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)
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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.
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PRIME HOSPITALITY CORP.
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
April 20, 2004
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Prime Hospitality Corp. (the "Company") to be held on May 20, 2004, at 10:00
a.m., at the Prime Hotel & Suites, 690 Route 46 East, Fairfield, New Jersey
07004. This year we are asking you to elect two Class III Directors of the
Company to serve until the 2007 Annual Meeting of Stockholders THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE TWO NOMINEES.
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 20, 2004
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To the Stockholders of
Prime Hospitality Corp.:
The Annual Meeting of Stockholders of Prime Hospitality Corp. (the
"Company") will be held on May 20, 2004, at 10:00 a.m., at the Prime Hotel &
Suites, 690 Route 46 East, Fairfield, New Jersey 07004 for the following
purposes:
1. To elect two Class III Directors of the Company to serve until the
2007 Annual Meeting of Stockholders; and
2. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The close of business on April 7, 2004 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting or any adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting. If you
do not expect to be present, please promptly complete, sign and date the
enclosed proxy and mail it in the enclosed postage prepaid envelope. If you
attend the Annual Meeting, you may revoke your proxy and vote your shares in
person.
The Company's Proxy Statement is submitted herewith. The Board of Directors
recommends that you vote FOR the two Nominees.
The Company's Annual Report for the fiscal year ended December 31, 2003,
including financial statements, is also enclosed.
By Order of the Board of Directors,
(-s- JOSEPH BERNADINO)
JOSEPH BERNADINO
Secretary
Fairfield, New Jersey
April 20, 2004
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 20, 2004
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 20, 2004, at 10:00 a.m., at the Prime
Hotel & Suites, 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 7, 2004 (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, and
the accompanying form of proxy, together with the Company's Annual Report for
the fiscal year ended December 31, 2003, are being mailed to stockholders on or
about April 20, 2004.
As of the Record Date, there were 44,958,019 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, AND (II) IN ACCORDANCE WITH THE PROXY HOLDER'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 the
proposal 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.
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 23, 2002, Class II Directors were
elected at the Annual Meeting held on May 22, 2003 and Class III Directors were
elected at the Annual Meeting held on May 24, 2001.
Election for two Class III Directors will be held at the Annual Meeting on
May 20, 2004. On June 26, 2003, Douglas Vicari resigned as director. The Board
anticipates filling the Class I vacancy resulting from Mr. Vicari's resignation
promptly in accordance with the Company's bylaws. The persons named in the
accompanying proxy will vote all shares for which they have received proxies for
the election of Howard M. Lorber and Richard Szymanski as Class III 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE TWO NOMINEES FOR DIRECTORS.
NOMINEES TO SERVE AS CLASS III DIRECTORS WHOSE TERMS EXPIRE AT THE 2007 ANNUAL
MEETING OF STOCKHOLDERS
<Table>
Howard M. Lorber..................... Howard M. Lorber, age 55, 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. Mr.
Lorber has been Chairman of the Board of Directors of
Hallman & Lorber Associates, Inc. for more than the past
five years, and until January 1, 1999 he was Chief Executive
Officer of Hallman & Lorber Associates, Inc. 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.
Richard Szymanski.................... Richard Szymanski, age 46, has been a Director of the
Company since February 10, 2004, Senior Vice President and
Chief Financial Officer since August 5, 2003 and a Vice
President for more than five years.
</Table>
2
CLASS I DIRECTORS WHOSE TERMS EXPIRE AT THE 2005 ANNUAL MEETING OF STOCKHOLDERS
<Table>
A. F. Petrocelli..................... A. F. Petrocelli, age 60, 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.
</Table>
CLASS II DIRECTORS WHOSE TERMS EXPIRE AT THE 2006 ANNUAL MEETING OF STOCKHOLDERS
<Table>
Lawrence N. Friedland................ Lawrence N. Friedland, age 81, 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.
Richard Reitman...................... Richard Reitman, age 66, has been a Director of the Company
and a member of the Compensation and Audit Committee since
2003. Mr. Reitman has been a partner in the certified public
accounting firm of Reitman and Reitman since 1963. Mr.
Reitman also serves on the Board of Directors for Kobrand
Corporation, Maison Louis Jadot, Demaine Carneros, Ltd., St.
