-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D3tXKVnnD4c32sKTC9dZi+ri6Rv+1DDU97W9kmQi72TL/4u0BcTXSnWiVN2Ru5o/ jPjB9FNghaukvmDVvTWmkA== 0000928385-96-000016.txt : 19960117 0000928385-96-000016.hdr.sgml : 19960117 ACCESSION NUMBER: 0000928385-96-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19951229 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960116 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOST MARRIOTT CORP/MD CENTRAL INDEX KEY: 0000314733 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 530085950 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05664 FILM NUMBER: 96503954 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013809000 MAIL ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 FORMER COMPANY: FORMER CONFORMED NAME: HOST MARRIOTT CORP DATE OF NAME CHANGE: 19931108 FORMER COMPANY: FORMER CONFORMED NAME: MARRIOTT CORP DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 29, 1995 ------------------------- HOST MARRIOTT CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 1-5664 53-0085950 (STATE OR OTHER JURISDICTION (COMMISSION FILE (I.R.S. EMPLOYER OF INCORPORATION) NUMBER) IDENTIFICATION NUMBER) 10400 FERNWOOD ROAD, BETHESDA, MARYLAND 20817 (ADDRESS OF PRINCIPLE EXECUTIVE OFFICES) (ZIP CODE) ------------------------- REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (301) 380-9000 (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.) ================================================================================ FORM 8-K ITEM 2. DISTRIBUTION OF THE OPERATING GROUP On January 2, 1996, the Registrant announced that on December 29, 1995 it completed the distribution of its Operating Group to its shareholders through a special dividend. As a result of the Special Dividend, shareholders of record on December 22, 1995 are receiving one share of Host Marriott Services Corporation stock for every five common shares they own in the Registrant. A copy of the news release announcing the special dividend is attached as an exhibit to this current report. ITEM 5. OTHER EVENTS During the fourth quarter of 1995, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of SFAS No. 121 required a charge against current operating results of approximately $47 million before taxes for the impairment of certain of the leasehold improvement assets of Host Marriott Services. Additionally, during the fourth quarter of 1995, Host Marriott Services Corporation recorded a $15 million pretax restructuring charge for the restructuring of its business processes. Most of these expenditures, primarily severance payments, will be incurred by Host Marriott Services in the first half of 1996. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (b) Financial Statements of Host Marriott Corporation to reflect Host Marriott Services Corporation as discontinued operations: Page ---- Consolidated Statements of Operations for each of the three fiscal years in the period ended December 30, 1994. 3 The Consolidated Statement of Operations for the thirty-six weeks ended September 8, 1995 and the consolidated Balance Sheet as of September 8, 1995 were previously filed in the Registrant's Quarterly Report on Form 10-Q dated October 23, 1995. (c) Exhibits 2.1 Distribution Agreement dated December 22, 1995 by and between Host Marriott Corporation and Host Marriott Services Corporation. 2.2 Amendment No 1 to the Distribution Agreement dated September 15, 1993 by and among Host Marriott Corporation, Host Marriott Services Corporation and Marriott International, Inc. 4.1 First Supplemental Warrant Agreement dated December 22, 1995 by and between Host Marriott Corporation, Host Marriott Services Corporation and First Chicago Trust Company of New York, as Warrant Agent. 4.2 Irrevocable Trust Agreement dated as of December 21, 1995 between Host Marriott Corporation and The First National Bank of Chicago, as Trustee. 4.3 Redemption Agent Agreement dated December 7, 1995 between Host Marriott Corporation and First Chicago Trust Company of New York, as Agent. 99.1 News Release dated January 2, 1996. 99.2 Transitional Corporate Services Agreement dated December 29, 1995 by and between Host Marriott Corporation and Host Marriott Services Corporation. 99.3 Amendment No. 1 to the Noncompetition Agreement dated October 8, 1993 by and between Host Marriott Corporation and Marriott International, Inc. 99.4 Employee Benefits and Other Employment Matters Allocation Agreement dated as of December 29, 1995 by and between Host Marriott Corporation and Host Marriott Services Corporation. 99.5 Tax Sharing Agreement dated as of December 29, 1995 by and between Host Marriott Corporation and Host Marriott Services Corporation. 99.6 Assignment and Assumption Agreement dated December 28, 1995 by and between Host Marriott Corporation and Host Marriott Services Corporation. 99.7 Corporate Services Letter Agreement dated December 28, 1995 by and between Marriott International, Inc. and Host Marriott Corporation. 99.8 Termination Agreement dated as of December 29, 1995 among Host Marriott Services Corporation, Host Marriott Corporation and Host Marriott International, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HOST MARRIOTT CORPORATION By: /s/ CHRISTOPHER G. TOWNSEND ----------------------------------- Christopher G. Townsend Senior Vice President and Secretary Date: January 16, 1996 2 HOST MARRIOTT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FISCAL YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993 (IN MILLIONS, EXCEPT PER COMMON SHARE AMOUNTS)
1994 1993 ----- ----- REVENUES Hotels......................................................... $ 338 $ 603 Senior living communities (including Marriott International lease payments of $14 million and $5 million in 1994 and 1993, respectively) ................................................ 14 67 Net gains (losses) on property transactions.................... 6 (1) Equity in earnings (losses) of affiliates...................... -- (27) Other.......................................................... 22 17 ----- ----- Total revenues............................................. 380 659 ----- ----- OPERATING COSTS AND EXPENSES Hotels (including Marriott International management fees of $41 million and $5 million, respectively.......................... 198 495 Senior living communities...................................... 5 58 Other.......................................................... 25 14 ----- ----- Total operating costs and expenses......................... 228 567 ----- ----- Operating profit before corporate expenses, interest and profit from distributed operations..................................... 152 92 Corporate expenses............................................... (32) (37) Interest expense................................................. (165) (164) Interest income.................................................. 29 26 Profit from operations distributed to Marriott International..... -- 211 ----- ----- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES..... (16) 128 Benefit (provision) for income taxes............................. 3 (72) ----- ----- INCOME (LOSS) FROM CONTINUING OPERATIONS ........................ (13) 56 Loss from discontinued operations (net of income taxes of $1 million in 1994 and 1993, respectively)......................... (6) (4) ----- ----- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES................................ (19) 52 Extraordinary item--Loss on extinguishment of debt (net of income tax benefit of $3 million in 1994 and $3 million in 1993)....... (6) (4) Cumulative effect of a change in accounting for income taxes..... -- 34 Cumulative effect of a change in accounting for assets held for sale (net of income taxes of $22 million)....................... -- (32) ----- ----- NET INCOME (LOSS)................................................ (25) 50 Dividends on preferred stock..................................... -- (8) ----- ----- NET INCOME (LOSS) AVAILABLE FOR COMMON STOCK..................... $ (25) $ 42 ===== ===== EARNINGS (LOSS) PER COMMON SHARE: CONTINUING OPERATIONS............................................ $(.09) $ .39 Discontinued operations (net of income taxes).................... (.04) (.03) Extraordinary item--Loss on extinguishment of debt (net of income taxes).......................................................... (.04) (.03) Cumulative effect of a change in accounting for income taxes..... -- .28 Cumulative effect of a change in accounting for assets held for sale (net of income taxes)...................................... -- (.26) ----- ----- NET INCOME (LOSS)................................................ $(.17) $ .35 ===== =====
3 HOST MARRIOTT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS FISCAL YEAR ENDED JANUARY 1, 1993 (IN MILLIONS, EXCEPT PER COMMON SHARE AMOUNTS)
1992 ------ SALES Lodging.............................................................. $4,547 Contract Services.................................................... 3,255 Equity in losses of affiliates....................................... (24) ------ 7,778 ------ OPERATING COSTS AND EXPENSES Lodging.............................................................. 4,214 Contract Services.................................................... 3,158 ------ 7,372 ------ OPERATING PROFIT (LOSS) Lodging.............................................................. 333 Contract Services.................................................... 97 Other................................................................ (24) ------ Operating profit before corporate expenses and interest.............. 406 Corporate expenses, (including restructuring charges of $21 million)... (102) Interest expense....................................................... (200) Interest income........................................................ 31 ------ INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES.................. 135 Provision for income taxes............................................. (60) ------ INCOME FROM CONTINUING OPERATIONS...................................... 75 Income from discontinued operations (net of income taxes of $5 million).............................................................. 10 ------ NET INCOME............................................................. 85 Dividends on preferred stock........................................... (17) ------ NET INCOME AVAILABLE FOR COMMON STOCK.................................. $ 68 ====== EARNINGS PER COMMON SHARE: CONTINUING OPERATIONS.................................................. $ .55 Discontinued operations (net of income taxes).......................... .09 ------ NET INCOME............................................................. $ .64 ======
4 EX-2.1 2 EXHIBIT 2.1 Exhibit 2.1 DISTRIBUTION AGREEMENT between HOST MARRIOTT CORPORATION and HOST MARRIOTT SERVICES CORPORATION dated as of December 22, 1995 TABLE OF CONTENTS PAGE RECITALS.................................................................... 1 ARTICLE I. DEFINITIONS .................................................. 2 Section 1.01. General ................................................ 2 Section 1.02. Terms Defined Elsewhere in Agreement ................... 17 ARTICLE II. TRANSFER OF ASSETS ........................................... 18 Section 2.01. Transfer of Assets to Services ......................... 18 Section 2.02. Transfers of Assets from Operating Group Subsidiaries to Host Marriott or Real Estate Group Subsidiaries ........ 18 Section 2.03. Transfers Not Effected Prior to the Distribution ....... 18 Section 2.04. Cooperation Re: Assets ................................ 19 Section 2.05. No Representations or Warranties; Consents ............. 20 Section 2.06. Conveyancing and Assumption Instruments ................ 21 Section 2.07. Cash Allocation; Cash Management ....................... 21 Section 2.08. Agreements with Marriott International ................. 24 Section 2.09. Settlement of Intercompany Accounts .................... 24 ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES ................... 24 Section 3.01. Assumption and Satisfaction of Liabilities ............. 24 Section 3.02. Funding of Unfunded Capex Amount ....................... 24 Section 3.03. Host Marriott Guarantees ............................... 25 ARTICLE IV. OBLIGATIONS FOR HOST MARRIOTT WARRANTS ....................... 26 Section 4.01. Sharing of Warrant Obligations ......................... 26 Section 4.02. Issuance of Services Common Stock Upon Exercise of Warrants ............................................... 26 Section 4.03. Allocation of Exercise Price ........................... 27 Section 4.04. Adjustments ............................................ 28 Section 4.05. Registration of Services Common Stock .................. 29 Section 4.06. Amendment to Warrant Agreement ......................... 30 ARTICLE V. OBLIGATIONS FOR MI EMPLOYEE BENEFIT AWARDS ................... 30 Section 5.01. Treatment of MI Employee Benefit Awards in the Distribution ........................................... 30 Section 5.02. Services Reimbursement Obligation ...................... 31 Section 5.03. Disposition of Services Common Stock; Registration Rights; Voting Agreement ............................... 32 ARTICLE VI. THE DISTRIBUTION ............................................. 34 Section 6.01. Cooperation Prior to the Distribution .................. 34 Section 6.02. Host Marriott Board Action; Conditions Precedent to the Distribution .......................... 35 Section 6.03. The Distribution ....................................... 36 ARTICLE VII. INDEMNIFICATION .............................................. 36 Section 7.01. Indemnification by Host Marriott ....................... 36 Section 7.02. Indemnification by Services ............................ 37 i TABLE OF CONTENTS - Continued PAGE Section 7.03. Insurance Proceeds ..................................... 38 Section 7.04. Procedure for Indemnification .......................... 38 Section 7.05. Remedies Cumulative .................................... 42 Section 7.06. Survival of Indemnities ................................ 42 ARTICLE VIII. CERTAIN ADDITIONAL MATTERS ................................... 42 Section 8.01. Services Board ......................................... 42 Section 8.02. Resignations; Host Marriott Board ...................... 42 Section 8.03. Certificate and Bylaws ................................. 43 Section 8.04. Certain Post-Distribution Transactions ................. 43 Section 8.05. Services Rights Plan ................................... 44 ARTICLE IX. ACCESS TO INFORMATION AND SERVICES ........................... 46 Section 9.01. Provision of Corporate Records ......................... 46 Section 9.02. Access to Information .................................. 46 Section 9.03. Production of Witnesses ................................ 48 Section 9.04. Reimbursement .......................................... 48 Section 9.05. Retention of Records ................................... 48 Section 9.06. Confidentiality ........................................ 49 Section 9.07. Privileged Matters ..................................... 49 ARTICLE X. INSURANCE .................................................... 52 Section 10.01. Policies and Rights Included Within the Operating Group Assets ................................. 52 Section 10.02. Post-Distribution Date Claims .......................... 53 Section 10.03. Administration and Reserves ............................ 54 Section 10.04. Agreement for Waiver of Conflict and Shared Defense ................................................ 55 ARTICLE XI. MISCELLANEOUS ................................................ 56 Section 11.01. Complete Agreement; Construction ....................... 56 Section 11.02. Expenses ............................................... 56 Section 11.03. Governing Law........................................... 56 Section 11.04. Notices ................................................ 56 Section 11.05. Amendments.............................................. 57 Section 11.06. Successors and Assigns.................................. 57 Section 11.07. Termination............................................. 57 Section 11.08. Subsidiaries............................................ 57 Section 11.09. No Third-Party Beneficiaries............................ 58 Section 11.10. Titles and Headings..................................... 58 Section 11.11. Exhibits and Schedules.................................. 58 Section 11.12. Legal Enforceability.................................... 58 Section 11.13. Arbitration of Disputes................................. 58 Section 11.14. Prompt Payment.......................................... 60 ii DISTRIBUTION AGREEMENT This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this 22nd day of December, 1995 between Host Marriott Corporation, a Delaware corporation ("Host Marriott") and Host Marriott Services Corporation, a Delaware corporation and wholly-owned subsidiary of Host Marriott ("Services"). RECITALS -------- WHEREAS, Host Marriott, directly and through subsidiaries, (i) acquires, develops and owns lodging properties and Restaurants and engages in activities related thereto (the "Real Estate Group"), and (ii) operates, directly or under management, concessions, cafeterias, gift shops, snack bars, food services and related facilities at airports, tollroads, stadiums, arenas, tourist destinations, shopping malls, hotels and other venues (the "Operating Group"). WHEREAS, the Board of Directors of Host Marriott has determined that it is in the best interests of Host Marriott and the stockholders of Host Marriott to separate the Real Estate Group and the Operating Group, and, in order to effect such separation, to transfer to Services the stock of certain Host Marriott subsidiaries conducting the business of the Operating Group and certain other assets and liabilities relating principally to the Operating Group, and to transfer to Host Marriott and/or its other subsidiaries certain assets and liabilities not relating principally to the Operating Group (the "Preliminary Transfers"), and thereafter to distribute all of the outstanding shares of common stock, no par value per share, of Services to the holders of Host Marriott Common Stock (the "Distribution"); WHEREAS, in connection with the Distribution, Services and Host Marriott have determined that it is necessary and desirable to set forth the principal corporate transactions required to effect the Distribution, and to set forth the agreements that will govern certain matters following the Distribution. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I. DEFINITIONS ----------- Section 1.01. General. As used in this Agreement, the following ------- terms shall have the following meanings: Action: Any action, claim, suit, arbitration, inquiry, proceeding ------ or investigation by or before any court, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal. Affiliate: Means, with respect to any specified Person, any other --------- Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes of this definition, "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. Notwithstanding the foregoing, (i) the Affiliates of Host Marriott shall not include Services, the Operating Group Subsidiaries or any other Person which otherwise would be an Affiliate of Host Marriott by reason of Host Marriott's ownership of the capital stock of Services prior to the 2 Distribution or the fact that any officer or director of Services or any of the Operating Group Subsidiaries shall also serve as an officer or director of Host Marriott or any of the Real Estate Group Subsidiaries, and (ii) the Affiliates of Services shall not include Host Marriott, or any other Person which otherwise would be an Affiliate of Services by reason of Host Marriott's ownership of the capital stock of Services prior to the Distribution or the fact that any officer or director of Services or any of the Operating Group Subsidiaries shall also serve as an officer or director of Host Marriott or any of the Real Estate Group Subsidiaries. Agent: First Chicago Trust Company of New York, as distribution ----- agent appointed by Host Marriott to distribute the Services Common Stock pursuant to the Distribution. Amended MI Distribution Agreement: The Distribution Agreement dated --------------------------------- September 15, 1993 by and among Marriott International, Inc., Host Marriott Corporation and Host Marriott Services Corporation, as amended by Amendment No. 1 thereto substantially in the form attached hereto as Exhibit A. Assigned MI Agreements: The following agreements entered into ---------------------- between Host Marriott or any of its Subsidiaries, on the one hand, and Marriott International or any of its Subsidiaries, on the other hand, in connection with the MI Distribution that are to be assigned to Services in connection with the Distribution and are listed on Schedule 1.01(a) attached: The Corporate Services Agreement; the Procurement Services Agreement; the Supply Agreement; the Casualty Claims Administration Agreement; the Employee Benefits Administration Agreement; Architectural and Construction Services Agreement; and Consulting Agreement. Assignment and License Agreement: The Assignment and License -------------------------------- Agreement dated October 8, 1993 by and between Marriott Corporation and Marriott International. 3 Branded Concept Agreements: Agreements pursuant to which Host -------------------------- Marriott or any of its Subsidiaries have been licensed, franchised or otherwise granted rights to use trademarks, service marks, marketing and sales concepts or other intellectual property or know-how of a third party in connection with the Operating Group Business. Commission: The Securities and Exchange Commission. ---------- Concession Agreements: Agreements under which Host Marriott or any --------------------- of its Subsidiaries are granted rights to use or operate facilities in connection with the Operating Group Business. Conveyancing and Assumption Instruments: Collectively, the various --------------------------------------- agreements, instruments and other documents to be entered into to effect the Preliminary Transfers and the assignment of assets and the assumption of Liabilities contemplated by this Agreement and the Related Agreements in the manner contemplated herein and therein. Credit Support Fee: A fee equal to 1% of the annual guaranteed ------------------ rental, performance and other obligations to which the credit support applies. Distribution Date: The date determined by the Host Marriott Board ----------------- as the date on which the Distribution shall be effected, which Distribution Date is contemplated by the Host Marriott Board to occur on or about December 29, 1995. Distribution Record Date: The date established by the Host Marriott ------------------------ Board as the date for taking a record of the Holders of Host Marriott Common Stock entitled to participate in the Distribution, which Distribution Record Date has been established as December 22, 1995, subject to the fulfillment on or before December 21, 1995 of certain conditions to the Distribution as provided in Section 6.02. 4 Employee Benefits Allocation Agreement: The Employee Benefits and -------------------------------------- Other Employment Matters Allocation Agreement between Services and Host Marriott, which agreement shall be entered into on or prior to the Distribution Date in substantially the form of Exhibit B attached hereto. Financing Obligations: All (i) indebtedness for borrowed money, --------------------- (ii) obligations evidenced by bonds, notes, debentures or similar instruments, (iii) obligations under capitalized leases and deferred purchase arrangements, (iv) reimbursement or other obligations relating to letters of credit or similar arrangements, and (v) obligations to guarantee, directly or indirectly, any of the foregoing types of obligations on behalf of others. HMTP: Host Marriott Travel Plazas, Inc., a Delaware ---- corporation. Holders: The holders of record of Host Marriott Common Stock as ------- of the Distribution Record Date. Holdings: HMH Holdings, Inc., a Delaware corporation and wholly- -------- owned subsidiary of Host Marriott. Hospitality: Host Marriott Hospitality, Inc. ----------- Host International: Host International, Inc., a Delaware ------------------ corporation. Host International Intercompany Payable: The intercompany account --------------------------------------- payable which is owed by Host International to Hospitality. Host International Intercompany Receivable: The intercompany ------------------------------------------ account receivable which is owed by Hospitality to Host International. Host Marriott Board: The Board of Directors of Host Marriott as it ------------------- is constituted immediately prior to the Distribution Date. 5 Host Marriott Books and Records: The books and records (including ------------------------------- computerized records) of Host Marriott and the Real Estate Group Subsidiaries and any other books and records of Host Marriott's Subsidiaries which relate principally to the Real Estate Group, are necessary to operate the Real Estate Group or are required by law to be retained by Host Marriott or a Real Estate Group Subsidiary, including, without limitation, (i) all such books and records relating to Real Estate Group Employees, (ii) all files relating to any Action pertaining to the Real Estate Group Liabilities, and (iii) original corporate minute books, stock ledgers and certificates and corporate seals, and all licenses, leases, agreements and filings, relating to Host Marriott, the Real Estate Group Subsidiaries or the Real Estate Group Business (but not including the Services Books and Records, provided that Host Marriott shall have access to, and shall have the right to obtain duplicate copies of, the Services Books and Records in accordance with the provisions of Article IX). Host Marriott Common Stock: The common stock, par value $1.00 per -------------------------- share, of Host Marriott. Host Marriott Guarantee: (a) any guarantee by Host Marriott or any ----------------------- Real Estate Group Subsidiary of the performance or obligation of Services or any Operating Group Subsidiary under any agreement or obligation to which Services or any Operating Group Subsidiary is a party, and (b) any continuing liability of Host Marriott under any Operating Group Agreement transferred to Services or any Operating Group Subsidiary pursuant to this Agreement or retained by Host Marriott and held by Host Marriott in trust for Services pursuant to Section 2.03 of this Agreement. Host Marriott Group: Host Marriott and the Real Estate Group ------------------- Subsidiaries, collectively. 6 Host Marriott Logo: The logo for Host Marriott attached hereto as ------------------ Exhibit C. Host Marriott Pro Forma Balance Sheet: The Pro Forma Consolidated ------------------------------------- Balance Sheet of Host Marriott as of September 8, 1995 attached hereto as Exhibit D. Host Marriott Unit Cash: all petty checking accounts, cash accounts ----------------------- and all other cash of Host Marriott and its Subsidiaries not maintained, in the ordinary course of business, in Host Marriott's corporate concentration account, excluding any marketable securities or cash equivalents. Information Statement: The Information Statement dated December 20, --------------------- 1995 provided to holders of Host Marriott Common Stock in connection with the Distribution. Insurance Proceeds: Those moneys (i) received by an insured from an ------------------ insurance carrier or (ii) paid by an insurance carrier on behalf of the insured, in either case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, cost or reserve paid or held by or for the benefit of such insured. Insured Claims: Those Liabilities that, individually or in the -------------- aggregate, are covered within the terms and conditions of any of the Policies (including Self Insurance Programs), whether or not subject to deductibles, co-insurance, uncollectability or retrospectively rated premium adjustments, but only to the extent that such Liabilities are within applicable Policy limits, including aggregates. IRS: The Internal Revenue Service. --- IRS Ruling: The letter ruling issued by the IRS in response to the ---------- Ruling Request. Liabilities: Any and all debts, liabilities and obligations, ----------- absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, 7 whenever arising, including all costs and expenses relating thereto, and including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any governmental entity or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking. License Agreement: The Amendment No. 1 to the Assignment and ----------------- License Agreement to be entered into by Host Marriott, Services and Marriott International substantially in the form attached hereto as Exhibit E. Marriott International: Marriott International, Inc., a Delaware ---------------------- corporation. MI Distribution: The distribution on October 8, 1993 by Marriott --------------- Corporation to its shareholders of all outstanding common stock of Marriott International. MI Distribution Agreement: The Distribution Agreement dated ------------------------- September 15, 1993, by and between Marriott International and Host Marriott. Net Host International Intercompany Receivable: The net ---------------------------------------------- intercompany account receivable owed by Hospitality to Host International which results from offsetting the Host International Intercompany Receivable against the Host International Intercompany Payable. New MI Agreements: The License Agreement, the Services ----------------- Noncompetition Agreement and the Amended MI Distribution Agreement. Noncompetition Agreement: The Noncompetition Agreement dated ------------------------ October 8, 1993 by and between Marriott Corporation and Marriott International. Operating Group Agreements: All agreements to which Host Marriott -------------------------- or any of the Real Estate Group Subsidiaries is a party relating principally to the Operating Group Business including, without limitation, Branded Concept Agreements and Concession Agreements. 8 Operating Group Assets: (i) the Transferred Subsidiaries Stock; ---------------------- (ii) the Transferred Intellectual Property; (iii) the Services Books and Records; (iv) the Operating Group Agreements; (v) all other assets expressly to be assigned or allocated to Services or the Operating Group Subsidiaries under this Agreement or the Related Agreements; and (vi) any other assets of Host Marriott and its Subsidiaries used principally in the Operating Group Business and not held by Services or one of the Operating Group Subsidiaries. Operating Group Business: The business conducted by the Operating ------------------------ Group, as referenced in the recitals to this Agreement. Operating Group Employees: The meaning specified in the ------------------------- Employee Benefits Allocation Agreement. Operating Group Liabilities: (i) All of the Liabilities of the --------------------------- Services Group under, or to be retained or assumed by Services or any of the Operating Group Subsidiaries pursuant to, this Agreement or any of the Related Agreements; (ii) the Services Senior Notes; (iii) all Liabilities for payment of outstanding drafts of Host Marriott and its Subsidiaries existing as of the Distribution Date attributable to the conduct of the Operating Group Businesses by the Services Group after the Distribution Date; (iv) the Services Self Insurance Liabilities; (v) all Liabilities of the Operating Group Subsidiaries, other than Liabilities transferred to Host Marriott or to any Real Estate Group Subsidiary as part of the Preliminary Transfers; and (vi) all other Liabilities arising out of, or in connection with, any of the Operating Group Assets or the Operating Group Business; provided, however, -------- ------- that the Operating Group Liabilities shall not include (a) any Financing Obligations of Host Marriott or the Real Estate Group Subsidiaries, except to the extent otherwise set forth above or reflected in the Services Pro Forma Balance Sheet and (b) such other liabilities transferred to, or assumed by, Host Marriott pursuant to any 9 management agreements or indemnification agreements previously entered into between Host Marriott and either Services or an Operating Group Subsidiary. Operating Group Policies: The Aetna Property and Casualty Insurance ------------------------ Program effective October 1, 1995 and any other Policies, current or past, which are owned or maintained by or on behalf of Host Marriott or any of its Affiliates or predecessors, which, by mutual agreement of Host Marriott and Services, are to be assigned to Services or to any Operating Group Subsidiary. Operating Group Subsidiaries: The Transferred Subsidiaries and all ---------------------------- Subsidiaries of Services or the Transferred Subsidiaries at the time of the Distribution. Operating Group Target Cash Balance: Twenty-Five Million Dollars ----------------------------------- ($25,000,000). Overfunded Capex Amount: The amount by which capital expenditures ----------------------- attributable to the Operating Group Business for fiscal year 1995 exceeds $59,500,000. Person: Any individual, corporation, partnership, association, ------ trust, estate or other entity or organization, including any governmental entity or authority. Policies: Insurance policies and insurance contracts of any kind -------- relating to the Operating Group Business or the Real Estate Group Business as conducted prior to the Distribution Date, including without limitation primary and excess policies, comprehensive general liability policies, automobile, aircraft and workers' compensation insurance policies, and self-insurance and captive insurance company arrangements, including any "fronted policies" with respect to Self Insurance Programs, together with the rights and benefits thereunder. Privileges: All privileges that may be asserted under applicable ---------- law including, without limitation, privileges arising under or relating to the attorney-client relationship 10 (including but not limited to the attorney-client and work product privileges), the accountant-client privilege, and privileges relating to internal evaluative processes. Privileged Information: All information as to which Host Marriott, ---------------------- Services or any of their Subsidiaries are entitled to assert the protection of a Privilege. Qualifying Restructuring Costs: all cash costs incurred or to be ------------------------------ incurred by Host Marriott, Services or their respective Subsidiaries (i) for the Business Development Redesign Initiative, (ii) for the Operating Group's Operations Excellence Initiative, (iii) directly related to restructuring or realigning the Operating Group, or (iv) for implementation of system changes necessary to implement a new general ledger system, regardless of whether such items are treated as expenses under generally accepted accounting principles. Real Estate Group Assets: The assets of Host Marriott and the Real ------------------------ Estate Group Subsidiaries including, without limitation, (i) the capital stock of the Real Estate Group Subsidiaries; (ii) the Real Estate Group Real Property; (iii) the Host Marriott Books and Records; (iv) the Sacramento Airport Hotel; (v) all of the assets expressly to be retained by, or assigned or allocated to, Host Marriott or any of the Real Estate Group Subsidiaries under this Agreement or the Related Agreements; and (vi) any other assets, of Host Marriott and its Subsidiaries not comprising Operating Group Assets. Real Estate Group Business: The business conducted by the Real -------------------------- Estate Group, as referenced in the recitals to this Agreement. Real Estate Group Employees: The meaning specified in the Employee --------------------------- Benefits Allocation Agreement. Real Estate Group Liabilities: (i) All of the Liabilities of Host ----------------------------- Marriott under, or to be retained or assumed by Host Marriott or any of the Real Estate Group Subsidiaries 11 pursuant to, this Agreement or any of the Related Agreements; (ii) any Financing Obligations of Host Marriott and its Subsidiaries not constituting Operating Group Liabilities; (iii) all Liabilities for payment of outstanding drafts of Host Marriott attributable to the conduct of the Real Estate Group or the Operating Group (to the extent not considered an Operating Group Liability) existing as of the Distribution Date; (iv) the Real Estate Group Self Insurance Liabilities; (v) all Liabilities transferred to Host Marriott or the Real Estate Group Subsidiaries in the Preliminary Transfers; (vi) all other Liabilities arising out of, or in connection with, any of the Real Estate Group Assets or the Real Estate Group Business; and (vii) all other Liabilities of Host Marriott and its Subsidiaries not constituting Operating Group Liabilities including, but not limited to, Liabilities relating to Restaurants, if any, as defined herein, whether past or present. Real Estate Group Real Property: The ownership interests of Host ------------------------------- Marriott and its Affiliates in the land, lodging properties and real estate development projects. Real Estate Group Self Insurance Liabilities: All Liabilities -------------------------------------------- arising under the Self Insurance Programs retained by Host Marriott under the MI Distribution Agreement not constituting a Services Self Insurance Liability. Real Estate Group Subsidiaries: All Subsidiaries of Host Marriott, ------------------------------ except Services and the Operating Group Subsidiaries. Related Agreements: All of the agreements, instruments, ------------------ understandings, assignments or other arrangements set forth in writing, which are entered into in connection with the transactions contemplated hereby, including, without limitation: the Conveyancing and Assumption Instruments, the Employee Benefits Allocation Agreement, the Tax Sharing 12 Agreement, the Transitional Services Agreement, the Assigned MI Agreements and the New MI Agreements. Restaurants: All restaurants presently or formerly owned or ----------- operated by Host Marriott and its Subsidiaries, except those restaurants at airports, on tollroads and at stadiums, arenas, tourist destinations, shopping malls and other venues. Ruling Request: The private letter ruling request filed by Host -------------- Marriott with the Internal Revenue Service on August 25, 1995, as supplemented and amended from time to time, with respect to certain tax matters relating to the Distribution. Self Insurance Programs: Those self-insured programs administered ----------------------- by Host Marriott for the benefit of its employees, properties and operating businesses, including without limitation such programs that utilize "fronted policies." Services Board: The Board of Directors of Services. -------------- Services Books and Records: The books and records (including -------------------------- computerized records) of Services and the Operating Group Subsidiaries and any other books and records of Host Marriott's Subsidiaries which relate principally to the Operating Group, are necessary to conduct the Operating Group Business, or are required by law to be retained by Services or an Operating Group Subsidiary, including, without limitation, (i) all such books and records relating to Operating Group Employees, (ii) all files relating to any Action being assumed by Services as part of the Operating Group Liabilities, and (iii) original corporate minute books, stock ledgers and certificates and corporate seals, and all licenses, leases, agreements and filings, relating to Services, the Operating Group Subsidiaries or the Operating Group Business (but not including the Host Marriott Books and Records, provided that Services shall have access to, and 13 have the right to obtain duplicate copies of, the Host Marriott Books and Records which pertain to the Operating Group Business in accordance with the provisions of Article VII). Services Bylaws: The Bylaws of Services, substantially in the form --------------- of Exhibit F, to be in effect at the Distribution Date. Services Certificate: The Amended and Restated Certificate of -------------------- Incorporation of Services, substantially in the form of Exhibit G, to be in effect at the Distribution Date. Services Common Stock: The common stock, no par value per share, of --------------------- Services (together with any rights issued pursuant to the Services Rights Plan). Services Cash Adjustment Amount: the sum of (a) ten million ------------------------------- dollars ($10,000,000), minus (b) all Qualifying Restructuring Costs incurred ----- and paid through the Distribution Date, plus (c) all Services Unit Cash ---- maintained at Schiphol Airport, Amsterdam, Netherlands, minus (d) the ----- Overfunded Capex Amount, if any. Services Group: Services and the Operating Group Subsidiaries, -------------- collectively. Services Initial Cash Balance: The sum of the Operating Group ----------------------------- Target Cash Balance and the Services Cash Adjustment Amount. Services Noncompetition Agreement: Amendment No. 1 to the --------------------------------- Noncompetition Agreement to be entered into by and between Services and Marriott International substantially in the form attached hereto as Exhibit H. Services Pro Forma Balance Sheet: The Pro Forma Consolidated -------------------------------- Balance Sheet of Services as of September 8, 1995 attached hereto as Exhibit I. Services Self Insurance Liabilities: All Liabilities arising under ----------------------------------- the Self Insurance Programs retained by Host Marriott under the MI Distribution Agreement which relate to the Operating Group Business. 