UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.         )

 

 

 

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Park Hotels & Resorts Inc.

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Notice of Annual Meeting of Stockholders

and Proxy Statement

 

 

 

 

March 30, 2018

Dear Fellow Stockholder:

It is our pleasure to cordially invite you to attend the annual meeting of stockholders of Park Hotels & Resorts Inc. to be held on Friday, April 27, 2018 at 11:30 a.m., Eastern time, at 1775 Tysons Blvd, Tysons, Virginia 22102.

At the annual meeting, you will be asked to (i) elect eight members to serve on our Board of Directors; (ii) approve, on an advisory (non-binding) basis, the compensation of our named executive officers; (iii) ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2018; and (iv) conduct such other business as may properly come before the annual meeting or any adjournment or postponement of the annual meeting. The Notice of Annual Meeting of Stockholders and Proxy Statement accompanying this letter provide further information regarding these proposals.

Your vote is important. The Board of Directors appreciates your continued support and, regardless of whether you plan to participate in the annual meeting, we hope that you will vote as soon as possible. Thank you for your continued interest and we look forward to seeing you at the annual meeting.

 

						Park Hotels & Resorts Inc. 1775 Tysons Blvd 7th Floor Tysons, VA 22102 +1 571 302 5757 Main

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

You are hereby invited to attend the 2018 annual meeting of stockholders of Park Hotels & Resorts Inc.

 

Date:		Friday, April 27, 2018
Time:		11:30 a.m., Eastern Time
Location:		1775 Tysons Blvd, Tysons, VA 22102
Items of Business:		•  To elect eight directors nominated by the Board of Directors to serve until the 2019 annual meeting of stockholders and until their successors have been duly elected and qualified (Proposal 1);   •  To consider and vote, on an advisory (non-binding) basis, on the compensation of our named executive officers as disclosed in this Proxy Statement (Proposal 2);   •  To consider and vote upon the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018 (Proposal 3); and   •  To conduct such other business as may properly come before the annual meeting or any adjournment or postponement thereof.
Record Date:		Stockholders of record as of the close of business on March 15, 2018 will be entitled to notice of and to vote at the 2018 annual meeting of stockholders and any adjournment or postponement of the annual meeting.
Voting:		The Board of Directors, on behalf of the Company, is soliciting your proxy to ensure that a quorum is present and that your shares are represented and voted at the 2018 annual meeting of stockholders. This Notice of Annual Meeting and Proxy Statement are first being distributed on or about March 30, 2018. You are requested, whether or not you plan to be present at the annual meeting, to vote, sign and promptly return your Proxy Card or Voting Instruction Form (as applicable). Alternatively, you may authorize a proxy to vote by telephone or the Internet. If you subsequently decide to vote at the meeting, information about revoking your proxy prior to the meeting is also provided.

 

 

VOTING CAN BE COMPLETED IN ONE OF FOUR WAYS:
		VIA THE INTERNET Go to the website address shown on your Proxy Card or Voting Instruction Form				BY MAIL Mark, sign, date and return the enclosed Proxy Card or Voting Instruction Form in the postage-paid envelope
		BY TELEPHONE Use the toll-free number shown on your Proxy Card or Voting Instruction Form and follow the recorded instructions				IN PERSON Vote at the annual meeting in Tysons, Virginia (if you are a record holder)

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON April 27, 2018. This Proxy Statement and our 2017 Annual Report are available free of charge at www.proxyvote.com.

TABLE OF CONTENTS

 

		Page
PROXY STATEMENT SUMMARY			1
PROPOSAL 1: ELECTION OF DIRECTORS			5
Introduction			5
Vote Required			5
Board Recommendation			5
Director Nominees			6
Former Directors			9
CORPORATE GOVERNANCE MATTERS			10
Introduction			10
Restriction on Governance Changes Until January 2019			10
Stockholder Engagement			10
Board Leadership Structure			10
Director Independence and Independence Determinations			11
Board Committees			12
Meetings			13
Corporate Governance Guidelines			13
Code of Conduct			14
Risk Management Oversight			14
Board Candidate Qualification and Selection Process			14
Stockholder Recommendations for Board Nominations			15
Diversity Policy			16
Policy Regarding Stockholder Rights Plan			16
Communication with the Board			16
DIRECTOR COMPENSATION			17
Compensation Program			17
Stock Ownership Policy			18
Director Travel			18
Director Compensation for 2017			18
EXECUTIVE OFFICERS			20
Executive Officer Biographies			20
PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS			22
Introduction			22
Vote Required			22
Board Recommendation			22
COMPENSATION DISCUSSION AND ANALYSIS			23
Introduction			23
2017 Company Performance Highlights			24
Executive Compensation Key Attributes			24
Compensation Process and Philosophy			25
Role of Compensation Consultant			25
Use of Peer Group Data			25
Role of Executives			26
Say-On-Pay			27
Compensation Framework			27
CEO Employment Agreement			33
Other Compensation Program Elements			33
Compensation Risk Review			35
Compensation Committee Interlocks and Insider Participation			36
Compensation Committee Report			36
COMPENSATION TABLES			37
2017 Summary Compensation Table			37

		Page
2017 Grants of Plan Based Awards Table			38
Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table			39
2017 Outstanding Equity Awards at Fiscal Year-End			40
2017 Option Exercises and Stock Vested			42
Potential Payments Upon Termination or Change in Control			42
Equity Compensation Plan Information			45
Pay Ratio			45
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG			46
Vote Required			46
Board Recommendation			46
Audit and Non-Audit Fees			46
Audit Committee Policies and Procedures			47
Audit Committee Report			47
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			48
Section 16(a) Beneficial Ownership Reporting Compliance			49
RELATED PARTY TRANSACTIONS			50
Related Party Transactions Policy			50
Internal Reorganization and Spin-off Related Agreements			50
Management and Franchise Agreements with Hilton			53
Agreements with Blackstone			53
Agreements with HNA			53
Indemnification Agreements			54
Real Estate and Other Transactions with Hilton and HGV			54
Other Relationships			55
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING			57
Proxy Materials			57
Annual Meeting & Voting Information			58
OTHER MATTERS			62
Stockholder Proposals for the 2019 Annual Meeting			62
Householding of Proxy Materials			62
Availability of Additional Materials			62
Other Business			63

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. Our proxy materials, including our Proxy Statement and Proxy Card or Voting Instruction Form (as applicable), are first being distributed on or about March 30, 2018.

GENERAL

The Board of Directors (the “Board”) of Park Hotels & Resorts Inc. (“Park,” the “Company,” “we,” “us” and “our”) is soliciting proxies to be voted at its 2018 annual meeting of stockholders. The Proxy Statement provides the information stockholders need to know to vote by proxy or in person at the annual meeting. Stockholders do not need to attend the annual meeting in person in order to vote. If, at the close of business on March 15, 2018, you were a stockholder of record or held shares through a broker, bank or other nominee, you may vote your shares by proxy via the Internet, by telephone or by mail. For shares held through a broker, bank or other nominee, you may vote by submitting voting instructions to your broker, bank or other nominee. Please refer to information from your broker, bank or other nominee on how to submit voting instructions.

 

ANNUAL MEETING OF STOCKHOLDERS
Date and Time		Record Date
April 27, 2018 at 11:30 a.m. (ET)		March 15, 2018
Location		Number of Shares of Common Stock Outstanding and Eligible to Vote at the Meeting as of the Record Date
1775 Tysons Blvd., Tysons, Virginia 22102		201,094,016 shares of common stock

VOTING MATTERS

Stockholders are being asked to vote on the following matters at the 2018 annual meeting of stockholders:

 

		Board Recommendation
Proposal 1. Election of Directors (page 5)
The Board and the Nominating and Corporate Governance Committee believe that the combination of the qualifications, experiences, skills and attributes of the director nominees would contribute to an effective and well-functioning Board and that, individually and as a whole, the director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s management.		FOR EACH NOMINEE
Proposal 2. Advisory Vote to Approve Compensation of Named Executive Officers (page 22)
Stockholders are being asked to cast a vote, on an advisory (non-binding) basis, to approve the compensation of the Company’s named executive officers, as described in this Proxy Statement. The Board values stockholders’ opinions and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.		FOR

 

1

		Board Recommendation
Proposal 3. Ratification of the Appointment of Ernst & Young LLP (page 46)
The Audit Committee has appointed Ernst & Young LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2018. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s selection of our independent registered public accounting firm. The Audit Committee and the Board believe that the continued retention of Ernst & Young as the independent registered public accounting firm for the Company is in the best interests of the Company and its stockholders.		FOR

BUSINESS HIGHLIGHTS

2017 was a landmark year for Park. We previously operated as a subsidiary of Hilton Worldwide Holdings Inc. (“Hilton”). In 2016, the board of directors of Hilton approved a plan to separate Hilton into three independent, publicly traded companies. Under this plan, Hilton executed a spin-off of Park and its subsidiaries (referred to in this Proxy Statement as the “Spin-off”), as well as a spin-off of Hilton Grand Vacations Inc. and its subsidiaries (“HGV”), both of which were effective as of January 3, 2017.

One of our biggest achievements during our first year as an independent public company was assembling a seasoned team of talented men and women who embody the teamwork and dedication needed to achieve our goals as a pure-play lodging real estate company. As a result of the exceptional efforts of this team, we launched several key initiatives in 2017, including an aggressive asset management effort to improve margins and a capital recycling initiative to dispose of non-core assets. Through these and other initiatives, we believe that we will succeed in delivering superior risk-adjusted returns to our stockholders.

2017 BY THE NUMBERS

 

TOTAL REVENUES   $2.791 BILLION   2.3% INCREASE YEAR-OVER-YEAR		COMPARABLE REVENUE PER AVAILABLE ROOM   $163.49   0.7% INCREASE ON PRO-FORMA BASIS YEAR-OVER-YEAR		RETURNED TO STOCKHOLDERS   ~$1 BILLION   PAID AS CASH AND STOCK FROM OUR REGULAR DIVIDENDS AND OUR EARNINGS AND PROFIT DIVIDEND

For more information on our 2017 results and other related financial measures, see our 2017 Annual Report.

 

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BOARD OF DIRECTORS NOMINEES AND COMMITTEES

 

Name		Independent		Committee Membership		Other Public Company Boards
Thomas J. Baltimore, Jr.		No		--		1
Gordon M. Bethune		Yes		Lead Independent Director Compensation Nominating & Corporate Governance		1
Patricia M. Bedient		Yes		Audit Nominating & Corporate Governance		2
Geoffrey Garrett		Yes		Audit		--
Christie B. Kelly		Yes		Audit (Chair) Compensation		1
Sen. Joseph I. Lieberman		Yes		Audit Nominating & Corporate Governance		--
Timothy J. Naughton		Yes		Nominating & Corporate Governance (Chair) Compensation		2
Stephen I. Sadove		Yes		Compensation (Chair) Audit		2

CORPORATE GOVERNANCE HIGHLIGHTS AND STOCKHOLDER ENGAGEMENT

The Company’s amended and restated certificate of incorporation (“certificate of incorporation”), amended and restated by-laws (“by-laws”) and corporate governance policies were modeled after those in place at Hilton at the time of the Spin-off. The Company is currently subject to an agreement with Hilton entered into prior to the Spin-off that restricts our ability to amend our certificate of incorporation and by-laws until January 2019, the second anniversary of the Spin-off. For further information regarding this agreement, see the discussion under the caption “Related Party Transactions—Internal Reorganization and Spin-Off Related Agreements—Tax Matters Agreement.” After that time, the Nominating and Corporate Governance Committee and the Board expect to review potential corporate governance changes that will further promote the long-term interests of our stockholders. During 2017, management engaged in discussions with stockholders who held approximately 40% of our outstanding shares. During these discussions, stockholders were given the opportunity to share feedback on the Company’s operations, its financial performance, governance practices and policies and compensation framework and programs.

Our current corporate governance highlights include the following:

 

 

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EXECUTIVE COMPENSATION HIGHLIGHTS

In 2017, the Compensation Committee established key elements of our executive compensation program as follows:

 

 

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PROPOSAL 1: ELECTION OF DIRECTORS

INTRODUCTION

The Board currently consists of eight directors, each nominated for election at the 2018 annual meeting of stockholders to serve until the Company’s 2019 annual meeting of stockholders and until their successors have been duly elected and qualified. Each nominee for director was recommended by our Nominating and Corporate Governance Committee, which considered a number of factors, including the criteria for Board membership approved by our Board, and then was nominated by our Board.

Each of our current directors has been previously elected by our stockholders. Seven of our directors joined the Board in December 2016 or January 2017 in connection with the Company’s Spin-off. Our remaining director, Geoffrey Garrett, was elected as an independent director in June 2017 pursuant to the stockholder agreement (the “HNA Stockholder Agreement”) between the Company and HNA Tourism Group Co., Ltd. (“HNA”). The HNA Stockholder Agreement terminated on March 9, 2018 following HNA’s sale of all of its shares of the Company’s common stock.

Each of our nominees has agreed to be named in this Proxy Statement and to serve if elected. The Board anticipates that the nominees will serve, if elected, as directors. However, if any person nominated by the Board ceases to be a candidate for election by the time of the 2018 annual meeting of stockholders, the proxies will be voted for the election of such other person as the Board may recommend.

VOTE REQUIRED

Under our by-laws, in an uncontested election, directors must be elected by a plurality of all the votes cast. This means that the director nominees with the greatest number of votes cast, even if less than a majority, will be elected. There is no cumulative voting. Abstentions, broker non-votes (if any) and votes marked “WITHHOLD” are not counted as votes cast.

Notwithstanding the foregoing, under our by-laws and Corporate Governance Guidelines, if a director nominee who is already serving as a director does not receive a majority of the votes cast, the director must tender his or her resignation to our Board and our Nominating and Corporate Governance Committee is required to consider all relevant factors and make a recommendation to the Board on whether to accept or reject the recommendation or take other action. The Board is required to take action with respect to this recommendation within 90 days following certification of the election results.

BOARD RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES NAMED BELOW.

 

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DIRECTOR NOMINEES

Below is biographical information about the director nominees and their specific qualifications, experience, skills and attributes which led the Board and the Nominating and Corporate Governance Committee to conclude that they should be nominated to serve as directors of Park.

 

Thomas J. Baltimore, Jr., Age 54 Director Since: 2016; Chairman of the Board Qualifications, Experience, Skills and Attributes: Mr. Baltimore’s knowledge of and extensive experience in various senior leadership roles in the lodging real estate industry provides the Board valuable industry-specific knowledge and expertise. In addition, Mr. Baltimore’s role as our President and Chief Executive Officer brings management perspective to Board deliberations and provides beneficial information about the status of our day-to-day operations.