Francis Winery & Vineyards, Inc. and L. & L. SAS.
Allen S. Kaplan...................... Allen S. Kaplan, age 54, has been a Director of the Company
since 2001 and a member of the Compensation and Audit
Committee since 2002. 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. The Charter of the Audit Committee is attached as an
exhibit to this proxy statement.
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.
The Board of Directors held 5 meetings during 2003. Each member of the
Board of Directors attended 100% of the aggregate number of meetings of the
Board of Directors and all committees of the Board of Directors on which such
member served. The Board of Directors expects all Directors to attend regularly
scheduled meetings and the Annual Meeting, unless there are extenuating
circumstances. All Directors attended the 2003 Annual Meeting.
3
COMPENSATION AND AUDIT COMMITTEE
The Compensation and Audit Committee presently consists of four
non-employee Directors: Messrs. Lorber (Chairman), Friedland, Reitman and
Kaplan. During 2003, the Committee held 4 meetings.
As part of its compensation oversight, the Committee administers the
Company's 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, 2003.
- Discussed with the independent auditors the matters required to be
discussed by Statement of Auditing Standards No. 61, Codification of
Statements on Auditing Standards AU Sec. 380, as amended, by the Auditing
Standards Board of the American Institute of Certified Public
Accountants.
- Received 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 Board of Directors have adopted a
written charter for the Compensation and Audit Committee.
Submitted by:
COMPENSATION AND AUDIT COMMITTEE
Howard M. Lorber (Chairman)
Lawrence N. Friedland
Richard Reitman
Allen S. Kaplan
CORPORATE GOVERNANCE
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics that applies
to its directors and executive officers. The Code of Ethics is available free of
charge on our website http://www.primehospitality.com. We intend to disclose any
amendments to or waivers of our Code of Ethics by posting such information on
our website.
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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee is comprised of Messrs.
Lorber, Friedland, Reitman and Kaplan. The Nominating and Corporate Governance
Committee was formed in April 2004. The Company did not have a Nominating and
Corporate Governance Committee during the year ended December 31, 2003. Each
committee member meets the independence requirements of the New York Stock
Exchange. The Nominating and Corporate Governance Committee is responsible for
identifying individuals qualified to become members of the Board of Directors,
recommending director nominees for the annual meeting of stockholders,
overseeing the evaluation of the Board of Directors and management, developing
and maintaining a set of corporate governance guidelines and the Company's Code
of Ethics and Business Conduct and generally advising the Board of Directors on
corporate governance and related matters.
The two nominees for Directors included in this proxy statement are all
incumbent Directors (one of whom was appointed by the Board of Directors to fill
a vacancy created by the resignation of a Class III Director) who were
recommended by the Board of Directors in accordance with its past practice.
These recommendations were made prior to the formation of the Nominating and
Corporate Governance Committee. In identifying and evaluating nominees for
Director, the Nominating and Corporate Governance Committee intends to follow a
process similar to that previously followed by the Board of Directors and may
also seek input from various sources, including other members of the Board of
Directors, management, stockholders or third party search firms. In recommending
these nominees, the Board of Directors considered past overall performance and
overall qualifications to serve on the Board of Directors. The Board of
Directors considered the additional criteria set forth in the Company's
Corporate Governance Guidelines, a copy of which is available on the Company's
website at http://www.primehospitality.com. These Corporate Governance
Guidelines set forth the general qualifications and criteria that will also be
considered by the Nominating and Corporate Governance Committee in recommending
nominees to the Board of Directors for election or re-election, as the case may
be. Other than complying with all applicable rules and regulations, the Company
does not have any specific, minimum qualifications that it believes must be met
by a nominee for a position on the Board of Directors. Instead, the Nominating
and Corporate Governance Committee and the Board of Directors will try to ensure
an appropriate composition of the Board of Directors by assessing each nominee's
qualities in light of the specific needs of the Company.
Although the Company has not received any director nominations from its
stockholders, the Nominating and Corporate Governance Committee will consider
all nominees in the same manner, regardless of whether they are recommended by
stockholders or a member of the Board of Directors or are recommended for re-
election. Additional information regarding the Nominating and Corporate
Governance Committee's policies and procedures (including with respect to
handling stockholder nominees) is set forth in the Company's Nominating and
Corporate Governance Committee Charter, a copy of which is available on the
Company's website at http://www.primehospitality.com. The Company did not pay
any fees during fiscal year 2003 to any third parties to identify or assist in
identifying or evaluating nominees.
