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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Crestline Capital Corporation
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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[LOGO]
6600 Rockledge Drive, Suite 600
Bethesda, Maryland 20817
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Crestline Capital Corporation (the "Company") at the Hyatt Regency Cambridge,
575 Memorial Drive, Cambridge, Massachusetts 02139, on Thursday, May 18, 2000
at 10:00 a.m. At the meeting, stockholders will consider and vote on the
following proposals:
Proposal 1: The election of Adam M. Aron, Michael A. Wildish, and William L.
Wilson, as directors for three-year terms expiring at the 2003
annual meeting;
Proposal 2: Amendments to the Company charter to effect a reverse split
followed by a forward split of the Company's common stock; and
Proposal 3: Ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Company to serve for the 2000 fiscal
year.
The stockholders will also transact such other business, if any, which may be
properly brought before the annual meeting.
If you were a stockholder at the close of business on April 7, 2000, you may
vote at the annual meeting.
Whether or not you plan to attend the meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us in the envelope
provided.
This proxy statement provides you with detailed information about the
proposals to be voted on at the meeting. Included with this proxy statement are
copies of the Company's 1999 Annual Report to stockholders and the Company's
Form 10-K for the 1999 fiscal year which provide you with additional
information about the Company. We encourage you to read the proxy statement and
the other enclosed information carefully.
We look forward to seeing you at the meeting.
/s/ Bruce D. Wardinski
Bruce D. Wardinski
Chairman of the Board, President, and
Chief Executive Officer
Bethesda, Maryland
April 13, 2000
<PAGE>
CRESTLINE CAPITAL CORPORATION
6600 Rockledge Drive, Suite 600
Bethesda, Maryland 20817
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 18, 2000
The Annual Meeting of Stockholders of Crestline Capital Corporation (the
"Company") will be held at the Hyatt Regency Cambridge, 575 Memorial Drive,
Cambridge, Massachusetts 02139 at 10:00 a.m., on Thursday, May 18, 2000. At the
meeting, stockholders will consider and vote on the following proposals:
Proposal 1: The election of Adam M. Aron, Michael A. Wildish, and William L.
Wilson, as directors for three-year terms expiring at the 2003 annual meeting;
Proposal 2: Amendments to the Company charter to effect a reverse split
followed by a forward split of the Company's common stock; and
Proposal 3: Ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Company to serve for the 2000 fiscal year.
The stockholders will also transact such other business, if any, which may be
properly brought before the annual meeting.
The Board of Directors has fixed the close of business on April 7, 2000, as
the record date for the determination of the stockholders entitled to notice of
and to vote at the annual meeting.
By order of the Board of Directors,
/s/ Tracy M.J. Colden
Tracy M.J. Colden
Corporate Secretary
Bethesda, Maryland
April 13, 2000
FOR INFORMATION ON ACCOMMODATIONS FOR AND DIRECTIONS TO THE
MEETING, PLEASE REFER TO THE OUTSIDE BACK COVER.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE>
CRESTLINE CAPITAL CORPORATION
6600 Rockledge Drive, Suite 600
Bethesda, Maryland 20817
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, MAY 18, 2000
THE MEETING
The Annual Meeting of Stockholders (the "Annual Meeting") of Crestline
Capital Corporation (the "Company") will be held at the Hyatt Regency
Cambridge, 575 Memorial Drive, Cambridge, Massachusetts 02139, beginning at
10:00 a.m. on Thursday, May 18, 2000.
ABOUT THIS PROXY STATEMENT
Our Board of Directors has sent you this Proxy Statement to solicit your
vote at the Annual Meeting (including any adjournment or postponement of the
Annual Meeting). We will pay all expenses incurred in connection with this
proxy solicitation. In addition to mailing this Proxy Statement to you, we
have hired MacKenzie Partners, Inc. to be our proxy solicitation agent for a
fee of $6,500 plus expenses. We also may make additional solicitations by
telephone, facsimile or other forms of communication. Brokers, banks and other
nominees who hold our stock for other beneficial owners will be reimbursed by
us for their expenses related to forwarding our proxy materials to the
beneficial owners. This Proxy Statement is first being mailed to stockholders
on or about April 13, 2000.
INFORMATION ABOUT VOTING
If you are a stockholder of record as of the close of business on April 7,
2000 (the "Record Date"), you may vote your shares:
. By Proxy: You can vote by completing, signing and dating the enclosed
proxy card and returning it to us by mail in the envelope provided. The
instructions for voting are contained on the enclosed proxy card. The
individuals named on the card, your "proxies," will vote your shares as
you indicate. If you sign your card without indicating how you wish to
vote, all of your shares will be voted (1) FOR all of the nominees for
director, (2) FOR approval of the Amendments to the Company charter to
effect a reverse split followed by a forward split of the Company's
common stock, (3) FOR ratification of the appointment of Arthur Andersen
LLP as independent auditors of the Company to serve for the 2000 fiscal
year, and (4) at the discretion of your proxies on any other matter that
may be properly brought before the Annual Meeting.
. In Person: You may attend the Annual Meeting and vote in person.
You may revoke your proxy at any time before it is voted at the meeting by
sending a written notice to Crestline Capital Corporation, P.O. Box 11463, New
York, New York 10203-0463, that you have revoked the proxy, by providing a
later-dated proxy or by voting in person at the Annual Meeting.
1
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The shares on your proxy card represent ALL of your shares of Company common
stock, including any shares that may be held for your account by The Bank of
New York, as trustee for the Company's Retirement and Savings Plan (i.e.,
401(k) plan) for employees. If you have shares in the Company Retirement and
Savings Plan and do not vote by proxy, or you return your proxy card with an
unclear voting designation or no voting designation at all, then your plan
shares will be voted at the discretion of the trustee for the Company
Retirement and Savings Plan.
If you held your shares in an account with a bank, broker or other nominee
on the Record Date, please follow the instructions given to you on your ballot
regarding casting your vote.
VOTING SECURITIES
As of the Annual Meeting Record Date, there were outstanding 16,929,292
shares of the Company's common stock, par value $0.01 per share. Only
stockholders at the close of business on the Record Date will be entitled to
vote. Each stockholder so entitled to vote at the meeting may cast, in person
or by proxy, one vote for each share of Company common stock held by such
stockholder.
QUORUM AND REQUIRED VOTES
Holders of a majority of the outstanding shares of Company common stock must
be present at the meeting, in person or by proxy, in order for a quorum to be
present. Votes on the proposals will be tallied as follows:
. Election of Directors: The three persons nominated for director receiving
the most votes will be elected.
. Approval of the Proposed Amendments to the Company Charter to effect the
reverse and forward stock splits: For approval, the amendments require
an affirmative vote from a majority of the shares outstanding and
entitled to vote at the meeting.
. Ratification of Independent Auditors: The ratification of Arthur Andersen
LLP as independent auditors of the Company must receive an affirmative
vote from a majority of the shares of Company common stock present and
voting on such proposal.
Unless otherwise required by our Bylaws or by applicable Maryland law, any
other matter properly presented for a vote at the meeting will require an
affirmative vote from a majority of the shares of Company common stock present
and voting on such proposal.
Shares of Company common stock represented by proxies that are marked
"withhold authority" (with respect to the election of any nominee for election
as director), or marked "abstain," or which constitute broker non-votes will
be counted as present at the meeting for the purpose of determining a quorum.
Broker non-votes occur when a nominee holding shares of Company common stock
for a beneficial owner has not received voting instructions from the
beneficial owner and such nominee does not possess or choose to exercise
discretionary authority with respect thereto. With respect to any matter to be
decided by a plurality (such as the election of directors) or a majority of
the votes cast at the meeting, proxies marked "withhold authority" or marked
"abstain," or which constitute broker non-votes will not be counted for the
purpose of determining the number of votes cast at the meeting.
2
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THE PROPOSALS
PROPOSAL 1
ELECTION OF DIRECTORS
Three directors will be elected at the Annual Meeting to serve until the 2003
annual meeting of stockholders. Adam M. Aron, Michael A. Wildish, and William
L. Wilson are the three nominees. Each of them is an incumbent director and
certain biographical information about them as well as the other directors and
executive officers of the Company is set forth below. These nominees have
consented to serve if elected, but should any nominee be unavailable to serve,
your proxy will vote for the substitute nominee recommended by the Board of
Directors. The three persons nominated for director receiving the most votes
will be elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
PERSONS NOMINATED FOR DIRECTOR IN PROPOSAL 1.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
Nominees for Director
Adam M. Aron
Age: 45
Mr. Aron has been a director of the Company since
December 29, 1998. Mr. Aron has held the position
of Chairman of the Board and Chief Executive
Officer of Vail Resorts, Inc. since July 1996.
Prior to joining Vail Resorts, Inc., Mr. Aron
served as President and Chief Executive Officer of
Norwegian Cruise Line Ltd. from 1993 until 1996.
Mr. Aron also currently serves on the Boards of
each of Sunterra Corporation and Florsheim Group,
Inc.
[Photo]
Michael A. Wildish
Age: 40
Mr. Wildish has been a director of the Company
since December 29, 1998. Mr. Wildish has been a
Managing Director in the investment firm of
Donaldson, Lufkin & Jenrette since 1997. Prior to
joining Donaldson, Lufkin & Jenrette, Mr. Wildish
worked in the investment firm of Lazard Freres &
Co. LLC, where he served as a General Partner from
1996 to 1997 and Vice President from 1992 to 1995.
[Photo]
3
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William L. Wilson
Age: 60 Mr. Wilson has been a director of the Company since
September 15, 1999. Mr. Wilson was elected by the
Board of Directors to fill a vacancy on the Board.
Mr. Wilson has been the Principal-in-Charge of
Synterra, Ltd., a site architectural and
construction management firm, since it was
established in 1972. Mr. Wilson currently serves on
the Board of Directors of the City of Philadelphia
Art Commission, the City of Philadelphia Percent
for Art Council, the Kutztown University, School of
Visual and Performing Arts, and the Board of
Trustees of the Pennsylvania School for the Deaf.
Mr. Wilson also serves as the Mayor of
Philadelphia's Transition Team Lead Co-Chair for
Housing.
[Photo]
Directors Continuing in Office
Bruce D. Wardinski
(Chairman of the Board)
Age: 39
Mr. Wardinski is Chairman of the Board, President
and Chief Executive Officer of the Company. Mr.
Wardinski has been a director of the Company since
November 9, 1998. Prior to joining the Company, Mr.
Wardinski was Senior Vice President and Treasurer
of Host Marriott Corporation ("Host Marriott") and
had served in various other capacities with Host
Marriott since 1987. Mr. Wardinski currently serves
on the Boards of Fairfax Opportunities Unlimited, a
not-for-profit advocacy group representing people
with disabilities, and eStara, a technology start
up company.
[Photo]
Louise M. Cromwell
Age: 55
Ms. Cromwell has been a director of the Company
since December 29, 1998. Ms. Cromwell has served as
Senior Counsel in the Real Estate Practice Group of
the law firm of Shaw Pittman, since January 1998.
From April 1984 to December 1997, Ms. Cromwell was
a Partner at Shaw Pittman. From January 1994
through December 1999, she served as General
Counsel of Federal City Council. Ms. Cromwell also
currently serves on the Board of The Economic Club
of Washington.
[Photo]
4
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Kelvin L. Davis
Age: 36
Mr. Davis has been a director of the Company since
December 29, 1998. Mr. Davis is a partner with the
Texas Pacific Group, an international private
equity investment firm. Prior to joining Texas
Pacific Group in March 2000, Mr. Davis was the
President and Chief Operating Officer of Colony
Capital, Inc., an international real estate
investment firm, and had served in various other
capacities with Colony since its formation in 1991.
Mr. Davis also currently serves on the Boards of
Franchise Finance Corporation of America and
Harveys Casino Resorts, a private gaming and resort
company.
[Photo]
John W. Marriott III
Age: 38
Mr. Marriott has been a director of the Company
since December 29, 1998. Mr. Marriott currently is
an employee of Marriott International, Inc.
("Marriott International"), where he became Senior
Vice President of Marriott International's Mid-
Atlantic Region in June 1996. Since 1986, Mr.
Marriott has held several positions including
Director of Finance in Marriott International's
Treasury Department, Director of Finance in Host
Marriott's Finance and Development Department and
Vice President, Lodging Development for The Ritz-
Carlton Hotel Company, L.L.C. He has also held
positions as Director of Corporate Planning,
Finance, Director of Marketing for a hotel and
General Manager. Mr. Marriott also currently serves
on the Board of Sodexho Marriott Services, Inc.
[Photo]
John B. Morse, Jr.
Age: 53 Mr. Morse has been a director of the Company since
December 29, 1998. Mr. Morse has held the position
of Vice President, Finance, and Chief Financial
Officer of The Washington Post Company since 1989.
Mr. Morse also currently serves as Chairman of the
Board of JMS Worldwide and as President of
Washington Post Telecommunications, Inc. and
Washington Post Productions, Inc., subsidiaries of
The Washington Post Company.
[Photo]
Christopher J. Nassetta, formerly a director of the Company, resigned from
his position on the Board effective August 3, 1999, to avoid any appearance of
a conflict of interest in the event of possible lease termination negotiations
between the Company and Host Marriott following a change in the tax law that
previously prevented Host Marriott, as a real estate investment trust ("REIT"),
from deriving revenues from operating its hotels. The Board elected William L.
