-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IQ39EVPy5HSPmUo6TAC4Yh1uZMOo7zGaBYKMwcHOT+14o21MYQfdu/YVN2IMRetJ /jzZ2og/1iY+U2fp6I3Efg== 0000950123-97-002253.txt : 19970319 0000950123-97-002253.hdr.sgml : 19970319 ACCESSION NUMBER: 0000950123-97-002253 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970512 FILED AS OF DATE: 19970318 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIME HOSPITALITY CORP CENTRAL INDEX KEY: 0000080293 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 222640625 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06869 FILM NUMBER: 97558628 BUSINESS ADDRESS: STREET 1: 700 RTE 46 EAST CITY: FAIRFIELD STATE: NJ ZIP: 07004 BUSINESS PHONE: 2018821010 MAIL ADDRESS: STREET 1: 700 RTE 46 EAST CITY: FAIRFIELD STATE: NJ ZIP: 07004 FORMER COMPANY: FORMER CONFORMED NAME: PRIME MOTOR INNS INC DATE OF NAME CHANGE: 19920609 FORMER COMPANY: FORMER CONFORMED NAME: PRIME EQUITIES INC DATE OF NAME CHANGE: 19731120 DEF 14A 1 DEFINITIVE NOTICE AND PROXY 1 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 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 14a-11(c) or 14a-12 Prime Hospitality Corp. - -------------------------------------------------------------------------------- (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)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------ (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------ (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------ (5) Total fee paid: ------------------------------------------------------------------------ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------ (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------ (3) Filing Party: ------------------------------------------------------------------------ (4) Date Filed: ------------------------------------------------------------------------ 2 PRIME HOSPITALITY CORP. 700 ROUTE 46 EAST FAIRFIELD, NEW JERSEY 07004 March 18, 1997 Dear Stockholder: You are cordially invited to attend the Annual Meeting of Stockholders of Prime Hospitality Corp. (the "Company") to be held on May 12, 1997, 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 three Class II Directors of the Company to serve until the year 2000 Annual Meeting of Stockholders, to approve an amendment to the 1995 Employee Stock Option Plan, 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, 1997. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL THREE NOMINEES AND THE PROPOSALS. At the Annual Meeting, the Board of Directors will also report on the Company's affairs and a discussion period will be provided for questions and comments. The Board of Directors appreciates and encourages stockholder participation. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented. Accordingly, we request that you complete, sign, date and promptly return the enclosed proxy in the enclosed postage prepaid envelope in order to make certain that your shares will be represented at the Annual Meeting. Thank you for your cooperation. Sincerely, /s/ David A. Simon DAVID A. SIMON Chairman of the Board of Directors 2 3 PRIME HOSPITALITY CORP. ------------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 12, 1997 ------------------ To the Stockholders of Prime Hospitality Corp.: The Annual Meeting of Stockholders of Prime Hospitality Corp. (the "Company") will be held on May 12, 1997 at 10:00 a.m., at the Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey 07004 for the following purposes: 1. To elect three Class II Directors of the Company to serve until the year 2000 Annual Meeting of Stockholders; 2. To approve an amendment to the 1995 Employee Stock Option Plan; 3. To approve an amendment to the 1995 Non-Employee Director Stock Option Plan; 4. To ratify the Board of Directors' selection of Arthur Andersen LLP to serve as the Company's independent auditors for the fiscal year ending December 31, 1997 and 5. To transact such other business as may properly come before the Annual Meeting or any adjournments thereof. The close of business on March 14, 1997 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 all three Nominees and FOR Items 2, 3 and 4. The Company's Annual Report for the fiscal year ended December 31, 1996, including financial statements, is also enclosed. By Order of the Board of Directors, /s/ Joseph Bernadino JOSEPH BERNADINO Secretary Fairfield, New Jersey March 18, 1997 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. 3 4 PRIME HOSPITALITY CORP. 700 ROUTE 46 EAST FAIRFIELD, NEW JERSEY 07004 ------------------ PROXY STATEMENT ------------------ March 18, 1997 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 12, 1997 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 March 14, 1997 (the "Record Date"). Only stockholders of record on the Record Date will be entitled to notice of, and to vote at, the Annual Meeting. Each share of Common Stock outstanding on the Record Date will be entitled to one vote per share on all matters to be voted upon at the Annual Meeting. Stockholders may revoke the authority granted by their execution of proxies at any time prior to their use by filing with the Secretary of the Company a written revocation or duly executed proxy bearing a later date or by attending the Annual Meeting and voting in person. Solicitation of proxies will be made principally through the mails, but additional solicitation may be made by telephone or telegram by the officers or regular employees of the Company without additional compensation. The Company has retained Continental Stock Transfer and Trust Company to assist with the solicitation at an estimated fee of $6,000 plus reimbursement of out-of-pocket expenses. The Company may also enlist the aid of brokerage houses in soliciting proxies. The Company will reimburse bank, broker 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, 1996, are being mailed to stockholders on or about April 10, 1997. As of the Record Date, there were 39,919,839 issued and outstanding shares of Common Stock. THE INTENTION OF THE PERSONS NAMED IN THE PROXY, UNLESS OTHERWISE SPECIFICALLY INSTRUCTED IN THE PROXY, IS TO VOTE ALL PROXIES RECEIVED BY THEM (1) FOR THE ELECTION OF THE THREE NOMINEES NAMED HEREIN TO SERVE AS DIRECTORS FOR THE TERMS SPECIFIED HEREIN AND UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED, (2) FOR APPROVAL OF THE AMENDMENT TO THE 1995 EMPLOYEE STOCK OPTION PLAN, (3) FOR APPROVAL OF THE AMENDMENT TO THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND (4) FOR THE RATIFICATION OF THE BOARD OF DIRECTORS' SELECTION OF ARTHUR ANDERSEN LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. All shares represented by proxy at the Annual Meeting will be voted. If a stockholder specifies a choice as to the matters to be acted upon, the shares will be voted in accordance with the specification. In the event that a quorum is present at the Annual Meeting but sufficient votes to approve any of the proposals are not received, the persons named as proxies may propose one or more adjournments of the Annual Meeting to permit further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of those shares represented at the Annual Meeting in person or by proxy. If a quorum is present, the persons named as proxies will vote those proxies that they are entitled to vote FOR any proposal in favor of an adjournment and will vote those proxies required to be voted AGAINST any such proposal against any adjournment. A stockholder vote may be taken on one or more of the proposals in the Proxy Statement prior to any adjournment if sufficient votes have been received and it is otherwise appropriate. A quorum of stockholders is constituted by the presence in person or by proxy of the holders of a majority of the outstanding Common Stock of the Company entitled to vote at the Annual Meeting. Brokers that do not receive instructions from the beneficial owner or other persons entitled to vote shares are entitled, under the rules of the New York Stock Exchange, to vote for the election of Directors and on each of the proposals. For purposes of determining the presence of a quorum for transacting business at the Annual Meeting, broker "non-votes" 4 5 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 13, 1996. Class II Directors were elected at the Annual Meeting held on May 13, 1994 and Class III Directors were elected at the Annual Meeting held on May 16, 1995. Election for three Class II directors will be held at the Annual Meeting. Herbert Lust, II, Jack H. Nusbaum and Howard M. Lorber have been nominated for election as Class II directors. All three 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 HERBERT LUST, II, JACK H. NUSBAUM AND HOWARD M. LORBER AS CLASS II DIRECTORS, UNLESS AUTHORITY TO DO SO IS WITHHELD. Approval of the nominees requires the affirmative vote of the holders of a plurality 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 II DIRECTORS UNTIL THE 2000 ANNUAL MEETING OF STOCKHOLDERS Herbert Lust, II.............. Herbert Lust, II, age 70, has been a Director since 1992 and Chairman of the Compensation and Audit Committee of the Company since 1993. Mr. Lust was a member of the Committee of Unsecured Creditors of PMI through 1992. Mr. Lust has been a private investor and President of Private Water Supply Inc. for more than the past five years. Mr. Lust is a director of BRT Realty Trust. Jack H. Nusbaum............... Jack H. Nusbaum, age 56, has been a Director since 1994. Mr. Nusbaum is Chairman of the New York law firm of Willkie Farr & Gallagher where he has been a partner for more than the past twenty-five years. He also is a director of Pioneer Companies, Inc., W.R. Berkley Corporation, Strategic Distributions, Inc., The Topps Company, Inc. and Fine Host Corporation. Howard M. Lorber.............. Howard M. Lorber, age 48, has been a Director and a member of the Compensation and Audit Committee since 1994. Mr. Lorber is Chairman of the Board of Directors of Nathan's Famous, Inc. and Hallman & Lorber, Inc., and a director of New Valley Corporation, United Capital Corp. and Alpine Lace Brands, Inc. Mr. Lorber has been Chief Executive Officer of Hallman & Lorber, Inc. for more than the past five years, President and Chief Operating Officer of New Valley Corporation since 1994, and Chief Executive Officer of Nathan's Famous, Inc. since 1987.
