SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
PRIME HOSPITALITY CORP.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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):
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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PRIME HOSPITALITY CORP.
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
April 19, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Prime Hospitality Corp. (the "Company") to be held on May 23, 2002, at 10:00
a.m., at the Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey 07004.
This year we are asking you to elect two Class I Directors of the Company to
serve until the 2005 Annual Meeting of Stockholders, to approve an amendment to
the 1995 Non-Employee Director Stock Option Plan and to ratify the Board of
Directors' selection of independent auditors for the year ending December 31,
2002. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE TWO NOMINEES, FOR
THE AMENDMENT TO THE STOCK OPTION PLAN AND FOR THE RATIFICATION OF THE
INDEPENDENT AUDITORS.
At the Annual Meeting, the Board of Directors also will report on the
Company's affairs and a discussion period will be provided for questions and
comments. The Board of Directors appreciates and encourages stockholder
participation.
Whether or not you plan to attend the Annual Meeting, it is important that
your shares be represented. Accordingly, we request that you complete, sign,
date and promptly return the enclosed proxy in the enclosed postage prepaid
envelope in order to make certain that your shares will be represented at the
Annual Meeting.
Thank you for your cooperation.
Sincerely,
/s/ A. F. Petrocelli
A. F. PETROCELLI
Chairman of the Board of Directors
PRIME HOSPITALITY CORP.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2002
------------------
To the Stockholders of
Prime Hospitality Corp.:
The Annual Meeting of Stockholders of Prime Hospitality Corp. (the
"Company") will be held on May 23, 2002, at 10:00 a.m., at the Radisson Hotel,
690 Route 46 East, Fairfield, New Jersey 07004 for the following purposes:
1. To elect two Class I Directors of the Company to serve until the
2005 Annual Meeting of Stockholders;
2. To consider and act upon a proposal to approve an amendment to the
1995 Non-Employee Director Stock Option Plan to increase the number of
shares of Common Stock available for issuance;
3. To consider and act upon a proposal to ratify the Board of
Directors' selection of independent auditors for the year ending December
31, 2002; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The close of business on April 9, 2002 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting or any adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting. If you
do not expect to be present, please promptly complete, sign and date the
enclosed proxy and mail it in the enclosed postage prepaid envelope. If you
attend the Annual Meeting, you may revoke your proxy and vote your shares in
person.
The Company's Proxy Statement is submitted herewith. The Board of Directors
recommends that you vote FOR the two Nominees and the proposals.
The Company's Annual Report for the fiscal year ended December 31, 2001,
including financial statements, is also enclosed.
By Order of the Board of Directors,
/s/ Douglas W. Vicari
DOUGLAS W. VICARI
Secretary
Fairfield, New Jersey
April 19, 2002
YOUR VOTE IS IMPORTANT.
YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE
WITH YOUR WISHES.
PRIME HOSPITALITY CORP.
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
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PROXY STATEMENT
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April 19, 2002
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Prime Hospitality Corp. (the "Company") for use at the Annual
Meeting of Stockholders to be held on May 23, 2002, at 10:00 a.m., at the
Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey 07004 or any
adjournments thereof (the "Annual Meeting"). This Proxy Statement is being sent
to all holders of record of the Company's common stock, par value $.01 per share
(the "Common Stock"), at the close of business on April 9, 2002 (the "Record
Date"). Only stockholders of record on the Record Date will be entitled to
notice of, and to vote at, the Annual Meeting. Each share of Common Stock
outstanding on the Record Date will be entitled to one vote per share on all
matters to be voted upon at the Annual Meeting. Stockholders may revoke the
authority granted by their execution of proxies at any time prior to their use
by filing with the Secretary of the Company a written revocation or duly
executed proxy bearing a later date or by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting by a stockholder who has
executed and delivered a proxy to us shall not in and of itself constitute a
revocation of such proxy. Solicitation of proxies will be made principally
through the mails, but additional solicitation may be made by telephone or
telegram by the officers or regular employees of the Company without additional
compensation. The Company will reimburse banks, brokers and other custodians,
nominees and fiduciaries for their costs in sending the proxy material to the
beneficial owners of the Common Stock. The expenses of preparing, printing,
mailing and soliciting will be paid by the Company. This proxy statement,
together with the Company's Annual Report for the fiscal year ended December 31,
2001, are being mailed to stockholders on or about April 19, 2002.
As of the Record Date, there were 45,023,588 issued and outstanding shares
of Common Stock.
THE INTENTION OF THE PERSONS NAMED IN THE PROXY, UNLESS OTHERWISE
SPECIFICALLY INSTRUCTED IN THE PROXY, IS TO VOTE ALL PROPERLY EXECUTED PROXIES
RECEIVED BY THEM (I) FOR THE ELECTION OF THE TWO NOMINEES NAMED HEREIN TO SERVE
AS DIRECTORS FOR THE TERMS SPECIFIED HEREIN AND UNTIL THEIR SUCCESSORS ARE
ELECTED AND QUALIFIED, (II) FOR THE APPROVAL OF THE AMENDMENT TO THE 1995
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN, (III) FOR THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 2002 AND (IV) IN ACCORDANCE WITH THE
PROXYHOLDER'S BEST JUDGMENT AS TO ANY OTHER BUSINESS WHICH MAY PROPERLY COME
BEFORE THE ANNUAL MEETING. ALL SHARES REPRESENTED BY A PROXY AT THE ANNUAL
MEETING WILL BE VOTED. IF A STOCKHOLDER SPECIFIES A CHOICE AS TO THE MATTERS TO
BE ACTED UPON, THE SHARES WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATION.
ANY STOCKHOLDER DESIRING TO APPOINT ANOTHER PERSON TO REPRESENT HIM OR HER AT
THE ANNUAL MEETING MAY DO SO BY COMPLETING ANOTHER FORM OF PROXY AND DELIVERING
AN EXECUTED PROXY TO THE SECRETARY OF THE COMPANY AT THE ADDRESS INDICATED
ABOVE, BEFORE THE TIME OF THE ANNUAL MEETING. IT IS THE RESPONSIBILITY OF THE
STOCKHOLDER APPOINTING SUCH OTHER PERSON TO REPRESENT HIM OR HER TO INFORM SUCH
PERSON OF THIS APPOINTMENT.