14 Services Senior Notes: The 9 1/2% Senior Secured Notes due 2005 --------------------- ($400 million aggregate principal amount outstanding) issued pursuant to the Indenture dated May 25, 1995 by and between HMTP and Marine Midland Bank, N.A., as trustee. Services Unit Cash: Host Marriott Unit Cash held by any Operating ------------------ Group Subsidiary or otherwise attributable to the Operating Group Business. Shared Policies: All Policies, current or past, which are owned or --------------- maintained by or on behalf of Host Marriott or any of its Subsidiaries or their respective predecessors which relate to both the Real Estate Group Business and the Operating Group Business, other than the Operating Group Policies. Subsidiary: With respect to any Person, (a) any corporation of ---------- which at least a majority in interest of the outstanding voting stock (having by the terms thereof voting power under ordinary circumstances to elect a majority of the directors of such corporation, irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned or controlled by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more of its Subsidiaries, or (b) any corporate or non-corporate entity in which such Person, one or more Subsidiaries of such Person, or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has an ownership interest and which is included in the consolidated financial reports of such Person consistent with generally accepted accounting principles. Supplemental Warrant Agreement: The Supplemental Warrant Agreement ------------------------------ dated as of December 29, 1995 by and among Host Marriott, Services and First Chicago Trust Company of New York, as Warrant Agent, substantially in the form attached hereto as 15 Exhibit J. Tax Sharing Agreement: The Tax Sharing Agreement between Services --------------------- and Host Marriott, which agreement shall be entered into on or prior to the Distribution Date in substantially the form of Exhibit K attached hereto. Transferred Intellectual Property: the trademarks, service marks, --------------------------------- goodwill and other intangible properties and rights listed on Schedule 1.01(b) hereto to be conveyed by Host Marriott to Services in connection with the Distribution. Transferred Subsidiaries: The Subsidiaries identified on Schedule ------------------------ 1.01(c). Transferred Subsidiaries Stock: All of the issued and outstanding ------------------------------ capital stock of the Transferred Subsidiaries. Transitional Services Agreement: The Transitional Services ------------------------------- Agreement by and between Host Marriott and Services pursuant to which such parties will provide to the other certain transitional services after consummation of the Distribution, substantially in the form attached hereto as Exhibit L. Unfunded Capex Amount: the amount by which spending for capital --------------------- expenditures by Host Marriott and its Subsidiaries attributable to the Operating Group for fiscal year 1995 is less than $59,500,000 resulting solely from delays in the timing of specific capital expenditures as compared to the Operating Group capital expenditures forecast submitted to the Host Marriott Board of Directors on August 3, 1995. Warrant Agreement: The Warrant Agreement dated as of October 19, ----------------- 1994 by and between Host Marriott and First Chicago Trust Company of New York, as Warrant Agent. Warrants: Common Stock Purchase Warrants expiring October 8, 1998 -------- to purchase an aggregate of 7.7 million shares of Host Marriott Common Stock. 16 Section 1.02. Terms Defined Elsewhere in Agreement. ------------------------------------ Each of the following terms is defined in the Section set forth opposite such term:
Term Section - ---- ------- Adjustment 5.01 Alternative I 5.02 Alternative II 5.02 Annual Aggregate Exercise Price 5.02 Cash 2.07 Consents 6.01 Distribution Recitals Deferred Capex Expenditures 3.02 Deferred Capex Termination Date 3.02 Exercised MI Options 5.02 Exercise Notice 6.07 Expended Deferred Capex 3.02 Host Marriott Recitals Host Marriott Indemnifiable Loss 7.02 Host Marriott Indemnitees 7.02 Host Marriott Initial Trading Price 4.03 Host Marriott Payment Amount 5.02 Indemnifiable Loss 7.02 Indemnifying Party 7.03 Indemnitee 7.03 Information 9.02 MI Deferred Stock 5.01 MI Employee Options 5.01 Operating Group Recitals Other Services Stockholders 5.03 Pre-Adjustment Percentage 5.02 Preliminary Transfers Recitals Real Estate Group Recitals Sales Price 4.03 Services Recitals Services Allocable Exercise Price 5.02(a) Services Applicable Percentage 4.03 Services Indemnifiable Loss 7.01 Services Indemnitees 5.01 Services Initial Trading Price 4.03 Services MI Shares 5.02 Services Rights 8.05 Services Rights Plan 6.07 Services Suspension Period 4.05 Services Year-End Stock Price 5.02
17 Statement 5.02 Third-Party Claim 5.04 Trading Day 4.03 Vested MI Deferred Stock 5.02
ARTICLE II. TRANSFER OF ASSETS ------------------ Section 2.01. Transfer of Assets to Services. Prior to the ------------------------------ Distribution Date, Host Marriott shall take or cause to be taken all actions necessary to cause the transfer, assignment, delivery and conveyance to Services or any Operating Group Subsidiary of all of Host Marriott's and its Subsidiaries' right, title and interest in the Operating Group Assets. Section 2.02. Transfers of Assets from Operating Group Subsidiaries ----------------------------------------------------- to Host Marriott or Real Estate Group Subsidiaries. -------------------------------------------------- Prior to the Distribution Date, Host International shall take or cause to be taken all action necessary to cause the transfer, assignment, delivery and conveyance to Host Marriott Hospitality, Inc. of all of such entity's right, title and interest in the Sacramento Airport Hotel. Section 2.03. Transfers Not Effected Prior to the Distribution. To ------------------------------------------------ the extent that any transfers contemplated by this Article II shall not have been fully effected on the Distribution Date, the parties shall cooperate to effect such transfers as promptly as shall be practicable following the Distribution Date. Nothing herein shall be deemed to require the transfer of any assets or the assumption of any Liabilities which by their terms or operation of law cannot be transferred or assumed; provided, however, that -------- ------- Services and Host Marriott and their respective Subsidiaries and Affiliates shall cooperate in seeking to obtain any necessary consents or approvals for the transfer of all assets and Liabilities contemplated to be transferred pursuant to this Article II. In the event that any such transfer of assets or Liabilities has not 18 been consummated effective as of the Distribution Date, the party retaining such asset or Liability shall thereafter hold such asset in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto) and retain such Liability for the account of the party by whom such Liability is to be assumed pursuant hereto, and take such other actions as may be reasonably required in order to place the parties, insofar as reasonably possible, in the same position as would have existed had such asset been transferred or such Liability been assumed as contemplated hereby. As and when any such asset or Liability becomes transferable, such transfer and assumption shall be effected forthwith. The parties agree that, except as set forth in this Section 2.03, as of the Distribution Date, each party hereto shall be deemed to have acquired complete and sole beneficial ownership over all of the assets, together with all rights, powers and privileges incidental thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incidental thereto, which such party is entitled to acquire or required to assume pursuant to the terms of this Agreement. Section 2.04. Cooperation Re: Assets. In the case that at any time ----------------------- after the Distribution Date, Services reasonably determines that any of the Real Estate Group Assets are essential for the conduct of the Operating Group Business, or Host Marriott reasonably determines that any of the Operating Group Assets are essential for the conduct of the Real Estate Group Business, and the nature of such assets makes it impracticable for Services or Host Marriott, as the case may be, to obtain substitute assets or to make alternative arrangements on commercially reasonable terms to conduct their respective businesses, and reasonable provisions for the use thereof are not already included in the Related Agreements, then Services (with respect to the Operating Group Assets) and Host Marriott (with respect to the Real Estate Group 19 Assets) shall cooperate to make such assets available to the other party on commercially reasonable terms, as may be reasonably required for such party to maintain normal business operations (provided that such assets shall be required to be made available only until such time as the other party may reasonably obtain substitute assets or make alternative arrangements on commercially reasonable terms to permit it to maintain normal business operations). Section 2.05. No Representations or Warranties; Consents. Each of ------------------------------------------ the parties hereto understands and agrees that no party hereto is, in this Agreement, in any Related Agreement, or otherwise, representing or warranting in any way (i) as to the value or freedom from encumbrance of, or any other matter concerning, any assets of such party or (ii) as to the legal sufficiency to convey title to any asset transferred pursuant to this Agreement or any Related Agreement. It is also agreed and understood that there are no warranties, express or implied, as to the merchantability or fitness of any of the assets either transferred to or retained by the parties, as the case may be, and all such assets shall be "as is, where is" and "with all faults" provided, however, that the absence of warranties shall have no effect upon the allocation of Liabilities under this Agreement and provided further that Services represents and warrants that, prior to the Distribution Date, Services and the Operating Group have maintained their accounts payable and accounts receivable in a manner consistent with the customary practices of the Operating Group Business. Each party hereto understands and agrees that no party hereto is, in this Agreement, in any Related Agreement or otherwise, representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any amendatory agreements and the making of any filings or applications contemplated by this Agreement, any Related Agreement or otherwise will satisfy the provisions of any or all applicable laws or judgments or other instruments or agreements relating to such assets. 20 Notwithstanding the foregoing, the parties shall use their good faith efforts to obtain all consents and approvals, to enter into all reasonable amendatory agreements and to make all filings and applications which may be reasonably required for the consummation of the transactions contemplated by this Agreement and the Related Agreements, and shall take all such further reasonable actions as shall be reasonably necessary to preserve for each of the Services Group and the Host Marriott Group, to the greatest extent feasible, the economic and operational benefits of the allocation of assets and liabilities provided for in this Agreement. In case at any time after the Distribution Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary or desirable action. Section 2.06. Conveyancing and Assumption Instruments. In connection --------------------------------------- with the Preliminary Transfers, the assignment of assets and the assumption of Liabilities contemplated by this Agreement and any Related Agreements, the parties shall execute, or cause to be executed by the appropriate entities, the Conveyancing and Assumption Instruments in such forms as the parties shall reasonably agree. The transfer of capital stock shall be effected by means of delivery of stock certificates and executed stock powers and notation on the stock record books of the corporation or other legal entities involved and, to the extent required by applicable law, by notation on public registries. Section 2.07. Cash Allocation; Cash Management. -------------------------------- (a) Cash Allocation on the Distribution Date. ---------------------------------------- As of the close of business on the Distribution Date, Services shall be allocated, out of the domestic and international cash bank balances and short-term investments of Host Marriott and its Subsidiaries including all Host Marriott Unit Cash ("Cash") recorded on the 21 books of Host Marriott and its Subsidiaries, an amount of Cash (including the Services Unit Cash) equal to the Services Initial Cash Balance and Host Marriott shall retain all other Cash. To the extent practicable, the parties shall use their reasonable best efforts to take all necessary action to cause the Cash balances of Services and its Subsidiaries immediately prior to consummation of the Distribution to equal the Services Initial Cash Balance. In the event the actual Cash balances of Services and its Subsidiaries as of the Distribution are less than the Services Initial Cash Balance, the amount of the deficiency shall be recorded in the accounts of Host Marriott and Services as of the Distribution Date as a payable from Host Marriott to Services (which payable will be paid as promptly as practicable following the Distribution); and in the event the actual Cash balances of Services and its Subsidiaries as of the Distribution Date exceeds the Services Initial Cash Balance, the amount of such excess shall be recorded in the accounts of Host Marriott and Services as of the Distribution Date as a payable from Services to Host Marriott (which payable will be paid as promptly as practicable following the time it is determinable). Host Marriott's obligation to transfer to Services Cash equal to the Services Initial Cash Balance pursuant to this Section 2.07 is expressly conditioned upon Services and the Operating Group maintaining the accounts payable and accounts receivable of the Services Group from the date hereof through the Distribution Date in the ordinary course of the Operating Group Business. (b) Cash Management After the Distribution Date. Services shall ------------------------------------------- establish and maintain a separate cash management system and accounting records with respect to the Operating Group effective as of 12:01 a.m. on the day following the Distribution Date. Thereafter, (i) any payments by Host Marriott or the Real Estate Group Subsidiaries on behalf of Services or the Operating Group Subsidiaries in connection with the Operating Group 22 Business (including without limitation, any such payments in respect of Liabilities or other obligations of Services or the Operating Group Subsidiaries under this Agreement and the Related Agreements) shall be recorded in the accounts of the Services Group as a payable from the Services Group to the Host Marriott Group; (ii) any payments by Services or the Operating Group Subsidiaries on behalf of Host Marriott or the Real Estate Group Subsidiaries in connection with the Real Estate Group Business (including, without limitation, any such payments in respect to Liabilities or other obligations of Host Marriott or the Real Estate Group Subsidiaries under this Agreement and the Related Agreements) shall be recorded in the accounts of the Host Marriott Group as a payable from the Host Marriott Group to the Services Group; (iii) any cash payments received by Host Marriott and the Real Estate Subsidiaries relating to the Operating Group Business shall be recorded in the accounts of the Host Marriott Group as a payable from the Host Marriott Group to the Services Group; (iv) any cash payments received by Services or the Operating Group Subsidiaries relating to the Real Estate Group Business shall be recorded in the accounts of the Services Group as a payable from the Services Group to the Host Marriott Group; (v) Services and Host Marriott shall make adjustments for late deposits, checks returned for not sufficient funds and other post-Distribution Date transactions as shall be reasonable under the circumstances consistent with the purpose and intent of this Agreement and the Related Agreements; and (vi) the net balance due to the Host Marriott Group or the Services Group, as the case may be, in respect of the aggregate amounts of clauses (i), (ii), (iii), (iv) and (v) shall be paid by Services or Host Marriott, as appropriate, as promptly as practicable following the date such net balance is determinable. For purposes of this Section 2.07(b), the parties contemplate that the Real Estate Group Business and the Operating Group Business, 23 including, but not limited to, the respective parties' administration of accounts payable and accounts receivable, will be conducted in the normal course. Section 2.08. Agreements with Marriott International. On or prior to -------------------------------------- the Distribution Date, (i) Host Marriott shall assign to Services, and Services shall assume all of Host Marriott's obligations under, the Assigned MI Agreements, and (ii) Services and Marriott International shall enter into the New MI Agreements. Section 2.09. Settlement of Intercompany Accounts. Immediately prior ----------------------------------- to the distribution of the stock of Host International to Host Marriott by Hospitality, Host International shall distribute the Net Host International Intercompany Receivable to Hospitality as a dividend. ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES ------------------------------------------ Section 3.01. Assumption and Satisfaction of Liabilities. Except as ------------------------------------------ set forth in the Employee Benefits Allocation Agreement, the Tax Sharing Agreement or other Related Agreements, effective as of and after the Distribution Date, (a) Services shall, and/or shall cause the Operating Group Subsidiaries to, assume, pay, perform and discharge in due course all of the Operating Group Liabilities, and (b) Host Marriott shall, and/or shall cause the Real Estate Group Subsidiaries to, assume, pay, perform and discharge in due course all of the Real Estate Group Liabilities. Section 3.02. Funding of Unfunded Capex Amount. -------------------------------- (a) On the Distribution Date, the parties hereto will agree on the capital expenditures attributable to the Operating Group (if any) that comprise the Unfunded Capex Amount (the "Deferred Capex Expenditures"). Host Marriott agrees to reimburse Services, in the manner set forth below, for Deferred Capex Expenditures that are incurred by Services from 24 and after the Distribution Date and prior to the date 365 days following the Distribution Date (the "Deferred Capex Termination Date"), in an amount not to exceed the Unfunded Capex Amount. (b) Within 30 days after Services expends any Deferred Capex Expenditures, Services will deliver to Host Marriott a statement (the "Capex Statement") showing the amount of such funds expended prior to the Deferred Capex Termination Date (the "Expended Deferred Capex") and containing a brief description of the use of such funds. Within 15 days following receipt of the Capex Statement, Host Marriott shall pay to Services cash in the amount equal to the Expended Deferred Capex. The remaining balance payable to Services for Deferred Capex Expenditures at any time shall equal the Unfunded Capex Amount minus the aggregate amount of Deferred Capex Expenditures paid to Services ----- through such time. Section 3.03. Host Marriott Guarantees. ------------------------ (a) Services shall use its reasonable best efforts to obtain the release of any Host Marriott Guarantee existing on and after the Distribution Date. (b) Commencing on the first business day of fiscal year 1997 or on the day 365 days after the Distribution (whichever is later), and on the first business day of each fiscal year thereafter, Services shall become obligated to pay to Host Marriott, in cash, a Credit Support Fee in respect of each Host Marriott Guarantee which remains outstanding on such date. The aggregate amount of such Credit Support Fees shall be paid pro rata over the 13 periods -------- of fiscal year 1997 and of each fiscal year thereafter in which a Credit Support Fee is due. 25 ARTICLE IV. OBLIGATIONS FOR HOST MARRIOTT WARRANTS -------------------------------------- Section 4.01. Sharing of Warrant Obligations. In connection with ------------------------------ the settlement of litigation brought by certain prior holders and purchasers of senior notes and debentures of Host Marriott, Host Marriott issued the Warrants, of which approximately 7.3 million Warrants were outstanding and unexercised as of the date of this Agreement. The Warrants contain provisions requiring an adjustment, effective immediately following the Distribution Record Date, to reflect the effects of the Distribution. Pursuant to this adjustment, either (i) the exercise price of the Warrants must be reduced and the number of shares of Host Marriott Common Stock issuable upon exercise of the Warrants must be increased, in accordance with the formula specified in Section 12(c) of the Warrant Agreement, or (ii) the Warrant holders must be entitled to participate in the Distribution on a basis and with notice that the Host Marriott Board determines to be fair and appropriate in light of the basis and notice on which the holders of Host Marriott Common Stock participate in the Distribution. In order to provide for the treatment of the Warrants in the Distribution referenced in clause (ii) of the preceding sentence, the Host Marriott Board has determined that, in connection with the Distribution, Services will assume its proportionate share of the obligations represented by the Warrants, as set forth below in this Article IV. Section 4.02. Issuance of Services Common Stock Upon Exercise of -------------------------------------------------- Warrants. -------- (a) Following the Distribution Record Date, upon exercise of a Warrant to purchase a share of Host Marriott Common Stock and payment of the exercise price therefor, the holder of the Warrant will be entitled to receive, in addition to the share of Host Marriott Common Stock issuable upon exercise of the Warrant, one-fifth of a share of Services Common 26 Stock. Upon receipt of a notice of exercise of Warrants, Host Marriott will promptly provide notice thereof to Services or a transfer agent designated by Services to receive such notice (which notice will contain the number of shares of Services Common Stock issuable by Services in connection with such exercise, the person in whose name such shares are to be issued and the address for delivery of the share certificates issuable to such person); and Services shall promptly thereafter (and in any event within 5 business days after receipt of such notice) issue the shares of Services Common Stock as set forth in such notice. Services and Host Marriott will, and will cause their respective transfer agents to, work together in good faith to establish procedures to ensure that such notices are received by Services, and such shares are issued by Services, as promptly as practicable. (b) Notwithstanding the provisions of Section 4.02(a) above, Services shall not be required to issue any fractional shares of Services Common Stock upon exercise of any Warrant. If any fraction of a share of Services Common Stock would, except for the provision of this Section 4.02(b), be issuable on the exercise of any Warrants, Services shall pay to the exercising Warrant holder (in lieu of issuance of such fractional share) an amount in cash equal to such fraction multiplied by the Services Warrant Exercise Amount, where the "Services Warrant Exercise Amount" equals the Services Applicable Percentage (as defined below) multiplied by the exercise price paid by the Warrant holder upon such exercise. Section 4.03. Allocation of Exercise Price. Services shall be ----------------------------- entitled to receive the Services Applicable Percentage (as defined below) of the exercise price paid upon the exercise of any Warrants (which exercise price currently is $8.00 per Warrant and will increase to $10.00 per Warrant as of October 8, 1996) occurring on or after October 1, 1995. Such Services Applicable Percentage shall be paid over to Services by Host Marriott as promptly as 27 practicable following Host Marriott's receipt of the exercise price for any Warrants. The term "Services Applicable Percentage" shall mean the result of the following calculation, expressed as a percentage: (i) one-fifth of the Services Initial Trading Price (as defined below), divided by (ii) the sum of ------- -- (x) one-fifth of the Services Initial Trading Price plus (y) the Host Marriott ---- Initial Trading Price (defined below). The "Services Initial Trading Price" shall mean the Sale Price of the Services Common Stock on the first full Trading Day following the Distribution Date that Services Common Stock trades "regular way"; and the "Host Marriott Initial Trading Price" shall mean the Sale Price of the Host Marriott Common Stock on the first full Trading Day following the Distribution Date that Host Marriott Common Stock trades "ex- distribution" one-fifth share of Services. The term "Sale Price" as applied to a share of Services Common Stock or Host Common Marriott Stock on any date means the closing per share sale price of a share of Services Common Stock or Host Marriott Common Stock, as applicable (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in composite transactions for the principal United States securities exchange on which the Services Common Stock or Host Marriott Common Stock (as applicable) is traded or, if such stock is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System. The term "Trading Day" means each day on which the securities exchange or quotation system which is used to determine the Sale Price is open for trading or quotation. Section 4.04. Adjustments. The obligation of Services to issue ----------- Services Common Stock, and of Host Marriott to issue Host Marriott Common Stock, upon the exercise of a Warrant shall be adjusted in accordance with the adjustment provisions set forth in Article 12 28 of the Warrant Agreement, such that the provisions of Article 12 (including all notice provisions relating thereto) of the Warrant Agreement shall apply equally and separately to Services and actions taken by Services that affect the Services Common Stock and to Host Marriott and action taken by Host Marriott that effect Host Marriott Common Stock. Promptly upon request, Host Marriott shall provide Services with all necessary information regarding the Warrant holders and the Warrant Agent to permit Services to satisfy all notice obligations. Section 4.05. Registration of Services Common Stock. Services will ------------------------------------- use its reasonable best efforts to maintain an effective and current registration statement under the Securities Act for the issuance of Services Common Stock issuable upon exercise of Warrants during the period commencing on the Distribution Date through the earlier of (i) the expiration of the Warrants or (ii) the date on which all Warrants have been exercised; provided that Services (in its sole discretion) shall have the right to discontinue the effectiveness of such registration statement with respect to the Services Common Stock issuable upon exercise of Warrants for such periods as Services determines are necessary and appropriate. Services will notify the Warrant Agent at any time that the effectiveness of the registration statement with respect to the Services Common Stock issuable upon exercise of a Warrant has been suspended (any such period during which effectiveness of the registration statement is suspended being referred to as a "Services Suspension Period"), and during any Services Suspension Period the Warrants will not be exercisable with respect to the Services Common Stock. Services will use its reasonable best efforts to obtain any required approvals or registrations under state "blue sky" securities laws for the issuance of the Services Common Stock issuable upon exercise of a Warrant; provided, however, that Warrants may not be 29 exercised with respect to Services Common Stock by, and Services Common Stock may not be issued to, any holder in any state where such exercise or issuance would be unlawful. Section 4.06. Amendment to Warrant Agreement. Host Marriott and ------------------------------ Services each agree to execute prior to the Distribution Date the Supplemental Warrant Agreement reflecting the changes necessary to implement the agreements set forth in this Article IV. ARTICLE V. OBLIGATIONS FOR MI EMPLOYEE BENEFIT AWARDS ------------------------------------------ Section 5.01. Treatment of MI Employee Benefit Awards in the ---------------------------------------------- Distribution. Host Marriott has issued to persons who were formerly employed ------------ by Host Marriott and/or Subsidiaries of Host Marriott and who, in connection with the MI Distribution, became employees of Marriott International and/or its subsidiaries, (i) options to purchase Host Marriott Common Stock (the "MI -- Employee Options") and (ii) deferred shares of Host Marriott Common Stock (the ---------------- "MI Deferred Stock"). In connection with the Distribution and pursuant to the ----------------- Employee Benefits Allocation Agreement, Host Marriott will adjust (the "Adjustment") the MI Employee Options such that the exercise price of the MI Employee Options will be reduced and the number of shares of Host Marriott Common Stock issuable upon exercise of the MI Employee Options will be increased in order to reflect the effects of the Distribution, and the MI Deferred Stock such that the number of shares of MI Deferred Stock will be increased in order to reflect the effects of the Distribution. In light of these adjustments, and in order that Services may assume its proportionate share of the obligations evidenced by the MI Employee Options and MI Deferred Stock outstanding prior to the Distribution, Services has agreed to comply with the provisions of this Article V. 30 Section 5.02. Services Reimbursement Obligation. --------------------------------- (a) Within 10 days after the end of each fiscal year following the Distribution Date (commencing with fiscal year 1996), Host Marriott will deliver to Services (i) a statement (the "Statement") showing the number of --------- shares of MI Deferred Stock vested, and the number of MI Employee Options exercised, during the preceding fiscal year (and, in the case of the Statement for fiscal year 1996, during any portion of fiscal year 1995 following the Distribution Record Date) and a calculation of the aggregate exercise price paid upon exercise of such options (the shares of MI Deferred Stock vested during the period covered by such Statement being referred to herein as "Vested MI Deferred Stock," the MI Employee Options exercised during the ------------------------ period covered by such Statement being referred to herein as the "Exercised MI ------------ Options," and the aggregate exercise price for such Exercised MI Options being ------- referred to herein as the "Annual Aggregate Exercise Price") and (ii) an ------------------------------- amount in cash equal to the Services Allocable Exercise Price for such Exercised MI Options, where the "Services Allocable Exercise Price" equals the --------------------------------- Annual Aggregate Exercise Price for the period covered by a Statement multiplied by the Services Applicable Percentage. ------------- (b) Within 10 days following receipt of such Statement, Services shall select one of the following alternatives (by making the appropriate notifications and deliveries set forth in Section 5.02(c) below): (i) Services shall issue to Host Marriott a number of shares of Services Common Stock (the "Services MI Shares") equal to (x) one- ------------------ fifth of the aggregate number of shares of Host Marriott Common Stock comprising Vested MI Deferred Stock and issued pursuant to the Exercised MI Options multiplied by (y) the ------------- 31 Pre-Adjustment Percentage. The "Pre-Adjustment Percentage" shall ------------------------- mean the result of the following calculation expressed as a percentage: (i) the aggregate number of shares of Host Marriott Common Stock issuable under the MI Employee Options outstanding immediately prior to the Adjustment (whether or not then vested) divided by (ii) the aggregate number of shares of Host Marriott ------- -- Common Stock issuable under the MI Employee Options immediately following the Adjustment. OR -- (ii) Services shall pay to Host Marriott, in cash, an amount equal to the number of Services MI Shares multiplied by the Services Year-End Stock Price. "Services Year-End Stock Price" shall mean ----------------------------- the Sale Price of the Services Common Stock for the last Trading Day of the fiscal year to which the Statement relates. (c) In the event that Services elects the alternative set forth in subparagraph (i) of Section 5.02(b) ("Alternative I"), Services shall so ------------- notify Host Marriott and deliver to Host Marriott certificates for the shares of Services Common Stock to be issued to Host Marriott pursuant to Alternative I. In the event that Services elects the alternative set forth in subparagraph (ii) of Section 5.02(b) ("Alternative II"), Services shall notify -------------- Host Marriott and deliver to Host Marriott payment of the amount set forth in subparagraph (ii) of Section 5.02(b). Section 5.03. Disposition of Services Common Stock; Registration -------------------------------------------------- Rights; Voting Agreement. The parties acknowledge that it is Host Marriott's ------------------------ intention to dispose of any shares 32 of Services Common Stock received by it pursuant to Services' election of Alternative I (as set forth in Section 5.02 above) as soon as practicable following Host Marriott's receipt of such shares. The parties also acknowledge and agree, however, that it would not be in the best interests of either Host Marriott or Services for Host Marriott to dispose of such shares in a manner that would adversely affect the market value of Services Common Stock. Accordingly, the parties have agreed to the following provisions governing Host Marriott's disposition of shares of Services Common Stock received by it pursuant to this Article V: (a) Services shall not elect Alternative I unless, at the time such election is made, there is an effective registration statement under the Securities Act and, if necessary, under any state "blue sky" securities laws, covering, and any other necessary approvals obtained in respect of, (i) the distribution by Services to Host Marriott of the Services Common Stock to be issued to Host Marriott pursuant to Alternative I and (ii) the subsequent resale by Host Marriott of such shares. Services shall use its reasonable best efforts to keep such approvals or registration statements effective for the longer of (i) 120 days or (ii) the period required for Host Marriott to dispose of such shares consistent with the requirements of subparagraph (b) below. (b) Host Marriott shall dispose of the shares of Services Common Stock received by it as promptly as practicable, consistent with the purpose and intent of this Section 5.03. 