-----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, HsyPdxS0cuHYJAJC/udopyW8pvraLrJkL25uUjXae8aSpOxgQB1Jingp3PHPam73 mDPDFoiRIuOc5+OKF3UGOA== 0000928385-96-000777.txt : 19960621 0000928385-96-000777.hdr.sgml : 19960621 ACCESSION NUMBER: 0000928385-96-000777 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960620 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: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-54545 FILM NUMBER: 96583570 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 POS AM 1 POST-EFFECTIVE AMEND. NO. 4 TO FORM S-1 ON FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE , 1996 REGISTRATION NO. 33-54545 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- POST-EFFECTIVE AMENDMENT NO. 4 ON FORM S-3 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- HOST MARRIOTT CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 7011 53-0085950 (STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER) OF INCORPORATION OR ORGANIZATION) 10400 FERNWOOD ROAD BETHESDA, MARYLAND 20817 (301) 380-9000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) STEPHEN J. MCKENNA, ESQ. 10400 FERNWOOD ROAD BETHESDA, MARYLAND 20817 (301) 380-9000 (NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) PLEASE SEND COPIES OF COMMUNICATIONS TO: BRUCE E. ROSENBLUM, ESQ. LATHAM & WATKINS 1001 PENNSYLVANIA AVENUE, N.W. SUITE 1300 WASHINGTON, D.C. 20004-2505 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As promptly as practicable after the effective date of this Registration Statement. If the only securities being registered on the form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- HOST MARRIOTT CORPORATION CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-3
FORM S-3 ITEM NUMBER AND LOCATION OR HEADING IN THE PROSPECTUS CAPTION OR REGISTRATION STATEMENT ------------------------ ------------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus..... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus.... Inside Front and Outside Back Cover Page 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges............. Prospectus Summary; Risk Factors 4. Use of Proceeds.............. Use of Proceeds 5. Determination of Offering Price........................ The Offering 6. Dilution..................... * 7. Selling Security Holders..... * 8. Plan of Distribution......... Plan of Distribution 9. Description of Securities to Description of the Warrants; Description of be Registered................ Capital Stock 10. Interests of Named Experts and Counsel.................. Legal Matters; Experts 11. Material Changes............. * 12. Incorporation of Certain Information by Reference..... Information Incorporated by Reference 13. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.................. *
- -------- * Inapplicable ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + + +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION DATED JUNE , 1996 PROSPECTUS HOST MARRIOTT CORPORATION 7,700,000 WARRANTS TO ACQUIRE SHARES OF COMPANY COMMON STOCK 7,700,000 SHARES OF COMPANY COMMON STOCK Host Marriott Corporation, a Delaware corporation (the "Company"), issued 7,700,000 Warrants (the "Warrants") to acquire shares of the Company's common stock, $1.00 par value per share ("Company Common Stock") in connection with the settlement of class action lawsuits instituted against the Company and certain individual defendants by certain holders and purchasers of senior notes and debentures of the Company. The Warrants were distributed pursuant to such settlement to the "Initial Warrantholders" as described more fully herein. See "Plan of Distribution." Additionally, 7,700,000 shares of Company Common Stock which may be purchased upon exercise of the Warrants by holders thereof are being offered hereby on a continuous basis. As of May 17, 1996, approximately 570,000 Warrants have been exercised and approximately 570,000 shares of Company Common Stock have been issued thereunder. On December 29, 1995 (the "Distribution Date"), the Company made a special dividend consisting of the distribution (the "Distribution") to holders of record as of the close of business on December 22, 1995 (the "Record Date") of Company Common Stock of all outstanding shares of common stock of Host Marriott Services Corporation ("HM Services"), no par value (the "Services Common Stock"). Each such holder received one share of Services Common Stock for every five shares of Company Common Stock held on the Record Date. Pursuant to the terms of a Warrant Agreement (the "Warrant Agreement"), dated October 19, 1994 between the Company and First Chicago Trust Company of New York, as Warrant Agent, the Board of Directors of the Company has determined that the holders of the Warrants shall participate in the Distribution such that Warrant holders exercising their right to purchase shares of Company Common Stock after the close of business on the Record Date will also receive, on and after the Distribution Date, one share of Services Common Stock for every five shares of Company Common Stock issuable upon such exercise. Each Warrant shall be exercisable for one share of Company Common Stock and one-fifth of one share of Services Common Stock, at the exercise price of (i) $8.00, if exercised on or before 5:00 p.m. New York City time on October 8, 1996 or (ii) $10.00, if exercised after 5:00 p.m. New York City time on October 8, 1996, but on or before 5:00 p.m. New York City time on October 8, 1998, subject to adjustment. See "Description of the Warrants." Upon notice to the Company of the exercise of a Warrant, the Company will issue to the exercising holder of the Warrants the appropriate number of shares of Company Common Stock otherwise issuable in connection with such exercise. The Company will provide notice to HM Services of the exercise of a Warrant and submit a pro rata portion of the exercise price of each Warrant exercised on or after October 1, 1995 (such portion to be based on the relative trading values of Company Common Stock and Services Common Stock immediately following the Distribution Date). The Warrants may be exercised at any time on or before 5:00 p.m. New York City time on October 8, 1998 (the "Expiration Time"). The Warrants were issued in connection with the settlement of certain lawsuits and the Company did not receive any proceeds from issuance of the Warrants. Proceeds to the Company from the exercise of all Warrants, assuming an exercise price for each Warrant of $8.00 and $10.00 would be $61,600,000 and $77,000,000, respectively, before deducting proceeds payable to HM Services and before deducting expenses payable by the Company. No underwriting discounts or commissions will be paid in connection with this offering. The Company does not intend to list the Warrants on any securities exchange and no assurances can be given that a trading market for the Warrants will develop or be maintained. The Company Common Stock is traded on the New York Stock Exchange and on the Chicago Stock Exchange, the Pacific Stock Exchange and the Philadelphia Stock Exchange under the symbol "HMT." On June , 1996, the last reported sale price of the Company Common Stock, as reported on the New York Stock Exchange Composite Tape, was $ per share. SEE "RISK FACTORS" ON PAGE 9 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS WHICH PROSPECTIVE INVESTORS SHOULD CONSIDER IN EVALUATING AN INVESTMENT IN THE WARRANTS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------- The date of this Prospectus is June , 1996 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained by mail from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its public reference facilities in New York, New York and Chicago, Illinois, at prescribed rates. Reports, proxy statements and other information regarding the Company may also be inspected at the offices of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New York, New York 10005, the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605 or the Philadelphia Stock Exchange, 1900 Market Street, Philadelphia, Pennsylvania 19103. The Company has filed with the Commission a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Warrants and the Company Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits thereto. For further information with respect to the Company, the Warrants and the Company Common Stock, reference is made to the Registration Statement and exhibits thereto. The Registration Statement, together with the exhibits thereto, may be inspected at the Commission's public reference facilities in Washington, D.C. and copies of all or any part thereof may be obtained from the Commission upon payment of the prescribed fees. ---------------- INFORMATION INCORPORATED BY REFERENCE The following documents, which have been filed by the Company with the Commission, are incorporated herein by reference and made a part hereof. 1. The Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1995; 2. The Company's Current Report on Form 8-K dated January 11, 1996 filed with the Commission on January 17, 1996; 3. The Company's Current Report on Form 8-K dated January 17, 1996 filed with the Commission on January 17, 1996; 4. The Company's Current Report on Form 8-K dated February 28, 1996 filed with the Commission on March 1, 1996; 5. The Company's Current Report on Form 8-K/A dated March 7, 1996 filed with the Commission on March 7, 1996; 6. The Company's Quarterly Report on Form 10-Q for the twelve weeks ended March 22, 1996; 7. The Joint Proxy Statement/Prospectus of the Company on Form 14A and Form S-4 dated March 9, 1996; and 8. The Company's Current Report on Form 8-K dated May 31, 1996 filed with the Commission on June 5, 1996. Any document filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Warrants made hereby shall be deemed to be incorporated by reference into this Prospectus and to be apart hereof from the date of filing of such documents. Any statement contained herein, or any document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this Prospectus 2 and the Registration Statement of which this Prospectus is a part of the extent that a statement contained herein, or in any subsequent filed document that also is or is deemed to be incorporated by reference herein, modified or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute part of this Prospectus and Registration Statement of which this Prospectus is a part. This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. These documents (other than exhibits thereto) are available without charge, upon written request by any person to whom this Prospectus has been delivered, from Investor Relations, Host Marriott Corporation, 10400 Fernwood Road, Bethesda, Maryland, 20817, telephone number (301) 380-9000. 