STOCKHOLDER COMMUNICATIONS
Stockholders who wish to communicate with a member or members of the Board
of Directors or Board Committee, may do so by addressing their correspondence to
the Board member or members or Board Committee, c/o the Secretary, Prime
Hospitality Corp., 700 Route 46 East, Fairfield, New Jersey 07004. The Company
will forward all stockholder correspondence about the Company to the Board,
committee or individual Director, as appropriate. This process has been approved
by the independent Directors of the Company.
5
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..................... 60 President, Chief Executive Officer and Chairman of the
Board of Directors
Richard T. Szymanski................. 46 Director, Senior Vice President and Chief Financial
Officer
Stephen M. Kronick................... 49 Senior Vice President/Hotel Operations
Vito Stellato........................ 51 Senior Vice President/Human Resources
Jeffrey T. Williams.................. 57 Senior Vice President/Franchise Sales and Development
John Capone.......................... 53 Senior Vice President/Hotel Operations
Maureen O'Hanlon..................... 53 Senior Vice President/Sales and Marketing
Arthur Manso......................... 51 Senior Vice President/Purchasing
Terry O'Leary........................ 48 Senior Vice President/Business Development
</Table>
The following is a biographical summary of the experience of the executive
officers of the Company, other than Messrs. Petrocelli and Szymanski who are
described above.
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 one year.
Vito Stellato has been a Senior Vice President of the Company since 2003.
In 2002, he was a Principal of Turtle Creek Consulting Group, LLC. From
1998-2001, he was Senior Vice President of Human Resources for La Quinta Inns,
Inc.
Jeffrey T. Williams was 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. Mr. Williams resigned from the
Company on April 5, 2004.
John Capone has been a Senior Vice President for Hotel Operations since
January 2004. Prior to that, he was a Vice President of Operations since
February, 2003 and a Regional Vice President of Operations from April 1999 until
February 2003.
Maureen O'Hanlon has been a Senior Vice President of the Company since May
2003. From 2001 to 2003 she held the position of Managing Partner of Marketing
Arts Org. Prior to that she was a Senior Vice President of Carlson Companies
from 1984 to 2001.
Arthur Manso has been a Senior Vice President of the Company since October
2003 and a Vice President of Purchasing from May 2002 to October 2003. Prior to
that, he was an Executive Director of Purchasing for Mirage Resorts, Inc., Las
Vegas Nevada from 1998 to 2001. Between 2001 and 2002 Mr. Manso was an outside
consultant.
Terry O'Leary was a Senior Vice President of the Company since 1998. Mr.
O'Leary resigned from the Company on February 5, 2004.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of April 7, 2004, the most recent practicable date, 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 44,958,019 shares
outstanding as of April 7, 2004, the most recent practicable date. 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
6
not such person has any pecuniary interest in such shares or the 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 OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS(L)
- ------------------------------------ ------------ ----------
A. F. Petrocelli(a)......................................... 6,659,697 14.81%
Richard Szymanski(b)........................................ 126,279 *
Lawrence N. Friedland(c).................................... 71,000 *
Allen S. Kaplan(d).......................................... 30,000 *
Howard M. Lorber(e)......................................... 185,000 *
Richard Reitman(f).......................................... 10,000 *
Stephen M. Kronick(g)....................................... 107,081 *
John Capone(h).............................................. 7,500 *
Arthur Manso(i)............................................. 4,000 *
Maureen O'Hanlon............................................ 0 *
Vito Stellato............................................... 0 *
Jeffrey T. Williams......................................... 0 *
Terry O'Leary............................................... 7,200,557 16.02%
</Table>
- ---------------
* Less than 1.0%.
(a) Includes 45,000 shares owned by Mr. Petrocelli and 3,539,697 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. Mr. Petrocelli expressly disclaims beneficial ownership
of the shares directly held by United Capital Corp. Also includes options
held by Mr. Petrocelli to purchase 3,075,000 shares at an exercise price of
$9.31 per share as to 10,000 shares, $10.00 per share as to 65,000 shares,
$5.91 per share as to 1,000,000 shares and $9.12 as to 2,000,000 shares.