 

Mr. Baltimore joined the Company in May 2016 and has served as our President and Chief Executive Officer and as a director and the Chairman of the Board since December 2016. Prior to joining the Company, Mr. Baltimore served most recently as the President and Chief Executive Officer of RLJ Lodging Trust (NYSE: RLJ) (“RLJ”) and as a member of its board of trustees from RLJ’s formation on January 31, 2011 until May 11, 2016. Prior to that, Mr. Baltimore co-founded RLJ Development and served as its president from 2000 to 2011. During this time period, RLJ Development and affiliates raised and invested more than $2.2 billion in equity. Previously, Mr. Baltimore served as vice president of gaming acquisitions of Hilton Hotels Corporation from 1997 until 1998 and later as vice president of development and finance from 1999 until 2000. He also served in various management positions with Marriott Corporation and Host Marriott Services Corporation, including vice president of business development. Mr. Baltimore currently serves on the board of directors of Prudential Financial, Inc. (NYSE: PRU) where he serves as Lead Independent Director. Previously, Mr. Baltimore served on the board of directors of Duke Realty Corporation (NYSE: DRE) until April 2017, the board of trustees of RLJ until May of 2016 and the board of directors of Integra Life Sciences Company (NASDAQ: IART) until August 2012. Mr. Baltimore is also a member of the National Association of Real Estate Investment Trusts (“NAREIT”) executive board where he currently serves as Chair. Mr. Baltimore received his Bachelor of Science degree from the McIntire School of Commerce, University of Virginia and his Master of Business Administration degree from the Colgate Darden School of Business, University of Virginia.

 

Gordon M. Bethune, Age 76 Director Since: 2017; Lead Independent Director Committees: Compensation, Nominating and Corporate Governance Qualifications, Experience, Skills and Attributes: Mr. Bethune brings to the Board his extensive public company directorship experience as well as his operations and management experience, including as chief executive officer of an airline.

Mr. Bethune has served as the Lead Independent Director since joining the Board in January 2017. Mr. Bethune worked for Continental Airlines, Inc. (now part of United Continental Holdings, Inc. (NYSE: UAL)) from February 1994 until December 2004, serving as Chairman and Chief Executive Officer from September 1996 until his retirement in December 2004, as Chief Executive Officer from November 1994 until September 1996 and as President and Chief Operating Officer from February 1994 until November 1994. Prior to his tenure at Continental, Mr. Bethune held senior management positions with The Boeing Company (NYSE: BA), Piedmont Airlines, Inc., Western Airlines, Inc. and Braniff Airlines. Mr. Bethune currently serves on the board of directors of Sprint Corporation (NYSE: S) and served on the board of directors of Prudential Financial, Inc. (NYSE: PRU) from 2005 until May 2016, Honeywell International Inc. (NYSE: HON) from 1999 until April 2016, Willis Towers Watson PLC (NASDAQ: WLTW) from 2004 until 2008, Continental from 1994 until 2004 and Sysco Corporation (NYSE: SYY) from 1999 until 2000. Mr. Bethune received his Bachelor of Science degree from Abilene Christian University in Dallas, Texas.

 

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Patricia M. Bedient, Age 64 Director Since: 2017 Committees: Audit, Nominating and Corporate Governance Qualifications, Experience, Skills and Attributes: Ms. Bedient brings to the Board her extensive financial and management experience, including service as a REIT chief financial officer. In addition, Ms. Bedient brings to the Board her public company directorship experience.

Ms. Bedient has served as a director on the Board since January 2017. Ms. Bedient most recently served as Executive Vice President for Weyerhaeuser Company (NYSE: WY), one of the world’s largest integrated forest products companies, from 2007 until her retirement in July 2016. Ms. Bedient also served Weyerhaeuser as Chief Financial Officer from 2007 until February 2016. Prior to that, Ms. Bedient served as Senior Vice President, Finance and Strategic Planning of Weyerhaeuser from 2006 until 2007 and as Vice President, Strategic Planning from 2003, when Ms. Bedient joined Weyerhaeuser, until 2006. A certified public accountant (“CPA”) since 1978, Ms. Bedient served as managing partner of the Seattle office of Arthur Andersen LLP prior to joining Weyerhaeuser. Ms. Bedient also worked at Arthur Andersen’s Portland and Boise offices as a partner and as a CPA during her 27-year career with that firm. Ms. Bedient currently serves on the board of directors of Alaska Air Group, Inc. (NYSE: ALK), where she serves as the Lead Independent Director, and Suncor Energy Inc. (NYSE: SU). Ms. Bedient received her Bachelor of Science degree in Business Administration with concentrations in Finance and Accounting from Oregon State University. She is a member of the American Institute of CPAs.

 

Geoffrey Garrett, Age 59 Director Since: 2017 Qualifications, Experience, Skills and Attributes: Mr. Garrett brings to the Board his extensive leadership and management experience, as well as a diverse perspective gained from serving as the dean of one of the most prominent business schools in the United States.

Mr. Garrett has served as a director of the Board since June 2017. Mr. Garrett currently serves as dean of the Wharton School of Business (“Wharton”) at the University of Pennsylvania. Prior to his appointment as dean of Wharton in 2014, Mr. Garrett served as the dean of the business school at University of New South Wales in Australia from January 2013 until June 2014 and the dean of the business school at the University of Sydney, Australia from January 2013 until December 2013. From 2008 until 2012, Mr. Garrett served as the Founding Chief Executive Officer and a Professor of Political Science at the United States Studies Centre in Sydney, Australia. Prior to that, Mr. Garrett served as President of the Pacific Council of International Policy in Los Angeles from 2005 until 2009 and the dean of the UCLA International Institute from 2001 until 2005. Mr. Garrett previously served as a professor at Oxford University, Stanford University, Yale University and as a member of the faculty in the Management Department at Wharton. Mr. Garrett received a Bachelor of Arts degree with Honors from the Australian National University and a Master of Arts and Doctor of Philosophy degrees from Duke University where he was a Fulbright Scholar.

 

Christie B. Kelly, Age 56 Director Since: 2016 Committees: Audit (Chair), Compensation Qualifications, Experience, Skills and Attributes: Ms. Kelly brings to the Board financial and industry-specific expertise, including as chief financial officer of a real estate investment trust, as well as her public company directorship experience.

Ms. Kelly has served as a director on the Board since December 2016. Ms. Kelly has served as Executive Vice President and Chief Financial Officer of Jones Lang LaSalle Incorporated (NYSE: JLL) (“JLL”), a publicly traded financial and professional services firm specializing in real estate, since July 2013. Prior to her

 

7

tenure at JLL, Ms. Kelly served as Executive Vice President and Chief Financial Officer of Duke Realty Corporation (NYSE: DRE) (“Duke”) from 2009 until June 2013. From 2007 until she joined Duke in 2009, Ms. Kelly served as Senior Vice President, Global Real Estate at Lehman Brothers, where she led real estate equity syndication in the United States and Canada. Prior to that, Ms. Kelly served at General Electric Company (NYSE: GE) from 1983 to 2007 in numerous finance and operational financial management positions in the United States, Europe and Asia that included responsibility for mergers and acquisitions, process improvements, internal audit and enterprise risk management. Ms. Kelly currently serves on the board of directors of Kite Realty Group Trust (NYSE: KRG). Ms. Kelly received her Bachelor of Arts degree in Economics from Bucknell University. She has been recognized as one of the Women of Influence by the Indianapolis Business Journal.

 

Sen. Joseph I. Lieberman, Age 76 Director Since: 2017 Committees: Audit, Nominating and Corporate Governance Qualifications, Experience, Skills and Attributes: Sen. Lieberman brings to the Board extensive public policy and government relations experience, including as U.S. Senator of the State of Connecticut, and legal experience in his current role as Senior Counsel.

Sen. Lieberman has served as a director on the Board since January 2017. Sen. Lieberman has been Senior Counsel at Kasowitz, Benson & Torres LLP, a national law firm focusing on complex commercial litigation, since 2013. Prior to joining Kasowitz, Sen. Lieberman, the Democratic Vice Presidential nominee in 2000, served 24 years in the U.S. Senate, retiring in January 2013 following the end of his fourth term. During his tenure in the U.S. Senate, Sen. Lieberman helped shape legislation in areas of public policy including national and homeland security, foreign policy, fiscal policy, environmental protection, human rights, health care, trade, energy, cyber security and taxes. Sen. Lieberman served the U.S. Senate in many leadership roles, including as the Chairman of the Committee on Homeland Security and Government Affairs. Prior to being elected to the U.S. Senate, Sen. Lieberman served as the Attorney General of the State of Connecticut from 1983 until 1988. From 1970 until 1980, Sen. Lieberman also served in the Connecticut State Senate, including three terms as majority leader. Sen. Lieberman received his Bachelor of Arts degree in Political Science and Economics and his Juris Doctorate degree from Yale University.

 

Timothy J. Naughton, Age 56 Director Since: 2017 Committees: Nominating and Corporate Governance (Chair), Compensation Qualifications, Experience, Skills and Attributes: Mr. Naughton brings to the Board industry-specific experience in the real estate sector, including as chief executive officer of a real estate investment trust, as well as his extensive public company directorship experience.

Mr. Naughton has served as a director on the Board since January 2017. Mr. Naughton currently serves as the Chairman, Chief Executive Officer and President of AvalonBay Communities, Inc. (NYSE: AVB) (“AvalonBay”). Mr. Naughton has served as Chairman of the board of directors of AvalonBay since May 2013, as Chief Executive Officer since January 2012, and as President since February 2005. Joining AvalonBay’s predecessor entity in 1989, Mr. Naughton served as Chief Operating Officer of AvalonBay from 2001 until 2005, as Senior Vice President, Chief Investment Officer from 2000 until 2001 and as Senior Vice President and Vice President, Development and Acquisitions from 1993 until 2000. Mr. Naughton currently serves on the board of directors of Welltower Inc. (NYSE: HCN), serves on the executive board of NAREIT, is a member of The Real Estate Round Table, is a member and past Chairman of the Multifamily Council of the Urban Land Institute and is a member of the Real Estate Forum. Mr. Naughton received his Master of Business Administration from Harvard Business School and received his Bachelor of Arts degree in Economics with High Distinction from the University of Virginia, where he was elected to Phi Beta Kappa.

 

8

Stephen I. Sadove, Age 66 Director Since: 2017 Committees: Compensation (Chair), Audit Qualifications, Experience, Skills and Attributes: Mr. Sadove brings to the Board extensive operations and management experience, including as chief executive officer of a retailer, as well as his extensive public company directorship experience.

Mr. Sadove has served as a director on the Board since January 2017. Mr. Sadove has served as a founding partner of JW Levin Management Partners LLC, a private management and investment firm, since 2015. Mr. Sadove also serves as principal of Stephen Sadove and Associates, which provides consulting services to the retail industry, since 2014. From 2007 until 2013, Mr. Sadove served as Chairman and Chief Executive Officer of Saks Incorporated. Prior to that, Mr. Sadove served Saks as Vice Chairman from January 2002 until March 2004, as Chief Operating Officer from March 2004 until January 2006 and was named Chief Executive Officer in 2006. Prior to his tenure with Saks, Mr. Sadove served Bristol-Myers Squibb Company (NYSE: BMY) from 1991 until 2001, as President, Clairol from 1991 until 1996, as President, Worldwide Beauty Care from 1996 until 1997, as President, Worldwide Beauty Care and Nutritionals from 1997 until 1998 and as Senior Vice President of Bristol-Myers Squibb and President, Worldwide Beauty Care from 1997 until 2001. Mr. Sadove currently serves on the board of directors of Colgate-Palmolive Company (NYSE: CL), where he serves as the Lead Director, and Aramark (NYSE: ARMK). Mr. Sadove served on the board of directors of J.C. Penney Company, Inc. (NYSE: JCP) until May 2016 and Ruby Tuesday, Inc. (NYSE: RT) until December 2017. Mr. Sadove received his Master of Business Administration degree with Distinction from Harvard Business School and received his Bachelor’s degree in Government from Hamilton College. He currently serves as the Chairman of the board of trustees of Hamilton College.

 

 

FORMER DIRECTORS

As previously announced, on December 5, 2017, Robert G. Harper and Tyler S. Henritze, each appointed to the Board as designees pursuant to a stockholder agreement between the Company and The Blackstone Group L.P., resigned from the Board following the sale by Blackstone of substantially all of its shares of the Company’s common stock. On March 5, 2018, Xianyi Mu, who was appointed to the Board as a designee pursuant to the HNA Stockholder Agreement, resigned from the Board effective upon the closing of HNA’s public offering of its shares of the Company’s common stock (which occurred on March 9, 2018). In each case, following such resignations, the Board reduced its size to eliminate the respective vacancies.

 

9

CORPORATE GOVERNANCE MATTERS

INTRODUCTION

Our Board believes that good corporate governance promotes the long-term interests of our stockholders and strengthens Board and management accountability. The Board is responsible for providing advice and oversight of the strategic and operational direction of the Company and overseeing its executive management to support the long-term interests of the Company and its stockholders.

We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance include:

 

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our Board is not classified and each of our directors is subject to re-election annually, and we intend not to classify the Board in the future without the approval of our stockholders

 

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under our by-laws and our Corporate Governance Guidelines, directors who fail to receive a majority of the votes cast in uncontested elections will be required to submit their resignation to the Board

 

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our non-management directors meet regularly in executive sessions, and

 

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we do not have a stockholder rights plan, and if the Board were ever to adopt a stockholder rights plan in the future without prior stockholder approval, the Board would either submit the plan to stockholders for ratification or cause the rights plan to expire within one year.

RESTRICTION ON GOVERNANCE CHANGES UNTIL JANUARY 2019

As we move away from the Spin-off, corporate governance will continue to be a focus of the Company. The Company’s certificate of incorporation, by-laws and corporate governance policies were modeled after those in place at Hilton prior to the Spin-off. The Company is currently subject to an agreement with Hilton entered into at the time of the Spin-off that restricts our ability to amend our certificate of incorporation and by-laws until January 2019, the second anniversary of the Spin-off. For further information regarding this agreement, see the discussion under the caption “Related Party Transactions—Internal Reorganization and Spin-Off Related Agreements—Tax Matters Agreement.” After that time, the Nominating and Corporate Governance Committee and Board expect to review potential corporate governance changes that will further promote the long-term interests of our stockholders.

STOCKHOLDER ENGAGEMENT

We believe that strong corporate governance practices should include regular outreach and conversations with our stockholders. We regularly discuss our operations, financial performance, industry, governance and compensation matters with stockholders. During 2017, we engaged with stockholders who held approximately 40% of our outstanding shares to obtain meaningful feedback on their perception and understanding of our business, markets and industry as well as our governance practices and compensation framework.