3 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Prospectus. Unless the context otherwise requires, the term "Company" refers to Host Marriott Corporation and its subsidiaries and their combined operations. References herein to "Smith Travel Research" are to industry data provided by Smith Travel Research. References herein to "Coopers & Lybrand" refer to the January 1996 Hospitality Directions Quarterly Research Journal published by Coopers & Lybrand LLP. THE COMPANY The Company is one of the largest owners of hotels in the world with 64 lodging properties as of June 14, 1996, primarily located in the United States. These properties generally are operated under Marriott brands and managed by Marriott International, Inc. ("Marriott International"), formerly a wholly owned subsidiary of the Company. The Marriott brand name is among the most respected and widely recognized brand names in the lodging industry. The Company's primary focus is on the acquisition of full-service lodging properties. During 1994 and 1995, the Company added 27 full-service hotels with approximately 11,300 rooms for an aggregate of approximately $915 million. In 1996, through June 14, 1996, the Company has added 8 full-service hotels with approximately 3,900 rooms for an aggregate of approximately $450 million. Based on data provided by Smith Travel Research, the Company believes that its full- service hotels consistently outperform the industry's average occupancy rate by a significant margin and averaged 75.5% occupancy for 1995 compared to 68.2% average occupancy for the upscale full-service segment of the lodging industry (the segment which is most representative of the Company's full-service hotels). The lodging industry as a whole, and the full-service hotel segment in particular, is benefiting from an improved supply and demand relationship in the United States. Management believes that recent demand increases have resulted primarily from an improved economic environment and a corresponding increase in business travel. In spite of increased demand for rooms, the room supply growth rate in the full-service segment has greatly diminished. Management believes that this decrease in the supply growth rate in the full- service segment is attributable to many factors including the limited availability of attractive building sites for full-service hotels, the lack of available financing for new full-service hotel construction and the availability of existing full-service properties for sale at a discount to their replacement value. Due to the relatively high occupancy rates of the Company's hotels, the limited supply of new rooms and the recent increase in business travel, the managers of the Company's hotels have increased average daily room rates by primarily replacing certain discounted group business with higher-rated group and transient business and by selectively increasing room rates. As a result, on a comparable basis, room revenues per available room ("REVPAR") for full-service properties increased approximately 9% for the first quarter of 1996 over the comparable period for the prior year. The Company expects this supply/demand imbalance, particularly in the upscale full-service segment, to continue, which should result in improved REVPAR and operating profits at its hotel properties in the near term. BUSINESS STRATEGY The Company's business strategy continues to focus on opportunistic acquisitions of full-service urban, convention and resort hotels primarily in the United States. The Company believes that the full-service segment of the market offers numerous opportunities to acquire assets at attractive multiples of cash flow and at substantial discounts to replacement value, including underperforming hotels which can be improved by conversion to the Marriott brand. The Company believes this segment is very promising because: . There is virtually no new supply of upscale full-service hotel rooms currently under construction. According to Smith Travel Research, from 1988 to 1990, upscale full-service room supply increased an average of approximately 5% annually, which resulted in an oversupply of rooms in the industry. 4 However, this growth slowed to an average of approximately 1.7% from 1990 to 1995. Management believes that the lead time from conception to completion of a full-service hotel is generally five years or more in the types of markets the Company is principally pursuing, which will contribute to the continued low growth of supply. According to Coopers & Lybrand, hotel supply in the upscale full-service segment is expected to grow annually at 1.8% to 1.9% through 1998. Furthermore, because of the prolonged lead time for construction of new full-service hotels, management believes that growth in the full-service segment will continue to be limited at least through 2000. . Many desirable hotel properties are held by inadvertent owners such as banks, insurance companies and other financial institutions which are motivated and willing sellers. The Company has acquired several properties from these inadvertent owners at significant discounts to replacement cost. . Management believes that there are numerous opportunities to improve the performance of acquired hotels by replacing the existing hotel manager with Marriott International and converting the hotels to the Marriott brand. Nine of the 27 full-service hotels added in 1994 and 1995 were converted to the Marriott brand following their acquisition. These conversion properties (excluding the Marriott World Trade Center which was only partially open during 1995) experienced a 66.5% average occupancy rate during 1995 compared to an average occupancy rate of 75.5% for all of the Company's full-service hotels. The Company believes these nine conversion properties will experience improved operations as a result of increases in occupancy and room rates as the properties begin to benefit from Marriott's brand recognition, reservation system and group sales organization. The Company intends to pursue additional full- service hotel acquisitions, some of which may be conversion opportunities. The Company holds minority interests in various partnerships that own, as of June 14, 1996, an aggregate of 261 additional properties, 41 of which are full- service properties, managed by Marriott International. Four of the properties added by the Company in the last two years were held by a partnership in which the Company holds a minority interest. As opportunities arise, the Company intends to pursue the acquisition of additional full-service hotels currently held by such partnerships and/or additional interests in such partnerships. See "Recent Acquisitions, Divestitures and Other Transactions." The Company believes it is well qualified to pursue its acquisition strategy. Management has extensive experience in acquiring and financing lodging properties and believes its industry knowledge, relationships and access to market information provide a competitive advantage with respect to evaluating and acquiring hotel assets. In addition, the Company is well positioned to convert acquired properties to the high-quality Marriott brand name due to its relationship with Marriott International. For a description of the Company's relationship with Marriott International, see "Relationship Between the Company and Marriott International." RECENT ACQUISITIONS, DIVESTITURES AND OTHER TRANSACTIONS During 1994, the Company added 18 full-service hotels with approximately 7,400 rooms (including the Springfield Radisson Hotel, a 199-room hotel subsequently sold in 1995) for approximately $525 million. In 1995, the Company acquired nine full-service hotels with approximately 3,900 rooms in separate transactions for approximately $390 million. In 1996, through the date hereof, the Company has acquired four full-service hotels (1,238 rooms) and controlling interests in four additional properties (2,669 rooms), one of which is currently under construction and is scheduled to be completed during the third quarter of 1996. The Company also acquired an 83% interest in mortgage loans secured by a 250-room full-service property. During the second quarter of 1996, the Company commenced an offer to purchase 100% of the limited partnership units of the Marriott Hotel Properties II Limited Partnership (MHP II), an affiliated partnership of the Company in which the Company owns a 1.67% general partner interest, for $150,000 per unit, or approximately $111 million for all 740 limited partnership units. MHP II owns the 1,290-room New Orleans 5 Marriott hotel, the 999-room San Antonio Marriott Rivercenter hotel, the 368- room San Ramon Marriott hotel and a 50% limited partner interest in the 754- room Santa Clara Marriott hotel. On June 18, 1996, the Company successfully completed the tender offer for a majority of the limited partnership units of MHP II by purchasing 375.5 units for $56,325,000, or $150,000 per unit. As a result of this transaction, a wholly-owned subsidiary of the Company became the majority limited partner in MHP II and the Company will consolidate the MHP II partnership. Consistent with its strategy of focusing on the full-service segment of the lodging industry, the Company sold 26 of its 30 Fairfield Inns and all of its 14 senior living communities in 1994. In addition, the Company sold (subject to a leaseback) 37 Courtyard by Marriott ("Courtyard") properties to an unrelated real estate investment trust (the "REIT") in 1995. In 1995, the Company also sold its remaining four Fairfield Inns and the 199-room Springfield Radisson Hotel (which was acquired as part of a portfolio of lodging properties by the Company in 1994). In 1996, the Company completed the sale and lease back of 16 Courtyard properties and 18 Residence Inns with the REIT (two of these 34 properties remain in escrow pending resolution of certain title issues which must be accomplished by December 31, 1996). Management believes that all of these sales were made at valuations that were attractive to the Company. SPECIAL DIVIDEND The Company previously operated food, beverage and merchandise concessions at airports, on tollroads and at stadiums and arenas and other tourist attractions (the "Operating Group"). On December 29, 1995, the Company distributed to its shareholders through a special dividend (the "Special Dividend") all of the outstanding shares of common stock of Host Marriott Services Corporation ("HM Services"), formerly a wholly owned subsidiary of the Company, which, as of the date of the Special Dividend, owned and operated the Operating Group business. The Special Dividend provided Company shareholders with one share of common stock of HM Services for every five shares of Company Common Stock held by such shareholders on the record date of December 22, 1995. The Special Dividend was designed to separate two types of businesses with distinct financial, investment and operating characteristics and to allow each business to adopt strategies and pursue objectives appropriate to its specific needs. The Special Dividend (i) facilitates the development of employee compensation programs custom-tailored to the operations of each business, including stock-based and other incentive programs, which will more directly reward employees of each business based on the success of that business, (ii) enables the management of each company to concentrate its attention and financial resources on the core businesses of such company, and (iii) permits investors to make more focused investment decisions based on the specific attributes of each of the two businesses. THE OFFERING Securities Offered...... 7,700,000 Warrants to acquire shares of (i) Company Common Stock and (ii) Services Common Stock; and 7,700,000 shares of Company Common Stock issuable upon the exercise of the Warrants. Use of Proceeds......... The Warrants were issued as part of a settlement of class action litigation and will not result in any cash proceeds to the Company. Proceeds from exercises of Warrants will be used for general corporate purposes. NYSE Trading Symbol..... HMT 6 Risk Factors............ Prospective investors should carefully consider the matters set forth under "Risk Factors." DESCRIPTION OF THE WARRANTS Total Number of Warrants................ Warrants which, when exercised, entitle the holders thereof (each such holder, a "Warrantholder") to acquire an aggregate of 7,700,000 shares of Company Common Stock and [1,438,185] shares of Services Common Stock (subject to adjustments). Expiration Time......... No Warrant may be exercised after 5:00 p.m., New York City time on October 8, 1998. Exercise of Warrants.... Each Warrant entitles the Warrantholder, upon exercise, to acquire one share of Company Common Stock and one-fifth of one share of Services Common Stock, at the exercise price of (i) $8.00, if exercised on or before 5:00 p.m. New York City time on October 8, 1996 or (ii) $10.00, if exercised after 5:00 p.m. New York City time on October 8, 1996, but on or before 5:00 p.m. New York City time on October 8, 1998, subject to adjustment. Warrants are not exercisable during any Suspension Period (as described below). No Rights as a Stockholder............. Warrantholders will not be entitled to any assets of the Company or rights as shareholders of the Company, including with respect to voting. No Fractional Shares.... The Company will not issue warrants to purchase fractional shares of Company Common Stock. As a result, the Warrants to which each Initial Warrantholder is entitled will be rounded downward where the fractional portion of such entitlement, if any, involves less than one-half of a Warrant or upward where the fractional portion of such entitlement, if any, involves one-half or more of a Warrant, subject to the overall limitation on the issuance of Warrants. In the event of certain transactions, described below, the number of shares of Company Common Stock that may be purchased upon the exercise of each Warrant is subject to adjustment. The Company will not issue fractional shares of Company Common Stock on the exercise of Warrants otherwise issuable as a result of any of the aforementioned adjustments. If any fraction of a share of Company Common Stock would be issuable on the exercise of any Warrants (or portion thereof), the Company shall pay to the exercising Warrantholder (in lieu of issuance of such fractional share of Company Common Stock) an amount of cash equal to the Exercise Price on the date the Warrant is presented for exercise, multiplied by such fraction. Adjustment Provisions... The exercise price and number of shares of Company Common Stock issuable upon exercise of the Warrants are subject to adjustment from time to time upon the occurrence of certain events, including (i) a change in the capital stock of the Company (as described more fully herein); (ii) certain distributions by the Company of rights, options or warrants to acquire Company Common Stock and (iii) certain other pro rata distributions to holders of Company Common Stock. See "Description of Warrants--Adjustment Provisions." 