33 (c) In the event that Host Marriott holds any shares of Services Common Stock received by it under this Section 5.03 at a time when a vote of the holders of Services Common Stock is required as to any matter, Host Marriott will vote the shares of Services Common Stock held by it in the same proportionate manner as all other holders of Services Common Stock entitled to vote on such matter, viewed as a whole (the "Other Services Stockholders"), it --------------------------- being the intention of the parties that Host Marriott will not use its ownership of Services Common Stock received under this Section 5.03 to affect the management or policies of Services. (For example, if Host Marriott holds 1,000 shares of Services Common Stock received under this Section 5.03, and if 57% of the Other Services Stockholders vote in favor of a proposal submitted to the holders of the Services Common Stock, Host Marriott will be deemed to have voted 570 shares in favor of such proposal.) ARTICLE VI. THE DISTRIBUTION ---------------- Section 6.01. Cooperation Prior to the Distribution. ------------------------------------- (a) Services and Host Marriott shall cooperate in preparing, filing with the Commission and causing to become effective any registration statements or amendments thereof which are appropriate to reflect the establishment of, or amendments to, any employee benefit plans and other plans contemplated by the Employee Benefits Allocation Agreement. (b) Services and Host Marriott shall take all such action as may be necessary or appropriate under the securities or blue sky laws of states or other political subdivisions of 34 the United States in connection with the transactions contemplated by this Agreement and the Related Agreements. (c) Services and Host Marriott shall use all reasonable efforts to obtain any third-party consents or approvals necessary or desirable in connection with the transactions contemplated hereby ("Consents"). -------- (d) Services and Host Marriott will use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary or desirable under applicable law, to consummate the transactions contemplated under this Agreement and the Related Agreements. Section 6.02. Host Marriott Board Action; Conditions Precedent to --------------------------------------------------- the Distribution. The Host Marriott Board shall, in its discretion, establish - ---------------- any appropriate procedures in connection with the Distribution. In no event shall the Distribution occur unless the following conditions shall have been satisfied: (i) the transactions contemplated by Section 2.01 shall have been consummated in all material respects; (ii) the Services Board, comprised as contemplated by Section 8.01, shall have been elected by Host Marriott, as sole stockholder of Services, and the Services Certificate and Services Bylaws shall have been adopted and shall be in effect; (iii) the Ruling Request shall have been granted in form and substance satisfactory to the Host Marriott Board, in its sole discretion; (iv) Host Marriott shall have received the opinion of American Appraisal Associates substantially in the form of Exhibit L and such opinion shall not have been withdrawn; 35 (v) Host Marriott shall have received the opinion of James D. Wolfensohn Incorporated substantially in the form of Exhibit M and such opinion shall not have been withdrawn; (vi) the Registration Statement on Form 10 under the Securities Exchange Act of 1934 filed by Services shall have been declared effective by the Commission; and (vii) Services and Host Marriott shall have entered into the Related Agreements; provided, however, that (x) any such condition may be waived by the Host -------- ------- Marriott Board in its sole discretion, and (y) the satisfaction of such conditions shall not create any obligation on the part of Host Marriott or any other party hereto to effect the Distribution or in any way limit Host Marriott's power of termination set forth in Section 11.07 or alter the consequences of any such termination from those specified in such Section. Section 6.03. The Distribution. On the Distribution Date, subject ---------------- to the conditions and rights of termination set forth in this Agreement, Host Marriott shall deliver to the Agent a share certificate representing all of the then outstanding shares of Services Common Stock owned by Host Marriott and shall instruct the Agent to distribute, on or as soon as practicable following the Distribution Date, such Services Common Stock to the Holders. Services agrees to provide all share certificates that the Agent shall require in order to effect the Distribution. ARTICLE VII. INDEMNIFICATION --------------- Section 7.01. Indemnification by Host Marriott. Except as -------------------------------- otherwise expressly set forth in a Related Agreement, Host Marriott shall indemnify, defend and hold harmless 36 Services and each of the Operating Group Subsidiaries, and each of their respective directors, officers, employees, agents and Affiliates and each of the heirs, executors, successors and assigns of any of the foregoing (the "Services Indemnitees") from and against the Real Estate Group Liabilities and -------------------- any and all losses, Liabilities, damages, including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions (collectively, "Services Indemnifiable Losses" and, individually, a ----------------------------- "Services Indemnifiable Loss") of the Services Indemnitees arising out of or --------------------------- due to the failure or alleged failure of Host Marriott, any Real Estate Group Subsidiary, or any of their Affiliates to (i) pay, perform or otherwise discharge in due course any of the Real Estate Group Liabilities, or (ii) comply with the provisions of Section 8.04. To the extent that counsel is provided to Services under this Indemnification, such counsel shall be selected by Host Marriott and such counsel may include its in-house corporate counsel. Section 7.02. Indemnification by Services. Except as otherwise --------------------------- expressly set forth in a Related Agreement, Services shall indemnify, defend and hold harmless Host Marriott and each of the Real Estate Group Subsidiaries, and each of their directors, officers, employees, agents and Affiliates and each of the heirs, executors, successors and assigns of any of the foregoing (the "Host Marriott Indemnitees") from and against the Operating ------------------------- Group Liabilities and any and all losses, Liabilities, damages, including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions 37 (collectively, "Host Marriott Indemnifiable Losses" and, individually, a "Host ---------------------------------- ---- Marriott Indemnifiable Loss") of the Host Marriott Indemnitees arising out of --------------------------- or due to the failure or alleged failure of Services, any Operating Group Subsidiaries, or any of their Affiliates to (i) pay, perform or otherwise discharge in due course any of the Operating Group Liabilities or (ii) comply with the provisions of Section 8.04. The "Services Indemnifiable Losses" and the "Host Marriott Indemnifiable Losses" are collectively referred to as the "Indemnifiable Losses." To the extent that counsel is provided to Host -------------------- Marriott under this Indemnification, such counsel shall be selected by Services and such counsel may include its in-house corporate counsel. Section 7.03. Insurance Proceeds. The amount which any party (an ------------------ "Indemnifying Party") is or may be required to pay to any other Person (an ------------------ "Indemnitee") pursuant to Section 7.01 or Section 7.02 shall be reduced ---------- (including, without limitation, retroactively) by any Insurance Proceeds or other amounts actually recovered by or on behalf of such Indemnitee in reduction of the related Indemnifiable Loss. If an Indemnitee shall have received the payment required by this Agreement from an Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds, or other amounts in respect of such Indemnifiable Loss as specified above, then such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts actually received. Section 7.04. Procedure for Indemnification. ----------------------------- (a) Except as may be set forth in a Related Agreement, if an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including, without limitation, any governmental entity) who is not a party to this Agreement or to any of the Related Agreements of any claim or of the commencement by any such Person of any Action with respect to which 38 an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement (a "Third-Party Claim"), such Indemnitee shall give such ----------------- Indemnifying Party written notice thereof promptly after becoming aware of such Third-Party Claim; provided, that the failure of any Indemnitee to give -------- notice as required by this Section 7.04 shall not relieve the Indemnifying Party of its obligations under this Article VII, except to the extent that such Indemnifying Party is prejudiced by such failure to give notice. Such notice shall describe the Third-Party Claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the Indemnifiable Loss that has been or may be sustained by such Indemnitee. (b) An Indemnifying Party may elect to defend or to seek to settle or compromise, at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party must confirm in writing that it agrees that the Indemnitee is entitled to indemnification hereunder in respect of such Third-Party Claim. Within 30 days of the receipt of notice from an Indemnitee in accordance with Section 7.04(a) (or sooner, if the nature of such Third-Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether to assume responsibility for such Third-Party Claim (provided that if the Indemnifying Party does not so notify the Indemnitee of its election within 30 days after receipt of such notice from the Indemnitee, the Indemnifying Party shall be deemed to have elected not to assume responsibility for such Third-Party Claim), and such Indemnitee shall cooperate in the defense or settlement or compromise of such Third-Party Claim. After notice from an Indemnifying Party to an Indemnitee of its election to assume responsibility for a Third-Party Claim, such Indemnifying Party shall not be liable to such Indemnitee under this Article VII for any legal or other expenses (except expenses approved in advance by the Indemnifying Party) subsequently incurred by such Indemnitee in 39 connection with the defense thereof; provided, that if the defendants in any -------- such claim include both the Indemnifying Party and one or more Indemnitees and in such Indemnitees' reasonable judgment a conflict of interest between such Indemnitees and such Indemnifying Party exists in respect of such claim, such Indemnitees shall have the right to employ separate counsel and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel reasonably satisfactory to the Indemnifying Party) shall be paid by such Indemnifying Party. If an Indemnifying Party elects not to assume responsibility for a Third-Party Claim (which election may be made only in the event of a good faith dispute that a claim was inappropriately tendered under Section 7.01 or 7.02, as the case may be) such Indemnitee may defend or (subject to the following sentence) seek to compromise or settle such Third- Party Claim. Notwithstanding the foregoing, an Indemnitee may not settle or compromise any claim without prior written notice to the Indemnifying Party, which shall have the option within ten days following the receipt of such notice (i) to disapprove the settlement and assume all past and future responsibility for the claim, including reimbursing the Indemnitee for prior expenditures in connection with the claim, or (ii) to disapprove the settlement and continue to refrain from participation in the defense of the claim, in which event the Indemnifying Party shall have no further right to contest the amount or reasonableness of the settlement if the Indemnitee elects to proceed therewith, or (iii) to approve the amount of the settlement, reserving the Indemnifying Party's right to contest the Indemnitee's right to indemnity, or (iv) to approve and agree to pay the settlement. In the event the Indemnifying Party makes no response to such written notice from the Indemnitee, the Indemnifying Party shall be deemed to have elected option (ii). (c) If an Indemnifying Party chooses to defend or to seek to compromise any Third-Party Claim, the Indemnitee shall make available to such Indemnifying Party any 40 personnel and any books, records or other documents within its control or which it otherwise has the ability to make available that are necessary or appropriate for such defense. (d) Any claim on account of an Indemnifiable Loss which does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall have a period of 15 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 15-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such 15-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party under applicable law or under this Agreement. (e) In addition to any adjustments required pursuant to Section 7.03, if the amount of any Indemnifiable Loss shall, at any time subsequent to the payment required by this Agreement, be reduced by recovery, settlement or otherwise, the amount of such reduction, less any expenses incurred in connection therewith, shall promptly be repaid by the Indemnitee to the Indemnifying Party. (f) In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. 41 Section 7.05. Remedies Cumulative. The remedies provided in this ------------------- Article V shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. Section 7.06. Survival of Indemnities. The obligations of each of ----------------------- Services and Host Marriott under this Article VII shall survive the sale or other transfer by it of any assets or businesses or the assignment by it of any Liabilities, with respect to any Indemnifiable Loss of the other related to such assets, businesses or Liabilities. ARTICLE VIII. CERTAIN ADDITIONAL MATTERS -------------------------- Section 8.01. Services Board. Services and Host Marriott shall -------------- take all actions which may be required to constitute, effective as of the Distribution Date, the following persons as the directors of Services: J.W. Marriott, Jr., Richard E. Marriott, William W. McCarten, William J. Shaw (Chairman), Andrew J. Young, Rosemary M. Collyer, Gilbert T. Ray and R. Michael McCullough. Section 8.02. Resignations; Host Marriott Board. --------------------------------- (a) Services shall cause all of its directors and Operating Group Employees to resign, effective as of the Distribution Date, from all boards of directors or similar governing bodies of Host Marriott or any of its Subsidiaries on which they serve, and from all positions as officers or employees of Host Marriott or any of its Subsidiaries in which they serve, except that (i) J. W. Marriott, Jr. shall serve as a director of both Services and Host Marriott and (ii) Richard E. Marriott shall serve as both a director of Services and as Chairman of Host Marriott. Host Marriott shall cause all of its directors and the Real Estate Group Employees to resign from all boards of directors or similar governing bodies of Services or any of its Subsidiaries on 42 which they serve, and from all positions as officers or employees of Services or any of its Subsidiaries in which they serve, except to the extent specified in the preceding sentence. Section 8.03. Certificate and Bylaws. On or prior to the ---------------------- Distribution Date, Services shall adopt the Services Certificate and the Services Bylaws, and shall file the Services Certificate with the Secretary of State of the State of Delaware. Host Marriott shall provide all necessary shareholder approvals for the Services Certificate prior to the filing of the Services Certificate with the Secretary of State of the State of Delaware. Section 8.04. Certain Post-Distribution Transactions. -------------------------------------- (a) Services. (i) Services shall, and shall cause each of the -------- Operating Group Subsidiaries to, comply with each representation and statement made, or to be made, to any taxing authority in connection with the IRS Ruling or any other ruling obtained, or to be obtained, by Services and Host Marriott acting together, from any such taxing authority with respect to any transaction contemplated by this Agreement; and (ii) until the second anniversary of the Distribution Date, neither Services nor any of its Subsidiaries shall (A) make a material disposition, by means of a sale or exchange of assets or capital stock, a distribution to stockholders or otherwise, of any substantial portion of its assets, (B) repurchase or issue any Services capital stock (other than stock issued pursuant to employee plans or to Host Marriott pursuant to Article V hereof), or (C) in the case of Services, cease the active conduct of a material portion of its business independently, with its own employees and without material change, unless, in each of cases (A), (B) and (C), in the opinion of counsel to Services, which opinion shall be reasonably satisfactory to Host Marriott, or pursuant to a favorable supplemental ruling letter reasonably satisfactory to Host Marriott, such act or omission would not adversely affect the tax consequences of the Distribution to Host Marriott or the stockholders of Host 43 Marriott, as set forth in any ruling issued by any taxing authority; and Services has no present intention to take any such actions. (b) Host Marriott. (i) Host Marriott shall, and shall cause each of ------------- the Real Estate Group Subsidiaries to comply with each representation and statement made, or to be made, to any taxing authority in connection with the IRS Ruling or any other ruling obtained, by Services and Host Marriott acting together, from any such taxing authority with respect to any transaction contemplated by this Agreement; and (ii) until the second anniversary of the Distribution Date, neither Host Marriott nor any of its Subsidiaries shall (A) make a material disposition, by means of a sale or exchange of assets or capital stock, a distribution to stockholders or otherwise, of any substantial portion of its assets (other than the Operating Group Assets in connection with the Distribution, transactions effected in contemplation thereof or the sale of Host Marriott's Courtyard by Marriott and Residence Inn hotel properties), (B) repurchase any capital stock of Host Marriott (other than stock issued pursuant to employee plans), or (C) in the case of Host Marriott, cease the active conduct of a material portion of its business independently, with its own employees and without material change, unless, in each of cases (A), (B) and (C), in the opinion of counsel to Host Marriott, which opinion shall be reasonably satisfactory to Services, or pursuant to a favorable supplemental ruling letter reasonably satisfactory to Services, such act or omission would not adversely affect the tax consequences of the Distribution to Services or the stockholders of Services, as set forth in any ruling issued by any taxing authority; and Host Marriott has no present intention to take any such actions. Section 8.05. Services Rights Plan. Prior to the Distribution -------------------- Date, the Services Board may elect, in its sole discretion, to recommend that Services adopt a shareholder rights 44 plan (the "Services Rights Plan"). The Services Rights Plan will be -------------------- substantially similar to the Host Marriott Rights Plan and will provide for the distribution of preferred share purchase rights ("Services Rights") with --------------- respect to each share of Services Common Stock. The Services Rights will be attached to the Services Common Stock and will not be exercisable, or transferable apart from the Services Common Stock, unless and until certain events occur. If certain events occur relating to the acquisition by an acquiring person of Services Common Stock, or a merger or other combination of Services with an acquiring person, the Services Rights will entitle holders (other than the acquiring person) to purchase either Services Common Stock or common stock of the acquiring person at a discount. The specific terms of the Services Rights will be determined by the Board of Directors of Services consistent with the description thereof in the Information Statement. Section 8.06. Use of the "Host" Name and the Host Marriott Logo. ------------------------------------------------- Notwithstanding anything to the contrary in this Agreement (including the conveyance to Services of the Transferred Intellectual Property) or in any Related Agreement, the parties hereto agree that Host Marriott shall retain the right to use the name "Host" without limitation or expiration and the right to use the Host Marriott Logo for a period of 18 months following the Distribution. At the end of 18 months, if Host Marriott has a good faith need to continue the use of the Host Marriott Logo, it may request Services to consent to an additional 12 months, such consent by Services not to be unreasonably withheld. 45 ARTICLE IX. ACCESS TO INFORMATION AND SERVICES ---------------------------------- Section 9.01. Provision of Corporate Records. ------------------------------ (a) Except as may otherwise be provided in a Related Agreement, Host Marriott shall arrange as soon as practicable following the Distribution Date, to the extent not previously delivered in connection with the transactions contemplated in Article II, for the transportation (at Services' cost) to Services of the Services Books and Records in its possession, except to the extent such items are already in the possession of Services or a Services Subsidiary. The Services Books and Records shall be the property of Services, but shall be available to Host Marriott for review and duplication until Host Marriott shall notify Services in writing that such records are no longer of use to Host Marriott. (b) Except as otherwise provided in a Related Agreement, Services shall arrange as soon as practicable following the Distribution Date, to the extent not previously delivered in connection with the transactions contemplated in Article II, for the transportation (at Host Marriott's cost) to Host Marriott of the Host Marriott Books and Records in its possession, except to the extent such items are already in the possession of Host Marriott. The Host Marriott Books and Records shall be the property of Host Marriott, but the Host Marriott Books and Records that reasonably relate to the Operating Group Business shall be available to Services for review and duplication until Services shall notify Host Marriott in writing that such records are no longer of use to Services. Section 9.02. Access to Information. --------------------- Except as otherwise provided in a Related Agreement, from and after the Distribution Date, Host Marriott shall afford to Services and its authorized accountants, counsel 46 and other designated representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to all records, books, contracts, instruments, computer data and other data and information relating to pre-Distribution operations (collectively, "Information") within Host ----------- Marriott's possession insofar as such access is reasonably required by Services for the conduct of its business, subject to appropriate restrictions for classified or Privileged Information. Similarly, except as otherwise provided in a Related Agreement, Services shall afford to Host Marriott and its authorized accountants, counsel and other designated representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to Information within Services's possession, insofar as such access is reasonably required by Host Marriott for the conduct of its business, subject to appropriate restrictions for classified or Privileged Information. Information may be requested under this Article IX for the legitimate business purposes of either party, including without limitation, audit, accounting, claims (including claims for indemnification hereunder), litigation and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the transactions contemplated hereby. The parties hereby agree that Services shall also grant to Host Marriott reasonable access to the computer systems maintained by Services after the Distribution that contain data and other information reasonably related to the Real Estate Group Assets or the Real Estate Group Business, for purposes of review and retrieval of such data (including the generation of reports containing such data). Host Marriott agrees to reimburse Services for the reasonable costs of the use of such computer systems. 47 Section 9.03. Production of Witnesses. At all times from and after ----------------------- the Distribution Date, each of Services and Host Marriott shall use reasonable efforts to make available to the other, upon written request, its and its Subsidiaries' officers, directors, employees and agents as witnesses to the extent that such persons may reasonably be required in connection with any Action. Section 9.04. Reimbursement. Except to the extent otherwise ------------- contemplated in any Related Agreement, a party providing Information or witness services to the other party under this Article IX shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments of such amounts, relating to supplies, disbursements and other out- of-pocket expenses (at cost) and direct and indirect expenses of employees who are witnesses or otherwise furnish assistance (at cost), as may be reasonably incurred in providing such Information or witness services. Section 9.05. Retention of Records. Except as otherwise required -------------------- by law or agreed to in a Related Agreement or otherwise in writing, each of Services and Host Marriott may destroy or otherwise dispose of any of the Information, which is material Information and is not contained in other Information retained by Host Marriott or Services, as the case may be, at any time after the tenth anniversary of this Agreement, provided that, prior to such destruction or disposal, (a) it shall provide no less than 90 or more than 120 days prior written notice to the other, specifying in reasonable detail the Information proposed to be destroyed or disposed of and (b) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the Information proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly 48 arrange for the delivery of such of the Information as was requested at the expense of the party requesting such Information. Section 9.06. Confidentiality. Each of Host Marriott and its --------------- Subsidiaries on the one hand, and Services and its Subsidiaries on the other hand, shall hold, and shall cause its consultants and advisors to hold, in strict confidence, all Information concerning the other in its possession or furnished by the other or the other's representatives pursuant to this Agreement (except to the extent that such Information has been (i) in the public domain through no fault of such party or (ii) later lawfully acquired from other sources by such party), and each party shall not release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, rating agencies, bankers and other consultants and advisors, unless compelled to disclose by judicial or administrative process or, as reasonably advised by its counsel, by other requirements of law, or unless such Information is reasonably required to be disclosed in connection with (x) any litigation with any third-parties or litigation between the Host Marriott Group and the Services Group, (y) any contractual agreement to which the Host Marriott Group or the Services Group are currently parties, or (z) in exercise of either party's rights hereunder. Section 9.07. Privileged Matters. Services and Host Marriott ------------------ recognize that legal and other professional services that have been and will be provided prior to the Distribution Date have been and will be rendered for the benefit of both the Host Marriott Group and the Services Group and that both the Host Marriott Group and the Services Group should be deemed to be the client for the purposes of asserting all Privileges. To allocate the interests of each party in the Privileged Information, the parties agree as follows: (a) Host Marriott shall be entitled, in perpetuity, to control the assertion or waiver of all Privileges in connection with Privileged Information which relates solely to the 49 Real Estate Group, whether or not the Privileged Information is in the possession of or under the control of Host Marriott or Services. Host Marriott shall also be entitled, in perpetuity, to control the assertion or waiver of all Privileges in connection with Privileged Information that relates solely to the subject matter of any claims constituting Real Estate Group Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by Host Marriott, whether or not the Privileged Information is in the possession of or under the control of Host Marriott or Services. (b) Services shall be entitled, in perpetuity, to control the assertion or waiver of all Privileges in connection with Privileged Information which relates solely to the Operating Group, whether or not the Privileged Information is in the possession of or under the control of Host Marriott or Services. Services shall also be entitled, in perpetuity, to control the assertion or waiver of all Privileges in connection with Privileged Information which relates solely to the subject matter of any claims constituting Operating Group Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by Services, whether or not the Privileged Information is in the possession of or under the control of Host Marriott or Services. (c) Services and Host Marriott agree that they shall have a shared Privilege, with equal right to assert or waive, subject to the restrictions in this Section 9.07, with respect to all Privileges not allocated pursuant to the terms of Sections 9.07(a) and (b). All Privileges relating to any claims, proceedings, litigation, disputes, or other matters which involve both Services and Host Marriott or in respect of which both Services and Host Marriott retain any responsibility or liability under this Agreement, shall be subject to a shared Privilege. 50 (d) No party may waive any Privilege which could be asserted under any applicable law, and in which the other party has a shared Privilege, with out the consent of the other party, except to the extent reasonably required in connection with any litigation with third-parties or as provided in subsection (e) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within twenty (20) days after written notice upon the other party requesting such consent. (e) In the event of any litigation or dispute between a member of the Host Marriott Group and a member of the Services Group, either party may waive a Privilege in which the other party has a shared Privilege, without obtaining the consent of the other party, provided that such waiver of a shared Privilege shall be effective only as to the use of Information with respect to the litigation or dispute between the Host Marriott Group and the Services Group, and shall not operate as a waiver of the shared Privilege with respect to third-parties. (f) If a dispute arises between the parties regarding whether a Privilege should be waived to protect or advance the interest of either party, each party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other party, and shall not unreasonably withhold consent to any request for waiver by the other party. Each party specifically agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests. (g) Upon receipt by any party of any subpoena, discovery or other request which arguably calls for the production or disclosure of Information subject to a shared Privilege or as to which the other party has the sole right hereunder to assert a Privilege, or if any party obtains knowledge that any of its current or former directors, officers, agents or employees have 51 received any subpoena, discovery or other requests which arguably calls for the production or disclosure of such Privileged Information, such party shall promptly notify the other party of the existence of the request and shall provide the other party a reasonable opportunity to review the Information and to assert any rights it may have under this Section 7.07 or otherwise to prevent the production or disclosure of such Privileged Information. (h) The transfer of the Services Books and Records and the Host Marriott Books and Records and other Information between Host Marriott and its Subsidiaries and Services and its Subsidiaries is made in reliance on the agreement of Services and Host Marriott, as set forth in Sections 9.06 and 9.07, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable Privileges. The access to information being granted pursuant to Sections 9.01 and 9.02 hereof, the agreement to provide witnesses and individuals pursuant to Section 9.03 hereof and the transfer of Privileged Information between Host Marriott and its Subsidiaries and Services and its Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Agreement or otherwise. ARTICLE X. INSURANCE --------- Section 10.01. Policies and Rights Included Within the Operating ------------------------------------------------- Group Assets. Without limiting the generality of the definition of the ------------ Operating Group Assets or the effect of Section 2.01, the Operating Group Assets shall include (a) any and all rights of an insured party under each of the Shared Policies, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred on or prior to the Distribution 52 Date by any party in or in connection with the conduct of the Operating Group or, to the extent any claim is made against Services or any of its Subsidiaries, the Real Estate Group, and which injuries, losses, liabilities, damages and expenses may arise out of insured or insurable occurrences or events under one or more of the Shared Policies; provided, however, that -------- ------- nothing in this clause shall be deemed to constitute (or to reflect) the assignment of the Shared Policies, or any of them, to Services and (b) the Operating Group Policies. Section 10.02. Post-Distribution Date Claims. ----------------------------- (a) If, subsequent to the Distribution Date, any person, corporation, firm or entity shall assert a claim against Services or any of its Subsidiaries with respect to any injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Distribution Date in, or in connection with, the conduct of the Operating Group Business or, to the extent any claim is made against Services or any of its Subsidiaries, the Real Estate Group Business, and which injury, loss, liability, damage or expense may arise out of insured or insurable occurrences or events under one or more of the Shared Policies, Host Marriott shall at the time such claim is asserted be deemed to assign, without need of further documentation, to Services any and all rights of an insured party under the applicable Shared Policy with respect to such asserted claim, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer; provided, however, that nothing in this sentence -------- ------- shall be deemed to constitute (or to reflect) the assignment of the Shared Policies, or any of them, to Services. (b) If, subsequent to the Distribution Date, any person, corporation, firm or entity shall assert a claim against Host Marriott or any of its Subsidiaries with respect to any injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the 53 Distribution Date and which injury, loss, liability, damage or expense may arise out of insured or insurable occurrences or events under one or more of the Operating Group Policies, Services shall at the time such claim is asserted be deemed to assign, without need of further documentation, to Host Marriott any and all rights of an insured party under the applicable Operating Group Policy with respect to such asserted claim, specifically including rights of indemnity and the right to be defended by or at the expense of the insurer; provided, however, that nothing in this sentence shall be deemed to -------- ------- constitute (or to reflect) the assignment of such Operating Group Policy to Host Marriott. Section 10.03. Administration and Reserves. --------------------------- (a) Notwithstanding the provisions of Article III, but subject to any contrary provisions of any Related Agreement, from and after the Distribution Date: (i) Services shall be entitled to any reserves established by Host Marriott or any of its Subsidiaries, or the benefit of reserves held by any insurance carrier, with respect to the Operating Group Liabilities; and (ii) Host Marriott shall be entitled to any reserves established by Host Marriott or any of its Subsidiaries, or the benefit of reserves held by any insurance carrier, with respect to the Real Estate Group Liabilities. (b) Insurance Premiums. Services shall have the right but not the ------------------ obligation to pay the premiums, to the extent that Host Marriott does not pay premiums with respect to Real Estate Group Liabilities (retrospectively-rated or otherwise), with respect to Shared Policies and the Operating Group Policies, as required under the terms and conditions of the respective Policies, whereupon Host Marriott shall forthwith reimburse Services for that portion of such premiums paid by Services as are attributable to the Real Estate Group Liabilities. Host 54 Marriott shall provide continued coverage under its director and officer liability insurance policy for a period of not less than one year for acts which took place or were alleged to have taken place prior to the Distribution Date covering persons who were directors and officers of Host Marriott prior to the Distribution Date. Fifty percent of the additional premiums, if any, for such coverage shall be reimbursed by Services within 15 days of the Distribution Date. Such coverage for director and officer liability insurance shall not be discontinued by Host Marriott without the consent of Services, which consent shall not be unreasonably withheld. (c) Allocation of Insurance Proceeds. Insurance Proceeds received -------------------------------- with respect to claims, costs and expenses under the Policies shall be paid to Services with respect to the Operating Group Liabilities and to Host Marriott with respect to the Real Estate Group Liabilities. Payment of the allocable portions of indemnity costs of Insurance Proceeds resulting from the liability policies will be made to the appropriate party upon receipt from the insurance carrier. In the event that the aggregate limits on any Policies are exceeded, the parties agree to provide an equitable allocation of Insurance Proceeds received after the Distribution Date based upon their respective bona fide claims. The parties agree to use their best efforts to cooperate with respect to insurance matters. Section 10.04. Agreement for Waiver of Conflict and Shared Defense. --------------------------------------------------- In the event that Insured Claims of both Services and Host Marriott exist relating to the same occurrence, Services and Host Marriott agree to jointly defend and to waive any conflict of interest necessary to the conduct of that joint defense. Nothing in this paragraph shall be construed to limit or otherwise alter in any way the indemnity obligations of the parties to this Agreement, including those created by this Agreement, by operation of law or otherwise. 