(b) Includes 2,280 shares owned by Mr. Szymanski. Also includes options to
purchase 123,999 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 35,000
shares, $9.16 per share as to 31,000 shares, $8.60 as to 12,666 shares, and
$8.445 per share as to 6,333 shares.
(c) 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 60,000 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, $12.01 per share as to 10,000 shares, $12.49 as
to $10,000 shares and $6.35 as to 10,000 shares.
(d) Consists of options held by Mr. Kaplan to purchase 30,000 shares at an
exercise price of $12.01 per share as to $10,000 shares, $12.49 as to
10,000, and $6.35 as to 10,000 shares.
(e) Includes 90,000 shares owned by Mr. Lorber. Also includes options to
purchase 95,000 shares with an exercise price of $9.31 per share as to
10,000 shares, $10.00 per share as to 65,000 shares, $12.49 as to $10,000
shares, and $6.35 as to 10,000.
(f) Consists of options held by Mr. Reitman to purchase 10,000 shares at an
exercise price of $6.35 per share.
(g) Includes 82 shares owned by Mr. Kronick. Also includes options to purchase
106,999 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 21,000
shares, $9.16 per share as to 31,000 shares, $8.60 as to 12,666 shares, and
$8.445 as to 6,333 shares.
7
(h) Consists of options to purchase 7,500 shares with an exercise price of
$4.72 per share as to 1,500 shares, $11.25 per share as to 1,500 shares,
$9.16 per share as to 2,700, $8.60 per share as to 1,200 shares and $8.445
per share as to 600 shares.
(i) Consists of options to purchase 4,000 shares with an exercise price of
$8.445 per share as to 4,000 shares.
(j) With the exception of Mr. A.F. Petrocelli, who beneficially owns 14.76% 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 15.97% of the outstanding Common Stock as a
group. Percentages were based on 44,958,019 shares outstanding as of April
7, 2004, the most recent practicable date.
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 7, 2004, the most recent
practicable date. Percentages are based on 44,958,019 shares outstanding as of
such date.
<Table>
<Caption>
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------ ------------ --------
Dimensional Fund Advisors Inc.(a)........................... 3,136,700 6.98%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
A.F. Petrocelli(b).......................................... 6,659,697 14.81%
c/o United Capital Corp.
9 Park Place
Great Neck, New York 11021
United Capital Corp(b)...................................... 3,539,697 7.87%
9 Park Place
Great Neck, New York 11021
Massachusetts Financial Services Company(c)................. 2,303,330 5.12%
500 Boylston St.
Boston, MA 02116
AXA Financial Services, Inc.(d)............................. 3,208,638 7.14%
1290 Avenue of the Americas
New York, NY 10104
</Table>
- ---------------
(a) Dimensional Fund Advisors Inc. filed a Schedule 13G dated February 6, 2004
with the SEC reporting ownership of 3,136,700 shares of Common Stock, with
sole voting and dispositive power with respect to all such shares.
(b) A.F. Petrocelli may be deemed to beneficially own 6,659,697 shares of Common
Stock, with sole voting and dispositive power with respect to 3,120,000
shares and shared voting and dispositive power with respect to 3,539,697
shares. Inclusive in these shares are 3,539,697 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.
(c) Massachusetts Financial Services Company filed a Schedule 13G dated February
11, 2004 with the SEC reporting ownership of 2,303,330 shares of Common
Stock, with sole voting power with respect to 2,270,530 shares and sole
dispositive power with respect to 2,303,330 shares.
(d) AXA Financial, Inc., AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle and AXA Courtage Assurance Mutuelle together filed a joint Schedule
13G dated February 13, 2004 with the SEC reporting beneficial ownership of
these shares of Common Stock. According to this Schedule 13G, (i) AXA
Financial reported beneficial ownership of an aggregate of 2,283,638 of such
shares, 2,002,871 of which it reported sole voting power, 24,650 of which it
reported shared voting power, and 2,283,638 of
8
which it reported sole dispositive power, and (ii) each of AXA Assurances
I.A.R.D., AXA Assurances Vie and AXA Courtage reported beneficial ownership
of all of such shares, 2,741,771 of which it reported sole voting power,
24,650 of which it reported shared voting power, 2,283,638 of which it
reported sole dispositive power and 925,000 of which it reported shared
dispositive power.