7 Registration of Warrant Shares.................. The Company has agreed to use its reasonable best efforts to maintain the effectiveness under the Securities Act of the registration statement of which this Prospectus is a part, until the earlier of the Expiration Time or the date on which all Warrants have been exercised, subject to the Company's right to discontinue the effectiveness of such registration statement for such periods as the Company determines are necessary and appropriate (any such period referred to as a "Suspension Period"). Warrants Outstanding.... Warrants to acquire 7,700,000 shares of Company Common Stock were issued in 1994. Approximately 570,000 warrants have been exercised as of May 17, 1996. Company Common StocK Outstanding............ As of May 17, 1996, 194.7 million shares of Company Common Stock are outstanding. This does not include (i) 7.1 million shares of Company Common Stock issuable upon exercise of the Warrants, (ii) 9.3 million shares of Company Common Stock subject to options granted to executive officers and certain current and former employees of the Company, with a weighted average exercise price of $4.01 per share (certain of which options are subject to vesting requirements) and (iii) 2.5 million shares of Company Common Stock issuable to executive officers and certain current and former employees under deferred stock incentive plans (certain of which shares are subject to vesting requirements). See "Description of the Warrants" and "Description of Capital Stock." 8 RISK FACTORS In addition to the other information contained in this Prospectus, prospective investors should consider carefully the following factors before purchasing the securities offered hereby. SUBSTANTIAL LEVERAGE AND LIMITED FINANCIAL FLEXIBILITY The Company has substantial indebtedness. As of March 22, 1996, on a pro forma basis as adjusted to give effect to the public offering of 31 million shares of Company Common Stock in April 1996, the Company had consolidated debt of $2.4 billion, representing 69% of its total capitalization on a pro forma basis. The Company's business is capital intensive, and the Company will have significant capital requirements in the future. The Company's leverage could affect its ability to obtain financing in the future or to undertake refinancings on terms and subject to conditions deemed acceptable by the Company. In the event that the Company's cash flow and working capital are not sufficient to fund the Company's expenditures or to service its indebtedness, the Company would be required to raise additional funds through the sale of additional equity securities, the refinancing of all or part of its indebtedness, the incurrence of additional permitted indebtedness, or the sale of assets. There can be no assurance that any of these sources of funds would be available in amounts sufficient for the Company to meet its obligations. Moreover, even if the Company were able to meet its obligations, its leveraged capital structure could significantly limit its ability to finance its acquisition program and other capital expenditures, to compete effectively or to operate successfully under adverse economic conditions. POTENTIAL ADVERSE CONSEQUENCES OF DEBT FINANCING The indentures relating to senior notes issued by certain of the Company's subsidiaries contain financial and operating covenants, including, but not limited to, restrictions on the ability of such subsidiaries to incur additional indebtedness and issue preferred stock, pay dividends or make other distributions to the Company, create liens, sell assets, enter into certain transactions with affiliates, and enter into certain mergers and consolidations. In addition, the new $225 million revolving line of credit with Marriott International (the "New Line of Credit") imposes certain restrictions on the ability of the Company and certain other subsidiaries to incur additional debt, create liens or mortgages on their properties (other than various types of liens arising in the ordinary course of business), extend new guarantees (other than replacement guarantees), pay dividends and repurchase their common stock. The above restrictions may limit the Company's ability to secure additional financing, and may prevent the Company from engaging in transactions that might otherwise be beneficial to the Company and to holders of Company Common Stock. RISKS OF ACQUISITION STRATEGY The Company intends to pursue a strategy of growth through the opportunistic acquisition of full-service urban, convention and resort hotels primarily in the United States. There can be no assurance that the Company will find suitable properties for acquisition. The Company incurs certain costs in connection with the acquisition of new properties and may be required to provide significant capital expenditures for conversions and upgrades when acquiring a property operating as other than a Marriott-brand property. There can be no assurance that any of the properties the Company may acquire will be profitable following such acquisition. The acquisition of a property that is not profitable, or the acquisition of a property that results in significant unanticipated conversion costs, could adversely affect the Company's profitability. The Company expects to finance new acquisitions from a combination of the proceeds of the public offering of 31 million shares of Company Common Stock in April 1996, and, to the extent available, funds from operations, other indebtedness and proceeds from the sale of limited-service properties. Depending on the number, size and timing of such transactions, the Company may in the future require additional financing in order to continue to make acquisitions. There is no assurance that such additional financing, if any, will be available to the Company on acceptable terms. 9 COMPETITION AND RISKS OF THE LODGING INDUSTRY The Company's hotels generally operate in areas that contain numerous other competitors. There can be no assurance that demographic, geographic or other changes in markets will not adversely affect the convenience or desirability of the location of the Company's hotels. Furthermore, there can be no assurance that, in the markets in which the Company's hotels operate, competing hotels will not pose greater competition for guests than presently exists, or that new hotels will not enter such markets. During the 1980s, construction of lodging facilities in the United States resulted in an excess supply of available rooms. This over-supply had an adverse effect on occupancy levels and room rates in the industry. Although the current outlook for the industry has improved, there can be no assurance that in the future, the lodging industry, including the Company and its hotels, will not be adversely affected by (i) national and regional economic conditions, (ii) changes in travel patterns, (iii) seasonality of the hotel business, (iv) taxes and government regulations which influence or determine wages, prices, interest rates, construction procedures and costs, and (v) the availability of credit. Hotel investments are relatively illiquid. Such illiquidity will tend to limit the ability of the Company to respond to changes in economic or other conditions. POTENTIAL CONFLICTS WITH MARRIOTT INTERNATIONAL The interests of the Company and Marriott International may potentially conflict due to the ongoing relationships between the companies. In addition, the Company and Marriott International share two common directors--J.W. Marriott, Jr. serves as Chairman of the Board of Directors and President of Marriott International and also serves as a director of the Company, and Richard E. Marriott serves as Chairman of the Board of Directors of the Company and also serves as a director of Marriott International. Messrs. J.W. Marriott, Jr. and Richard E. Marriott, as well as certain other officers and directors of Marriott International and the Company, also own shares (and/or options or other rights to acquire shares) in both companies. With respect to the various contractual arrangements between the two companies, the potential exists for disagreement as to the quality of services provided by Marriott International and as to contract compliance. Any such disagreements between the Company and Marriott International could adversely affect the performance of one or more of the Company's hotels. Additionally, the possible desire of the Company, from time to time, to finance, refinance or effect a sale of any of the properties managed by Marriott International may, depending upon the structure of such transactions, result in a need to modify the management agreement with Marriott International with respect to such property. Any such modification proposed by the Company may not be acceptable to Marriott International, and the lack of consent from Marriott International could adversely affect the Company's ability to consummate such financing or sale. In addition, certain situations could arise where actions taken by Marriott International in its capacity as manager of competing lodging properties would not necessarily be in the best interests of the Company. Any such actions by Marriott International could adversely impact one or more of the Company's hotels. Nevertheless, the Company believes that there is sufficient mutuality of interest between the Company and Marriott International to result in a mutually productive relationship. Moreover, appropriate policies and procedures are followed by the Board of Directors of each of the companies to limit the involvement of Messrs. J.W. Marriott, Jr. and Richard E. Marriott (and, if appropriate, other officers and directors of such companies) in conflict situations, including requiring them to abstain from voting as directors of either the Company or Marriott International (or as directors of any of their subsidiaries) on certain matters which present a conflict between the companies. For a description of the Company's relationship with Marriott International, see "Relationship Between the Company and Marriott International." RISKS INVOLVED IN INVESTMENTS THROUGH PARTNERSHIPS OR JOINT VENTURES Historically, the Company has served as a general or limited partner in hotel partnerships, which typically owned a number of hotel properties and involved numerous limited partners. More recently, the Company's joint venture arrangements have been focused on one or a small number of properties, and have involved only a few partners, which could include the manager or former owners of such hotels. In the future, the Company intends selectively to use joint venture arrangements to acquire properties and may consider acquiring full or controlling 10 interests in partnerships in which it currently holds general or limited partner interests. Joint venturers may have certain rights over the operation of the joint venture assets. Therefore, such investments may, under certain circumstances, involve risks such as the possibility that the co-venturer in an investment might become bankrupt, or have economic or business interests or goals that are inconsistent with the business interests or goals of the Company, or be in a position to take action contrary to the instructions or the requests of the Company or contrary to the Company's policies or objectives. Consequently, actions by a co-venturer might result in subjecting hotel properties owned by the joint venture to additional risk. Although the Company will seek to maintain sufficient control of any joint venture to permit the Company's objectives to be achieved, it may be unable to take action without the approval of its joint venture partners