BOARD LEADERSHIP STRUCTURE

Thomas J. Baltimore, Jr. serves as the Chairman of the Board, President and Chief Executive Officer. Gordon M. Bethune serves as our Lead Independent Director. The Board believes at this time that the use of the Lead

 

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Independent Director, together with a combined Chairman and Chief Executive Officer position, is an effective leadership structure. The Company’s Policy Regarding Board Leadership Structure is set forth below:

Our Board’s leadership structure consists of a Chairman of the Board (who is also our CEO), a Lead Independent Director and Committee Chairs. The Board believes that the Company is best served by having the same individual serve as both Chairman and CEO in order to facilitate strategic discussion at Board meetings based on the extensive familiarity of the Chairman and CEO with our business. The Board also believes that a strong Lead Independent Director function is an important part of our corporate governance. Accordingly, the Board has adopted Corporate Governance Guidelines which establish the responsibilities and authorities of the Lead Independent Director as follows:

 

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presiding at all meetings of the Board at which the Chair is not present, including executive sessions of the independent directors

 

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serving as a liaison between the Chair and the independent directors

 

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approving information sent to the Board

 

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approving meeting agendas for the Board

 

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approving meeting schedules to assure there is sufficient time for discussion of all agenda items

 

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authorization to call meetings of the independent directors, and

 

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ensuring that he/she be available, if requested by stockholders for consultation and direct communication.

Our Corporate Governance Guidelines require the independent directors to elect a Lead Independent Director on an annual basis. As well, our Board expects to periodically review the continued appropriateness of this Board leadership structure.

DIRECTOR INDEPENDENCE AND INDEPENDENCE DETERMINATIONS

Under our Corporate Governance Guidelines and NYSE rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with us or any of our subsidiaries. In addition, the director must meet the bright-line tests for independence set forth by the NYSE rules.

Our Corporate Governance Guidelines define independence in accordance with the independence definition in the current NYSE corporate governance rules for listed companies. Our Corporate Governance Guidelines require the Board to review the independence of all directors at least annually.

In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the objective tests set forth in the NYSE independence definition, the Board will determine, considering all relevant facts and circumstances, whether that relationship is material.

Our Board has affirmatively determined that each of Ms. Bedient, Mr. Bethune, Mr. Garrett, Ms. Kelly, Sen. Lieberman, Mr. Naughton and Mr. Sadove is independent under the guidelines for director independence set forth in our Corporate Governance Guidelines and under all applicable NYSE guidelines, including with respect to committee membership. Our former directors, Messrs. Harper, Henritze and Mu, were not determined to be independent during their terms on the Board.

 

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BOARD COMMITTEES

Committee Membership

Effective as of the Spin-off, the Board established three standing committees comprised entirely of independent directors: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each of these committees is described in more detail below. The following table summarizes the current membership of each of the Board’s committees.

 

Name		Audit Committee		Compensation Committee		Nominating and Corporate Governance Committee
Patricia M. Bedient		✓				✓
Gordon M. Bethune				✓		✓
Geoffrey Garrett		✓
Christie B. Kelly		Chair		✓
Sen. Joseph I. Lieberman		✓				✓
Timothy J. Naughton				✓		Chair
Stephen I. Sadove		✓		Chair

Audit Committee

The purpose of the Audit Committee is to assist the Board’s oversight of the adequacy and integrity of the Company’s financial reporting processes and procedures; the integrity of the Company’s financial statements; the Company’s compliance with legal and regulatory requirements and the Company’s enterprise risk management program; the independent auditor’s appointment, qualification, independence, work and retention; and the scope, approach, performance and results of the independent auditors and the Company’s internal audit function. The duties and responsibilities of our Audit Committee are more fully described in our Audit Committee Charter, which is available under the “Investors” tab of the Company’s website at http://www.pkhotelsandresorts.com, under the heading “Corporate Governance—Governance Documents.”

The Board has determined that each of the members of the Audit Committee is independent as defined by our Corporate Governance Guidelines and the NYSE listing standards applicable to boards of directors generally and audit committees in particular. The Board has also determined that each of the members of the Audit Committee is financially literate within the meaning of the NYSE listing standards and that Ms. Bedient and Ms. Kelly qualify as “audit committee financial experts” as defined under applicable Securities and Exchange Commission (“SEC”) rules and regulations.

Compensation Committee

The purpose of the Compensation Committee is to assist the Board in fulfilling its responsibilities relating to compensation matters, including with respect to the compensation of the Company’s executive officers. The Compensation Committee has responsibility for overseeing the goals, objectives, compensation and benefits of our executive officers; our overall compensation structure, policies and programs; making recommendations to the Board with respect to director compensation; and our compliance with applicable legal and regulatory requirements. The duties and responsibilities of our Compensation Committee are more fully described in our Compensation Committee Charter, which is available under the “Investors” tab of the Company’s website at http://www.pkhotelsandresorts.com, under the heading “Corporate Governance—Governance Documents.”

 

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Pursuant to the Compensation Committee Charter, and subject to compliance with applicable laws of our state of jurisdiction, the Compensation Committee may not delegate its authority to approve executive compensation or grant equity awards to directors or executive officers of the Company, except to subcommittees comprised solely of Compensation Committee members. The Compensation Committee also has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable. A more detailed discussion of the Compensation Committee’s use of outside advisors with respect to 2017 compensation matters is provided under the caption “Compensation Discussion and Analysis—Role of Compensation Consultant.”

The Board has determined that each of the members of the Compensation Committee is independent as defined by our Corporate Governance Guidelines and the NYSE listing standards applicable to boards of directors generally and compensation committees in particular.

Nominating and Corporate Governance Committee

The purpose of the Nominating and Corporate Governance Committee is to advise the Board concerning appropriate composition of the Board and its committees. The Nominating and Corporate Governance Committee has responsibility for, among other things, identifying and recommending to the Board candidates for election to our Board, reviewing the composition of the Board and its committees, developing and recommending to the Board corporate governance guidelines that are applicable to us and overseeing Board evaluations. The duties and responsibilities of our Nominating and Corporate Governance Committee are more fully described in our Nominating and Corporate Governance Committee Charter, which is available under the “Investors” tab of the Company’s website at http://www.pkhotelsandresorts.com, under the heading “Corporate Governance—Governance Documents.”

The Board has determined that each of the members of the Nominating and Corporate Governance Committee is independent as defined in our Corporate Governance Guidelines and the NYSE listing standards.

MEETINGS

The Board discharges its responsibilities through regularly scheduled meetings, special meetings, actions taken by unanimous written consent and other communications with management as appropriate. Our Corporate Governance Guidelines currently provide that all directors are expected to make every effort to attend any meeting of stockholders.

Mr. Baltimore is invited to attend meetings of the Board committees, but he does not have a vote on any committee matter. The Board and the Board committees regularly meet in executive sessions, at which no management representative is present. During 2017, the Board held five meetings, the Audit Committee held five meetings, the Compensation Committee held four meetings and the Nominating and Corporate Governance Committee held three meetings. During 2017, each of our director nominees attended at least 75% of the aggregate of: (i) the total number of meetings of the Board (held during the period for which he or she has been a director) and (ii) the total number of meetings held by all committees of the Board on which he or she serves (during the periods that he or she served). All the directors, including our former directors, attended the 2017 annual meeting of stockholders in person other than Mr. Henritze.

CORPORATE GOVERNANCE GUIDELINES

Our commitment to good corporate governance is reflected in our Corporate Governance Guidelines, which describe the Board’s views on a wide range of governance topics. Our Corporate Governance Guidelines are expected to be reviewed from time to time by the Nominating and Corporate Governance Committee and revised as it considers appropriate, upon recommendation to and approval by the Board. Our Corporate Governance Guidelines is available under the “Investors” tab of the Company’s website at http://www.pkhotelsandresorts.com, under the heading “Corporate Governance—Governance Documents.”

 

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CODE OF CONDUCT

The Board has adopted a Code of Conduct, which is available under the “Investors” tab of the Company’s website at http://www.pkhotelsandresorts.com, under the heading “Corporate Governance—Governance Documents.”

The Code of Conduct applies to all of our directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Controller, and sets forth our policies and expectations on a number of topics, including conflicts of interest, compliance with laws, use of our assets and business conduct and fair dealing. This Code of Conduct also satisfies the requirements for a code of ethics, as defined by Item 406 of Regulation S-K promulgated by the SEC. Any substantive amendment to, or waivers from, certain provisions of our Code of Conduct for the Company’s Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller or persons performing similar functions or any director will be posted on the Company’s website, at the address and location specified above.

The Company also maintains a Whistleblower Policy that establishes procedures for the receipt, retention and treatment of complaints received by us regarding questionable accounting or auditing matters or practices that may include or result in any such questionable accounting or auditing matters.

RISK MANAGEMENT OVERSIGHT

The Board has overall responsibility for risk oversight, including, as part of regular Board and committee meetings, general oversight of executives’ management of risks relevant to the Company. Our Corporate Governance Guidelines currently provide as follows with respect to risk oversight:

The Board exercises direct oversight of strategic risks to the Company. While the full Board has overall responsibility for risk oversight, it is supported in this function by its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. The Audit Committee assists the Board in fulfilling its risk oversight responsibilities by periodically reviewing the Company’s accounting, reporting and financial practices, including the integrity of its financial statements, the surveillance of administrative and financial controls, the Company’s compliance with legal and regulatory requirements and the Company’s enterprise risk management program and receiving reports from the Company’s officers. The Compensation Committee assists the Board by overseeing and evaluating risks related to the Company’s compensation structure and compensation programs, including the formulation, administration and regulatory compliance with respect to compensation matters, and succession planning. The Nominating and Corporate Governance Committee assists the Board by overseeing and evaluating programs and risks associated with Board organization, membership and structure and corporate governance.

BOARD CANDIDATE QUALIFICATION AND SELECTION PROCESS

When evaluating candidates for nomination to the Board, the Committee considers the factors set forth in our Corporate Governance Guidelines, as amended from time to time. Our Corporate Governance Guidelines currently provide as follows:

The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board, subject to any obligations and procedures governing the nomination of directors to the Board that may be set forth in any agreement or arrangement to which the Company is party. The Nominating and Corporate Governance Committee may consider:

 

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relevant experience, skills and knowledge as well as minimum individual qualifications, including strength of character, judgment, industry knowledge or experience and an ability to work collegially with the other members of the Board; and

 

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all other factors it considers appropriate, which may include existing commitments to other businesses, potential conflicts of interest with other pursuits, legal considerations, corporate governance background, financial and accounting background, executive compensation background and the size, composition and combined expertise of the existing Board.

The Board should monitor the mix of skills and experience of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively.

The Nominating and Corporate Governance Committee expects to identify potential candidates through referrals and recommendations, including by incumbent directors, management and stockholders, as well as through business and other organizational networks. The Nominating and Corporate Governance Committee may also retain and compensate third parties, including executive search firms, to identify or evaluate, or assist in identifying or evaluating, potential director nominees.

The Nominating and Corporate Governance Committee expects to consider current Board members by balancing the value of the director’s continuity of service and familiarity with the Company with that of obtaining a new perspective. The Nominating and Corporate Governance Committee also expects to consider each individual’s contributions, performance and level of participation, the current composition of the Board, and the Company’s needs. If any existing director does not want to continue in service or if the Nominating and Corporate Governance Committee decides not to re-nominate a director, the Nominating and Corporate Governance Committee will identify and evaluate new candidates based on the qualifications set forth in our Corporate Governance Guidelines. Prior to recommending a new candidate to the Board, the Nominating and Corporate Governance Committee will (i) request that one or more of its members (or other members of the Board) interview the candidate, (ii) conduct an appropriate review of the background of the candidate and (iii) discuss the candidate. Once the Nominating and Corporate Governance Committee selects a slate of Board candidates, it will present and recommend the slate to the full Board. The Nominating and Corporate Governance Committee will evaluate candidates for nomination for election to the Board recommended by stockholders on a substantially similar basis as it considers other nominees.

STOCKHOLDER RECOMMENDATIONS FOR BOARD NOMINATIONS

The Nominating and Corporate Governance Committee will accept for consideration qualified candidates properly recommended by stockholders. Stockholders who wish to nominate qualified candidates must do so by notifying the Company in writing, by notice delivered to the attention of the Secretary of the Company at the address of the Company’s executive offices as set forth in the Company’s periodic reports, of a proposed nominee. Submissions may be by mail, overnight courier or personal delivery. E-mail submissions will not be considered. In order to ensure meaningful consideration of candidates, notice must be received not less than 90 calendar days and not more than 120 calendar days prior to the first anniversary of the date of the proxy statement for the prior year’s annual meeting of stockholders. In the event that the annual meeting date is advanced by more than 20 calendar days or delayed by more than 70 calendar days from the anniversary date of the previous year’s meeting, then notice must be received no earlier than the close of business on the 120^th day prior to such annual meeting and not later than the close of business on the later of the 90^th day prior to such annual meeting or, if later, the 10th calendar day following the day on which public announcement of the date of such meeting is first made.

The notice must set forth as to each proposed nominee all information required under our by-laws and any other information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, including the nominee’s written consent to being named in the Company’s proxy statement as a nominee and to serving as a director if elected. The Company may require any proposed nominee to furnish such other information as may reasonably be required to determine the eligibility of the nominee to serve as a director, as well as a consent to be interviewed by the Nominating and Corporate Governance Committee.

 

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Submissions received through this process will be forwarded to the Nominating and Corporate Governance Committee for review. Only those nominees whose submissions comply with these procedures and who satisfy the qualifications determined by the Nominating and Corporate Governance Committee for directors of the Company will be considered by the Nominating and Corporate Governance Committee. Acceptance of a recommendation for consideration does not imply the Nominating and Corporate Governance Committee will nominate or recommend for nomination the recommended candidate.

DIVERSITY POLICY

In April 2017, the Board adopted a Policy Regarding Diversity as a Consideration for Board Nominations. Pursuant to this policy, the Nominating and Corporate Governance Committee and Board consider diversity – in terms of age, experience, industry, gender and ethnicity—to be an important factor in the consideration of candidates for nomination to the Board. However, as this policy was only recently adopted, the Board has not yet evaluated the effectiveness of this policy.

POLICY REGARDING STOCKHOLDER RIGHTS PLANS

The Board affirms as a matter of corporate policy that it will not authorize or adopt any stockholder rights plan or similar plan or agreement without the prior approval of the Company’s stockholders, unless any such plan or agreement would be submitted to the Company’s stockholders to be ratified or, in the absence of such stockholder approval or ratification, would expire within one year of its adoption.