ITEM 2. 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.
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, 2003, 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 the named
executive officers for the years ended December 31, 2003, 2002 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......................... 2003 $713,461 $700,000 0 $ 18,960(1)
President and Chief 2002 700,000 700,000 0 9,091
Executive Officer 2001 700,000 700,000 3,000,000 8,791
Douglas W. Vicari........................ 2003 120,831 108,873 0 314,111(2)
Former Officer 2002 200,671 108,873 19,000 136,598
2001 203,339 0 19,000 3,797
Richard T. Szymanski..................... 2003 190,210 100,776 7,000 6,425(3)
Senior Vice President and 2002 185,878 100,776 19,000 136,459
Chief Financial Officer 2001 181,185 0 19,000 3,529
Chester Reed............................. 2003 168,162 74,823 12,000 50,099(4)
Former Officer 2002 137,307 25,000 19,000 1,601
2001 0 0 0 0
Jeffrey T. Williams...................... 2003 178,365 0 12,000 59,612(5)
SVP, Franchise Sales and Development 2002 177,782 0 19,000 78,457
2001 88,492 0 4,800 33,776
Stephen M. Kronick....................... 2003 162,696 86,198 12,000 2,373(6)
SVP, Full Service Operations 2002 157,661 86,198 19,000 82,150
2001 154,978 0 19,000 2,104
Terry O'Leary............................ 2003 143,161 0 12,000 52,455(7)
Senior Vice President Development 2002 138,799 0 19,000 50,771
2001 140,459 0 19,000 150,243
</Table>
- ---------------
(1) Represents $2,000 related to 401k matching contributions and $5,851 for
premiums for Company-provided life insurance and $11,109 for travel
expenses.
(2) Represents $2,000 related to 401k matching contributions and, $180 for
premiums for Company-provided life insurance and $1,750 for travel expenses
and $310,181 for transition pay.
9
(3) Represents $2,000 related to 401k matching contributions, $225 for premiums
for Company-provided life insurance and $4,200 for travel expenses.
(4) Represents $1,190 related to 401k matching contributions, $259 for premiums
for Company-provided life insurance, $8,265 related to the exercise of stock
options and $40, 385 for transition pay.
(5) Represents $56,025 for commissions, $2,000 related to 401k matching
contributions, $1,032 for premiums for Company-provided life insurance and
$555 for travel expenses.
(6) Represents $2,000 related to 401k matching contributions, $360 for premiums
for Company-provided life insurance and $13 for travel expense.
(7) Represents $46,000 for commissions, $1,895 related to 401k matching
contributions, $360 for premiums for Company-provided life insurance and
$4,200 for travel expense.
STOCK OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 2003
The following table sets forth information concerning individual grants of
stock options made during the year ending December 31, 2003 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 FOR
UNDERLYING GRANTED TO EXERCISE OR OPTIONS TERM
OPTIONS EMPLOYEES IN BASE PRICE ----------------------
NAME GRANTED FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
- ---- ---------- ------------ ----------- --------------- --------- ----------
A. F. Petrocelli......... -0- 0% $ -0- N/A $ -0- $ -0-
Douglas Vicari........... -0- 0% -0- N/A -0- -0-
Richard T. Szymanski..... 7,000 2.2% 9.090 10/28/2013 40,017 101,410
Chester Reed............. 12,000 3.7% 9.090 10/28/2013 68,600 173,845
Jeffrey T. Williams...... 12,000 3.7% 9.090 10/28/2013 68,600 173,845
Stephen M. Kronick....... 12,000 3.7% 9.090 10/28/2013 68,600 173,845
Terry O'Leary............ 12,000 3.7% 9.090 10/28/2013 68,600 173,845
</Table>
These stock options vest with respect to one third of the grant on each of
October 28, 2004, 2005 and 2006 and will continue to be exercisable through
October 28, 2013. These options become immediately exercisable upon a change in
control of the Company.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 2003 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- 3,075,000 1,750,000 $6,481,875 $4,302,500
Douglas W. Vicari........ -0- -0- 143,299 19,000 83,810 32,365
Richard T. Szymanski..... -0- -0- 123,999 26,001 76,035 40,135
Chester Reed............. 6,333 8,265 -0- -0- -0- -0-
Jeffrey T. Williams...... -0- -0- 9,533 26,267 16,234 38,111
Stephen Kronick.......... -0- -0- 106,999 31,001 75,435 45,685
Terry O'Leary............ -0- -0- 106,999 31,001 72,320 45,685
</Table>
10
EQUITY COMPENSATION PLAN INFORMATION
<Table>
<Caption>
(C) NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
(A) NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED (B) WEIGHTED-AVERAGE EQUITY COMPENSATION
UPON EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
- ------------- ------------------------ -------------------- ---------------------------
Equity Compensation plans
approved by security
holders................ 1,751,938 $9.46 2,434,000
Equity Compensation plans
not approved by
security holders....... 4,750,000 $7.93 -0-
TOTAL.................... 6,501,938 $8.34 2,434,000
</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, 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.