or its joint venture partners could take actions binding on the joint venture without the Company's consent. Additionally, should a joint venture partner become bankrupt, the Company could, in certain circumstances, become liable for such partner's share of joint venture liabilities. POTENTIAL ANTITAKEOVER EFFECT OF PROVISIONS IN COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS The Company's Restated Certificate of Incorporation and Bylaws each contain provisions that will make difficult an acquisition of control of the Company by means of a tender offer, open market purchases, proxy fight, or otherwise, that is not approved by the Board of Directors. Provisions that may have an antitakeover effect include (i) a staggered board of directors with three separate classes, (ii) a super-majority vote requirement for removal or filling of vacancies on the Board of Directors and for amendment to the Company's Restated Certificate of Incorporation and Bylaws, (iii) a prohibition on shareholder action by written consent and (iv) super-majority voting requirements for approval of mergers and other business combinations involving the Company and interested shareholders. In addition, the Company is subject to Section 203 of the Delaware General Corporation Law requiring super-majority approval for certain business combinations. The Company has also adopted a shareholder rights plan which may discourage or delay a change in control of the Company. Certain indebtedness issued by subsidiaries of the Company also have change of control provisions that would require such indebtedness to be repurchased in the event of a change of control which also may have the effect of discouraging or delaying a change in control of the Company. Finally, the Company has granted Marriott International, for a period expiring in October 2003, the right to purchase up to 20% of each class of the then outstanding voting stock of the Company at the fair market value thereof upon the occurrence of certain specified events, generally involving changes in control of the Company (the "Marriott International Purchase Right"). The Marriott International Purchase Right may have certain antitakeover effects with respect to the Company. Any person considering acquiring a substantial or controlling block of Company Common Stock would face the possibility that its ability to exercise control would be impaired by Marriott International's 20% ownership resulting from exercise of the Marriott International Purchase Right. It is also possible that the exercise price of the Marriott International Purchase Right would be lower than the price at which a potential acquirer might be willing to purchase a 20% block of shares of Company Common Stock because the purchase price for the Marriott International Purchase Right is based on the average trading price during a 30-day period which may be prior to the announcement of the takeover event. This potential price difference may have a further antitakeover effect of discouraging potential acquirers of the Company. See "Purposes and Antitakeover Effects of Certain Provisions of the Company Certificate and Bylaws and the Marriott International Purchase Right" and "Description of Capital Stock--Rights and Junior Preferred Stock." UNCERTAINTY AS TO MARKET PRICE OF THE COMPANY COMMON STOCK Because the market price of Company Common Stock is subject to fluctuation, the market value of the shares of Company Common Stock may increase or decrease prior to and following the consummation of the Offering. There can be no assurance that at or after the consummation of the Offering the shares of Company Common Stock will trade at the prices at which such shares have traded in the past. The prices at which the Company Common Stock trades after the consummation of the Offering may be influenced by many factors, including the liquidity of the Company Common Stock, investor perceptions of the Company and the real estate industry, the operating results of the Company and its subsidiaries, the Company's dividend policy, and general economic and market conditions. 11 HISTORY OF LOSSES The Company has sustained losses from continuing operations of $13 million, $62 million and $12 million during 1994, 1995 and the first quarter of 1996, respectively. The Company's losses have resulted principally from depreciation, interest expense and write downs of the carrying values of certain assets to their estimated sales values. There can be no assurance that the Company will not continue to experience losses from operations in the future. LACK OF PUBLIC MARKET FOR THE WARRANTS The Warrants have no established trading market and no assurance can be given that any such market will develop or, if one develops, that it will be sustained. The Company does not intend to apply to list the Warrants on any stock exchange. If a market for the Warrants does not develop, Warrantholders may be unable to sell the Warrants for an extended period of time, if at all. THE COMPANY The Company is one of the largest owners of lodging properties in the world. The Company's 64 full-service lodging properties as of June 14, 1996, are generally operated under Marriott brand names and managed by Marriott International, formerly a wholly-owned subsidiary of the Company. The Company is the largest owner of hotels operated under Marriott brands. The Company also holds minority interests in various partnerships that own in the aggregate as of June 14, 1996, 261 additional properties operated by Marriott International. The Marriott brand is among the most respected and widely recognized in the lodging industry. The principal executive offices of the Company are located at 10400 Fernwood Road, Bethesda, Maryland, 20817, and its telephone number is (301) 380-9000. The Company was incorporated under the laws of the State of Delaware in 1929. USE OF PROCEEDS The Warrants were issued as part of the Class Action Settlement, and the Company did not receive any proceeds from such issuance. The net proceeds to be received by the Company from the sale of 7,700,000 shares of Company Common Stock upon the exercise of the Warrants would be approximately $61.6 million, assuming the exercise of all Warrants at an exercise price of $8.00 per share and approximately $77 million, assuming the exercise of all Warrants at an exercise price of $10.00 per share, before deducting proceeds payable to HM Services and before deducting expenses payable by the Company. Any net proceeds are expected to be used to fund future acquisitions of primarily full-service lodging properties or related assets and for general corporate purposes. DIVIDEND POLICY The Company intends to retain future earnings, if any, for use in its business and does not currently anticipate paying any regular cash dividends on the Company Common Stock. In addition, The New Line of Credit contains restrictions on the payment of dividends on Company Common Stock and the Company's subsidiaries are subject to certain agreements that limit their ability to pay dividends to the Company. 12 THE DISTRIBUTION AND THE SPECIAL DIVIDEND Prior to October 8, 1993, the Company was named "Marriott Corporation." In addition to conducting its existing Ownership Business and the Host/Travel Plazas Business, Marriott Corporation engaged in lodging and senior living services management, timeshare resort development and operation, food service and facilities management and other contract services businesses (the "Management Business"). On October 8, 1993, Marriott Corporation made a special dividend consisting of the distribution (the "Distribution") to holders of outstanding shares of Common Stock, on a share-for-share basis, of all outstanding shares of its wholly-owned subsidiary, Marriott International, which at the time of the Distribution held all of the assets relating to the Management Business. Marriott International now conducts the Management Business as a separate publicly-traded company. The Company and Marriott International are parties to several important ongoing arrangements, including agreements pursuant to which Marriott International manages or leases certain of the Company's lodging properties. See "Relationship Between the Company and Marriott International." The Company previously operated food, beverage and merchandise concessions at airports, on tollroads and at stadiums and arenas and other tourist attractions. On December 29, 1995, the Company distributed to its shareholders through a special dividend all of the outstanding shares of common stock of HM Services, formerly a direct wholly owned subsidiary of the Company, which, as of the date of the Special Dividend, owned and operated the Operating Group business. The Special Dividend provided Company shareholders with one share of common stock of HM Services for every five shares of Company Common Stock held by such shareholders on the record date of December 22, 1995. The Special Dividend was designed to separate two types of businesses with distinct financial, investment and operating characteristics and to allow each business to adopt strategies and pursue objectives appropriate to its specific needs. The Special Dividend (i) facilitates the development of employee compensation programs custom-tailored to the operations of each business, including stock-based and other incentive programs, which will more directly reward employees of each business based on the success of that business, (ii) enables the management of each company to concentrate its attention and financial resources on the core businesses of such company, and (iii) permits investors to make more focused investment decisions based on the specific attributes of each of the two businesses. RELATIONSHIP BETWEEN THE COMPANY AND HM SERVICES AFTER THE SPECIAL DIVIDEND For the purpose of governing certain of the ongoing relationships between the Company and HM Services after the Special Dividend and to provide mechanisms for an orderly transition, the Company and HM Services have entered into various agreements, and have adopted policies, as described in this section. The Company believes that the agreements are fair to both parties and contain terms which generally are comparable to those which would have been reached in arms-length negotiations with unaffiliated parties. In most cases (such as the Distribution Agreement, the Tax Sharing Agreement and the Employee Benefits Allocation Agreement) the agreements are comparable to those used by others in similar situations. In each case, the terms of these agreements have been reviewed by individuals who were then and are now at a senior management level at the Company and by individuals who were then and are now at a senior management level of HM Services. DISTRIBUTION AGREEMENT Subject to certain exceptions, the HM Services Distribution Agreement (the "HM Services Distribution Agreement") provides for, among other things, assumptions of liabilities and cross-indemnities designed to allocate, effective as of December 29, 1995, financial responsibility for the liabilities arising out of or in 13 connection with the business of the Operating Group ("Operating Group Business") to HM Services and its subsidiaries, and financial responsibility for the liabilities arising out of or in connection with the business of the Real Estate Group ("Real Estate Group Business") to the Company and its subsidiaries. Other agreements executed in connection with the HM Services Distribution Agreement set forth certain specific allocations of liabilities between the Company and HM Services. See "--Employee Benefits and other Employment Matters," and "--Tax Sharing Agreement," below. Under the HM Services Distribution Agreement, the Company retains all cash and cash equivalent balances of HM Services and its subsidiaries, as of the close of business on December 29, 1995, except for an amount equaling $25 million (the "Initial Cash Amount"), which is subject to adjustments to reflect certain restructuring costs, certain budgeted capital expenditures to be incurred by the HM Services and cash maintained by HM Services at Schiphol Airport in Amsterdam, Netherlands. The HM Services Distribution Agreement also provides that HM Services will assume its proportionate share of the Company's current obligation for certain employee benefit awards denominated in Company Common Stock currently held by employees of Marriott International. The Company and HM Services agreed to share the cost to Host Marriott of