55 ARTICLE XI. MISCELLANEOUS ------------- Section 11.01. Complete Agreement; Construction. This Agreement, -------------------------------- including the Schedules and Exhibits and the Related Agreements and other agreements and documents referred to herein, shall constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of the Related Agreements, then the Related Agreements shall control. Section 11.02. Expenses. Except as otherwise set forth in this -------- Agreement or any Related Agreement, all costs and expenses in connection with the preparation, execution, delivery and implementation of this Agreement and the Distribution and with the consummation of the transactions contemplated by this Agreement shall be charged to the party for whose benefit the expenses are incurred, with any expenses which cannot be allocated on such basis to be split equally between the parties. Section 11.03. Governing Law. This Agreement shall be governed by ------------- and construed in accordance with the laws of the State of Maryland, without regard to the principles of conflicts of laws thereof. Section 11.04. Notices. All notices and other communications ------- hereunder shall be in writing and shall be delivered by hand or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other addresses for a party 56 as shall be specified by like notice) and shall be deemed given on the date on which such notice is received: To Services: Host Marriott Services Corporation 10400 Fernwood Road 4th Floor Bethesda, Maryland 20817 Attention: Joe P. Martin Senior Vice President and General Counsel To Host Marriott: Host Marriott Corporation 10400 Fernwood Road 5th Floor Bethesda, Maryland 20817 Attention: Stephen J. McKenna Executive Vice President and General Counsel Section 11.05. Amendments. This Agreement may not be modified or ---------- amended except by an agreement in writing signed by the parties. Section 11.06. Successors and Assigns. This Agreement and all of ---------------------- the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Section 11.07. Termination. This Agreement may be terminated and ----------- the Distribution abandoned at any time prior to the Distribution Date by and in the sole discretion of the Host Marriott Board without the approval of Services or of Host Marriott's stockholders. In the event of such termination, no party shall have any liability to any other party pursuant to this Agreement. Section 11.08. Subsidiaries. Each of the parties hereto shall ------------ cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations 57 set forth herein to be performed by any Subsidiary of such party which is contemplated to be a Subsidiary of such party on and after the Distribution Date. Section 11.09. No Third-Party Beneficiaries. Except for the ---------------------------- provisions of Article VII relating to Indemnities, this Agreement is solely for the benefit of the parties hereto and their respective Subsidiaries and Affiliates and should not be deemed to confer upon third-parties any remedy, claim, claim of action or other right in excess of those existing without reference to this Agreement. Section 11.10. Titles and Headings. Titles and headings to ------------------- sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Section 11.11. Exhibits and Schedules. The Exhibits and Schedules ---------------------- shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. Section 11.12. Legal Enforceability. Any provision of this -------------------- Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party hereto, each party hereto acknowledges that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. Section 11.13. Arbitration of Disputes. (a) Any controversy or ----------------------- claim arising out of this Agreement, or any breach of this Agreement, including any controversy relating to a 58 determination of whether specific assets constitute Operating Group Assets or Real Estate Group Assets or whether specific Liabilities constitute Operating Group Liabilities or Real Estate Group Liabilities, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association then in effect, as modified by this Section 11.13 or by the further agreement of the parties. (b) Such arbitration shall be conducted in Montgomery County, Maryland. (c) Any judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitrators shall not, under any circumstances, have any authority to award punitive, exemplary or similar damages, and may not, in any event, make any ruling, finding or award that does not conform to the terms and conditions of this Agreement. (d) Nothing contained in this Section 11.13 shall limit or restrict in any way the right or power of a party at any time to seek injunctive relief in any court and to litigate the issues relevant to such request for injunctive relief before such court (i) to restrain the other party from breaching this Agreement or (ii) for specific enforcement of this Section 11.13. The parties agree that any legal remedy available to a party with respect to a breach of this Section 11.13 will not be adequate and that, in addition to all other legal remedies, each party is entitled to an order specifically enforcing this Section 11.13. (e) The Parties hereby consent to the jurisdiction of the federal courts located in the State of Maryland for all purposes under this Agreement. (f) Neither party nor the arbitrators may disclose the existence or results of any arbitration under this Agreement or any evidence presented during the course of the 59 arbitration without the prior written consent of both parties, except as required to fulfill applicable disclosure and reporting obligations, or as otherwise required by law. (g) Each party shall bear its own costs incurred in the arbitration. If either party refuses to submit to arbitration any dispute required to be submitted to arbitration pursuant to this Section 11.13, and instead commences any other proceeding, including, without limitation, litigation, then the party who seeks enforcement of the obligation to arbitrate shall be entitled to its attorneys' fees and costs incurred in any such proceeding. Section 11.14. Prompt Payment. Where the terms of this Agreement -------------- require payment of an amount "as promptly as possible," "as soon as practicable," or "as soon as possible," following a specified event, occurrences or date, such payment shall be made within five (5) business days of such event, occurrence or date. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. HOST MARRIOTT CORPORATION By: /s/ Christopher G. Townsend ----------------------------------- Title: Senior Vice President -------------------------------- HOST MARRIOTT SERVICES CORPORATION By: /s/ Joe P. Martin ----------------------------------- Title: Senior Vice President -------------------------------- 60 INDEX OF EXHIBITS Exhibit A Amended MI Distribution Agreement Exhibit B Employee Benefits Allocation Agreement Exhibit C Host Marriott Logo Exhibit D Host Marriott Pro Forma Balance Sheet Exhibit E License Agreement Exhibit F Services Bylaws Exhibit G Services Certificate Exhibit H Services Noncompetition Agreement Exhibit I Services Pro Forma Balance Sheet Exhibit J Supplemental Warrant Agreement Exhibit K Tax Sharing Agreement Exhibit L Transitional Service Agreement Exhibit M Opinion of American Appraisal Associates Exhibit N Opinion of James D. Wolfensohn Incorporated 61 SCHEDULE 1.01(a) Assigned MI Agreements 62 SCHEDULE 1.01(b) Transferred Intellectual Property 63 SCHEDULE 1.01(c) Transferred Subsidiaries 64 EX-2.2 3 EXHIBIT 2.2 Exhibit 2.2 AMENDMENT NO. 1 DATED AS OF DECEMBER 29, 1995 TO DISTRIBUTION AGREEMENT DATED AS OF SEPTEMBER 15, 1993 BETWEEN HOST MARRIOTT CORPORATION AND MARRIOTT INTERNATIONAL, INC. Host Marriott Corporation (f/k/a Marriott Corporation, "Host Marriott"), Marriott International, Inc. ("MI"), and Host Marriott Services Corporation, ("HM Services") desire to adopt this Amendment to the Distribution Agreement between Host Marriott and MI dated as of September 15, 1993 (the "Original Agreement", and as amended hereby, the "Distribution Agreement"). By way of this Amendment, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Host Marriott, HM Services and MI understand and agree as follows: 1. On or about December 29, 1995 (the "HM Services Distribution Date"), Host Marriott will distribute all of the common stock of HM Services to the shareholders of record of Host Marriott (the "HM Services Distribution"); 2. Section 6.06 of the Original Agreement, provides, among other things, for the right of MI to purchase from Host Marriott, under certain conditions, the "Host/Travel Plazas Business" as defined in the Original Agreement; 3. On and after the HM Services Distribution, HM Services, directly and through its subsidiaries and related enterprises, will conduct substantially all of the present "Host/Travel Plazas Business" of Host Marriott; 4. MI agrees not to exercise any rights it may have under Section 6.06 in connection with the HM Services Distribution and MI, Host Marriott, and HM Services agree to terminate any and all of MI's rights under Section 6.06; 5. Effective as of the HM Services Distribution Date, the Distribution Agreement is amended to delete the text of Section 6.06 in its entirety, and replace the existing caption "Right of First Offer With Respect To Host/Travel Plaza's Business" with the caption "Intentionally Omitted"; and 6. HM Services constitutes a "successor and permitted assign" of Host Marriott with respect to the Host/Host Travel Plazas Business within the meaning of Section 9.06 of the Distribution Agreement, and accordingly from and after the HM Services Distribution Date (without releasing Host Marriott from any of its obligations under the Distribution Agreement), HM Services shall with respect to the Host/Travel Plazas Business also be bound by and entitled to the benefits of the Distribution Agreement. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered as of December 29, 1995. Marriott International, Inc. Host Marriott Services Corporation By: /s/ Raymond G. Murphy By: /s/ Joe P. Martin ------------------------------- ------------------------------------ Title: SVP & Treasurer Title: SRVP & Gen Counsel ---------------------------- --------------------------------- Host Marriott Corporation By: /s/ Chris Townsend ------------------------------- Title: SRVP ---------------------------- AMENDMENT TO THE NON-COMPETITION AGREEMENT BETWEEN --------------------------------------------------- MARRIOTT INTERNATIONAL, INC. AND HOST MARRIOTT CORPORATION ---------------------------------------------------------- Marriott International, Inc. ("MI"), Host Marriott Corporation ("Host Marriott") and Host Marriott Services Corporation ("HM Services") hereby enter into this Amendment to the Non-Competition Agreement between MI and HM Services ("Agreement") and agree that: 1. MI and Host Marriott are parties to the Non-Competition Agreement dated October 8, 1993 (the "1993 Agreement"). A copy of the 1993 agreement is attached as Exhibit 1 to this Agreement and incorporated herein. The 1993 Agreement remains in full force and effect except to the extent expressly modified by this Agreement. 2. HM Services is presently a subsidiary company of Host Marriott. On or about December 29, 1995 the common stock of HM services will be distributed to the shareholders of Host Marriott (the "HM Services Distribution"). 3. All terms of the 1993 Agreement shall apply to HM Services as they would have otherwise applied to the Host Marriott. 4. The 1993 Agreement and this Agreement shall be binding on all parties and shall be binding on all subsidiary companies of each party and shall further be binding on any successor company conducting substantially all of the "MMS Business" or "Host Business". For Marriott International, Inc. For Host Marriott Corporation /s/ Raymond G. Murphy /s/ Stephen McKenna - ------------------------------------ -------------------------------- Date: 12/27/95 Date: 12/27/95 For Host Marriott Services Corporation /s/ Joe P. Martin - ------------------------------------ Date: 12/26/95 EX-4.1 4 EXHIBIT 4.1 Exhibit 4.1 HOST MARRIOTT CORPORATION HOST MARRIOTT SERVICES CORPORATION and FIRST CHICAGO TRUST COMPANY OF NEW YORK ______________________________ FIRST SUPPLEMENTAL WARRANT AGREEMENT Dated as of December 22, 1995 ______________________________ This First Supplemental Warrant Agreement (this "Supplement") to the Warrant Agreement dated October 19, 1994 (the "Warrant Agreement") between Host Marriott Corporation, a Delaware corporation (the "Company") and First Chicago Trust Company of New York, as Warrant Agent (the "Warrant Agent"), is entered into this 22nd day of December, 1995, by and among the Company, the Warrant Agent and the Company's wholly-owned subsidiary, Host Marriott Services Corporation, a Delaware Corporation ("Services"). WHEREAS, pursuant to the Warrant Agreement, the Company has issued Common Stock Purchase Warrants ("Warrants") to purchase 7.7 million shares of common stock, $1.00 par value per share, of the Company ("Company Common Stock"), of which Warrants to purchase approximately 7.3 million shares of Company Common Stock are outstanding on the date hereof; WHEREAS, the Company plans to make a special dividend consisting of the distribution (the "Distribution"), to holders of its outstanding shares of Company Common Stock as of December 22, 1995 (the "Distribution Record Date"), on a one share-for-five share basis, of all the outstanding shares of common stock, no par value per share, of Services; WHEREAS, the Board of Directors of the Company has determined that the rights provided to the holders of Warrants pursuant to this Supplement will enable the holders of Warrants to participate in the Distribution on a basis that is fair and appropriate in light of the basis on which holders of Company Common Stock will participate in this Distribution, and that the notice to be provided to holders of Warrants in connection with the Distribution is fair and appropriate in light of the notice being provided to holders of Common Stock in connection with the Distribution; and WHEREAS, in connection with the Distribution, the Company and Services will enter into a Distribution Agreement (the "Distribution Agreement"), pursuant to which the Company and Services have agreed, among other things, to effect the amendments to the Warrant Agreement set forth herein, which do not adversely affect the interests of the holders of Warrant Certificates (as defined in the Warrant Agreement); WHEREAS, pursuant to Section 19 of the Warrant Agreement, the Company and the Warrant Agent may amend the Warrant Agreement without the consent of the holders of Warrant Certificates to supplement and amend the Warrant Agreement in a manner for matters arising thereunder which the Company and the Warrant Agent may deem necessary or desirable and which do not adversely affect the interests of the holders of Warrant Certificates. NOW THEREFORE, pursuant to Section 19 of the Warrant Agreement, and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby supplement and amend the Warrant Agreement as follows: Section 1. Capitalized Terms. All capitalized terms used herein, and ----------------- not defined herein, shall have the meanings ascribed to them in the Warrant Agreement. 2 Section 2. Definitions. The following definitions shall be added to ----------- the Warrant Agreement immediately following the recitals thereto: "Distribution: the distribution by a special dividend to holders of ------------ record of Common Stock on the Distribution Record Date, on a one share-for-five share basis, of all of the outstanding shares of Services Common Stock. Distribution Record Date: December 22, 1995 ------------------------ Services: Host Marriott Services Corporation, a Delaware corporation. -------- Services Common Stock: common stock, no par value per share, of --------------------- Services. Services Warrant Shares: the shares of Services Common Stock issuable ----------------------- upon exercise of the Warrants (which shall comprise one-fifth of a share of Services Common Stock for each Warrant Share issuable on the exercise of each Warrrant, subject to further adjustment as set forth in Section 12 of the Agreement)." Section 3. Terms of Warrants; Exercise of Warrants. A new Section 6A --------------------------------------- shall be added to the Warrant Agreement immediately after Section 6 as follows: "SECTION 6A. Terms and Exercise of Warrants With Respect to Services ------------------------------------------------------- Common Stock. Commencing on the date after the Distribution Record ------------ Date, holders who exercise their Warrants pursuant to Section 6 of the Warrant Agreement shall also be entitled to receive from Services, upon exercise of such Warrants and upon consummation of the Distribution, one-fifth of one share of Services Common Stock per Warrant exercised, as adjusted pursuant to Section 12 of this Agreement. Subject to the provisions of Section 8 of the Agreement, upon surrender of Warrants and payment of the Exercise Price, Services shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder, and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Services Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 13A. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Services Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price." Section 4. No Rights as Stockholders. A new Section 7A shall be ------------------------- added to the Warrant Agreement immediately after Section 7 as follows: "SECTION 7A. No Rights as Stockholders of Services. Nothing ------------------------------------- contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders of Warrant Certificates the right to vote or to consent to or to receive notice as stockholders in respect of the 3 meetings of stockholders or the election of Directors of Services or any other matter, or any rights whatsoever as stockholders of Services." Section 5. Payment of Taxes and Other Costs. The first paragraph of -------------------------------- Section 8 of the Warrant Agreement is hereby deleted in its entirety and replaced with the following: "The Warrant holder shall be required to pay any and all tax or taxes which may be payable in respect of (i) the issuance of the Warrants, (ii) the issuance of Warrant Shares upon exercise of the Warrants, (iii) the issuance of Services Warrrant Shares upon exercise of the Warrants, or (iv) any transfer of any Warrant Certificates or the issuance of any certificates for Warrant Shares in a name other than that of the registered holder of the Warrant Certificate surrendered upon the exercise of the Warrant, and neither the Company nor Services shall be required to issue or deliver Warrant Shares or Services Warrant Shares, respectively, or new Warrant Certificates unless and until the person or persons requesting the issuance thereof shall have paid to the Company or Services (as applicable) the amount of such tax or shall have established to the satisfaction of each of the Company and Services that such tax has been paid." Section 6. Reservation of Services Warrant Shares. A new Section 10A -------------------------------------- shall be added to the Warrant Agreement immediately after Section 10 as follows: "SECTION 10A. Reservation of Services Warrant Shares. The provisions -------------------------------------- of Section 10 shall apply equally to Services, the Services Warrant Shares and to the reservation of Services Common Stock for the purpose of enabling Services to satisfy its obligation to issue the Services Warrant Shares with the same force and effect as such provisions apply to the reservation of Warrant Shares by the Company." Section 7. Registration of Services Warrant Shares. A new Section --------------------------------------- 11A shall be added to the Warrant Agreement immediately after Section 11 as follows: "SECTION 11A. Registration of Services Warrant Shares. Services will --------------------------------------- use its reasonable best efforts to maintain an effective and current registration statement under the Securities Act for the issuance of Services Warrant Shares issuable upon exercise of Warrants during the period commencing on the Distribution Date through the earlier of (i) the expiration of the Warrants or (ii) the date on which all Warrants have been exercised; provided that Services (in its sole discretion) shall have the right to discontinue the effectiveness of such registration statement with respect to the Services Warrant Shares for such periods as Services determines are necessary and appropriate. Services will notify the Warrant Agent at any time that the effectiveness of the registration statement with respect to the Services Warrant Shares has been suspended (any such period during which effectiveness of the registration statement is suspended being referred to as a "Services Suspension Period"), 4 and during any Services Suspension Period the Warrants will not be exercisable with respect to the Services Warrant Shares." Section 8. Adjustment of Exercise Price and Number of Warrant Shares --------------------------------------------------------- Issuable. - -------- The first two sentences of Section 12 of the Warrant Agreement shall be deleted and the following text shall be inserted in its place: "The Exercise Price and the number of Warrant Shares and Services Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 12. For purposes only of application of this Section 12 to events occurring with respect to the Company ("Company Events"), (a) "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount, and (b) "Exercise Price" means the "Company Portion of the Exercise Price," which equals the product of the Exercise Price and the Company Percentage. The "Company Percentage" means the amount, expressed as a percentage, resulting from the following calculation: (i) the Company Initial Trading Price (as defined below), divided by (ii) the sum of (x) one fifth of the ------- -- Services Initial Trading Price (as defined below) plus (y) the Company Initial Trading Price. The "Company Initial Trading Price" shall mean the Sale Price of Company Common Stock on the first full Trading Day following the date on which the Distribution was effected (the "Distribution Date") that the Company Common Stock trades "ex- distribution" one-fifth share of Services Common Stock. The "Services Initial Trading Price" shall mean the Sale Price of the Services Common Stock on the first full Trading Day following the Distribution Date that the Services Common Stock trades "regular way." The term "Sale Price" as applied to a share of Services Common Stock or Company Common Stock on any date means the closing per share sale price of a share of Services Common Stock or Company Common Stock, as applicable (or, if no closing sale price is reported, the average of the bid and asked prices or, if more than one in either case, the average of the average bid and the asked prices) on such date as reported in composite transaction for the principal United States securities exchange on which the Services Common Stock or Company Common Stock (as applicable) is traded or, if such stock is not listed on a United States national or regional stock exchange, as reported by the National Association of Securities Dealers Automated Quotation System. The term "Trading Day" means each day on which the Securities Exchange or Quotation System which is used to determine the Sale Price is open for trading or quotation. No adjustment under this Section 12 shall be made to the Services 5 Portion of the Exercise Price (as defined below) or to the number of Services Warrant Shares issuable upon exercise of a Warrant in connection with Company Events. For purposes only of application of this Section 12 to events occurring with respect to Services ("Services Events"), (a) "the Company" means Services, (b) "Common Stock" means shares now or hereafter authorized of any class of common stock of Services and any other stock of Services, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount and (c) "Exercise Price" means the "Services Portion of the Exercise Price," which equals the product of the Exercise Price and the Services Percentage. The "Services Percentage" means the amount, expressed as a percentage, resulting from subtracting the Company Percentage from one hundred percent (100%). No adjustment under the Section 12 shall be made to the Company Portion of the Exercise Price or to the number of Warrant Shares issuable upon exercise of a Warrant in connection with Services Events. Successive adjustments may be made with respect to Company Events specified in this Section 12, but such adjustments shall affect only the number of and/or type of capital stock of the Company issuable in consideration of the Company Portion of the Exercise Price. Successive adjustments may be made with respect to Services Events specified in this Section 12, but such adjustments shall affect only the number and/or type of capital stock of Services issuable in consideration of the Services Portion of the Exercise Price. Notwithstanding such adjustments, each Warrant may be exercised only upon payment of the applicable Exercise Price set forth in the Warrant Certificate (i.e., $8 per Warrant if exercised on or before 5:00 p.m. ---- New York City time on October 8, 1996, and $10 per Warrant if exercised thereafter); and upon exercise of a Warrant and payment of such Exercise Price following consummation of the Distribution, the holder shall be entitled to receive one share of Company Common Stock (subject to adjustment under this Section 12 with respect to subsequent Company Events) and one-fifth of one share of Services Common Stock (subject to adjustment under this Section 12 with respect to subsequent Services Events.)" Section 9. Fractional Interests. (a) The last sentence of Section 13 -------------------- of the Warrant Agreement shall be deleted and the following text inserted in its place: "If any fraction of a Warrant Share would, except for the provision this Section 13, be issuable upon exercise of any Warrants (or specified portion thereof), the Company shall pay to the exercising Warrant holder (in lieu of issuance of such fractional Warrant Share) an amount in cash equal to (a) the Exercise Price on the date of the Warrant is presented for exercise multiplied by (b) the Company ---------- -- Percentage (as defined in Section 12) multiplied by (c) such ---------- -- fraction." 6 (b) A new Section 13A shall be added to the Warrant Agreement immediately after Section 13 as follows: "SECTION 13A. Fractional Interests -- Services Warrant Shares. ----------------------------------------------- Services shall not be required to issue fractional Services Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Services Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Services Warrant Shares issuable on exercise of the Warrants so presented. If any fraction of a Services Warrant Share would, except for the provision of this Section 13A, be issuable on the exercise of any Warrants (or specified portion thereof), Services shall pay to the exercising Warrant holder (in lieu of issuance of such fractional Services Warrant Share) an amount in cash equal to (a) the Exercise Price on the date the Warrant is presented for exercise multiplied by (b) the Services Percentage (as defined in ---------- -- Section 12) multiplied by (c) such fraction." ---------- -- Section 10. Notices to Warrant Holders. -------------------------- (a) The first sentence of Section 14 of the Warrant Agreement shall be deleted and the following text inserted in its place: "Upon the occurrence of a Company Event, the Company shall promptly thereafter (i) cause to be filed with the Warrant Agent a certificate signed by the Chief Financial Officer, the Treasurer or an Assistant Treasurer, specifying the adjustment of the number of Warrant Shares issuable upon exercise of a Warrant and payment of the Exercise Price pursuant to Section 12 and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at his or her address appearing on the Warrant register written notice of such adjustments by first class mail, postage prepaid." (b) A new Section 14A shall be added to the Warrant Agreement immediately after Section 14 as follows: "SECTION 14A. Notices to Warrant Holders By Services. Upon the -------------------------------------- occurrence of a Services Event, Services shall promptly thereafter (i) cause to be filed with the Warrant Agent a certificate signed by the Chief Financial Officer, the Treasurer or any Assistant Treasurer, specifying the adjustment of the number of Services Warrant Shares issuable upon exercise of a Warrant and payment of the Exercise Price pursuant to Section 12 and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at his or her address 7 appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such Notice may be given in advance and included as a part of any notice required to be mailed under the other provision of this Agreement." Section 11. Warrant Agent. ------------- a) The preamble of Section 16 of the Warrant Agreement is hereby deleted in its entirety and replaced by the following: "The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company, Services, and the holders of Warrants, by their acceptance thereof, shall be bound:" b) A new Section 16A shall be added to the Warrant Agreement immediately following Section 16 as follows: "SECTION 16A. Warrant Agent -- Services. The provisions of Section ------------------------- 16 limiting the responsibility of and defining the rights and obligations of the Warrant Agent to the Company and the holders of Warrant Certificates shall apply with the same force and effect to limit the responsibility and to define the rights and obligations of the Warrant Agent to Services." Section 12. Notices. New Sections 18A and 18B regarding notices to ------- be delivered under the Warrant Agreement shall be added to the Warrant Agreement immediately following Section 18 of the Warrant Agreement as follows: "SECTION 18A. Notices to Services and Warrant Agent. Any notice or ------------------------------------- demand authorized by the Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant Certificate to or on Services shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by Services with the Warrant Agent), as follows: Host Marriott Services Corporation 10400 Fernwood Road Bethesda, Maryland 20817 Attention: Corporate Secretary In case Services shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the principal office of the Warrant Agent. Any notice pursuant to this Agreement to be given by Services or by the registered holder(s) of any Warrant Certificate to the Warrant Agent 8 shall be sufficiently given when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with Services), or in the case of notices by Services to the Warrant Agent, by telecopier, confirmed by overnight courier, to the Warrant Agent as follows: First Chicago Trust Company of New York Stock Transfer Department 14 Wall Street, Suite 4680 New York, New York 10005 Section 18B. Notices Between the Company and Services. The Company ---------------------------------------- shall deliver to Services, in the manner set forth in Section 18A, a copy of any notice that, pursuant to the Agreement, the Company delivers to, or receives from, the Warrant Agent or the registered holder of any Warrant Certificate substantially contemporaneously with the delivery or receipt of the Notice to or from the Warrant Agent or such registered holders. Services shall deliver to the Company, in the manner set forth in Section 18, a copy of any notice that, pursuant to the Agreement, Services delivers to, or receives from, the Warrant Agent or the registered holder of any Warrant Certificate substantially contemporaneously with the delivery or receipt of the Notice to or from the Warrant Agent or such registered holders." 9 IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Supplemental Warrant Agreement on behalf of the respective parties hereto as of the 22nd day of December, 1995. Attest: HOST MARRIOTT CORPORATION By: /s/ Christopher G. Townsend - -------------------------- ------------------------------- Christopher G. Townsend Senior Vice President Attest: HOST MARRIOTT SERVICES CORPORATION By: /s/ Joe P. Martin - -------------------------- ------------------------------- Joe P. Martin Vice President Attest: FIRST CHICAGO TRUST COMPANY OF NEW YORK By: /s/ Kathleen D. Whelply - -------------------------- ------------------------------- Kathleen D. Whelply Assistant Vice President 10 EX-4.2 5 EXHIBIT 4.2 Exhibit 4.2 IRREVOCABLE TRUST AGREEMENT --------------------------- Irrevocable Trust Agreement, dated as of December 21, 1995 (the "Agreement"), between Host Marriott Corporation (the "Company") and The First National Bank of Chicago, a banking association formed under the laws of the United States of America (the "Trustee"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Board of Directors of the Company has heretofore authorized the issuance and sale of shares of a series of preferred stock of the Company, designated as Series A Cumulative Convertible Preferred Stock ("Convertible Preferred Stock") pursuant to that certain Certificate of Designation Rights and Preferences of the Series A Cumulative Convertible Preferred Stock without par value of Host Marriott Corporation, formerly known as Marriott Corporation (the "Certificate of Designation"); WHEREAS, the Company has outstanding on the date hereof 10.888 shares of its Convertible Preferred Stock represented by 10,888 shares of publicly traded depositary shares ("Depositary Shares"); WHEREAS, the Board of Directors of the Company have determined to cause the Company to call for redemption (the "Redemption") any and all shares of Convertible Preferred Stock on January 15, 1996 (the "Redemption Date") pursuant to Section 4 of the Certificate of Designation; WHEREAS, on December 7, 1995, the Company gave to holders of Convertible Preferred Stock notice of the Redemption pursuant to Section 4(c) of the Certificate of Designation; WHEREAS, the Company desires to deposit in trust, for the account of the holders of shares of Convertible Preferred Stock to be redeemed, $683,684.74 representing funds sufficient to pay, in full, the redemption price for the outstanding shares of Convertible Preferred Stock (the "Redemption Fund"), as permitted by Section 4(d) of the Certificate of Designation; WHEREAS, the Trustee has full power and authority to execute this Agreement and to accept the trust imposed upon it; NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereby agree as follows: ARTICLE I APPOINTMENT OF TRUSTEE ---------------------- 1.1 Appointment of Trustee. The Company hereby appoints The First ---------------------- National Bank of Chicago as Trustee hereunder, and the Trustee accepts the trust created by this Agreement upon the terms and conditions hereof. ARTICLE II REDEMPTION ---------- 2.1 Covenant to Redeem. The Company hereby irrevocably covenants to ------------------ redeem in accordance with the Certificate of Designation all shares of the Convertible Preferred Stock outstanding on the Redemption Date at the redemption price of $62,792.50 per share of Convertible Preferred Stock, representing a redemption price per Depositary Share of $62.7925 (the "Redemption Price"). All references herein to Convertible Preferred Stock and the redemption thereof shall be deemed to include a reference to Depositary Shares and the redemption of such Depositary Shares. 2.2 Corporate Authorization. The Company represents that it has ----------------------- taken all corporate action necessary to authorize the Company's election to redeem the Convertible Preferred Stock. 2.3 Notice of Redemption. The Company represents that it has given -------------------- the holders of the Convertible Preferred Stock notice which complies, in all material respects, with the requirements for such notice set forth in Section 4(c) of the Certificate of Designation. ARTICLE III THE TRUST ESTATE ---------------- 3.1 Assignment of Rights and Interests. With respect to the ---------------------------------- Convertible Preferred Stock, there is hereby created and established with the Trustee a special and irrevocable trust (the "Trust") to be held by the Trustee separate and apart from all other assets of the Company or the Trustee. The Company hereby transfers and assigns to the Trustee and its successors, in trust, for the purposes herein specified, all right, title and interest of the Company in and to the Redemption Fund, for the benefit of holders of Convertible Preferred Stock. The Redemption Fund held in trust hereunder as well as any interest received thereon by the Trustee are hereinafter referred to as the "Trust Estate." The Trustee shall deposit into the Trust Estate, as and when received by the Trustee, the Redemption Fund and any interest or other payments received thereon. 2 Pursuant to the Certificate of Designation, shares of Convertible Preferred Stock are convertible into shares of common stock, $1.00 par value per share ("Common Stock"), of the Company until the close of business on January 5, 1996. Upon the Trustee's receipt of any notice from First Chicago Trust Company of New York, Conversion and Redemption Agent for the Convertible Preferred Stock (the "Conversion and Redemption Agent"), stating that a specified number of shares of Convertible Preferred Stock have been converted into shares of Common Stock pursuant to the terms of the Certificate of Designation, the Trustee shall promptly return to the Company from the Redemption Fund any funds in respect of such shares of Convertible Preferred Stock converted into shares of Common Stock. 3.2 Purpose of Trust. The Trust is established for the purpose of ---------------- satisfying the Company's obligations in respect of the redemption of the Convertible Preferred Stock. The Trust Estate will be used to pay, on the Redemption Date, the Redemption Price, which includes accrued and unpaid dividends on the Convertible Preferred Stock up to and including the Redemption Date. On the Redemption Date, and upon the request of the Conversion and Redemption Agent, the Trustee shall pay to the Conversion and Redemption Agent funds in an amount equal to the aggregate Redemption Price for shares of Convertible Preferred Stock for the Conversion and Redemption Agent specifies that which holders have properly surrendered for redemption through the Redemption Date. Thereafter, and until termination of the Trust pursuant to Section 5.1, at the request of the Conversion and Redemption Agent, the Trustee shall pay to the Conversion and Redemption Agent the Redemption Price for any shares of Convertible Preferred Stock properly surrendered to the Conversion and Redemption Agent for redemption. Any securities, cash or other assets constituting a part of the Trust Estate in excess of the amount necessary to redeem shares of Convertible Preferred Stock shall be paid over and distributed to the Company from, and free of, the applicable Trust pursuant to Section 3.1 or Section 5.1 hereof. Except as provided in this Article or Section 5.1, the Trust Estate shall not be used for any other purpose. 