5 6 CLASS I DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS David A. Simon................ David A. Simon, age 44, has been President, Chief Executive Officer and a Director since 1992 and Chairman of the Board of Directors of the Company since 1993. Mr. Simon was a director and Chief Executive Officer of Prime Motor Inns, Inc. ("PMI") during 1992. John M. Elwood................ John M. Elwood, age 42, has been a Director and Executive Vice President of the Company since 1992 and Chief Financial Officer since 1993. Mr. Elwood was the Director of Reorganization of PMI during 1992.
CLASS III DIRECTORS WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS Allen J. Ostroff.............. Allen J. Ostroff, age 60, has been a Director since 1992 and a member of the Compensation and Audit Committee since 1993. Mr. Ostroff has been a Managing Director of the Prudential Realty Group, a subsidiary of The Prudential Insurance Company of America, since June 1994 and was a Senior Vice President of the Prudential Realty Group from 1992 to June 1994. A. F. Petrocelli.............. A. F. Petrocelli, age 53, has been a Director since 1992 and a member of the Compensation and Audit Committee since 1993. 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE THREE NOMINEES FOR DIRECTORS. BOARD OF DIRECTORS COMPENSATION AND BENEFITS Directors who are employees of the Company do not receive additional compensation for serving on the Board of Directors. Non-employee Directors receive $30,000 annually. In addition, each non-employee Director receives $1,500 for each Board of Directors meeting attended, $1,500 for each committee meeting attended and $500 for each telephonic meeting if such meeting extends beyond a period of 15 minutes. The Chairman of the Compensation and Audit Committee receives an additional $20,000 annually. The Directors' remuneration is paid quarterly. All Directors are reimbursed for their expenses. In addition, on the date of the Company's Annual Meeting of Stockholders, each non-employee Director receives an automatic grant of options to purchase 10,000 shares of the Company's Common Stock in accordance with the Company's 1995 Non-Employee Director Stock Option Plan. The options vest one year from the date of grant at an option price equal to the mean price of a share of the Company's Common Stock on the New York Stock Exchange for the trading day immediately prior to the date of grant. The Board of Directors held seven meetings during 1996. All members of the Board of Directors attended at least 75% of the aggregate number of meetings of the Board of Directors. COMPENSATION AND AUDIT COMMITTEE The Compensation and Audit Committee consists of four non-employee Directors: Messrs. Lust (Chairman), Petrocelli, Ostroff and Lorber. During 1996, the Committee held three meetings. All members of the Committee attended at least 75% of the aggregate number of Committee meetings. As part of its audit oversight, the Committee meets with representatives of the Company's independent auditors and with representatives of senior management. In addition, the Committee reviews the plans and results of the independent auditors, the scope and results of the Company's internal auditing and procedures and systems of internal accounting and financial control. 6 7 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 non-discretionary annual stock option grants to each non- employee Director. EXECUTIVE OFFICERS OF THE COMPANY Set forth below are the names, ages and positions of the executive officers of the Company:
NAME AGE POSITION - ------------------------------ --- -------------------------------------------------------- David A. Simon................ 44 President, Chief Executive Officer and Chairman of the Board of Directors John M. Elwood................ 42 Executive Vice President, Chief Financial Officer and Director Paul H. Hower................. 62 Executive Vice President Timothy E. Aho................ 53 Senior Vice President/Development Denis W. Driscoll............. 52 Senior Vice President/Human Resources John H. Leavitt............... 44 Senior Vice President/Sales and Marketing Joseph Bernadino.............. 50 Senior Vice President, Secretary and General Counsel Richard T. Szymanski.......... 39 Vice President and Corporate Controller Douglas W. Vicari............. 37 Vice President and Treasurer
The following is a biographical summary of the experience of the executive officers of the Company, other than Mr. Simon and Mr. Elwood who are described above. Paul H. Hower has been an Executive Vice President of the Company since 1993. Mr. Hower was President of Integrity Hospitality Services from 1992 to 1993 and prior to such time was Vice President and Hotel Division Manager of B.F. Saul Co. Timothy E. Aho has been a Senior Vice President of the Company since 1994. Mr. Aho was a Senior Vice President of Development for Boykin Management Company from 1993 to 1994 and Vice President of Development for Interstate Hotels Corporation from 1992 to 1993. Denis W. Driscoll has been a Senior Vice President of the Company since 1993. Mr. Driscoll was President of Driscoll Associates, a human resources consulting organization, from 1992 to 1993. John H. Leavitt has been a Senior Vice President of the Company since 1992. Mr. Leavitt was a Senior Vice President of PMI during 1992 and a Senior Vice President of Medallion Hotel Corporation prior to such time. Joseph Bernadino has been Senior Vice President, Secretary and General Counsel of the Company since 1992. Mr. Bernadino was an Assistant Secretary and Assistant General Counsel of PMI during 1992. Richard T. Szymanski has been a Vice President and Corporate Controller of the Company since 1992. Mr. Szymanski was Corporate Controller of PMI from 1991 to 1992. Douglas W. Vicari has been a Vice President and Treasurer of the Company since 1992 and was Vice President and Treasurer of PMI during 1992. 7 8 STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the beneficial ownership of Common Stock as of March 14, 1997 for all executive officers, all Directors, all nominees to the Board of Directors, and all directors and executive officers as a group.
AMOUNT AND NATURE PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP CLASS(O) - ----------------------------------------------------------------- ----------------- ---------- David A. Simon(a)................................................ 567,228 1.42 John M. Elwood(b)................................................ 244,120 * Herbert Lust, II(c).............................................. 88,151 * A. F. Petrocelli(d).............................................. 73,276 * Allen J. Ostroff(e).............................................. 68,000 * Jack H. Nusbaum(f)............................................... 65,000 * Howard M. Lorber(g).............................................. 55,000 * Paul H. Hower(h)................................................. 44,300 * Denis W. Driscoll(i)............................................. 25,734 * Joseph Bernadino(j).............................................. 19,364 * John H. Leavitt(k)............................................... 19,624 * Richard T. Szymanski(l).......................................... 16,998 * Douglas W. Vicari(m)............................................. 16,998 * Timothy E. Aho(n)................................................ 12,335 * All directors and executive officers as a group (14 1,316,128 3.29 persons)(o)....................................................
- --------------- (a) Includes 151,726 shares owned by David A. Simon, 146 shares owned by his wife and 249 shares held by Mr. Simon as custodian for his children. Mr. Simon disclaims beneficial ownership of the shares owned by his wife and held as custodian for his children. Also includes warrants to purchase 5,510 shares with an exercise price of $2.71 per share owned by Mr. Simon, 467 warrants owned by his wife, and 797 warrants held as custodian for his children. Mr. Simon disclaims beneficial ownership of the warrants owned by his wife and held as custodian for his children. Also includes options to purchase 408,333 shares with an exercise price of $3.20 per share as to 45,000 shares, $2.71 per share as to 330,000 shares and $9.75 per share as to 33,333 shares. (b) Includes 49,500 shares, warrants to purchase 12,122 shares with an exercise price of $2.71 per share and options to purchase 182,498 shares at an exercise price of $3.81 per share as to 20,000 shares, $3.20 per share as to 45,000 shares, $7.38 per share as to 37,500 shares, $9.25 per share as to 53,332 shares and $15.13 per share as to 26,666 shares. (c) Includes 20,000 shares owned by Herbert Lust, 23,151 shares held by a trust under which Mr. Lust and his wife are co-trustees and beneficiaries and options held by Mr. Lust to purchase 45,000 shares at an exercise price of $3.20 per share as to 25,000 shares, $9.31 per share as to 10,000 shares and $15.06 per share as to 10,000 shares. (d) Includes 45,000 shares held by Mr. Petrocelli, 8,276 shares held by United Capital Corp. of which A. F. Petrocelli is Chairman of the Board of Directors and Chief Executive Officer and options held by Mr. Petrocelli to purchase 20,000 shares at an exercise price of $9.31 per share as to 10,000 shares and $15.06 per share as to 10,000 shares. (e) Includes 3,000 shares and options to purchase 65,000 shares with an exercise price of $3.20 per share as to 45,000 shares, $9.31 per share as to 10,000 shares and $15.06 per share as to 10,000 shares. (f) Includes 10,000 shares and options to purchase 55,000 shares with an exercise price of $7.25 per share as to 15,000 shares, $9.31 per share as to 10,000 shares, $9.50 per share as to 20,000 shares and $15.06 per share as to 10,000 shares. 8 9 (g) Includes options to purchase 55,000 shares with an exercise price of $7.25 per share as to 15,000 shares, $9.31 per share as to 10,000 shares, $9.50 per share as to 20,000 shares and $15.06 per share as to 10,000 shares. (h) Includes 2,000 shares owned by Paul H. Hower, 300 shares owned by his wife and options to purchase 42,000 shares with an exercise price of $4.00 per share as to 20,000 shares, $7.63 per share as to 10,000 shares and $9.63 per share as to 12,000 shares. (i) Includes 6,038 shares owned by Denis W. Driscoll, 200 shares held by Mr. Driscoll as custodian for his children and 100 shares held as custodian for his grandchild, warrants to purchase 64 shares with an exercise price of $2.71 per share and options to purchase 19,332 shares with an exercise price of $3.63 per share as to 8,000 shares, $7.63 per share as to 5,332 shares and $9.63 per share as to 6,000 shares. (j) Includes 4,700 shares and options to purchase 14,664 shares with an exercise price of $7.63 per share as to 5,332 shares, $9.63 per share as to 6,000 shares and $9.88 per share as to 3,332 shares. (k) Includes 207 shares, warrants to purchase 85 shares with an exercise price of $2.71 per share and options to purchase 19,332 shares with an exercise price of $3.63 per share as to 8,000 shares, $7.63 per share as to 5,332 shares and $9.63 per share as to 6,000 shares. (l) Includes options to purchase 16,998 shares with an exercise price of $3.63 per share as to 5,000 shares, $7.63 per share as to 4,666 shares, $9.63 per share as to 4,000 shares and $9.88 per share as to 3,332 shares. (m) Includes options to purchase 16,998 shares with an exercise price of $3.63 per share as to 5,000 shares, $7.63 per share as to 4,666 shares, $9.63 per share as to 4,000 shares and $9.88 per share as to 3,332 shares. (n) Includes 1,003 shares and options to purchase 11,332 shares with an exercise price of $7.63 per share as to 5,332 shares and $9.63 per share as to 6,000 shares. (o) With the exception of David Simon, the Directors and executive officers each owns less than one percent of the outstanding Common Stock and own approximately two percent of the outstanding Common Stock as a group. Percentages were based on 39,919,839 shares outstanding as of March 14, 1997. PRINCIPAL HOLDERS OF SECURITIES The following entities were known to the Company to be the beneficial holders of more than 5% of the Common Stock as of March 14, 1997.