such awards. HM Services may issue up to 1.7 million shares of Services Common Stock upon the exercise or distribution of such awards. At the Company's option, HM Services may satisfy this obligation by paying to the Company cash equal to the value of such shares of HM Services common stock. Additionally, the Company and HM Services have agreed to share the exercise price for options comprising such awards. To avoid adversely affecting the intended tax consequences of the Special Dividend and related transactions, the HM Services Distribution Agreement provides that, until December 29, 1997, HM Services must obtain an opinion of counsel reasonably satisfactory to the Company or a supplemental tax ruling before HM Services may make certain material dispositions of its assets, engage in certain repurchases of HM Services capital stock or cease the active conduct of its business independently, with its own employees and without material changes. The Company must also obtain an opinion of counsel reasonably satisfactory to HM Services or a supplemental tax ruling before the Company may engage in similar transactions during such period. The Company does not expect these limitations to inhibit significantly its operations, growth opportunities or its ability to respond to unanticipated developments. On December 20, 1995, the Company had outstanding warrants to purchase an aggregate of 7.5 million shares of Company Common Stock (the "Warrants") issued (or reserved for issuance) in connection with the settlement of litigation brought by certain holders and purchasers of senior notes and debentures of the Company. In connection with the HM Services Distribution, the Warrants were adjusted such that, after December 29, 1995, each Warrant is exercisable for one share of Company Common Stock and one-fifth of a share of Services Common Stock. The HM Services Distribution Agreement provides that, upon notice to HM Services of the exercise of Warrants, HM Services will issue to the exercising holder of the Warrants the appropriate number of whole shares of Services Common Stock and, if applicable, a check for the value of any fractional shares of HM Services otherwise issuable in connection with such exercise; and HM Services will be entitled to receive a pro rata portion of the exercise price (such pro rata portion to be established by allocating the exercise price of the Services Common Stock and the Company Common Stock issuable upon exercise of the Warrants in accordance with their relative values immediately following the Special Dividend.) EMPLOYEE BENEFITS AND OTHER EMPLOYMENT MATTERS The Company and HM Services entered into an Employee Benefits Allocation and Other Employment Matters Agreement (the "Employee Benefits Allocation Agreement") providing for the allocation of certain responsibilities with respect to employee compensation, benefit and labor matters. The Employee Benefits Allocation Agreement provides that, effective as of December 29, 1995, HM Services will assume or retain, as the case may be, all liabilities of the Company, under employee benefit plans, policies, arrangements, contracts and agreements, including under collective bargaining agreements, with respect to employees who, on or after December 29, 1995, will be employees of HM Services or its subsidiaries, including those former employees employed by HM Services and its subsidiaries for whom the Company retained such liabilities in connection 14 with the Marriott International Distribution, as defined below ("HM Services Employees"). The Employee Benefits Allocation Agreement also provides that, effective as of December 29, 1995, the Company will assume or retain, as the case may be, all liabilities of the Company, under employee benefit plans, policies, arrangements, contracts and agreements, including under collective bargaining agreements, with respect to employees who on or after December 29, 1995 will be employees of the Company or its other subsidiaries, including certain former employees employed by the Company or one of its other subsidiaries for whom the Company retained such liabilities in connection with Marriott International Distribution ("Company Employees"). Pursuant to the Employee Benefits Allocation Agreement, and in connection with the Special Dividend, the Company also adjusted outstanding awards under Company employee benefit plans. TAX SHARING AGREEMENT The Company and HM Services entered into a tax sharing agreement (the "Tax Sharing Agreement") that defines the parties' rights and obligations with respect to deficiencies and refunds of federal, state and other income or franchise taxes relating to the Company's business for tax years prior to the Special Dividend and with respect to certain tax attributes of the Company after the Special Dividend. In general, with respect to periods ending on or before December 29, 1995, the Company is responsible for (i) filing both consolidated federal tax returns for the Company affiliated group and combined or consolidated state tax returns for any group that includes a member of the Company affiliated group, including in each case HM Services and its subsidiaries for the relevant periods of time that such companies were members of the applicable group, and (ii) paying the taxes relating to such returns (including any subsequent adjustments resulting from the redetermination of such tax liabilities by the applicable taxing authorities). HM Services will reimburse the Company for a defined portion of such taxes relating to the Operating Group. HM Services is responsible for filing returns and paying taxes related to the Operating Group for subsequent periods. The Company and HM Services have agreed to cooperate with each other and to share information in preparing such tax returns and in dealing with other tax matters. TRANSITIONAL SERVICES AGREEMENT The Company and HM Services entered into an agreement pursuant to which the Company or HM Services may provide certain services to the other for a transitional period on an as-needed basis. The fee for such services will be based on hourly rates designed to reflect the cost for providing such services plus reimbursement of certain direct out of pocket expenses. Subject to the termination provisions of the agreement, HM Services will be free to procure such services from outside vendors or may develop an in-house capability in order to provide such services internally. In general, the transitional services agreement will terminate prior to the end of 1996. The transitional services to be provided to HM Services pursuant to such agreements may include corporate secretary services, cash management services, accounting services, internal audit services, tax administration, litigation management or any other similar services that HM Services may require. ASSIGNMENT OF TRADEMARKS In conjunction with the Special Dividend, all of the Company's right, title and interest in certain trademarks, including the Company logo, were conveyed to HM Services. Under the HM Services Distribution Agreement, the Company and its subsidiaries retain the right to use the name "Host" without limitation or expiration. The Company does not currently contemplate any change to its name. The Company has adopted a new logo (presented on the cover of this Prospectus); although, the Company has retained the right to use its former logo for a period of 18 months following the Special Dividend, which period may be extended for up to an additional 12 months with HM Services' consent. POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS The on-going relationship between the Company and HM Services may present certain conflicts for J.W. Marriott, Jr. who serves as a director of the Company and HM Services and for Richard E. Marriott who serves 15 as a director of HM Services and as the Chairman of the Board of Directors of the Company. Mr. Richard E. Marriott, as well as other executive officers and directors of the Company and HM Services also own (or have options or other rights to acquire) a significant number of shares of Company Common Stock in the Company and HM Services. The Company and HM Services have adopted appropriate policies and procedures to be followed by the Board of Directors of each company to limit the involvement of Richard E. Marriott and J.W. Marriott, Jr. (or such executive officers and other directors having a significant ownership interest in the companies) in conflict situations, including matters relating to contractual relationships or litigation between the Company and HM Services. Such procedures include requiring Richard E. Marriott and J.W. Marriott, Jr. (or such executive officers or other directors having a significant ownership interest in the companies) to abstain from voting as directors of each company with respect to matters that present a significant conflict of interest between the companies. Whether or not a significant conflict of interest exists will be determined on a case-by-case basis depending on such factors as the dollar value of the matter, the degree of personal interest of Richard E. Marriott and J.W. Marriott, Jr. (or such executive officers and other directors having a significant ownership interest in the companies) in the matter and the likelihood that resolution of the matter has significant strategic, operational or financial implications for the business of the Company. It is a principal responsibility of the General Counsel of each of the Company and HM Services to monitor this issue in consultation with the Company's or HM Services' (as applicable) board of directors and to determine when a significant conflict of interest exists. The Company and HM Services believe that such conflicts will be minimal. RELATIONSHIP BETWEEN THE COMPANY AND MARRIOTT INTERNATIONAL For the purpose of governing certain of the ongoing relationships between the Company and Marriott International after the Marriott International Distribution and to provide mechanisms for an orderly transition, the Company and Marriott International entered into various agreements and adopted policies, as described in this section. Subsequent to the Marriott International Distribution, the Company and Marriott International have entered into additional agreements and arrangements which are also described below. The Company believes that the agreements are fair to both parties and contain terms which generally are comparable to those which would have been reached in arms-length negotiations with unaffiliated parties (although comparisons are difficult with respect to certain agreements, such as the Assignment and License Agreement, which relate to the specific circumstances of certain transactions). In many cases (such as with the Lodging Management Agreements, the Consolidation Agreement and the Transitional Services Agreements) the forms of agreements are based on agreements that the Company has in fact negotiated with third parties. In other cases (such as the Marriott International Distribution Agreement, the Marriott International Tax Sharing Agreement and the New Line of Credit) the agreements are comparable to those used by others in similar situations. In each case, the terms of such agreements have been reviewed by individuals at a senior management level in the Company and by individuals at a senior management level in Marriott International. DISTRIBUTION AGREEMENT The Marriott International Distribution Agreement provides for, among other things, assumptions of liabilities and cross-indemnities designed to allocate, effective as of the Marriott International Distribution, financial responsibility for the liabilities arising out of or in connection with the Management Business to Marriott International and its subsidiaries, and financial responsibility for the liabilities arising out of or in connection with the Real Estate Group Business and the Operating Group Business, along with the Company's liabilities under a substantial portion of its pre-existing financing and long-term debt obligations, to the Company and its retained subsidiaries. The agreements executed in connection with the Marriott International Distribution Agreement also set forth certain specific allocations of liabilities between the Company and Marriott International. 