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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:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] 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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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 [14], 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 [14], 2000
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FOR INFORMATION ON ACCOMMODATIONS FOR AND DIRECTIONS TO THE
MEETING, PLEASE REFER TO THE OUTSIDE BACK COVER OF THIS PROXY STATEMENT.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
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 [14], 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 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.
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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 an employee of Host Marriott
Corporation ("Host Marriott"). At Host Marriott, he
was appointed Senior Director of Project Finance in
June 1993, Vice President of Project Finance in
June 1994 and Senior Vice President of
International Development in October 1995. In June
1996, Mr. Wardinski was elected Senior Vice
President and Treasurer of Host Marriott. Mr.
Wardinski also currently serves on the Boards of
Fairfax Opportunities Unlimited, a not-for-profit
advocacy group representing people with
disabilities, and eStara.
[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 has served as
President and Chief Operating Officer of Colony
Capital, Inc., an international real estate
investment firm, since August 1997, and has 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 hotel
and gaming 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 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
Senior Living Marriott.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>
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
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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. 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 approval of individual salary
adjustments and stock awards in those areas. 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, compensation of directors, 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.
7
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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................................... 474,733(3)(4) --
Adam M. Aron......................................... 7,000 *
Louise M. Cromwell................................... 6,601 *
Kelvin L. Davis...................................... 4,500 *
John W. Marriott III................................. 317,408(5) --
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) *
Steven J. Fairbanks.................................. 92,203(3)(4) *
Tracy M.J. Colden.................................... 64,709(3)(4) *
Larry K. Harvey...................................... 72,299(3)(4) *
All Directors, Director Nominees and Executive
Officers as a
Group (12 persons).................................. 1,293,821 --
Other 5% Beneficial Owners:
Brahman Entities..................................... 1,634,330(6) --
Blackstone Entities.................................. 1,370,423(7) --
Southeastern Asset Management, Inc................... 1,206,180(8) --
Performance Capital Entities......................... 1,122,600(9) --
J.W. Marriott, Jr.................................... 877,897(10) --
Perry Corp........................................... 841,400(11) --
Richard E. Marriott.................................. 835,002(12) --
</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 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 "Exchange Act") filed with the Securities and Exchange Commission
(the "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
9
<PAGE>
(collectively all such persons and entities, the "Blackstone Entities").
The Blackstone Entities have reported in a Schedule 13G under the Exchange
Act filed with the 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 Exchange Act filed with the 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 Exchange Act filed with the 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 Exchange Act with the 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
shares for which J.W. Marriott, Jr.
10
<PAGE>
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 Exchange Act filed with the 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.
(12) J.W. Marriott, Jr. and Richard E. Marriott have reported and filed
jointly a Schedule 13G under the Exchange Act with the Commission in
relation to the Company common stock. Includes: 228,097 shares for which
Richard E. Marriott has the sole powers to vote, or direct the vote, and
to dispose, or direct the disposition of; and (ii) 606,905 shares for
which Richard E. Marriott shares the powers to vote, or to direct the
vote, and to dispose, or to direct the disposition of (including 369,812
shares also beneficially owned by J.W. Marriott, Jr.). Does not include
(i) shares held by the adult children of Richard E. Marriott as trustees
for trusts established for grandchildren of Richard E. Marriott and J.W.
Marriott, Jr.; (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 J.W. Marriott, Jr. are
remaindermen; Richard E. Marriott 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.