3.3 Administration of Trust Estate. Monies deposited in the Trust ------------------------------ Estate shall be invested by the Trustee at the direction of the Company. ARTICLE IV THE TRUSTEE ----------- 4.1 Limitations on Liability. ------------------------ (a) The duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement. The liability of the Trustee for the payment of the Redemption Price to the holders of the Convertible Preferred Stock shall be limited to the application of the cash (or any other assets) in the Trust Estate. 3 (b) The Trustee may rely, and shall be protected in acting or refraining from acting in reliance upon, any direction, certificate, statement or other paper or document believed by it to be genuine and to have been signed or presented by the proper person or persons. (c) The Trustee may consult with counsel or other experts and any written opinion of such counsel or other experts shall be full and complete authorization and protection with respect to any action taken or suffered or omitted by the Trustee hereunder in good faith and in accordance with such opinion of counsel or other experts. (d) The Trustee shall not be liable for any actions taken, suffered or omitted by it and believed by it to be authorized or within its duties or powers conferred upon it by this Agreement so long as the Trustee is not acting in bad faith or with negligence. (e) The Trustee may execute any of the trust powers hereunder and perform any duty hereunder and exercise any right hereunder either directly or by or through its agents or attorneys. (f) The Trustee shall have no duty with respect to amounts payable to it in respect of the Trust Estate other than to receive them and to apply the amounts actually received in accordance with this Agreement. The Trustee shall not be obligated to take legal action to enforce the payment obligations of the issuers of any securities in the Trust Estate. The Company may, after 10 days' written notice to the Trustee, enforce any such obligations, in the Company's name or in the Trustee's name, at the Company's sole expense. (g) The Trustee shall have no duty to see to any filing, recording or registration of this Agreement or of any agreement amendatory or supplemental hereto or of any instrument of assignment, conveyance, or further assurance, or to the payment of any taxes, fees or charges in connection therewith, or to give any notice with respect thereto or to inquire or see to the payment of, or be under any duty in respect of, any tax or assessment or other governmental charge which may be levied or assessed on the Trust Estate or any part thereof or against the Company. The Trustee shall cooperate with the Company to the extent necessary to enable the Company to take any of the actions contemplated by this paragraph, but all at the Company's expense. (h) The Trustee shall not be required to post any bond or other security or risk any funds in connection with its duties as Trustee hereunder. (i) The Trustee shall not be liable for any loss resulting from any investment made pursuant to the terms of this Agreement, except as otherwise provided by Section 4.1(d) hereof. 4.2 Indemnification. The Company agrees to indemnify, defend and --------------- hold harmless the Trustee and its successors, assigns, agents and servants, from and against any 4 and all liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and expenses) of whatsoever kind and nature, which may be imposed on, incurred by or asserted against, at any time, the Trustee, arising from or out of the execution, delivery or administration, of this Agreement (including, without limitation, the establishment of the Trust Estate, the acceptance of the cash, securities or other assets deposited therein, the sufficiency of the Redemption Fund, the retention of the Redemption Fund or the proceeds thereof and any payment, transfer or other application of securities or cash by the Trustee in accordance with the provisions of this Agreement or as may arise by reason of any act, omission or error of the Trustee made in good faith in the conduct of its duties hereunder) except for those caused by its own negligence or bad faith. The obligations of the Company to indemnify the Trustee pursuant to this paragraph shall survive the termination of this Agreement. The Trustee shall have no right to obtain payment from the Trust Estate of amounts owing to the Trustee pursuant to this Section 4.2. 4.3 Compensation of the Trustee. In consideration of the service --------------------------- rendered by the Trustee under this Agreement, the Company agrees to and shall pay to the Trustee compensation as agreed from time to time between the Trustee and the Company. The Trustee shall be reimbursed for its out-of-pocket costs, expenses and attorneys fees and expenses reasonably incurred by it as Trustee with respect to the Trust Estate. The Trustee shall have no right to obtain payments of its fees and expenses hereunder from the Trust Estate. The provisions of this Section 4.3 shall survive the termination of this Agreement. ARTICLE V MISCELLANEOUS ------------- 5.1 Termination. ----------- (a) This Agreement shall terminate upon the earlier to occur of (i) the payment by the Trustee of the Redemption Price in respect of all shares of Convertible Preferred Stock outstanding on the Redemption Date or (ii) January 15, 1998. Upon termination of this Agreement, any cash, securities or other assets remaining in the Trust Estate shall be transferred promptly to the Company. Any portion of the Redemption Fund which shall remain unclaimed by the holders of Convertible Preferred Stock as of January 15, 1998 shall be promptly repaid to the Company and thereafter the holder of any such shares shall look only to the Company for the payment of the Redemption Price. 5.2 No Effect on Certificate of Designation and Convertible Preferred ----------------------------------------------------------------- Stock. Except as expressly provided in the Certificate of Designation, this - ----- Agreement (and the consummation of the transactions contemplated hereby) is not, and shall not be construed to be, a termination of or an amendment to the Certificate of Designation, nor shall it alter any provision of the Convertible Preferred Stock. 5 5.3 Notices. All instruction, notices and other communications shall ------- be given by mail, addressed as follows: In the case of the Company: Host Marriott Corporation 10400 Fernwood Road Bethesda, Maryland 20871 Attention: Christopher G. Townsend In the case of the Trustee: The First National Bank of Chicago c/o First Chicago Trust Company of New York 14 Wall Street 8th Floor, Window 2 New York, New York 10005 Mail Suite 4607 or at any other address furnished in writing by any of the parties hereto. 5.4 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 5.5 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. HOST MARRIOTT CORPORATION By: /s/ Christopher G. Townsend ----------------------------- Christopher G. Townsend Senior Vice President THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By: /s/ Richard D. Manella ----------------------------- R. D. Manella Vice President 7 EX-4.3 6 EXHIBIT 4.3 Exhibit 4.3 Host Marriott Corporation 10400 Fernwood Road Bethesda, Maryland 20817 December 7, 1995 First Chicago Trust Company of New York 525 Washington Boulevard, Suite 4660 3rd Floor, Tenders & Exchanges Jersey City, New Jersey 07310 Dear Sirs: Host Marriott Corporation (the "Corporation") has called for the redemption on January 15, 1996 (the "Redemption Date") of all of the issued and outstanding shares of its Series A Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock") at the redemption price of $52,480 per share (representing a redemption price of $52.48 per Depositary Share), plus the dividends accrued to and including the Redemption Date of $10,312.50 per share (representing dividends of $10.3125 per Depositary Share), or a total redemption payment of $62,792.50 per share (representing a total redemption payment of $62.7925 per Depositary Share). In accordance with the terms of the Certificate of Designation, Rights and Preferences of the Convertible Preferred Stock, the shares to be redeemed are convertible into common stock, $1.00 par value per share ("Common Stock"), of the Corporation until 5:00 p.m., New York City time on January 5, 1996. Each share of Convertible Preferred Stock (at its face value of $50,000 per share, representing $50 per Depositary Share) is convertible at a conversion price of $2.61 per share of Common Stock (resulting a conversion ratio of 19,157.088 shares of Common Stock per share of Convertible Preferred Stock, representing 19.157088 shares of Common Stock per Depositary Share) subject to adjustment as set forth below. As you know, Host Marriott (i) intends to distribute (the "Distribution") to the holders of its Common Stock, on a one-fifth share-for-one-share basis, all of the shares of the common stock, no par value per share ("Services Common Stock"), of Host Marriott Services Corporation ("Services"), (ii) has set December 22, 1995 as the record date (the "Record Date") for determining the identity of its common stockholders of record who will participate in the Distribution and (iii) has set December 29, 1995, as the date (the Distribution Date") on which (subject to the satisfaction of certain conditions discussed below) the Distribution will be made. Holders who exercise their right to convert their Depositary Shares into shares of Common Stock on or prior to the Record Date will participate in the Distribution on the same basis as any other holders of record of Common Stock on such date. Those who do not convert their Depositary Shares into shares of Common Stock prior to the close of business on the Record Date will be entitled to an adjustment in the price (the "Conversion Price") at which their Depositary Shares will be convertible into Common Stock subsequent to the Record Date, but will not be entitled to receive shares of Services Common Stock in the Distribution. The adjusted conversion price for each share of Convertible Preferred Stock after the Record Date will be $2.2185 per share (resulting in a conversion ratio of 22,537.75 shares of Common Stock per share of Convertible Preferred Stock, representing 22.53775 shares of Common Stock per Depositary Share). The Distribution is subject to the satisfaction of certain conditions on or before December 21, 1995. These conditions include, among other things, (i) receipt of a favorable tax ruling from the Internal Revenue Service with respect to the Distribution, (ii) the registration statement on Form 10 with respect to the Services Common Stock having been declared effective under the Securities and Exchange Act of 1934, as amended and (iii) the registration statement on Form 10 with respect to the Services Common Stock having been declared effective under the Securities and Exchange Act of 1934, as amended and (iii) the receipt of any necessary consents to the Distribution from third parties to certain concession and other contracts, except for those the failure of which to obtain would not have a material adverse effect on Services or the Company. If such conditions are not satisfied or waived by the Board on or before December 21, 1995, the Board may elect to postpone the Distribution Date and to establish a new Record Date for the Distribution, in which case the Distribution will remain subject to fulfillment or waiver of such conditions and/or such other conditions as the Board may impose in connection with the establishment of such new Distribution Date and Record Date. You have been appointed agent of the Corporation for the redemption of the Convertible Preferred Stock, in addition to your existing appointments as Transfer Agent for the Convertible Preferred Stock and Conversion Agent for the Convertible Preferred Stock. In this connection, we enclose a certified copy of resolutions adopted by the Board of Directors of the Corporation at a meeting of the Board held on November 4, 1995, covering (i) the call for redemption of the Convertible Preferred Stock, (ii) mailing of a Notice of Redemption, (iii) your appointment as agent for redemption of the Convertible Preferred Stock, and (iv) authorization for any officer of the Corporation to enter into an agreement with you in connection with the redemption of the Convertible Preferred Stock. We have furnished you with copies of: Notice of the Redemption and of the Distribution and a Letter of Transmittal and you have arranged for the reproduction of these documents for distribution to holders of Convertible Preferred Stock. The Notice of Redemption and of the Distribution, the Letter of Transmittal and a return envelope should be mailed, first class mail, postage pre-paid, to the registered holders of the Convertible Preferred Stock at their registered addresses appearing on the stock records maintained by you as Transfer Agent. Mailing should commence promptly after your receipt of the material to be mailed and should be completed not later than December 7, 1995 and you are to furnish us with an Affidavit of Mailing certifying to the completion of the mailing on or before that date. A complete set of redemption material should be mailed to all new accounts up to the Redemption Date. As you know, the Company intends to deposit the aggregate Redemption Price in trust with The First National Bank of Chicago, as Trustee (the "Trustee") pursuant to that certain Irrevocable Trust Agreement to be executed between the Company and the Trustee (the "Trust Agreement"). As our agent, you are to redeem or convert surrendered shares of Convertible Preferred Stock as directed by the surrendering shareholder in accordance with the following instructions: 1) You are hereby authorized to accept without endorsement certificates for shares of Convertible Preferred Stock surrendered for redemption or conversion into Common Stock of the Corporation, provided in any such case that the check in payment for the shares surrendered for redemption, or the certificates representing shares of Common Stock issued upon conversion, is to be issued in the same name as that appearing on the face of the surrendered certificate. In the case of certificates for shares of Convertible Preferred Stock surrendered for redemption or conversion into Common Stock of the Corporation, where the check in payment for the shares surrendered for redemption, or the certificates representing shares of Common Stock issued upon conversion, is to be issued in a name other than that appearing on the face of the surrendered certificate, the certificate for shares surrendered should be accepted if they are duly endorsed, or have duly executed powers attached with customary signature guarantee (as noted in the instructions forming a part of the Letter of Transmittal furnished to the holders of Convertible Preferred Stock). 2) Upon receipt by you prior to 5:00 p.m. New York City time on January 5, 1996 of certificates of shares of Convertible Preferred Stock surrendered for conversion, at the conversion price applicable on the date such shares are so surrendered, you are authorized, subject to the foregoing instructions, to follow procedures we have previously established with you with respect to conversion of Convertible Preferred Stock. Promptly upon receipt of shares of Convertible Preferred Stock properly surrendered for conversion, you shall notify the Trustee that such shares of Convertible Preferred Stock have been converted to shares of Common Stock. 3) On January 15, 1996, you are directed to obtain from the Trustee out of the Trust Estate created pursuant to the Trust Agreement, the amount sufficient to pay the total redemption price of $62,792.50 for each share of Convertible Preferred Stock (representing a redemption price of $62.7925 per Depositary Share) presently issued and outstanding which has not been presented for conversion prior to 5:00 p.m. New York City time on January 5, 1996 and which has been properly surrendered to you for redemption prior to 5:00 p.m. New York City time on January 15, 1996. Thereafter, and for a period of two years after the Redemption Date, you shall promptly notify the Trustee of any holder properly surrendering shares of Convertible Preferred Stock for redemption and obtain from the Trustee, out of the Trust Estate, the redemption price for such surrendered shares. Payment should be made for shares of Convertible Preferred Stock surrendered to you after January 15, 1996 within ten (10) business days of receipt. Your check in payment of redemption should be mailed by first class mail, postage pre-paid. 4) You are directed to close the transfer books for the Convertible Preferred Stock on January 15, 1996. 5) You will furnish weekly written reports of activity as follows: Host Marriott Corporation 10400 Fernwood Road Bethesda, Maryland 20817 Attn: Christopher G. Townsend 6) You will arrange to prepare and file IRS form 1099B for the redemption proceeds. The accrued and unpaid dividends payable upon redemption of the Convertible Preferred Stock is equal to $10,312.50 per share (representing a dividend payment per Depositary Share of $10.3125). Also the method of reporting must be given (e.g. paid, constructive receipt). We also understand that you will deduct 31% from the Redemption Payment to any holder who has not furnished you with a Certified Tax Identification Number, as required by law. 7) For services rendered as a Redemption Agent hereunder, your fees are approved as set forth in Schedule A to this Agreement. 8) We agree to indemnify and hold you harmless against any loss, liability or expense incurred by you without gross negligence on your part in the performance of your duties as agent for the redemption of the Convertible Preferred Stock, including costs and expenses of defending yourself against any claim or liability in the premises, in accordance with the resolutions governing your appointment and these instructions and such further instructions as we may deliver to you from time to time. This agreement shall be governed by the laws of the State of New York. Please acknowledge acceptance of your appointment as agent for redemption of the Convertible Preferred Stock and receipt of the foregoing instructions by signing and returning to the undersigned the enclosed copy of this letter. Very truly yours. HOST MARRIOTT CORPORATION By: /s/ Christopher G. Townsend ------------------------------- Christopher G. Townsend Senior Vice President Agreed By: FIRST CHICAGO TRUST COMPANY OF NEW YORK By: /s/ Ralph Persico -------------------------- EX-99.1 7 EXHIBIT 99.1 EXHIBIT 99.1 PAGE 1 OF 2 HOST MARRIOTT ISSUES SPECIAL DIVIDEND, COMPLETING SPLIT INTO TWO COMPANIES BETHESDA, MD, Jan. 2, 1996 -- Host Marriott Corporation announced today that on December 29, 1995 it completed the special dividend, plans for which were first announced in August 1995, dividing Host Marriott into two companies. As a result of the special dividend, shareholders of record on December 22, 1995 are receiving one share of Host Marriott Services Corporation for every five common shares they own in Host Marriott Corporation. Host Marriott Corporation will continue to own hotels and real estate, while Host Marriott Services Corporation will operate concessions at airports, on tollroads and at sports and entertainment attractions. "This split should have strategic and economic benefits for both companies," said Terence C. Golden, president and chief executive officer of Host Marriott Corporation. "Each company now will be able to allocate its resources to help realize its full potential, and investors will be able to make focused decisions based on the specific attributes of each business." Mr. Golden said that Host Marriott Corporation would continue its successful strategy of acquiring full service hotels, which remain available at prices well below replacement cost. "The full service segment still offers the best opportunity for capital appreciation and return on investment. Through the third quarter of 1995, the company's Earnings Before Interest Expense, Taxes, Depreciation, Amortization and other non-cash items (EBITDA) from its hotels was up 16% over last year," he said. "With little new full service hotel supply coming on line, and our strategic alliance with Marriott International adding considerable value to the properties we acquire, we see continued strong revenue and cash flow growth." Host Marriott Corporation currently owns 90 lodging properties operated primarily under Marriott brand names. On a pro forma basis, if it had been a separate company without the concessions businesses in 1994, it would have had annual revenues of approximately $380 million and EBITDA of approximately $269 million. Host Marriott Services Corporation will be the nation's leading operator and developer of restaurant and retail outlets at airports, on tollroads and at sports and entertainment attractions. Host Marriott Services Corporation has operations at over 70 domestic and international airports, on 13 tollroads (including over 90 travel plazas) and at more than 35 tourist attractions, stadiums and arenas. On a historical basis, as a separate company in 1994, Host Marriott Services Corporation would have had annual revenues of approximately $1.1 billion and EBITDA of approximately $108 million. The company has $409 million of debt consisting primarily of $400 million of bonds due in 2005, issued in 1995. "The prospects for Host Marriott Services Corporation as an independent company are excellent," said William W. McCarten, president and chief executive officer. Mr. McCarten had been president of the Host Marriott Operating Group prior to the split. "Our significant presence in nearly all of the largest airports and tollroads in the United States gives us a strong platform for future growth. A total focus on the business, together with the continued commitment of the Marriott family, should further strengthen our new company's market position," Mr. McCarten said. "Our leadership position, experience and expertise provide increasing access to attractive opportunities, both domestically and abroad." (more) EXHIBIT 99.1 PAGE 2 OF 2 The two companies will have separate boards of directors. Richard E. Marriott will remain chairman of the board of Host Marriott Corporation. William J. Shaw, executive vice president of Marriott International, Inc. and president of the Marriott Service Group, will serve as chairman of the board of Host Marriott Services Corporation while retaining his positions at Marriott International. Richard E. Marriott and J.W. Marriott, Jr., his brother and the chairman and president of Marriott International, Inc., will serve as directors of both companies. Both Host Marriott Corporation and Host Marriott Services Corporation are listed on the New York Stock Exchange. "Regular way" trading in the common stock of Host Marriott Services Corporation (ticker symbol HMS) commenced today. Latham & Watkins, James D. Wolfensohn Incorporated and American Appraisal Associates acted as advisors to Host Marriott Corporation on the transaction. # # # 4 EX-99.2 8 EXHIBIT 99.2 Exhibit 99.2 TRANSITIONAL CORPORATE SERVICES AGREEMENT ----------------------------------------- BETWEEN -------- HOST MARRIOTT CORPORATION AND ----------------------------- HOST MARRIOTT SERVICES CORPORATION ---------------------------------- Host Marriott Corporation ("Host Marriott") and Host Marriott Services Corporation ("HM Services"), enter into this Agreement for the purpose of providing certain transitional corporate services to each other in connection with the distribution of all of the shares of common stock of HM Services to shareholders of Host Marriott (the "HM Services Distribution"). Subject to final approval of the Host Marriott Board of Directors, the HM Services Distribution is expected to occur on or about December 29, 1995 or as soon thereafter as the Host Marriott Board shall specify. To ensure an orderly separation of Host Marriott into two separate and independent corporations, Host Marriott and HM Services agree: (1) Host Marriott and HM Services intend this Agreement to cover all intercompany corporate services between them except legal and corporate secretary services; (2) It is intended, without limitation, that Host Marriott may provide corporate accounting, corporate tax, cash management, and investor relations services to HM Services, and that HM Services may provide human resources, internal audit, and LAN/systems services to Host Marriott. This listing of services that each company may provide to the other is not exhaustive of the services that may be provided nor a guarantee that either company will in fact request any or all of the services listed in this paragraph; (3) If Host Marriott requests a corporate service of HM Services or HM Services requests a service of Host Marriott, such services shall be provided and the service provider company shall use good faith and its reasonable best efforts to provide the service in a timely and competent manner. All services provided under this Agreement shall be provided in accordance with the provider company's standard policies, procedures and practices; (4) If after receiving a request for a corporate service the requested provider company cannot in good faith using reasonable best efforts provide the service in a timely and competent manner, the provider company shall so inform the requestor company which shall secure such service form another provider. Host Marriott and HM Services do not expect such situations to arise and recognize that such situations should be extraordinary occurrences. Nothing in this paragraph shall excuse Host Marriott or HM Services from providing a mandatory service or duty under any other inter-company agreement between them; (5) The service provider company shall be paid the fees for service set forth in Schedule 1 to this Agreement and shall be further reimbursed for certain direct, non-overhead costs such as travel and legal fees, provided, however that no travel or legal or other non-overhead costs shall be incurred without prior consultation with the requesting company. For a period of ninety (90) days after the HM Services Distribution, no fee for services and non-overhead costs shall be charged by the provider company to the requesting company, Payment for all services shall be made to the provider company within 45 days of receipt of invoice for payment, such invoice to include documentation of any applicable direct, non-overhead costs not included in the hourly rate; (6) It shall be presumed, without need for further or separate documentation, that any request for a corporate service not otherwise the subject of a separate intercompany agreement is governed by this Agreement; (7) This Agreement shall terminate 180 days after the HM Services Distribution unless the parties mutually agree to extend the Agreement for an additional 180 days. The Agreement shall also terminate in the event of a material default by either party or a change in control of either party; (8) The parties agree to defend, indemnify, and hold harmless the other and its agents, employees, directors, and shareholders from any claims or actions of whatever nature may arise in connection with Host Marriott providing services under this Agreement to HM Services and HM Services providing services under the Agreement to Host Marriott. Neither company shall become a fiduciary to the other by providing services under this Agreement; (9) This Agreement shall be governed by the law of the State of Maryland without regard to conflict or choice of law rules which might make the law of another jurisdiction apply. The parties expressly select Maryland law to apply; (10) This Agreement represents the full and complete Agreement of the parties and cannot be modified except in writing. Any legal notices shall be sent to the General Counsel of the company to be placed on notice. SIGNATURES ON FOLLOWING PAGE ---------------------------- For Host Marriott: /s/ C.G. Townsend - ---------------------- Date: 12/29/95 For HM Services: /s/ Joe P. Martin - ---------------------- Date: 12/29/95 SCHEDULE 1 EXHIBIT A ADMINISTRATIVE SERVICES BILLING RATES -------------------------------------
Grade Level Hourly Billing Rate ----------- ------------------- 56 & Above 2.4 x salary 54 - 55 $116 52 Bonus - 53 97 50 - 52 Non-bonus 71 46 - 49 56 41 - 45 43 10 - 12 39 6 - 9 32 Consultant Their charge + 20%
--------- NOTE: The above represents the 1996 rates quoted by MI to HMC for corporate services. EX-99.3 9 EXHIBIT 99.3 Exhibit 99.3 AMENDMENT TO THE NON-COMPETITION AGREEMENT BETWEEN -------------------------------------------------- MARRIOTT INTERNATIONAL, INC. AND HOST MARRIOTT CORPORATION ---------------------------------------------------------- Marriott International, Inc. ("MI"), Host Marriott Corporation ("Host Marriott") and Host Marriott Services Corporation ("HM Services") hereby enter into this Amendment to the Non-Competition Agreement between MI and HM Services ("Agreement") and agree that: 1. MI and Host Marriott are parties to the Non-Competition Agreement dated October 8, 1993 (the "1993 Agreement"). A copy of the 1993 agreement is attached as Exhibit 1 to this Agreement and incorporated herein. The 1993 Agreement remains in full force and effect to the extent expressly modified by this Agreement. 2. HM Services is presently a subsidiary company of Host Marriott. On or about December 29, 1995 the common stock of HM services will be distributed to the shareholders of Host Marriott (the "HM Services Distribution"). 3. All terms of the 1993 Agreement shall apply to HM Services as they would have otherwise applied to the Host Marriott. 4. The 1993 Agreement and this Agreement shall be binding on all parties and shall be binding on all subsidiary companies of each party and shall further be binding on any successor company conducting substantially all of the "MMS Business" or "Host Business". For Marriott International, Inc. For Host Marriott Corporation /s/ RAYMOND G. MURPHY /s/ STEPHEN McKENNA - --------------------- --------------------- Date: 12/27/95 Date: 12/27/95 For Host Marriott Services Corporation /s/ JOE P. MARTIN - --------------------- Date: 12/26/95 EX-99.4 10 EXHIBIT 99.4 Exhibit 99.4 EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS ALLOCATION AGREEMENT BETWEEN HOST MARRIOTT CORPORATION AND HOST MARRIOTT SERVICES CORPORATION TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS........................................................ 1 1.01 Definitions........................................................ 1 Aggregate Spread................................................... 1 Aggregate Value.................................................... 1 Code............................................................... 1 Collective Bargaining Agreement.................................... 2 Commission......................................................... 2 Common Stock....................................................... 2 (i) Employer Common Stock....................................... 2 (ii) HMC Common Stock............................................ 2 (iii) Host Marriott Services Common Stock......................... 2 Company Contribution............................................... 2 1993 HMC Comprehensive Stock Plan.................................. 2 Host Marriott Services Comprehensive Stock Plan.................... 2 Conversion Award................................................... 2 Current Plan Year.................................................. 2 Cut-off Date....................................................... 2 Deferred Compensation Plan......................................... 3 (i) HMC Deferred Compensation Plan.............................. 3 (ii) HMC Executive Deferred Compensation Plan.................... 3 (iii) Host Marriott Services Corporation Executive Deferred Compensation Plan................................................. 3 Distribution Agreement............................................. 3 Distribution Date.................................................. 3 Employee........................................................... 3 (i) HMC Terminee................................................ 3 (ii) Retained Employee........................................... 3 (iii) Retained Individual......................................... 3 (iv) Host Marriott Services Individual........................... 4 (v) Host Marriott Services Employee............................. 4 (vi) Host Marriott Services Terminee............................. 4 (vii) Marriott International Employee............................. 4 ERISA.............................................................. 4 Existing HMC Stock Option.......................................... 4 Nonqualified Stock Option.......................................... 4 HMC Closing Stock Price............................................ 4 HMC Corporation.................................................... 4 HMO................................................................ 5 IRS................................................................ 5
2 Marriott International Distribution................................ 5 Medical/Dental Plan................................................ 5 (i) HMC Medical/Dental Plans.................................... 5 (ii) Host Marriott Medical/Dental Plan........................... 5 (iii) Host Marriott Services Medical/Dental Plan.................. 5 Plan............................................................... 5 Post-Conversion Stock Price........................................ 5 Profit Sharing Plan................................................ 5 (i) Host Marriott Profit Sharing Plan........................... 6 (ii) Host Marriott Corporation (HMC) Retirement Plan............. 6 (iii) Host Marriott Services Profit Sharing Plan.................. 6 Qualified Beneficiary.............................................. 6 (i)HMC Qualified Beneficiary...................................... 6 (ii)Current Qualified Beneficiary................................. 6 (iii)Host Marriott Services Qualified Beneficiary................. 6 Restricted Stock Measurement Date.................................. 6 Retained Business.................................................. 6 Service Credit..................................................... 6 Host Marriott Services Business.................................... 7 Stock Purchase Plan................................................ 7 Subsidiary......................................................... 7 (i) Retained Subsidiary......................................... 7 (ii) Host Marriott Services Subsidiary........................... 7 Welfare Plan....................................................... 7 1.01 Certain Constructions.............................................. 7 1.02 Schedules, Sections................................................ 7 1.03 Survival........................................................... 7 ARTICLE II EMPLOYEE BENEFITS.................................................. 7 2.01 Employment......................................................... 7 (a) Allocation of Responsabilities on Distribution Date........... 7 (b) Service Credits............................................... 8 (i) Distribution Date Transfers.............................. 8 (ii) Post-Distribution Date Terminations...................... 8
3 2.02 Profit Sharing Plans............................................... 8 (a) Sponsorship of Host Marriott Profit Sharing Plan............. 8 (b) Establishment of New Host Marriott Profit Sharing Plan....... 8 (c) Obligation to Make Company Contribution...................... 9 (d) Adjustment Made to Account Balances.......................... 9 (e) Transfer and Acceptance of Account Balances.................. 9 (f) HMC to Provide Information................................... 9 (g) Regulatory Filings........................................... 9 2.03 Deferred Compensation Plans........................................ 10 (a) Host Marriott Services Deferred Compensation Plans........... 10 (b) HMC Deferred Compensation Plans.............................. 10 2.04 Other Retirement Plans............................................. 10 2.05 Stock Plans........................................................ 11 (a) Host Marriott Comprehensive Stock Plan....................... 11 (b) Host Marriott Services Comprensive Stock Plan................ 11 (c) Effect of the Distribution on Awards Made Prior to the Cut-off Date............................................... 11 (i) Restricted Stock......................................... 11 (ii) Deferred Stock........................................... 12 (iii) Substitution of Stock Options............................ 13 (iv) Adjustment of Option Price............................... 13 (v) Adjustment of Number of Shares Covered by Options........ 14 (vi) Limitation on Adjustments................................ 14 2.06 Stock Purchase Plan................................................ 14 2.07 Medical/Dental Plan Liability and Coverage......................... 15 (a) Liability for Claims.......................................... 15 (b) Continuation Coverage Administration.......................... 15 2.08 Vacation and Sick Pay Liabilities.................................. 16 (a) Division of Liabilities....................................... 16 (b) Funded Reserves............................................... 16