AMOUNT AND NATURE ----------------- Putnam Investments, Inc. (a)...................................... 4,947,808 12.39% One Post Office Square Boston, Massachusetts 02109 FMR Corp. (b)..................................................... 3,343,600 8.38% 82 Devonshire Street Boston, Massachusetts 02109 Denver Investment Advisors LLC (c)................................ 2,844,935 7.13% 1225 17th Street, 26th Floor Denver, Colorado 80202 Pilgrim Baxter & Associates, Ltd. (d)............................. 2,560,800 6.41% 11255 Drummers Lane, Suite 300 Wayne, Pennsylvania 19087
- --------------- (a) Putnam Investments, Inc. filed a Schedule 13G, dated January 27, 1997 with the Securities and Exchange Commission (the "SEC") reporting ownership of 4,947,808 shares of Common Stock, with shared voting power with respect to 533,808 shares and shared dispositive power with respect to 4,947,808 shares. 9 10 (b) FMR Corp. filed a Schedule 13G, dated February 14, 1997 with the SEC reporting ownership of 3,343,600 shares of Common Stock, with dispositive power with respect to 3,343,600 shares. (c) Denver Investment Advisors LLC filed a Schedule 13G, dated February 10, 1997 with the SEC reporting ownership of 2,844,935 shares of Common Stock, with sole voting power with respect to 1,905,834 and sole dispositive power with respect to 2,844,935 shares. (d) Pilgrim Baxter & Associates, Ltd. filed a Schedule 13G, dated February 14, 1997 with the SEC reporting ownership of 2,560,800 shares of Common Stock, with shared voting power with respect to 2,560,800 and sole dispositive power with respect to 2,560,800 shares. ITEM 2. PROPOSAL TO APPROVE THE AMENDMENTS TO THE 1995 EMPLOYEE STOCK OPTION PLAN On February 26, 1997, the Board of Directors amended the Prime Hospitality Corp. 1995 Employee Stock Option Plan (the "Employee Plan") (as amended, the "Amended Employee Plan"), subject to stockholder approval, in order to (i) increase the number of shares of Common Stock that may be issued pursuant to the exercise of Options, (ii) change the composition of the administrative committee (the "Committee") and (iii) provide for the withholding of taxes with respect to the exercise of Options. The Company is seeking stockholder approval of the Amended Employee Plan in order to comply with the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and the requirements of the New York Stock Exchange. The following summary of the Amended Employee Plan is qualified in its entirety by the express reference to the text of the Amended Employee Plan as filed with the SEC. Under the Amended Employee Plan, Options may be granted which are qualified as "incentive stock options" within the meaning of Section 422 of the Code ("ISOs") and Options which are not so qualified ("NQSOs"). PURPOSE AND ELIGIBILITY The primary purpose of the Amended Employee Plan is to attract and retain the best available personnel for positions of substantial responsibilities with the Company and any of its subsidiaries and to provide an additional incentive to such employees to exert their maximum efforts toward the success of the Company and its subsidiaries. All officers and key employees of the Company and its subsidiaries are eligible to be granted Options under and participate in the Amended Employee Plan. The approximate number of officers and key employees eligible to participate in the Amended Employee Plan is 200. ADMINISTRATION The Amended Employee Plan is administered by the Committee appointed by the Board of Directors from among its members, which consists of at least two members thereof, each of whom is both a "non-employee director" within the meaning of Rule 16b-3 of the Exchange Act ("Rule 16b-3") and an "outside director" within the meaning of Section 162(m) of the Code. Prior to the amendment, the Employee Plan was administered by a committee of at least two directors each of whom was a "disinterested person" within the meaning of prior Rule 16b-3. The Committee, in its sole discretion, determines which eligible employees are to receive grants of Options pursuant to the Amended Employee Plan ("Participants"). In addition, the Committee determines the terms of all Options granted thereunder (subject to the requirements of the Code for ISOs) including the exercise price for an Option, the time or times at which Options will be granted, become exercisable and forfeitable, and the number of shares covered by an Option. The Committee interprets the Amended Employee Plan and makes all other determinations deemed advisable for the administration of the Amended Employee Plan. The Committee may, in its discretion, provide for the accelerated vesting and exercisability of Options, upon the occurrence of such events as it deems appropriate. 10 11 SHARES SUBJECT TO THE AMENDED EMPLOYEE PLAN The Employee Plan allows for the grant of an aggregate of 1,200,000 shares of Common Stock. The Amended Employee Plan proposes to increase the total number of shares of Common Stock which may be issued thereunder by 1,895,000, an increase which, when combined with the proposed increase of 100,000 shares requested in the amendment of the 1995 Non-Employee Director Stock Option Plan, represents less than 5% of the outstanding shares of Common Stock. As a result, the total number of shares of Common Stock which can be granted under the Amended Employee Plan is 3,095,000 in the aggregate, subject to equitable adjustment in the event of certain corporate transactions, as set forth below. TERMS AND CONDITIONS OF OPTIONS The terms and conditions of Options granted under the Amended Employee Plan will be set out in option agreements between the Company and Participants which will contain such provisions as the Committee from time to time deems appropriate. The terms of each Option granted under the Amended Employee Plan will be determined by the Committee and be consistent with the terms of the Amended Employee Plan. The exercise price for any Option will be determined by the Committee, but will not be less than the fair market value of the Common Stock on the date of grant, and no Option will be exercisable after the expiration of ten years from the date of its grant. No Participant may be granted Options to purchase more than 100,000 shares of Common Stock in any one calendar year. SPECIAL CONDITIONS APPLICABLE TO ISOS No ISO can be granted under the Amended Employee Plan after February 25, 2007. ISOs may not be granted under the Employee Plan to a person who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, any of its subsidiary corporations, or any parent corporation of the Company. If the fair market value of the Common Stock with respect to which ISOs are exercisable for the first time by any optionee during any calendar year (under all plans of the Company and its parent corporations and any subsidiary corporations) exceeds $100,000, such ISOs will be treated, to the extent of such excess, as NQSOs. 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 Committee) (i) in cash, (ii) by certified check or bank cashiers check, (iii) by promissory note, (iv) by delivery to the Company of shares of Common Stock, (v) by irrevocable instructions to a broker to deliver to the Company an amount of sale or loan proceeds, or (vi) any combination thereof; provided, however, that the Company will have the right to deduct from the Common Stock to be delivered upon exercise a number of shares of Common Stock, valued at its fair market value on the date of payment, in an amount necessary to satisfy all Federal, state or local taxes as required by law to be withheld with respect to such Options, or, the optionee or other person receiving such Common Stock may be required to pay to the Company, prior to delivery of such Common Stock, the amount of such taxes which the Company is required to withhold, if any, with respect to such Common Stock. Prior to the amendment, the Employee Plan did not specifically provide for the withholding upon exercise of Options. 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 Committee to the number of shares of Common Stock available under the Amended Employee Plan, number of shares and price per share of Common Stock subject to each outstanding Option and the maximum number of shares available for grant to any Participant in any one year. In the event the Company is reorganized, consolidated, or merged with another corporation, or if all or substantially all of the assets of the Company are sold, optionees will be 11 12 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 March 14, 1997, the closing price for the Common Stock on the New York Stock Exchange was $16.00. 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 The Board of Directors may terminate or amend the Amended Employee Plan at any time; provided that, without shareholder approval, no such action will (i) increase the maximum number of shares for which Options may be granted under the Amended Employee Plan or increase the total number of shares for which Options may be granted to any optionee in any calendar year under the Amended Employee Plan, (ii) change the class of persons eligible to become Participants, (iii) change the period during which any Option could be granted or remain outstanding or the date on which the Amended Employee Plan will terminate, (iv) change the price at which Options are granted, or (v) materially increase the benefits that accrue to optionees under the Amended Employee Plan. FEDERAL INCOME TAX CONSEQUENCES The following is a brief discussion of the Federal income tax consequences of transactions under the Amended Employee Plan based on the 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. ISOs. No taxable income is realized by the optionee upon the grant or exercise of an ISO. If Common Stock is issued to an optionee pursuant to the exercise of an ISO, and if no disqualifying disposition of such shares is made by such optionee within two years after the date of grant or within one year after the transfer of such shares to such optionee, then (1) upon sale of such shares, any amount realized in excess of the Option price will be taxed to such optionee as a long-term capital gain and any loss sustained will be a long-term capital loss, and (2) no deduction will be allowed to the optionee's employer for federal income tax purposes. If the Common Stock acquired upon the exercise of an ISO is disposed of prior to the expiration of either holding period described above, generally (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at exercise (or, if less, the amount realized on the disposition of such shares) over the Option price paid for such shares, and (2) the optionee's employer will be entitled to deduct such amount for federal income tax purposes if the amount represents an ordinary and necessary business expense. Any further gain (or loss) realized by the optionee upon the sale of the Common Stock will be taxed as short-term or long-term capital gain (or loss), depending on how long the shares have been held, and will not result in any deduction by the employer. Subject to certain exceptions for disability or death, the exercise of the Option will generally be taxed as the exercise of a NQSO, if an ISO is exercised more than three months following