Wilson on September 15, 1999 to fill the seat vacated by Mr. Nassetta.
5
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Executive Officers
Biographical information on Bruce D. Wardinski, Chairman of the Board,
President and Chief Executive Officer of the Company is included above in the
section "Directors Continuing in Office."
<TABLE>
<CAPTION>
Business Experience Prior to Becoming an Executive Officer
Name and Title Age of the Company
- ----------------------- --- ------------------------------------------------------------
<S> <C> <C>
James L. Francis 38 Mr. Francis is Executive Vice President and Chief Financial
Executive Vice Officer of the Company. Prior to joining the Company, Mr.
President and Chief Francis was an employee of Host Marriott. He joined Host
Financial Officer Marriott in July 1997 as Vice President of Finance and
became Assistant Treasurer of Host Marriott in February
1998. He was Vice President of Finance for Lodging-
Reengineering Team Leader of Marriott International from
1995 to 1997 and was promoted to Vice President of Finance
for Lodging-Asset Management and Owner Relations of Marriott
International in 1997 prior to his joining Host Marriott in
that year.
Steven J. Fairbanks 36 Mr. Fairbanks is Executive Vice President for Lodging and
Executive Vice Senior Living Investments of the Company. Prior to joining
President, Lodging and the Company, Mr. Fairbanks was an employee of Host Marriott.
Senior Living He joined Host Marriott in 1996 as Vice President-
Investments Acquisitions. In 1997, he was elected Senior Vice President-
Acquisitions of Host Marriott. Prior to joining Host
Marriott, he served as Vice President of Capital Management
and Development Corporation from 1992 until 1996.
Tracy M.J. Colden 38 Ms. Colden is Senior Vice President, General Counsel and
Senior Vice President, Corporate Secretary of the Company. Prior to joining the
General Counsel and Company, Ms. Colden was an employee of Host Marriott. She
Corporate Secretary joined Host Marriott as an Attorney in 1996. She was
promoted to Senior Attorney of Host Marriott in June 1996
and became Assistant General Counsel of Host Marriott in
June 1997. Prior to joining Host Marriott, Ms. Colden was an
attorney with the law firm of Hogan & Hartson L.L.P.
Larry K. Harvey 35 Mr. Harvey is Senior Vice President, Treasurer, and
Senior Vice President, Controller of the Company. Mr. Harvey was elected Treasurer
Treasurer, and of the Company in January 2000. Prior to joining the
Controller Company, Mr. Harvey was an employee of Host Marriott. In
1995, Mr. Harvey was Director-Corporate Accounting of Host
Marriott. He was promoted to Senior Director-Corporate
Accounting of Host Marriott in 1997 and Vice President-
Corporate Accounting of Host Marriott in 1998. Prior to
joining Host Marriott, Mr. Harvey was with the public
accounting firm of PricewaterhouseCoopers LLP.
</TABLE>
6
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Executive Officers (continued)
<TABLE>
<CAPTION>
Business Experience Prior to Becoming an Executive Officer
Name and Title Age of the Company
- ---------------------- --- ------------------------------------------------------------
<S> <C> <C>
Donald R. Trice 60 Mr. Trice was elected President and Chief Executive Officer
President and Chief of Crestline Hotels & Resorts, Inc. ("CHRI"), a wholly-owned
Executive Officer, subsidiary of the Company, in March 2000. Prior to joining
Crestline Hotels & the Company, Mr. Trice was the President and a Director of
Resorts, Inc. Stormont Trice Corporation, a developer, owner and manager
of hotels, resorts and conference centers, since January
1993. He also held various positions with and was on the
boards of other Stormont companies during that time.
David L. Durbin 51 Mr. Durbin was elected Executive Vice President of CHRI in
Executive Vice March 2000. Prior to joining the Company, Mr. Durbin was the
President, Crestline President and Co-founder of Durbin Companies, Inc., a
Hotels & Resorts, privately-held hotel management and development company.
Inc. Prior to forming the Durbin Companies, Mr. Durbin held
several positions during his 15-year career with Marriott
International, including General Manager of Marriott's Essex
House in New York City.
</TABLE>
The Board of Directors and Committees
The Board of Directors is divided into three classes, each consisting of
approximately one-third of the total number of directors. There are currently
eight directors. Class I directors, consisting of Bruce D. Wardinski, John W.
Marriott III and Louise M. Cromwell, will hold office until the 2002 annual
meeting of stockholders; Class II directors, consisting of Adam M. Aron,
Michael A. Wildish and William L. Wilson, will hold office until the 2000
annual meeting of stockholders; and Class III directors, consisting of Kelvin
L. Davis and John B. Morse, Jr., will hold office until the 2001 annual meeting
of stockholders.
The Board met seven times in 1999. Each Director attended 75% or more of the
meetings of the Board held during 1999 for the period during which he or she
was a Director.
Executive Committee. The Executive Committee possesses and may exercise all
the authority and powers of the Board of Directors in the management of the
business and affairs of the Company, except those reserved to the Board of
Directors by the Maryland General Corporation Law, the Company's Bylaws or the
Executive Committee charter. The Executive Committee consists of four members:
Messrs. Davis, Marriott, Morse and Wardinski. Following the resignation of Mr.
Nassetta from the Board, Mr. Morse replaced Mr. Nassetta as a member of the
Executive Committee effective September 16, 1999. Mr. Wardinski is Chairman of
the Executive Committee. During fiscal year 1999, the Executive Committee did
not meet.
Audit Committee. The Audit Committee recommends to the Board of Directors the
appointment of independent auditors; approves the scope of audits and other
services to be performed by the independent and internal auditors; considers
whether the performance of any professional service by the auditors other than
services provided in connection with the audit function could impair the
independence of the outside auditors; and reviews the results of internal and
external audits, the accounting principles applied in financial reporting and
financing and operational controls.
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The Audit Committee consists of three members: Messrs. Davis and Morse and Ms.
Cromwell. Mr. Morse is the Chairman of the Audit Committee. The Audit Committee
met five times in 1999. Each member attended 75% or more of the meetings held
in 1999 for the period during which he or she was a Director.
Compensation Policy Committee. The Compensation Policy Committee's functions
include recommendations on policies and procedures relating to senior officers'
compensation and various stock plans and stock awards. A member of the
Compensation Policy Committee who does not qualify as a "non-employee director"
and "outside director" under applicable securities and tax law rules may not
participate in making awards under the Company's 1998 Amended and Restated
Comprehensive Stock Incentive Plan ("1998 Comprehensive Stock Incentive Plan")
to senior officers and, as a result, Mr. Wildish would not currently
participate in making awards to senior officers under such plan. The
Compensation Policy Committee consists of three members: Messrs. Aron, Wilson
and Wildish. Mr. Wilson replaced Mr. Morse on September 16, 1999. Mr. Wildish
is the Chairman of the Compensation Policy Committee. The Compensation Policy
Committee met seven times in 1999. Each member attended 75% or more of the
meetings held in 1999 for the period during which he was a member of the
committee.
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee considers candidates for election as directors and is
responsible for keeping abreast of, and making recommendations with regard to,
corporate governance. In addition, the Nominating and Corporate Governance
Committee advises the Board of Directors on a range of matters affecting the
Board of Directors and its committees, including qualification of director
candidates, selection of committee chairs, committee assignments and related
matters. The Nominating and Corporate Governance Committee consists of three
members: Messrs. Aron and Wildish and Ms. Cromwell. Ms. Cromwell is the
Chairperson of the Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee met four times in 1999. Each
member attended 75% or more of the meetings held in 1999 for the period during
which he or she was a Director.
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Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth the number of shares of Company common stock
beneficially owned as of March 1, 2000 by (i) each person serving as an
executive officer or director of the Company, (ii) all director nominees,
(iii) all directors, director nominees and executive officers as a group and
(iv) persons or entities owning 5% or more of the outstanding shares of
Company common stock.
<TABLE>
<CAPTION>
Percent
Number of of
Name and Address of Beneficial Owner(1) Shares Shares(2)
- --------------------------------------- --------- ---------
<S> <C> <C>
Directors:
Bruce D. Wardinski................................... 474,689(3)(4) 2.8
Adam M. Aron......................................... 7,000 *
Louise M. Cromwell................................... 6,601 *
Kelvin L. Davis...................................... 4,500 *
John W. Marriott III................................. 317,408(5) 1.9
John B. Morse, Jr.................................... 4,501 *
Michael A. Wildish................................... 6,001 *
William L. Wilson.................................... 3,000 *
Executive Officers:
James L. Francis..................................... 240,866(3)(4) 1.4
Steven J. Fairbanks.................................. 92,203(3)(4) *
Tracy M.J. Colden.................................... 64,708(3)(4) *
Larry K. Harvey...................................... 72,299(3)(4) *
All Directors, Director Nominees and Executive
Officers as a
Group (12 persons).................................. 1,293,776 7.6
Certain Other Beneficial Owners:
Brahman Entities..................................... 1,634,330(6) 9.7
Blackstone Entities.................................. 1,370,423(7) 8.1
Southeastern Asset Management, Inc................... 1,206,180(8) 7.1
Performance Capital Entities......................... 1,122,600(9) 6.6
J.W. Marriott, Jr.................................... 877,897(10) 5.2
Perry Corp........................................... 841,400(11) 5.0
</TABLE>
- --------
* Less than 1%
(1) Unless otherwise indicated, the address of each beneficial owner is 6600
Rockledge Drive, Suite 600, Bethesda, Maryland 20817.
(2) For purposes of computing the percentage of outstanding shares held by
each person, all shares of Company common stock that such person has the
right to acquire within 60 days pursuant to the exercise of stock options
are deemed to be outstanding, but are not deemed to be outstanding for
the purposes of computing the ownership percentage of any other person.
(3) As of March 1, 2000, there were 16,918,957 shares of Company common stock
outstanding. For purposes of this table, a person is deemed to have
"beneficial ownership" of the number of shares of common stock of the
Company that such person would have had the right to acquire within 60
days of March 1, 2000 upon exercise of options to purchase shares of
common stock granted pursuant to the Company's 1998 Comprehensive Stock
Incentive Plan. The following number of shares can be acquired by the
named persons through the exercise of Company stock options exercisable
within 60 days of March 1, 2000: Mr. Wardinski, 272,624; Mr. Francis,
152,149; Mr. Fairbanks, 44,056, Ms. Colden, 27,792 and Mr. Harvey,
35,721.
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(4) Includes shares of unvested restricted stock issued pursuant to the
Company's 1998 Comprehensive Stock Incentive Plan to Messrs. Wardinski,
Francis and Fairbanks, Ms. Colden and Mr. Harvey in the amounts of 96,000
shares; 48,000 shares; 24,000 shares; 20,000 shares; and 20,000 shares,
respectively. See "Executive Compensation; Summary Compensation Table."
(5) Includes 1,440 shares held by Mr. Marriott as trustee for three trusts
for the benefit of his children; 1,914 shares owned by three trusts for
the benefit of his children in which his wife serves as co-trustee; 315
shares owned by his wife, and 270,759 shares held by JWM Family
Enterprises LP of which Mr. Marriott is President and CEO of the
corporate general partner.
(6) Represents the shares of common stock held by Brahman Partners II, L.P.
("BPII"); Brahman Institutional Partners, L.P. ("BIP"); BY Partners, L.P.
("BYP"); Brahman Management, L.L.C. ("BMLLC"), Brahman Capital Corp.
("BCC"), Peter Hochfelder, Robert J. Sobel and Mitchell A. Kuflik (BPII,
BIP, BYP, BMLLC, BCC and Messrs. Hochfelder, Sobel and Kuflic,
collectively, the "Brahman Entities"). The Brahman Entities have reported
in a Schedule 13G under the Securities Exchange Act of 1934, as amended
(the "Securities Exchange Act") filed with the Securities and Exchange
Commission, that the Brahman Entities could be deemed to beneficially own
an aggregate of 1,092,530 shares of Company common stock. BMLLC is the
sole general partner of BPII, BIP and BYP. Pursuant to an investment
advisory contract, BCC has the power to vote and dispose of shares of
Company common stock held by BYP and Brahman Partners II Offshore, Ltd.
("BPO"). Messrs. Hochfelder, Sobel and Kuflik are the managing members of
BMLLC and the executive officers and directors of BCC. Of the shares of
Company common stock, BPII has shared voting and dispositive power over
163,200; BIP has shared voting and dispositive power over 567,500; BYP
has shared voting and dispositive power over 877,630; BMLLC has shared
voting and dispositive power over 1,608,330; BCC has shared voting and
dispositive power over 903,630; and each of Messrs. Hochfelder, Sobel and
Kuflik has shared voting and dispositive power over 1,634,330. The
principal business address for the Brahman Entities is 277 Park Avenue,
26th Floor, New York, New York 10172. The principal business address for
BPO is c/o Citco, N.V., Kaya Flamboyan 9, Willemstad, Curacao, Netherland
Antilles.
(7) Represents the shares of common stock held by Blackstone Real Estate
Partners II L.P. ("BRE II"); Blackstone Real Estate Holdings II L.P.