COMMUNICATIONS WITH THE BOARD

As described in our Corporate Governance Guidelines, stockholders and other interested parties who wish to communicate with our Lead Independent Director, the chairperson of the Audit, Compensation or Nominating and Corporate Governance Committees, or to the non-management or independent directors as a group, may do so by addressing such communications or concerns to the Secretary of the Company, c/o Park Hotels & Resorts Inc., 1775 Tysons Blvd, 7^th Floor, Tysons, Virginia 22102, who will forward all such communication to the appropriate party.

 

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DIRECTOR COMPENSATION

COMPENSATION PROGRAM

Our director compensation program is designed to compensate independent, non-employee directors fairly for work required for a company of our size and scope and to align their interests with the interests of our stockholders. The program reflects our desire to attract, retain and use the expertise of highly-qualified people serving on our Board. The Compensation Committee, in consultation with the Compensation Committee’s independent compensation consultant (as described further in the Compensation Discussion and Analysis section of this Proxy Statement), is responsible for reviewing and making recommendations to the Board regarding compensation paid to all independent, non-employee directors. Our Chairman and Chief Executive Officer does not receive any additional compensation for serving as a director.

Our director compensation program for independent directors consists of an annual compensation package as follows:

 

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cash retainer of $75,000 ($110,000 in the case of the Lead Independent Director)

 

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additional cash retainer for serving on committees or as the chairperson of a committee as follows:

 

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$7,500 for serving as a member (other than the chairperson) of the Audit Committee, the Compensation Committee and/or the Nominating and Corporate Governance Committee

 

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$25,000 for the chairperson of the Audit Committee

 

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$20,000 for the chairperson of each of the Compensation Committee and the Nominating and Corporate Governance Committee, and

 

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equity award of $125,000 in the form of restricted stock, which generally vests on the date of the next annual meeting of stockholders that follows the grant date.

Our independent directors (other than Mr. Garrett, who joined our Board in June 2017) received their first grant of restricted stock in February 2017 in an amount equal to a pro rata portion of the annual equity award for the service period from January 3, 2017 until July 28, 2017, the date of our 2017 annual meeting. Mr. Garrett received a grant of unrestricted stock on July 28, 2017 in an amount equal to a pro rata portion of the annual equity award for the service period from June 10, 2017 (the date he was elected to the Board) until July 28, 2017. On July 28, 2017, each independent director received a grant of restricted stock in an amount equal to a pro rata portion of the annual equity award for the service period from July 29, 2017 until April 27, 2018, the date of our 2018 annual meeting. Our directors, as holders of restricted stock, will receive dividends on such restricted stock at the same time that regular dividend payments are made on the Company’s common stock. The next equity award grant to our independent directors is expected to be made on the date of our 2018 annual meeting of stockholders and will represent the directors’ annual grant for their services as a director until the 2019 annual meeting of stockholders.

All cash retainers will be paid to each independent director in quarterly installments. Any independent director may elect to receive 100% of his or her cash Board fees in fully vested shares of the Company’s common stock of an equivalent value, which have a grant date that is five business days before the regular quarterly payment date of such cash fees. Our independent directors (other than Mr. Garrett, who joined our Board in June 2017) received their first cash Board fees (or vested common stock in lieu thereof) in March 2017. Mr. Garrett received his first cash Board fees in June 2017.

 

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Additionally, all of our directors will be reimbursed for reasonable travel and related expenses associated with attendance at our Board or committee meetings.

STOCK OWNERSHIP POLICY

To align the interests of directors with stockholders, the Board has adopted a requirement that each of our independent directors will be required to own stock in an amount equal to five times his or her annual cash retainer. For purposes of this requirement, a director’s holdings include shares held directly or indirectly, individually or jointly, shares underlying unvested time-vesting restricted stock, and shares held under a deferral or similar plan. Independent directors are expected to meet this ownership requirement within five years of the later of (a) February 23, 2017 (i.e., the date on which the Company made its first broad-based equity incentive grants following the Spin-off) or (b) the date he or she first becomes subject to this stock ownership policy.

DIRECTOR TRAVEL

In order to encourage our independent directors to better understand our hotel assets and provide feedback on our portfolio, our independent directors are entitled to up to 30 complimentary room nights per calendar year (including associated room taxes and fees) at properties owned by the Company for their own use or use by family members accompanying them. The Company does not provide tax gross-ups to the directors with respect to these benefits.

DIRECTOR COMPENSATION FOR 2017

The table below sets forth information regarding non-employee director compensation for the fiscal year ended December 31, 2017. Messrs. Baltimore, Harper, Henritze and Mu did not receive any compensation from the Company for serving as a director during fiscal year 2017.

 

Name		Fees Earned or Paid in Cash(1) ($)		Stock Awards(2) ($)		All Other Compensation(3) ($)		Total ($)
Patricia M. Bedient		89,463		164,354		4,922		258,739
Gordon M. Bethune		124,315		164,354		3,892		292,561
Geoffrey Garrett		45,904		110,262		1,811		157,977
Christie B. Kelly		107,276		164,354		5,131		276,761
Sen. Joseph I. Lieberman		89,507		164,354		4,147		258,008
Timothy J. Naughton		101,875		164,354		5,071		271,300
Stephen I. Sadove		101,875		164,354		5,431		271,660

(1)

Except in the case of Ms. Kelly who was a director for the entire year, the amounts shown in the Fees Earned or Paid in Cash column represent the pro rata portion of the annual cash retainers paid to directors in fiscal year 2017 for Board and committee service for the service period from January 3, 2017 until December 31, 2017 (or, in the case of Mr. Garrett, for the service period from June 10, 2017 until December 31, 2017), as described above. The following directors elected to receive all or a portion of their respective cash compensation in the form of fully vested shares of the Company’s common stock, which election resulted in the

 

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following number of fully vested shares being granted during fiscal year 2017: Ms. Bedient, 3,280; Ms. Kelly, 3,918; Mr. Naughton, 3,735; and Mr. Sadove, 3,735, which number of shares were determined using the closing price of Park’s common stock on the NYSE on the applicable grant date.

(2)

Amounts shown in the Stock Awards column reflect the aggregate grant date fair value of each director’s restricted stock awards granted in fiscal year 2017. Each director’s restricted stock award was prorated based on time of service.

(3)

Represents dividends paid on equity awards granted to our directors and amounts for complimentary rooms for directors staying at properties owned by Park.

 

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EXECUTIVE OFFICERS

EXECUTIVE OFFICER BIOGRAPHIES

Set forth below is certain information regarding each of our current executive officers as of March 30, 2018, other than Mr. Baltimore, whose biographical information is presented under “Proposal 1: Election of Directors—Director Nominees.”

 

Name		Age		Position
Thomas J. Baltimore, Jr.		54		President and Chief Executive Officer
Sean M. Dell’Orto		43		Executive Vice President, Chief Financial Officer and Treasurer
Thomas C. Morey		46		Executive Vice President, General Counsel and Secretary
Jill C. Olander		44		Executive Vice President, Human Resources
Matthew A. Sparks		57		Executive Vice President and Chief Investment Officer
Robert D. Tanenbaum		51		Executive Vice President, Asset Management

Sean M. Dell’Orto has served as our Executive Vice President, Chief Financial Officer and Treasurer since December 2016. Prior to joining the Company, Mr. Dell’Orto served as Senior Vice President, Treasurer of Hilton Worldwide Holdings Inc. (NYSE: HLT) from September 2012 until December 2016. Prior to that, Mr. Dell’Orto served as Vice President, Corporate Finance of Hilton from February 2010 to September 2012, leading corporate forecasting and capital markets activities including debt fundraising and refinancing, loan workouts and modifications, strategic planning and debt compliance. Prior to his tenure at Hilton, Mr. Dell’Orto held similar management roles at Barceló Crestline Corporation and Highland Hospitality Corporation. Mr. Dell’Orto received his Bachelor of Science degree from University of Virginia and his Master of Business Administration degree from the Wharton School, University of Pennsylvania. Mr. Dell’Orto served on the pre Spin-off Board of the Company from December 2016 until January 3, 2017.

Thomas C. Morey joined the Company in August 2016 and served as our Senior Vice President, General Counsel and Secretary from December 2016 until February 2018 and has served as our Executive Vice President, General Counsel and Secretary since February 2018. Prior to joining the Company, Mr. Morey served as Senior Vice President and General Counsel of Washington Real Estate Investment Trust from October 2008 until July 2016. Prior to that, he served in a business role as Chief Operating Officer of Medical Funding Services, Inc., a provider of financial and administrative services to healthcare companies, from February 2006 to September 2008. Previously, Mr. Morey was a corporate partner with Hogan & Hartson LLP, a multi-national law firm (now known as Hogan Lovells US LLP), where he focused on capital markets transactions, mergers and acquisitions, strategic investments and general business matters for national and regional lodging, residential, office, retail and other real estate investment trusts (“REITs”). From 1997 to 1998, Mr. Morey was a corporate attorney with Jones Day in Dallas, Texas. Mr. Morey is a former member of the board of directors of the Maryland Chamber of Commerce and also previously served on the Executive Committee of the Maryland Chamber of Commerce. Mr. Morey received his Bachelor of Arts degree from Princeton University and his Juris Doctor degree from Duke Law School. Mr. Morey served on the pre Spin-off Board of the Company from December 2016 until January 3, 2017.

Jill C. Olander has served as our Executive Vice President, Human Resources since February 2018 and, prior to that, as our Senior Vice President, Human Resources from January 2017 until February 2018. Prior to joining the Company, Ms. Olander served as Vice President, Human Resources Consulting with Hilton (NYSE: HLT) from July 2013 until December 2016. Prior to that, Ms. Olander served as Senior Director of Human Resources Consulting with Hilton from April 2010 to July 2013. Prior to that, she served as Vice President of Human Resources for Allied Capital (acquired by Ares Capital Management in 2010), a private equity investment firm and mezzanine capital lender, from April 2006 to January 2010. Previously, Ms. Olander also held various Human Resources management roles at Chevy Chase Bank (now Capital One Bank), Deloitte & Touche and Capital One Financial. Ms. Olander received her Bachelor of Science degree from Vanderbilt University.

 

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Matthew A. Sparks has served as our Executive Vice President and Chief Investment Officer since January 2017. Prior to joining the Company, Mr. Sparks served as the Senior Vice President of Acquisitions & Development of Hilton (NYSE: HLT) from August 2011 until December 2016. During his tenure with Hilton, Mr. Sparks oversaw much of Hilton’s Luxury and Corporate growth and development in North America and led the Hilton team that completed the sale of the Waldorf Astoria New York to Anbang Insurance Group Co. Ltd. in 2015. Prior to his tenure at Hilton, Mr. Sparks served as senior vice president of acquisitions at Sage Hospitality Resources from 2010 until 2011. Before joining Sage, Mr. Sparks held various positions with Fairmont Raffles Hotels International, Wyndham Worldwide and Starwood Hotels & Resorts Worldwide Inc. Mr. Sparks received his Bachelor of Arts degree from the School of Hospitality Business, Michigan State University.

Robert D. Tanenbaum joined the Company in September 2016 and has served as our Executive Vice President, Asset Management since January 2017. Prior to joining the Company, Mr. Tanenbaum served as the Chief Operating Officer and Executive Vice President of Asset Management at DiamondRock Hospitality Company (NYSE: DRH) from 2013 until September 2016. Prior to his tenure at DiamondRock, Mr. Tanenbaum served as Principal of Madison Hotel Advisors LLC, a specialized asset management firm dedicated to value optimization for hotel owners, from 2004 until 2013. From 1996 until 2004, Mr. Tanenbaum served in various positions with Host Marriot Corporation (now known as Host Hotels & Resorts Inc. (NYSE: HST) (“Host”)), ending his tenure with Host as Vice President, Asset Management. During his time at Host, Mr. Tanenbaum was responsible for the repositioning of many assets and optimizing investor returns through a focused approach on operational excellence. Before joining Host, Mr. Tanenbaum served at PKF Consulting in San Francisco from 1992 until 1996, where he performed appraisals and feasibility studies for hotels, conference centers, and entertainment venues, as well as developed strategic plans for several US Air Force bases, and started his career with Four Seasons Hotels and Resorts working in both Chicago and then Maui. Mr. Tanenbaum is a member of the Hospitality Asset Managers Association, a lodging industry organization focused solely on asset management, and previously served four years on its board of directors and as Treasurer. Mr. Tanenbaum received his Bachelor of Science degree in Hotel Restaurant and Institutional Management from Pennsylvania State University.

There are no family relationship among any of our directors or executive officers.

 

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PROPOSAL 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS

INTRODUCTION

We are asking stockholders to vote, on an advisory (non-binding) basis, to approve the compensation of our named executive officers, as required by Section 14A of the Exchange Act, and related SEC rules. This non-binding advisory vote is commonly referred to as a “say-on-pay” vote.

The Company has in place a comprehensive executive compensation program. Please refer to the Compensation Discussion and Analysis section of this Proxy Statement for a detailed discussion of the Company’s executive compensation program, practices and philosophy. The Compensation Committee intends to continually monitor executive compensation programs and adopt changes to reflect the dynamic marketplace in which the Company competes for talent, as well as general economic developments affecting executive compensation.

You have the opportunity to vote “for,” “against” or “abstain” from voting on the following resolution relating to executive compensation:

“RESOLVED, that the holders of common stock of Park Hotels & Resorts Inc. approve, on an advisory (non-binding) basis, the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement, pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and related material disclosed in the Proxy Statement.”

As provided by the Dodd-Frank Act, this vote is advisory, and therefore not binding on the Company, the Board or the Compensation Committee. However, the Board and Compensation Committee value the views of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

VOTE REQUIRED

Under our by-laws, approval of the say-on-pay proposal requires the affirmative vote of a majority of all the votes cast. This means that the number of votes cast “FOR” the proposal must exceed the number of votes cast “AGAINST” the proposal. Abstentions and broker non-votes, if any, are not counted as votes “FOR” or “AGAINST” and will have no effect on the result of this vote.

Our current policy is to provide our stockholders with an opportunity to approve the compensation of our named executive officers each year at the annual meeting of stockholders. Accordingly, we anticipate that the next such vote will occur at the 2019 annual meeting of stockholders.

BOARD RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.

 

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COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

2017 was a landmark year for Park. We finished fiscal year 2016 as a portion of the ownership business segment of Hilton, one of the world’s largest hospitality companies, and began fiscal year 2017 as a separate, independent publicly-traded company and leading lodging real estate company with a diverse portfolio of market-leading hotels.