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 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
11
<PAGE>
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 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 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 four most highly
compensated executive officers (other than the Chief Executive Officer) of the
Company in fiscal year 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 (2) Stock (3) Options (#) (4)(5)(6)
---- ------ ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bruce D. Wardinski
Chairman of the Board
and
Chief Executive
Officer............... 1999 $530,000 $196,834 $1,224,172 750,000 $94,450
James L. Francis
Executive Vice
President and Chief
Financial Officer..... 1999 330,000 148,086 604,638 397,736 29,159
Steven J. Fairbanks
Executive Vice
President, Lodging &
Senior Living
Investments........... 1999 200,000 81,397 299,453 126,570 17,186
Bruce F. Stemerman(7)
Executive Vice
President, Asset
Management............ 1999 200,000 93,381 310,530 146,684 17,578
Tracy M.J. Colden
Senior Vice President,
General Counsel &
Corporate Secretary... 1999 160,000 73,232 255,674 77,137 9,693
Larry K. Harvey
Senior Vice President,
Treasurer &
Controller............ 1999 160,000 78,076 260,420 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) Fiscal year 1999 Bonus includes awards earned and accrued under Host
Marriott's Annual Incentive Plan prior to the spin-off and creation of the
Company to Messrs. Wardinski, Francis, Fairbanks, Stemerman, Ms. Colden and
Mr. Harvey in the amounts of $196,834, $148,086, $81,397, $93,381, $73,232
and $78,076 respectively.
(3) 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 from 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:
13
<PAGE>
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, $2,153 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.
(4) 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 Mr.
Harvey, $6,379.
(5) Includes $49,892, which Mr. Wardinski received as final payment to reflect
prior ownership in shares of Host Marriott Services stock options, for
which Crestline received reimbursement from Host Marriott Services.
(6) 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 below
market interest rates 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 $224,469 for Messrs. Wardinski, Francis, Fairbanks,
Ms. Colden and Mr. Harvey, respectively. The loans bear interest at 5.5%
and are for a maximum term of 8 years, 11 months. The loans are secured by
the stock and the employees are personally liable on the loans.
(7) Although Mr. Stemerman resigned his position as Executive Vice President,
Asset Management, effective December 31, 1999, he is included in this
Table in accordance with applicable regulations because he otherwise would
have been included as one of the Company's five most highly compensated
executive officers for the Company's last fiscal year.
Stock Option Tables
The following two tables show information concerning options to purchase the
Company's common stock granted in fiscal 1999 under the 1998 Comprehensive
Stock Incentive Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Stock
Stock Options
Options Granted to Grant Date
Granted Employees in Exercise Expiration Present
Name (1)(#) Fiscal Year Price ($/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 in accordance with SFAS 123, 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 received as a result of the spin-off of the
Company from Host Marriott to replace options to purchase shares of Host
Marriott common stock on 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]
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 their 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 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 for 1998 under Host Marriott's
Performance-Based Annual Incentive Bonus Plan and pursuant to the 1998
performance criteria (payable in 1999) that was set by Host Marriott. These
bonus funds had been given to the Company in connection with the REIT
conversion of Host Marriott and the spin-off of the Company and represents an
amount that would have been payable to Mr. Wardinski as an employee of Host
Marriott. This award was 44% of his fiscal year base salary earnings.
18
<PAGE>
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.
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 SEC
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)
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
officers. This tax provision, Section 162(m), is a new provision as of 1993.
Performance-based compensation, however, can be excluded from the determination
of compensation expense if it meets certain requirements. 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. The 1998 Comprehensive Stock Incentive Plan is in compliance
with Section 162(m) of the Internal Revenue Code. Stock grants made pursuant to
the 1998 Comprehensive Stock Incentive Plan and that are performance-based
compensation, therefore, may be exempt as a compensation expense under Section
162(m), if so determined by the Committee. This outcome would permit us the
maximum tax benefit. Although the Executive Officer 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 Executive Officer Annual Incentive Plan and
believes that stockholder's best interest was carried out in the Executive
Officer Annual Incentive Plan by retaining the discretionary portion of the
Executive Officer Annual Incentive Plan. The Committee reserves the right to
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 salaries of $530,000 and $330,000, respectively and which,
subject to renewal, continue 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 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. Senior
executives employed as of employees as of June 25, 1999 and any other employees
designated by the Compensation Policy Committee are eligible to participate.