In the event that a quorum is present at the Annual Meeting but sufficient
votes to approve any of the proposals are not received, the persons named as
proxies may propose one or more adjournments of the Annual Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Annual Meeting
in person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies that they are entitled to vote FOR any proposal in favor of
an adjournment and will vote those proxies required to be voted AGAINST any such
proposal against any adjournment. A stockholder vote may be taken on one or more
of the proposals in the Proxy Statement prior to any adjournment if sufficient
votes have been received and it is otherwise appropriate. A quorum of
stockholders is constituted by the presence in person or by proxy of the holders
of a majority of the outstanding Common Stock of the Company entitled to vote at
the Annual Meeting. Member brokerage firms of the New
York Stock Exchange that hold shares in street name for beneficial owners that
do not receive instructions from the beneficial owner or other persons entitled
to vote shares are entitled, under the rules of the New York Stock Exchange, to
vote for the election of Directors and on each of the proposals. For purposes of
determining the presence of a quorum for transacting business at the Annual
Meeting, broker "non-votes" will be treated as shares that are not present.
Abstentions will be treated as shares that are present and as votes cast against
a particular proposal.
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes (Class I, Class II and
Class III) serving staggered terms in accordance with the Company's Restated
Certificate of Incorporation. The number of the full Board of Directors is seven
and Directors were initially elected on July 31, 1992. Class I Directors were
elected at the Annual Meeting held on May 19, 1999. Class II Directors were
elected at the Annual Meeting held on May 23, 2000 and Class III Directors were
elected at the Annual Meeting held on May 24, 2001.
Election for two Class I Directors will be held at the Annual Meeting. A.
F. Petrocelli and Douglas W. Vicari have been nominated for election as Class I
Directors. The two nominees are presently Directors. The persons named in the
accompanying proxy will vote all shares for which they have received proxies for
the election of A. F. Petrocelli and Douglas W. Vicari as Class I Directors,
unless authority to do so is withheld.
Approval of the nominees requires the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented by proxy at the
Annual Meeting, and entitled to vote thereon.
In the event that any of the nominees should become unable or unwilling to
serve as a Director, it is intended that the proxies will be voted for the
election of such other person, if any, as shall be designated by the Board of
Directors. It is not anticipated that any of the nominees will be unable or
unwilling to serve as a Director.
NOMINEES TO SERVE AS CLASS I DIRECTORS UNTIL THE 2005 ANNUAL MEETING OF
STOCKHOLDERS
<Table>
A.F. Petrocelli...................... A. F. Petrocelli, age 58, has been a Director since 1992 and
served as a member of the Compensation and Audit Committee
from 1993 to 1998. Mr. Petrocelli has been the Chairman of
the Board of Directors, President and Chief Executive
Officer of the Company since 1998. Mr. Petrocelli has been
the Chairman of the Board of Directors and Chief Executive
Officer of United Capital Corp. for more than the past five
years. He is also a director of Nathan's Famous, Inc., Boyar
Value Fund, Inc. and Philips International Realty Corp.
Douglas W. Vicari.................... Douglas W. Vicari, age 42, has been a Director of the
Company since 1999 and a Senior Vice President and Chief
Financial Officer of the Company since 1998. Prior to that
he had been a Vice President and the Treasurer of the
Company for more than five years.
</Table>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF
THE TWO NOMINEES FOR DIRECTORS.
CLASS II DIRECTORS WHOSE TERMS EXPIRE AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS
<Table>
Herbert Lust, II..................... Herbert Lust, II, age 75, has been a Director since 1992 and
a member of the Compensation and Audit Committee of the
Company since 1993. Mr. Lust has been a private investor and
President of Private Water Supply Inc. for more than the
past five years. Mr. Lust is a director and member of the
Compensation Committee of BRT Realty Trust.
</Table>
2
<Table>
Jack H. Nusbaum...................... Jack H. Nusbaum, age 61, has been a Director since 1994. Mr.
Nusbaum is Chairman of the law firm of Willkie Farr &
Gallagher, where he has been a partner for more than the
past 25 years. He also is a director of W.R. Berkley
Corporation, Neuberger Berman, Inc., Strategic
Distributions, Inc., and The Topps Company, Inc.
Lawrence N. Friedland................ Lawrence N. Friedland, age 79, has been a Director of the
Company and a member of the Compensation and Audit Committee
since 1998. Mr. Friedland has been of counsel to the law
firm of Olsham Grundman Frome Rosenzweig and Wolosky since
2001. Prior to that he had been a partner in the law firm of
Hoffinger Friedland Dobrish & Stern, P.C. for more than the
past 25 years. He has been a director of the Apple Bank for
Savings since 1990, a director of Lutron Electronics Co.,
Inc. since 1961, a member of the Advisory Committee of Brown
Harris Stevens, LLC since 1995 and a general partner,
manager or director of numerous real estate entities.
</Table>
CLASS III DIRECTORS WHOSE TERMS EXPIRE AT THE 2004 ANNUAL MEETING OF
STOCKHOLDERS
<Table>
Howard M. Lorber..................... Howard M. Lorber, age 53, has been a Director of the Company
and a member since 1994 and Chairman since 1998 of the
Compensation and Audit Committee. Mr. Lorber has been
Chairman of the Board and Chief Executive Officer of
Nathan's Famous, Inc. for more than the past five years and
Chairman of the Board of Directors and Chief Executive
Officer of Hallman & Lorber Associates, Inc. for over five
years. He has been a director, President and Chief Operating
Officer of New Valley Corporation for more than five years.
He has been a director of and member of the Audit Committee
of United Capital Corp. for more than the past five years.
Since 2001, he has been a Director of and President and
Chief Operating Officer of Vector Group Ltd. Mr. Lorber is
also the Chairman of Ladenburg Thalmann Financial Services
and serves as a member of the Compensation Committee of that
company.
Allen S. Kaplan...................... Allen S. Kaplan, age 52, has been a Director of the Company
since 2001. Mr. Kaplan has been Vice President and Chief
Operating Officer of Team Systems, Inc. for more than the
past five years. He also is currently Vice President of the
Metropolitan Taxicab Board of Trade and a director of
Ameritrans Capital Corp.
</Table>
BOARD OF DIRECTORS COMPENSATION AND BENEFITS
Directors who are employees of the Company do not receive additional
compensation for serving on the Board of Directors. Non-employee Directors
receive $30,000 annually. In addition, each non-employee Director receives
$1,500 for each Board of Directors meeting attended, $1,500 for each committee
meeting attended and $500 for each telephonic meeting if such meeting extends
beyond a period of 15 minutes. The Chairman of the Compensation and Audit
Committee receives an additional $20,000 annually. The Directors' remuneration
is paid quarterly. All Directors are reimbursed for their expenses.
In addition, on the date of the Company's Annual Meeting of Stockholders,
each non-employee Director receives an automatic grant of options to purchase
10,000 shares of the Company's Common Stock in accordance with the Company's
1995 Non-Employee Director Stock Option Plan. The options vest one year from the
date of grant at an option price equal to the mean price of a share of the
Company's Common Stock on the New York Stock Exchange for the trading day
immediately prior to the date of grant. In February 1998, Messrs. Lust, Nusbaum
and Lorber each received a discretionary grant of options for 45,000 shares of
Common Stock and agreed to forgo receipt of his automatic grant of options until
the 2002 Annual Meeting.