termination of employment. For purposes of determining whether an optionee is subject to any alternative minimum tax liability, an optionee who exercises an ISO generally would be required to increase his or her alternative minimum taxable income, and compute the tax basis in the stock so acquired, in the same manner as if the optionee had exercised an NQSO. Each optionee is potentially subject to the alternative minimum tax. In substance, a taxpayer is required to pay the higher of his/her alternative minimum tax liability or his/her "regular" income tax liability. As a result, a taxpayer has to determine his/her potential liability under the alternative minimum tax. 12 13 NQSOs. With respect to NQSOs: (1) no income is realized by the optionee at the time the Option is granted; (2) generally, at exercise, ordinary income is realized by the optionee 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 optionee's employer is generally entitled to a tax deduction in the same amount, subject to applicable tax withholding requirements; and (3) at sale, 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. SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS. As a result of the rules under Section 16(b) of the Exchange Act ("Section 16(b)"), and depending upon the particular exemption from the provisions of Section 16(b) utilized, officers of the Company and persons owning more than 10% of the outstanding shares of stock of the Company ("Insiders") may not receive the same tax treatment as set forth above with respect to the grant and/or exercise of Options. Generally, Insiders 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. Insiders 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 The grant of Options under the Amended Employee Plan is entirely within the discretion of the Committee. The Company cannot forecast the extent of Option grants that will be made in the future. Therefore, the Company has omitted the tabular disclosure of the benefits or amounts allocated under the Amended Employee Plan. Information with respect to compensation paid and other benefits, including Options, granted in respect of the 1996 fiscal year to the named executive officers is set forth in the Summary Compensation Table. APPROVAL BY STOCKHOLDERS The effectiveness of the Amended Employee 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 Employee Plan and any Option granted thereunder shall not be effective. If the Amended Employee Plan is not approved, the Employee Plan will continue in operation and Options may continue to be granted thereunder. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO THE 1995 EMPLOYEE STOCK OPTION PLAN. ITEM 3. PROPOSAL TO APPROVE THE AMENDMENTS TO THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN On February 26, 1997, the Board of Directors amended the Prime Hospitality Corp. 1995 Non-Employee Director Stock Option Plan (the "Director Plan") (as amended, the "Amended Director Plan"), subject to stockholder approval, in order to increase the number of shares of Common Stock that may be issued pursuant to the exercise of Options 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 NQSOs 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 demonstrate the Company's appreciation for their services to the Company. There are currently 5 persons eligible to participate in the Amended Director Plan. 13 14 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 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 Director Plan allows for the grant of an aggregate of 300,000 shares of Common Stock. The Amended Director Plan proposes to increase the total number of shares of Common Stock which can be granted thereunder by 100,000, an increase which, when combined with the proposed increase of 1,895,000 shares requested in the amendment of the 1995 Employee Stock Option Plan, represents less than 5% of the outstanding shares of Common Stock. As a result, the total number of shares of Common Stock which can be granted under the Amended Director Plan is 400,000 in the aggregate subject to equitable adjustment in the event of certain corporate transactions, as set forth below. GRANT OF OPTIONS Each year, on the date of the Annual Meeting, each Non-Employee Director will be automatically granted, without further action by the Committee or the Board of Directors, an Option to purchase 10,000 shares of Common Stock. The exercise price for each Option will be 100% of the fair market value of the Common Stock on the date of grant. All 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 earlier if the Non-Employee Director ceases to be a member of the Board of Directors. 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 must 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 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 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 March 14, 1997, the closing price for the Common Stock on the New York Stock Exchange was $16.00. 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 14 15 optionee or his legal representative. Prior to the amendment, the Director Plan prohibited the grant of an Option that was transferable other than by will or the laws of descent and distribution. TERMINATION OR AMENDMENT The Board of Directors may terminate or amend the Amended Director Plan at any time; provided that without shareholder approval, no such action will (i) increase the maximum number of shares for which Options may be granted under the Amended Director Plan or increase the total number of shares for which an Option may be granted to any participating directors thereunder, (ii) change the period during which any Option could be granted or remain outstanding or the date on which the Amended Director Plan may terminate, (iii) change the class of persons eligible to receive Options, (iv) change the price at which Options are granted, or (v) materially increase benefits that accrue to optionees under the Amended Director Plan. Amendments to the Amended Director Plan may not be made more than once every six months other than to comply with changes in the Code. 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 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. Generally, 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) generally, 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) at sale, 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
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS - -------------------------------------------------------------- ---------------- --------------- Howard M. Lorber, Non-Employee Director....................... NA 10,000 Herbert Lust, II, Non-Employee Director....................... NA 10,000 Jack H. Nusbaum, Non-Employee Director........................ NA 10,000 Allen J. Ostroff, Non-Employee Director....................... NA 10,000 A.F. Petrocelli, Non-Employee Director........................ NA 10,000
Under the Amended Director Plan, as set forth above, as of the date of each Annual Meeting, each Non-Employee Director receives an automatic grant of Options with respect to 10,000 shares of Common Stock. 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 is not obtained, Options will continue to be automatically granted in accordance with the terms of the Director Plan. 15 16 THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. ITEM 4. RATIFICATION OF SELECTION OF AUDITORS Upon the recommendation of the Compensation and Audit Committee, the Board of Directors has selected Arthur Andersen LLP, independent auditors, to serve as independent accountants for the Company. Arthur Andersen LLP will audit the Company's consolidated financial statements for the fiscal year ending December 31, 1997; perform audit-related services; and act as consultants in connection with various accounting and financial reporting matters. Arthur Andersen LLP provided those services to the Company for the fiscal year ended December 31, 1996. Representatives of Arthur Andersen LLP are expected to be present at the Annual Meeting and will be given the opportunity to make a statement, if they desire to do so, and are expected to be available to respond to appropriate questions. Although it is not required to do so, 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 Arthur Andersen LLP 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. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. ITEM 5. OTHER BUSINESS The Company is not aware of any business to be acted upon at the Annual Meeting other than that which is explained in this Proxy Statement. In the event that any other business calling for a vote of the stockholders is properly presented at the Annual Meeting, the holders of the proxies will vote your shares in accordance with their best judgment. 16 17 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, 1996, 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 ending December 31, 1994, 1995 and 1996. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION ------------ ---------------------------------- SECURITIES NAME AND OTHER ANNUAL UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION - -------------------------------- ---- -------- -------- ------------ ------------ ------------ David A. Simon.................. 1996 $353,816 $243,253 $ -0- 100,000 $3,236(1) President and Chief 1995 336,808 218,297 -0- 100,000 8,774 Executive Officer 1994 312,552 161,538 -0- 0 5,507 John M. Elwood.................. 1996 280,000 191,075 -0- 80,000 2,336(2) Executive Vice President 1995 272,982 184,305 -0- 80,000 5,642 and Chief Financial Officer 1994 249,423 129,231 -0- 50,000 3,147 Paul H. Hower................... 1996 209,000 60,000 -0- 35,000 6,253(3) Executive Vice President 1995 205,675 50,000 -0- 36,000 7,174 1994 190,000 20,000 -0- 15,000 5,410 Denis W. Driscoll............... 1996 177,870 24,000 -0- 17,500 1,365(4) Senior Vice President -- Human 1995 168,974 20,000 -0- 18,000 1,873 Resources 1994 159,961 10,000 -0- 8,000 959 Joseph Bernadino................ 1996 143,864 36,000 -0- 17,500 1,226(5) Senior Vice President, 1995 132,667 30,000 -0- 23,000 1,697 Secretary and General Counsel 1994 126,184 24,150 -0- 8,000 614
- --------------- (1) Represents $102 for premiums of Company-provided life insurance, $404 related to 401k matching contributions and $2,730 in value of use of Company-provided car. (2) Represents $102 for premiums for Company-provided life insurance, $323 related to 401k matching contributions and $1,911 in value of use of Company-provided car. (3) Represents $702 for premiums for Company-provided life insurance, $1,339 related to 401k matching contributions and $4,212 in value of use of Company-provided car. (4) Represents $288 for premiums for Company-provided life insurance and $1,077 related to 401k matching contributions. (5) Represents $174 for premiums for Company-provided life insurance and $1,052 related to 401k matching contributions. 17 18 STOCK OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996 The following table sets forth information concerning individual grants of stock options made during the year ending December 31, 1996 to each of the named executive officers. The Company did not grant any stock appreciation rights during such period.