The Company will pay senior executives covered by the Plan twelve months' base
pay and will continue to pay 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. The Plan terminates on
December 31, 2001, and the Company cannot amend the plan in a manner adverse to
the participants prior to January 1, 2002. A change in control
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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 elected to be considered
a REIT.
The Company engages in the business of leasing and subleasing full-service
and limited-service hotels, asset management of hotels and owning senior living
communities. Our subsidiaries currently lease from subsidiaries of Host
Marriott's successor by merger, a Maryland corporation now named Host Marriott,
[116] full-service hotels, representing substantially all of the hotels owned
by Host Marriott. In addition, our subsidiaries currently sublease from
subsidiaries of Host Marriott 71 limited-service hotels. In connection with
these leases and subleases, our subsidiaries have assumed the existing
management agreements between subsidiaries of Host Marriott and Marriott
International and other entities currently managing Host Marriott's hotels.
Additionally, the Company through our subsidiaries owns 31 senior living
communities located in 13 states, all of which are managed by Marriott
International.
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 leases and reducing the number of hotels leased from Host Marriott
to [116] full-service hotels. Each Hotel Lease has a fixed term ranging from
seven to ten years. The Hotel Leases have four (4) seven-year renewal options
at the option of the Company; however, Host Marriott may terminate any
unexercised renewal options. The Company is 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
any increases 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
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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 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, 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 have to pay a termination fee 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, without having to pay a termination fee. In addition, Host
Marriott also has the right to terminate up to twelve 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 full-service leases
without penalty upon 180 days notice to Host Marriott. During 1999, the Company
exercised its right to terminate [five] Hotel Leases. These [five] Hotel Leases
will terminate in fiscal year 2000, 180 days after each respective notification
date.
As a result of the Tax Law Change, Host Marriott may terminate all, but not
less than all, of the Hotel Leases beginning January 1, 2001 upon payment of
the termination fee. The payment of the termination fee 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 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 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
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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 $
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, less the cost of any repairs, maintenance,
renovations or replacements of the hotel, (ii) plus 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.
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, as described below.
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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 Marriott 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. Under these contracts, the
Company is entitled to be paid an aggregate annual fee of $4.5 million for
services rendered. 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 development. 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 date of the Distribution and with respect to certain tax attributes of the
Company after the Distribution. Generally, Host Marriott will be responsible
for filing consolidated returns and paying taxes for periods through the date
of the Distribution, and the Company will be responsible for filing returns and
paying taxes for subsequent periods.
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., are each deemed to beneficially
own more than 5% of the Company common stock. Richard E. Marriott is the
Chairman of the Board of Host Marriott and J.W. Marriott, Jr. is a director of
Host Marriott.
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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 the Company, as assignee, and
Marriott International. In connection with entering into the hotel leases and
subleases, the Company, Host Marriott and Marriott International entered into
agreements whereby the rights, interests and obligations of Host Marriott under
the hotel management agreements between Host Marriott and Marriott
International were assigned 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 non-economic 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 [16] 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 (4)
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 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 a Senior Vice
President of Marriott International's Mid-Atlantic Region. Mr. J.W. Marriott,
Jr., who is deemed to beneficially own more than 5% of the outstanding Company
common stock, is Chairman of the Board and Chief Executive Officer of Marriott
International.
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Other Transactions and Relationships
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, 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 , 2000 (the "Transaction
Date"). In order to complete the Transaction, a majority of the stockholders
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 have the following
net effect on the Company common stockholders who hold common stock as of the
Transaction Date.
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
bank or broker) through 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
As a result of the spin-off from The Transaction will reduce the number of
Host Marriott, the Company has a registered stockholders with small accounts
large number of small and result in significant cost savings for
stockholders. Almost [22,200] the Company.