The Board of Directors held 6 meetings during 2001. All members of the
Board of Directors attended at least 75% of the aggregate number of meetings of
the Board of Directors and all committees of the Board of Directors on which
such member served.
3
COMPENSATION AND AUDIT COMMITTEE
The Compensation and Audit Committee presently consists of three
non-employee Directors: Messrs. Lorber (Chairman), Friedland and Lust. During
2001, the Committee held 4 meetings.
As part of its compensation oversight, the Committee administers the
Company's 1992 Stock Option Plan and the 1995 Employee Stock Option Plan and in
this capacity grants options to the Company's employees and officers. In
addition, the Committee makes recommendations to the Board of Directors
regarding compensation and approves the compensation paid to the Company's Chief
Executive Officer, other executive officers and other employees. The Committee
also administers the Company's 1995 Non-Employee Director Stock Option Plan
which provides for stock option grants to each non-employee Director.
REPORT OF THE COMPENSATION AND AUDIT COMMITTEE ON AUDIT MATTERS
The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information or report be incorporated by reference
into any future filing by us under the Securities Act of 1933, as amended, or
the Securities Act of 1934, as amended, except to the extent that we
specifically incorporate it by reference in such filing.
As part of its audit oversight, the Compensation and Audit Committee has:
- Reviewed and discussed with management the Company's audited financial
statements as of and for the year ended December 31, 2001.
- Discussed with the independent auditors the matters required to be
discussed by Statement of Auditing Standards No. 61, Communication with
Audit Committees, as amended, by the Auditing Standards Board of the
American Institute of Certified Public Accountants.
- Received and reviewed the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees, as amended, by the
Independence Standards Board, and has discussed with the independent
accountants the independent accountants, independence.
- Based on the reviews and discussions referenced above, recommended to the
Board of Directors that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the last fiscal year for
filing with the Securities and Exchange Commission.
The Board of Directors has determined that the members of the Compensation
and Audit Committee are independent. The Compensation and Audit Committee has
adopted a written charter.
Submitted by:
COMPENSATION AND AUDIT COMMITTEE
Howard M. Lorber (Chairman)
Lawrence N. Friedland
Herbert Lust, II
NOMINATING COMMITTEE
The Company does not have a nominating or similar committee.
4
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names, ages and positions of the executive officers
of the Company:
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
A. F. Petrocelli..................... 58 President, Chief Executive Officer and Chairman of the
Board of Directors
Douglas W. Vicari.................... 42 Director, Senior Vice President and Chief Financial
Officer
Carl J. Garraffo..................... 44 Senior Vice President/Human Resources
Dennis R. Hill....................... 57 Senior Vice President/Hotel Operations
Stephen M. Kronick................... 47 Senior Vice President/Hotel Operations
Chester Reed......................... 48 Senior Vice President/Hotel Operations
Terry P. O'Leary..................... 46 Senior Vice President/Business Development
Jeffrey T. Williams.................. 55 Senior Vice President/Franchise Sales and Development
Richard T. Szymanski................. 44 Vice President/Finance
</Table>
The following is a biographical summary of the experience of the executive
officers of the Company, other than Messrs. Petrocelli and Vicari who are
described above.
Carl J. Garraffo has been a Senior Vice President of the Company since
2000. From 1997 until 2000 he served as the Corporate Director of Human
Resources for the Lennar Corporation. Prior to that he was the Firmwide Director
of Human Resources for LeBoeuf, Lamb, Greene & MacRae LLP for more than three
years.
Dennis R. Hill has been a Senior Vice President of the Company since 2001.
From 1998 until 2001 he served as President of ROI Hotel Training Systems. Prior
to that he was Vice President of Operations at La Quinta Inns, Inc. for more
than five years.
Stephen M. Kronick has been a Senior Vice President of the Company since
1999. Prior to that he held the position of Vice President of the Company for
more than five years.
Chester Reed has been a Senior Vice President of the Company since 2002.
From 2000 until joining the Company, he served as President and Chief Operating
Officer of Presidian Destinations, Ltd. From 1999 until 2000 he was Vice
President of Operations for Bristol Hotels & Resorts. Prior to that he was a
Regional Manager for La Quinta Inns, Inc. for more than five years.
Terry P. O'Leary has been a Senior Vice President of the Company since 1998
and was Vice President of Food and Beverage since 1995.
Jeffrey T. Williams has been a Senior Vice President of the Company since
2001. From 2000 until joining the Company, he held the position of Senior Vice
President of Global Development for Meineke. In 1998, he founded JTW Global
Franchise Systems and serves as its President. Prior to that he held the
position of Senior Vice President and Managing Director of International
Development for Cendant Corporation (HFS, Inc.) for more than two years.
Richard T. Szymanski has been a Vice President of the Company for more than
five years.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of April 9, 2002 for all executive officers, all Directors, all nominees to the
Board of Directors, and all directors and executive officers as a group.
Percentages are based on 45,023,588 shares outstanding as of April 9, 2002.
Pursuant to the regulations promulgated by the Securities and Exchange
Commission (the "Commission" or "SEC"), shares are deemed to be "beneficially
owned" by a person if such person directly or indirectly has or shares the power
to vote or dispose of such shares whether or not such person has any pecuniary
interest in such shares or the
5
right to acquire the power to vote or dispose of such shares within 60 days,
including any right to acquire through the exercise of any option, warrant or
right.
<Table>
<Caption>
Amount
and Nature Percent of
Name and Address of Beneficial Owner of Ownership Class(l)
- ------------------------------------ ------------ ----------
A. F. Petrocelli(a)......................................... 3,223,297 7.16%
Lawrence N. Friedland(b).................................... 51,000 *
Allen S. Kaplan(c).......................................... 10,000 *
Howard M. Lorber(d)......................................... 165,000 *
Herbert Lust, II(e)......................................... 127,251 *
Jack H. Nusbaum(f).......................................... 100,000 *
Douglas W. Vicari(g)........................................ 87,733 *
Carl J. Garraffo(h)......................................... 3,333 *
Dennis R. Hill.............................................. 0 *
Stephen M. Kronick(i)....................................... 60,415 *
Terry P. O'Leary(j)......................................... 60,333 *
Chester Reed................................................ 0 *
Jeffrey T. Williams......................................... 0 *
Richard T. Szymanski(k)..................................... 74,946 *
All directors and executive officers as a group (14
persons)(l)............................................... 3,963,308 8.80%
</Table>
- ---------------
* Less than 1.0%.