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 granted under the
Nonqualified Stock Option Agreement, dated October 14, 1998, 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 three of the
Company's executive officers, consisting named executive officers, A. F.
Petrocelli, Richard Szymanski and Stephen Kronick. All 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.
11
COMPENSATION AND AUDIT COMMITTEE REPORT ON EXECUTIVE COMPENSATION
All members of the Compensation and Audit Committee have been determined by
the Board to be independent, as defined by the New York Stock Exchange and the
SEC.
The Board has determined that Mr. Lorber qualifies as an "audit committee
financial expert" as defined by the SEC and, in addition to being independent
according to the Board's independence standards as set out in its Corporate
Governance Guidelines, is independent within the meaning of applicable SEC rules
and the corporate governance rules of the New York Stock Exchange.
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, a bonus 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 2003 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.
Pursuant to a Nonqualified Stock Option Agreement, dated as of October 14,
1998, Mr. Petrocelli was granted a nonqualified stock option to purchase
1,750,000 shares of Common Stock at an exercise price of $5.91 per share, the
fair market value of the Common Stock on the date of grant. This option expires
on October 14, 2008 and is subject to vesting in two tranches. Tranche A covers
1,000,000 shares of Common Stock and will vest and become exercisable in
increments of 200,000 shares on each anniversary from the date of grant
beginning September 14, 1999 through September 13, 2003. Tranche B covers
750,000 shares of Common Stock and will vest and become exercisable upon the
earlier of September 14, 2006 or the attainment of the following price targets
for the Company's Common Stock: (i) 250,000 shares on the date that the closing
price for the Common Stock on the New York Stock Exchange reaches or exceeds $20
per share; (ii) 250,000 shares on the date that the closing price for the Common
Stock on the New York Stock Exchange reaches or exceeds $25 per share; and (iii)
250,000 shares on the date that the closing price for the Common Stock on the
New York Stock Exchange reaches or exceeds $30 per share.
Pursuant to a Nonqualified Stock Option Agreement, dated as of October 23,
2001, Mr. Petrocelli was granted a nonqualified stock option to purchase
3,000,000 shares of Common Stock at an exercise price of $9.115 per share, the
fair market value of the Common Stock on the date of grant. This option expires
on October 23, 2011 and is subject to vesting in three tranches of 1,000,000
shares vesting on each of October 23, 2002, October 23, 2003 and October 23,
2004.
All vesting of Mr. Petrocelli's options is contingent on Mr. Petrocelli's
continuing status as an employee on the applicable vesting date. However, such
vesting is automatically accelerated upon a "Change in Control" (as defined in
the Change of Control Agreement) or upon the Company's non-renewal of Mr.
Petrocelli's employment agreement pursuant to Section 2 of that agreement.
COMPENSATION POLICIES
The Company's compensation policy with respect to all executive officers,
including the named executive officers, 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.
12
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 2003, options to
purchase an aggregate of 103,000 shares of Common Stock pursuant to the
Company's 1995 Employee Stock Option Plan.
POLICY REGARDING SECTION 162(M)
Section 162(m) of the Internal Revenue Code imposes a one million dollar
ceiling on tax-deductible remuneration paid to each of the Chief Executive
Officer and the four next most highly compensated executive officers of a
publicly-held corporation. The limitation does not apply to qualified
"performance based" remuneration payable solely on account of the attainment of
one or more performance goals approved by an independent compensation committee,
nor to compensation attributable to certain options granted under
shareholder-approved stock option plans. The 1995 Employee Stock Option Plan is
structured to comply with this exception. All compensation paid to the executive
officers, other than to Mr. Petrocelli, for the Company's 2003 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 2003, the Company paid a bonus to Mr. Petrocelli, a part of
which will not be deductible.