("BREH II"); Blackstone Real Estate Partners II T.E. 1 L.P. ("BRE II TE
1"); Blackstone Real Estate Partners II T.E. 2 L.P. ("BRE II TE 2");
Blackstone Real Estate Partners II T.E. 3 L.P. ("BRE II TE 3");
Blackstone Real Estate Partners II T.E. 4 L.P. ("BRE II TE 4");
Blackstone Real Estate Partners II T.E. 5 L.P. ("BRE II TE 5");
Blackstone Real Estate Partners I L.P. ("BRE I"); Blackstone Real Estate
Partners Two L.P. ("BRE Two"); Blackstone Real Estate Partners Three L.P.
("BRE Three"); Blackstone Real Estate Partners IV L.P. ("BRE IV");
Blackstone RE Capital Partners L.P. ("BRECP"); Blackstone RE Capital
Partners II L.P. ("BRECP II"); Blackstone RE Offshore Capital Partners
L.P. ("BOC"); Blackstone Real Estate Holdings L.P. ("BREH"); CR/RE L.L.C.
("CRRE"); BRE Logan Hotel Inc. ("Logan"); BRE/Cambridge L.L.C.
("Cambridge"); the general partner of BRE I, BRE Two, BRE Three, BRE IV,
BRECP, BRECP II, and BOC, Blackstone Real Estate Associates L.P.
("BREA"); the general partner of BRE II, BRE II TE 1, BRE II TE 2, BRE II
TE 3, BRE II TE 4, and BRE II TE 5, Blackstone Real Estate Associates II
L.P. ("BREA II"); the general partner of BREH II and BREA II, Blackstone
Real Estate Management Associates II L.P. ("BREMA II"); the general
partner of BREH and BREA, BREA L.L.C. ("BREA LLC"); the general partner
of BREMA II, BREA II L.L.C. ("BREA II LLC"); Peter G. Peterson
("Peterson") and Stephen A. Schwarzman ("Schwarzman"), who are the
founding members of BREA LLC and BREA II LLC; and John G. Schreiber, a
limited partner in BREA and BREA II
10
<PAGE>
(collectively all such persons and entities, the "Blackstone Entities").
The Blackstone Entities have reported in a Schedule 13G under the
Securities Exchange Act filed with the Securities and Exchange Commission,
that the Blackstone Entities may be deemed to beneficially own in the
aggregate 1,370,423 shares of Company common stock and by reason of their
ability to control BREA LLC, BREA II LLC and Logan, Peterson and
Schwarzman have shared power to vote or to direct the vote and to dispose
or to direct the disposition of the shares of common stock that may be
deemed to be beneficially owned by BREA LLC, BREA II LLC and Logan and,
accordingly, may be deemed to beneficially own 1,368,474 shares of common
stock. The principal business address for each of the non-individual
Blackstone Entities and Messrs. Peterson and Schwarzman is 345 Park
Avenue, 31st Floor, New York, New York 10154. The principal business
address for Mr. Schreiber is Schreiber Investments, 1115 East Illinois
Road, Lake Forest, Illinois 60045. These shares of common stock are
currently held by such affiliated partnerships, but it is expected that
eventually they will be distributed by such affiliated partnerships to
their partners.
(8) Represents shares of common stock of the Company that are held by
Southeastern Asset Management, Inc. ("SAM"). SAM reported in a Schedule
13G under the Securities Exchange Act filed with the Securities and
Exchange Commission, sole dispositive power over 123,900 shares of
Company common stock, shared dispositive power over 1,076,380 shares of
Company common stock and 5,900 shares held with no dispositive power. Of
these shares, SAM has reported sole voting power over 126,900 shares,
shared voting power over 1,076,380 and no power to vote 2,900 shares. The
principal business address of SAM is 6410 Poplar Avenue, Suite 900,
Memphis, Tennessee 38119.
(9) Represents the shares of common stock held by Performance Capital, L.P.
("PCI"); Performance Capital II, L.P. ("PCII"); Performance Offshore,
Ltd. ("POL"); Brett Fialkoff, IRA, an individual retirement account for
the benefit of Brett Fialkoff ("BF"), and Jordan Warner (PCI, PCII, POL,
Brett Fialkoff, IRA and Mr. Warner, collectively, the "Performance
Entities"). The Performance Entities have filed a report on a Schedule
13G under the Securities Exchange Act filed with the Securities and
Exchange Commission, that indicates that the Performance Entities could
be deemed to beneficially own an aggregate of 1,129,700 shares of Company
common stock. Of the foregoing shares, PCI, PCII, POL, BF and Jordan
Warner have reported ownership of 934,100 shares, 115,400 shares, 73,100
shares, 100 shares and 7,000 shares, respectively. PCI's sole general
partner is Performance Capital, LLC ("PCLLC") which has sole voting and
dispositive power over the shares held by PCI. PCII's sole general
partner is Performance Management, LLC ("PMLLC") which has sole voting
and dispositive power over the shares held by PCII. Performance
Management Holding Corp. ("PMHC") is the sole investment manager of POL
and has sole voting and dispositive power over the shares held by POL. BF
has sole voting and dispositive power over the shares held by BF. Brian
Warner has sole voting and dispositive power over the shares held by
Jordan Warner. Brian Warner is the sole manager of each of PCLLC and
PMLLC. Brian Warner and BF are the members of each of PCLLC and PMLLC.
Brian Warner is the President and sole director of PMHC and Brian Warner
and BF are its shareholders. Jordan Warner is a retired individual who
resides at 137 Golf View Drive, Jericho, New York 11753. The principal
business address for PCI, PCII, PCLLC, PMLLC, PMHC, Brian Warner and BF
is 767 Third Avenue, 16th Floor, New York, New York 10017. The principal
business address for POL is Corporate Centre, West Bay Road, P.O. Box
31106 SMB, Grand Cayman, Cayman Islands, B.W.I.
(10) J.W. Marriott, Jr. and Richard E. Marriott have reported and filed
jointly a Schedule 13G under the Securities Exchange Act with the
Securities and Exchange Commission in relation to the Company common
stock. Includes: (i) 222,484 shares for which J.W. Marriott, Jr., has the
sole powers to vote, or to direct the vote, and to dispose, or direct the
disposition of; and (ii) 655,413
11
<PAGE>
shares for which J.W. Marriott, Jr. shares the powers to vote, or to
direct the vote, and to dispose, or direct the disposition of (including
369,812 shares also beneficially owned by Richard E. Marriott and 270,759
shares also beneficially owned by John W. Marriott III). Does not include
(i) shares held by the adult children of J.W. Marriott, Jr. as trustees
for trusts established for grandchildren of J.W. Marriott, Jr. and Richard
E. Marriott; (ii) shares owned directly or indirectly by certain members
of the Marriott family; or (iii) shares held by a charitable trust of
which his mother is trustee and he and Richard E. Marriott are
remaindermen; J. W. Marriott, Jr. disclaims beneficial ownership of all
such shares. The principal address of J.W. Marriott, Jr. and Richard E.
Marriott is 10400 Fernwood Road, Bethesda, Maryland 20817.
(11) Represents shares of common stock of the Company that are held by Perry
Corp. ("Perry Corp."). Perry Corp. and Richard C. Perry reported in a
Schedule 13G under the Securities Exchange Act filed with the Securities
and Exchange Commission, that Perry Corp. beneficially owned 841,400
shares of Company common stock with sole dispositive power and sole
voting power over all such shares. Richard C. Perry is the President and
sole stockholder of Perry Corp. The principal business address of Perry
Corp. and Richard C. Perry is 599 Lexington Avenue, New York, New York
10022.
Compensation Of Directors
Directors who are also officers of the Company receive no additional
compensation for their services as directors. Directors who are not officers
of the Company and who are elected by the holders of Company common stock
receive an annual retainer fee of $15,000 and 2,000 shares of Company common
stock, as well as an attendance fee of $1,250 for each stockholders' meeting,
meeting of the Board of Directors and meeting of a committee of the Board of
Directors, regardless of the number of meetings held on a given day. The chair
of each committee of the Board of Directors receives an additional annual
retainer fee of $1,000. Any individual director receiving these fees may elect
to defer payment of all such fees or any portion thereof pursuant to the
Company's Executive Deferred Compensation Plan and/or the Company's Non-
Employee Directors' Deferred Stock Compensation Plan. The Non-Employee
Directors' Deferred Stock Compensation Plan provides for each non-employee
director to elect to receive the annual director stock grant of 2,000 shares
of Company common stock paid in lump sum immediately or in annual installments
beginning at such time as such individual is no longer a member of the Board
of Directors. This annual director stock grant of 2,000 shares is effective
following each annual meeting of stockholders.
Additionally, under the Non-Employee Directors' Deferred Stock Compensation
Plan, as a result of his becoming director, William L. Wilson received an
initial grant of 2,500 shares of Company common stock effective as of
September 15, 1999, consistent with the initial grants given to other
directors. Directors are also reimbursed for travel expenses and other out-of-
pocket costs incurred while attending meetings or visiting the Company's hotel
properties or senior living communities.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities ("Reporting Persons"),
to file reports of beneficial ownership of Company equity securities with the
Securities and Exchange Commission and the New York Stock Exchange. Specific
due dates for these reports have been established, and the Company is required
to report in this Proxy Statement any failure by such Reporting Persons to
file such reports on a timely basis during 1999. During 1999, the Reporting
Persons of the Company were in compliance with these requirements, with the
exception of one transaction not timely reported by Adam M. Aron. This
transaction has now been reported.
12
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows the compensation paid by the
Company to the Chief Executive Officer and the other five most highly
compensated executive officers (other than the Chief Executive Officer) of the
Company in fiscal year 1999 and bonuses earned for 1999, which was the first
fiscal year following the Company's spin-off from Host Marriott.
<TABLE>
<CAPTION>
All Other
Fiscal Restricted Stock Compensation
Name Year Salary (1) Bonus Stock (2) Options (#) (3)(4)(5)
---- ------ ---------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bruce D. Wardinski
Chairman of the Board,
President and Chief
Executive Officer..... 1999 $530,000 $556,500 $1,224,172 750,000 $94,450
James L. Francis
Executive Vice
President and Chief
Financial Officer..... 1999 330,000 297,000 604,638 397,736 29,159
Steven J. Fairbanks
Executive Vice
President, Lodging &
Senior Living
Investments........... 1999 200,000 150,000 299,456 126,570 17,186
Bruce F. Stemerman(6)
Executive Vice
President, Asset
Management............ 1999 200,000 150,000 310,530 146,684 17,578
Tracy M.J. Colden
Senior Vice President,
General Counsel &
Corporate Secretary... 1999 160,000 96,000 255,674 77,137 9,693
Larry K. Harvey
Senior Vice President,
Treasurer &
Controller............ 1999 160,000 96,000 260,420 82,381 6,695
</TABLE>
- --------
(1) Salary amounts include both base salary earned and paid in cash during the
fiscal year, and the amount of base salary deferred at the election of the
executive officer.
(2) Includes restricted stock and deferred bonus stock. Restricted stock awards
are subject to general restrictions, such as continued employment and non-
competition. Holders of restricted stock receive dividends and exercise
voting rights on their restricted shares. Deferred bonus stock represents
awards that were earned while employees at Host Marriott pursuant to its
stock plans prior to the Company's spin-off but which, as part of the spin-
off, were converted from Host Marriott common stock to Company common stock
on a basis which did not increase or decrease the economic value of the
awards. The Company is not currently awarding deferred bonus stock to its
executive officers. Subject to earlier vesting resulting from death,
disability, retirement at age 55 with ten years of service or approved
retirement after 20 years of service, deferred bonus stock contingently
vests in ten equal annual installments beginning one year after the award
is granted. As of the end of the 1999 fiscal year, the total number of
deferred bonus stock, restricted stock and the aggregate value of these
shares, respectively, was as follows: Mr. Wardinski, 2,498 shares, 120,000
shares, $34,972 and $1,189,200; Mr. Francis, 717 shares, 60,000 shares,
$10,038 and $594,600; Mr. Fairbanks, 154 shares, 30,000 shares, $2,156 and
$297,300; Mr. Stemerman, 945 shares, 30,000 shares, $13,230 and $297,300;
Ms. Colden, 566 shares, 25,000 shares, $7,924 and $247,750 and Mr. Harvey,
905 shares, 25,000 shares, $12,670 and $247,750.
13
<PAGE>
(3) This column includes the following Company matching contributions made
under the Company's Retirement and Profit Sharing Plan and Executive
Deferred Compensation Plan for fiscal 1999, respectively: Mr. Wardinski,
$9,600 and $33,460; Mr. Francis, $9,600 and $18,805; Mr. Fairbanks, $9,600
and $7,207; Mr. Stemerman, $9,600 and $7,978; Ms. Colden, $9,459 and 0; and
Mr. Harvey, $6,379 and 0.
(4) Includes $49,892, which Mr. Wardinski received as a cash-out of Host
Marriott Services Corporation stock options, for which the Company received
reimbursement from Host Marriott Services Corporation.
(5) Includes imputed income for federal income tax purposes in the amounts of
$1,498, $754, $379, $234 and $316 for Messrs. Wardinski, Francis,
Fairbanks, Ms. Colden and Mr. Harvey, respectively, resulting from interest
rates below the Applicable Federal Rate charged on loans financed by the
Company. During 1999, the above named executives exercised rights to
purchase shares of stock under the Company's Executive Stock Loan Program.
These purchases were made at the then fair market value of the shares and
financed with loans from the Company in total aggregate amounts of
$1,055,700, $529,500, $263,475, $168,000 and $224,469 for Messrs.