4 2.09 Preservation of Right To Amend or Terminate Plans.................. 16 2.10 Notice............................................................. 16 2.11 Payroll Reporting and Withholding.................................. 17 (a) Form W-2 Reporting............................................ 17 (b) Forms W-4 and W-5............................................. 17 (c) Garnishments, Tax Levies, Child Support Orders, Medical Child Support Orders, and Wage Assignments....................... 17 (d) Authorizations for Payroll Deductions......................... 17 ARTICLE III LABOR AND EMPLOYMENT MATTERS....................................... 18 3.01 Separate Employers................................................. 18 3.02 Employment Policies and Practices.................................. 18 3.03 Collective Bargaining Agreements................................... 18 3.04 Claims............................................................. 19 (a) Scope......................................................... 19 (b) Employment-Related Claims..................................... 19 (c) Obligation to Indemnify....................................... 19 (d) Pre-Distribution Claims....................................... 19 (e) Distribution and Other Joint Liability Claims................. 19 (f) Post-Distribution Employment-Related Claims................... 20 3.05 Funding of Union Plans............................................. 20 3.06 Notice of Claims................................................... 20 3.07 Assumption of Unemployment Tax Rates............................... 20 3.08 Intercompany Service Charge........................................ 20 3.09 Warn Claims........................................................ 21 3.10 Employees on Leave of Absence...................................... 21 3.11 No Third-Party Beneficiary Rights.................................. 21 3.12 Attorney-Client Privilege.......................................... 21
5 ARTICLE IV DEFAULT............................................................ 21 4.01 Default............................................................ 21 4.02 Force Majeure...................................................... 21 ARTICLE V MISCELLANEOUS...................................................... 22 5.01 Relationship of Parties............................................ 22 5.02 Access to Information: Cooperation................................. 22 5.03 Assignment......................................................... 22 5.04 Headings........................................................... 22 5.05 Severability of Provisions......................................... 22 5.06 Parties Bound...................................................... 22 5.07 Notices............................................................ 22 5.08 Further Action..................................................... 23 5.09 Waiver............................................................. 23 5.10 Governing Law...................................................... 23 5.11 Consent to Jurisdiction............................................ 23 5.12 Entire Agreement................................................... 23
6 EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS ALLOCATION AGREEMENT THIS EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS ALLOCATION AGREEMENT ("Agreement") is made and entered into as of December 29, 1995, by and between HOST MARRIOTT CORPORATION, a Delaware corporation ("HMC"), and HOST MARRIOTT SERVICES CORPORATION, a Delaware corporation ("Host Marriott Services"). RECITALS WHEREAS, subject to certain conditions, HMC intends to pay a special dividend to the holders of HMC Common Stock on a one share-for-five share basis, consisting of all outstanding shares of Host Marriott Services common stock (the "Distribution"); and WHEREAS, in connection with said special dividends, HMC and Host Marriott Services have entered into a Distribution Agreement (the "Distribution Agreement") dated as of December 29, 1995; and WHEREAS, pursuant to the aforesaid Distribution Agreement HMC and Host Marriott Services have agreed to enter into an agreement allocating responsibilities with respect to employee compensation, benefits, labor and certain other employment matters pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, HMC and Host Marriott Services agree as follows: ARTICLE 1 DEFINITIONS 1.01 Definitions. As used in this Agreement, the following terms shall have the meanings indicated below: Aggregate Spread: the difference between the exercise price of an Existing HMC Stock Option and the HMC Closing Stock Price, multiplied by the number of shares underlying such Existing HMC Stock Option remaining unexercised on the Cut-off Date. Aggregate Value: the number of shares of HMC Common Stock reserved for a holder of a deferred award of HMC Common Stock under the HMC Comprehensive Stock Incentive Plan as of the Cut-off Date, multiplied by the HMC Closing Stock Price. Code: the Internal Revenue Code of 1986, as amended, or any successor legislation. 7 Collective Bargaining Agreement: any collective bargaining agreement or other labor agreement to which HMC or any of its subsidiaries or affiliates was a party on or before the Cut-off Date. Commission: the Securities and Exchange Commission. Common Stock: the common stock of HMC or Host Marriott Services, as more specifically described below: (i) Employer Common Stock: HMC Common Stock in the case of Retained Employees and HMC Terminees and Host Marriott Services Common Stock in the case of Host Marriott Services Employees; or (ii) HMC Common Stock: the common stock, par value $1 per share, of HMC after the Distribution Date; or (iii) Host Marriott Services Common Stock: the common stock, par value $1 per share, of Host Marriott Services. Company Contribution: the Company Contribution of HMC under the HMC Profit Sharing Plan (as provided in the Host Marriott Profit Sharing Plan document), as may be supplemented in the sole and absolute discretion of the HMC Board of Directors. 1993 HMC Comprehensive Stock Incentive Plan: a stock-based incentive compensation Plan providing awards of stock options, deferred stock and restricted stock maintained for Employees of HMC and their beneficiaries adopted in 1993 and continued pursuant to Section 2.05(a). Host Marriott Services Comprehensive Stock Plan: the Host Marriott Services Comprehensive Stock Plan adopted by Host Marriott Corporation as sole shareholder of Host Marriott Services on November 2, 1995. Conversion Award: an award of Common Stock or of an option to acquire Common Stock made to a Host Marriott Services Individual or a Retained Individual to reflect the effect of the Distribution on awards of HMC Common Stock or Existing HMC Stock Options held on the Cut-off Date, in accordance with Section 2.05. Current Plan Year: the plan year or fiscal year, whichever is applicable with respect to any Plan, during which the Distribution occurs. Cut-off Date: the date immediately preceding the Distribution Date. 8 Deferred Compensation Plan: a plan of deferred compensation that is not tax- qualified under Section 401(a) of the Code and that is maintained for Employees of HMC or Host Marriott Services and their beneficiaries, as described below: (i) HMC Deferred Compensation Plan: the new 1995 Executive Deferred Compensation Plan to be established by HMC to accrue benefits for Retained Employees after the Cut-off Date; (ii) Host Marriott Corporation Executive Deferred Compensation Plan: the current Deferred Compensation Plan, adopted as of October 8, 1993, through which eligible executives of HMC or members of HMC's Board of Directors may defer current compensation for retirement or other purposes, and which serves as the means by which amounts that would otherwise exceed certain limitations for contributions to the tax-qualified Host Marriott Corporation Profit Sharing, Retirement and Savings Plan are credited and automatically deferred; or (iii) Host Marriott Services Corporation Executive Deferred Compensation Plan: the Host Marriott Corporation Executive Deferred Compensation Plan that is assumed, renamed, and continued by Host Marriott Services after the Distribution Date. Distribution Agreement: the agreement described in the second recital of this Agreement. Distribution Date: the date on which the Distribution occurs. Employee: an individual who, on the Distribution Date, is identified as being in any of the following categories: (Host Marriott Corporation Categories of Employees) (i) HMC Terminee: any individual formerly employed in any Retained Business of HMC or of any Subsidiary of HMC who terminated such employment prior to the Distribution Date, including, but not limited to, any HMC Employee who has retired from a Retained Business prior to the Distribution Date; or (ii) Retained Employee: any individual who is an Employee of HMC or any Retained Subsidiary on the Distribution Date; or (iii) Retained Individual: any individual who (i) is a Retained Employee, or (ii) is, as of the Cut-off Date, a Host Marriott Terminee whose last employment with HMC or a Retained Subsidiary was with a Retained Business or any Retained Subsidiary, or (iii) is a beneficiary of any individual described in clause (i) or (ii). 9 (Host Marriott Services Categories of Employees) (iv) Host Marriott Services Terminee: any individual formerly employed by any Host Marriott Services Business or any subsidiary of Host Marriott Services who terminated such employment prior to the Distribution Date, including, but not limited to, any Host Marriott Services Employee who has retired from a Host Marriott Services Business prior to the Distribution Date; or (v) Host Marriott Services Employee: any individual who is an Employee of Host Marriott Services or any Host Marriott Services Subsidiary on the Distribution Date; or (vi) Host Marriott Services Individual: any individual who (i) is a Host Marriott Services Employee, or (ii) is, as of the Cut-off Date, a Host Marriott Services Terminee whose last employment with HMC or a Retained Subsidiary was with a Host Marriott Services Business or any Host Marriott Services Subsidiary, or (iii) is a beneficiary of any individual specified in clause (i) or (ii). (Marriott International Employees) (vii) Marriott International Employee: any individual who is an employee of Marriott International or any Marriott International Subsidiary on the Distribution Date or any individual formerly employed by Marriott International who terminated such employment prior to the Distribution Date, including, but not limited to, any Marriott International Employee who has retired from Marriott International prior to the Distribution Date. ERISA: the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation. Existing HMC Stock Option: an unexercised option to purchase HMC Common Stock held by a grantee on the Cut-off Date pursuant to the 1993 HMC Comprehensive Stock Plan. Nonqualified Stock Option: an award under the 1993 HMC Comprehensive Stock Incentive Plan of a stock option which is not qualified as an incentive stock option under Code Section 422. HMC Closing Stock Price: the New York Stock Exchange closing price per share for HMC Common Stock on the Distribution Date, trading regular way, with a due bill for the special dividend of Host Marriott Services Common Stock to be made in connection with the Distribution. HMC Corporation: Host Marriott Corporation, a Delaware corporation. 10 HMO: any health maintenance organization organized under 42 U.S.C. 300e-9, or a state health maintenance organization statute that provides medical services for Retained Individuals or Host Marriott Services Individuals under any Plan. IRS: the Internal Revenue Service. Marriott International Distribution: the 1993 Marriott Corporation distribution to its shareholders of the capital stock of its wholly owned subsidiary Marriott International, Inc. Medical/Dental Plan: a Welfare Plan providing health benefits to Employees of HMC and their dependents, or to Employees of Host Marriott Services and their dependents, as described below: (i) Host Marriott Corporation (HMC) Medical/Dental Plans: the Medical/Dental Plans to be established by HMC in accordance with Section 2.07; or (ii) Host Marriott Medical/Dental Plans: the existing Host Marriott Corporation Medical/Dental Plans maintained prior to the Distribution primarily for the benefit of Retained Employees and Host Marriott Services Employees and continued by Host Marriott Services after the Distribution Date pursuant to Section 2.07. (iii) Host Marriott Services Medical/Dental Plans: the Host Marriott Medical/Dental Plans as renamed and continued after the Distribution Date by Host Marriott Services. Plan: any plan, policy, arrangement, contract or agreement providing compensation or benefits for any group of Employees or former employees or for any individual Employee or former employee, or the dependents or beneficiaries of any such Employee or former Employee, whether formal or informal or written or unwritten, and including, without limitation, any means, whether or not legally required, pursuant to which any benefit is provided by an employer to any Employee or former employee or the beneficiaries of any such Employee or former employee. The term "Plan" as used in this Agreement does not include any contract, agreement or understanding entered into by HMC prior to the Distribution or by HMC or Host Marriott Services after the Distribution and relating to settlement of actual or potential employee-related litigation claims. Post-Conversion Stock Price: the per share price of Host Marriott Services Common Stock or HMC Common Stock on the Distribution Date, as determined in accordance with Section 2.05(c) based on the HMC Closing Stock Price and the when-issued closing price of Host Marriott Services Common Stock on the New York Stock Exchange on the Distribution Date. Profit Sharing Plan: a defined contribution plan maintained pursuant to Sections 401(a) and 401(k) of the Code for Employees and their beneficiaries, as specifically identified using one of the categories described below: 11 (i) Host Marriott Profit Sharing Plan: the Host Marriott Corporation Employees' Profit Sharing, Retirement and Savings Plan and Trust, as in effect prior to the Distribution Date; or (ii) Host Marriott Corporation (HMC) Retirement Plan: the Host Marriott Corporation (HMC) Retirement Plan and Trust, to be adopted by HMC and effective on the Distribution Date; or (iii) Host Marriott Services Profit Sharing Plan: the Host Marriott Services Corporation Employees' Profit Sharing, Retirement and Savings Plan and Trust (known prior to the Distribution Date as the Host Marriott Corporation Employees' Profit Sharing, Retirement and Savings Plan and Trust), as in effect on the Distribution Date as continued by Host Marriott Services after the Distribution. Qualified Beneficiary: an individual (or dependent thereof) who either (1) experiences a "qualifying event" (as that term is defined in Code Section 4980B(f)(3) and ERISA Section 603) while a participant in any Medical/Dental Plan, or (2) becomes a "qualified beneficiary" (as that term is defined in Code Section 4980B(g)(1) and ERISA 607(3)) under any Medical/Dental Plan, and who is included in any one of the following categories: (i) HMC Qualified Beneficiary: any person who becomes a Qualified Beneficiary on or after the Distribution Date under any HMC Medical/Dental Plan; or (ii) Current Qualified Beneficiary: any person who, on or before the Cut- off Date, was a Qualified Beneficiary under any Host Marriott Corporation Medical/Dental Plan; or (iii) Host Marriott Services Qualified Beneficiary: any person who becomes a Qualified Beneficiary after the Cut-off Date under any Host Marriott Services Medical/Dental Plan. Restricted Stock Measurement Date: the earlier of (1) the first trading day following 270 days after the Distribution Date or (2) September 30, 1996; or (3) such earlier date as the Company shall permit in the "Consent to Redenominate" between the Company and the holder of restricted stock. Retained Business: any business or operation of HMC or its Subsidiaries which is, pursuant to the Distribution Agreement defined as the Real Estate Group Business, or which is to be conducted, following the Distribution, by HMC or any Retained Subsidiary. Service Credit: the period taken into account under any Plan for purposes of determining length of service or plan participation to satisfy eligibility, vesting, benefit accrual and similar requirements under such Plan. 12 Host Marriott Services Business: any business or operation of HMC or its Subsidiaries which is, pursuant to the Distribution Agreement defined as the Operating Group Business, or which is to be conducted, following the Distribution, by Host Marriott Services or any Host Marriott Services Subsidiary. Stock Purchase Plan: a stock-based Plan meeting the requirements of Section 423 of the Code, maintained for Employees of HMC or Host Marriott Services. Subsidiary: any corporation, including each of the following categories: (i) Retained Subsidiary: any subsidiary of HMC, except Host Marriott Services and the Host Marriott Services Subsidiaries; or (ii) Host Marriott Services Subsidiary: each of the Transferred Subsidiaries as defined in the Distribution Agreement and all other Subsidiaries of Host Marriott Services as defined in the Distribution Agreement at the time of the Distribution. Welfare Plan: any Plan which provides medical, health, disability, accident, life insurance, death, dental or any other welfare benefit, including, without limitation, any post-employment benefit. 1.01 Certain Constructions. References to the singular in this Agreement shall refer to the plural and vice-versa and references to the masculine shall refer to the feminine and vice-versa. 1.02 Schedules, Sections. References to a "Schedule" are, unless otherwise specified, to one of the Schedules attached to this Agreement, and references to a "Section" are, unless otherwise specified, to one of the Sections of this Agreement. 10.3 Survival. Obligations described in this Agreement shall remain in full force and effect and shall survive the Distribution Date. ARTICLE II EMPLOYEE BENEFITS 2.01 Employment. (a) Allocation of Responsibilities on Distribution Date. On the Distribution Date, except to the extent retained or assumed by HMC under this Agreement or any other agreement relating to the Distribution, Host Marriott Services shall retain or assume, as the case may be, responsibility as employer for the Host Marriott Services Employees. On the Distribution Date, except to the extent retained or assumed by Host Marriott Services under this Agreement or any 13 other agreement relating to the Distribution, HMC shall retain or assume, as the case may be, responsibility as employer for the Retained Employees. The assumption or retention of responsibility as employer by HMC or Host Marriott Services described in this Section 2.01 shall not, of itself, constitute a severance or a termination of employment under any plan of severance or of income extension maintained by HMC or Host Marriott Services, and no such severance, separation or termination shall be deemed to occur. (b) Service Credits. (i) Distribution Date Transfers. On the Distribution Date, for purposes of determining Service Credits under any Plans, HMC shall credit each Retained Employee and Host Marriott Services shall credit each Host Marriott Services Employee with such Employee's Service Credits and original hire date as are reflected in the HMC payroll system records. Such Service Credits and hire date shall continue to be maintained as described herein for as long as the Employee does not terminate employment. (ii) Post-Distribution Date Terminations. Subject to the provisions of ERISA, Host Marriott Services may, in the case of Host Marriott Services Employees, and HMC may, in the case of Retained Employees, each in its sole discretion, make such decisions as it deems appropriate with respect to determining Service Credits for such Employees who terminate employment from the other company after the Distribution Date. 2.02 Profit Sharing Plans. (a) Sponsorship of Host Marriott Profit Sharing Plan. Effective as of the Distribution Date, Host Marriott Services shall adopt and assume sponsorship of the Host Marriott Corporation Profit Sharing Plan. Further, effective as of the Distribution Date, the Host Marriott Services Board of Directors shall ratify the following actions taken with respect to the Host Marriott Profit Sharing Plan by the HMC Board of Directors in a timely manner: (i) ratify adoption of the Host Marriott Profit Sharing Plan by Host Marriott Services, and (ii) change the name of the Host Marriott Profit Sharing Plan to the Host Marriott Services Corporation Employees' Profit Sharing, Retirement and Savings Plan and Trust. (b) Establishment of the Host Marriott Corporation (HMC) Retirement Plan. Effective as of the Distribution Date, HMC shall take, or cause to be taken, all action necessary and appropriate to establish and administer a new Plan named the Host Marriott Corporation (HMC) Retirement Plan and Trust in the form approved by the Host Marriott Corporation Board of Directors. HMC shall provide benefits under such Host Marriott Corporation (HMC) Retirement Plan after the Distribution Date for all Retained Employees who, immediately prior to the Distribution Date, were participants in or otherwise entitled to benefits under the Host Marriott Profit Sharing Plan. The Plan shall be intended to qualify for tax-favored treatment under Sections 401(a) and 401(k) of the Code and to be in compliance with the requirements of ERISA. 14 (c) Obligation to Make Company Contribution. HMC is responsible for HMC's obligation to make payment of Company Contributions under the Host Marriott Profit Sharing Plan in accordance with the terms and conditions of the Host Marriott Profit Sharing Plan, and the Company Contribution to the Host Marriott Corporation Profit Sharing Plan for the current 1995 Plan Year shall be paid in accordance with the provisions of the Plan document and applicable law. (d) Adjustment Made to Account Balances. The plan administrator of the Host Marriott Profit Sharing Plan shall adjust the account balances of all participants entitled under such Plan to Company Contributions and forfeitures for the Current Plan Year to reflect such Company Contributions and forfeitures. (e) Transfer and Acceptance of Account Balances. As soon as practicable after the Distribution Date, Host Marriott Services shall cause the trustees of the Host Marriott Services Profit Sharing Plan to transfer to the trustee or other funding agent of the Host Marriott Corporation (HMC) Retirement Plan the amounts (in cash, securities, other property or a combination thereof) acceptable to the HMC administrator or Trustee representing the account balances of all Retained Individuals, and HMC shall credit the accounts of such individuals under the Host Marriott Corporation (HMC) Retirement Plan with said amounts. Each such transfer shall comply with Section 414(l) of the Code and the requirements of ERISA and the regulations promulgated thereunder. HMC shall cause the trustees or other funding agent of the Plan to accept the plan-to- plan transfer from the Host Marriott Services Profit Sharing Plan trustees, and to credit the accounts of such Retained Individuals under the Host Marriott Corporation (HMC) Retirement Plan with amounts transferred on their behalf. (f) HMC to Provide Information. HMC shall provide Host Marriott Services, as soon as practicable after the Distribution Date (with the cooperation of Host Marriott Services to the extent that relevant information is in the possession of Host Marriott Services or a Host Marriott Services Subsidiary, and in accordance with Section 5.02), with a list of Retained Individuals who, to the best knowledge of HMC, were participants in or otherwise entitled to benefits under the Host Marriott Profit Sharing Plan on the Cut-off Date, together with a listing of each participant's Service Credits under such Plan and a listing of each such Retained Individual's account balance thereunder. HMC shall, as soon as practicable after the Distribution Date and in accordance with Section 5.02, provide Host Marriott Services with such additional information in the possession of HMC or a Retained Subsidiary (and not already in the possession of Host Marriott Services or a Host Marriott Services Subsidiary) as may be reasonably requested by Host Marriott Services and necessary for Host Marriott Services to administer effectively the Host Marriott Services Profit Sharing Plan. (g) Regulatory Filings. Host Marriott Services and HMC shall, in connection with the plan-to-plan transfer described in Section 2.02(f), cooperate in making any and all appropriate filings required by the Commission or the IRS, or required under the Code, ERISA, or any applicable securities laws and the regulations thereunder, and take all such actions as may be 15 necessary and appropriate to cause such plan-to-plan transfer to take place as soon as practicable after the Distribution Date or otherwise when required by law. Further, the parties shall each seek favorable IRS determination letters to the effect that the Host Marriott Services Profit Sharing Plan and the Host Marriott Corporation (HMC) Retirement Plan, as organized, satisfy all qualification requirements under Section 401(a) and 401(k) of the Code, and the transfers described in Section 2.02(f) shall take place as soon as practicable. Such transfers may take place pending issuance of favorable determination letters, upon receipt of an opinion of counsel reasonably satisfactory to both Host Marriott and Host Marriott Services that the aforesaid Plans so qualify, or can be made to so qualify by retroactive amendment, and that the transfers will not adversely affect the qualified status of either Plan or decrease the accrued benefits of any participant. 2.03 Deferred Compensation Plans. (a) Host Marriott Services Deferred Compensation Plans. Effective as of the Distribution Date, Host Marriott Services or a Host Marriott Services Subsidiary shall assume or retain sponsorship of the Host Marriott Corporation Executive Deferred Compensation Plan. Effective as of the Distribution Date, HMC's Board of Directors, acting on behalf of HMC as sole shareholder of Host Marriott Services, shall restate the Host Marriott Corporation Executive Deferred Compensation Plan to change the name to the Host Marriott Services Corporation Executive Deferred Compensation Plan, and to provide future deferred compensation benefits thereunder accruing after the Cut-off Date for all Host Marriott Services Employees who are admitted to participation therein on or after the Distribution Date. Host Marriott Services shall be responsible for all liabilities and obligations of HMC relating to Host Marriott Services Individuals accrued through the Cut-off Date with respect to the Host Marriott Corporation Executive Deferred Compensation Plan, along with earnings required to be credited to account balances included therein. (b) HMC Deferred Compensation Plans. HMC shall adopt a new plan named the Host Marriott Corporation (HMC) Executive Deferred Compensation Plan. HMC shall thereafter (1) provide similar deferred compensation opportunities to Retained Individuals as shall have been provided to participants in the HMC Executive Deferred Compensation Plan prior to the Distribution Date of Host Marriott Services; and (2) shall assume all liabilities and obligations of HMC relating to Retained Individuals accrued through the Cut-off Date with respect to the Host Marriott Corporation Executive Deferred Compensation Plan, along with earnings required to be credited to account balances included therein. The foregoing shall be subject to the requirements of ERISA and the Code. 2.04 Other Retirement Plans. As of the Distribution Date, Host Marriott Services shall assume or continue the sponsorship and responsibility and the associated liabilities (including any and all contributions required thereunder) for the retirement plans listed on Schedule R, and HMC shall assume or continue the sponsorship and responsibility and the associated liabilities for the plans listed on 16 Schedule RT, except that Host Marriott Services shall retain liability for employees in the plans assumed by HMC (see Schedule RT) who are actively employed with the Services Business as of the Distribution Date. Nothing in this section is intended to create any requirement that either Host Marriott Services or HMC continue Plans listed in Schedule R or RT that have been terminated. 2.05 Stock Plans. (a) Host Marriott Comprehensive Stock Incentive Plan. HMC shall continue the 1993 HMC Comprehensive Stock Incentive Plan. All awards under the 1993 HMC Comprehensive Stock Incentive Plan will continue to be denominated in HMC Common Stock. HMC shall continue to reserve those shares already reserved under the 1993 HMC Comprehensive Stock Plan, including those awards held by certain Marriott International Employees which are denominated in shares of HMC Common Stock and were granted prior to or in connection with the Marriott International Distribution. Additionally, HMC, after the Distribution, will cause to be reserved any additional shares identified for reservation thereunder to the extent authorized by the shareholders. In addition, HMC shall retain all obligations with respect to, and administer under the 1993 HMC Comprehensive Stock Incentive Plan, any Conversion Awards denominated in HMC Common Stock after the Distribution as described in Section 2.05(c). (b) Host Marriott Services Comprehensive Stock Plan. As soon as practicable after the date hereof and effective as of the Distribution Date, Host Marriott Services shall take, or cause to be taken, all action necessary and appropriate to ratify the adoption of the Host Marriott Services Comprehensive Stock Plan, and to provide Conversion Awards of Host Marriott Services Common Stock or Host Marriott Services Stock Options for all Host Marriott Services Individuals, in accordance with Section 2.05(c). All awards under the Host Marriott Services Comprehensive Stock Plan will be denominated in Host Marriott Services Common Stock. Host Marriott Services will reserve as shares under the Host Marriott Services Comprehensive Stock Plan, 6.5 million shares of Host Marriott Services Common Stock identified for reservation thereunder, to the extent authorized by HMC, its sole shareholder, prior to the Distribution Date. Any such shares not used to adjust outstanding awards pursuant to Section 2.05(c) will be available for future awards to Host Marriott Services Individuals. Host Marriott Services shall assume all obligations with respect to, and shall administer any Conversion Award denominated in Host Marriott Services Common Stock under the Host Marriott Services Comprehensive Stock Plan under the terms governing such awards. (c) Effect of the Distribution on Awards Made Prior to the Cut-off Date. (i) Restricted Stock: After the Distribution Date, the grantee of each restricted share of HMC Common Stock awarded under the HMC Comprehensive Stock Incentive Plan as of the Cut-off Date shall retain such share, and shall receive as part of the Distribution one restricted share of Host Marriott Services Common Stock for each five restricted shares of HMC Common Stock awarded under the HMC Comprehensive Stock Plan as of the Distribution Date. For the Retained Employees and HMC Terminees and Marriott International Employees, the 17 restricted shares of Host Marriott Services Common Stock will be subject to restrictions identical to those applicable to the underlying restricted shares of HMC Common Stock. For Host Marriott Services Employees and Host Marriott Services Terminees, all restrictions will be replaced with restrictions for the benefit of Host Marriott Services. Restricted shares of Host Marriott Services Common Stock awarded as part of the Distribution shall be released from restrictions at the same time and on the same schedule as the shares of HMC Common Stock retained, under the terms of the restrictions to which the grantee's award under the 1993 HMC Comprehensive Stock Incentive Plan were subject, except that: (1) release of such restricted shares shall be contingent upon a finding by the President (or other equivalent or higher officer) of HMC that a grantee who is a Retained Employee has satisfied conditions for such release; (2) release of such shares shall be contingent upon a finding by the President (or other equivalent or higher officer) of Host Marriott Services that a grantee who is a Host Marriott Services Employee has satisfied conditions for such release; or (3) release of such restricted shares shall be contingent upon a finding by the President (or other equivalent or higher officer) of Marriott International that a grantee who is a Marriott International Employee has satisfied conditions for such release. After the Distribution, with respect to Host Marriott Services Employees and only upon obtaining the consent of such Host Marriott Services Employees, outstanding awards of restricted shares of non-Employer Common Stock will be redenominated into restricted shares of Employer Common Stock as follows: (1) restricted shares of Host Marriott Services Common Stock will be converted to a number of restricted shares of HMC Common Stock equal to the market value, on the Restricted Stock Measurement Date, of the restricted shares of Host Marriott Services Common Stock exchanged therefor; and (2) restricted shares of HMC Common Stock will be converted to a number of restricted shares of Host Marriott Services Common Stock equal to 115% of the market value, on the Restricted Stock Measurement Date, of the restricted shares of HMC Common Stock exchanged therefor. Such exchange of HMC restricted shares for Host Marriott Services restricted shares at 115% of market is subject to opinion of counsel that the exchange is in compliance with all applicable laws and does not result in adverse tax consequences to HMC or Host Marriott Services. (ii) Deferred Stock: HMC Retained Employees and Host Marriott Services Employees with Deferred Stock Bonus Award balances denominated in HMC stock shall have their accounts adjusted to reflect shares of both companies as follows--one additional share of Host Marriott Services will be reserved for every five shares of HMC. Any Marriott International Employee that is a grantee of an award of deferred stock denominated in shares of HMC Common Stock granted prior to or in connection with the Marriott International Distribution will have the number of HMC shares reserved for such grantees on the Cut-off Date multiplied by the HMC Closing Stock Price to determine the Aggregate Value. The Aggregate Value shall then be divided by the Post-Conversion Stock Price for HMC Common Stock to determine the adjusted number of whole shares of HMC Common Stock reserved for the grantee as of the Distribution Date. 18 (iii) Substitution of Stock Options: On the Distribution Date, each Retained Employee or Host Marriott Services Employee that is a grantee of a Nonqualified Award of an Existing HMC Stock Option shall receive for each such award, in substitution therefor, a Conversion Award, consisting of two separately exercisable nonqualified options: one to purchase a number of shares of HMC Common Stock equal to the number of shares covered by the Existing HMC Stock Option (the "New HMC Nonqualified Stock Option"), and one to purchase a number of shares of Host Marriott Services Common Stock equal to one-fifth of the number of shares covered by the Existing HMC Stock Option (the "Host Marriott Services Nonqualified Stock Option"). Each Marriott International Employee that is a grantee of a Nonqualified Award of an Existing HMC Stock Option granted prior to or in connection with the Marriott International Distribution will not receive a similar Conversion Award. Such nonqualified options will remain an option to acquire only shares of HMC Common Stock, except that the exercise price of, and the number of shares underlying, such option shall be adjusted pursuant to 2.05(c)(iv) and (v) below to maintain the Aggregate Spread with respect to such Existing HMC Stock Options held by Marriott International Employees. Notwithstanding the foregoing, the HMC Board of Directors reserves the right prior to the issuance of any Conversion Awards and effective as of the Distribution Date, to adopt resolutions modifying the terms and conditions under which any Conversion Awards of nonqualified options shall be granted. Modifications may include, without limitation, shortening the term within which options to purchase shares that are not Employer Common Stock may be exercised, and providing for Conversion Awards of such nonqualified options to be issued solely as options to acquire shares of Employer Common Stock. (iv) Adjustment of Option Price: For purposes of determining the adjusted option price of a Conversion Award of a New HMC Nonqualified Stock Option and a Host Marriott Services Nonqualified Stock Option, the following formula shall be used to maintain the grantee's Aggregate Spread on each outstanding grant of a Nonqualified Award of an Existing HMC Stock Option. The Aggregate Spread on each such outstanding grant shall be maintained by setting the option prices for the New HMC Nonqualified Stock Options and the Host Marriott Services Nonqualified Stock Options to ensure that the difference between (1) the Post Conversion Stock Price of the HMC Common Stock granted in the Conversion Award multiplied by the number of shares of HMC Common Stock underlying the options granted in the Conversion Award plus the Post Conversion Stock Price of the Host Marriott Services Common Stock multiplied by the number of shares of Host Marriott Services Common Stock underlying the options granted in the Conversion Award and (2) the per Share exercise price of the New HMC Nonqualified Stock Option multiplied by the number of shares of HMC Common Stock underlying the options granted in the Conversion Award plus the per share exercise price of the Host Marriott Services Nonqualified Stock Option multiplied by the number of shares of Host Marriott Services Common Stock underlying the options granted in the Conversion Award exercise is equal to (3) the Aggregate Spread. 19 In addition, the adjusted price under each option to acquire Host Marriott Common Stock or Host Marriott Services Common Stock granted in a Conversion Award shall be set so that the ratio of (1) the adjusted option exercise price for the New HMC Nonqualified Stock Option and Host Marriott Services Nonqualified Stock Option, respectively, to (2) the Post-Conversion Stock Price of the Common Stock purchasable under the Conversion Award (Host Marriott Common Stock or Host Marriott Services Common Stock, respectively) shall equal (3) the ratio of the exercise price of each Existing HMC Stock Option being converted to the HMC Closing Stock Price. For purposes of maintaining the Aggregate Spread of Existing HMC Stock Options held by Marriott International Employees, the adjusted option price for such Existing HMC Stock Options shall be set to ensure that the difference between (1) the Post-Conversion Stock Price of the HMC Common Stock multiplied by the number of shares underlying each such Existing HMC Stock Option, and, (2) the adjusted per share option exercise price for each such Existing HMC Stock Option multiplied by the number of shares underlying, is equal to (3) the Aggregate Spread. (v) Adjustment of Number of Shares Covered by Options: With respect to Conversion Awards replacing Existing HMC Stock Options and with respect to Existing HMC Stock Options held by Marriott International Employees, additional adjustments may be made to the extent the adjustments in Section 2.05(c)(iv) are not sufficient to maintain the Aggregate Spread and ratio described in Section 2.05(c)(iv) or to the extent it is determined that additional adjustments are desirable. In the case of Conversion Awards of a New HMC Nonqualified Stock Option and a Host Marriott Services Nonqualified Stock Option, the number of shares of HMC Common Stock and Host Marriott Services Common Stock purchasable shall be adjusted as necessary to maintain the Aggregate Spread and ratio described in Section 2.05(c)(iii). (vi) Limitation on Adjustments: To the extent that any adjustment or limitation of this section 2.05(c) is inconsistent with the 1993 HMC Comprehensive Stock Plan, the Host Marriott Services Comprehensive Stock Plan or the intended tax or accounting treatment of the Distribution or any option, it shall not apply, and Host Marriott Corporation and Host Marriott Services Corporation shall mutually agree on an alternative adjustment. 