After the completion of the Spin-off on January 3, 2017, the Compensation Committee (when referred to in this section, the “Committee”) undertook a careful review of our business and competitive environment. As an independent lodging real estate investment trust, Park’s business model is significantly different from that of Hilton’s. Consequently, the Committee began a comprehensive effort to develop a new executive compensation program for the Company in January 2017. To assist with that effort, the Committee engaged FPL Associates L.P. (“FPL”), a compensation consultant with substantial experience working with real estate investment trusts. The Committee then established a peer group to assess executive compensation in relation to the companies against which Park’s performance is and will be compared. In developing the Company’s executive compensation program, the Committee established goals of (i) creating programs that align the interests of our executives with those of our stockholders to maximize stockholder value; (ii) properly motivating management to balance short-term objectives with long-term value creation to stockholders; and (iii) attracting and retaining the best executive talent by remaining competitive with programs that executives may be offered by other potential employers in the marketplace in which we compete for talent. At the completion of its process to develop the Company’s executive compensation program, the Committee adopted and approved the programs described below, which took effect for the 2017 compensation year.

This Compensation Discussion and Analysis (“CD&A”) provides an overview of the compensation for each of Park’s named executive officers (“NEOs”) for 2017 under the executive compensation programs adopted by the Committee. For fiscal year 2017, our NEOs were:

 

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Thomas J. Baltimore, Jr. – Chairman of the Board, President and Chief Executive Officer

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Sean M. Dell’Orto – Executive Vice President, Chief Financial Officer and Treasurer

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Thomas C. Morey – Executive Vice President, General Counsel and Secretary

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Matthew A. Sparks – Executive Vice President and Chief Investment Officer

•

Robert D. Tanenbaum – Executive Vice President, Asset Management

 

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2017 COMPANY PERFORMANCE HIGHLIGHTS

One of our biggest achievements during our first year as an independent public company was assembling a seasoned team of talented men and women who embody the teamwork and dedication needed to achieve our goals as a pure-play lodging real estate company. As a result of the exceptional efforts of this team, we launched several key initiatives in 2017, including an aggressive asset management effort to improve margins and a capital recycling initiative to dispose of non-core assets. For fiscal year 2017, revenues for the Company increased to $2.791 billion, which was a 2.3% increase from fiscal year 2016. Also in 2017, we returned in aggregate nearly $1 billion in capital to our stockholders in the form of cash and stock dividends (including our regular dividends and our earnings and profit dividend). Through these efforts, we were able to achieve total stockholder return for the year of 13.7%, as illustrated in the chart below showing the Company and other companies on the FTSE NAREIT Lodging Resorts Index that have a market capitalization in excess of $1 billion.

 

 

For more information on our 2017 results and other related financial measures, see our 2017 Annual Report.

EXECUTIVE COMPENSATION KEY ATTRIBUTES

Set forth below is a summary of some of the key attributes that define our executive compensation program.

 

 

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COMPENSATION PROCESS AND PHILOSOPHY

Our executive compensation programs are designed and administered under the direction and control of the Committee. The Committee is comprised solely of independent directors who review and approve our overall executive compensation programs and practices and set the compensation of our executive officers. In determining compensation for our executive officers, other than our Chief Executive Officer, the Committee considers, among other things, the recommendations of our Chief Executive Officer. The Committee is, however, solely responsible for making the final decisions on compensation for the Chief Executive Officer and other executive officers.

The Company’s executive compensation programs strive to achieve the following philosophy, principles and business objectives:

 

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To align the interests of our executives with those of our stockholders to maximize stockholder value

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To attract and retain top talent

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To reinforce our business objectives and the Company’s values

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To motivate management to balance short-term objectives with long-term value creation to the stockholders, and

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To provide competitive compensation to management based on the marketplace in which the Company competes for talent.

ROLE OF COMPENSATION CONSULTANT

Following the Spin-off, the Committee engaged the services of FPL as its independent compensation consultant. FPL provides the Committee with advice and resources to help it assess the effectiveness of the Company’s executive compensation strategy and programs. FPL reports directly to the Committee, and the Committee has the sole power to terminate or replace FPL at any time. The Committee assessed the independence of FPL in 2017 in accordance with the applicable rules of the SEC and the NYSE. After considering the foregoing, the Committee determined that it was appropriate to engage FPL as its independent compensation consultant.

During 2017, FPL did no work for management and neither FPL nor any of its affiliates received any compensation from the Company other than for its work in advising the Committee. In January 2018, Ferguson Partners L.P., an affiliate of FPL, was retained by the Company, with the Committee’s approval, to provide recruitment services relating to an executive search for a Senior Vice President – Design & Construction officer position. The Company expects to pay approximately $200,000 for such services.

USE OF PEER GROUP DATA

The Committee worked with FPL to develop peer groups of companies for benchmarking purposes. Traditionally, companies compare their compensation practices and performance against the performance of a single group of companies whose business model and industry are relatively similar to those of the company. However, in recognition of the size and complexity of the Company, the Committee, at FPL’s recommendation, determined that it would be appropriate to utilize two peer groups in designing and administering the Company’s compensation programs. One peer group may be utilized to assess Company executive compensation practices against other lodging REITs and in the future for measuring relative performance. The other peer group may be utilized in designing pay programs calculated to attract and retain key employees in recognition of the greater responsibilities involved in managing a company of our size and complexity.

 

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In January 2017, the Committee approved a 13-company size-based peer group and a 10-company lodging REIT-based peer group, both as set forth below. The size-based peer group took into account comparability in size in terms of market/total capitalization and similar revenue streams (i.e., generally real estate businesses with short-term “lease/rental” durations). The lodging REIT-based peer group includes REITs with a strategic focus on hotel assets. The Committee expects to annually review the composition of our peer groups and make changes when appropriate.

Size-Based Peer Group

 

Apartment Investment and Management Company		Host Hotels & Resorts, Inc.		Ryman Hospitality Properties, Inc.
Apple Hospitality REIT, Inc.		Hyatt Hotels Corporation		Sunstone Hotel Investors, Inc.
Camden Property Trust		LaSalle Hotel Properties		Weingarten Realty Investors
Extra Space Storage Inc.		RLJ Lodging Trust		Wyndham Worldwide Corporation
Federal Realty Investment Trust

Lodging REIT-Based Peer Group

 

Apple Hospitality REIT, Inc.		LaSalle Hotel Properties		Ryman Hospitality Properties, Inc.
Chesapeake Lodging Trust		Pebblebrook Hotel Trust		Sunstone Hotel Investors, Inc.
DiamondRock Hospitality Company		RLJ Lodging Trust		Xenia Hotels & Resorts, Inc.
Host Hotels & Resorts, Inc.

FPL’s benchmarking compared the compensation of our executive officers based on base salary and total target compensation (including base salary, target short-term annual incentive compensation and an annualized long-term incentive compensation) with that of executive officers of similar titles and job roles across the peer companies. The Committee considered and expects to continue to consider the amount and mix of base and variable compensation by referencing, for each executive officer position, the prevalence of each element and the level of compensation that is provided in the market based on FPL’s comparison analysis.

In January 2018, the Committee reviewed the composition of our size-based peer group and our lodging REIT-based peer group. Based on the recommendation from FPL, the Committee approved the addition of JBG SMITH Properties to, and the removal of Weingarten Realty Investors from, the size-based peer group. The Committee believes these changes better align our size-based peer group for future compensation decisions because JBG SMITH Properties is located in the same geographical region as the Company and may compete with Park in hiring talent. No changes were made to the lodging REIT-based peer group for 2018.

ROLE OF EXECUTIVES

The Committee believes management input is important to the overall effectiveness of the Company’s executive compensation programs. The Committee believes the advice of an independent compensation consultant should be combined with management input and the business judgment of the Committee members to arrive at a proper alignment of our compensation philosophy, principles and business objectives.

The Chief Executive Officer, the Executive Vice President and General Counsel and the Executive Vice President, Human Resources are the members of the Company who interact most closely with the Committee. These individuals work with the Committee to provide their perspective on aligning executive compensation strategies with our business objectives. When determining compensation for our executive officers, other than the

 

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Chief Executive Officer, the Committee considered individual performance as summarized and assessed by the Chief Executive Officer. The performance of the Chief Executive Officer is assessed directly by the Committee in executive session without the Chief Executive Officer present.

SAY-ON-PAY

In 2017, we provided our stockholders with their first advisory (non-binding) vote on our executive compensation program as an independent public company (a “say-on-pay” vote). At our 2017 annual meeting of stockholders, stockholders owning more than 98% of our common stock voted for our say-on-pay proposal. In addition, throughout 2017, we engaged in proactive outreach efforts with major institutional investors holding approximately 40% of our outstanding shares, providing our stockholders the opportunity to share feedback on the Company and its compensation framework and programs.

After considering our 2017 say-on-pay voting results and the advice from our compensation consultant, the Committee determined that it was appropriate to maintain the core design of our executive compensation program from 2017 and, therefore, did not make any changes to the Company’s executive compensation program in response to the 2017 say-on-pay voting results. The Committee expects to consider future annual say-on-pay votes and investor feedback when making decisions relating to our executive compensation program, policies, and practices.

COMPENSATION FRAMEWORK

The primary components of our executive compensation program, which commenced in fiscal year 2017, are base salary, short-term incentive compensation (cash) and long-term incentive compensation (equity). These components are described in more detail below.

 

Compensation Element				Form		Primary Objective		Key Feature
Base salary				Cash		•  Recognize the performance of job responsibilities •  Attract and retain the best executive talent to drive our success		•  Adjustments are considered annually based on competitive market analysis and individual performance
Short-Term Incentive				Cash		•  Promote short-term business objectives and growth strategies •  Align pay with performance		•  Annual awards are made with respect to achievement of Company performance objectives and individual performance
Long-Term Incentive				Equity consisting of restricted stock awards (“RSAs”) and performance stock units (“PSUs”)		•  Promote long-term value creation and growth strategies •  Encourage maximization of stockholder value •  Promote retention and provide ongoing incentives by encouraging long-term stock ownership		•  50% of annual award is delivered in RSAs that vest over 3 years •  Remaining 50% is delivered in PSUs with 3-year performance period based solely on relative total stockholder return

 

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The following charts illustrate the mix between the compensation elements (base salary, short-term incentive in the form of cash and long-term incentive in the form of RSAs and PSUs) for our Chief Executive Officer and the average of our other NEOs, in each case based on target levels of compensation.

 

 

Base Salary

Structure

The base salary payable to each executive officer provides a fixed component of compensation that reflects the executive’s position and responsibilities. Base salary levels are intended to be comparable with the competitive market, as determined by the Committee in its judgment, but are not targeted to specific market levels. The Committee expects to review base salaries annually and may make adjustments to better match competitive market levels or to recognize an executive’s professional growth and development or increased responsibilities.

2017 Base Salary

With respect to fiscal year 2017, the annual base salaries of our NEOs as of December 31, 2017 were as follows:

 

Name		Base Salary(1) ($)
Thomas J. Baltimore, Jr.			1,000,000
Sean M. Dell’Orto			500,000
Thomas C. Morey(2)			450,000
Matthew A. Sparks			500,000
Robert D. Tanenbaum			500,000

 

(1)	The amounts shown reflect annualized base salary amounts for fiscal year 2017. Actual base salary amounts received during 2017 by the NEOs are reported in the 2017 Summary Compensation Table below.

(2)	In February 2018, Mr. Morey was promoted to Executive Vice President and his annual base salary starting in March 2018 was increased to $475,000.

Short-Term Incentive

Structure

Following the Spin-off, the Committee approved an executive short-term incentive plan (the “STIP”) to reward Company executives designated at the level of senior vice president and above who are members of the Company’s executive committee or are subject to Section 16 of the Exchange Act based on our Company’s overall performance and the individual’s contribution to that performance. Pursuant to the STIP, each fiscal year, the Committee will determine a target bonus (the “Target Bonus”) for each such participant. Unless otherwise determined by the Committee, the Target Bonus for each participant (other than the Chief Executive Officer) will be up to 75% (for officers at the senior vice president level) or up to 100% (for officers at the executive vice president level) of his or her base salary, with the actual bonus range that may be earned by each participant

 

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being determined by the Committee each fiscal year. Pursuant to Mr. Baltimore’s Executive Employment Agreement with the Company, dated April 26, 2016 (the “CEO Employment Agreement”), his Target Bonus will be 150% of his base salary, with the actual bonus range that may be earned by Mr. Baltimore ranging from 75% to 225% of his base salary.

Annual STIP bonuses will be earned based on the achievement of both individual and Company performance objectives each fiscal year, as follows: (i) 25% (for officers at the senior vice president level), 20% (for officers at the executive vice president level) or 10% (for the Chief Executive Officer) of the bonus will be earned based on the achievement of individual performance objectives; and (ii) the remainder of the bonus will be earned based on the achievement of corporate performance objectives determined by the Committee at the beginning of such fiscal year. Individual objectives will be approved and scored by the Committee for the Chief Executive Officer and by the immediate supervisor for each other participant (with the Chief Executive Officer having the authority to revise any individual objectives or the scoring of such objectives for participants for whom the Chief Executive Officer is not the immediate supervisor). Corporate objectives will be approved and scored by the Committee.

To receive an award, participants must be employed by the Company through December 31 of the relevant fiscal year. Notwithstanding the foregoing, in the event of a participant’s termination of employment prior to December 31 of the relevant fiscal year (i) due to death or “disability” (as defined in the Company’s 2017 Omnibus Incentive Plan), the participant will receive a bonus for such fiscal year based on achievement of target performance but prorated for the actual days worked during such year, or (ii) due to “retirement” (as defined in the STIP), the participant will receive a bonus for such fiscal year based on actual achievement but prorated for the actual days worked during such year. In the event of a participant’s termination of employment by the Company for “cause” (as defined in the Company’s 2017 Omnibus Incentive Plan) following the end of the relevant fiscal year but prior to the payment of STIP bonuses for such fiscal year, the participant will forfeit his or her right to receive an annual STIP bonus for such fiscal year.

2017 Company Performance Objectives

The Committee adopted 2017 corporate performance objectives pursuant to the STIP following a review of the Company’s 2017 annual budget. The Committee also assigned each performance objective a relevant weighting. The Committee selected the specific performance objectives because they complement various parts of the Company’s overall strategy and business goals as explained further below –

 

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Comparable RevPAR Growth focuses on revenue growth on a “same-store” basis within our portfolio – one of the Company’s core pillars of aggressive asset management

 

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Comparable Consolidated Hotel EBITDA Margin focuses on “same store” margin improvement – as expense reduction is another of our core pillars of aggressive asset management

 

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Corporate Adjusted EBITDA focuses on the Company’s overall earnings profile, which is affected by both asset management and acquisition and disposition activity, and

 

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Net Debt to Adjusted EBITDA focuses on our overall net leverage position to align with maintaining a strong, conservative balance sheet.