Wardinski, Francis, Fairbanks, Ms. Colden and Mr. Harvey, respectively. The
loans bear interest at 5.5% and are for a maximum term of 8 years, 11
months. The loans are secured by the stock purchased and are recourse to
the employees.
(6) Although Mr. Stemerman resigned from his position as Executive Vice
President, Asset Management, effective December 31, 1999, he is included in
this Table in accordance with applicable regulations because he otherwise
would have been included as one of the Company's five most highly
compensated executive officers for the Company's last fiscal year.
Stock Option Tables
The following two tables show information concerning options to purchase the
Company's common stock granted in fiscal 1999 under the 1998 Comprehensive
Stock Incentive Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Stock
Stock Options
Options Granted to Grant Date
Granted Employees in Exercise Expiration Present
Name (1)(#) Fiscal Year Price ($/Sh) Date (2) Value (3)
---- ------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Bruce D. Wardinski..... 500,000 27.6% $9.9100 01/21/14 $2,517,140
250,000 13.8 14.8600 01/21/14 807,665
James L. Francis....... 272,736 15.0 9.9100 01/21/14 1,373,029
125,000 6.9 14.8600 01/21/14 403,833
Steven J. Fairbanks.... 126,570 7.0 9.9100 01/21/14 637,189
Bruce F. Stemerman..... 146,684 8.1 9.9100 01/21/14 738,448
Tracy M.J. Colden...... 77,137 4.3 9.9100 01/21/14 388,329
Larry K. Harvey........ 82,381 4.5 9.9100 01/21/14 414,729
</TABLE>
- --------
(1) Under Company's 1998 Comprehensive Stock Incentive Plan, the Company
granted non-qualified options.
14
<PAGE>
(2) The options become exercisable in annual increments of one-third of the
shares covered thereby beginning on of the first anniversary of the date of
grant. Each option has a fifteen-year term, so long as the holder remains
an employee of the Company.
(3) These values were established using the Black-Scholes (50.8% and 32.6%,
respectively) stock option valuation model. Assumptions used to calculate
the grant date present value of option shares granted during fiscal 1999
were as follows:
Expected Volatility--The standard deviation of the continuously compounded
rates of return calculated on the average daily stock price over a period
of time immediately preceding the grant and equal in length to the expected
life. The volatility was 20%.
Dividend Yield--The expected annual dividend yield was $0.00; there were no
dividends paid in the past.
Expected Life--The expected life of the grant was 10 years, calculated
based on the historical expected life of previous grants.
Forfeiture Rate--The probability of forfeiture due to termination of
employment prior to vesting was 3%.
Grant Date Present Value--was $5.03 and $3.23, respectively.
Aggregated Stock Option/SAR Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised in the
Unexercised Options at Money Stock Options at
Fiscal Year End (#) Fiscal Year End (1)
------------------------------- -----------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Bruce D. Wardinski...... 924 $9,800 22,623 750,000 $ 297,079 $ 6,611,250
James L. Francis........ -- -- 19,570 414,200 85,810 3,629,367
Steven J. Fairbanks..... -- -- 1,866 127,192 10,157 1,327,944
Bruce F. Stemerman...... 411 5,438 30,754 149,890 382,039 1,564,431
Tracy M.J. Colden....... -- -- 2,079 78,444 6,293 809,331
Larry K. Harvey......... -- -- 7,491 86,586 35,415 873,916
</TABLE>
- --------
(1) Certain of these options were converted as a result of the spin-off of the
Company from Host Marriott to replace options to purchase shares of Host
Marriott common stock upon terms which did not increase or decrease the
economic value of the options.
15
<PAGE>
Performance Graph
The following graph compares the cumulative return, since the Company's
common stock was distributed by Host Marriott to its stockholders, of the
Company's common stock to the total cumulative return over the same period of
the common stocks in (i) the Standard & Poor's 500 Stock Index, and (ii) a peer
group index of companies selected by the Company. The comparison assumes $100
was invested on December 30, 1998 in the Company's common stock and in each of
the comparison groups. The comparison assumes reinvestment of dividends. The
Company paid no dividends during the periods.
[PERFORMANCE GRAPH]
Legend
12/30/98 12/31/99
-------- --------
Crestline Capital Corporation $100 $134.15
S&P 500 Index $100 $120.76
Peer Group $100 $ 54.98
Companies in the Self-Determined Peer Group
American Retirement Corporation Bristol Hotels & Resorts
Brookdale Living Communities, Inc. Interstate Hotels Corporation
Lodgian Inc. Meristar Hotels & Resorts Inc.
Prime Hospitality Corporation Senior Housing Properties Trust
Sunrise Assisted Living, Inc.
16
<PAGE>
Board Compensation Committee Report on Executive Compensation
To Our Stockholders
The Compensation Policy Committee (the "Committee") of the Board of Directors
is responsible for establishing basic principles related to compensation
programs of the Company. The Committee oversees and administers our executive
pay program on behalf of the Board and, by extension, our stockholders. This
report provides details and background information regarding the executive pay
program.
The Committee
The Committee is composed of three non-employee members of the Board of
Directors. It approves executive compensation programs and policies, sets
performance targets, and evaluates the performance of the Company and its
senior management. The Committee met seven times during the year and acted by
unanimous consent in lieu of a meeting on four occasions.
Compensation Philosophy and Programs
The Committee believes that executive officer compensation should be closely
aligned with the performance of the Company on both a short-term and long-term
basis, and such compensation should assist the Company in attracting, retaining
and motivating highly qualified executives. To that end, the Committee has
established a compensation program for executive officers that provides, (i)
competitive base salary, (ii) annual incentives that emphasize performance
based compensation dependent upon achieving both Company and individual
performance goals; and (iii) equity based programs to promote and enhance the
long-term growth, development and financial success of the Company by aligning
the personal interests of management to those of stockholders. The Committee
establishes total annual compensation for senior executive officers after
reviewing each component of such executive's compensation against executive
compensation surveys prepared by outside compensation consultants. The surveys
used for comparison reflect compensation levels and practices for companies of
similar size within the lodging, real estate and senior living industries.
The Committee reviews the data provided by these surveys with a focus on the
median level of compensation to determine base salary and annual incentive
levels. In addition to reviewing senior executive officers' compensation
against the comparator group, the Committee also solicits appropriate input
from the Company's president and chief executive officer regarding total
compensation for those executives who report directly to him. The Committee
then makes decisions for individual executives based on competitive levels of
compensation considering experience and individual performance. Consistent with
the philosophy of aligning executive compensation with stockholder value, long-
term incentive awards represent a substantial portion of the total pay package
for executive officers. The long term incentive awards are targeted at the 75th
percentile of selected peer group companies and reflect achievement of
outstanding business performance as determined by the Committee.
17
<PAGE>
Base Salary
The Committee believes that base salary should be competitive with other
companies in the lodging, real estate and senior living industries. Each
position's salary band and target annual incentive opportunity is established
based on the median level of total cash compensation for positions in the
survey data. At least annually, the Committee reviews the performance of each
senior executive and adjusts his or her base salary based on the Committee's
view of how the management team and the respective individual contribute to the
overall success of the Company.
Annual Incentive Awards
Annual Incentives are intended to reflect the Company's belief that
management's contribution to medium and long term Company performance should be
measured and rewarded. The Committee has established an annual incentive
program with performance measures currently tied to the meeting of certain cash
flow targets, earnings per share, and individual performance goals.
Stock Incentives
The Company provides long-term incentives through our 1998 Comprehensive
Stock Incentive Plan, which permits restricted stock, stock options, deferred
stock awards and other stock-based awards. The Committee believes that
management's interest should be aligned with that of the stockholders, and that
stock ownership is an efficient and effective way to accomplish this goal.
Restricted stock and stock options are our primary long-term incentive vehicles
for senior executives. Both vehicles create an incentive for senior executives
to manage our Company in a manner that creates significant long-term value for
stockholders. The 1998 Comprehensive Stock Incentive Plan permits the Committee
to make awards of stock with restrictions relating to either continued
employment ("time-based" awards) or to performance standards that are set by
the Committee ("performance-based" awards). Awards for all employees are
evaluated by reviewing individual contribution, level of responsibility and
industry long term compensation information.
The Committee believes that executive stock ownership is integral to the
growth and success of the Company. As such, the Company has established a loan
program to allow certain of its senior executives to purchase stock with funds
borrowed from the Company on a recourse basis at 5.5% interest payable
annually.
Compensation of the Chief Executive Officer
Base Salary
Mr. Wardinski received a salary adjustment in January 1999 as a result of a
compensation study conducted by an independent compensation consulting firm for
the Committee. His salary was adjusted from $450,000 to $530,000. This salary
is at the median for the survey group.
Annual Incentive Awards
Mr. Wardinski received a bonus award of $556,500 for 1999 under the Company's
Annual Incentive Plan and pursuant to the 1999 performance criteria (payable in
2000) that was set by the Company.
Restricted Stock and Stock Options
Restricted stock and stock options are our primary long-term incentive
vehicles for senior executives. Both vehicles create an incentive for senior
executives to manage our company in a manner that creates significant long-term
value for stockholders.
18
<PAGE>
During 1999, the Committee retained the services of an independent outside
compensation consulting firm to conduct an executive compensation study to
determine the competitiveness of our total compensation program and to further
link incentive plans with stockholder interest. As part of this study, awards
of restricted stock and stock options were granted to Mr. Wardinski. In
compliance with Securities and Exchange Commission regulations, we are
reporting the multi-year (five-year) restricted stock grant to Mr. Wardinski in
the amount of 120,000 shares. This five-year grant is subject to continued
employment. Similarly, the options set forth in the Stock Option Tables are
multi-year (three-year) grants and the award of such options does not mean they
were exercisable in 1999.
Impact of Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code limits the tax deduction for
compensation expense in excess of $1,000,000 a year for each of the five
highest paid executive officer unless the compensation qualifies as
performance-based compensation under applicable requirements of the Internal
Revenue Code. The Committee's policy is to qualify executive compensation
programs for the performance-based exclusion to the extent reasonably possible.
The Board of Directors and stockholders approved the 1998 Comprehensive Stock
Incentive Plan. Stock options and other stock grants under the 1998
Comprehensive Stock Incentive Plan may qualify as performance-based
compensation for purposes of the deduction limit of Section 162(m). Stock
grants made pursuant to the 1998 Comprehensive Stock Incentive Plan that are
performance-based compensation, therefore, may be exempt as a compensation
expense under Section 162(m), if so determined by the Committee. Although the
Company's Annual Incentive Plan does not meet the requirements necessary for
exemption as performance-based compensation, the Committee believes that
incentives for performance relative to certain Company objectives, such as
individual objectives and other non-financial business requirements, are
relevant and appropriate. The Committee will continue to evaluate the Company's
Annual Incentive Plan and believes that stockholder's best interest was carried
out in the Company's Annual Incentive Plan by retaining the discretionary
portion of the Company's Annual Incentive Plan. The Committee may pay non-
deductible compensation if it considers that to be in the best interest of the
stockholders and the Company.
Summary
The Committee believes that the caliber and motivation of our employees, and
their leadership, are critical to our success in a competitive marketplace. The
Committee believes that our compensation programs are well structured to
encourage attainment of objectives and to align management's perspective with
those of the Company's stockholders. We believe that the awards made in 1999
were competitive and will serve the long-term interests of the stockholders.
MEMBERS OF THE COMPENSATION POLICY COMMITTEE
Michael A. Wildish, Chairman
Adam M. Aron
John B. Morse, Jr. (Former Member)
William L. Wilson
19
<PAGE>
Employment Arrangements
Certain of the terms and conditions of employment of Bruce D. Wardinski and
James L. Francis are also governed by written employment agreements which
provide for annual base salaries of $530,000 and $330,000, respectively. Each
employment agreement is subject to renewal and continues until December 31,
2001 and December 31, 2000, respectively. The salaries under each of the
agreements are reviewed annually. In the event of a termination by the Company
without cause, a resignation by Mr. Wardinski or Mr. Francis for good reason
(assignment of duties inconsistent with his position, requirement of work at
location outside a 75-mile radius of current location, the Company's failure to
pay any compensation, or a substantial reduction in compensation as a whole,
excluding reductions caused by a failure to achieve performance targets), or a
resignation by Mr. Wardinski or Mr. Francis for any reason upon 60 days'
written notice within twenty-four months for Mr. Wardinski, or twelve months
for Mr. Francis, of either a change in control of the Company or a change in
the federal income law that would allow Host Marriott or an entity or entities
in which Host Marriott owns a substantial economic interest to operate its
hotels without adversely affecting its qualification for tax purposes as a real
estate investment trust (a "Tax Law Change"), then Mr. Wardinski or Mr.
Francis, as the case may be, will receive continued payment of his base salary
for a period of time (twenty-four months for Mr. Wardinski, twelve months for
Mr. Francis), life, health and disability benefits (during the same period),
vesting as of the last day of employment in any unvested portion of any stock
option or any restricted stock previously issued, a pro-rata share of any bonus
to which he would have been entitled for the fiscal year in which the
employment terminated and if the payments and benefits to be received would
subject Mr. Wardinski or Mr. Francis to an excise tax on excess payments, an
amount necessary to provide a net after-tax benefit equal to the amount that
would have been received had such excise tax not applied. As a result of the
adoption of the Tax Relief Extension Act of 1999, a Tax Law Change is currently
scheduled to occur effective January 1, 2001. Accordingly, effective January 1,
2001, Mr. Wardinski and Mr. Francis will be eligible to terminate employment
for any reason and receive the salary continuation and other benefits provided
by their employment agreements. Both Mr. Wardinski and Mr. Francis have advised
the Board that they have no present intent to terminate their employment as a
result of the Tax Law Change.