2.06 Stock Purchase Plan. The 1995 Plan Year for the Host Marriott Corporation Stock Purchase Plan shall end on December 15, 1995 or such other date as the Plan Administrator shall specify, and shares of HMC common stock shall be purchased for all eligible Plan participants so as to allow Plan participants to participate in the Distribution of the shares of Host Marriott Services. The 1996 Plan Year for the 1996 HM Corporate Stock Purchase Plan shall begin on February 1, 1996, or such other date as the Plan Administrator shall specify. 20 The Host Marriott Services Stock Purchase Plan, approved by Host Marriott Corporation in its role as sole shareholder of Host Marriott Services on November 2, 1995, shall begin its 1996 Plan Year on February 1, 1996, or such other date as Plan Administrator shall specify. 2.07 Medical/Dental Plan Liability and Coverage. (a) Liability for Claims. After the Distribution Date, HMC shall be responsible for providing medical/dental coverage and assuming responsibility for the associated liabilities and accrued obligations of and relating to all Retained Employees and their eligible dependents who will be offered participation in a Host Marriott Corporation (HMC) medical/dental plan or plans on terms and conditions deemed appropriate by HMC. Retained Employees shall have no preexisting condition limitation imposed other than that which is or was imposed under their existing plan or plans, and they will be credited with any expenses incurred toward deductibles, out-of-pocket expenses, maximum benefit payments, and any benefit usage toward plan limits which would have been applicable to the plan in which they were enrolled prior to the Distribution. Host Marriott Services shall sponsor and continue the existing HMC medical/dental plans and be responsible for providing medical/dental coverage, including appropriate stop-loss insurance, and assuming responsibility for the associated liabilities and accrued obligations of these plans relating to Host Marriott Services Employees and Host Marriott Services Individuals, and Retained Individuals. Solely for purposes of this Section 2.07, Retained Individuals shall also include any Employee of HMC and their Qualified Beneficiaries, who are deemed employees of HMC as of the result of the terms of any management contract between HMC and Host Marriott Services. HMC must reimburse Host Marriott Services for any incurred obligations relating to such covered Retained Individuals after the Distribution Date. Host Marriott Services Employees, Host Marriott Services Individuals and Retained Individuals shall have no pre-existing condition limitation imposed other than that which is or was imposed under the existing plan or plans, and they will be credited with any expenses incurred toward deductibles, out-of-pocket expenses, maximum benefit payments, and any benefit usage toward plan limits which would have been applicable to the plan in which they were enrolled prior to the Distribution. The medical/dental plans to be sponsored and continued by Host Marriott Services are listed on Schedule MD attached to and incorporated into this Agreement. (b) Continuation Coverage Administration. As of the Distribution Date, Host Marriott Services or a Host Marriott Services Subsidiary shall assume or retain and shall be solely responsible for, or cause its insurance carriers or HMOs to be responsible for, the administration of the continuation coverage requirements imposed by Code Section 4980B and ERISA Sections 601 through 608 as they relate to any current Qualified Beneficiary or any Host Marriott Services Qualified Beneficiary. As of the Distribution Date, Host Marriott Services or a Host Marriott Services Subsidiary shall assume or retain and shall be responsible for, or cause its insurance carriers or HMOs to be responsible for, all liabilities and obligations in connection with coverage to be provided, claims incurred and premiums owed on or after the Cut-off Date under 21 any HMC Medical/Dental Plan or any HMC Medical/Dental Plan in respect of any current Qualified Beneficiary or any Host Marriott Services Qualified Beneficiary. 2.08 Vacation and Sick Pay Liabilities. (a) Division of Liabilities. Effective on the Distribution Date, Host Marriott Services shall assume, as to the Host Marriott Services Employees, and HMC shall retain, as to the Retained Employees, all accrued liabilities (whether vested or unvested, and whether funded or unfunded) for vacation and sick leave in respect of employees of HMC as of the Cut-off Date. Host Marriott Services shall be solely responsible for the payment of such vacation or sick leave to Host Marriott Services Employees after the Cut-off Date, and HMC shall be solely responsible for the payment of such vacation or sick leave to Retained Employees after the Cut-off Date. Each party shall provide to its own Employees on the Distribution Date the same vested and unvested balances of vacation and sick leave as credited to such Employee on the HMC payroll system on the Cut-off Date. The preceding sentence shall not be construed as in any way limiting the right of either Host Marriott Services or HMC to change its vacation or sick leave policies as it deems appropriate. (b) Funded Reserves. Assets attributable to funded reserves for the vacation or sick leave liabilities being divided in accordance with Section 2.09(a) (whether held in a trust, a voluntary employees beneficiary association, or any other funding vehicle) shall be allocated in an appropriate and equitable manner between HMC and Host Marriott Services. 2.09 Preservation of Right To Amend or Terminate Plans. Except as otherwise expressly provided in Article II, no provisions of this Agreement, including, without limitation, the agreement of HMC or Host Marriott Services, or any Retained Subsidiary or Host Marriott Services Subsidiary, to make a contribution or payment to or under any Plan herein referred to for any period, shall be construed as a limitation on the right of HMC or Host Marriott Services or any Retained Subsidiary or Host Marriott Services Subsidiary to amend such Plan or terminate its participation therein which HMC or Host Marriott Services or any Retained Subsidiary or Host Marriott Services Subsidiary would otherwise have under the terms of such Plan or otherwise. No provision of this Agreement shall be construed to create a right in any employee or former employee, or dependent or beneficiary of such employee or former employee, under a Plan which such person would not otherwise have under the terms of the Plan itself. 2.10 Notice: HMC and Host Marriott Services acknowledge that HMC and the Retained Subsidiaries, on the one hand, and Host Marriott Services and the Host Marriott Services Subsidiaries, on the other hand, may incur costs and expenses, including, but not limited to, contributions to Plans and the payment of insurance premiums arising from or related to any of the Plans which are, as set forth in the Agreement, the responsibility of the other party hereto. Accordingly, HMC (and any Retained Subsidiary responsible therefor) and Host Marriott Services (and any Host Marriott Services Subsidiary responsible therefor) shall give notice to the other party of the costs to be incurred prior to payment and demand that the other party which has the obligation to pay shall pay the cost and expense. 22 2.11 Payroll Reporting and Withholding. (a) Form W-2 Reporting. Host Marriott Services and HMC hereby adopt the "alternative procedure" for preparing and filing IRS Forms W-2 (Wage and Tax Statements), as described in Section 5 of Revenue Procedure 84-77, 1984-2 IRS Cumulative Bulletin 753 ("Rev. Proc. 84-77"). Under this procedure Host Marriott Services as the successor employer shall provide all required Forms W- 2 to all Host Marriott Services Individuals reflecting all wages paid and taxes withheld by both HMC as the predecessor and Host Marriott Services as the successor employer for the entire year during which the Distribution takes place. HMC shall provide all required Forms W-2 to all Retained Individuals reflecting all wages and taxes paid and withheld by HMC before, on and after the Distribution Date. In connection with the aforesaid agreement under Rev. Proc. 84-77, each business unit or business operation of HMC shall be assigned to either HMC or Host Marriott Services, depending upon whether it is a Retained Business or a Host Marriott Services Business, and each Retained Individual or Host Marriott Services Individual associated with such business unit or business operation shall be assigned for payroll reporting purposes to HMC or Host Marriott Services, as the case may be. (b) Forms W-4 and W-5. Host Marriott Services and HMC agree to adopt the alternative procedure of Rev. Proc. 84-77 for purposes of filing IRS Forms W-4 (Employee's Withholding Allowance Certificate) and W-5 (Earned Income Credit Advance Payment Certificate). Under this procedure HMC shall provide to Host Marriott Services as the successor employer all IRS Forms W-4 and W-5 on file with respect to each Host Marriott Services Individual, and Host Marriott Services will honor these forms until such time, if any, that such Host Marriott Services Individual submits a revised form. (c) Garnishments, Tax Levies, Child Support Orders, Qualified Medical Child Support Orders, and Wage Assignments. With respect to Employees with garnishments, tax levies, child support orders, qualified medical child support orders, and wage assignments in effect with HMC on the Cut-off Date, Host Marriott Services with respect to each Host Marriott Services Individual shall honor such payroll deduction authorizations or court or governmental orders applicable to Host Marriott Services Plans, and will continue to make payroll deductions and payments to any authorized payee, as specified by the court or governmental order which was filed with HMC. Likewise, HMC with respect to each Retained Individual shall honor such payroll deduction authorization or court or governmental orders applicable to HMC Plans and will continue to make payroll deductions and payments to any authorized payee, as specified by the court or governmental order which was filed with HMC. (d) Authorizations for Payroll Deductions. Unless otherwise prohibited by this or another agreement entered into in connection with the Distribution, or by a Plan document, with respect to Employees with authorizations for payroll deductions in effect with HMC on the Cut-off Date, Host Marriott Services as the successor employer will honor such payroll deduction 23 authorizations relating to each Host Marriott Services Individual, and shall not require that such Host Marriott Services Individual submit a new authorization to the extent that the type of deduction by Host Marriott Services does not differ from that made by HMC. Such deduction types include, without limitation, contributions to any Plan, U.S. Savings Bonds, and United Giver's Fund; scheduled loan repayments to the Profit Sharing Plan or to an employee credit union; and Direct Deposit of Payroll, bonus advances, union dues, employee relocation loans, and other types of authorized company receivables usually collectible through payroll deductions. ARTICLE III LABOR AND EMPLOYMENT MATTERS Notwithstanding any other provision of this Agreement or any other Agreement between Host Marriott Services and HMC to the contrary, Host Marriott Services and HMC understand and agree that: 3.01 Separate Employers. After the Distribution Date and the separation of Employees into their respective companies, Host Marriott Services and HMC will be separate and independent employers. 3.02 Employment Policies and Practices. Host Marriott Services and HMC may adopt, continue, modify or terminate such employment policies, compensation practices, retirement plans, welfare benefit plans, and other employee benefit plans or policies of any kind or description, as each may determine, in its sole discretion, are necessary and appropriate. 3.03 Collective Bargaining Agreements. With regard to employees of HMC covered by a Collective Bargaining Agreement on the Cut-off Date who become Host Marriott Services Employees or Retained Employees, Host Marriott Services and HMC promise and covenant to each other not to take any action which disrupts or otherwise negatively impacts the labor relations of the other. Where necessary, Host Marriott Services and HMC will diligently work to substitute Host Marriott Services for HMC in Collective Bargaining Agreements covering Host Marriott Services employees, and HMC for Host Marriott Services in Collective Bargaining Agreements covering Retained Employees. Further, Host Marriott Services or a Host Marriott Services Subsidiary, as appropriate, shall assume and discharge all liabilities and obligations relating to Host Marriott Services Employees effective as of the Distribution Date under all Collective Bargaining Agreements to which HMC or a Retained Subsidiary is a party on the Distribution Date, and HMC or a Retained Subsidiary, as appropriate, shall retain or assume and discharge all liabilities and obligations relating to Retained Employees effective as of the Distribution Date under all such Collective Bargaining Agreements. 24 3.04 Claims. (a) Scope. This section is intended to allocate all liabilities for employment-related claims involving HMC or Host Marriott Services including, but not limited to, claims against either or both HMC and Host Marriott Services and their officers, directors, agents and employees, or against or by their various employee benefit plans and plan administrators and fiduciaries provided, however, that this section shall not apply to any indemnification between the parties regarding employees under a management agreement by which Host Marriott Services employees manage a unit or operation for HMC including but not limited to a certain management agreement and indemnification agreement between the parties dated May 25, 1995 regarding MFR matters. (b) Employment-Related Claims. An employment-related claim shall include any actual or threatened lawsuit, arbitration, ERISA claim, or federal, state, or local judicial or administrative proceeding of whatever kind involving a demand by or on behalf of or relating to Retained Individuals or Host Marriott Services Individuals, or by or relating to a collective bargaining agent of Employees, or by or relating to any federal, state or local government agency alleging liability against HMC or Host Marriott Services, or against any employee health, welfare, deferred compensation or other benefit plan and/or their respective officers, directors, agents, employees, administrators, trustees and fiduciaries. (c) Obligation to Indemnify. The duty of a party to indemnify, defend and hold harmless the other party under this Section 3.04 shall include the following obligations of the party having such duty: to provide a legal defense and incur all attorneys' fees and litigation costs which may be associated with such a defense; to pay all costs of settlement or judgment where the indemnifying party has the full duty to do so or to pay the full percentage of the party's share when the duty is only a percentage of the full settlement or judgment; and to hold harmless from all claims and costs which may be asserted with or arising from the duty of the indemnifying party to defend and indemnify. (d) Pre-Distribution Claims. (i) Host Marriott Services shall indemnify, defend and hold harmless HMC from any employment-related claims of a Host Marriott Services Individual arising on or before the Cut-off Date. (ii) HMC shall indemnify, defend and hold harmless Host Marriott Services from any employment-related claims of a Retained Individual arising on or before the Cut-off Date. (e) Distribution and Other Joint Liability Claims. Where employment-related claims alleging or involving joint and several liability asserted against Host Marriott Services and HMC are not separately traceable to liabilities relating to Host Marriott Services Individuals or Retained Individuals, any liability shall be apportioned between Host Marriott Services and HMC in 25 accordance with the percentage that each party's Employees represents of the combined total number of Employees of both parties, as described below. The percentage of the liability assumed by Host Marriott Services shall equal the ratio of (i) the total number of Host Marriott Services Employees on the Distribution Date, to (ii) the combined total number of Host Marriott Services Employees and Retained Employees on such date. The percentage of the liability assumed by HMC shall equal the ratio of (i) the total number of HMC Employees on the Distribution Date to (ii) the combined total number of Host Marriott Services Employees and Retained Employees on such date. Each party will indemnify, defend, and hold harmless the other to the extent of the indemnifying party's apportioned percentage determined in accordance herewith. (f) Post-Distribution Employment-Related Claims. Employment related claims arising after the Distribution and division of the Employees between the parties and not relating to, arising from, or in connection with the Distribution will be the sole responsibility of Host Marriott Services as to Host Marriott Services Individuals and of HMC as to Retained Individuals. Each Company will indemnify, defend, and hold harmless the other from employment- related claims of the other company. 3.05 Funding of Union Plans. Without limitation to the scope and application of Section 3.04, any claims by or on behalf of employees or their collective bargaining agent or any federal, state or local governmental agency for alleged underfunding of, or failure to make payments to, union health, welfare and pension funds based on acts or omissions occurring on or before the Distribution Date or arising from or in connection with the Distribution, or resulting from actuarial recalculation by auditors of the union plans and funds, will be the sole responsibility of each party as to its own employees (i.e., Host Marriott Services with respect to Host Marriott Services Individuals, and HMC with respect to Retained Individuals), and the responsible party will indemnify, defend, and hold harmless the other from any such claims. 3.06 Notice of Claims. Without limitation to the scope and application to each party in the performance of its duties under Sections 3.04 and 3.05 herein, each party will notify in writing and consult with the other party prior to making any settlement of an employee claim, for the purpose of avoiding any prejudice to such other party arising from the settlement. 3.07 Assumption of Unemployment Tax Rates. Changes in state unemployment tax experience as of the Cut-off Date shall be handled as follows. In the event an option exists to allocate state unemployment tax experience of HMC, the HMC experience shall be transferred to Host Marriott Services if this results in the lowest aggregate unemployment tax costs for both HMC and Host Marriott Services combined, and the HMC experience shall be retained by HMC if this results in the lowest aggregate unemployment tax costs for HMC and Host Marriott Services combined. 3.08 Intercompany Service Charge. Legal, professional, managerial, administrative, clerical, consulting, and support or production services provided to one party by personnel of the other party, upon the request of the first party or when such services are otherwise required by 26 this Agreement between Host Marriott Services and HMC, shall be charged to the party receiving such services on commercially reasonable terms to be negotiated (or in accordance with the provisions of any applicable agreement between the parties). 3.09 WARN Claims. Before and after the Distribution Date, each party shall comply in all material respects with the Worker Adjustment and Retraining Act ("WARN"). HMC shall be responsible for WARN claims relating to Retained Individuals or to Employees who prior to the Distribution Date were employed in a Retained Business. Host Marriott Services shall be responsible for WARN Claims relating to Host Marriott Services Individuals or to Employees who prior to the Distribution Date were employed in a Host Marriott Services Business. Each party shall indemnify, defend and hold harmless the other in connection with WARN Claims for which the indemnitor is responsible and which are brought against the indemnitee. 3.10 Employees on Leave of Absence. After the Distribution Date, Host Marriott Services shall assume responsibility, if any, as employer for all Employees returning from an approved leave of absence who prior to the Distribution Date were employed in a Host Marriott Services Business. After the Distribution Date, HMC shall assume responsibility, if any, as employer for all Employees returning from an approved leave of absence who prior to the Distribution Date were employed in a Retained Business. 3.11 No Third-Party Beneficiary Rights. Neither this Agreement nor any other intercompany agreement between Host Marriott Services and HMC is intended to nor does it create any third party contractual or other common law rights. No person shall be deemed a third-party beneficiary of the agreements between Host Marriott Services and HMC. 3.12 Attorney-Client Privilege. The provisions herein requiring either party to this Agreement to cooperate shall not be deemed to be a waiver of the attorney/client privilege for either party nor shall it require either party to waive its attorney/client privilege. ARTICLE IV DEFAULT 4.01 Default. If either party materially defaults hereunder, the non- defaulting party shall be entitled to all remedies provided by law or equity (including reasonable attorney's fees and costs of suit incurred). 4.02 Force Majeure. Host Marriott Services and HMC shall incur no liability to each other due to a default under the terms and conditions of this Agreement resulting from fire, flood, war, strike, lock-out, work stoppage or slow-down, labor disturbances, power failure, major equipment breakdowns, construction delays, accident, riots, acts of God, acts of United States' enemies, laws, orders or at the insistence or result of any governmental authority or any other delay beyond each other's reasonable control. 27 ARTICLE V MISCELLANEOUS 5.01 Relationship of Parties. Nothing in this Agreement shall be deemed or construed by the parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the parties, it being understood and agreed that no provision contained herein, and no act of the parties, shall be deemed to create any relationship between the parties other than the relationship set forth herein. 5.02 Access to Information: Cooperation. HMC and Host Marriott Services and their authorized agents will be given reasonable access to and may take copies of all information relating to the subjects of this Agreement (to the extent permitted by federal and state confidentiality laws) in the custody of the other party, including any agent, contractor, subcontractor, agent or any other person or entity under the contract of such party. The parties will provide one another with such information within the scope of this Agreement as is reasonably necessary to administer each party's Plans. The parties will cooperate with each other to minimize the disruption caused by any such access and providing of information. 5.03 Assignment. Neither party shall, without the prior written consent of the other, have the right to assign any rights or delegate any obligations under this Agreement. 5.04 Headings. The headings used in this Agreement are inserted only for the purpose of convenience and reference, and in no way define or limit the scope or intent of any provision or part hereof. 5.05 Severability of Provisions. Neither HMC nor Host Marriott Services intends to violate statutory or common law by executing this Agreement or any contractual obligations of Host Marriott Corporation to Marriott International under the 1993 Distribution Agreement with Marriott International and any related agreements to the 1993 Distribution of Marriott International to the shareholders of Marriott Corporation. If any section, sentence, paragraph, clause or combination of provisions in this Agreement is in violation of any law, such sections, sentences, paragraphs, clauses or combinations shall be inoperative and the remainder of this Agreement shall remain in full force and effect and shall be binding upon the parties. 5.06 Parties Bound. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing herein, expressed or implied, shall be construed to give any other person any legal or equitable rights hereunder. 5.07 Notices. All notices, consents, approvals and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given when delivered personally or by overnight courier or three days after being mailed by registered or certified mail (postage prepaid, return receipt requested) to the named representatives of the parties at the 28 following addresses (or at such other address for a party as shall be specified by like notice, except that notices of changes of address shall be effective upon receipt): (a) if to HMC HOST MARRIOTT CORPORATION 10400 Fernwood Road Bethesda, Maryland 20817 Attention: Stephen J. McKenna, General Counsel (b) if to Host Marriott Services HOST MARRIOTT SERVICES CORPORATION 10400 Fernwood Road Bethesda, Maryland 20817 Attention: Joe P. Martin, General Counsel Host Marriott Services agrees that, upon the request of HMC, Host Marriott Services will give copies of all notices, consents, approvals and other communications hereunder to any lender to HMC or other person specified by HMC. 5.08 Further Action. Host Marriott Services and HMC each shall cooperate in good faith and take such steps and execute such papers as may be reasonably requested by the other party to implement the terms and provisions of this Agreement. 5.09 Waiver. Host Marriott Services and HMC each agree that the waiver of any default under any term or condition of this Agreement shall not constitute a waiver of any subsequent default or nullify the effectiveness of that term or condition. 5.10 Governing Law. All controversies and disputes arising out of or under this Agreement shall be determined pursuant to the laws of the State of Maryland, regardless of the laws that might be applied under applicable principles of conflicts of laws. 5.11 Consent to Jurisdiction. The parties irrevocably submit to the exclusive jurisdiction of (a) the Courts of the State of Maryland, Montgomery County, or (b) any federal district court where there is federal jurisdiction for the purpose of any suit, action or other Court proceeding arising out of this Agreement. The parties hereby irrevocably designate, appoint and empower Prentice Hall Corporation System, Inc. in each case as its true and lawful agent and attorney-in-fact in its name, place, and stead to receive on its behalf service of process in any action, suit, or proceeding with respect to any matters as to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. 5.12 Entire Agreement. This Agreement and the Distribution Agreement constitute the entire understanding between the parties hereto, and supersede all prior written or oral 29 communications, relating to the subject matter covered by said agreements. No amendment, modification, extension or failure to enforce any condition of this Agreement by either party shall be deemed a waiver of any of its rights herein. This Agreement shall not be amended except by a writing executed by the parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. HOST MARRIOTT CORPORATION, a Delaware corporation By:________________________________________ Christopher G. Townsend Senior Vice President and Deputy General Counsel HOST MARRIOTT SERVICES CORPORATION a Delaware corporation By: _______________________________________ Joe P. Martin Senior Vice President and General Counsel 30 SCHEDULE RT HOST MARRIOTT OTHER PLANS Howard Johnson (Prime & Exeter) Retirement Award Howard Johnson Company Executive Retirement Plan Howard Johnson Retirement Plan (Long & Loyal) Marriott Family Restaurants, Inc. Retirement Savings Plan (assets remaining)* Big Boy Cleveland Disposition Deferred Stock Plan 31 SCHEDULE R HOST MARRIOTT SERVICES OTHER PLAN Host International Inc., Cleveland Retirement Plan Bird-Marriott, Inc. Pension Plan Host Annuity Contract Plan Supplemental Retirement Plan for Officers of Host International 32 SCHEDULE MD The Host Marriott Corporation Enhanced Protection Plan The Host Marriott Corporation Dental Care Plan The Host Marriott Corporation Med*Connection Health Plan The Host Marriott Corporation Minimum Protection Health Plan 33 EX-99.5 11 EXHIBIT 99.5 Exhibit 99.5 TAX SHARING AGREEMENT TAX SHARING AGREEMENT, dated as of December 29, 1995, among Host ------------ Marriott Corporation, a Delaware corporation ("Host Marriott"), Host Marriott Services Corporation, a Delaware corporation ("Services"), and their respective direct and indirect subsidiaries. References herein to a "party" (or "parties") to this Agreement, shall refer to Host Marriott, Services, and where appropriate and the context so requires, their subsidiaries. WHEREAS, Host Marriott and its subsidiaries have joined in filing consolidated federal Tax Returns and certain consolidated, combined or unitary state, local or foreign Tax Returns; WHEREAS, Host Marriott and Services have entered into that certain Distribution Agreement, dated as of the date hereof (the "Distribution Agreement"), pursuant to which Host Marriott will distribute all of the outstanding common stock in Services to its stockholders in a transaction intended to qualify for tax-free treatment under Code Section 355 (the "Spin- off"); WHEREAS, pursuant to the Spin-off, Services and its subsidiaries will leave the Pre-Spin-off Group; and WHEREAS, the parties hereto wish to provide for (i) allocations of, and indemnifications against, certain liabilities for Taxes, (ii) the preparation and filing of Tax Returns on a basis consistent with prior practice and the payment of Taxes with respect thereto, and (iii) certain related matters; NOW THEREFORE, in consideration of their mutual promises, the parties hereby agree as follows: 1. Definitions. When used herein the following terms shall have the following meanings: "Affiliate" -- with respect to any corporation (the "given corporation"), each person, corporation, partnership or other entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the given corporation. For purposes of this definition, "control" means the possession, directly or indirectly, of 50% or more of the voting power or value of outstanding voting interests. "Affiliated Group" -- an affiliated group of corporations within the meaning of Code Section 1504(a) for the Taxable Period or, for purposes of any state income tax matters, any consolidated, combined or unitary group of corporations within the meaning of the corresponding provisions of tax law for the state in question. "Caterair Transaction" -- that certain transaction dated as of December 15, 1989 pursuant to which certain federal Tax audit adjustments have been proposed. 1 "Closing" -- the time at which the Spin-off shall become effective on the Closing Date. "Closing Date" -- the date on which the Spin-off is effected by Host Marriott. "Code" -- the Internal Revenue Code of 1986, as amended, or any successor thereto, as in effect for the Taxable Year in question. "Combined Jurisdiction" -- for any Taxable Period, any state, local or foreign jurisdiction in which Host Marriott or a Host Marriott Affiliate is included in a consolidated, combined, unitary or similar return with Host Marriott or any Host Marriott Affiliate for state, local or foreign Tax purposes. "Distribution Agreement" -- as defined in the preamble to this Agreement. "Final Determination" -- (i) a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (ii) a closing agreement or accepted offer in compromise under Code Sections 7121 or 7122, or comparable agreements under the laws of other jurisdictions; (iii) any other final settlement with the IRS or other Taxing Authority; or (iv) the expiration of an applicable statute of limitations. "Host Marriott"-- as defined in the preamble to this Agreement. "Host Marriott Group" -- Host Marriott and each corporation that joins with Host Marriott in filing a consolidated federal income tax return for any Post-Closing Taxable Period. For purposes of this Agreement, the Host Marriott Group shall exist from the beginning of the day immediately after the Closing Date. "Host Marriott Member" -- a corporation that was immediately before the Spin-off a Pre-Spin-off Member and becomes a member of the Host Marriott Group at the beginning of the day immediately after the Closing Date. "Information Return(s)" -- with respect to any corporation or Affiliated Group, any and all reports, returns, declarations or other filings (other than Tax Returns) required to be supplied to any Tax Authority. "IRS" -- the Internal Revenue Service. "Net Tax(es)" -- Taxes (as defined herein) less any related interest or penalty attributed to such Taxes. "Overdue Rate" -- a rate of interest per annum that equals LIBOR plus 400 basis points. 2 "Post-Closing Straddle Period" -- with respect to any Straddle Period, the period beginning on the day after the Closing Date and ending on the last day of such Taxable Year. "Post-Closing Taxable Period" -- a Taxable Year that begins on or after the day immediately after the Closing Date. "Pre-Closing Straddle Period" -- with respect to any Straddle Period, the period beginning on the first day of such Taxable Year and ending on the close of business on the Closing Date. "Pre-Closing Taxable Period" -- a Taxable Year that ends at or before the close of business on the Closing Date. "Preliminary Transactions" -- those certain transactions occurring on or before the Closing Date that are described as "Preliminary Transactions" in the request for rulings filed with the IRS on August 25, 1995, as supplemented by subsequent submissions. "Pre-Spin-Off Affiliate" -- any Affiliate of any Pre-Spin-Off Member. "Pre-Spin-off Group" -- Host Marriott and each corporation that joined with Host Marriott in filing a consolidated federal income tax return for any Pre-Closing Taxable Period. For purposes of this Agreement, the Pre-Spin-off Group shall terminate at the close of business on the Closing Date. "Pre-Spin-off Member" -- a corporation that was a member of the Pre- Spin-off Group at the close of business on the Closing Date. "Representative" -- with respect to any person or entity, any of such person's or entity's directors, officers, employees, agents, consultants, accountants, attorneys and other advisors. "Separate Return Basis" -- the Tax liability for the Services Group (or any Services Member) calculated with Services as the common parent of the Affiliated Group and without regard to any Host Marriott Members. "Services"-- as defined in the preamble to this Agreement. "Services Group" -- Services and each corporation that joins with Services in filing a consolidated federal income tax return for any Post-Closing Taxable Period. For purposes of this Agreement, the Services Group shall exist from the beginning of the day immediately after the Closing Date. "Services Member" -- a corporation that was a Pre-Spin-off Member and becomes a member of the Services Group at the beginning of the day immediately after the Closing Date. 3 "Spin-off" -- as defined in the Preamble to this Agreement. "Straddle Period" -- any Taxable Year beginning before and ending after the close of business on the Closing Date. "Tax(es)" -- with respect to any corporation or group of corporations, any and all taxes based upon or measured by net income, gross income or gross receipts (when levied in lieu of an income tax) or alternative minimum taxable income, regardless of whether denominated as an "income tax," a "franchise tax" or otherwise, imposed by any Taxing Authority, whether any such tax is imposed directly or through withholding, together with any interest and any penalty, addition to tax or additional amount. "Taxable Period" -- a Pre-Closing Taxable Period, a Post-Closing Taxable Period or a Straddle Period. "Taxable Year" -- a taxable year (which may be shorter than a full calendar or fiscal year), year of assessment or similar period with respect to which any Tax may be imposed. "Tax Benefit(s)" -- (i) in the case of a Tax for which a consolidated federal, or a consolidated, combined or unitary state or other, Tax Return is filed, the amount by which the Tax liability of the Affiliated Group or other relevant group of corporations is actually reduced on a "with and without" basis (by deduction, entitlement to refund, credit, offset or otherwise, whether available in the current Taxable Year, as an adjustment to taxable income in any other Taxable Year or as a carryforward or carryback, and including the effect of such reduction on other Taxes), plus any interest received with respect to any related Tax refund, and (ii) in the case of any other Tax, the amount by which the Tax liability of a corporation is actually reduced on a "with and without" basis (by deduction, entitlement to refund, credit, offset or otherwise, whether available in the current Taxable Year, as an adjustment to taxable income in any other Taxable Year or as a carryforward or carryback, and including the effect of such reduction on other Taxes), plus any interest received with respect to any related Tax refund. "Taxing Authority" -- the IRS and any other domestic or foreign governmental authority responsible for the administration of any Tax. "Tax Practices" -- the most recently applied policies, procedures and practices employed by the Pre-Spin-off Group in the preparation and filing of, and positions taken on, any Tax Returns of Host Marriott or any Pre-Spin-off Member or Pre-Spin-off Affiliate for any Pre-Closing Taxable Period. "Tax Return(s)" -- with respect to any corporation or Affiliated Group, all returns, reports, estimates, information statements, declarations and other filings relating to, or required to be filed in connection with, the payments or refund of any Tax for any Taxable Period. 