 

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After assessing the significant impact and business disruption resulting from Hurricanes Irma and Maria, which took three of the Company’s properties out of service, the Committee adopted adjusted 2017 corporate performance objectives and recognized corresponding hurricane-related adjustments to the Company’s results, each as set forth below:

 

Performance Objective		Weighting				Threshold		Target		High		Results
Comparable RevPAR Growth			20	%		-0.5%		1.5%		2.5%		0.8%
Comparable Consolidated Hotel EBITDA Margin			30	%		26.9%		27.6%		27.9%		27.3%
Corporate Adjusted EBITDA			30	%		$707 million		$747 million		$767 million		$753 million
Net Debt to Adjusted EBITDA			20	%		4.50x		4.00x		3.75x		3.74x

2017 Actual STIP Awards

In February 2017, pursuant to the CEO Employment Agreement, the Committee approved a Target Bonus for fiscal year 2017 for Mr. Baltimore of 150% of his base salary, with his bonus range being set at 75% to 225% of his base salary. The Committee also approved 2017 Target Bonuses of 100% of base salary (with bonus ranges of 75% to 150% of base salary) for each of Messrs. Dell’Orto, Sparks and Tanenbaum and 75% of base salary (with a bonus range of 50% to 115% of base salary) for Mr. Morey. In February 2018, in connection with his promotion to Executive Vice President, the Committee approved an increased Target Bonus for fiscal year 2018 for Mr. Morey of 100% of his base salary (with a bonus range of 75% to 150% of base salary).

In February 2017, the Committee determined individual performance objectives for Mr. Baltimore. Thereafter, individual performance goals for each other executive officer were determined by Mr. Baltimore. At the beginning of 2018, Mr. Baltimore reviewed and determined each NEO’s individual performance score. In February 2018, the Committee discussed and determined Mr. Baltimore’s individual performance score. Based on these individual performance scores and the achievement of the corporate performance objectives set forth above, the Committee approved the following 2017 actual STIP awards:

 

Name		Corporate Objective Payout ($)				Individual Performance Payout ($)				Total 2017 STIP Award ($)
Thomas J. Baltimore, Jr.			1,411,714				225,000				1,636,714
Sean M. Dell’Orto			438,143				150,000				588,143
Thomas C. Morey			275,521				129,375				404,896
Matthew A. Sparks			438,143				125,000				563,143
Robert D. Tanenbaum			438,143				125,000				563,143

Long-Term Incentive

Structure

Following the Spin-off, the Committee also approved an executive long-term incentive plan (the “LTIP”). The LTIP is intended to focus our executive officers and other eligible employees on, and reward them for, achieving our long-term goals and enhancing stockholder value. In addition to the Target Bonus determined pursuant to the STIP, each fiscal year, the Committee will also determine an aggregate target value (the “Aggregate Target Value”) under the LTIP for each participant. Unless otherwise determined by the Committee, the Aggregate Target Value for each participant (other than the Chief Executive Officer) will be up to 100% (for officers at the senior vice president level) or up to 200% (for officers at the executive vice president level) of his or her base salary. Pursuant to the CEO Employment Agreement, the Aggregate Target Value for the Chief Executive

 

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Officer will be equal to at least $3,500,000, as determined each year by the Committee. For each fiscal year, the Aggregate Target Value for each participant is allocated such that (i) 50% of the value is granted in the form of a time-based award consisting of shares of restricted stock (“RSAs”) and (ii) 50% of the value is granted in the form of a performance-based award consisting of performance-based restricted stock units (“PSUs”). The terms of each RSA award and PSU award are described below.

 

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Each fiscal year’s RSA award will vest ratably on each of the first three anniversaries of the grant date, subject to the continued employment of the participant through the applicable vesting date. In the event of a participant’s termination of employment (i) without “cause” (as defined in the Company’s 2017 Omnibus Incentive Plan) or due to “retirement” (as defined in the RSA award agreement), in each case after the first anniversary of the grant date, all of the remaining unvested shares will become vested, (ii) without cause within 12 months following a “change in control” (as defined in the Company’s 2017 Omnibus Incentive Plan), all of the remaining unvested shares will become vested, and (iii) due to death or “disability” (as defined in the Company’s 2017 Omnibus Incentive Plan), a prorated amount of the shares will vest based on the actual days worked during the vesting period. With respect to the Chief Executive Officer’s RSA awards, the vesting upon termination of employment will be as set forth in the CEO Employment Agreement, as described below. Participants will receive dividends on the RSAs at the same time that regular dividend payments are made on the Company’s common stock.

 

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Each fiscal year’s PSU award will vest based on the Company’s total stockholder return relative to the total stockholder returns of the companies that comprise the FTSE NAREIT Lodging Resorts Index and that have a market capitalization in excess of $1 billion as of the first day of the applicable performance period (the “PSU TSR metric”), in each case over a three-year performance period beginning on January 1 of the fiscal year of such grant (or, in the case of the PSU awards made during 2017, January 4, 2017, which was the Company’s first day as a separate public company) (each a “Performance Period”), subject to the participant’s continued employment through the end of the Performance Period. The number of PSUs that may become vested will range from 0% to 200% of the number of PSUs granted to the participant, based on the level of achievement of the foregoing performance measure, as determined by the Committee. In the event of a participant’s termination of employment (i) without cause, due to retirement or due to death or disability, a prorated amount of the PSUs will vest based on the actual days worked during the Performance Period (and calculated based on actual performance through the end of the Performance Period) and (ii) without cause within 12 months following a change in control, the PSUs will vest based on actual performance through the end of the Performance Period and will not be prorated based on actual days worked during the Performance Period, provided that if the PSUs are not substituted or assumed following a change in control, then the PSUs will vest on the day immediately prior to the consummation of such change in control based on actual performance through such day. With respect to the Chief Executive Officer’s PSU awards, the vesting upon termination of employment will be as set forth in the CEO Employment Agreement, as described below. After the end of the Performance Period once the Committee has determined total stockholder return performance and the actual number of PSUs that have vested based on such performance, participants will receive accrued dividends on the shares underlying the vested PSUs based on each regular cash dividend declared on the Company’s common stock during the Performance Period.

 

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2017 Actual LTIP Awards

The following table presents the dollar value of the LTIP awards granted to each NEO in February 2017, including the specific threshold, target and high PSU opportunities for each NEO and the value of the RSAs granted in 2017. PSU awards are denominated in units that convert into shares of our common stock upon vesting (rather than being denominated as a dollar value). As a result, the actual value received by the NEO upon vesting will take into account the value of our common stock at such time.

 

Name		Performance based PSUs												Time-based RSAs ($)
		Threshold ($)				Target ($)				High ($)
Thomas J. Baltimore, Jr.			437,500				1,750,000				3,500,000				1,750,000
Sean M. Dell’Orto			125,000				500,000				1,000,000				500,000
Thomas C. Morey(1)			56,250				225,000				450,000				225,000
Matthew A. Sparks			125,000				500,000				1,000,000				500,000
Robert D. Tanenbaum			125,000				500,000				1,000,000				500,000

 

(1)

In February 2018, Mr. Morey was promoted to Executive Vice President. In relation to his promotion, Mr. Morey’s RSA award value for fiscal year 2018 was increased to $415,625 and his PSU award value for fiscal year 2018 was increased to $103,906 for threshold level, $415,625 for target level and $831,250 for high level.

Other 2017 Equity Awards in Connection with Spin-Off

The Company made several special, one-time equity awards to our NEOs in 2017, including certain negotiated awards agreed to during the hiring process and transition awards granted in recognition of the efforts undertaken in connection with the Spin-off.

 

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Pursuant to the CEO Employment Agreement and as described further below, Mr. Baltimore received a long-term incentive award grant of $1,750,000, which represented 50% of the long-term incentive award for fiscal year 2016 that the Company was obligated to grant him pursuant to the CEO Employment Agreement. This award was granted under the LTIP on February 3, 2017, and was in the form of PSUs that are eligible to vest in amounts ranging from 0% to 200% of the target number of units based on Park’s relative TSR compared to the PSU TSR metric over a three-year performance period beginning on January 4, 2017 and ending on January 3, 2020, generally subject to his continued employment through the applicable vesting date. For further information regarding Mr. Baltimore’s long-term award for fiscal year 2016 that was granted in February 2017, see the discussion under the caption “Compensation Tables—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—CEO Employment Agreement.”

 

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Pursuant to the terms of each of their offer letters, on February 3, 2017, each of Messrs. Morey and Tanenbaum was granted a one-time sign-on RSA award, with a value of $1,300,000 and $1,900,000, respectively. Each of these awards vest ratably on each of the first three anniversaries of such NEO’s start date of August 1, 2016 for Mr. Morey and September 26, 2016 for Mr. Tanenbaum. On March 3, 2017, Mr. Dell’Orto was granted a one-time grant of RSAs, with a value of $1,000,000, which will vest ratably on each of the first three anniversaries of the grant date. These special, one-time RSA awards granted to Messrs. Morey, Tanenbaum and Dell’Orto are otherwise on the same general terms and conditions described above with respect to annual RSA awards granted under the LTIP (except that the one-time RSA awards to Messrs. Morey and Tanenbaum fully vest upon a termination without “cause” or due to death or “disability,” in each case at any time following the grant date).

 

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•

For 2017 only, the NEOs also received one-time LTIP transition awards equal to 75% of their Aggregate Target Value, in the amounts set forth below. The one-time LTIP transition awards were implemented by the Committee to ensure an appropriate aggregate level of LTIP award opportunity during the first two years of “phase in” of the LTIP.

 

Name		Transition Award Aggregate Target Value ($)
Thomas J. Baltimore, Jr.			2,625,000
Sean Dell’Orto			750,000
Thomas C. Morey			337,500
Matthew A. Sparks			750,000
Robert D. Tanenbaum			750,000

The value of the one-time LTIP transition awards was allocated such that 33.34% of such value was delivered in RSAs that vest ratably on each of the first two anniversaries of the grant date and 66.66% of such value was delivered in PSUs that will vest, if at all, based on the PSU TSR metric over the two-year performance period beginning on January 4, 2017 and ending on January 3, 2019. The one-time LTIP transition awards otherwise generally have the same terms as the regular annual RSA awards and PSU awards described above.

For further information regarding the LTIP awards granted to our NEOs for fiscal year 2017, see the table entitled “Compensation Table—2017 Grants of Plan-Based Awards” below.

CEO EMPLOYMENT AGREEMENT

We have an employment agreement with our Chief Executive Officer, pursuant to which he is entitled to receive severance benefits in connection with certain terminations of employment and we are provided with the protections of certain restrictive covenants. The material terms of this agreement are described below in the section entitled “Compensation Tables—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—CEO Employment Agreement.”

OTHER COMPENSATION PROGRAM ELEMENTS

Other Benefits and Perquisites

We maintain medical and dental insurance, accidental death insurance and disability insurance for all of our employees. Executives are eligible to participate in the same welfare benefit plans as our other employees and are covered by the same vacation, leave of absence and similar polices. Our executives may participate in Hilton-sponsored arrangements for executives of designated major hotel owners, including guaranteed access at Hilton-branded hotels at a 25% discount off best available rate, up to 30 nights per year at cost, up to 30 nights per year at 50% off best available rate and 50% off food and beverage. In addition, our executives may participate in similar programs offered by other hotel operators. We also provide our executive officers with the opportunity for an annual physical examination at our expense. We also may pay for or reimburse our executives for insurance covering losses they may suffer as a result of their service as Company executives.

Severance Benefits

In April 2017, the Committee adopted and approved the Park Hotels & Resort Inc. Executive Severance Plan (the “Executive Severance Plan”) for employees of the Company at the level of senior vice president and above designated for participation by the Committee. At such time, the Committee designated each of the NEOs as participants of the Executive Severance Plan, other than the Chief Executive Officer whose severance arrangements will continue to be governed by the terms of the CEO Employment Agreement. For a further

 

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description of the Chief Executive Officer’s severance and change in control terms, see the discussion under the caption “Compensation Tables—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—CEO Employment Agreement.”

The Executive Severance Plan sets forth the terms for payment of severance and other benefits to participants in the event of a termination of employment with the Company under certain circumstances. In the event of a termination of employment “without cause” (other than due to death or disability) or for “good reason” (each as defined in the Executive Severance Plan), the participant is entitled to the following payments and benefits:

 

•

A cash payment, payable in a single lump sum payment, equal to 2.0x (for executive vice presidents) or 1.5x (for senior vice presidents who are also members of the Company’s Executive Committee) the sum of the participant’s annual base salary and his or her average annual bonus for the most recent two fiscal years (or one fiscal year if applicable). A participant who was not eligible for a bonus in the prior fiscal year will remain eligible to receive an actual bonus for the year of termination (prorated for the actual period of service during such year).

 

•

The vesting of the participant’s outstanding equity and equity-based awards in accordance with the Company’s 2017 Omnibus Incentive Plan (or any successor plan) and applicable award agreements. A participant’s termination of employment for good reason will be treated as a termination by the Company without cause under the 2017 Omnibus Incentive Plan (or any successor plan) and applicable award agreement.

 

•

A cash amount equal to the difference between the participant’s monthly COBRA premium cost and the monthly contribution paid by similarly situated active Company executives for the same coverage, payable in equal installments over a twelve-month period following the participant’s termination date. These payments will cease earlier than the expiration of such twelve-month period if the participant becomes eligible to receive group health coverage from another employer or ceases to be eligible to receive COBRA coverage.

 

•

A cash payment of the participant’s accrued pay through the date of termination.

Receipt of all severance payments and benefits under the Executive Severance Plan is contingent upon the NEO complying with various requirements, including non-solicitation and non-competition obligations to the Company (which apply for a period of twelve-months following the NEO’s termination of employment) and the NEO’s timely execution and delivery to the Company of an effective release of claims. Subject to certain exceptions, the Company shall pay or commence providing all severance benefits within 10 days following the effectiveness of the required release of claim. The Executive Severance Plan superseded and terminated any prior severance plans applicable to participants, including any Hilton severance plan.

Stock Ownership Policy

Our minimum stock ownership guidelines require each executive officer to maintain equity investment in the Company based upon a multiple (six times, in the case of the Chief Executive Officer, and three times, in the case of all other executive officers) of his or her base salary. For purposes of this requirement, an executive officer’s holdings include shares held directly or indirectly, individually or jointly; shares underlying unvested time-vesting restricted stock and restricted stock units; and shares held under a deferral or similar plan. Each executive officer is expected to meet this ownership requirement within five years of the later of (a) February 23, 2017 (i.e., the date on which the Company made its first broad-based equity incentive grants following the Spin-off) or (b) the date he or she first becomes subject to this stock ownership policy.