16 Under the Marriott International Distribution Agreement, Marriott International has the Marriott International Purchase Right to purchase up to 20% of each class of the Company's voting stock (determined after assuming full exercise of the right) at its then fair market value (based on an average of trading prices during a specified period), upon the occurrence of certain specified events generally involving a change in control of the Company. The Marriott International Purchase Right terminates on October 8, 2003. The Marriott International Purchase Right may have certain antitakeover effects as described in "Purposes and Antitakeover Effects of Certain Provisions of the Company Certificate and Bylaws and the Marriott International Purchase Right." LODGING MANAGEMENT AGREEMENTS Nearly all of the Company's hotels are managed by Marriott International. The Marriott International Lodging Management Agreements provide for Marriott International to manage most of the Marriott full-service hotels and all Courtyard hotels and Residence Inns owned or leased by the Company. Each Marriott International Lodging Management Agreement reflects market terms and conditions and is substantially similar to the terms of management agreements with other third-party owners regarding lodging facilities of a similar type. The Company paid to Marriott International fees of $17 million in first quarter 1996, and $67 million, $41 million and $5 million for the fiscal years 1995, 1994 and 1993, respectively, from the managed and franchised lodging properties owned or leased by the Company. Additionally, the Company is a general partner in several unconsolidated partnerships that own over 260 lodging properties operated by Marriott International under long-term agreements. A separate Lodging Management Agreement is typically entered into for each hotel owned or leased by the Company and operated by Marriott International. Each Lodging Management Agreement has an initial term of 15 to 20 years and, at the option of Marriott International, may be renewed for up to two or three additional terms of eight to ten years each, aggregating 16 to 30 years, for a total term of up to 50 years. Each Lodging Management Agreement for the Courtyard hotels and Residence Inns (but not full-service hotels) is also subject to the terms of a Consolidation Agreement (the "Consolidation Agreement"), pursuant to which (i) certain fees payable under the Lodging Management Agreement with respect to a particular lodging facility will be determined on a consolidated basis with certain fees payable under the Lodging Management Agreements for all lodging facilities of the same type, and (ii) certain base fees payable under Lodging Management Agreements with respect to a particular lodging facility will be waived in return for payment of an incentive fee upon the sale of such facility. No Lodging Management Agreement with respect to a single lodging facility is cross-collateralized or cross- defaulted to any other Lodging Management Agreement and a single Lodging Management Agreement may be cancelled under certain conditions, although such cancellation will not trigger the cancellation of any other Lodging Management Agreement. Marriott International does not have the right to set off amounts owed to the Company under any Lodging Management Agreement against any other indebtedness or amounts due from the Company and Marriott International may not apply cash flows from one lodging facility against cash deficits of other lodging facilities. Under the Consolidation Agreement (which is discussed below), all revenues collected, expenses incurred under Lodging Management Agreements for the Company's limited service hotels are aggregated on the basis of hotel product line for purposes of calculating certain management fees payable to Marriott International thereunder. The Lodging Management Agreements with respect to the Company's full service hotels are not subject to the Consolidation Agreement and the management fees payable to Marriott International under a single Lodging Management Agreement are calculated solely with respect to the lodging facility managed thereunder. In general, properties remain subject to the Lodging Management Agreement upon the sale of such property to third parties. Under each Lodging Management Agreement for full-service hotels, Marriott International collects all revenue generated at a particular lodging property. Marriott International holds such amounts on behalf of the Company in segregated accounts and forwards to the Company every two weeks all amounts in excess of certain expenses and management fees (as described more fully below). Under the Lodging Management Agreements for the Company's limited service hotels and the Consolidation Agreement, all revenues generated at the Company's limited service hotels are collected and aggregated in a single segregated account for each limited 17 service product line (i.e., Courtyard and Residence Inns). Marriott International forwards to the Company amounts in excess of aggregated expenses and management fees in a manner similar to that for the full-service hotels. Because amounts collected by Marriott International are held on the Company's behalf, the Company does not depend upon the creditworthiness of Marriott International for receipt of such payments. Marriott Hotels, Resorts and Suites. The form of Lodging Management Agreement for full-service hotels in the Marriott Hotels, Resorts and Suites line provides for a base management fee equal to three percent of annual gross revenues plus an incentive management fee generally equal to 40% to 50% of "Available Cash Flow" for each fiscal year (provided that the cumulative incentive management fee may not on any date exceed 20% of the cumulative operating profit of the hotel from the Marriott International Distribution through such date). The Company and Marriott International have agreed that, subject to certain exceptions, the incentive management fee for full-service hotels acquired after September 8, 1995 will equal 20% of Available Cash Flow. Available Cash Flow is defined to be the excess of "Operating Profit" over the "Owner's Priority." Operating Profit is defined generally in all forms of Lodging Management Agreements as gross revenues, less all ordinary and necessary operating expenses, including all base and system fees and reimbursement for certain system-wide operating costs ("Chain Services"), as well as a deduction to fund a required reserve for furniture, fixtures and equipment for certain hotels, before any depreciation or amortization or similar fixed charges. Owner's Priority in all forms of Lodging Management Agreements is derived from an agreed-upon base amount assigned to each lodging facility. Marriott International is also entitled to reimbursement for certain costs attributable to Chain Services of Marriott International. The Company has the option to terminate the agreement if specified performance thresholds regarding Operating Profit are not satisfied and if specified revenue market share tests are not met (provided that Marriott International can elect to avoid such termination by making cure payments to the extent necessary to allow the specified Operating Profit thresholds to be satisfied). The Company intends to aggressively pursue further hotel acquisitions and it is anticipated that the Company will engage Marriott International to manage many of the hotels that are acquired. Limited Service Hotels. The forms of Lodging Management Agreements for Courtyard hotels and Residence Inns provide for a system fee equal to three percent (in the case of Courtyard hotels) or four percent (in the case of Residence Inns) of annual gross revenue, and a base fee equal to two percent of annual gross revenues. The base fee is deferred in favor of the Owner's Priority, and in any fiscal year in which the base fee is greater than Operating Profit (prior to deduction of the base fee) less Owner's Priority, the excess base fee is deferred, to be paid in a subsequent fiscal year out of excess Operating Profit. Owner's Priority and Operating Profit are determined in substantially the same manner as described above for Marriott Hotels, Resorts and Suites. In addition, the agreements provide for an incentive management fee equal to 50% of "Available Cash Flow" for each fiscal year (provided that the cumulative incentive management fee may not on any date exceed 20% of the cumulative Operating Profit of the hotel through such date). Available Cash Flow is defined to be the excess of Operating Profit (after deduction of the base fee, including any portion of the base fee that is deferred or waived) over the Owner's Priority. Under such forms of agreement, Marriott International is also entitled to reimbursement for certain costs attributable to Chain Services of Marriott International. The Company or its subsidiaries have the option to terminate the agreement if specified performance thresholds regarding Operating Profit are not satisfied and if specified revenue market share tests are not met (provided that Marriott International can elect to avoid such termination by making cure payments to the extent necessary to allow the specified Operating Profit thresholds to be satisfied). Consolidation Agreement. Each Lodging Management Agreement for the Courtyard hotels and Residence Inns (but not full-service hotels) is subject to the terms of the Consolidation Agreement. Pursuant to the Consolidation Agreement, certain revenues, expenses and fees payable under the Lodging Management Agreements for Courtyard hotels and Residence Inns are consolidated by product line as discussed herein. With respect to any Courtyard hotels and Residence Inns managed by Marriott International under a Lodging Management Agreement, for so long as the Company has not sold or financed any such lodging facility, then the calculations, distributions and dispositions of gross revenues, reserves, base fees, Owner's Priority, incentive 18 management fees and system fees under the Lodging Management Agreement with respect to such lodging facility will be determined and reported on an aggregate basis, together with all such facilities governed by a Lodging Management Agreement in the same product line. After any such lodging facility is sold or financed, the Consolidation Agreement will no longer be applicable to such facility, and the gross revenues, reserves, base fee, Owner's Priority, incentive management fee and system fee for such facility will be determined solely in accordance with the Lodging Management Agreement applicable to such facility. In addition, pursuant to the terms of the Consolidation Agreement, the base fee payable under the Lodging Management Agreements (other than Lodging Management Agreements for full-service hotels) is modified as set forth below. Until December 31, 2000, in lieu of the base fees payable to Marriott International with respect to the Courtyard hotels and Residence Inns managed by Marriott International under a Lodging Management Agreement, Marriott International will receive a "Bonus Incentive Fee" upon the sale of any of such facilities by the Company. The "Bonus Incentive Fee" is defined to be 50% of the "Net Excess Sale Proceeds" resulting from the sale of such facility (provided that the Bonus Incentive Fee shall not exceed two percent of the cumulative gross revenues of such facility, from the date of inception of the Lodging Management Agreement for such facility through the earlier of December 31, 2000 or the date of sale). Net Excess Sale Proceeds is defined to be the gross property sales price for the facility less (i) the reasonable costs incurred by the Company in connection with the sale and (ii) a base amount assigned to each lodging facility. Any future owners of such facility, and the Company to the extent that it retains ownership of such facility after December 31, 2000, will not be subject to the foregoing terms and will be required to pay to Marriott International the base fee as set forth in the Lodging Management Agreement applicable to such facility. FRANCHISE AGREEMENTS At the time that the Company acquired the San Francisco Marriott-- Fisherman's Wharf, the Charlotte Marriott Executive Park and the Plaza San Antonio, the Company entered into franchise agreements with Marriott International to allow the Company to use the Marriott brand, associated trademarks, research, standards, quality control, reservation systems, food and beverage services and other related items in connection with its operations of these properties. Pursuant to these franchise agreements, the Company pays a franchise royalty fee of six percent of gross room sales plus