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 The Transaction cashes out stockholders
prohibitively expensive for with small record accounts without
stockholders with fewer than 100 transaction costs such as brokerage fees.
shares to sell their shares on However, if these stockholders do not want
the open market. 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 , 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 City, New York City 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 City 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
City 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
Ms. Smith is a registered Instead of receiving a fractional share
stockholder who holds 90 shares (9/10 of a share) of Company common stock
of Company common stock in her after the reverse split, Ms. Smith's 90
record account as of 6 p.m., shares will be converted into the right to
New York Time, on the receive cash. Using the trading value of
Transaction Date. At that time, $19 per share, Ms. Smith will receive
assume the trading value of 1 $1,710 ($19 x 90 shares).
share of Company common stock
is $19 (see "Determination of
hypothetical 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. Jones has 2 record Mrs. Jones will receive cash payments equal
accounts. As of the Transaction to the trading value of her shares of
Date, she holds 50 shares of Company common stock in each record
Company common stock in one account instead of receiving her
account and 70 shares of fractional shares ( 1/2 of a share and
Company common stock in the 7/10 of a share). Assuming a hypothetical
other. All of her shares are trading value of Company common stock at
registered in name only. $19 per share, Mrs. Jones would receive
two checks totaling $2,280 (50 x $19 =
$950; 70 x $19 = $1,330; $950 + $1,330 =
$2,280).
Note: If Mrs. Jones 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
Transaction Date. through 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 [25,500] 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 , approximately [22,200] registered holders of Company common stock
owned fewer than 100 shares of stock. At that time, these stockholders
represented approximately 87% 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 [22,200]
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 City 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 City 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 and Directors:
If you are an employee or director of the Company (or a former employee or
director), 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
In order to avoid the expense and inconvenience of issuing fractional shares
to registered stockholders who hold less than 1 share in a record account after
the reverse split, under Maryland state law, the Company may pay cash for their
fair 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 Company common stock that is cashed out.
The Cashed-Out Stockholders will receive cash equal to the trading value of
the shares they held immediately prior to the reverse split in fractional
record accounts with fewer than 100 shares of the Company common stock. 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 , 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. 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 SEC under the 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.
32
<PAGE>
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 , 2000, there were shares of
the Company common stock issued 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 , 2000, the number of outstanding shares
of the Company common stock would have been reduced by the Transaction from
to approximately or by approximately [310,000]. In addition, the number of
registered holders of the Company common stock would have been reduced from
approximately [25,500] to [3,300] or by approximately [22,200] stockholders.
The average daily closing price per share of the Company common stock on the
New York Stock Exchange on , 2000, for the ten trading days immediately
preceding and including such date was $ . The cash payments that would have
been issued to Cashed-Out Stockholders instead of fractional shares would have
been approximately $ . The actual amounts will depend on the number of
Cashed-Out Stockholders on , 2000, which will vary from the number of such
stockholders on , 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 , 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 ,
2000. 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
33
<PAGE>
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 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
34
<PAGE>
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.
"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
Dissenting stockholders do 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 Charter
amendments with the Maryland Secretary of State, even if the Transaction has
been authorized 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 , 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 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 , 2001 and no later
than , 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. on , 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 Corporate Secretary on , 2000.
WITNESS: CRESTLINE CAPITAL CORPORATION
_____________________________________ _____________________________________
Assistant Corporate Secretary Senior Vice President
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 City 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 City time, on the Transaction Date.
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 Corporate Secretary on , 2000.
WITNESS: CRESTLINE CAPITAL CORPORATION
- ------------------------------------- -------------------------------------
Assistant Corporate Secretary Senior Vice President
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 special rate of $ single or double occupancy.
To receive this special rate, please call the hotel directly at the telephone
number below prior to , 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
(617) 492-1234
---------------------------------
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. 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.
Thank you in advance for voting.
Tracy M.J. Colden
Corporate Secretary
<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 the discretion of the Proxies on any other
matter that may properly come before the meeting or any adjournment of
postponement thereof.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) Election of Directors FOR all nominces 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).
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
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.
Address Change Mark Here
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).
Date:____________________,2000
______________________________
SIGNATURE
______________________________
SIGNATURE IF HELD JOINTLY
