance shares may be
awarded under the Incentive Plan after July 11, 2006. The Board of Directors may
amend or terminate the Incentive Plan at any time, but an
7
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 PROFITS-ONLY OPERATING PARTNERSHIP UNITS ("POPS") PLAN
As of March 29, 2000, the Board of Directors approved the MeriStar
Hospitality Corporation Profits-Only Operating Partnership Units Plan (the "POPs
Plan"). The purpose of the POPs Plan is to (i) attract and retain officers,
directors, employees and consultants of the Company and its participating
affiliates and (ii) enable such individuals to acquire an equity interest in and
participate in the long-term growth and financial success of MeriStar
Hospitality Operating Partnership, L.P. (the "Operating Company").
Profits-Only Operating Partnership units
Pursuant to the POPs Plan, officers, directors, employees and consultants of
the Company are eligible to receive restricted Profits-Only OP Units ("POPs") of
the Operating Company. A holder of POPs normally will be entitled to receive
special allocations of gain on specified dispositions of operating partnership
property (including gain on revaluations of partnership property) until such
time as the partnership capital account attributable to each unit is equivalent
to the value of a regular OP unit at the time the POPs were issued; thereafter,
the holder will receive allocations of gain and loss on specified dispositions
and upon partnership revaluations based on the holder's percentage interest in
the operating partnership attributable to the units. A holder of POPs will be
entitled to regular distributions, in the discretion of the Company as general
partner of the operating partnership and subject to the distribution priorities
for other classes of partnership interests, equal to the holder's percentage
interest of the proceeds from the sale of partnership property with respect to
which allocations are made to such holder. POPs are subject to the transfer
restrictions contained in the operating partnership agreement as well as to
those additional transfer restrictions described below that are imposed by the
POPs Plan and the agreement pursuant to which the POPs are granted. Holders of
POPs will be entitled to exchange the POPs held by them for cash or, at the
option of the Company, for shares of the Company's Common Stock, based upon an
exchange formula and the satisfaction of other conditions contained in an
exchange rights agreement entered into by such holders and the Company.
Administration
The POPs Plan is administered by the Compensation Committee. The
Compensation Committee may delegate to one or more officers or managers of the
Company or an affiliate of the Company, or to a committee of such officers or
managers, its authority to administer the POPs Plan. As used in this summary,
the term "Administrator" means the Compensation Committee or its delegate, as
appropriate.
Eligibility
Each officer, director, employee or consultant of the Company or a
participating affiliate of the Company is eligible to participate in the POPs
Plan ("Participants"). The Administrator may from time to time grant restricted
units to Participants. As of April 11, 2002, the class of Participants consisted
of approximately 30 persons.
Restricted Units
A Participant's rights in a POPs award will be nontransferable or forfeitable
or both unless certain conditions prescribed by the Administrator are satisfied.
These conditions may include, for example, a requirement that the Participant
continue employment with the Company for a specified period or that the Company
or the Participant achieve stated, performance-related objectives. Generally, if
any conditions remain unfilled with respect to any units awarded to a
Participant at the time that Participant's employment with the Company and its
participating affiliates is terminated, those units will be forfeited. The
Compensation Committee may, however, provide for complete or partial exceptions
to this forfeiture provision.
8
Transferability
Awards granted under the POPs Plan are generally nontransferable. The
Administrator may, however, permit transfers to a Participant's immediate family
and certain other permitted transferees.
Unit Authorization
At any given time, the maximum number of POPs that may be granted under the
POPs Plan is 1,000,000. This limitation and the terms of outstanding awards will
be adjusted, as the Administrator deems appropriate, in the event of a dividend
or other distribution by the Operating Company or recapitalization, merger,
consolidation, issuance or exchange of POPs or other ownership interests of the
Operating Company or other similar event.
Termination and Amendment
The Administrator may amend, alter, suspend, discontinue or terminate the
POPs Plan at any time provided that no such action which would materially
adversely effect the rights of any Participant shall be effective without the
written consent of the affected Participant.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Mr. Whetsell as of
October 1, 2002, Mr. Emery as of April 1, 2000 (as amended October 1, 2001), and
Mr. Wiles as of August 3, 1998. With respect to Mr. Whetsell, the agreement has
an initial term of three and one-half years with automatic renewal on a
year-to-year basis thereafter unless terminated in accordance with its terms.
Mr. Emery's agreement provides for an initial term of three years with automatic
renewals on a year-to-year basis thereafter, unless terminated in accordance
with its terms. Mr. Wiles' agreement provides for an initial term of one year
and automatically extends on a day-to-day basis so that there is a rolling
one-year term; however, in no event will the term of Mr. Wiles' employment
agreement extend beyond December 31, 2003 or until terminated in accordance with
its terms. Certain material terms of these agreements are as follows:
Base Salary
Mr. Whetsell receives a base salary of $285,000 per year. Mr. Whetsell will
also receive a base salary of $190,000 per year as an employee of MeriStar
Hotels & Resorts, Inc. Mr. Emery receives a base salary of $230,000 per year.