(a) Includes 45,000 shares owned by Mr. Petrocelli, 8,276 shares owned by United
Capital Corp. of which A. F. Petrocelli is a majority shareholder, Chairman
of the Board of Directors, President and Chief Executive Officer, and
2,495,021 shares owned by Metex Mfg. Corporation, a wholly-owned subsidiary
of United Capital Corp. Mr. Petrocelli expressly disclaims beneficial
ownership of the shares directly held by United Capital Corp. and by Metex
Mfg. Corporation. Also includes options held by Mr. Petrocelli to purchase
675,000 shares at an exercise price of $9.31 per share as to 10,000 shares,
$10.00 per share as to 65,000 shares and $5.91 per share as to 600,000
shares.
(b) Includes 2,000 shares owned by Mr. Friedland, 7,000 shares owned by trusts
under which Mr. Friedland is the trustee and beneficiary and 2,000 shares
owned by trusts for the benefit of Mr. Friedland's grandchildren. Mr.
Friedland disclaims beneficial ownership of the shares owned by the trusts
for the benefit of his grandchildren. Also includes options held by Mr.
Friedland to purchase 40,000 shares at an exercise price of $10.00 per share
as to 10,000 shares, $12.00 per share, as to 10,000 shares, $8.63 per share
as to 10,000 shares and $12.01 per share as to 10,000 shares.
(c) Includes options held by Mr. Kaplan to purchase 10,000 shares at $12.01 per
share.
(d) Includes 90,000 shares owned by Mr. Lorber. Also includes options to
purchase 75,000 shares with an exercise price of $9.31 per share as to
10,000 shares and $10.00 per share as to 65,000 shares.
(e) Includes 35,000 shares owned by Mr. Lust, and 17,251 shares held by a trust
under which Mr. Lust and his wife are co-trustees and beneficiaries. Also
includes options held by Mr. Lust to purchase 75,000 shares with an exercise
price of $9.31 per share as to 10,000 shares and $10.00 per share as to
65,000 shares.
(f) Includes 25,000 shares owned by Mr. Nusbaum. Also includes options to
purchase 75,000 shares with an exercise price of $9.31 per share as to
10,000 shares and $10.00 per share as to 65,000 shares.
(g) Includes 2,300 shares owned by Mr. Vicari. Also includes options to purchase
85,433 shares with an exercise price of $9.63 per share as to 12,000 shares,
$10.00 per share as to 33,000 shares, $11.25 per share as to 28,000 shares
and $9.16 per share as to 12,433 shares.
(h) Includes options to purchase 3,333 shares at an exercise price of $9.34 per
share.
6
(i) Includes 82 shares owned by Mr. Kronick. Also includes options to purchase
60,333 shares with an exercise price of $9.63 per share as to 12,000 shares,
$10.00 per share as to 24,000 shares, $11.25 per share as to 14,000 shares,
and $9.16 per share as to 10,333 shares.
(j) Includes options to purchase 60,333 shares with an exercise price of $9.63
per share as to 4,000 shares, $10.00 per share as to 32,000 shares, $11.25
per share as to 14,000 shares and $9.16 per share as to 10,333 shares.
(k) Includes 2,280 shares owned by Mr. Szymanski. Also includes options to
purchase 72,666 shares with an exercise price $9.63 per share as to 12,000
shares, $10.00 per share as to 27,000 shares, $11.25 per share as to 23,333
shares and $9.16 per share as to 10,333 shares.
(l) With the exception of Mr. A.F. Petrocelli, who beneficially owns 7.16% of
the outstanding Common Stock, the other current directors and executive
officers each owns less than 1% of the outstanding Common Stock and
collectively own approximately 8.80% of the outstanding Common Stock as a
group. Percentages were based on 45,023,588 shares outstanding as of April
9, 2002.
PRINCIPAL HOLDERS OF SECURITIES
The following entities were known to the Company to be the beneficial
holders of more than 5% of the Common Stock as of April 9, 2002. Percentages are
based on 45,023,588 shares outstanding as of such date.
<Table>
<Caption>
AMOUNT
AND NATURE PERCENT
OF OWNERSHIP OF CLASS
------------ --------
Neuberger & Berman, LLC(a).................................. 3,074,356 6.83%
605 Third Avenue
New York, New York 10158-3698
Dimensional Fund Advisors Inc.(b)........................... 3,145,300 6.99%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
A.F. Petrocelli(c).......................................... 3,223,297 7.16%
c/o United Capital Corp.
9 Park Place
Great Neck, New York 11021
</Table>
- ---------------
(a) Neuberger & Berman, LLC filed a Schedule 13G (Amendment No. 6) dated
February 11, 2002 with the SEC reporting ownership of 3,074,356 shares of
Common Stock, with sole voting power with respect to 2,040,056 shares,
shared voting power with respect to 478,400, and with shared dispositive
power with respect to 3,074,356 shares.
(b) Dimensional Fund Advisors Inc. filed a Schedule 13G dated January 30, 2002
with the SEC reporting ownership of 3,145,300 shares of Common Stock, with
sole voting and dispositive power with respect to all such shares.
(c) A.F. Petrocelli may be deemed to beneficially own 3,223,297 shares of Common
Stock, with sole voting and dispositive power with respect to 520,000 shares
and shared voting and dispositive power with respect to 2,503,297 shares.
Inclusive in these shares are 2,503,297 shares held by United Capital Corp.,
of which Mr. Petrocelli is a majority shareholder, Chairman of the Board of
Directors, President and Chief Executive Officer. Of the 2,503,297 shares
held by United Capital Corp., 2,495,021 shares are directly held by Metex
Mfg. Corporation, a wholly-owned subsidiary of United Capital Corp. Mr.
Petrocelli expressly disclaims beneficial ownership of the shares directly
held by United Capital Corp. and by Metex Mfg. Corporation.
7
ITEM 2. PROPOSAL TO APPROVE THE AMENDMENTS TO THE
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
On October 23, 2001, the Board of Directors amended and restated the Prime
Hospitality Corp. 1995 Non-Employee Director Stock Option Plan (the "Director
Plan") (as amended and restated, the "Amended Director Plan"), subject to
stockholder approval, in order to increase the number of shares of Common Stock
available for issuance thereunder. The Company is seeking stockholder approval
of the Amended Director Plan in order to comply with the requirements of the New
York Stock Exchange. The following summary of the Amended Director Plan is
qualified in its entirety by express reference to the text of the Amended
Director Plan as filed with the SEC. The Amended Director Plan provides for the
award of stock options ("Options") to members of the Board of Directors who are
not employed by the Company or any of its subsidiaries ("Non-Employee
Directors").
Purpose and Eligibility. The primary purpose of the Amended Director Plan
is to promote the interests of the Company by providing an inducement to obtain
and retain the services of qualified persons to serve as Non-Employee Directors
and to adequately compensate them for their services to the Company. There are
currently five persons eligible to participate in the Amended Director Plan.