three percent of gross food and beverage sales, except for the Plaza San Antonio for which the Company pays a royalty fee of four percent of gross room sales in years one and two increasing to five percent in years three and four and six percent in years five through ten, plus two percent of gross food and beverage sales in years one and two increasing to three percent in years three through ten. Additionally, the Company pays an advertising fee of one percent of gross room sales and a reservations charge on usage of the Marriott International reservations system, subject to certain agreed upon adjustments. The term of the franchise agreement for the San Francisco Marriott-- Fisherman's Wharf is 30 years, the term of the franchise agreement for the Charlotte Marriott Executive Park is 15 years and the term of the franchise agreement for the Plaza San Antonio is ten years. NEW LINE OF CREDIT Marriott International and the Company have entered into the New Line of Credit under which the Company has the right to borrow from Marriott International up to $225 million to fund (i) obligations under certain guarantees made by the Company, (ii) payments of principal on specified recourse debt of the Company and its subsidiaries, (iii) payment of interest on amounts borrowed under the New Line of Credit and on specified recourse debt of the Company and its subsidiaries, (iv) working capital, and (v) other items approved in advance by Marriott International. Borrowings under the New Line of Credit bear interest at LIBOR plus 3% (4% when the outstanding balance exceeds $112.5 million) and mature in June 1998. Any such borrowings are guaranteed by, or secured by the pledge of the stock of, certain subsidiaries of the Company. An annual commitment fee of 5/8% is charged on the unused portion of the New Line of Credit. The New Line of Credit imposes certain restrictions on the ability of the Company and certain of its subsidiaries to incur additional debt, create liens or mortgages on their properties (other than various types of liens arising in the ordinary course of business), extend new guarantees (other than replacement guarantees), pay dividends, and repurchase their common stock. When 19 no advances are outstanding under the New Line of Credit and the Company and certain of its subsidiaries have adequately reserved for debt maturities over a 6-month term, such restricted payments as would otherwise be prohibited are permitted in the amount by which aggregate EBITDA of the Company and certain of its subsidiaries (as defined in the New Line of Credit) and the proceeds of specified stock issuances exceed 170% of the aggregate of certain specified charges. PHILADELPHIA MORTGAGE Marriott International provided first mortgage financing for a portion of the development and construction costs for the Philadelphia Marriott hotel constructed by the Company, pursuant to a mortgage financing agreement (the "Philadelphia Mortgage") entered into between the Company and Marriott International. The Philadelphia Mortgage (approximately $109 million at March 22, 1996) provided for the funding of a portion (approximately 60%) of the construction and development costs of such hotel, as and when such costs were incurred, up to a maximum of $125 million of funding. The Philadelphia Mortgage (i) is a two-year "mini-perm" facility, carrying a floating interest rate of LIBOR plus 300 basis points, and (ii) will, upon maturity of the two- year mini-perm, fund into a ten-year term loan, bearing cash-pay interest at the rate of 10% per annum, plus deferred interest of 2% per annum. The Philadelphia Mortgage is due on sale of the property (or any majority interest therein) and is subject to other terms and conditions customary for first mortgage financings of this type. TAX SHARING AGREEMENT The Company and Marriott International have entered into a tax sharing agreement (the "Marriott International Tax Sharing Agreement") that defines the parties' rights and obligations with respect to deficiencies and refunds of federal, state and other income or franchise taxes relating to the Company's businesses for tax years prior to the Marriott International Distribution and with respect to certain tax attributes of the Company after the Marriott International Distribution. In general, with respect to periods ending on or before the last day of 1993, the Company is responsible for (i) filing both consolidated federal tax returns for the Company affiliated group and combined or consolidated state tax returns for any group that includes a member of the Company affiliated group, including in each case Marriott International and its subsidiaries for the relevant periods of time that such companies were members of the applicable group, and (ii) paying the taxes relating to such returns (including any subsequent adjustments resulting from the redetermination of such tax liabilities by the applicable taxing authorities). Marriott International will reimburse the Company for the portion of such taxes relating to the Management Business. Marriott International is responsible for filing returns and paying taxes related to the Management Business for subsequent periods. The Company and Marriott International have agreed to cooperate with each other and to share information in preparing such tax returns and in dealing with other tax matters. ASSIGNMENT AND LICENSE AGREEMENT Pursuant to the terms of an Assignment and License Agreement, all of the Company's right, title and interest in certain trademarks, including the trademarks "Marriott," "Courtyard," "Residence Inns by Marriott" and "Fairfield Inns by Marriott," were conveyed to Marriott International. The Company and its subsidiaries have been granted a license to use such trademarks in their corporate names, subject to specified terms and conditions. NONCOMPETITION AGREEMENT The Company and Marriott International entered into a Noncompetition Agreement dated October 8, 1993 which agreement was amended in connection with the Special Dividend (the "Noncompetition Agreement"). Under the Noncompetition Agreement, the Company and its subsidiaries are prohibited from entering into, or acquiring an ownership interest in any entity that operates, any business that competes with the hotel management business as conducted by Marriott International, subject to certain exceptions. The Noncompetition Agreement has a term expiring on October 8, 2000. 20 TRANSITIONAL SERVICES AGREEMENTS Marriott International and the Company entered into a number of agreements pursuant to which Marriott International has agreed to provide certain continuing services to the Company and its subsidiaries for a transitional period. Such services are provided on market terms and conditions. Subject to the termination provisions of the specific agreements, the Company and its subsidiaries are free to procure such services from outside vendors or may develop an in-house capability in order to provide such services internally. The Company believes that these agreements are based on commercially reasonable terms including pricing and payment terms. In general, the transitional services agreements can be kept in place at least through 1997. The Company has the right to terminate such agreements upon giving 180 days (or less) notice. POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS The on-going relationship between Marriott International and the Company may present certain conflicts for Messrs. J.W. Marriott, Jr. and Richard E. Marriott, because J.W. Marriott, Jr. serves as Chairman of the Board of Directors and President of Marriott International and also serves as a director of the Company, and Richard E. Marriott serves as Chairman of the Board of Directors of the Company and as a director of Marriott International. Messrs. J.W. Marriott, Jr. and Richard E. Marriott, as well as other executive officers and directors of the Company and Marriott International, also own (or have options or other rights to acquire) a significant number of shares of common stock in both the Company and Marriott International. The Company and Marriott International have adopted appropriate policies and procedures to be followed by the Board of Directors of each company to limit the involvement of Messrs. J.W. Marriott, Jr. and Richard E. Marriott (or such other executive officers and directors having a significant ownership interest in both companies) in conflict situations, including matters relating to contractual relationships or litigation between the companies. Such procedures include requiring Messrs. J.W. Marriott, Jr. and Richard E. Marriott (or such other executive officers or directors having a significant ownership interest in both companies) to abstain from making management decisions in their capacities as officers of Marriott International and the Company, respectively, and to abstain from voting as directors of either company, with respect to matters that present a significant conflict of interest between the companies. Whether or not a significant conflict of interest exists is determined on a case-by-case basis depending on such factors as the dollar value of the matter, the degree of personal interest of Messrs. J.W. Marriott, Jr. or Richard E. Marriott (or such other executive officers and directors having a significant ownership interest in both companies) in the matter, the interests of the shareholders of the Company and the likelihood that resolution of the matter has significant strategic, operational or financial implications for the business of the Company. It is a principal responsibility of the general counsel of the Company to monitor this issue in consultation with the Audit Committee of the Board of Directors and to determine when a significant conflict of interest exists. See "Risk Factors--Potential Conflicts with Marriott International." OTHER TRANSACTIONS AND RELATIONSHIPS The Company has also entered into certain other transactions and relationships with Marriott International. Marriott International has provided, and expects in the future to provide, financing to the Company for a portion of the cost of acquiring properties to be operated or franchised by Marriott International. In 1995, Marriott International invested an aggregate of $80 million, principally in the form of mortgage loans. The Company also acquired a full-service property from a partnership in which Marriott International owned a 50% interest. In January 1996, Marriott International provided $57 million in connection with the Company's acquisition of a controlling interest in two full-service hotels in Mexico City comprising 914 hotel rooms. 