Clawback Policy

We have adopted an incentive compensation clawback policy, which allows the Company to recover annual and/or long-term incentive compensation in specified situations. If the Committee determines that incentive

 

34

compensation of our current and former officers subject to reporting under Section 16 of the Exchange Act or any other employee designated by the Board or the Committee was overpaid, in whole or in part, as a result of a restatement of the reported financial results of the Company or any of its segments due to material non-compliance with financial reporting requirements (unless due to a change in accounting policy or applicable law) caused or contributed to by such employee’s fraud, willful misconduct or gross negligence, the Committee will review the incentive compensation paid, granted, vested or accrued based on the prior inaccurate results and determine whether to seek recovery of any excess incentive compensation paid or earned as a result of such inaccurate results.

No Pledging Policy

The Company maintains a policy that prohibits independent directors and executive officers from purchasing any Company securities on margin, borrowing against Company securities held in margin accounts or pledging Company securities as collateral for a loan.

No Hedging Policy

The Company maintains a policy that prohibits directors and executive officers from completing any short sales of Company securities or from purchases or sales of puts, calls or other derivative instruments or securities based on the Company’s securities.

Tax Implication on Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) limits the deductibility of compensation over $1 million for covered employees which includes the Company’s principal executive officer, principal financial officer, and the three other most highly paid executive officers (the principal financial officer is excluded for years prior to 2018) unless, in general, the compensation is paid pursuant to a plan which is performance-based, non-discretionary and has been approved by the Company’s stockholders. As the Company’s compensation plan does not qualify for this exception, the Committee’s compensation policy and practices are not currently guided by considerations related to Section 162(m).

COMPENSATION RISK REVIEW

The Committee reviewed and considered risks arising from the Company’s compensation policies and practices for its employees. This review included consideration of the following specific elements of the Company’s executive compensation policies and procedures:

 

•

the executive compensation program is structured as a balanced mix among salary, cash bonus and equity

 

•

the STIP and LTIP are each based upon pre-existing, defined goals set at the beginning of the year or three-year performance period, as applicable

 

•

the STIP and LTIP contain multiple financial targets, including performance against a pre-approved budget

 

•

the STIP and LTIP performance goals include both absolute and relative-to-peer performance

 

•

the STIP annual goals balance financial and non-financial performance goals

 

•

the STIP and LTIP performance goals include achievement against both single-year and multi-year metrics

 

35

•

the STIP and LTIP include maximum payouts at each executive level

 

•

STIP and LTIP awards are not determined on an “all or nothing” basis, but rather on a graduated basis against stated targets

 

•

the STIP includes a goal addressing an appropriate leverage ratio

 

•

the executive compensation program mandates stock ownership by executive officers

 

•

the executive compensation program includes an appropriate “clawback policy” to recoup overpayments of incentive compensation arising from restatements due to material non-compliance with financial reporting requirements, and

 

•

the Committee retains discretion to adjust STIP payouts as warranted by circumstances.

Following this review, the Committee concluded that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company at this time.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of our Committee is or has at any time been one of our executive officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee.

COMPENSATION COMMITTEE REPORT

The Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this report. Based upon this review and discussion, the Committee recommended to the Board that this Compensation Discussion & Analysis section be included in this Proxy Statement.

Respectfully submitted,

The Compensation Committee of the Board

Stephen I. Sadove (Chairman)

Gordon M. Bethune

Christie B. Kelly

Timothy J. Naughton

 

36

COMPENSATION TABLES

2017 SUMMARY COMPENSATION TABLE

The following table summarizes the total compensation earned by each of our NEOs for the fiscal year ended December 31, 2017 and, to the extent required under the SEC’s executive compensation disclosure rules, the fiscal year ended December 31, 2016. The information provided below for fiscal year 2016 includes compensation earned by our NEOs for services provided to Hilton prior to the Spin-off. A substantial portion of the compensation below consists of one-time, Spin-off related awards granted to our NEOs in fiscal years 2016 and 2017, including awards agreed to during the hiring process and transition awards granted in recognition of efforts undertaken in connection with the Spin-off and the start up as an independent public company (the “Spin-off Related Awards”). For further information on the Spin-off Related Awards, see footnote 3 below on this page.

 

Name and Principal Position		Year				Salary ($)				Bonus ($)				Stock Awards(4) ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation(5) ($)				All Other Compensation(6) ($)				Total ($)
Thomas J. Baltimore, Jr. President and Chief Executive Officer			2017				1,000,000				—				9,019,890	(3)			—				1,636,714				290,263				11,946,867	(3)
			2016	(1)			634,615				783,664	(3)			8,499,979	(3)			—				1,016,336				35,256				10,969,850	(3)
Sean M. Dell’Orto Executive Vice President and Chief Financial Officer			2017				500,000				—				2,954,169	(3)			—				588,143				114,976				4,157,288	(3)
			2016				369,651				—				297,013				74,261				273,629				11,280				1,025,834
Thomas C. Morey Executive Vice President and General Counsel			2017				450,000				—				2,179,349	(3)			—				404,896				83,394				3,117,639	(3)
			2016	(2)			190,385				269,986	(3)			—				—				173,282				2,561				636,214	(3)
Matthew A. Sparks Executive Vice President and Chief Investment Officer			2017				500,000				—				1,954,178	(3)			—				563,143				70,086				3,087,407	(3)
Robert D. Tanenbaum Executive Vice President, Asset Management			2017				500,000				—				3,854,161	(3)			—				563,143				129,721				5,047,025	(3)

 

(1)	Mr. Baltimore joined the Company on May 16, 2016 and, as a result, his compensation for 2016 shown above represents compensation for a partial year of service.

(2)	Mr. Morey joined the Company on August 1, 2016 and, as a result, his compensation for 2016 shown above represents compensation for a partial year of service.

(3)	Includes Spin-off Related Awards, the amounts of which are reflected below:

•

2016: Sign-on equity awards granted to Mr. Baltimore pursuant to the terms of CEO Employment Agreement: $6,749,996 of Hilton restricted stock units granted in 2016 (and subsequently converted to Park restricted stock units (“RSUs”)).

•

2017: Sign-on RSAs granted to Messrs. Morey and Tanenbaum pursuant to offer letters: Mr. Morey, $1,300,000; and Mr. Tanenbaum, $1,900,000.

•

2017: Transition LTIP awards granted: Mr. Baltimore, $2,625,000; Mr. Dell’Orto, $750,000; Mr. Morey, $337,500; Mr. Sparks, $750,000; and Mr. Tanenbaum, $750,000.

•

2017: Spin-off related RSA grant: Mr. Dell’Orto, $1,000,000.

•

2016: Spin-off related cash bonuses: Mr. Baltimore, $783,664; Mr. Morey, $139,986.

•

2016: Sign-on cash bonus: Mr. Morey, $130,000.

(4)

The amounts shown in the Stock Awards column reflect the aggregate grant date fair value of awards of RSAs and PSUs, as computed in accordance with FASB ASC Topic 718, using the assumptions discussed in Note 12 (“Share-Based Compensation”) of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017. The grant date fair value of the RSAs is determined using the fair value of the underlying common stock on the grant date. The grant date fair value of the PSUs is based upon the probable outcome of the applicable performance conditions and is reported at target level. If the maximum level of performance was achieved, the grant date fair value of the PSU would be $3.5 million for Mr. Baltimore, $1 million for Mr. Dell’Orto, $450,000 for Mr. Morey, $1 million for Mr. Tanenbaum and $1 million for Mr. Sparks. For additional information on the

 

37

RSAs and PSUs granted to our NEOs in fiscal year 2017, see “Compensation Discussion and Analysis —Long-Term Incentive —2017 Actual LTIP Awards” and “—Other 2017 LTIP Awards in Connection with Spin-off.”

(5)

The amounts shown in the Non-Equity Incentive Plan Compensation column reflect the cash award that each NEO earned in fiscal year 2017 that was paid in March 2018. For additional information on these cash awards, see “Compensation Discussion and Analysis —Short-Term Incentive —2017 Actual STIP Awards.”

(6)

The amounts shown in the All Other Compensation column for the fiscal year ended December 31, 2017 reflect: (i) for Mr. Baltimore, group term life insurance premiums valued at $2,622 and dividend payments of $287,641 on RSUs and RSAs granted to him; (ii) for Mr. Dell’Orto, group term life insurance premiums valued at $677, our matching contributions under the Company’s 401(k) plan of $10,800 and dividend payments of $103,499 on RSUs and RSAs granted to him; (iii) for Mr. Morey, group term life insurance premiums valued at $720, our matching contributions under the Company’s 401(k) plan of $10,800 and dividend payments of $71,874 on RSAs granted to him; (iv) for Mr. Sparks, group term life insurance premiums valued at $2,766, our matching contributions under the Company’s 401(k) plan of $9,981, an executive physical reimbursed at $3,975 and dividend payments of $53,364 on RSUs and RSAs granted to him; and (v) for Mr. Tanenbaum, group term life insurance premiums valued at $1,242, our matching contributions under the Company’s 401(k) plan of $10,800 and dividend payments of $117,679 on RSAs granted to him.

2017 GRANTS OF PLAN BASED AWARDS TABLE

The following table sets forth information regarding grants of plan-based awards to each of our NEOs for the fiscal year ended December 31, 2017.

 

				Estimated Future Payouts(1) Under Non-Equity Incentive Plan Awards						Estimated Future Payouts(2) Under Equity Incentive Plan Awards
Name		Grant Date		Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)		All Other Stock Awards: Number or Shares of Stock or Units(3) (#)		Grant Date Fair Value of Stock and Option Awards(4) ($)
Thomas J. Baltimore, Jr.
Annual STIP Award				750,000		1,500,000		2,250,000
RSAs		2/23/17														33,371		874,988
RSAs		2/23/17														66,742		1,749,975
PSUs		2/23/17								16,686		66,742		133,484				2,129,070
PSUs		2/23/17								16,686		66,742		133,484				2,085,688
PSUs		2/03/17								16,222		64,886		129,772				2,180,170
Sean M. Dell’Orto
Annual STIP Award				375,000		500,000		750,000
RSAs		3/03/17														37,023		999,991
RSAs		2/23/17														19,069		499,989
RSAs		2/23/17														9,534		249,981
PSUs		2/23/17								4,767		19,069		38,138				608,301
PSUs		2/23/17								4,767		19,069		38,138				595,906
Thomas C. Morey
Annual STIP Award				225,000		337,500		517,500
RSAs		2/23/17														8,581		224,994
RSAs		2/23/17														4,290		112,484
RSAs		2/03/17														48,201		1,299,981
PSUs		2/23/17								2,145		8,581		17,162				273,734
PSUs		2/23/17								2,145		8,581		17,162				268,156
Matthew A. Sparks
Annual STIP Award				375,000		500,000		750,000
RSAs		2/23/17														19,069		499,989
RSAs		2/23/17														9,534		249,981
PSUs		2/23/17								4,767		19,069		38,138				608,301
PSUs		2/23/17								4,767		19,069		38,138				595,906
Robert D. Tanenbaum
Annual STIP Award				375,000		500,000		750,000
RSAs		2/23/17														19,069		499,989
RSAs		2/23/17														9,534		249,981
RSAs		2/03/17														70,448		1,899,983
PSUs		2/23/17								4,767		19,069		38,138				608,301
PSUs		2/23/17								4,767		19,069		38,138				595,906

 

(1)

Reflects the possible payouts of cash incentive compensation under our short-term incentive plan. The actual amounts that were paid to the NEOs are set forth in the “Non-Equity Incentive Plan Compensation” column of the 2017 Summary Compensation Table. See “Compensation Discussion and Analysis—Short-Term Incentive—2017 Actual STIP Awards” above.

(2)

The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards column represent the possible number of PSUs granted under the LTIP that may vest based upon the level of achievement of the applicable performance measures. As described in further detail under the section entitled “Compensation Discussion and Analysis—Long-Term Incentive,” the PSUs have a three-year performance period (except for the one-time transition awards, which have a two-year performance period) and vest based on

 

38

the PSU TSR metric. Threshold assumes that 25% of the total value of the PSUs awarded vest, target assumes that 100% of the total value of the PSUs awarded vest and maximum assumes that 200% of the total value of the PSUs awarded vest.

(3)	The amounts reported in the All Other Stock Awards: Number of Shares of Stock or Units column represent the number of time vesting RSAs granted to the NEOs pursuant to the LTIP.

(4)

The amounts reported in the Grant Date Fair Value of Stock and Option Awards column show the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, using the assumptions discussed in Note 12 (“Share-Based Compensation”) of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017. The grant date fair value of the RSAs is determined using the fair value of the underlying common stock on the grant date. The grant date fair value of the PSUs is based upon the probable outcome of the applicable performance conditions.

NARRATIVE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE

The following discussion should be read in conjunction with (i) the “2017 Summary Compensation Table” and the “2017 Grants of Plan-Based Awards Table,” as well as the footnotes to such tables, and (ii) the disclosure under the caption “Compensation Discussion and Analysis” above.

CEO Employment Agreement

On April 26, 2016, the Company entered into the CEO Employment Agreement with Mr. Baltimore specifying the terms of his employment as Hilton’s Executive Adviser—Real Estate prior to the Spin-off and as our President and Chief Executive Officer and a director on our Board following the Spin-off, subject to his re-election at our annual stockholders meetings. The CEO Employment Agreement provides for an initial four-year employment term, which term will be automatically extended by one year at the end of the then-current term unless either party provides advance notice of non-renewal. Under the terms of the CEO Employment Agreement, Mr. Baltimore is entitled to receive an initial annual base salary of $1,000,000, which is subject to increase but not decrease. During the employment term, he is also eligible to receive an annual cash bonus of 150% of his annual base salary (the “target annual bonus”) if target performance objectives are achieved, 75% of his annual base salary if threshold performance objectives are achieved and 225% of his annual base salary if maximum performance objectives are achieved.