Administration. The Amended Director Plan is administered by the
Compensation and Audit Committee of the Board of Directors (the "Director
Committee"), which, subject to the provisions of the Amended Director Plan, has
the power and authority to make discretionary grants of options under the
Amended Director Plan, to construe the Amended Director Plan, to determine all
questions thereunder and to adopt and amend such rules and regulations for the
administration of the Amended Director Plan as may be determined by the Board of
Directors.
Shares Subject to Amended Director Plan. The Amended Director Plan, if
approved by stockholders, will allow for the grant of options covering an
aggregate of 650,000 shares of Common Stock, subject to equitable adjustment in
the event of certain corporate transactions, as set forth below. Prior to the
amendment and restatement, the Directors Plan allowed for the grant of options
covering an aggregate of 400,000 shares of Common Stock.
Grant and Terms of Options. The Director Committee may make discretionary
grants of Options to Non-Employee Directors at such times and with such terms as
it determines. Unless otherwise determined by the Director Committee, each year,
on the date of the Annual Meeting, each Non-Employee Director will be
automatically granted, without further action by the Director Committee or the
Board of Directors, an Option to purchase 10,000 shares of Common Stock. The
exercise price for each automatic Option will be 100% of the fair market value
of the Common Stock on the date of grant. All automatic Options granted will be
fully vested and exercisable one year after the date of grant, and will expire
ten years after the date of grant, or (i) if the Non-Employee Director ceases to
be a member of the Board of Directors for any reason other than death or
disability, thirty (30) days following such cessation or (ii) if the
Non-Employee Director ceases to be a member of the Board of Directors by reason
of death or disability, one hundred eighty (180) days following such cessation,
but in no event later than the expiration of the Option.
Payment Upon Exercise. Payment in full for the number of shares of Common
Stock purchased pursuant to the exercise of any Option must be made to the
Company at the time of such exercise. Payment for such shares may be made (as
determined by the Director Committee) (i) in cash, (ii) by certified check or
bank cashiers check, (iii) by delivery to the Company of an appropriate number
of shares of Common Stock, (iv) by irrevocable instructions to a broker to
deliver to the Company an amount of sale or loan proceeds, or (v) any
combination thereof.
Adjustment for Recapitalization, Merger, Etc. If any change is made to the
shares of Common Stock by reason of any merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, split-up, combination of
shares, exchange of shares, or otherwise, appropriate adjustments will be made
by the Director Committee to the number of shares of Common Stock available
under the Amended Director Plan and number of shares and price per share of
Common Stock subject to each outstanding Option. In the event the Company is
reorganized, consolidated, or merged with another corporation, or if all or
substantially all of the
8
assets of the Company are sold, optionees will be entitled to receive upon
exercise of their Options the same number and kind of shares, property, cash or
otherwise as shareholders would be entitled to receive upon such transaction.
Market Value. On April 9, 2002, the closing price for the Common Stock on
the New York Stock Exchange was $13.10.
Transferability of Options. No grant of Options, or any right or interest
therein, is assignable or transferable except by will or the laws of descent and
distribution and during the lifetime of an optionee, Options are exercisable
only by the optionee or his legal representative.
Termination or Amendment. Under the Amended Director Plan, the Board of
Directors can terminate or amend the plan at any time; provided that without
shareholder approval, no such action can increase the maximum number of shares
for which Options may be granted.
Federal Income Tax Consequences. The following is a brief discussion of
the federal income tax consequences of transactions under the Amended Director
Plan based on the Internal Revenue Code, as in effect as of the date of this
summary. This discussion is not intended to be exhaustive and does not describe
the state or local tax consequences.
With respect to Options granted under the Amended Director Plan: (1) no
income is realized by the Non-Employee Director at the time the Option is
granted; (2) at exercise, ordinary income is realized by the Non-Employee
Director in an amount equal to the excess, if any, of the fair market value of
the shares on such date over the exercise price, and the Company is generally
entitled to a tax deduction in the same amount; and (3) upon the sale of the
stock acquired upon exercise, appreciation (or depreciation) after the date of
exercise is treated as either short-term or long-term capital gain (or loss)
depending on how long the shares have been held.
As a result of the rules under Section 16(b), and depending upon the
particular exemption from the provisions of Section 16(b) utilized, Non-Employee
Directors may not receive the same tax treatment as set forth above with respect
to the grant and/or exercise of Options. Generally, Non-Employee Directors will
not be subject to taxation until the expiration of any period during which they
are subject to the liability provisions of Section 16(b) with respect to any
particular Option. Non-Employee Directors should check with the General Counsel
of the Company or their own tax advisers to ascertain the appropriate tax
treatment for any particular Option.
New Plan Benefits
As noted above, each Non-Employee Director receives an annual grant of
Options covering 10,000 shares of Common Stock. The table below reflects the
Option grants to be made to the Non-Employee Directors for the 2002 fiscal year
at the Annual Meeting. While the Director Committee has the right to make
discretionary grants under the Amended Director Plan, as of the date of this
Proxy, the Director Committee had not determined to make any such discretionary
Option grants.
<Table>
<Caption>
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS
- ----------------- ------------ ---------------
Howard M. Lorber N/A 10,000
Allen S. Kaplan N/A 10,000
Herbert Lust, II N/A 10,000
Jack H. Nusbaum N/A 10,000
Lawrence N. Friedland N/A 10,000
</Table>
Approval by Stockholders. The effectiveness of the Amended Director Plan
and any Option granted thereunder is subject to approval by an affirmative vote
of a majority of the shares of Common Stock present at the Annual Meeting, in
person or by proxy, and entitled to vote thereon. Until such approval is
obtained, the Amended Director Plan and any Option granted thereunder shall not
be effective. In the event such approval
9
is not obtained, Options will continue to be automatically granted in accordance
with the terms of the Director Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO
THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
ITEM 3. SELECTION OF AUDITORS
Upon the recommendation of the Compensation and Audit Committee, the Board
of Directors has selected Ernst & Young LLP, independent auditors, to serve as
independent accountants for the Company. Ernst & Young LLP will audit the
Company's consolidated financial statements for the fiscal year ending December
31, 2002; perform audit-related services; and act as consultants in connection
with various accounting and financial reporting matters. Ernst & Young LLP
provided those services to the Company for the fiscal year ended December 31,
2001.
AUDIT FEES
The aggregate fees and expenses of Ernst & Young LLP for professional
services for the audit of the Company's annual consolidated financial statements
for the fiscal year ended December 31, 2001 and the review of the consolidated
financial statements included in the Company's Forms 10-Q for 2001 were
$175,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal year ended December 31, 2001, Ernst & Young LLP billed
$95,000 fees to the Company for financial information systems design and
implementation services.