INDIVIDUAL GRANTS ------------------------------------------------- POTENTIAL REALIZED % OF TOTAL VALUE AT ASSUMED NUMBER OF OPTIONS ANNUAL RATES OF STOCK SECURITIES GRANTED TO PRICE APPRECIATION FOR UNDERLYING EMPLOYEES EXERCISE OPTION TERMS OPTIONS IN FISCAL PRICE PER EXPIRATION ------------------------------- NAME GRANTED YEAR SHARE DATE 0% 5% 10% - ------------------------ ---------- ---------- --------- ---------- ----- ---------- ---------- David A. Simon.......... 100,000(1) 16.8% $ 18.00 8/01/2006 $ -0- $1,132,010 $2,868,736 John M. Elwood.......... 80,000(2) 13.4% $ 15.13 5/15/2006 $ -0- $ 760,962 $1,928,428 Paul H. Hower........... 35,000(3) 5.9% $ 16.63 7/01/2006 $ -0- $ 365,938 $ 927,359 Denis W. Driscoll....... 17,500(3) 2.9% $ 16.63 7/01/2006 $ -0- $ 182,969 $ 463,679 Joseph Bernadino........ 17,500(3) 2.9% $ 16.63 7/01/2006 $ -0- $ 182,969 $ 463,679
- --------------- (1) These stock options vest with respect to one third of the grant on each of August 1, 1997, 1998 and 1999 and will continue to be exercisable through July 31, 2006. 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 May 15, 1997, 1998 and 1999 and will continue to be exercisable through May 14, 2006. These options become immediately exercisable upon a change in control of the Company. (3) These stock options vest with respect to one third of the grant on each of July 1, 1997, 1998 and 1999 and will continue to be exercisable through June 30, 2006. These options become immediately exercisable upon a change in control of the Company. AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1996 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS SHARES OPTIONS AT YEAR-END AT YEAR-END ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------------ ----------- -------- ----------- ------------- ----------- ------------- David A. Simon................ -0- $ -0- 408,333 166,667 $ 5,221,073 $ 425,002 John M. Elwood................ -0- $ -0- 116,666 158,334 $ 1,230,004 $ 665,421 Paul H. Hower................. -0- $ -0- 42,000 64,000 $ 405,500 $ 198,500 Denis W. Driscoll............. -0- $ -0- 19,332 32,168 $ 184,322 $ 100,678 Joseph Bernadino.............. -0- $ -0- 20,998 35,502 $ 194,735 $ 121,516
EMPLOYMENT AGREEMENTS David A. Simon Mr. Simon and the Company executed an employment agreement dated August 1, 1995 which provides for a term of three years, with automatic successive one-year extensions unless a prior election is made by either party not to extend the agreement. The employment agreement provides for an annual base salary of $350,000 (which will increase annually based upon increases in the consumer price index), a discretionary annual bonus based on attainment of performance objectives set by the Board of Directors, a life insurance policy in an amount not less than $1,000,000, an automobile and other customary welfare benefits, including medical and disability insurance. The agreement also provides that, to the extent payments made by the Company for disability insurance, life insurance and the use of the automobile are subject to federal, state or local income taxes, the Company will pay Mr. Simon 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. 18 19 Pursuant to this employment agreement, Mr. Simon was granted stock options on August 1, 1995 to purchase 100,000 shares of Common Stock and on August 1, 1996 to purchase 100,000 shares of Common Stock and will be entitled to a final grant of stock options to purchase 100,000 shares of Common Stock on August 1, 1997. Such stock options are exercisable as to one-third of the grant on each of the first, second and third anniversaries of the option grant date, provided his employment has not been terminated by such date. This employment agreement may be terminated by the Company at anytime, 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. Simon 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. All stock options would become fully vested. Any bonus awarded for the year of termination would not be prorated. If the agreement is terminated by the Company for cause (as such term is defined in the employment agreement), or if Mr. Simon resigns voluntarily 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 prior to such termination or resignation. John M. Elwood As of May 15, 1995, Mr. Elwood and the Company executed an employment agreement which had a term of three years. This employment agreement provided for an annual base salary of $280,000 (which will increase annually based upon increases in the consumer price index), a discretionary annual bonus based on attainment of performance objectives set by the Board of Directors, a life insurance policy in the amount of $1,000,000, an automobile, and other customary welfare benefits, including medical and disability insurance. Pursuant to this employment agreement, Mr. Elwood was granted stock options on May 15, 1995 to purchase 80,000 shares of Common Stock and on May 15, 1996 to purchase 80,000 shares of Common Stock and will be entitled to a final grant of options to purchase 80,000 shares of Common Stock on May 15, 1997. Such stock options are exercisable as to one-third of the grant on each of the first, second and third anniversaries of the option grant date, provided his employment has not been terminated by such date. This employment agreement may be terminated by the Company at anytime, 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. Elwood 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. All stock options would become fully vested. Any bonus awarded for the year of termination would not be prorated. If the agreement is terminated by the Company for cause (as such term is defined in the employment agreement), or if Mr. Elwood resigns voluntarily 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 prior to such termination or resignation. CHANGE IN CONTROL AGREEMENTS As of February 15, 1995, the Company executed change in control agreements with ten officers of the Company, including each named executive officer. These agreements provide that, if within two years of a change in control of the Company, the officer's employment with the Company is terminated by the Company without cause or if the officer resigns for good reason (as defined in the agreements), the Company will pay the officer two and one-half times the aggregate cash compensation earned by the officer during the fiscal year immediately preceding the termination of employment. Such payments are to be reduced, however, to the extent necessary to avoid characterization as "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code. In addition, any outstanding options to purchase shares of the Company held by the officer will vest and become exercisable as of the date of the change in control. COMPENSATION AND AUDIT COMMITTEE REPORT ON EXECUTIVE COMPENSATION All members of the Compensation and Audit Committee are independent, non-employee Directors. 19 20 Mr. Simon and the Company are parties to an employment agreement dated August 1, 1995 which provides for a term of three years, with automatic successive one-year extensions unless a prior election is made by either party not to extend the agreement. The agreement provides for the terms of Mr. Simon's compensation including an annual base salary of $350,000 (which will increase annually based upon increases in the consumer price index) and a discretionary annual bonus based on attainment of certain annual performance objectives to be set by the Board of Directors. Pursuant to his employment agreement, Mr. Simon was granted stock options on August 15, 1995 to purchase 100,000 shares of Common Stock and on August 1, 1996 to purchase 100,000 shares of Common Stock and will be entitled to a final grant of stock options to purchase 100,000 shares of Common Stock on August 15, 1997. Such stock options are exercisable as to one-third of the grant on each of the first, second and third anniversaries of the option grant date, provided his employment has not been terminated by such date. Mr. Simon's employment agreement and option grants were approved by the full Board of Directors of the Company. In February 1997 Mr. Simon received a bonus based on the overall performance of the Company during fiscal year 1996. The Compensation and Audit Committee established Mr. Simon's bonus at $50,000 plus an amount equal to 60% of the sum which represents 1.5% of the Company's consolidated earnings before taxes for 1996, but set a maximum so that the bonus could not exceed 50% of Mr. Simon's total compensation for 1996. Mr. Simon received the maximum bonus of $357,051. The Company's compensation policy is designed to help the Company achieve its business objectives by: - setting levels of compensation designed to attract and retain qualified executive in a highly competitive business environment; - providing incentive compensation that is directly linked with both the Company's financial performance and individual initiative and achievement contributing to such performance; and - linking compensation to elements which affect the Company's annual and long-term share performance. The Company intends to compensate executives and to grant stock options pursuant to stockholder approved employee stock option plans in order to provide executives with a competitive total compensation package and reward them for their contribution to the Company's annual and long-term share performance. The Compensation and Audit Committee based the compensation awarded to executive officers, other than the Chief Executive Officer, on the Company's overall performance during fiscal year 1996. 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 1996 options to purchase an aggregate 212,000 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 the five 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. Compensation paid to the executive officers for the Company's 1996 fiscal year was well below the deductibility limit. 