Pursuant to Bruce F. Stemerman's resignation from the Company and his re-
employment with Host Marriott, the Company agreed to provide Mr. Stemerman with
accelerated vesting of a portion of his restricted stock, stock option and
deferred bonus stock grants which we identified in the previous tables (see
"Executive Compensation; Summary Compensation Table"). The Company received and
exercised a right to cash-out Mr. Stemerman's rights with respect to the
accelerated stock and options, by making a payment to Mr. Stemerman for
$1,069,699.
Certain of the terms and conditions of employment regarding severance issues
for senior executives without employment agreements are governed by a written
Change in Control/Separation Pay Plan (the "Separation Plan"). The Separation
Plan provides a basic framework of severance benefits following a Change in
Control of the Company in the event of an eligible employee's termination by
the Company without cause or in the case of senior executives, termination by
the employee for good reason. Certain employees, including senior executives,
of the Company as of June 25, 1999 designated by the Compensation Policy
Committee are eligible to participate. The Company will pay senior executives
covered by the Separation Plan twelve months' base pay and will continue to pay
the Company premium portion of any life, health and disability insurance. In
addition, the unvested portion of any stock option, restricted stock and
deferred stock will vest and the employee will receive a pro-rata share of any
bonus to which he or she would have been entitled.
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The Separation Plan terminates on December 31, 2001, and the Company cannot
amend the Separation Plan in a manner adverse to the participants prior to
January 1, 2002. A change in control occurs if any person acquires more than
35% of the Company outstanding common stock or outstanding voting securities,
if, immediately following a merger or consolidation, any person, who did not
already own such stock, owns more than 35% of the outstanding shares of voting
stock of the surviving entity, if the Company sells all or substantially all of
its assets, if the directors on June 25, 1999 and directors whose nominations
are approved by a majority of such directors cease to be majority of directors
at any time prior to December 31, 2001, or any other event that the Board
determines would materially alter the structure or business of the Company or
its ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Background. The Company was formed under the name CCC Merger Corporation, a
Maryland corporation, in November 1998 as a wholly-owned subsidiary of Host
Marriott, then a Delaware corporation, in connection with Host Marriott's
efforts to convert its business operations to qualify as a real estate
investment trust or "REIT" for federal income tax purposes. CCC Merger
Corporation was merged with Crestline Capital Corporation, formerly known as
HMC Senior Communities, Inc., a Delaware corporation and wholly-owned
subsidiary of Host Marriott, pursuant to which CCC Merger Corporation, as the
surviving corporation, changed its name to Crestline Capital Corporation. The
Company became a publicly-traded company on December 29, 1998 when Host
Marriott completed its plan of reorganizing its business by spinning off the
Company to the stockholders of Host Marriott (the "Distribution") as part of a
series of transactions pursuant to which Host Marriott converted to a REIT.
The Company operates in the lodging and senior living industries through the
management, ownership and leasing of hotels and the ownership of senior living
communities. The Company is engaged in third party hotel management and
currently manages or has agreements to manage 27 hotels and conference centers.
These hotels and conference centers are managed under management and lease
agreements with most of the managed hotels operated under franchise agreements.
The Company also owns a majority interest in a partnership that owns ten
limited-service hotels, which are operated by Marriott International, under a
long-term management agreement. The Company is also one of the largest leasing
companies in the lodging industry and currently leases 116 full-service hotels
and subleases 71 limited-service hotels from Host Marriott. The Company's
leased hotels are operated under long-term management agreements that were
assigned to the Company by Host Marriott for the term of the hotel leases with
most of the Company's leased hotels managed by Marriott International. The
Company is also one of the largest owners of senior living communities and
currently owns 31 communities with nearly 7,500 units located in 13 states. All
of the Company's senior living communities are managed by Marriott
International under long-term operating agreements.
Relationship with Host Marriott After the Distribution
Hotel Leases. In connection with the Distribution, wholly-owned subsidiaries
of the Company entered into leases (the "Hotel Leases") with Host Marriott on
December 31, 1998 for 121 full-service hotels. In 1999, Host Marriott sold five
of the leased full-service hotels, resulting in the termination of the
applicable Hotel Lease. Each Hotel Lease has a fixed term generally ranging
from seven to ten years. The Hotel Leases have four seven- year renewal options
at the option of the Company, however, Host Marriott may terminate any
unexercised renewal options. The Company is
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required to pay the greater of (i) a minimum rent specified in each Hotel
Lease, or (ii) a percentage rent based upon a specified percentage of aggregate
sales from the hotel, including room sales, food and beverage sales, and other
income, in excess of specified thresholds. The amount of minimum rent will be
increased each year based upon 50% of the increase in the consumer price index
("CPI") during the previous twelve months. Percentage rent thresholds will be
increased each year based on a blend of any increases in CPI and the Employment
Cost Index during the previous twelve months. The Hotel Leases will generally
provide for a rent adjustment in the event of damage, destruction, partial
taking or certain capital expenditures. The rent during any renewal periods
will be negotiated at fair market value at the time the renewal option is
exercised.
The Company is responsible for paying all of the expenses of operating the
hotels, including all personnel costs, utility costs, and general repair and
maintenance of the hotels. In addition, the Company is responsible for all fees
payable to the hotel manager, including base and incentive management fees,
chain services payments and franchise or system fees. Host Marriott is
responsible for real estate and personal property taxes, property casualty
insurance, equipment rent, ground lease rent, maintaining a reserve fund for
furniture, fixtures and equipment ("FF&E") replacements and capital
expenditures.
In the event that Host Marriott disposes of a hotel free and clear of the
Hotel Lease, Host Marriott would generally have to purchase the Company's
interest in the Hotel Lease with the purchase price equal to the fair market
value of the Company's leasehold interest in the remaining term of the Hotel
Lease using a discount rate of 12%. Alternatively, Host Marriott would be
entitled to (i) substitute a comparable hotel for any hotel that is sold, with
the terms agreed to by the Company, or (ii) sell the hotel subject to the Hotel
Lease, subject to the Company's approval under certain circumstances, in lieu
of payment of the purchase price. In addition, Host Marriott also has the right
to terminate up to twelve Hotel Leases in connection with the sale of a leased
hotel without having to pay a termination fee. During 1999, Host Marriott
exercised its right to terminate three Hotel Leases without paying a
termination fee for three leased hotels that were sold during 1999. Conversely,
the Company may terminate up to twelve Hotel Leases without penalty upon 180
days notice to Host Marriott. During 1999, the Company exercised its right to
terminate five Hotel Leases. The Company may renegotiate the terms of these
Hotel Leases with Host Marriott. If these five Hotel Leases are not
renegotiated, they will terminate in fiscal year 2000, 180 days after each
respective notification date. The other two hotels sold by Host Marriott in
1999 did not have termination fee provisions due to the pending sale of the
hotels at the time the leases were entered into.
As a result of the Tax Law Change, Host Marriott may purchase all, but not
less than all, of the Company's interest in the Hotel Leases beginning January
1, 2001 with the purchase price calculated as discussed above. The purchase
price will be payable in cash or, subject to certain conditions, shares of Host
Marriott common stock at the election of Host Marriott.
As part of the Distribution, the Company and Host Marriott entered into
guaranty and pooling agreements by which the Company and certain of its
subsidiaries guarantee the Hotel Lease obligations. The Hotel Leases were
placed into four different pools with all of the Hotel Leases having similar
terms placed into the same pool. The parent subsidiary of each pool (the "Pool
Parent") has a full guarantee obligation of the Hotel Leases in its respective
pool. However, for each pool, the cumulative limit of the Company's guaranty
obligation will be the greater of ten percent of the aggregate rent payable for
the immediately preceding fiscal year under all Hotel Leases in the pool or ten
percent of the aggregate rent payable under all Hotel Leases in the pool for
1999. In the event that the Company's obligation under a guaranty agreement for
a pool is reduced to zero, the
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Company can terminate its guaranty and pooling agreement for that pool, and
Host Marriott can terminate the Hotel Leases in the pool without penalty.
Upon the commencement of the Hotel Leases, the Company purchased the working
capital of the hotels from Host Marriott for approximately $95 million with the
purchase price evidenced by notes that bear interest at 5.12%. Interest on each
note is due simultaneously with the rent payment of each Hotel Lease. The
principal amount of each note is due upon the termination of each Hotel Lease.
Upon termination of the Hotel Lease, the Company will sell the existing working
capital to Host Marriott at its current value. To the extent the working
capital delivered to Host Marriott is less than the value of the note, the
Company will pay Host Marriott the difference in cash. However, to the extent
the working capital delivered to Host Marriott exceeds the value of the note,
Host Marriott will pay the Company the difference in cash. As of December 31,
1999, the outstanding balance of the hotel working capital notes was $90
million.
FF&E Leases. In connection with the Distribution, if the average tax basis of
a hotel's FF&E and other personal property exceeded 15% of the aggregate
average tax basis of the hotel's real and personal property (the "Excess
FF&E"), subsidiaries of the Company and affiliates of Host Marriott entered
into lease agreements (the "FF&E Leases") for the Excess FF&E. The terms of the
FF&E Leases generally range from two to three years, and rent under the FF&E
Leases is a fixed amount. The Company will have the option at the expiration of
the FF&E Lease term to either (i) renew the FF&E Leases for consecutive one
year renewal terms at a fair market rental rate, or (ii) purchase the Excess
FF&E for a price equal to its fair market value. If the Company does not
exercise its purchase or renewal option, the Company is required to pay a
termination fee equal to approximately one month's rent.
Limited-Service Hotel Subleases. Host Marriott leases 71 limited-service
hotels under the Residence Inn and Courtyard by Marriott brands (the "HPT
Leases") from Hospitality Properties Trust, Inc. ("HPT"). The HPT Leases have
initial terms expiring through 2012 for the Courtyard properties and 2010 for
the Residence Inn properties, and are renewable at the option of Host Marriott.
In connection with the Distribution, subsidiaries of the Company entered into
sublease agreements with Host Marriott for these limited-service hotels (the
"Subleases"). The terms of the Subleases will expire simultaneously with the
expiration of the initial term of the HPT Leases. If Host Marriott elects to
renew the HPT Leases, the Company can elect to also renew the Subleases for the
corresponding renewal term.
Each Sublease provides that generally all of the terms in the HPT Leases will
apply to the Subleases. The HPT Leases require the lessee to pay rent equal to
(i) a fixed minimum rent plus (ii) an additional rent based upon a specified
percentage of gross revenues to the extent they exceed gross revenues from a
base year. In addition, the HPT Leases require the lessee to pay all repair and
maintenance costs, impositions, utility charges, insurance premiums and all
fees payable under the hotel management agreements. Pursuant to the Subleases,
subsidiaries of the Company are required to pay rent to Host Marriott equal to
the minimum rent due under the HPT Leases and an additional rent based on a
percentage of revenues. To the extent the reserves for FF&E replacements are
insufficient to meet the hotel's capital expenditure requirements, HPT is
required to fund the shortfall.
The rent payable under the Subleases is guaranteed by the Company up to a
maximum of $30 million. The Company's wholly-owned subsidiaries that are party
to the Subleases were capitalized with $30 million in notes from the Company
payable upon demand.
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As a result of the Tax Law Change, Host Marriott may terminate all, but not
less than all of the Subleases beginning January 1, 2001 upon payment of the
termination fee equal to the fair market value of the Company's leasehold
interests in the remaining term of the Subleases using a discount rate of five
percent.
For the purposes of governing certain of the ongoing relationships between
the Company and Host Marriott after the Distribution and to provide mechanisms
for an orderly transition, the Company and Host Marriott entered into various
agreements in addition to the Hotel Leases and Subleases, as described below.
Distribution Agreement. The Company and Host Marriott entered into a
distribution agreement (the "Distribution Agreement"), which provides for,
among other things, (i) the Distribution; (ii) the division between the Company
and Host of certain assets and liabilities; (iii) the contribution to the
Company of Host Marriott's 3% general partnership interest in a partnership,
which owns a senior living community; (iv) the transfer to the Company of the
25% interest in Swissotel Management (USA) LLC; (v) a guarantee by Host
Marriott on certain company debt obligations; and (vi) certain other agreements
governing the relationship between the Company and Host Marriott following the
Distribution. The Company also granted Host Marriott a contingent right for a
period of ten years to purchase the Company's interest in Swissotel Management
(USA) LLC at fair market value in the event the tax laws are changed so that
Host Marriott could own such interest without jeopardizing its status as a
REIT.
Subject to certain exceptions, the Distribution Agreement also provides for,
among other things, the assumption of liabilities and cross-indemnities
designed to allocate to the Company, effective as of the Distribution Date,
financial responsibilities for liabilities arising out of, or in connection
with, the business of the senior living communities.