During the employment term, Mr. Baltimore was eligible to participate in the Hilton LTIP prior to the Spin-off and is eligible to participate in the Company’s LTIP following the Spin-off. Mr. Baltimore is entitled to receive an annual grant of long-term equity-based incentive awards with a target value of $3,500,000 (based on the grant date fair market value of the common stock awarded). With respect to the first grant made under the CEO Employment Agreement, 50% of the award was granted under the Hilton LTIP on May 16, 2016, and was in the form of Hilton restricted stock units that vest in three substantially equal annual installments beginning on the first anniversary of such grant date, generally subject to his continued employment through each applicable vesting date. The remaining 50% of such award was granted under the Park LTIP on February 3, 2017, and was in the form of Park PSUs that are eligible to vest in amounts ranging from 0% to 200% of the target number of units based on Park’s relative TSR compared to the TSRs of the companies that comprise the FTSE NAREIT Lodging/Resorts Index (that have a market capitalization in excess of $1 billion as of January 4, 2017) over a three-year performance period beginning on January 4, 2017 and ending on January 3, 2020, generally subject to his continued employment through the applicable vesting date. In addition to the foregoing, on May 16, 2016, Mr. Baltimore was granted a one-time sign-on equity-based incentive award valued at $6,750,000 in the form of Hilton restricted stock units that were originally scheduled to vest, as to 40% of the award, on December 15, 2016 and, as to the remaining 60% of the award, in three substantially equal annual installments beginning on the first anniversary of the grant date, generally subject to his continued employment through each applicable vesting date. In connection with the Spin-off, Hilton’s compensation committee determined to accelerate the vesting date for the 40% of the sign-on equity-based award originally scheduled to vest on December 15, 2016 to December 5, 2016. Mr. Baltimore is also entitled to participate in all employee benefit plans, programs and arrangements made available to our other executive officers generally.

If Mr. Baltimore’s employment is terminated without “cause” (other than due to death or “disability”), by him for “good reason” (as each such term is defined in the CEO Employment Agreement), or due to our non-renewal of

 

39

the employment term, he will be entitled to receive (1) all accrued but unpaid amounts (including, accrued but unpaid salary through the date of termination, any accrued but unpaid annual cash bonus and any unpaid or unreimbursed expenses) (collectively, the “Accrued Rights”), (2) a lump sum cash severance payment in an amount equal to 2.99 times the sum of his annual base salary and target annual bonus then in effect, (3) subject to his election of COBRA continuation coverage, payment for a period of 12 months following the termination date (subject to earlier termination in certain cases) of an amount equal to the difference between the monthly COBRA premium cost and the monthly contribution paid by active employees for the same coverage and (4) accelerated vesting of any then-held unvested time-based restricted stock and unvested stock options and a prorated portion of the target number of any then-held unvested PSUs and performance shares, provided that such target number will not be prorated if the termination occurs within 12 months following a “change in control” (as defined in the CEO Employment Agreement). Mr. Baltimore is entitled to the foregoing, in each case, subject to his execution and non-revocation of a release of claims and continued compliance with non-compete and non-solicitation covenants for 18 months following his termination and non-disparagement and confidentiality covenants at all times following his termination. If Mr. Baltimore’s employment terminates due to death or disability, he will be entitled to receive (1) any Accrued Rights, (2) a prorated portion of the annual cash bonus that he would have otherwise been entitled to receive had his employment not terminated and (3) accelerated vesting of any then-held unvested time-based restricted stock and unvested stock options and a prorated portion of the target number of any then-held unvested PSUs and performance shares. The CEO Employment Agreement also provides that payments and benefits to be delivered in connection with this Agreement will be either delivered in full or to such lesser extent as would result in no portion of such payments and benefits being subject to the excise taxes imposed by the golden parachute rules of Section 4999 of the Code, whichever of the foregoing amounts, after taking into account all applicable taxes, results in the greatest amount of such payments and benefits to Mr. Baltimore on an after-tax basis.

Equity Awards

The equity awards granted to our NEOs during 2017 that appear in the tables above were granted pursuant to the LTIP, which is described further in the Compensation Discussion and Analysis section under the caption “Compensation Discussion and Analysis—Long-Term Incentive.”

2017 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth information regarding outstanding equity awards for each of our NEOs as of December 31, 2017.

 

				Option Awards																Stock Awards
Name		Grant Date		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable(1)				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(2) ($)
Thomas J.   Baltimore, Jr.		2/23/17			--				--				--				--				66,742	(3)			1,918,833				--				--
		2/23/17			--				--				--				--				33,371	(4)			959,416				--				--
		2/23/17			--				--				--				--				--				--				133,484	(8)			3,837,665
		2/23/17			--				--				--				--				--				--				133,484	(9)			3,837,665
		2/3/17			--				--				--				--				--				--				129,772	(10)			3,730,945
		5/16/16			--				--				--				--				55,607	(5)			1,598,701				--				--
		5/16/16			--				--				--				--				128,690	(5)			3,699,838				--				--

 

40

				Option Awards																Stock Awards
Name		Grant Date		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable(1)				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(2) ($)
Sean M.   Dell’Orto		3/3/17			--				--				--				--				37,023	(6)			1,064,411				--				--
		2/23/17			--				--				--				--				19,069	(3)			548,234				--				--
		2/23/17			--				--				--				--				9,534	(4)			274,103				--				--
		2/23/17			--				--				--				--				--				--				38,138	(8)			1,096,468
		2/23/17			--				--				--				--				--				--				38,138	(9)			1,096,468
		2/18/16			--				--				--				--				1,963	(5)			56,436				--				--
		2/18/16			--				--				--				--				11,780	(11)			338,675				--				--
		2/18/16			4,692				9,387				18.91				2/18/26				--				--				--				--
		2/10/15			5,938				2,973				26.49				2/10/25				--				--				--				--
		2/19/14			9,576				--				20.77				2/19/24				--				--				--				--
Thomas C.   Morey		2/23/17			--				--				--				--				8,581	(3)			246,704				--				--
		2/23/17			--				--				--				--				4,290	(4)			123,338				--				--
		2/23/17			--				--				--				--				--				--				17,162	(8)			493,408
		2/23/17			--				--				--				--				--				--				17,162	(9)			493,408
		2/3/17			--				--				--				--				32,134	(7)			923,853				--				--
Matthew A.   Sparks		2/23/17			--				--				--				--				19,069	(3)			548,234				--				--
		2/23/17			--				--				--				--				9,534	(4)			274,103				--				--
		2/23/17			--				--				--				--				--				--				38,138	(8)			1,096,468
		2/23/17			--				--				--				--				--				--				38,138	(9)			1,096,468
		2/18/16			--				--				--				--				1,717	(5)			49,364				--				--
		2/18/16			--				--				--				--				10,294	(11)			295,953				--				--
		2/18/16			4,098				8,204				18.91				2/18/26				--				--				--				--
		2/10/15			5,189				2,597				26.49				2/10/25				--				--				--				--
		2/19/14			2,721				--				20.77				2/19/24				--				--				--				--
Robert D.   Tanenbaum		2/23/17			--				--				--				--				19,069	(3)			548,234				--				--
		2/23/17			--				--				--				--				9,534	(4)			274,103				--				--
		2/23/17			--				--				--				--				--				--				38,138	(8)			1,096,468
		2/23/17			--				--				--				--				--				--				38,138	(9)			1,096,468
		2/3/17			--				--				--				--				46,966	(7)			1,350,273				--				--

 

(1)	Stock options vest in three equal annual installments beginning on the first anniversary of the grant date.

(2)	Amounts reported are based on the closing price of Park’s common stock on the NYSE as of December 29, 2017 ($28.75), multiplied by the number of outstanding shares.

(3)	Represents 2017 LTIP award granted as RSAs that vest ratably on each of the first three anniversaries of the grant date.

(4)	Represents the transition awards granted as RSAs that vest ratably on each of the first two anniversaries of the grant date.

(5)

Represents RSUs granted to the respective NEOs. Pursuant to the CEO Employment Agreement, Mr. Baltimore was granted (i) a one-time sign-on equity award of 310,202 Hilton restricted stock units on May 16, 2016 (“Mr. Baltimore’s Sign-On Grant”) and (ii) an award of 80,422 Hilton restricted stock units on May 16, 2016 (“Mr. Baltimore’s 2016 RSU Grant”), which represents 50% of his annual

 

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long- term equity-based incentive award for 2016. 40% of Mr. Baltimore’s Sign-On Grant vested on December 5, 2016 and the remainder of the Hilton restricted stock units were subsequently converted to Park RSUs, with the remaining 60% of Mr. Baltimore’s Sign-On Grant vesting in three substantially equal annual installments on the first three anniversaries of his hire date. Mr. Baltimore’s 2016 RSU grant vests in three substantially equal annual installments beginning on the first anniversary of the grant date. Pursuant to the Hilton LTIP, Mr. Dell’Orto was granted 3,786 Hilton restricted stock units on February 18, 2016, which subsequently converted and were adjusted to 3,926 Park RSUs, which vest in two equal annual installments beginning on the first anniversary of the grant date (which was adjusted following the grant to a February 15 vesting date). Pursuant to the Hilton LTIP, Mr. Sparks was granted 3,309 Hilton restricted stock units on February 18, 2016, which subsequently converted and were adjusted to 3,431 Park RSUs, which vest in two equal annual installments beginning on the first anniversary of the grant date (which was adjusted following the grant to a February 15 vesting date).

(6)	Represents a one-time grant of RSAs to Mr. Dell’Orto on March 3, 2017, which vests ratably on each of the first three anniversaries of the grant date.

(7)	Represents one-time sign-on RSA awards granted to each of Mr. Morey (48,201 RSAs) and Mr. Tanenbaum (70,448 RSAs), which vest ratably on each of the first three anniversaries of such NEO’s start date (August 1, 2016 for Mr. Morey and September 26, 2016 for Mr. Tanenbaum).

(8)

Represents the PSU portion of the 2017 LTIP award that the respective NEO would vest in based on achieving the maximum level of performance. The PSUs have a three-year performance period commencing on January 4, 2017, and vest based on the PSU TSR metric. At December 31, 2017, our PSU TSR metric performance achieved a greater than target level.

(9)

Represents the PSU portion of the Transition Award that the respective NEO would vest in based on achieving the maximum level of performance. The PSUs have a two-year performance period commencing on January 4, 2017, and vest based on the PSU TSR metric. At December 31, 2017, our PSU TSR metric performance achieved a greater than target level.

(10)

Represents the PSUs granted to Mr. Baltimore in relation to the second tranche of his fiscal year 2016 long-term incentive award that he would vest in based on achieving the maximum level of performance. The PSUs have a three-year performance period commencing on January 4, 2017, and vest based on the PSU TSR metric. At December 31, 2017, our PSU TSR metric performance achieved a greater than target level.

(11)

Represents performance shares granted to Mr. Dell’Orto and Mr. Sparks pursuant to the Hilton LTIP. Generally, Hilton’s performance shares vest according to Hilton’s EBITDA and Hilton’s TSR relative to Hilton’s peer company group at the end of a three-year performance period. In connection with the Spin-off, on January 3, 2017, all of the Hilton performance shares granted to our NEOs in 2015 and 2016 were valued at target and converted to Park RSUs subject to time-based vesting only.

2017 OPTION EXERCISES AND STOCK VESTED

The following table provides information regarding the number of stock options that were exercised by our NEOs and the number of RSUs and RSAs that vested during the fiscal year ended December 31, 2017.

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized on Exercise ($)				Number of Shares Acquired on Vesting(1) (#)				Value Realized on Vesting(2) ($)
Thomas J. Baltimore, Jr.			--				--				92,146				2,374,602
Sean M. Dell’Orto			--				--				22,917				614,611
Thomas C. Morey			--				--				16,067				434,934
Matthew A. Sparks											19,587				525,773
Robert D. Tanenbaum											23,482				649,747

 

(1)

Represents for Mr. Baltimore, the 92,146 RSUs that vested on May 16, 2017; for Mr. Dell’Orto, the 14,751 RSUs that vested in February 2017 but were delivered on March 13, 2017 and the 8,166 RSUs that vested December 31, 2017; for Mr. Morey, the 16,067 RSAs that vested on August 1, 2017; for Mr. Sparks, the 12,451 RSUs that vested in February 2017 but were delivered on March 13, 2017 and 7,136 RSUs that vested on December 31, 2017; and for Mr. Tanenbaum, the 23,482 RSAs that vested on September 26, 2017.

(2)	Amounts reported are based on the closing price of Park’s common stock on the NYSE on the applicable vesting date.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The following table, footnotes and narrative set forth our payment obligations pursuant to the compensation arrangements for each of our NEOs under certain existing plans, agreements and awards, assuming (1) a termination of employment and/or (2) a change in control (“CIC”) occurred, in each case, on December 31, 2017. The amounts shown in the table do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the NEOs.

 

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In providing the estimated potential payments below, we have assumed that there are no (1) accrued but unpaid salary and annual bonuses amounts outstanding or (2) unpaid reimbursements for expenses incurred prior to the date of termination.

Because the disclosures in the table assume the occurrence of a termination or CIC as of a particular date and under a particular set of circumstances and therefore make a number of important assumptions, the actual amount to be paid to each of our NEOs upon a termination or CIC may vary significantly from the amounts included herein. Factors that could affect these amounts include the timing during the year of any such event, the continued availability of benefit policies at similar prices and the type of termination event that occurs.

 

Name		Benefit		Termination by Company without Cause or by NEO for Good Reason ($)				Termination by Company for Cause or by Executive without Good Reason ($)				Termination within 12 Months Following CIC ($)				Termination due to Death or Disability ($)
Thomas J. Baltimore, Jr.(1)
		Cash Severance			7,475,000	(2)			--				7,475,000	(2)			1,500,000	(3)
		Equity Awards(4)			10,379,325				--				13,879,925				10,379,325
		Continuation of Benefits			20,450	(5)			--				20,450	(5)			--
		Total Value of Benefits			17,874,775				--				21,375,375				11,879,325
Sean M. Dell’Orto(6)
		Cash Severance(7)			1,547,258				--				1,547,258				500,000
		Equity Awards(8)			390,511				--				3,138,738				1,335,567
		Continuation of Benefits(9)			20,083				--				20,083				--
		Total Value of Benefits			1,957,852				--				4,706,079				1,835,567
Thomas C. Morey(6)
		Cash Severance(7)			1,144,902				--				1,144,902				337,500
		Equity Awards(8)			1,099,544				--				1,787,301				1,222,508
		Continuation of Benefits(9)			23,758				--				23,758				--
		Total Value of Benefits			2,268,204				--				2,955,961				1,560,008
Matthew A. Sparks(6)
		Cash Severance(7)			1,466,430				--				1,466,430				500,000
		Equity Awards(8)			390,511				--				2,054,764				992,653
		Continuation of Benefits(9)			20,450				--				20,450				--
		Total Value of Benefits			1,877,391				--				3,541,644				1,492,653
Robert D. Tanenbaum(6)
		Cash Severance(7)			1,285,752				--				1,285,752				500,000
		Equity Awards(8)			1,740,784				--				3,269,076				2,014,110
		Continuation of Benefits(9)			23,758				--				23,758				--
		Total Value of Benefits			3,050,294				--				4,578,586				2,514,110

 

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