20 21 COMPENSATION AND AUDIT COMMITTEE HERBERT LUST, II (Chairman) A. F. Petrocelli Allen J. Ostroff Howard M. Lorber COMPENSATION AND AUDIT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation and Audit Committee are Herbert Lust, II (Chairman), A. F. Petrocelli, Allen J. Ostroff and Howard M. Lorber. Mr. Petrocelli 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, a Director of the Company, is the Chairman of the Board and Chief Executive Officer of United Capital Corp, and Howard M. Lorber, a Director of the Company, is a Director of United Capital Corp. In March 1994, the Company entered into management agreements with the corporate owners of two hotels who are affiliates of United Capital Corp. The Company received $157,000 in management fees for the fiscal year ended 1996. In March 1996, United Capital Corp. agreed to loan $4,000,000 to finance the construction of a hotel to be owned by an entity in which the Company expected to have a 50% interest. United Capital Corp. received $20,000 in commitment fees relating to this proposed loan. The project was canceled subsequent to the payment of these fees and no loan was received. During 1989, a partnership in which Peter E. Simon, father of David A. Simon, is a partner acquired an interest in three hotels from PMI. In partial payment PMI received non-recourse junior loans aggregating $21,590,000. As of December 31, 1996, the aggregate balance owed on these loans was $21,472,766. The interest rates on these loans ranged from 9 1/2% to 11% per annum. The Company has restructured these loans in order to obtain payment based upon the available cash flow of the hotels. During 1996, the Company recognized $579,000 of interest income related to these loans. The Company managed these three hotels for the partnership and received $558,000 in management fees for fiscal year 1996. During 1989, this same partnership acquired PMI's interest in eight hotel properties. In partial payment PMI received a junior non-recourse mortgage note in the principal amount of $9,647,450. The Company restructured this transaction as of December 1, 1992 by (i) conveying to the partnership its interest in one hotel property, and (ii) amending the principal amount and interest rate of the note to $8,103,362 and 8.2% per annum, respectively. The Company managed these nine hotels for the partnership and received $94,000 in accounting and management fees for fiscal year 1996. In March 1996 the Company purchased these nine hotels from the partnership together with an additional nine hotels from two unrelated entities for an aggregate purchase price of $4,700,000. In a simultaneous transaction, the Company purchased from unrelated holders the first mortgage notes secured by the eighteen properties for $60,400,000. The partnership received $1,900,000 out of the purchase proceeds and the junior non-recourse note held by the Company was canceled. During February 1990, this same partnership purchased from PMI a note owed by a third party in the original principal amount of $3,255,380. This partnership paid PMI $488,318 in cash and granted PMI an 85% note participation. In partial settlement of its claim on the note, the Company acquired a hotel located in Miami, Florida in which the partnership has a 15% interest. In December 1993, the Company entered into a management agreement with the corporate owner of a hotel in which Peter E. Simon is a stockholder. The Company received $49,000 in management fees for the fiscal year 1996. The Company has a note receivable from John H. Leavitt, Senior Vice President -- Sales and Marketing, with a balance of approximately $37,000 at December 31, 1996. The note bears interest at 8.5% and is due in 2011. 21 22 The Company has retained Willkie Farr & Gallagher as its legal counsel involving certain matters during its last fiscal year and anticipates it will continue such relationship with the firm in this fiscal year. Mr. Nusbaum, a Director of the Company, is the Chairman of the firm. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's directors, executive officers, and persons who own more than ten percent of the Common Stock, to file reports of beneficial ownership with the SEC, the New York Stock Exchange and the Company. Based solely upon its review of the copies of such forms received by it, the Company believes that, during fiscal year 1996, 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 Common Stock began trading on the NYSE under the symbol "PDQ" on August 3, 1992. As a result, the following graph commences as of August 3, 1992. The graph compares the Common Stock with (a) the Dow Jones Equity Market Index and (b) the Dow Jones Lodging Index. Furthermore, the following graph assumes an investment of $100 on August 3, 1992 in each of the Common Stock, the stocks comprising the Dow Jones Equity Market Index and the Dow Jones Lodging Index. COMPARISON OF 1992 THROUGH 1996 CUMULATIVE TOTAL RETURN AMONG PRIME HOSPITALITY CORP., DOW JONES EQUITY MARKET INDEX AND DOW JONES LODGING INDEX
MEASUREMENT PERIOD INDUSTRY GROUP (FISCAL YEAR COVERED) COMPANY STOCK INDEX INDEX 8/3/92 100 100 100 1992 120 103 108 1993 320 111 177 1994 400 108 183 1995 533 145 225 1996 860 175 270
22 23 FINANCIAL STATEMENTS The Company's annual report to stockholders for the year ended December 31, 1996, 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, 1996 (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 1998 Annual Meeting will be held on or about May 11, 1998. Proposals of stockholders submitted for consideration at the 1998 annual meeting of stockholders must be received by the Company not later than December 10, 1997 in order to be included in the Company's proxy statement for that meeting. A stockholder desiring to submit a proposal must be a record or beneficial owner of at least 1% of the outstanding shares or $1,000 in market value of shares entitled to be voted at the annual meeting and must have held such shares for at least one year. Further, the stockholder must continue to hold such shares through the date on which the meeting is held. Documentary support regarding the foregoing must be provided along with the proposal. There are additional requirements regarding proposals of the stockholders, and a stockholder contemplating submission of a proposal is referred to Rule 14a-8 promulgated under the Exchange Act. In addition, the bylaws of the Company require, among other things, that notice of proposals of stockholders be delivered to or mailed and received at the principal executive offices of the Company not less than fifty (50) days nor more than seventy-five (75) days prior to the meeting; provided, however, that in the event that less than sixty-five (65) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the fifteenth (15th) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. By Order of the Board of Directors /s/ JOSEPH BERNADINO -------------------------------------- JOSEPH BERNADINO Secretary 23 24 PRIME HOSPITALITY CORP. 1995 EMPLOYEE STOCK OPTION PLAN 1. PURPOSES. The 1995 Employee Stock Option Plan (the "Plan") is intended to attract and retain the best available personnel for positions with substantial responsibilities with Prime Hospitality Corp. (the "Company") or any of its subsidiary corporations, and to provide an additional incentive to such employees to exert their maximum efforts toward the success of the Company and its subsidiary corporations through the granting of certain options ("Options") to purchase shares of the Company's Common Stock, par value $.01 per share ("Common Shares"). Under the Plan, Options may be granted which are qualified as incentive stock options ("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), or Options which are not so qualified ("Non-ISOs"). 2. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a committee (the "Committee") appointed by the Board of Directors of the Company (the "Board") from among its members, which shall consist of at least two members thereof, each of whom is both a "non-employee director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act") and an "outside director" within the meaning of Section 162(m) of the Code. The Committee may exercise the power and authority vested in the Board under the Plan. Within the limits of the express provisions of the Plan, the Committee shall have the authority, in its discretion, to take the following actions under the Plan: (i) to determine the individuals to whom, and the time or times at which, Options shall be granted, and the number of Common Shares to be subject to each Option, and whether such Options shall be ISOs or Non-ISOs; (ii) to interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations relating to the Plan; (iv) to determine the terms and provisions of the respective stock option agreements granting Options (which need not be identical); and (v) to make all other determinations and take all other actions necessary or advisable for the administration of the Plan. In making such determinations, the Committee may take into account the nature of the services rendered by such individuals, their present and potential contributions to the Company's success, and such other factors as the Committee, in its discretion, shall deem relevant. An individual to whom an Option has been granted under the Plan is referred to herein as an "Optionee." The Committee's determinations on the matters referred to in this paragraph shall be conclusive. Any determination by a majority of the members of the Committee shall be deemed to have been made by the whole Committee. 3. SHARES SUBJECT TO THE PLAN. The total number of Common Shares which shall be subject to Options granted under the Plan shall be 3,095,000 in the aggregate, subject to adjustment as provided in Paragraph 7. The Company shall at all times while the Plan is in force reserve such number of Common Shares as will be sufficient to satisfy the requirements of outstanding Options. The Common Shares to be issued upon exercise of Options shall be authorized and unissued or reacquired Common Shares. The unexercised portion of any expired, terminated or cancelled Option shall again be available for the grant of Options under the Plan. 24 25 4. ELIGIBILITY. (a) Options may be granted only to key employees and officers of the Company or of a "subsidiary corporation", as determined by the Committee. For purposes of the Plan, "subsidiary corporation" shall mean a subsidiary corporation of the Company within the meaning of Section 424(f) of the Code. (b) Nothing contained in the Plan shall be construed to limit the right of the Company to grant Options otherwise than under the Plan for proper corporate purposes. (c) Nothing contained in the Plan shall be construed to limit the right of the Committee to grant additional Options from time to time to the Optionee holding Options, and Options may be granted from time to time to one or more employees who have not previously been granted Options. (d) Notwithstanding anything to the contrary herein, no person may be granted Options to purchase more than 100,000 Common Shares in any one calendar year. 5. TERMS OF OPTIONS. The terms of each Option granted under the Plan shall be determined by the Committee consistent with the provisions of the Plan, including the following: (a) The purchase price of the Common Shares subject to each Option shall be fixed by the Committee, in its discretion, at the time such Option is granted, but shall not be less than the "Fair Market Value" (as defined herein) of the Common Shares on the date of grant. (b) The dates on which each Option (or portion thereof) shall be exercisable shall be fixed by the Committee, in its discretion, at the time such Option is granted. (c) The expiration of each Option shall be fixed by the Committee, in its discretion, at the time such Option is granted. No Option shall be exercisable after the expiration of ten (10) years from the date of its grant and each Option shall be subject to earlier termination as expressly provided in Paragraph 6 hereof or as determined by the Committee, in its discretion, at the date such Option is granted. (d) Options shall be exercised by the delivery to the Company at its principal office or at such other address as may be established by the Committee (Attention: Administrator, 1995 Employee Stock Option Plan) of written notice of the number of Common Shares with respect to which the Option is being exercised accompanied by payment in full of the purchase price of such Common Shares. Payment for such Common Shares may be made (as determined by the Committee) (i) in cash, (ii) by certified check or bank cashier's check payable to the order of the Company in the amount of such purchase price, (iii) by promissory note issued by the Optionee in favor of the Company in an amount equal to such purchase price and payable on terms prescribed by the Committee and which provides for the payment of interest at a fair market rate, as determined by the Committee, (iv) by delivery of Common Shares to the Company having an aggregate Fair Market Value equal to said purchase price, (v) by irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the aggregate purchase price of the Common Shares as to which such exercise relates and to sell the Common Shares to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Optionee or to deliver the remaining Common Shares to the Optionee, or (vi) by any combination of the methods of payment described in (i) through (v) above; provided, however, that the Company shall have the right to deduct from the Common Shares to be delivered upon exercise a number of Common Shares, valued at Fair Market Value on the date of payment, in an amount necessary to satisfy all Federal, state or local taxes as required by law to be withheld with respect to such Options, or, the Optionee or other person receiving such Common Shares may be required to pay to the Company, prior to delivery of such Common Shares, the amount of any such taxes which the Company is required to withhold, if any, with respect to such Common Shares. 