Asset Management Agreement. In connection with the Distribution, the Company
entered into an asset management agreement (the "Asset Management Agreement")
with Host Marriott and its affiliates for a term of two years (with a one-year
automatic renewal) to provide asset management services to Host Marriott and
its affiliates for its hotel portfolio. These services include: (i) monitoring
property/brand performance; (ii) pursuing expansion and repositioning
opportunities; (iii) overseeing capital expenditure budgets and forecasts; (iv)
assessing return on investment expenditure opportunities; and (v) analyzing
competitive supply conditions in each market. In 1999, the Company was paid an
aggregate fixed annual fee of $4.5 million for services rendered under these
contracts. In the first quarter of 2000, the Company and Host Marriott and its
affiliates, renegotiated the Asset Management Agreement pursuant to a
restructuring of the Company's asset management department. Under the amended
Asset Management Agreement, the Company will be paid an aggregate annual fee of
$3.5 million in fiscal year 2000.
Tax Sharing Agreement. The Company and Host Marriott entered into a tax
sharing agreement which defines each party's rights and obligations with
respect to deficiencies and refunds of federal, state and other income or
franchise taxes relating to the Company's business for taxable years prior to
the Distribution Date and with respect to certain tax attributes of the Company
after the Distribution Date. Generally, Host Marriott will be responsible for
filing consolidated returns and paying taxes for periods through the date of
the Distribution Date, and the Company will be responsible for filing returns
and paying taxes for subsequent periods.
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Host Marriott Non-Competition Agreement. The Company and Host Marriott
entered into a non-competition agreement that limits the respective parties'
future business opportunities. The Company is generally precluded until the
earlier of December 31, 2008 or the date when the Company no longer leases at
least 25% of the original hotels leased from Host Marriott at the time of the
Distribution, from owning or acquiring any full-service hotels not leased from
Host Marriott. The Company is also subject to certain restrictions relating to
leasing, operating and managing full-service hotels under its agreement with
Host Marriott.
Richard E. Marriott and J.W. Marriott, Jr. beneficially own approximately
6.6% and 5.9%, respectively, of the outstanding common stock of Host Marriott.
Richard E. Marriott is the Chairman of the Board of Host Marriott and J.W.
Marriott, Jr. is a director of Host Marriott.
Relationship with Marriott International
Marriott International serves as the manager for 95 of the 116 full-service
hotels currently leased by the Company under the Marriott and Ritz-Carlton
brands and all of the limited-service hotels currently subleased by the Company
under long-term management agreements between Host Marriott and Marriott
International. In connection with entering into the Hotel Leases and the
Subleases, the Company, Host Marriott and Marriott International entered into
agreements whereby the existing rights of the owner under hotel management
agreements with Marriott International were delegated to the Company for the
term of the corresponding Hotel Leases or Subleases. For the leased hotels
where it is the manager, Marriott International has a noneconomic membership
interest with certain limited voting rights in the Company's subsidiaries that
are the lessee under the hotel leases. Marriott International is the manager of
the ten limited-service hotels owned by the Company under a long-term
management agreement. The Company also manages or has agreements to manage 15
hotels under long-term franchise agreements with Marriott International under
the Marriott, Renaissance, Courtyard by Marriott and Residence Inn brand names.
In addition, Marriott International is the manager for all 31 senior living
communities under long-term operating agreements.
The Company is bound by a non-competition agreement with Marriott
International pursuant to which the Company is generally prohibited prior to
October 8, 2000, subject to limited exceptions, from entering into or acquiring
any business that competes with the hotel management business of Marriott
International. Certain activities are permitted however, including: (1) the
operation of an unlimited number of limited-service hotel properties as long as
the Company does not operate more than ten such properties under a common name;
(2) contracting with a third party manager for operation of an unlimited number
of limited-service hotel properties, so long as the number of properties under
such third party management is not more than the greater of (a) ten such
properties operated under a common name or (b) 25% of the system operated by
such third party manager under a common name; (3) contracting with a third
party manager for operation for an unlimited number of full-service hotels
having the same brand name as one of Host Marriott's hotels, so long as the
number of properties under such third party management is not more than the
greater of (a) five such properties operated under a common name or (b) 12.5%
of the system operated by such third party under a common name; and (iv)
franchising of an unlimited number of limited service hotel properties so long
as the Company is not franchisor for more than ten such properties under a
common name.
The Company is also bound by a non-competition agreement with Marriott
International which, in general, limits the Company's activities in the senior
living area to owning, having equity interests in or lending money or otherwise
financing senior living communities. Under the agreement, the
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Company is generally prohibited from engaging in the business of operating,
managing or franchising senior living communities and from entering into a
transaction or a series of transactions whereby ten or more of the Company's
senior living communities or a controlling interest therein would be
transferred to another party unless such party agreed to be bound by the non-
competition agreement. The Company is bound by this non-competition agreement
until June 17, 2010.
Mr. John W. Marriott III, a director of the Company, is also Senior Vice
President of Marriott International's Mid-Atlantic Region. J.W. Marriott, Jr.
and Richard E. Marriott beneficially own approximately 10.8% and 10.6%,
respectively, of the outstanding Class A common stock of Marriott
International. J.W. Marriott, Jr. is Chairman of the Board and Chief Executive
Officer of Marriott International and Richard E. Marriott is a director of
Marriott International.
Other Transactions and Relationships
In August 1999, the Compensation Policy Committee and the Board of Directors
of the Company approved the Company's Executive Stock Loan Program (the
"Program") pursuant to which the Compensation Policy Committee may make awards
of stock purchase rights to certain executives of the Company and provide
assistance for increasing their investment in Company common stock. The
assistance provided by the Company is in the form of loans to such executives
to allow them to purchase shares of Company common stock under the 1998
Comprehensive Stock Incentive Plan. During 1999, certain executives exercised
rights to purchase shares of common stock under the Program. See footnote (5)
under "Executive Compensation; Summary Compensation Table."
Louise M. Cromwell, who is a director of the Company, is Senior Counsel in
the Real Estate Practice Group of the law firm of Shaw Pittman in Washington,
D.C. Shaw Pittman provides certain real estate related and employee benefit-
related legal services to the Company.
Michael A. Wildish, who is a director nominee of the Company, is a Managing
Director in the investment firm of Donaldson, Lufkin & Jenrette ("DLJ"). DLJ
rendered assistance to the Company in connection with the Company's stock
repurchase program in 1999.
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PROPOSAL 2
APPROVAL OF THE AMENDMENTS OF THE COMPANY'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION
Summary
The Board of Directors has authorized, and recommends for your approval, a
reverse 1-for-100 stock split followed immediately by a forward 100-for-1
stock split of the Company's common stock. As permitted under Maryland state
law, registered stockholders whose shares of stock are converted into less
than 1 share in the reverse split will receive cash payments equal to the fair
value of those fractional interests. We refer to the reverse and forward stock
splits, together with the related cash payments to stockholders with small
holdings of less than 100 shares and the related reduction in the amount of
the Company's stated capital, as the "Transaction." We also refer to our
record stockholders whose shares of Company common stock are registered in
their names as "registered stockholders."
If approved, the Transaction will take place on Friday, June 23, 2000 (also
referred to as the "Transaction Date"). In order to complete the Transaction,
holders of a majority of shares of Company common stock outstanding and
entitled to vote at the annual meeting must approve amendments to the
Company's Amended and Restated Articles of Incorporation (the "Charter"). We
attach the proposed amendments to the Company's Charter to this proxy
statement as Appendix A.
The highlights of the Transaction are as follows.
Effect on Stockholders
If approved at the Annual Meeting, the Transaction will effect Company
stockholders as follows after completion:
Stockholder as of June 23, 2000 Net Effect After Transaction Completion
Registered stockholders holding None.
100 or more shares of Company
common stock in a record
account
Registered stockholders holding Shares will be cashed out at a price based
fewer than 100 shares of on the trading value of the record account
Company common stock in a shares at that time (see "Determination of
record account Trading Value" below). You will not have to
pay any commissions or other fees on this
cash-out. Holders of these shares will not
have any continuing equity interest in the
Company.
Stockholders holding Company The Company does not intend for the
common stock in street name Transaction to affect stockholders holding
through a nominee (such as a Company common stock in street name through
bank or broker) a nominee (such as a bank or broker).
However, nominees may have different
procedures and the Company stockholders
holding Company common stock in street name
should contact their nominees to determine
whether they will be affected by the
Transaction.
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Reasons for the Transaction
The Board recommends that the stockholders approve the Transaction for the
reasons described in detail below under "Background and Purpose of the
Transaction," including:
Issue Solution
The Transaction will reduce the number of
As a result of the spin-off from registered stockholders with small accounts
Host Marriott, the Company has a and result in significant cost savings for
large number of small the Company.
stockholders. Almost 22,000
registered stockholders hold
fewer than 100 shares of Company
common stock in their record
accounts. Continuing to maintain
accounts for these stockholders
will cost the Company over
$280,000 per year.
In many cases it is
prohibitively expensive for The Transaction cashes out stockholders
stockholders with fewer than 100 with small record accounts without
shares to sell their shares on transaction costs such as brokerage fees.
the open market. However, if these stockholders do not want
to cash out their holdings of Company
common stock, they may purchase additional
shares on the open market to increase their
record account to at least 100 shares. In
addition, if beneficial owners of fewer
than 100 shares of stock want to have those
shares cashed out in the Transaction, they
should instruct their nominee to transfer
their shares into a record account far
enough in advance so that the shares are
registered in their names by June 23, 2000.
Structure of the Transaction
The Transaction includes both a reverse stock split and a forward stock split
of Company common stock. If this Transaction is approved and occurs, the
reverse split will occur at 6:00 p.m., New York time, on the Transaction Date.
All registered stockholders on the Transaction Date will receive 1 share of
Company common stock for every 100 shares of Company common stock held in their
record accounts at that time. Any registered stockholder who holds fewer than
100 shares of Company common stock in a record account at 6:00 p.m., New York
time, on the Transaction Date (also referred to as a "Cashed-Out Stockholder"),
will receive a cash payment instead of fractional shares. This cash payment
will be based on the trading value of the cashed-out shares at that time. (See
"Determination of Trading Value" below for a description of how the trading
value will be determined upon completion of the Transaction.) Immediately
following the reverse split, at 6:01 p.m., New York time, on the Transaction
Date, all registered stockholders who are not Cashed-Out Stockholders will
receive 100 shares of Company common stock for every 1 share of stock they
received after the reverse stock split. If a stockholder holds 100 or more
shares in a record account, any fractional share in the account will not be
cashed out after the reverse split and the total number of shares held in that
account will not change as a result of the Transaction.
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In general, the Transaction can be illustrated by the following examples:
Hypothetical Scenario Result
Instead of receiving a fractional share
Ms. Smith is a registered (9/10 of a share) of Company common stock
stockholder who holds 90 shares after the reverse split, Ms. Smith's 90
of Company common stock in her shares will be converted into the right to
record account as of 6:00 p.m., receive cash. Using the trading value of
New York time, on June 23, $19 per share, Ms. Smith will receive
2000. At that time, assume the $1,710 ($19 x 90 shares).
trading value of 1 share of
Company common stock is $19
(see "Determination of Trading
Value" below).
Note: If Ms. Smith wants to continue her
investment in the Company, she can buy at
least 10 more shares of Company common
stock and hold it in her record account.
Ms. Smith would have to act far enough in
advance of the Transaction Date so that the
purchase is complete by the close of
business on that date.
Mrs. Garcia has 2 record Mrs. Garcia will receive cash payments
accounts. As of the Transaction equal to the trading value of her shares of
Date, she holds 50 shares of Company common stock in each record account
Company common stock in one instead of receiving her fractional shares
account and 70 shares of ( 1/2 of a share and 7/10 of a share).
Company common stock in the Assuming a hypothetical trading value of
other. All of her shares are Company common stock at $19 per share, Mrs.
registered in her name only. Garcia would receive two checks totaling
$2,280 (50 x $19 = $950; 70 x $19 = $1,330;
$950 + $1,330 = $2,280).
Note: If Mrs. Garcia wants to continue her
investment in the Company, she can
consolidate/transfer her two record
accounts prior to the Transaction Date. In
that case, her holdings will not be cashed
out in connection with the Transaction
because she will hold at least 100 shares
in one record account. She would have to
act far enough in advance so that the
consolidation is complete by the close of
business on the Transaction Date.
Mr. Taylor holds 150 shares of After the Transaction, Mr. Taylor will
Company common stock in his continue to hold all 150 shares of Company
record account as of the common stock.
Transaction Date.
Mr. Updike holds 50 shares of The Company does not intend for the
Company common stock in a Transaction to affect stockholders holding
brokerage account as of the Company common stock in street name through
Transaction Date. a nominee (such as a bank or broker).
However, nominees may have different
procedures and the Company stockholders
holding Company common stock in street name
should contact their nominees to determine
whether they will be affected by the
Transaction.
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Background and Purpose of the Transaction
The Company has an exceptionally large stockholder base of approximately
50,000 stockholders, including almost 25,000 registered stockholders. This
large base is principally the result of the spin-off of the Company from Host
Marriott in December 1998. At the spin-off, each of Host Marriott's
stockholders received 1 share of the Company common stock for every 10 shares
of their Host Marriott common stock. Since that time, the Company has been able
to reduce its total number of stockholders by almost 15,500 through an odd-lot
buyback program where the Company offered to purchase shares from stockholders
with less than 100 shares.
As of April 7, 2000, approximately 22,000 registered holders of Company
common stock owned fewer than 100 shares of stock. At that time, these
stockholders represented approximately 88% of the total number of registered
holders of Company common stock, but they owned less than 2% of the total
number of outstanding shares of the Company's stock.