COMPENSATION AND AUDIT COMMITTEE
HOWARD M. LORBER (CHAIRMAN)
Lawrence N. Friedland
Richard Reitman
Allen Kaplan
COMPENSATION AND AUDIT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Audit Committee for the fiscal year
2003 were Howard M. Lorber (Chairman), Lawrence N. Friedland, Allen Kaplan and
Richard Reitman. Mr. Lorber has certain business relationships with the Company,
which are described under the heading "Certain Relationships and Related
Transactions."
INDEPENDENT AUDITORS
The Compensation and Audit Committee has not yet recommended, and the Board
of Directors has not yet selected, independent auditors to act as independent
public accountants to audit the Company's consolidated financial statements for
the fiscal year ending December 31, 2004, 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
years ended December 31, 2003 and 2002. The Company will be soliciting bids from
a number of nationally recognized independent auditing firms, including Ernst &
Young LLP, so that it can obtain the most competitive price for those services.
Fees for professional services provided by our independent auditors in each
of the last two fiscal years, in each of the following categories were:
<Table>
<Caption>
2003 2002
-------- ----------
Audit Fees(1)............................................... $175,000 $ 175,000
Audit Related Fees(2)....................................... $ 78,500 $ 81,000
Tax Fees(3)................................................. $ 57,640 $ 262,000
All Other Fees(4)........................................... $ 3,500 $ 578,900
-------- ----------
$314,640 $1,096,900
</Table>
13
- ---------------
(1) Fees for audit services include fees and expenses associated with the annual
audit and the reviews of the Company's quarterly reports on Form 10-Q.
(2) Audit related fees and expenses principally included the audit of an
employee benefit plan and the audits of certain subsidiaries of the Company.
(3) Tax fees and expenses include a cost segregation study and other tax
services.
(4) All other fees and expenses include services provided to assist the Company
in selecting a new financial and operational software package, to design new
business processes and provide project management oversight of the software
implementation in 2002.
All audit and non audit services provided by Ernst & Young, LLP were
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.
At the beginning of each fiscal quarter, the Compensation and Audit
Committee pre-approves all fees and specific terms of the audit and permissible
non-audit services to be performed for the Company by its independent auditor
during the quarter. The full Compensation and Audit Committee reconvenes in
response to any requests or applications to provide services that have not been
previously approved at the beginning of the relevant quarter or have been
approved but exceed the pre-approved fee range for such services. The
Compensation and Audit Committee also has the authority to delegate its
pre-approval authority to one or more of its members. Additionally, the
Compensation and Audit Committee has designated the Chief Financial Officer to
monitor the performance of the services provided by the independent auditor
during each quarter, to determine whether the independent auditor's services are
in compliance with the Compensation and Audit Committee's pre-approval policies
and to report his findings to the Audit Committee.
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.
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. Mr. Petrocelli also holds
approximately 70% of the outstanding shares of capital stock of United Capital
Corp. In March 1994, the Company entered into management agreements with the
corporate owners of two hotels who are affiliates of United Capital Corp. The
Company received an aggregate of approximately $96,614.00 in management fees for
the fiscal year ended 2003.
In December 2002, Prime-Meadowlands, L.L.C., a wholly owned subsidiary of
the Company, and AFP Eighteen Corp., an indirect wholly owned subsidiary of
United Capital Corp., entered into an operating agreement pursuant to which
Prime-Meadowlands and AFP Eighteen formed East Rutherford Group, L.L.C. At that
time, both Prime-Meadowlands and AFP Eighteen Corp. held 50% of the outstanding
equity interests of East Rutherford Group. In December 2002, East Rutherford
Group acquired the Sheraton Meadowlands Hotel and Conference Center in East
Rutherford, New Jersey. Simultaneously with this acquisition, East Rutherford
Group entered into a management agreement with the Company pursuant to which the
Company manages the operation of the Sheraton Meadowlands Hotel. Under this
management agreement, the Company is entitled to a management fee equal to 2% of
the gross revenues of the Sheraton Meadowlands Hotel, an accounting services fee
of $1,000 per month and reimbursement for all of its ordinary course expenses.