25 26 (e) An Optionee shall not have any of the rights of a shareholder with respect to the Common Shares subject to his Option until such shares are issued to him upon the exercise of his Option as provided herein. (f) No Option shall be transferable, except by will or the laws of descent and distribution, and any Option may be exercised during the lifetime of the Optionee only by him. No Option granted under the Plan shall be subject to execution, attachment or other process. (g) For purposes of the Plan, the "Fair Market Value" of a share shall be deemed to be the mean between the highest and lowest sale prices of the Common Shares reported on the New York Stock Exchange on the date immediately preceding, (i) with respect to the grant of an Option, the date of grant, and (ii) with respect to the exercise of an Option, the date of exercise, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported. (h) The Committee may, in its discretion, accelerate the vesting and exercisability of Options previously granted under the Plan, or provide for accelerated vesting and exercisability of such Options upon the occurrence of such events as it may deem appropriate. 6. TERMINATION OF OPTION RIGHTS (a) If the employment of an Optionee with the Company or any of its subsidiary corporations shall be terminated voluntarily by the employee, or by the Company or a subsidiary corporation for cause, and immediately after such termination such Optionee shall not then be employed by the Company or any of its subsidiary corporations, as the case may be, any Option or Options granted to such Optionee to the extent not theretofore exercised shall expire forthwith. (b) If such employment of an Optionee with the Company shall terminate other than (i) by reason of death, (ii) voluntarily by the employee, or (iii) by the Company or a subsidiary corporation for cause, and immediately after such termination such Optionee shall not then be employed by the Company or any of its subsidiary corporations, as the case may be, any Option or Options granted to such Optionee may be exercised at any time within three months after such termination, subject to the provisions of subparagraph (d) of this Paragraph 6. For the purposes of the Plan, the retirement of an Optionee either pursuant to a pension or retirement plan adopted by the Company or a subsidiary corporation, as the case may be, on the normal retirement date prescribed from time to time by the Company or such subsidiary corporation, and the termination of employment as a result of a disability (as defined in Section 22(e)(3) of the Code shall be deemed to be a termination of such Optionee's employment other than voluntarily by the Optionee or for cause. (c) If an Optionee dies (i) while employed by the Company or a subsidiary corporation or (ii) within three months after the termination of his employment other than (A) a voluntary termination by the Optionee, or (B) a termination by the Company as a subsidiary corporation for cause, any Option or Options granted to such Optionee may be exercised at any time within six months after such Optionee's death, subject to the provisions of subparagraph (d) of this Paragraph 6. (d) An Option may not be exercised pursuant to this Paragraph 6 except to the extent that the Optionee was entitled to exercise the Option at the time of termination of employment or death, and in any event may not be exercised after the expiration of ten (10) years from the date the Option was granted. (e) For purposes of the Plan, an individual who is on military or sick leave or other bona fide leave of absence (such as temporary employment by the United States or any state government) shall be considered as remaining in the employ of the Company or of a subsidiary corporation for 90 days or such longer period as shall be determined by the Committee. (f) Notwithstanding the limitations of Paragraphs 6(a), 6(b), and 6(c)(ii), the Committee, in its sole discretion, may consent to an Optionee's exercise within three months after the Optionee's voluntary termination of any Option granted to the Optionee, if the Committee determines that it is in the interests of the Company to permit such exercise, subject, nevertheless, to the limitations of Paragraph 6(d). 26 27 7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. (a) In the event that the outstanding Common Shares are hereafter changed by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination or exchange of shares and the like, or dividends payable in Common Shares, an appropriate adjustment shall be made by the Committee in the aggregate number of shares available under the Plan, the number of shares and price per share subject to outstanding Options and the maximum number of shares available for grant to any Optionee in any one year. If the Company shall be reorganized, consolidated, or merged with another corporation, or if all or substantially all of the assets of the Company shall be sold or exchanged, an Optionee shall at the time of issuance of the stock under such corporate event be entitled to receive upon the exercise of his Option the same number and kind of shares of stock or the same amount of property, cash or securities as he would have been entitled to receive upon the occurrence of any such corporate event as if he had been, immediately prior to such event, the holder of the number of shares covered by his Option. (b) Any adjustment under this Paragraph 7 in the number of Common Shares subject to Options shall apply proportionately to only the unexercised portion of any Option granted hereunder. If fractions of a share would result from any such adjustment, the adjustment shall be revised to the next lower whole number of shares. 8. FURTHER CONDITIONS OF EXERCISE. (a) Unless prior to the exercise of an Option the Common Shares issuable upon such exercise are the subject of a registration statement filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and a prospectus meeting the requirements of Section 10(a)(3) of the Securities Act has been distributed to Optionholders, the notice of exercise with respect to such Option shall be accompanied by a representation or agreement of the Optionee to the Company to the effect that such shares are being acquired for investment only and not with a view to the resale or distribution thereof, or such other documentation as may be required by the Company, unless, in the opinion of counsel to the Company, such representation, agreement or documentation is not necessary to comply with the Securities Act. (b) Anything in subparagraph (a) of this Paragraph 9 to the contrary notwithstanding, the Company shall not be obligated to issue or sell any Common Shares until they have been listed on each securities exchange on which the Common Shares may then be listed and until and unless, in the opinion of counsel to the Company, the Company may issue such shares pursuant to a qualification or an effective registration statement, or an exemption from registration, under such state and federal laws, rules or regulations as such counsel may deem applicable. The Company shall use reasonable efforts to effect such listing, qualification and registration, as the case may be. 9. TERMINATION AND AMENDMENT OF PLAN. The Board may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that the Board may not, without approval by a majority of the Common Shares present in person or by proxy and entitled to vote thereon: (a) increase the maximum number of shares for which Options may be granted under the Plan or the number of shares for which an Option may be granted to any Optionee hereunder; (b) change the period during which any Options may be granted or remain outstanding or the date on which the Plan shall terminate; (c) change the designation of the class of persons eligible to receive Options; (d) change the price at which Options are granted; or (e) materially increase benefits accruing to Optionees under the Plan. 27 28 10. SPECIAL PROVISIONS APPLICABLE TO ISOS. The following special provisions shall be applicable to ISOs granted under the Plan. (a) No ISOs shall be granted under the Plan after ten (10) years from the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the Company's shareholders. (b) ISOs may not be granted to a person who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, any of its subsidiary corporations, or any "parent corporation" of the Company within the meaning of Section 424(e) of the Code. (c) If the aggregate Fair Market Value of the Common Shares with respect to which ISOs are exercisable for the first time by any Optionee during a calendar year (under all plans of the Company and its parent corporations and subsidiary corporations) exceeds $100,000, such ISOs shall be treated, to the extent of such excess, as Non-ISOs. For purposes of the preceding sentence, the Fair Market Value of the Common Shares shall be determined at the time the ISOs covering such shares were granted. 11. NOT A CONTRACT OF EMPLOYMENT. Nothing contained in the Plan or in any stock option agreement executed pursuant hereto shall be deemed to confer upon Optionee any right to remain in the employ of the Company or any subsidiary corporation. 12. APPROVAL OF SHAREHOLDERS. The Plan will be effective upon approval by the affirmative vote of a majority of the Common Shares present in person or by proxy and entitled to vote thereon. 28 29 PRIME HOSPITALITY CORP. 