Mr. Emery will also receive a base salary of $230,000 per year as an employee
of MeriStar Hotels & Resorts, Inc. Mr. Wiles receives a base salary of $300,800
per year. Each base salary will be subject to review annually.
Annual Incentive Bonus
Each executive is eligible to receive an annual incentive bonus at the
following targeted amounts of base salary:
Maximum
Threshold Bonus
Target Target Amount
--------- ------ -------
Paul W. Whetsell .......................... 25.0% 165.0% 200.0%
John Emery ................................ 25.0% 112.5% 137.5%
Bruce G. Wiles ............................ 25.0% 100.0% 125.0%
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.
9
Restricted Stock/POPs
In the case of Mr. Whetsell, at the discretion of the Compensation Committee,
he will be granted a minimum of 125,000 and a maximum of 200,000 POPs, awarded
on May 1, 2002, 2003 and 2004, vesting over three years. Future grants will be
at the Board's discretion. Mr. Whetsell will also receive an amount, paid
quarterly, for each POP that has been granted to him equal to the dividend rate
that the Company pays to its shareholders for the corresponding quarter.
Long-Term Incentives
Each executive is eligible to participate in the Incentive Plan. Awards are
made at the discretion of the Compensation Committee. As officers of MeriStar
Hotels & Resorts, Inc., Messrs. Whetsell, Emery and Wiles also are eligible to
participate in the MeriStar Hotels & Resorts, Inc. Incentive Plan.
Certain Severance Benefits
If at any time during the term of their respective employment agreements or
any automatic renewal period, the employment of Messrs. Whetsell, Wiles or Emery
is terminated, he shall be entitled to receive the benefits described below.
Termination by the Company Without Cause or by the Executive for Good Reason.
If Mr. Whetsell is terminated without cause or voluntarily terminates for "good
reason," he is entitled to a lump-sum payment equal to the product of (x) the
sum of (A) his then annual base salary and (B) the amount of his bonus for the
preceding year multiplied by (y) the greater of (A) two and one half (2 1/2) or
(B) a fraction, the numerator of which is the number of days remaining in the
term of the employment agreement, without further extension, and the denominator
of which is 365. In addition, all of his unvested 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 him 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, health insurance plans or
their equivalent for a period equal to the greater of two and one-half (2 1/2)
years or the remaining term of the employment agreement, without further
extension, or the date on which he obtains health insurance from a substitute
employer. All ungranted POPs that were to be granted on May 1, 2002, 2003 or
2004 (assuming 165,000 POPs were to be granted each year) will be immediately
granted and vested, all unvested POPs will immediately vest, and all POPs of the
Company held by Mr. Whetsell at termination will be converted to Common OP Units
of the Partnership or Common Stock and shall become free from all contractual
obligations.
If Mr. Emery is terminated without cause or voluntarily terminates with "good
reason," he is entitled to a lump-sum payment equal to the product of (x) the
sum of (A) his then annual base salary and (B) the amount of his bonus for the
preceding year multiplied by (y) the greater of (A) two (2) or (B) a fraction,
the numerator of which is the number of days remaining in the term of the
employment agreement, without further extension, and the denominator of which is
365. In addition, all of his unvested 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 him 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, health insurance plans or their equivalent for a
period equal to the greater of two (2) years or the remaining term of the
employment agreement, without further extension, or the date he obtains heath
insurance coverage from a subsequent employer.
If Mr. Wiles is terminated without cause or voluntarily terminates with "good
reason," he will be entitled to receive (i) a lump-sum payment equal to one time
his annual base salary, (ii) the amount of his bonus for the preceding year,
(iii) immediate vesting and exercisability of all unvested stock options and
certain restricted stock awards and (iv) the continuance of health insurance
benefits under his employment agreement, but only until the earlier of (x) one
year from the end of the term of his employment agreement or (y) the date on
which he obtains health insurance coverage from a subsequent employer.
10
Termination Due to Death or Disability. Upon termination due to death or
disability, each executive or his estate will receive a lump-sum payment equal
to the executive's base salary, plus the pro rata portion of his bonus for the
fiscal year in question, in addition to payment for one year of any other
compensation due the executive pursuant to his employment contract. Any unvested
portion of such executive's stock options and restricted stock will vest
immediately and become exercisable for a period of one year thereafter, and the
shares of restricted stock previously granted to the executive will become free
from all contractual restrictions. In the case of Mr. Whetsell, all ungranted
POPs that were to be granted to him on May 1, 2002, 2003 or 2004 (assuming
165,000 POPs were to be granted each year) will be immediately granted and
vested, all unvested POPs will immediately vest, and all POPs of the Company
held by Mr. Whetsell at termination will be converted to Common OP Units of the
Partnership or Common Stock and shall become free from all contractual
restrictions.
Voluntary Termination or Termination for Cause. Upon voluntary termination
or termination for "cause" by the Company, each executive will receive the
accrued and unpaid amount of his base salary through the termination date. Any
unvested options will terminate immediately, and any vested options held by the
executive will expire ninety (90) days after the termination date. In the case
of Mr. Whetsell's voluntary termination, all POPs granted through the date of
termination shall immediately vest and convert into Common OP Units of the
Partnership or Common Stock.