This management agreement expires in December 2007. In March of 2003,
Prime-Meadowlands and AFP Eighteen Corp. each sold a ten percent interest in the
company to Ark Meadowlands, Inc., decreasing each of their equity interests in
the hotel to 40%.
In January 2003, Quebec City, Inc., a wholly owned subsidiary of the
Company, and AFP Nineteen Corp., an indirect wholly owned subsidiary of United
Capital Corp., entered into an operating agreement
14
pursuant to which Quebec City and AFP Nineteen formed 3072929 Nova Scotia
Company. At that time, Quebec City and AFP Nineteen held 50% of the outstanding
equity interests of 3072929 Nova Scotia Company. In January 2003, 3072929 Nova
Scotia Company acquired the Quebec City Holiday Inn Select in Quebec City,
Canada. Pursuant to the operating agreement, Quebec City agreed to asset manage
the operation of the Quebec City Holiday Inn Select. Under this agreement, the
Company is entitled to an asset management fee equal to 1% of the gross revenues
of the Quebec City Holiday Inn Select and reimbursement for all of its ordinary
course expenses. In March of 2003, Quebec City, Inc. and AFP Nineteen Corp. each
sold a ten percent interest in the company to Ark Quebec, Inc., decreasing each
of their equity interests in the hotel to 40%.
The Company has retained Willkie Farr & Gallagher LLP 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, who
was a Director of the Company from January 1 through May 22, 2003, 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 of Hallman & Lorber Associates, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 2003 year. Based solely upon its review of the copies of such
forms received by it, the Company believes that, during fiscal year 2003, 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, 2003, 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, 1998 in each of the Common Stock,
the stocks comprising the Dow Jones Industrial Average and the Dow Jones U.S.
Lodging Index.
15
COMPARISON OF 1998 THROUGH 2003 CUMULATIVE TOTAL RETURN
[LINE GRAPH]
<Table>
<Caption>
- --------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------
Company $100 $ 83 $109 $104 $77 $ 96
Stock Index $100 $125 $117 $109 $91 $114
Industry Group
Index $100 $ 98 $100 $100 $88 $121
</Table>
FINANCIAL STATEMENTS
The Company's annual report to stockholders for the year ended December 31,
2003, 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, 2003 (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 2005 Annual Meeting will be held on or
about May 19, 2005. Proposals of stockholders submitted for consideration at the
2005 annual meeting of stockholders must be received by the Company not later
than December 22, 2004 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 2004 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
2004 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
16
event that less than sixty-five (65) days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the fifteenth (15th) day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made, whichever
first occurs.
By Order of the Board of Directors,
(-s- JOSEPH BERNADINO)
JOSEPH BERNADINO
Secretary
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PRIME HOSPITALITY CORP.
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PRIME HOSPITALITY FOR THE ANNUAL MEETING ON MAY 20, 2004
The undersigned hereby constitutes and appoints A. F. Petrocelli and Joseph
Bernadino, and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of Prime Hospitality Corp. to be held at the Prime Hotel
& Suites, 690 Route 46 East, Fairfield, New Jersey 07004, on Thursday, May 20,
2004, 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 20, 2004
Please Detach and Mail in the Envelope Provided
A [X] Please mark your votes as in this example.
FOR WITHHELD
ALL ALL NOMINEES:
NOMINEES NOMINEES
LISTED AT LISTED AT
RIGHT RIGHT
1. ELECTION OF TWO CLASS III DIRECTORS [ ] [ ] Howard M. Lorber
Richard Szymanski
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. RATIFICATION OF INDEPENDENT AUDITORS.
For ratification of Ernst & Young LLP to serve as the Company's
independent auditors for the year ending December 31, 2004.
For [ ]
Against [ ]
Abstain
[ ]
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF ERNST & YOUNG LLP AS COMPANY'S 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 ELECTION OF THE TWO NOMINEES TO SERVE AS CLASS III
DIRECTORS AND (ii) FOR THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO
SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDED DECEMBER 31,
2004.
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 _______, 2004
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee, guardian, or
corporate executor, please give full title as such.