ALL OTHER FEES
During 2001, the aggregate fees and expenses billed to the Company for all
other services rendered by Ernst & Young were $145,500. These other services
included audit-related services and tax analysis.
All audit and non-audit services provided by Ernst & Young LLP are approved
by the Compensation and Audit Committee, which considers whether the provision
of any non-audit services is compatible with maintaining the auditor's
independence.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement, if they
desire to do so, and are expected to be available to respond to appropriate
questions. Although it is not required to, the Board of Directors is submitting
the selection of auditors for ratification at the Annual Meeting. If this
selection is not ratified, the Board of Directors will reconsider its choice.
Ratification of the selection of Ernst & Young LLP requires the affirmative
vote of the holders of a majority of shares of Common Stock present or
represented by proxy at the Annual Meeting, and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2002.
ITEM 4. OTHER BUSINESS
As of this date, the Company is not aware of any business to be acted upon
at the Annual Meeting other than that which is described in this Proxy
Statement. In the event that any other business calling for a vote of the
stockholders is properly presented at the Annual Meeting, it is intended that
the holders of the proxies will vote your shares in accordance with their best
judgment.
10
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation for services in all capacities awarded to, earned by or paid to the
persons who were, at December 31, 2001, the Company's Chief Executive Officer
and the four other most highly compensated executive officers of the Company
(the "named executive officers"). The information shown reflects compensation
for services in all capacities awarded to, earned by or paid to these persons
for the years ended December 31, 1999, 2000 and 2001.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION SECURITIES
NAME AND ---------------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ------------------ ---- -------- -------- ------------ ------------
A. F. Petrocelli.................... 2001 $700,000 $700,000 3,000,000 $ 8,791(1)
President and Chief 2000 700,000 700,000 0 2,632
Executive Officer 1999 700,000 700,000 0 5,866
Douglas W. Vicari................... 2001 203,339 0 19,000 3,797(2)
Senior Vice President 2000 188,211 114,000 37,300 1,840
and Chief Financial 1999 169,847 100,000 42,000 1,840
Officer
Richard T. Szymanski................ 2001 181,185 0 19,000 3,529(3)
Vice President -- 2000 174,230 106,000 31,000 1,750
Finance 1999 162,912 92,000 35,000 1,750
Joseph Bernadino.................... 2001 226,293 0 19,000 177,598(4)
Former officer 2000 178,723 110,000 18,400 3,195
1999 173,122 70,000 21,000 3,059
Stephen M. Kronick.................. 2001 154,978 0 19,000 2,104(5)
Senior Vice President 2000 149,296 92,000 31,000 1,960
1999 141,590 13,035 21,000 1,960
Terry P. O'Leary.................... 2001 140,459 0 19,000 150,243(6)
Senior Vice President 2000 135,100 14,108 31,000 141,013
1999 129,904 0 21,000 151,618
</Table>
- ---------------
(1) Represents $1,700 related to 401k matching contributions, $1,032 for
premiums for Company-provided life insurance and $6,059 for travel expenses.
(2) Represents $1,700 related to 401k matching contributions, $240 for premiums
for Company-provided life insurance and $1,857 for travel expenses.
(3) Represents $1,700 related to 401k matching contributions, $150 for premiums
for Company-provided life insurance and $1,600 for travel expenses.
(4) Represents $1,700 related to 401k matching contributions, $414 for premiums
for Company-provided life insurance, $88,866 for transition pay, $80,430 on
the exercise of stock options and $1,088 for travel expenses.
(5) Represents $1,700 related to 401k matching contribution, $360 for premiums
for Company-provided life insurance and $44 for travel expenses.
(6) Represents $103,233 related to income on the exercise of options, $43,900
for commissions, $360 for premiums for Company-provided life insurance,
$2,396 for travel expenses and $354 related to 401k matching contributions.
11
STOCK OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 2001
The following table sets forth information concerning individual grants of
stock options made during the year ending December 31, 2001 to each of the named
executive officers. The Company did not grant any stock appreciation rights
during such period.
<Table>
<Caption>
INDIVIDUAL GRANTS POTENTIAL REALIZED
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTIONS TERM
OPTIONS EMPLOYEES IN BASE PRICE -------------------------
NAME GRANTED FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
- ---- ---------- ------------ ----------- --------------- ----------- -----------
A. F. Petrocelli...... 3,000,000(1) 91.8% $9.115 10/23/2011 $17,197,124 $43,580,888
Douglas W. Vicari..... 19,000(2) .6% 8.600 09/25/2011 102,761 260,418
Richard T.
Szymanski........... 19,000(2) .6% 8.600 09/25/2011 102,761 260,418
Terry P. O'Leary...... 19,000(2) .6% 8.600 09/25/2011 102,761 260,418
Stephen M. Kronick.... 19,000(2) .6% 8.600 09/25/2011 102,761 260,418
</Table>
- ---------------
(1) These stock options vest with respect to one third of the grant on each of
October 23, 2002, 2003 and 2004, and will continue to be exercisable through
October 23, 2011. These options become immediately exercisable upon a change
in control of the Company.
(2) These stock options vest with respect to one third of the grant on each of
September 25, 2002, 2003 and 2004, and will continue to be exercisable
through September 25, 2011. These options become immediately exercisable
upon a change in control of the Company.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 2001 AND FISCAL
YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END AT FY-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
A.F. Petrocelli.............. -0- $-0- 675,000 4,150,000 $3,169,625 $11,716,000
Douglas W. Vicari............ -0- -0- 85,433 57,867 75,294 93,641
Richard T. Szymanski......... -0- -0- 72,666 51,334 65,018 85,687
Terry P. O'Leary............. -0- -0- 60,333 46,667 58,868 85,687
Stephen M. Kronick........... -0- -0- 60,333 46,667 61,868 85,687
</Table>
EMPLOYMENT AGREEMENTS
A. F. Petrocelli
Mr. Petrocelli and the Company executed an employment agreement dated as of
September 14, 1998 (the "Agreement") under which Mr. Petrocelli agreed to serve
as President and Chief Executive Officer of the Company. The Agreement provides
for an initial term of three (3) years and renews automatically thereafter for
one year unless either party elects not to renew it. The Agreement provides for
an annual base salary of $700,000, a discretionary annual bonus based on the
attainment of performance objectives set by the Compensation Committee, a life
insurance policy in an amount equal to $2,000,000, an automobile and other
customary welfare and fringe benefits. The Agreement also provides that, to the
extent payments made by the Company for life insurance or use of an automobile
are subject to federal, state or local taxes, the Company will pay Mr.
Petrocelli the amount of such additional taxes plus such additional amount as
will be reasonable to hold him harmless from the obligation to pay such taxes.