4 2. Obligations, Responsibilities and Rights of Host Marriott and Services. (a) Preparation and Filing of Tax Returns. (i) By Host Marriott. Host Marriott shall prepare and ---------------- timely file (or cause to be prepared and timely filed): (A) all Tax and Information Returns of the Pre-Spin-off Group and any Pre-Spin-off Member that are required to be filed on or before the Closing Date; (B) all Tax and Information Returns of the Pre-Spin-off Group and any Pre-Spin-off Member for all Pre-Closing Taxable Periods (other than such Returns that relate solely to any Services Member or group of Services Members for all Taxable Years ending after December 28, 1990) that are not required to be filed on or before the Closing Date; (C) all Tax and Information Returns of the Host Marriott Group and any Host Marriott Member for all Straddle Periods and Post-Closing Taxable Periods; and (D) all Tax and Information Returns not otherwise required to be filed by Host Marriott or Services pursuant to this Section 2(a)(i) and Section 2(a)(ii). (ii) By Services. Services shall prepare and timely file ----------- (or cause to be prepared and timely filed): (A) all Tax and Information Returns that relate solely to any Services Member or group of Services Members for all Pre-Closing Taxable Periods ending after December 28, 1990 that are not required to be filed on or before the Closing Date; and (B) all Tax and Information Returns of the Services Group and any Services Member for all Straddle Periods and Post-Closing Taxable Periods. (b) Provision of Filing Information. Each party shall cooperate and assist the other party in the preparation and filing of all Tax and Information Returns subject to Section 2(a) and submit to the other party (i) all necessary filing information in a manner consistent with past Tax Practices and (ii) all other information reasonably requested by the other party in connection with the preparation of such Tax and Information Returns promptly after such request. (c) Taxable Year. Services and Host Marriott agree that, for Tax purposes, (i) the Services Members shall be included in the consolidated federal Tax Return of the Pre-Spin-off Group for the Taxable Year that ends at the close of business on the Closing Date (and in all corresponding consolidated, combined or unitary state or other Tax Returns of the Pre-Spin-off Group) and (ii) the Services Group and each Services Member shall begin a new 5 Taxable Year for purposes of such federal and, to the extent permitted by law, state Taxes on the day after the Closing Date. The parties further agree that, to the extent permitted by applicable law, all federal, state or other Tax Returns shall be filed consistently with this position. (d) Straddle Period Taxes. (i) For purposes of this Agreement, Taxes shall be allocated between the Pre- and Post-Closing Straddle Periods, in Host Marriott's reasonable judgment with the consent of the appropriate Services' personnel, which shall not be unreasonably withheld, in the following manner: (A) to the extent not impractical, Taxes shall be allocated on the basis of the actual taxable income for each such period, determined by closing the books of the Pre- Spin-off Group at the close of business on the Closing Date; and (B) to the extent that such an allocation based on a closing of the books is impractical, Host Marriott shall be authorized to allocate Taxes based on rounding to the next nearest accounting period-end. (ii) Host Marriott shall pay to Services within fourteen (14) days after receipt of an executed Straddle Period Tax Return prepared by Services pursuant to Section 2(a)(ii)(B), the excess of any amount so allocated (based on the amount of Tax shown on such Tax Return) to the Pre-Closing Straddle Period over the amount of any estimated Taxes previously paid by any Pre-Spin-off Member to the relevant Taxing Authority prior to the Closing Date; or Services shall pay to Host Marriott within fourteen (14) days after the filing of such Tax Return the excess of the amount of any estimated Taxes previously paid by any Pre-Spin-off Member to the relevant Taxing Authority prior to the Closing Date over the amount so allocated to such Period. (e) Payment of Taxes. Host Marriott shall pay (i) all Taxes shown to be due and payable on all Tax Returns filed by (A) Host Marriott pursuant to Section 2(a)(i) hereof and (B) Services pursuant to Section 2(a)(ii)(A) hereof and (ii) subject to Section 3, all Taxes that shall thereafter become due and payable with respect to all Tax Returns filed pursuant to Sections 2(a)(i) and 2(a)(ii)(A) as a result of a Final Determination; provided, however, that Services shall reimburse Host Marriott [within fourteen (14) days of receipt of notification from Host Marriott] for the amount of Net Taxes that are attributable to any Services Member on a Separate Return Basis for all Pre-Closing Taxable Periods that shall thereafter become due and payable as a result of a Final Determination (but excluding (i) Net Taxes attributable to the Caterair Transaction and (ii) federal Taxes for all Taxable Years ending on or prior to December 28, 1990). Services shall pay all Taxes attributable to all Tax Returns filed by Services pursuant to Section 2(a)(ii)(B) hereof. (f) Amendments to Tax Returns. No Tax Returns for any Pre- Closing Taxable Periods filed by Host Marriott may be amended without Host Marriott's and Services' consent, which shall not be unreasonably withheld . (g) Refunds of Taxes. (i) Host Marriott shall be entitled to any refund of Taxes and 6 any Tax Benefits realized as a result of a Final Determination with respect to all Tax Returns filed by Host Marriott pursuant to Section 2(a)(i) and with respect to all Tax Returns filed by Services pursuant to Section 2(a)(ii)(A); provided, however, that Host Marriott shall reimburse Services for the amount of any Tax Benefit attributable to any Services Member for all Pre-Closing Taxable Periods which arises as a result of a Final Determination. Services shall be entitled to any refund with respect to all Tax Returns filed by Services pursuant to Section 2(a)(ii)(B). Any such refunds attributable to a Straddle Period shall be allocated between the Pre-Closing Straddle Period and Post- Closing Straddle Period on a basis consistent with the method used to allocate the Tax liability for such Straddle Period. With respect to Straddle Period Tax Returns prepared by Services pursuant to Section 2(a)(ii)(B), Host Marriott shall be entitled to any refund attributable to a Pre-Closing Straddle Period. (ii) If Host Marriott or any Host Marriott Member receives a Tax refund or Tax Benefit to which Services or any Services Member is entitled pursuant to this Agreement, Host Marriott shall pay (in accordance with Section 4) the amount of such Tax refund or Tax Benefit to Services [within fourteen (14) days of] receipt thereof. (iii) Except as otherwise provided in this Agreement, if Services or any Services Member receives a Tax refund or Tax Benefit to which Host Marriott or any Host Marriott Member is entitled pursuant to this Agreement, Services shall pay (in accordance with Section 4) the amount of such Tax refund or Tax Benefit (including any interest received thereon) to Host Marriott [within fourteen (14) days of] receipt thereof. (h) Carrybacks. Neither Services nor Host Marriott shall file any carryback claim for federal Taxes or state, local or foreign Taxes in a Combined Jurisdiction for the Services Group or any Services Member or the Host Marriott Group or any Host Marriott Member into a Pre-Closing Taxable Period without the prior written consent of Host Marriott or Services, as applicable, which shall not be unreasonably withheld. 3. Indemnification. (a) By Host Marriott. (i) Taxes. Except as provided in Section 3(b), Host Marriott ----- shall indemnify and hold Services and Services Members harmless against any and all (A) Taxes attributable to all Tax Returns filed by Host Marriott pursuant to Section 2(a)(i), (B) with respect to Straddle Period Tax Returns prepared by Services pursuant to Section 2(a)(ii)(B), Taxes attributable to Pre-Closing Straddle Periods as shown on such Tax Returns, and (C) Taxes attributable to the Spin-off or the Preliminary Transactions. (ii) Member Liability. Except as provided in Sections ---------------- 3(a)(i) and 3(b), Host Marriott shall indemnify and hold Services and the Services Members harmless against each and every liability for Taxes of the Pre- Spin-off Group under Treasury Regulation Section 1.1502-6 or any similar law, rule or regulation administered by any Taxing Authority. 7 (b) By Services. Services shall indemnify and hold Host Marriott and Host Marriott Members harmless against any and all (i) Taxes attributable to all Tax Returns filed by Services pursuant to Section 2(a)(ii)(B) (but excluding Taxes attributable to Pre-Closing Straddle Periods that are shown on any Straddle Period Tax Returns), and (ii) all Net Taxes attributable to any Services Member on a Separate Return Basis for all Pre-Closing Taxable Periods that shall thereafter become due and payable as a result of a Final Determination (but excluding (A) Net Taxes attributable to the Caterair Transaction and (B) federal Taxes for all Taxable Years ending on or prior to December 28, 1990). (c) Certain Reimbursements. Services (or Host Marriott, as the case may be) shall notify Host Marriott (or Services) of any Taxes paid by the Services Group or any Services Member (or the Host Marriott Group or any Host Marriott Member) which are subject to indemnification under this Section 3. To the extent not otherwise provided in this Section 3, any other notification contemplated by this Section 3(c) shall include a detailed calculation (including, if applicable, separate allocations of such Taxes between Pre- and Post-Closing Taxable Periods and Pre- and Post-Closing Straddle Periods and supporting work papers) and a brief explanation of the basis for indemnification hereunder. Whenever a notification described in this Section 3(c) is given, the notified party shall pay the amount requested in such notice to the notifying party in accordance with Section 4, but only to the extent that the notified party agrees with such request. To the extent the notified party disagrees with such request, it shall, within 14 days, so notify the notifying party, whereupon the parties shall use their best efforts to resolve any such disagreement. Any payment made after such 14-day period shall include interest at the Overdue Rate from the date such payment would have been made under Section 4 based upon the original notice given by the notifying party. (d) Other Indemnifications. Notwithstanding the foregoing, the indemnification provisions in this Agreement shall not restrict the scope of any other indemnification provisions between any Host Marriott Member and any Services Member as set forth in any other intercompany agreements entered into in connection with the Spin-off or the Preliminary Transactions, including, but not limited to, that certain Management and Indemnification Agreement dated as of May 25, 1995 between Host Marriott and Host Marriott Travel Plazas, Inc. 4. Method, Timing and Character of Payments Required by This Agreement. (a) Payment in Immediately Available Funds; Interest. All payments made pursuant to this Agreement shall be made in immediately available funds. Except as otherwise provided herein, any payment not made within fourteen (14) days of when due shall thereafter bear interest at the Overdue Rate from the date such payment was due. (b) Characterization of Payments. Any payment (other than interest thereon) made hereunder by Host Marriott to Services or by Services to Host Marriott shall be treated by all parties for Tax purposes to the extent permitted by law, and for accounting purposes to the extent permitted by generally accepted accounting principles, as non-taxable dividend distributions or capital contributions made prior to the close of business on the Closing Date. 8 5. Tax Returns; Cooperation; Document Retention; Confidentiality. (a) Provision of Cooperation, Documents and Other Information. Upon the reasonable request of any party to this Agreement, Host Marriott and Services shall provide (and shall cause the members of their respective Affiliated Groups to provide) the requesting party, promptly upon request, with such cooperation and assistance, documents, and other information, without charge, as may reasonably be requested by such party in connection with (i) the preparation and filing of any original or amended Tax Return, (ii) the conduct of any audit or other examination or any judicial or administrative proceeding involving to any extent Taxes or Tax Returns within the scope of this Agreement, or (iii) the verification by a party of an amount payable hereunder to, or receivable hereunder from, another party. Such cooperation and assistance shall include, without limitation: (i) the provision on demand of books, records, Tax Returns, documentation or other information relating to any relevant Tax Return; (ii) the execution of any document that may be necessary or reasonably helpful in connection with the filing of any Tax Return, or in connection with any audit, proceeding, suit or action of the type generally referred to in the preceding sentence, including, without limitation, the execution of powers of attorney and extensions of applicable statutes of limitations, with respect to Tax Returns which Host Marriott may be obligated to file on behalf of Services Members pursuant to Section 2(a); (iii) the prompt and timely filing of appropriate claims for refund; and (iv) the use of reasonable best efforts to obtain any documentation from a governmental authority or a third party that may be necessary or helpful in connection with the foregoing. Each party shall make its employees and facilities available on a mutually convenient basis to facilitate such cooperation. (b) Retention of Books and Records. Host Marriott, each Host Marriott Member, Services and each Services Member shall retain or cause to be retained all Tax Returns, and all books, records, schedules, workpapers, and other documents relating thereto, until the expiration of the later of (i) all applicable statutes of limitations (including any waivers or extensions thereof), and (ii) any retention period required by law or pursuant to any record retention agreement. The parties hereto shall notify each other in writing of any waivers, extensions or expirations of applicable statutes of limitations. The parties shall provide written notice of any intended destruction of the documents referred to in this subsection. A party giving such a notification shall not dispose of any of the foregoing materials without first offering to transfer possession thereof to all notified parties. (c) Status and Other Information Regarding Audits and Litigation. Each party shall use reasonable best efforts to keep the other party advised, as to the status of Tax audits and litigation involving any issue relating to any Taxes, Tax Returns or Tax Benefits subject to indemnification under this Agreement. To the extent relating to any such issue, each party shall promptly furnish the other party copies of any inquiries or requests for information from any Taxing Authority or any other administrative, judicial or other governmental authority, as well as copies of any revenue agent's report or similar report, notice of proposed adjustment or notice of deficiency. (d) Confidentiality of Documents and Information. Except as required by law or with the prior written consent of the other party, all Tax Returns, documents, 9 schedules, work papers and similar items and all information contained therein, which Tax Returns and other materials are within the scope of this Agreement, shall be kept confidential by the parties hereto and their Representatives, shall not be disclosed to any other person or entity and shall be used only for the purposes provided herein. 6. Contests and Audits. (a) Notification of Audits or Disputes. Upon the receipt by a party of notice of any pending or threatened Tax audit or assessment which may affect the liability for Taxes that are subject to indemnification hereunder, such party shall promptly notify the other party in writing of the receipt of such notice. (b) Control and Settlement. Host Marriott shall have the right and obligation to control, and to represent the interests of all affected taxpayers in, any Tax audit or administrative, judicial or other proceeding relating, in whole or in part, to any Pre-Closing Taxable Period or any other Taxable Period for which Host Marriott is responsible, in whole or in part, for Taxes under Sections 2(e) and (3), and to employ counsel of its choice; provided, however, that, with respect to such issues that may impact Services or any Services Member for any such Taxable Period, Host Marriott (i) shall in good faith consult with Services as to the handling and disposition of such issues and (ii) shall not enter into any settlement that impacts Services or any Services Member without the written consent of Services, which shall not be unreasonably withheld; and provided, further, that Services' General Counsel shall hand deliver to Host Marriott's Tax Director a written response to any notification by Host Marriott of a proposed settlement within ten days of the receipt of such notification. If Services' General Counsel fails to so respond within such ten day period, Services shall be deemed to have consented to the proposed settlement. (c) Delivery of Powers of Attorney and Other Documents. Services shall execute and deliver to Host Marriott, promptly upon request, powers of attorney authorizing Host Marriott to extend statutes of limitations, receive refunds, negotiate settlements and take such other actions that Host Marriott reasonably considers to be appropriate in exercising its control rights pursuant to Section 6(b), and any other documents reasonably necessary to effect the exercising of such control rights. 7. Marriott International Tax Sharing Agreement. Notwithstanding anything to the contrary in this Agreement, the parties hereto agree that the Tax Sharing Agreement dated October 8, 1993 entered into by and among Host Marriott (formerly Marriott Corporation), Marriott International, Inc. and their respective direct and indirect subsidiaries (the "Marriott International Agreement") shall remain in full force and effect. [To the extent any provision in this Agreement conflicts with a provision in the Marriott International Agreement, this Agreement shall govern.] 8. Miscellaneous. 10 (a) Effectiveness. This Agreement shall be effective from and after the Closing Date and shall survive until the expiration of any applicable statute of limitations; provided, however, that this Agreement shall terminate immediately upon a termination of the Distribution Agreement in accordance with the terms of Section 11.07 thereof and thereafter this Agreement shall be of no further force and effect. (b) Entire Agreement. Except as provided in the Marriott International Agreement, this Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof. This Agreement terminates and supersedes, on a prospective basis only, any and all other sharing or allocation agreements with respect to Taxes in effect at the time between the Pre-Spin-off Group and the Services Members (except for the Marriott International Agreement), but shall not affect any such agreement to the extent applicable only among Host Marriott Members. (c) Guarantees of Performance. Host Marriott and Services hereby guarantee the complete and prompt performance by the members of their respective Affiliated Groups of all of their obligations and undertakings pursuant to this Agreement. If, subsequent to the close of business on the Closing Date, either Host Marriott or Services shall be acquired by another entity such that 50% or more of its common stock is in common control, such acquirer shall, by making such acquisition, simultaneously agree to jointly and severally guarantee the complete and prompt performance by the acquired corporation and any Affiliate of the acquired corporation of all of their obligations and undertakings pursuant to this Agreement. (d) Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable, the enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions hereof without including any of such which may hereafter be declared invalid, void or unenforceable. In the event that any such term, provision, covenant or restriction is hereafter held to be invalid, void or unenforceable, the parties hereto agree to use their best efforts to find and employ an alternate means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. (e) Indulgences, etc. Neither the failure nor any delay on the part of any party hereto to exercise any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or further exercise of the same or any other right, nor shall any waiver of any right with respect to any occurrence be construed as a waiver of such right with respect to any other occurrence. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Maryland without regard to the conflict of law principles thereof, except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or subject of this Agreement, and 11 as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. (g) Notices. All notices, requests, demands and other communications required or permitted under this Agreement that are routine in nature shall be made in writing and shall be delivered by hand or mailed by registered or certified mail (return receipt requested) to the designated representative of the tax department of each party and confirmed by a copy thereof directed to the general counsel of each party, while all notices, requests, demands and other communications of material importance shall be made in the manner provided in Section 11.04 of the Distribution Agreement and confirmed by a copy thereof directed to the designated representative of the tax department of each party. (h) Modification or Amendment. This Agreement may be amended at any time by written agreement executed and delivered by duly authorized officers of Services and Host Marriott. (i) Successors and Assigns. A party's rights and obligations under this Agreement may not be assigned without the prior written consent of the other party. All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns, and shall survive any acquisition, disposition or other corporate restructuring or transaction involving either party. (j) No Third-Party Beneficiaries. This Agreement is solely for the benefit of the parties to this Agreement and their respective Affiliates and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without this Agreement. (k) Other. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all of such counterparts shall together constitute one and the same instrument. The section numbers and captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. (l) Predecessors and Successors. To the extent necessary to give effect to the purposes of this Agreement, any reference to any corporation, Affiliated Group or member of an Affiliated Group shall also include any predecessors or successors thereto, by operation of law or otherwise. (m) Tax Elections. Nothing in this Agreement is intended to change or otherwise affect any previous tax election made by or on behalf of the Pre- Spin-off Group (including the election with respect to the calculation of earnings and profits under Code Section 1552 and the regulations thereunder). Host Marriott, as common parent of the Host Marriott Group, shall continue to have discretion, reasonably exercised, to make any and all elections with respect to all members of the Pre-Spin-off Group for all Pre-Closing Taxable Periods for which it is obligated to file Tax or Information Returns under Section 2(a)(i). 12 (n) Injunctions. The parties acknowledge that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. The parties hereto shall be entitled to an injunction or injunctions to prevent breaches hereto and to enforce specifically the terms and provisions hereof in any court having jurisdiction; such remedy shall be in addition to any other remedy available at law or in equity. (o) Further Assurances. Subject to the provisions hereof, the parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Subject to the provisions hereof, each party shall, in connection with entering into this Agreement, performing its obligations hereunder and taking any and all actions relating hereto, comply with all applicable laws, regulations, orders and decrees, obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or similar authority and promptly provide the other party with all such information as it may reasonably request in order to be able to comply with the provisions of this sentence. (p) Setoff. All payments to be made by any party under this Agreement shall be made without setoff, counterclaim or withholding, all of which are expressly waived. (q) Costs and Expenses. Unless otherwise specifically provided herein, each party agrees to pay its own costs and expenses resulting from the fulfillment of its respective obligations hereunder. (r) Rules of Construction. Any ambiguities shall be resolved without regard to which party drafted the Agreement. 13 IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have caused this Agreement to be duly executed on their respective behalf by their respective officers thereunto duly authorized, as of the day and year above written. HOST MARRIOTT CORPORATION AND SUBSIDIARIES By:/s/ Christopher G. Townsend ------------------------------ Name:Christopher G. Townsend ---------------------------- Title:Senior Vice President --------------------------- HOST MARRIOTT SERVICES CORPORATION AND SUBSIDIARIES By:/s/ Joe P. Martin ------------------------------ Name:Joe P. Martin ---------------------------- Title:Senior Vice President --------------------------- 14 EX-99.6 12 EXHIBIT 99.6 Exhibit 99.6 ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the ''Agreement'') is made and entered into as of December 28, 1995, by and between Host Marriott Corporation (''HM Corporate'') and Host Marriott Services Corporation (''HMSC''), HM Corporate's wholly-owned subsidiary. WHEREAS, the Board of Directors of Host Marriott has determined that it is in the best interests of Host Marriott and the stockholders of Host Marriott to separate the ''Development and Ownership Business'' (as defined in the Distribution Agreement by and between Host Marriott and Services dated the date hereof (the ''Services Distribution Agreement'')), from the ''Host Travel Plazas Business'' (as defined in the Services Distribution Agreement), and, in order to effect such separation, to transfer to Services the stock of certain Host Marriott subsidiaries principally engaged in the Host/Travel Plazas Business and certain other assets relating principally to the Host/Travel Plazas Business, and thereafter to distribute all of the outstanding shares of common stock of Services to the holders of Host Marriott common stock (the ''Services Distribution''); WHEREAS, as part of the Services Distribution, HM Corporate desires to assign and HMSC desires to assume all rights and obligations of HM Corporate under certain services agreements dated as of October 8, 1993, by and between HM Corporate and Marriott International, Inc. which services are utilized exclusively or primarily by HMSC; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this agreement, the parties hereby agree as follows: 1. Assignment and Assumption. Subject to the provisions of the Services -------------------------- Distribution Agreement (as any of such agreements may have been amended or modified on or before the date hereof), HM Corporate hereby assigns and HMSC hereby assumes all rights and obligations relating to the following services agreements: Corporate Services Agreement Benefits Administration Agreement Work & Family Life Agreement A&C Services Agreement Procurement Services Agreement Supply Agreement Subject to the provisions of the Services Distribution Agreement (as any of such agreements may have been amended or modified on or before the date hereof), HM Corporate shall retain all rights and obligations relating to the following services agreements: Casualty Claims Administration Agreement Risk Management Consulting Agreement Government Affairs Agreement Corporate Relations Agreement Corporate Jet Services Agreement Tax Administration Agreement Feasibility Services Agreement 2. Indemnity. With respect to the assumption of the foregoing ---------- agreements, the assignee agrees to indemnify, hold harmless and defend the assignor from any or all losses, liabilities, obligations, damages, claims or expenses (including, without limitation, reasonable attorneys' and accountants' fees and disbursements) arising from such assumed agreement. 3. Governing Law. This Agreement shall be governed by the law of the -------------- State of Maryland without regard to conflict or choice of law rules which might make the law of another jurisdiction apply. The parties expressly select Maryland law to apply. 4. Entire Agreement. This Agreement represents the full and complete ----------------- Agreement of the parties and cannot be modified except in writing executed by both parties. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. HOST MARRIOTT CORPORATION By: /s/ C.G. Townsend ---------------------- Its: --------------------- HOST MARRIOTT SERVICES CORPORATION By: /s/ Brian W. Bethers ---------------------- Its: --------------------- EX-99.7 13 EXHIBIT 99.7 [LETTERHEAD OF MARRIOTT INTERNATIONAL, INC. APPEARS HERE] Exhibit 99.7 December 28, 1995 Host Marriott Corporation 10400 Fernwood Road Bethesda, MD 20817 Re: Host Marriott Services Corporation Spin-Off: Provision of Corporate Services to Host Marriott Corporation Ladies and Gentlemen: In connection with the October 8, 1993 special dividend of all of the outstanding common stock of Marriott International, Inc. ("MI") to the shareholders of Marriott Corporation, MI entered into an agreement (the "Corporate Services Agreement") with Host Marriott Corporation (formerly known as Marriott Corporation, "HM") and its subsidiaries, pursuant to which, among other things, HM and its subsidiaries obtain certain corporate services. HM now intends to consolidate its Host/Travel Plazas business under Host Marriott Services Corporation ("HMSC"), and distribute all of HMSC's outstanding common stock to HM's shareholders (the "HMSC Distribution"). In connection with the HMSC Distribution, HM intends to assign the Corporate Services Agreement to HMSC, as permitted under the Corporate Services Agreement, and has asked MI to agree to provide certain but not all of the services described in the Corporate Services Agreement to HM. MI and HM intend to enter into a separate corporate services agreement for those certain services which agreement will be substantially similar to the relevant terms and conditions of the Corporate Services Agreement. MI hereby agrees to provide the following services for the benefit of HM: . headquarters telephones and access to the Marriott Computing and Network Center under the pricing structure identified in the Corporate Services Agreement. . assistance in HM's transition to a new accounting and services providers, including related reporting and access to historical records, on a time and materials basis under the pricing structure provided for Consulting Services in the Corporate Services Agreement. . as part of Payroll Services under the Corporate Services Agreement, issuance of Forms W-2 for Fiscal Year 1995 and completing of remaining 1995 tax deposit and tax return filings due. . until HM converts to a new Fixed Asset System (conversion currently estimated for end of third quarter FY 1996), Property Accounting Services and support services related to establishing, maintaining and analyzing the HM Fixed Asset System under the pricing structure identified in the Corporate Services Agreement. Host Marriott Corporation December 28, 1995 Page 2 . maintaining projects on the MI Authorized Expenditure System (and related support services) for units owned by HM and managed by MI under the pricing structure identified in the Corporate Services Agreement. . any other services which MI agrees to provide to HM shall be considered Consulting Services and the charges shall be the rates provided for in the Corporate Services Agreement. By executing this letter agreement in the space provided below, HM acknowledges its acceptance of and agreement to the foregoing. This letter agreement will automatically terminate at the earlier of January 31, 1996 or the date on which the parties enter into a formal agreement regarding the subject matter hereof. Sincerely, MARRIOTT INTERNATIONAL, INC. By: /s/ John W. Murray ----------------------------- Name: John W. Murray Title: Vice-President Accepted and Agreed: HOST MARRIOTT CORPORATION By: /s/ C.G. Townsend ----------------------------- Name: Christopher G. Townsend Title: Senior Vice President Date: December 28, 1995 EX-99.8 14 EXHIBIT 99.8 [Marriott Letterhead Appears Here] Exhibit 99.8 As of December 29, 1995 Host Marriott Corporation 10400 Fernwood Road Bethesda, MD 20817 Host Marriott Services Corporation 10400 Fernwood Road Bethesda, MD 20817 Re: Host Marriott Services Corporation Spin-Off: Termination of Consulting Agreement, Reimbursement of A&C Severance Costs, and Early Termination right under HMSC Sublease Ladies and Gentlemen: In connection with the October 8, 1993 special dividend (the ''Special Dividend'') of all of the outstanding common stock of Marriott International, Inc. (''MI'') to the shareholders of Marriott Corporation, MI and its subsidiaries entered into a Distribution Agreement (the ''Distribution Agreement'') and certain other agreements (collectively, the ''Host Marriott Agreements'') with Host Marriott Corporation (formerly known as Marriott Corporation, ''HM'') and its subsidiaries, pursuant to which, among other things, HM and its subsidiaries (i) obtain a wide range of services (the ''Intercompany Services'') from MI, (ii) have certain limited rights to use the ''Marriott'' name, and (iii) sublease space in MI's corporate headquarters building. Also in connection with the Special Dividend, each existing Marriott Corporation nonqualified employee stock option was on October 8, 1993 split into (i) an option to purchase an equal number of shares of the common stock of HM (collectively, the ''Host Split Options'') and (ii) an option to purchase an equal number of shares of the common stock of MI. HM now intends to consolidate its Host/Travel Plazas business under Host Marriott Services Corporation (''HMSC'') and HMSC's subsidiaries (collectively with HMSC, ''Services''), and distribute all of HMSC's outstanding common stock to HM's shareholders (the ''HMSC Distribution''). In connection with the HMSC Distribution, (i) HM and its remaining subsidiaries (collectively with HM, ''Host Marriott'') and Services have asked MI to agree to certain modifications to the Host Marriott Agreements and to enter into certain agreements with Services in order to facilitate the HMSC Distribution, and (ii) HM has decided, in response to, among other things, a request by MI, to re-denominate the Host Split Options which are held by employees of MI and its subsidiaries so that, after the HMSC Distribution, those options will remain exercisable only for HM common stock, rather than further splitting those Host Split Options between HM and HMSC. In response to that re-denomination and in consideration of, among other things, this Letter Agreement, MI is entering into certain agreements with HMSC which are substantially similar to the Host Marriott Agreements and is making certain modifications to the Host Marriott Agreements to, among other things, (i) provide for the continued provision of certain Intercompany Services to Host Marriott and/or Services, (ii) acknowledge that certain Intercompany Services which pertain primarily to the businesses of Services will no longer be required by Host Marriott, and vice versa, (iii) terminate MI's right of first offer for the Host/Travel Plazas business under the Distribution Agreement, and (iv) grant HMSC, pursuant to a license agreement with MI, certain limited rights to use the name ''Marriott.'' Host Marriott Corporation Host Marriott Services Corporation As of December 29, 1995 Page 2 In consideration of the foregoing, HM and HMSC hereby agree with MI as follows: (i) HMSC will promptly (and in any event within 30 days of receipt of an invoice from MI) reimburse MI and its subsidiaries for up to $600,000 in A&C employee severance costs that MI and its subsidiaries may incur (to the extent actually incurred) in connection with the termination of certain architecture and construction services presently provided to the Host/Travel Plaza's business; (ii) HMSC shall be entitled to early termination under its Sublease Agreement with MI dated as of August 16, 1995, upon (a) not less than nine months prior written notice of the date of termination, which termination date may not be earlier than December 31, 1996, (b) payment of a $750,000 early termination fee at the time of such notice, and (c) satisfaction of all of HMSC's other obligations thereunder on the termination date (including payment of all amounts, other than rents for periods beyond the termination date and associated costs, that may then be due MI thereunder and surrender of the premises in accordance with the provisions of section 15 thereof); and (iii) in consideration of MI's prompt receipt of $113,710 (representing accrued by unpaid fees from October 8, 1995 through the date hereof) under that certain Consulting Agreement dated as of October 8, 1993 among MI and HM pertaining to the Host/Travel Plazas business and Consulting Agreement is hereby terminated and MI hereby releases HM from any further payment obligations thereunder. By executing this letter agreement in the space provided below, HM and HMSC each acknowledge their acceptance of and agreement to the foregoing. This letter agreement will be automatically canceled and its provisions will be of no further force or effect if it is not fully executed by both HM and HMSC by December 29, 1995. Sincerely, MARRIOTT INTERNATIONAL, INC. By: /s/ Raymond G. Murphy ----------------------------------- Raymond G. Murphy Senior Vice President and Treasurer Accepted and Agreed: HOST MARRIOTT CORPORATION HOST MARRIOTT SERVICES CORPORATION By:/s/ C. G. Townsend By:/s/ Joe P. Martin -------------------------------- -------------------------------- Name: C. G. Townsend Name: Joe P. Martin ------------------------------ ------------------------------ Title: SRVP Title: SRVP & General Counsel ----------------------------- ------------------------------ Date: 12/29/95 Date: 12/29/95 ------------------------------ ------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----