Termination Following a Change in Control. If (1) Mr. Whetsell or Mr. Emery
is terminated without cause within 24 months following a "Change in Control,"
(2) if Mr. Whetsell or Mr. Emery voluntarily terminates with "good reason"
(within 24 months in the case of Mr. Emery or within 6 months in the case of
Mr. Whetsell) following a Change of Control, (3) if Mr. Whetsell's title or
responsibilities change during the 2-year period following the Change of Control
and Mr. Whetsell within 6 months following such change terminates the agreement,
or (4) if Mr. Whetsell's employment by MeriStar Hotels & Resorts, Inc. is
terminated and the Company does not agree to pay Mr. Whetsell the equivalent of
his then-current salary with MeriStar Hotel & Resorts, Inc. Mr. Whetsell or
Mr. Emery 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 or (B) the amount
of his bonus for the preceding year, or if the term of the employment agreement
is terminated in its initial year his target bonus for such year, multiplied by
(y) the greater of (A) three and one-half (3 1/2) in the case of Mr. Whetsell,
or three (3) 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 agreement, without
further extension, and the denominator of which is 365; (ii) all unvested stock
options and shares of restricted stock held by him will immediately vest and be
exercisable for a period of one year thereafter and shares of restricted stock
previously granted to him will become free from contractual restrictions; and
(iii) the continuance of certain benefits under the employment agreement,
including, but not limited to, health insurance plans or their equivalent for a
period equal to the greater of two (2) years in the case of Mr. Emery and two
and one-half (2 1/2) years in the case of Mr. Whetsell, or the remaining term of
the employment agreement, without further extension, or if he obtains health
insurance from a subsequent employer. In the case of Mr. Wiles, he would be
entitled to the same type of benefits provided the termination occurred within
18 months of the Change in Control, except his lump-sum payment will be two
times the sum of his then-annual base salary plus bonus.
Change in Control Payments. In the case of Mr. Whetsell, Mr. Emery or
Mr. Wiles, in the event that any accelerated vesting of his rights with respect
to stock options, restricted stock or any other payment, benefit or compensation
results in the imposition of an excise tax payable by the executive under
section 4999 of the Internal Revenue Code, or any successor or other provision
with respect to "excess parachute payments" within the meaning of section
280G(b) of the Internal Revenue Code, MeriStar will make a cash payment to him
in the amount of such excise tax (the "Excise Tax Payment") and shall also make
a cash payment to him in an amount equal to the total of federal, state and
local income and excise taxes for which he may be liable on account of such
Excise Tax Payment.
No set-off requirements. In the case of Mr. Whetsell, Mr. Emery or
Mr. Wiles, in the event of termination of his employment, he will not be
required to seek alternative employment and, in the event he does secure other
11
employment, no compensation or other benefits received in respect of such
employment shall be set-off or in any other way limit or reduce the obligations
of the Company under the employment agreements.
Non-solicitation. Mr. Whetsell may not, during his employment and for a
period of twenty-four months thereafter, solicit, raid, entice or induce any
person that then is or at any time during the twelve-month period prior to the
end of Mr. Whetsell's agreement, who was an employee of a Company Affiliate
(other than a person whose employment whose employment has been terminated) to
become employed by any person, firm or corporation.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, MeriStar Hospitality Operating Partnership, L.P. has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
BY: /s/ Paul W. Whetsell
------------------------------------
Paul W. Whetsell
Chairman Chief Executive Officer and
Dated: April 29, 2002
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Paul W. Whetsell, Bruce G. Wiles and John Emery, such
person's true and lawful attorneys-in-fact and agents, with full power of
substitution and revocation, for such person and in such person's name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this report filed pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, and to file the same
with all exhibits thereto, and the other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and things requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
and the foregoing Power of Attorney have been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Paul W. Whetsell Chief Executive Officer April 29, 2002
- ----------------------- and Chairman
Paul W. Whetsell
/s/ Steven D. Jorns Vice Chairman April 29, 2002
- -----------------------
Steven D. Jorns
/s/ John Emery Chief Operating Officer April 29, 2002
- ----------------------- and Director
John Emery
/s/ James A. Calder Chief Accounting Officer April 29, 2002
- -----------------------
James A. Calder
/s/ J. Taylor Crandall Director April 29, 2002
- -----------------------
J. Taylor Crandall
/s/ James F. Dannhauser Director April 29, 2002
- -----------------------
James F. Dannhauser
/s/ William S. Janes Director April 29, 2002
- -----------------------
William S. Janes
Director April __, 2002
- -----------------------
H. Cabot Lodge III
/s/ Bruce G. Wiles Director April 29, 2002
- -----------------------
Bruce G. Wiles
/s/ James R. Worms Director April 29, 2002
- -------------------
James R. Worms
/s/ D. Ellen Shuman
- ------------------- Director April 29, 2002
D. Ellen Shuman