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 1. PURPOSES. The 1995 Non-Employee Director Stock Option Plan (the "Plan") is intended to promote the interests of Prime Hospitality Corp. (the "Company") by providing an inducement to obtain and retain the services of qualified persons who are neither employees nor officers of the Company to serve as members of the Board of Directors (the "Board") and to demonstrate the Company's appreciation for their service upon the Company's Board of Directors. These purposes shall be achieved by the granting of options ("Options") to purchase shares of the Company's Common Stock, par value $.01 per share (the "Common Shares"). Under the Plan no Options may be granted which are qualified as incentive stock options. 2. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Audit and Compensation Committee of the Board (the "Committee"). The Committee shall, subject to the provisions of the Plan, have the power to construe the Plan, to determine all questions thereunder, and to adopt and amend such rules and regulations for the administration of the Plan as may be determined by the Board. 3. SHARES SUBJECT TO THE PLAN. The total number of Common Shares which shall be subject to Options granted under the Plan shall be 400,000 in the aggregate, subject to adjustment as provided in Paragraph 7. The Company shall at all times while the Plan is in force reserve such number of Common Shares as will be sufficient to satisfy the requirements of outstanding Options. The Common Shares to be issued upon exercise of Options shall be authorized and unissued or reacquired Common Shares. The unexercised portion of any expired, terminated or cancelled Option shall again be available for the grant of Options under the Plan. 4. ELIGIBILITY. (a) Options may be granted pursuant to the Plan only to non-employee members of the Board. (b) Nothing contained in the Plan shall be construed to limit the right of the Company to grant options otherwise than under the Plan for proper corporate purposes. (c) An individual to whom an Option has been granted under the Plan is referred to herein as an "Optionee". 5. TERMS OF OPTION. The terms of each Option granted under the Plan are as follows: (a) The purchase price of the Common Shares covered by an Option granted pursuant to the Plan shall be 100% of the Fair Market Value of such shares on the day the Option is granted. The Option price will be subject to adjustment in accordance with the provisions of Section 7 hereof. For purposes of the Plan, the "Fair Market Value" of a share shall be deemed to be the mean between the highest and lowest sale prices of the Common Shares reported on the New York Stock Exchange on the date immediately preceding, (i) with respect to the grant of an Option, the date of grant and (ii) with respect to an exercise of an Option, the date of exercise, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported. (b) Each year, on the date of the Company's Annual Meeting of Stockholders, each member of the Board (who is a director subsequent to any election of Directors occurring at the meeting) who is neither an employee nor an officer of the Company shall be automatically granted on such date without further action by the Board an Option to purchase 10,000 Common Shares. 29 30 (c) The Options granted under the Plan shall be fully vested and exercisable one year after the date of grant and shall expire on the date which is ten (10) years after the date of grant of the Options. The Plan shall terminate when all Options granted hereunder have terminated. (d) Options shall be exercised by the delivery to the Company at its principal office or at such other address as may be established by the Committee (Attention: General Counsel) of written notice of the number of Common Shares with respect to which the Option is being exercised accompanied by payment in full of the purchase price of such Common Shares. Payment for such Common Shares may be made (as determined by the Committee) (i) in cash, (ii) by certified check or bank cashier's check payable to the order of the Company in the amount of such purchase price, (iii) by delivery to the Company of Common Shares having an aggregate Fair Market Value equal to such purchase price, (iv) by irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay such purchase price and to sell the Common Shares to be issued upon exercise of the Option and deliver the cash proceeds less commissions and brokerage fees to the Optionee or to deliver the remaining Common Shares to the Optionee, or (v) by any combination of the methods of payment described in (i) through (iv) above. (e) An Optionee shall not have any of the rights of a shareholder with respect to the Common Shares subject to his Option until such shares are issued to him upon the exercise of his Option as provided herein. (f) No Option shall be transferable, except by will or the laws of descent and distribution, and any Option may be exercised during the lifetime of the Optionee only by him. No Option granted under the Plan shall be subject to execution, attachment or other process. 6. TERMINATION OF OPTION RIGHTS. (a) In the event an Optionee ceases to be a member of the Board for any reason other than death or disability, any then unexercised Options granted to such Optionee may be exercised, to the extent exercisable on the date of such cessation, within a period of thirty (30) days following such time the Optionee so ceases to be a member of the Board, but in no event later than the expiration of the Option. (b) In the event that an Optionee ceases to be a member of the Board by reason of his or her disability or death, any Option granted to such Optionee may be exercised (by the Optionee's personal representative, heir or legatee, in the event of death), to the extent exercisable on the date of such cessation, during the period ending one hundred eighty (180) days after the date the Optionee so ceases to be a member of the Board, but in no event later than the expiration date of the Option. 7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. (a) In the event that the outstanding Common Shares are hereafter changed by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination or exchange of shares and the like, or dividends payable in Common Shares, an appropriate adjustment shall be made by the Committee in the aggregate number of shares available under the Plan and in the number of shares and price per share subject to outstanding Options. If the Company shall be reorganized, consolidated, or merged with another corporation, or if all or substantially all of the assets of the Company shall be sold or exchanged, an Optionee shall at the time of issuance of the stock under such corporate event be entitled to receive upon the exercise of his Option the same number and kind of shares of stock or the same amount of property, cash or securities as he would have been entitled to receive upon the occurrence of any such corporate event as if he had been, immediately prior to such event, the holder of the number of shares covered by his Option. (b) Any adjustment under this Paragraph 7 in the number of Common Shares subject to Options shall apply proportionately to only the unexercised portion of any Option granted hereunder. If fractions of a share would result from any such adjustment, the adjustment shall be revised to the next lower whole number of shares. 30 31 8. FURTHER CONDITIONS OF EXERCISE. (a) Unless prior to the exercise of an Option the Common Shares issuable upon such exercise are the subject of a registration statement filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and a prospectus meeting the requirements of Section 10(a)(3) of the Securities Act has been distributed to Optionees, the notice of exercise with respect to such Option shall be accompanied by a representation or agreement of the Optionee to the Company to the effect that such shares are being acquired for investment only and not with a view to the resale or distribution thereof, or such other documentation as may be required by the Company, unless, in the opinion of counsel to the Company, such representation, agreement or documentation is not necessary to comply with the Securities Act. (b) Anything in subparagraph (a) of this Paragraph 8 to the contrary notwithstanding, the Company shall not be obligated to issue or sell any Common Shares until they have been listed on each securities exchange on which the Common Shares may then be listed and until and unless, in the opinion of counsel to the Company, the Company may issue such shares pursuant to a qualification or an effective registration statement, or an exemption from registration, under such state and federal laws, rules or regulations as such counsel may deem applicable. The Company shall use reasonable efforts to effect such listing, qualification and registration, as the case may be. 9. TERMINATION AND AMENDMENT OF PLAN. The Board may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that (i) the Board may not, without approval by a majority of the common shares present in person or by proxy and entitled to vote thereon; (a) increase the maximum number of shares for which Options may be granted under the Plan or the number of shares for which an Option may be granted to any participating directors hereunder; (b) change the period during which any Options may be granted or remain outstanding or the date on which the Plan shall terminate; (c) change the designation of the class of persons eligible to receive Options; (d) change the price at which Options are granted; or (e) materially increase benefits accruing to Optionees under the plan; and (ii) the foregoing provisions of the Plan shall in no event be amended more than once every six months other than to comport with changes in the Internal Revenue Code. Termination or any modification or amendment of the Plan shall not, without consent of an Optionee, affect his rights under an Option previously granted to him. 10. APPROVAL OF STOCKHOLDERS. The Plan shall be effective upon approval by the affirmative vote of a majority of Common Shares present in person or by proxy and entitled to vote thereon. 31 32 ================================================================================ PRIME HOSPITALITY CORP. PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR ANNUAL MEETING MAY 12, 1997 The undersigned hereby constitutes and appoints David A. Simon, John M. Elwood 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 Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey 07004, on Monday, May 12, 1997, at 10:00 a.m., and any adjournments thereof, on all matters coming before said meeting. DIRECTORS RECOMMEND A VOTE "FOR" ELECTION OF BOTH NOMINEES AND "FOR" PROPOSALS 2, 3 AND 4. 1. ELECTION OF THREE CLASS II DIRECTORS. FOR nominees listed below [ ] [ ] WITHHOLD authority to vote for nominees. HERBERT LUST II, JACK H. NUSBAUM AND HOWARD M. LORBER FOR except vote withheld from the following nominee __________ . 2. PROPOSAL TO APPROVE AN AMENDMENT TO THE 1995 EMPLOYEE STOCK OPTION PLAN. [ ] FOR [ ] AGAINST [ ] ABSTAIN 3. PROPOSAL TO APPROVE AN AMENDMENT TO THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. [ ] FOR [ ] AGAINST [ ] ABSTAIN 4. PROPOSAL TO RATIFY THE BOARD OF DIRECTORS' SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANT OF THE COMPANY. [ ] FOR [ ] AGAINST [ ] ABSTAIN (continued, and to be signed, on other side) -----END PRIVACY-ENHANCED MESSAGE-----