Pursuant to the Agreement, Mr. Petrocelli was granted a stock option on
October 14, 1998 to purchase 1,750,000 shares of Common Stock, having a term of
10 years. The per share exercise price for the option is $5.91, which represents
the fair market value of the Common Stock as of October 14, 1998. The option
will vest in two tranches. Tranche A covers 1,000,000 shares of Common Stock and
will vest and become
12
exercisable in increments of 200,000 shares on each anniversary from the date of
grant beginning September 14, 1999 through September 13, 2003. Tranche B covers
750,000 shares of Common Stock and will vest and become exercisable upon the
earlier of September 14, 2006 or the attainment of the following price targets
for the Company's Common Stock: (i) 250,000 shares on the date that the closing
price for the Common Stock on the New York Stock Exchange reaches or exceeds $20
per share; (ii) 250,000 shares on the date that the closing price for the Common
Stock on the New York Stock Exchange reaches or exceeds $25 per share; and (iii)
250,000 shares on the date that the closing price for the Common Stock on the
New York Stock Exchange reaches or exceeds $30 per share. All vesting is
contingent on Mr. Petrocelli's continuing status as an employee on the vesting
date.
The Agreement may be terminated by the Company at any time, with or without
cause. If the Agreement is terminated by the Company prior to the expiration of
the three year term without cause, or if Mr. Petrocelli resigns because of
circumstances amounting to constructive termination of employment, severance
would be paid in a single lump sum equal to one year's base salary, or, if
greater, the base salary that would have been payable over the remainder of the
term and benefits would be continued for the greater of one year or the
remainder of the term. Any bonus awarded for the year would not be prorated. In
addition, if Mr. Petrocelli is terminated without cause or if at the end of the
three year period the Agreement is not renewed by the Company for any additional
period, the unvested portion of Tranche A of the option shall become immediately
fully vested. If the Agreement is terminated by the Company for cause (as such
term is defined in the Agreement) or if Mr. Petrocelli resigns under
circumstances not amounting to a constructive termination of employment, no
benefits are payable other than accrued but unpaid salary and any unpaid bonus
earned but unpaid prior to such termination or resignation.
CHANGE IN CONTROL AGREEMENTS
The Company has executed change in control agreements with eight of the
Company's employees, including certain of its named executive officers. Five of
the agreements provide that, if within two years of a change in control of the
Company, the employee's employment with the Company is terminated by the Company
without cause or if the employee resigns for good reason (as defined in the
agreements), the Company will pay the employee two and one-half times the
aggregate cash compensation earned by the employee during the fiscal year
immediately preceding the termination of employment. Such payments are to be
reduced, however, to the extent necessary to avoid characterization as "excess
parachute payments" within the meaning of Section 280G of the Internal Revenue
Code. In addition, any outstanding options to purchase shares of the Company
held by the employee will vest and become exercisable as of the date of the
change in control. The agreement with one employee contains identical terms
except that it provides for the payment of one and one-half times the aggregate
cash compensation. The agreements with the remaining two employees provide for a
payment equaling the greater of 2 weeks salary for each full year of employment
or 6 months salary.
COMPENSATION AND AUDIT COMMITTEE REPORT ON EXECUTIVE COMPENSATION
All members of the Compensation and Audit Committee are independent,
non-employee Directors.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Petrocelli and the Company are parties to an employment agreement dated
as of September 14, 1998 (the terms of which are more fully described under the
heading herein entitled "Employment Agreements"). The employment agreement
provides for an annual base salary of $700,000 and an option grant covering
1,750,000 shares of Common Stock. In order to incentivise Mr. Petrocelli to
increase shareholder value, early vesting with respect to 750,000 shares of the
option is tied to the attainment of certain price targets for the Common Stock.
The bonus earned by Mr. Petrocelli in 2001 was based on the overall performance
of the Company. In determining the amount of such bonus, the Compensation and
Audit Committee made a subjective determination based on Mr. Petrocelli's
contributions to the Company performance during the year.
13
COMPENSATION POLICIES
The Company's compensation policy with respect to all executive officers
(including the Chief Executive Officer) is designed to help the Company achieve
its business objectives by:
- setting levels of compensation designed to attract and retain qualified
executives in a highly competitive business environment;
- providing incentive compensation that is directly linked to both the
Company's financial performance and individual initiative and achievement
contributing to such performance; and
- linking compensation to improvements in the Company's annual and
long-term share performance.
The Compensation and Audit Committee did not increase the base salaries for
the executive officers for 2002 nor were bonuses granted to any executive
officer other than the President and C.E.O. whose bonus was paid pursuant to his
employment agreement.
As a part of the Company's policy to provide incentive compensation that is
directly linked to long-term share performance, the Compensation and Audit
Committee granted to its executive officers during fiscal year 2001, options to
purchase an aggregate of 3,106,133 shares of Common Stock pursuant to the
Company's 1995 Employee Stock Option Plan.
POLICY REGARDING SECTION 162(m)
Section 162(m) of the Internal Revenue Code imposes a one million dollar
ceiling on tax-deductible remuneration paid to each of the Chief Executive
Officer and the four next most highly compensated executive officers of a
publicly-held corporation. The limitation does not apply to qualified
"performance based" remuneration payable solely on account of the attainment of
one or more performance goals approved by an independent compensation committee,
nor to compensation attributable to certain options granted under
shareholder-approved stock option plans. The 1995 Employee Stock Option Plan is
structured to comply with this exception. All compensation paid to the executive
officers, other than to Mr. Petrocelli, for the Company's 2001 fiscal year was
fully deductible. While the Company intends to maximize the deductibility of
compensation to its executive officers, the Company also believes that it is
important to maintain the flexibility to take action with respect to
compensation it considers in the best interest of the Company and its
stockholders, which are necessarily based on considerations in addition to
Section 162(m). In 2001, in keeping with its goal of attracting and retaining
only the most highly qualified management personnel and taking into
consideration the extremely competitive environment for management talent, the
Company paid a bonus to Mr. Petrocelli in recognition of his outstanding
contributions to the Company, a part of which will not be deductible.
COMPENSATION AND AUDIT COMMITTEE
HOWARD M. LORBER (CHAIRMAN)
Lawrence N. Friedland
Herbert Lust, II
COMPENSATION AND AUDIT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Audit Committee for the fiscal year
2001 were Howard M. Lorber (Chairman), Lawrence N. Friedland, and Herbert Lust,
II. Mr. Lorber has certain business relationships with the Company, which are
described under the heading "Certain Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. F. Petrocelli, President, Chief Executive Officer and Chairman of the
Board of Directors of the Company, is also the Chairman of the Board and Chief
Executive Officer of United Capital Corp., and Howard M. Lorber, a Director of
the Company, is a Director of United Capital Corp. In March 1994, the
14
Company entered into management agreements with the corporate owners of two
hotels who are affiliates of United Capital Corp. The Company received
approximately $121,000 in management fees for the fiscal year ended 2001.