The Transaction will provide registered stockholders with fewer than 100
shares with a cost-effective way to cash out their investments, because the
Company will pay all transaction costs such as brokerage or service fees in
connection with the Transaction. In most other cases, small stockholders would
likely incur brokerage fees which would be disproportionately high relative to
the market value of their shares if they wanted to sell their stock. In
addition, some small stockholders might even have difficulty finding a broker
willing to handle such small transactions. The Transaction, however, eliminates
these problems for small stockholders.
In addition, the Company will benefit from substantial cost savings as a
result of the Transaction. The costs of administering each registered
stockholder's account is the same regardless of the number of shares held in
each account. In 2000, we expect that each registered stockholder will cost the
Company approximately $13.00 for transfer agent fees and the printing and
postage costs to mail the proxy materials and annual report. We expect that
these costs will only increase over time.
In light of these disproportionate costs, the Board believes that it is in
the best interests of the Company and its stockholders as a whole to eliminate
the administrative burden and costs associated with approximately 22,000 small
record accounts with fewer than 100 shares of Company common stock. We expect
that we will reduce the total direct cost of administering stockholder accounts
by approximately $280,000 per year if we complete the Transaction.
Effect of the Transaction on the Company Stockholders
Stockholders With a Record Account of Fewer Than 100 Shares:
If we complete the Transaction and you are a Cashed-Out Stockholder (i.e., a
stockholder holding fewer than 100 shares of Company common stock in a record
account immediately prior to the reverse stock split):
. You will not receive a fractional share of Company common stock as a
result of the reverse split.
. Instead of receiving a fractional share of Company common stock, you
will receive cash equal to the trading value of your affected shares.
See "Determination of Trading Value" below.
30
<PAGE>
. After the reverse split, you will have no further interest in the
Company with respect to your cashed-out shares. These shares will no
longer entitle you to the right to vote as a stockholder or share in the
Company's assets, earnings, or profits. In other words, you will no
longer hold your cashed-out shares, you will just have the right to
receive cash for these shares.
. You will not have to pay any service charges or brokerage commissions in
connection with the Transaction.
. As soon as practicable after the Transaction Date, you will receive cash
for Company common stock you held in your record account immediately
prior to the reverse split in accordance with the procedures described
below.
. If you are a Cashed-Out Stockholder, you will receive a transmittal
letter from the Company as soon as practicable after the Transaction
Date. The letter of transmittal will contain instructions on how to
surrender your stock certificate(s) to the Company's transfer agent, The
Bank of New York, for your cash payment. You will not receive your cash
payment until you surrender your outstanding certificate(s) to The Bank
of New York, together with a completed and executed copy of the letter
of transmittal. Please do not send your certificates until you receive
your letter of transmittal. For further information, see "Stock
Certificates" below.
You will not receive any interest on cash payments owed to you as a result of
the Transaction.
NOTE: If you want to continue to hold Company common stock after the
Transaction, you may do so by taking any of the following actions far enough in
advance so that it is complete by the Transaction Date:
(1) purchase a sufficient number of shares of Company common stock on the
open market and have them registered in your name so that you hold at least 100
shares in your record account immediately prior to the reverse split; (2) if
applicable, consolidate your record accounts so that you hold at least 100
shares of Company common stock in one record account immediately prior to the
reverse split; or (3) have your shares of Company common stock placed in a
brokerage account or other account in nominee form which accounts hold in the
aggregate at least 100 shares of Company common stock.
Registered Stockholders With 100 or More Shares:
If you are a registered stockholder with 100 or more shares of common stock
in your record account as of 6:00 p.m., New York time, on the Transaction Date,
we will first convert your shares into one one-hundredth (1/100) of the number
of shares you held immediately prior to the reverse split. One minute after the
reverse split, at 6:01 p.m., New York time, we will reconvert your shares in
the forward stock split into 100 times the number of shares you held after the
reverse split, which is the same number of shares you held before the reverse
split. For example, if you were a registered owner of 250 shares of Company
common stock immediately prior to the reverse split, your shares would be
converted to 2.5 shares in the reverse split and back to 250 shares in the
forward split. As a result, the Transaction will not affect the number of
shares that you hold in record name if you hold 100 or more shares of Company
common stock in your record account immediately prior to the reverse split.
31
<PAGE>
Beneficial Owners of the Company Common Stock:
The Company does not intend for the Transaction to affect stockholders
holding Company common stock in street name through a nominee (such as a bank
or broker). However, nominees may have different procedures and stockholders
holding the Company common stock in street name should contact their nominees
to determine whether they will be affected by the Transaction.
NOTE: If you are a beneficial owner of fewer than 100 shares of Company
common stock and want to have your shares exchanged for cash in the
Transaction, you should instruct your nominee to transfer your shares into a
record account in your name in a timely manner so that you will be considered a
holder of record immediately prior to the reverse split.
Current and Former Company Employees:
If you are an employee of the Company (or a former employee), you may have
purchased Company common stock through the Employee Stock Purchase Plan or
invested in Company common stock under the Company's Retirement and Savings
Plan (the "401(k) Plan"). If your shares of Company common stock acquired under
the Employee Stock Purchase Plan are held in street name through a nominee
(such as a bank or broker), the Transaction will not affect your holdings.
Similarly, if you have invested in Company common stock under the 401(k) Plan,
the Transaction will not affect that investment.
Determination of Trading Value
If stockholders approve this proposal at the Annual Meeting and the
Transaction is completed, the Company will pay cash for the fractional shares
based on the trading value of the shares of Company common stock that are
cashed out. The trading value of each outstanding share of the Company common
stock at that time will be based on the average daily closing price per share
of the Company common stock on the New York Stock Exchange for the ten trading
days immediately before and including June 23, 2000, without interest.
The transfer agent will make a cash payment (without interest) equal to the
trading value of each Cashed-Out Stockholder's fractional shares held
immediately prior to the reverse split. The Company will pay all out-of-pocket
transaction costs.
As soon as practicable after the determination of the amount of cash to be
paid in place of fractional shares, the transfer agent will pay the cash to the
Cashed-Out Stockholders as described above in "Effect of Transaction on the
Company Stockholders."
Effect of the Transaction on the Company
The Transaction will not affect the public registration of the Company's
common stock with the Securities and Exchange Commission under the Securities
Exchange Act. Similarly, we do not expect that the Transaction will affect the
Company's application for continued listing of the Company common stock on the
New York Stock Exchange.
The Company's Charter currently authorizes the issuance of 75,000,000 shares
of common stock. The number of shares of authorized common stock will not
change as a result of the Transaction. On April 7, 2000, there were 16,929,292
shares of the Company common stock issued
32
<PAGE>
and outstanding. The total number of outstanding shares of the Company common
stock will be reduced by the number of shares held by the Cashed-Out
Stockholders immediately prior to the reverse split. The total number of shares
that will be purchased and the total cash to be paid by the Company are
unknown. Based on our best estimates, if the Transaction had taken place as of
April 7, 2000, the number of outstanding shares of the Company common stock
would have been reduced by the Transaction from 16,929,292 to approximately
16,629,292 or by approximately 300,000. In addition, the number of registered
holders of the Company common stock would have been reduced from approximately
25,000 to 3,000 or by approximately 22,000 stockholders. The average daily
closing price per share of the Company common stock on the New York Stock
Exchange on April 7, 2000, for the ten trading days immediately preceding and
including such date was $16.99. The cash payments that would have been made to
Cashed-Out Stockholders instead of fractional shares would have been
approximately $5,100,000. The actual amounts will depend on the number of
Cashed-Out Stockholders on June 23, 2000 which will vary from the number of
such stockholders on April 7, 2000. In addition, we do not know what the
average daily closing price per share of the Company common stock on the New
York Stock Exchange for the ten trading days prior to and including June 23,
2000 will be.
The par value of the Company's common stock will remain at $.01 per share
after the Transaction.
Stock Certificates
In connection with the Transaction, the Company's common stock will retain
its current CUSIP number. This CUSIP number will continue to appear on any
stock certificates representing shares of the Company common stock after the
Transaction Date. The Transaction will not affect any certificates representing
shares of common stock or the book-entry account records held by registered
stockholders owning 100 or more shares immediately prior to the reverse split.
Old certificates held by any of these stockholders will continue to evidence
ownership of the same number of shares as is set forth on the face of the
certificate.
As described above, any Cashed-Out Stockholder with share certificates will
receive a letter of transmittal after the Transaction is completed. These
stockholders must complete and sign the letter of transmittal and return it
with their stock certificate(s) to the Company's transfer agent before they can
receive cash payment for those shares.
Certain Federal Income Tax Consequences
Discussed below are the material federal income tax consequences to the
Company and stockholders resulting from the Transaction. This discussion is
based upon the Internal Revenue Code, Treasury Regulations, Internal Revenue
Service rulings and judicial decisions now in effect, all of which are subject
to change, even retroactively, at any time. This discussion does not discuss
all aspects of federal income taxation which may be important to you in light
of your individual circumstances. Many stockholders, including financial
institutions, insurance companies, broker-dealers, tax-exempt organizations,
and foreign persons, may be subject to special tax rules. Other stockholders
may also be subject to special tax rules, including but not limited to:
stockholders who received the Company common stock as compensation for services
or pursuant to the exercise of an employee stock option, or stockholders who
have held, or will hold, stock as part of a straddle, hedging, or conversion
transaction for federal income tax purposes. In addition, this discussion does
not discuss any state, local, foreign, or other tax considerations. This
discussion assumes that you are
33
<PAGE>
a U.S. person and have held, and will hold, your shares as capital assets for
investment purposes under Section 1221 of the Internal Revenue Code. You should
consult your tax advisor as to the particular federal, state, local, foreign,
and other tax consequences to you, in light of your specific circumstances.
The Transaction will result in no material federal income tax consequences to
the Company.
Federal Income Tax Consequences To Stockholders Who Are Not Cashed Out By The
Transaction
If you (1) continue to hold the Company common stock immediately after the
Transaction, and (2) you receive no cash as a result of the Transaction, you
will not recognize any gain or loss in the Transaction. In addition, you will
have the same adjusted tax basis and holding period in your Company common
stock as you had in such stock immediately prior to the Transaction.
Federal Income Tax Consequences To Stockholders Who Receive Cash
If you receive cash as a result of the Transaction, your tax consequences
will depend on whether, in addition to receiving cash, you actually or
constructively, within the meaning of Section 302(c) of the Internal Revenue
Code, continue to own Company common stock immediately after the Transaction,
as explained below.
Stockholders Who Exchange All of Their Company Common Stock for Cash as a
Result of the Transaction and Do Not Constructively Own Company Common Stock
After the Transaction.
If you (1) receive cash in exchange for a fractional share as a result of the
Transaction and (2) you do not continue to hold, actually or constructively,
any Company common stock immediately after the Transaction, you will recognize
capital gain or loss. The amount of capital gain or loss you recognize will
equal the difference between the cash you receive for your cashed-out stock and
your aggregate adjusted tax basis in such stock.
Stockholders Who Both Receive Cash and Continue to Hold Company Common Stock,
Either Actually or Constructively, Immediately After the Transaction.
If you continue to own, actually or constructively, Company common stock
immediately after the Transaction, you will recognize capital gain or loss in
the same manner as set forth in the previous paragraph, provided that your
receipt of cash either (1) is "not essentially equivalent to a dividend," or
(2) is a "substantially disproportionate redemption of stock," as described
below. In applying these tests, you will be treated as owning shares actually
or constructively owned by certain individuals and entities related to you, as
determined under Section 302 of the Internal Revenue Code.
"Not Essentially Equivalent to a Dividend." You will satisfy the "not
essentially equivalent to a dividend" test if the reduction in your
proportionate interest in the Company (based on your actual and constructive
ownership of Company common stock) resulting from the Transaction is considered
a "meaningful reduction" in your interest in the Company. The Internal Revenue
Service has ruled that a small reduction by a minority stockholder whose
relative stock interest is minimal and who exercises no control over the
affairs of the corporation will meet this test.
34
<PAGE>
"Substantially Disproportionate Redemption of Stock." The receipt of cash in
the Transaction will be a "substantially disproportionate redemption of stock"
for you if the percentage of the outstanding shares of the Company common stock
owned by you, actually and constructively, immediately after the Transaction is
less than 80% of the percentage of shares of the Company common stock owned by
you, actually and constructively, immediately before the Transaction.
If you are not treated as recognizing capital gain or loss under the tests
set forth above, the receipt of cash will be treated as a dividend and will be
taxed first as ordinary dividend income to the extent of your ratable share of
the Company's current or accumulated earnings and profits, then as a tax-free
return of capital to the extent of your aggregate adjusted tax basis in your
shares, and any remaining amount will be treated as capital gain.
If the cash you receive in the Transaction is taxed as a dividend, your tax
basis (reduced by amounts treated as a tax-free return of capital) in the stock
that is exchanged for cash will be transferred to any remaining Company common
stock that you actually own, subject in the case of a corporate holder to
reduction or possible gain recognition under Section 1059 of the Internal
Revenue Code in an amount equal to the non-taxed portion of such dividend. If
you do not actually own any remaining Company common stock, having a remaining
stock interest only constructively, you may lose the benefit of your tax basis
in the stock that is exchanged for cash. The tax basis in this stock may,
however, be shifted to the stock of the related person whose stock you
constructively own.
Backup Withholding
You may be subject to backup withholding at the rate of 31% with respect to
cash received in the Transaction, any dividends paid on your shares of Company
common stock and gross proceeds from a sale of Company common stock unless (i)
you are a corporate holder or come within another exempt category or (ii) you
provide a correct taxpayer identification number, certify as to no loss from
backup withholding and otherwise comply with applicable requirements. If you do
not provide us with your correct taxpayer identification number, you may be
subject to penalties imposed by the Internal Revenue Service. Amounts paid as
backup withholding do not constitute an additional tax and will be credited
against the holder's federal income tax liabilities so long as the required
information is provided to the Internal Revenue Service.
We will report to holders of Company common stock and to the Internal Revenue
Service the amount of any reportable payments for each calendar year and the
amount of tax withheld, if any, with respect to the Transaction and any
payments on Company common stock.
The foregoing discussion of Certain Federal Income Tax Consequences is for
general information and is not tax advice. Accordingly, you should consult your
tax advisor as to the particular tax consequences of the Transaction and the
ownership and disposition of the Company common stock after the Transaction,
including the applicability and effect of any state, local or foreign income
tax laws, and any recent or prospective changes in applicable tax laws.
Appraisal Rights
Because shares of Company common stock are listed on the New York Stock
Exchange, stockholders who object to the Transaction will not have appraisal
rights under Maryland state law or under the Company's Charter or Bylaws in
connection with the Transaction.
35
<PAGE>
Reservation of Rights
The Board of Directors reserves the right to abandon the Transaction without
further action by the stockholders at any time before the filing of the
Articles of Amendment with the State Department of Assessments and Taxation of
Maryland, even if the Transaction has been approved by the stockholders at the
Annual Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL, UNLESS YOU
SPECIFY OTHERWISE IN YOUR PROXY.
PROPOSAL 3
RATIFICATION OF AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed the accounting firm of Arthur Andersen LLP to serve as the
independent auditors of the Company for the 2000 fiscal year, subject to
ratification by the Company's stockholders. Arthur Andersen LLP is considered
by the Company's management to be well qualified.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
The favorable vote of at least a majority of the shares of Company common
stock present in person or by proxy and voting at a meeting at which a quorum
is present is required for ratification of the appointment of independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
OTHER MATTERS
We do not know of any other matters to be presented at the Annual Meeting
other than those discussed in this proxy statement. If, however, other matters
are properly brought before the Annual Meeting, your proxies will be able to
vote those matters at their discretion.
36
<PAGE>
OTHER INFORMATION
Stockholder Proposals For 2001 Annual Meeting
Stockholder proposals for inclusion in the proxy statement for the 2001
Annual Meeting must be received by us no later than December 14, 2000. To be
considered for inclusion in the Company's proxy statement for that meeting,
stockholder proposals must be in compliance with Rule 14a-8 under the
Securities Exchange Act and the Company's Bylaws and must be submitted in
writing. Any such stockholder proposals must be mailed to Crestline Capital
Corporation, Attention: Corporate Secretary, 6600 Rockledge Drive, Suite 600,
Bethesda, Maryland 20817.
In addition, the Company's Bylaws require that, in order for recommendations
for director nominees or other business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
to the Company's Corporate Secretary. Stockholders wishing to submit
recommendations for director nominees to be considered by the Nominating and
Corporate Governance Committee for election at the 2001 Annual Meeting must
submit such recommendations in writing by mail to Crestline Capital
Corporation, Attention: Corporate Secretary, 6600 Rockledge Drive, Suite 600,
Bethesda, Maryland 20817. To be timely, notice of other business to be brought
before the 2001 Annual Meeting or recommendations for director nominees for the
2001 Annual Meeting must be received no earlier than January 15, 2001 and no
later than February 12, 2001. This notice requirement is a separate requirement
from the requirement above relating to inclusion of stockholder proposals in a
proxy statement.
Annual Report
A copy of the Company's 1999 Annual Report and Form 10-K for the 1999 fiscal
year are being mailed to stockholders together with this proxy statement. Any
stockholder who desires additional copies may obtain one (excluding exhibits),
without charge, by addressing a request to the Corporate Secretary at the above
address. A charge equal to the reproduction cost will be made if the exhibits
are requested.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Tracy M.J. Colden
Tracy M.J. Colden
Corporate Secretary
37
<PAGE>
Appendix A
CRESTLINE CAPITAL CORPORATION
ARTICLES OF AMENDMENT
CRESTLINE CAPITAL CORPORATION, a Maryland corporation, having its principal
office in Montgomery County, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation hereby effects a reverse stock split by changing and
reclassifying each 100 shares of Common Stock, par value $.01 per share, of the
Corporation, which is issued and outstanding at 6:00 p.m. on the effective date
of this amendment, into one share of such Common Stock, par value $.01 per
share.
Fractional shares held by record stockholders who as a result of the reverse
split hold less than one share will be converted into the right to receive the
fair value of such fractional interests as determined by the Board of Directors
of the Corporation.
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter and reduction in the stated
capital of the Corporation has been advised by the Board of Directors and
approved by the stockholders of the Corporation.
FOURTH: The foregoing amendment to the Charter will become effective at 6:00
p.m. New York time on June 23, 2000.
IN WITNESS WHEREOF, Crestline Capital Corporation has caused these presents
to be signed in its name and on its behalf by its Senior Vice President, and
witnessed by its Assistant Secretary on , 2000.
WITNESS: CRESTLINE CAPITAL CORPORATION
_____________________________________ By: ____________________________
Senior Vice President
Assistant Secretary
A-1
<PAGE>
THE UNDERSIGNED, Senior Vice President of Crestline Capital Corporation, who
executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of her
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
-------------------------------------
Senior Vice President
A-2
<PAGE>
CRESTLINE CAPITAL CORPORATION
ARTICLES OF AMENDMENT
CRESTLINE CAPITAL CORPORATION, a Maryland corporation, having its principal
office in Montgomery County, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation hereby effects a forward stock split by changing and
reclassifying each 1 share of Common Stock, par value $.01 per share, of the
Corporation, which is issued and outstanding at 6:01 p.m., New York time, on
the effective date of this amendment, into 100 shares of such Common Stock, par
value $.01 per share.
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter and increase in the stated
capital of the Corporation has been advised by the Board of Directors and
approved by the stockholders of the Corporation.
FOURTH: The foregoing amendment to the Charter will become effective at 6:01
p.m., New York time on June 23, 2000.
IN WITNESS WHEREOF, Crestline Capital Corporation has caused these presents
to be signed in its name and on its behalf by its Senior Vice President, and
witnessed by its Assistant Secretary on , 2000.
WITNESS: CRESTLINE CAPITAL CORPORATION
_____________________________________ By: ____________________________
Senior Vice President
Assistant Secretary
A-3
<PAGE>
THE UNDERSIGNED, Senior Vice President of Crestline Capital Corporation, who
executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of her
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
-------------------------------------
Senior Vice President
A-4
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF CRESTLINE CAPITAL CORPORATION
The 2000 Annual Meeting of Stockholders of Crestline Capital Corporation will
be held on Thursday, May 18, 2000 at the Hyatt Regency Cambridge, 575 Memorial
Drive, Cambridge, Massachusetts 02139. The meeting will begin at 10:00 a.m. A
continental breakfast will be provided to stockholders attending the meeting
beginning at 9:30 a.m. Doors to the meeting will open at 9:30 a.m.
A special "Stockholder Annual Meeting" rate is being offered at the hotel for
Wednesday, May 17, 2000, the night before the meeting. A limited number of
rooms are available for this group rate of $249 single or double occupancy. To
receive this group rate, please call the hotel directly at the telephone number
below prior to April 28, 2000 and ask for the Crestline Capital Corporation
"Annual Meeting" rate for May 17, 2000. Applicable taxes and gratuities will be
additional and reservations are required in advance. This discount may not be
used in conjunction with any other discount, coupon or group rate.
Because parking is extremely limited in the general area of the hotel, we
strongly recommend that stockholders attending the Annual Meeting consider
using public transportation.
DIRECTIONS TO
THE HYATT REGENCY CAMBRIDGE
575 Memorial Drive,
Cambridge, Massachusetts 02139
(800) 233-1234
---------------------------------
From the West on the Mass Pike:
Take Exit #18 BRIGHTON/CAMBRIDGE (left exit). Bear right Cambridge/Boston. Go
straight over bridge and stay in the right lane. Make a right after bridge
before the Mobil station. At fork stay left and go over bridge. At first light
make a left. Make a left into hotel drive and park in garage or use valet
parking in circle.
From the South on 95 OR 3, TAKE 93 NORTH
Take Exit 26 "Storrow Drive/Back Bay/Cambridge." Stay all the way in the left
lane. Go 3/4 mile and take first exit of left hand side--"Government
Center/Kendall Square" exit. Go up ramp and stay right. Turn right at stop
sign. Go across the Longfellow Bridge, take first right off bridge and turn
right onto Memorial Drive (Route 3). Stay on Memorial Drive. Around 1 mile on
right, at the light, turn right. The Hyatt is on your left.
From the North on I-93 or Route 1:
Take "Storrow Drive" Exit 26 and get all the way in the left lane as you exit.
Go 3/4 mile and take first exit on the left hand side--"Government
Center/Kendall Square" exit. Go up ramp and stay right. Turn right at stop
sign. Go across the Longfellow Bridge, take first right off bridge and turn
right onto Memorial Drive (Route 3). Stay on Memorial Drive. Around 1 mile on
right, at the light, turn right. The Hyatt is on your left.
From Logan International Airport:
Follow signs to Sumner Tunnel. After leaving tunnel, stay to the left and
follow signs to I-93 North. Take exit 26--Storrow Drive/Back Bay/Cambridge.
Stay all the way in the left lane. Go 3/4 mile and take first exit on the left
hand side.--"Government Center/Kendall Square" exit. Go up ramp and stay right.
Turn right at stop sign. Go across the Longfellow Bridge, take first right off
bridge and turn right onto Memorial Drive (route 3). Stay on Memorial Drive.
Around 1 mile on right, at the light, turn right to access the hotel entrance
and parking garage.
<PAGE>
To Fellow Crestline Capital Stockholders:
Here is your 2000 Crestline Capital Corporation proxy card. Please read both
sides of the card and mark, sign and date it. Then detach and return it
promptly using the enclosed envelope. It is important that your shares be
represented at this meeting, whether or not you attend the meeting in person. We
urge you to vote your shares.
You are invited to attend the Annual Meeting of Stockholders on Thursday, May
18, 2000, at 10:00 a.m. at the Hyatt Regency Cambridge. If you plan on attending
the Annual Meeting, please mark the appropriate box on your proxy card.
Thank you in advance for voting.
/s/ Tracy M.J. Colden
- ---------------------
Tracy M.J. Colden
Corporate Secretary
DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
CRESTLINE CAPITAL CORPORATION
P R O X Y
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
ON MAY 18, 2000, 10:00 A.M.
The undersigned appoints each of Bruce D. Wardinski and Tracy M.J. Colden,
as Proxies. Each shall have the power to appoint a substitute. Each is
authorized to represent and vote, as designated on the reverse side, all shares
of Crestline Capital Corporation Common Stock held of record by the undersigned
on April 7, 2000, at the Annual Meeting of Stockholders to be held on May 18,
2000, or any adjournment or postponement thereof. The Board of Directors
recommends voting FOR Proposals 1, 2 and 3.
(change of address)
- --------------------------------
- --------------------------------
- -------------------------------- CRESTLINE CAPITAL CORPORATION
P.O. BOX 11463
- -------------------------------- NEW YORK, N.Y. 10203-0463
CONTINUED AND TO BE SIGNED ON
REVERSE SIDE
<PAGE>
DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
--------
--------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1,2 AND 3. This proxy
when properly executed will be voted in the manner directed herein by the
undersigned stockholder. If no instruction is indicated, such proxy will be
voted "FOR" Proposals 1, 2 and 3, and at the discretion of the Proxies on any
other matter that may properly come before the meeting or any adjournment or
postponement thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote "EXCEPTIONS" [_]
listed below [_] for all nominees listed below [_]
Nominees: Adam M. Aron, Michael A. Wildish and William L. Wilson
(INSTRUCTIONS: To Withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
Exceptions________________________________________________________________________________________________
(2) Approval of Amendments to the Company Charter to (3) Ratification of the appointment of Arthur Andersen LLP as
Effect a Reverse Split Followed by a Forward Split of the the Company's independent auditors for the 2000 fiscal
Company Common Stock. year.
FOR [_] AGAINST [_] ABSTAIN [_] FOR [_] AGAINST [_] ABSTAIN [_]
</TABLE>
The proposals are fully explained in the enclosed Notice of Annual Meeting of
Stockholders and Proxy Statement. To vote your proxy please mark by placing an
"X" in the appropriate box, sign and date the Proxy.
I will attend the Annual Meeting. [_]
NOTE: Please sign exactly as
name appears on the certificate
or certificates representing
shares to be voted by this
proxy, as shown on the label
above. When signing as executor,
administrator, trustee, or
guardian, please give full title
as such. If a corporation,
please sign full corporate name
by president or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person(s).
Dated:____________________,2000
______________________________
SIGNATURE
______________________________
- ----------------------------------------- SIGNATURE IF HELD JOINTLY
(Please sign, date and return this proxy card
in the envelope provided.)