The Company has retained Willkie Farr & Gallagher as its legal counsel
involving certain matters during its last fiscal year and anticipates it will
continue such relationship with the firm in this fiscal year. Mr. Nusbaum, a
Director of the Company, is the Chairman of the firm.
Hallman & Lorber Associates, Inc. provided insurance services to the
Company during its last fiscal year, for which Hallman & Lorber received certain
commissions. The Company anticipates it will continue such relationship in this
fiscal year. Howard M. Lorber, a Director of the Company and Chairman of the
Company's Compensation and Audit Committee, is Chairman of the Board of
Directors and Chief Executive Officer of Hallman & Lorber Associates, Inc.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors, executive officers, and persons who own more
than ten percent of the Common Stock, to file reports of beneficial ownership
with the SEC, the New York Stock Exchange and the Company. Specific filing dates
for these reports have been established by the SEC, and the Company is required
to disclose in this proxy statement any failure by such persons to file these
reports during the 2001 year. Based solely upon its review of the copies of such
forms received by it, the Company believes that, during fiscal year 2001, all
filing requirements applicable to such persons were complied with.
PERFORMANCE GRAPH
The SEC requires the Company to present a graph comparing the cumulative
total stockholder return on its Common Stock with the cumulative total
stockholder return (a) of a broad equity market index and (b) of a published
industry index or peer group. The following graph compares the Common Stock with
(a) the Dow Jones Industrial Average and (b) the Dow Jones U.S. Lodging Index.
For the fiscal year ended December 31, 2001, the Company is using the Dow Jones
Industrial Average and the Dow Jones U.S. Lodging Index. The following graph
assumes an investment of $100 on January 1, 1996 in each of the Common Stock,
the stocks comprising the Dow Jones Industrial Average and the Dow Jones U.S.
Lodging Index.
COMPARISON OF 1997 THROUGH 2001 CUMULATIVE TOTAL RETURN
LOGO
<Table>
<Caption>
- --------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
Company $100 $126 $ 67 $ 55 $ 72 $ 69
Stock Index $100 $123 $142 $178 $167 $155
Industry Group
Index $100 $137 $105 $103 $105 $105
</Table>
15
FINANCIAL STATEMENTS
The Company's annual report to stockholders for the year ended December 31,
2001, including audited financial statements, is being mailed to stockholders
concurrently with this Proxy Statement. The annual report is on file with the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 and the New York Stock
Exchange.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 (excluding exhibits) is available without charge to any
stockholder of the Company who requests a copy in writing. Requests for copies
of the Report should be directed to the Secretary, Prime Hospitality Corp., 700
Route 46 East, Fairfield, New Jersey 07004.
STOCKHOLDER PROPOSALS
It is presently anticipated that the 2003 Annual Meeting will be held on or
about May 22, 2003. Proposals of stockholders submitted for consideration at the
2003 annual meeting of stockholders must be received by the Company not later
than December 16, 2002 in order to be included in the Company's proxy statement
for that meeting. A stockholder desiring to submit a proposal must be a record
or beneficial owner of at least 1% of the outstanding shares or $2,000 in market
value of shares entitled to be voted at the annual meeting and must have held
such shares for at least one year. Further, the stockholder must continue to
hold such shares through the date on which the meeting is held. Documentary
support regarding the foregoing must be provided along with the proposal. There
are additional requirements regarding proposals of the stockholders, and a
stockholder contemplating submission of a proposal is referred to Rule 14a-8
promulgated under the Exchange Act. If a stockholder proposal is introduced in
the 2003 Annual Meeting without any discussion of the proposal in our proxy
statement, and the stockholder does not notify us on or before the time required
by SEC Rule 14a-4(c)(1) of the intent to raise such proposal at the annual
general meeting of stockholders, then proxies received by the Company for the
2003 Annual Meeting will be voted by the persons named as such proxies in their
discretion with respect to such proposal. Notice of such proposal is to be sent
to the above address.
In addition, the bylaws of the Company require, among other things, that
notice of proposals of stockholders be delivered to or mailed and received at
the principal executive offices of the Company not less than fifty (50) days nor
more than seventy-five (75) days prior to the meeting; provided, however, that
in the event that less than sixty-five (65) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the fifteenth (15th) day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made, whichever
first occurs.
By Order of the Board of Directors,
/s/ Douglas W. Vicari
DOUGLAS W. VICARI
Secretary
16
PRIME HOSPITALITY CORP.
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING ON MAY 23, 2002
The undersigned hereby constitutes and appoints A. F. Petrocelli and
Douglas W. Vicari, and each of them, his true and lawful agents and proxies with
full power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of Prime Hospitality Corp. (the "Company") to be held at
the Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey 07004, on Thursday,
May 23, 2002, at 10:00 a.m., and any adjournments thereof, on all matters coming
before said meeting, with all powers which the undersigned would possess if
personally present.
(CONTINUED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
PRIME HOSPITALITY CORP.
MAY 23, 2002
Please Detach and Mail in the Envelope Provided
A /X/ Please mark your
votes as in this
example.
FOR WITHHELD
all nominees all nominees NOMINEES:
listed at right listed at right
1. ELECTION A. F. Petrocelli
OF TWO Douglas W. Vicari
CLASS I DIRECTORS / / / /
FOR, EXCEPT VOTE WITHHELD FROM
THE FOLLOWING NOMINEE:
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ELECTION OF
THE TWO NOMINEES.
2. APPROVAL TO AMEND THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
For amendment / /
Against amendment / /
Abstain / /
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
3. RATIFICATION OF INDEPENDENT AUDITORS.
For ratification of Ernst & Young LLP to serve as the Company's independent
auditors for the year ending December 31, 2002. / /
Withhold authority to ratify Ernst & Young LLP / /
Abstain / /
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF ERNST &
YOUNG LLP AS THE INDEPENDENT AUDITORS.
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting. You are encouraged to specify your
choices by marking the appropriate boxes, but you need not mark any boxes if you
wish to vote in accordance with the Board of Directors' recommendations. The
Proxy cannot vote your shares unless you sign and return this card in the
enclosed postage prepaid envelope.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF THIS PROXY IS EXECUTED AND RETURNED BUT NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED (i) FOR THE TWO NOMINEES, (ii) FOR THE APPROVAL OF THE AMENDMENT TO THE
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND (iii) FOR THE RATIFICATION OF
THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE YEAR ENDED DECEMBER 31, 2002.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Signature_______________________ Signature if held jointly___________________ Date_______________, 2002
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, guardian, or
corporate executer, please give full title as such.