21 DESCRIPTION OF THE WARRANTS GENERAL As part of the Class Action Settlement and pursuant to that certain Stipulation and Agreement of Compromise and Settlement dated as of June 16, 1993 (the "Settlement Agreement"), the Company agreed to issue the Warrants to the Initial Warrantholders as described in "Plan of Distribution." The Company issued the Warrants pursuant to a Warrant Agreement (the "Original Warrant Agreement") between the Company and First Chicago Trust Company of New York, as Warrant Agent, in the manner described more fully in "Plan of Distribution." The Original Warrant Agreement has been supplemented (the "Supplemental Warrant Agreement") to provide that, subsequent to the Record Date and upon consummation of the Distribution, the holder of a Warrant ("Warrantholder") is entitled to receive on exercise thereof one share of Company Common Stock and one-fifth of one share of Services Common Stock. The following summary of certain provisions of the Original Warrant Agreement and the Supplemental Warrant Agreement (collectively referred to herein as the "Warrant Agreement"), does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Warrant Agreement, including the definition of certain terms therein. A copy of the Warrant Agreement has been filed as an exhibit to the registration statement of which this Prospectus is a part. Wherever particular sections or defined terms of the Warrant Agreement not otherwise defined herein are referred to, such section or defined terms shall be incorporated herein by reference. The Warrants are evidenced by warrant certificates (the "Warrant Certificates"), a form of which is attached as an exhibit to the Warrant Agreement. Each Warrant entitles the Warrantholder, at any time prior to 5:00 p.m. on October 8, 1998 (the "Expiration Time"), to purchase one share of Company Common Stock and one-fifth of one share of Services Common Stock at a price (the "Exercise Price") of (i) $8.00, if exercised on or before 5:00 p.m. New York City time on October 8, 1996, or (ii) $10.00, if exercised after 5:00 p.m. New York City time on October 8, 1996, but on or before 5:00 p.m. New York City time on October 8, 1998. Both the Exercise Price and the number of shares subject to the Warrants are subject to certain adjustments, as described below. Warrants that are not exercised prior to the Expiration Time expire and become void. Warrantholders will not be entitled to vote or to consent or to receive notice as shareholders in respect of the meeting of shareholders or the election of Directors of the Company or of HM Services or any other matter, or possess any rights whatsoever as shareholders of the Company or HM Services. The Company has agreed to use its reasonable best efforts to maintain the effectiveness under the Securities Act of the registration statement of which this Prospectus is a part until the earlier of the Expiration Time or the date on which all Warrants have been exercised, subject to the Company's right to discontinue the effectiveness of such registration statement for such periods as the Company determines are necessary and appropriate (any such period referred to as a "Suspension Period"). The Company expects to exercise its right to discontinue the effectiveness of the registration statement only (i) if it determines that, based on circumstances arising after the date hereof, the registration statement contains an untrue statement of material fact or omits to state a material fact required to be stated therein in order to make the statements therein not misleading or (ii) as may otherwise be required under the Securities Act of 1933, as amended. During the pendency of any Suspension Period, no Warrants may be exercised and no shares of Company Common Stock may be issued upon the exercise of any Warrant. The Company has also agreed to use its reasonable best efforts to obtain any required approvals or registration under state securities laws for the issuance of the Company Common Stock upon exercise of the Warrants. Under the Warrant Agreement, however, Warrants may not be exercised by, or shares of Company Common Stock or Services Common Stock issued to, any Warrantholder in any state where such exercise or issuance would be unlawful. The Warrants have no established trading market and no assurance can be given that any such markets will develop. The Company does not intend to apply to list the Warrants on any stock exchange. See "Risk Factors--Lack of Public Market for the Warrants." 22 EXERCISE OF THE WARRANTS The Warrants are exercisable at the election of the holder, in full or from time to time in part, at any time prior to the Expiration Time, except that Warrants may not be exercised during a Suspension Period. In the event of partial exercise of Warrants evidenced by a Warrant Certificate, a new certificate evidencing the remaining Warrant or Warrants will be issued. To exercise all or any of the Warrants represented by a Warrant Certificate, the Warrantholder is required to surrender to the Warrant Agent the Warrant Certificate, a duly executed copy of the Form of Election to Purchase (which is set forth in the Warrant Certificate) and payment in full of the Exercise Price for each share of Common Stock as to which a Warrant is exercised, which payment may be made in cash or by certified or official bank check to the order of the Company. Upon the exercise of any Warrants in accordance with the Warrant Agreement, the Company will issue and cause to be delivered to, or upon the written order of, the Warrantholder, in such name or names as the Warrantholder may designate, a certificate or certificates for the number of full shares of Company Common Stock issuable upon the exercise of Warrants. The Company will provide notice to HM Services of the exercise of a Warrant and submit a pro rata portion of the exercise price of each Warrant exercised on or after October 1, 1995 (such portion to be based on the relative trading value of Company Common Stock and Services Common Stock immediately following the Distribution Date). Any shares of Company Common Stock issuable by the Company upon the exercise of the Warrants must be validly issued, fully paid and non- assessable. PAYMENT OF TAXES AND OTHER COSTS Warrantholders are required to pay any and all taxes, costs and expenses payable (a) in respect of the issuance of the Company Common Stock upon the exercise of Warrants and (b) in respect of any certificate for shares of Company Common Stock issuable upon exercise of Warrants in a name other than that of the registered holder of the Warrant Certificates surrendered upon the exercise of the Warrant. Any Warrantholder requesting transfer or exchange of any Warrant Certificates pursuant to the Warrant Agreement is also required to pay any and all costs and expenses of such transfer or exchange (including without limitation the fees and expenses of the Warrant Agent in connection therewith). The Company is not required to issue or deliver shares of Company Common Stock upon exercise of the Warrants unless and until the person requesting such issuance or delivery shall have paid to the Company the amount of such taxes, costs and expenses or established to the Company's satisfaction that such taxes, costs and expenses have been paid. NO FRACTIONAL SHARES The Company will not issue fractional shares of Company Common Stock on the exercise of the Warrants. If any fraction of a share of Company Common Stock would be issuable on the exercise of any Warrants (or portion thereof), the Company will pay to the exercising Warrantholders (in lieu of issuance of such fractional share of Company Common Stock) an amount of cash equal to the Exercise Price on the date the Warrant is presented for exercise, multiplied by such fraction. ADJUSTMENT PROVISIONS The number of shares of Company Common Stock that may be purchased upon the exercise of each Warrant are subject to adjustment in the event of certain transactions involving the Company, including (a)(i) issuing shares of Company Common Stock as a stock dividend to the holders of Company Common Stock; (ii) subdividing or combining the outstanding shares of Company Common Stock into a greater or lesser number of shares; (iii) issuing shares of its capital stock other than Company Common Stock as a distribution to the holders of Company Common Stock; (iv) issuing by reclassification of the Company Common Stock any shares of its capital stock, (b) distributing any rights, options or warrants to all holders of Company Common Stock entitling such holders to purchase shares of Company Common Stock at a price per share less than the current 23 market price per share on the record date for such distribution, and (c) distributing to all holders of Company Common Stock any of the assets or any rights or warrants to purchase assets or other securities of the Company. In case of any consolidation, merger or sale of all or substantially all of the assets of the Company, upon the consummation of the transaction, the Warrants automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the effective date of the transaction. DESCRIPTION OF CAPITAL STOCK The following description of the Company's capital stock is a summary and is subject in all respects to applicable Delaware law and to the provisions of the Company's Restated Certificate of Incorporation and shareholder's rights plan listed as exhibits to the Registration Statement of which this Prospectus is a part. GENERAL The Company's Restated Certificate of Incorporation (the "Company Certificate") authorizes the issuance of a total of 301 million shares of all classes of stock, of which one million may be shares of preferred stock, without par value, and 300 million may be shares of Company Common Stock. At May 17, 1996, approximately 194.7 million shares of Company Common Stock were outstanding. The Company Certificate provides that the Board is authorized to provide for the issuance of shares of preferred stock, from time to time, in one or more series, and to fix any voting powers, full or limited or none, and the designations, preferences and relative, participating, optional or other special rights, applicable to the shares to be included in any such series and any qualifications, limitations or restrictions thereon. COMPANY COMMON STOCK Voting Rights. Each holder of Company Common Stock is entitled to one vote for each share registered in his name on the books of the Company on all matters submitted to a vote of shareholders. Except as otherwise provided by law, the holders of Company Common Stock vote as one class. The shares of Company Common Stock do not have cumulative voting rights. As a result, subject to the voting rights, if any, of the holders of any shares of the Company's preferred stock which may at the time be outstanding, the holders of Company Common Stock entitled to exercise more than 50% of the voting rights in an election of directors will be able to elect 100% of the directors to be elected if they choose to do so. In such event, the holders of the remaining Company Common Stock voting for the election of directors will not be able to elect any persons to the Board. The Company Certificate provides that the Board is classified into three classes, each serving a three-year term, with one class to be elected in each of three consecutive years. Dividend Rights. Subject to the rights of the holders of any shares of the Company's preferred stock which may at the time be outstanding, holders of Company Common Stock are entitled to such dividends as the Board of Directors may declare out of funds legally available therefor. The Company intends to retain future earnings for use in its business and does not currently intend to pay regular cash dividends. In addition, the New Line of Credit contains restrictions on the payment of dividends on the Company Common Stock. See "Dividend Policy." Liquidation Rights and Other Provisions. Subject to the prior rights of creditors and the holders of any of the Company's preferred stock which may be outstanding from time to time, the holders of Company Common Stock are entitled in the event of liquidation, dissolution or winding up to share pro rata in the distribution of all remaining assets. The Company Common Stock is not liable for any calls or assessments and is not convertible into any other securities. The Company Certificate provides that the private property of the shareholders shall not be subject to the payment of corporate debts. There are no redemption or sinking fund provisions applicable to the Company Common Stock, and the Company Certificate provides that there shall be no preemptive rights. 24 The transfer agent and registrar for the Common Stock is First Chicago Trust of New York. RIGHTS AND JUNIOR PREFERRED STOCK The Company has adopted a shareholder rights plan as set forth in a Rights Agreement dated February 3, 1989, as amended, between the Company and the Bank of New York, as rights agent (the "Rights Agreement"). The following is a summary of the terms of the Rights Agreement. Rights. Following the occurrence of certain events (the "Occurrence Date") and except as described below, each right (a "Right," and, collectively, the "Rights") will entitle the registered holder thereof to purchase from the Company one one-thousandth of a share (a "Unit") of the Company's Series A Junior Participating Preferred Stock ("Junior Preferred Stock") at a price (the "Purchase Price") of $150 per Unit, subject to adjustment. The Rights are not exercisable until the Occurrence Date. The Rights expire on the tenth anniversary of the adoption of the Rights Agreement, unless exercised in connection with a transaction of the type described below or unless earlier redeemed by the Company. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. Initially, ownership of the Rights will be attached to all Company Common Stock certificates representing shares then outstanding, and no separate certificates representing the Rights (the "Rights Certificates") will be distributed. Until the Occurrence Date (or earlier redemption or expiration of the Rights), the Rights will be transferable only with the Company Common Stock, and the surrender or transfer of any certificate of Common Stock will also constitute the transfer of the Rights associated with the Company Common Stock represented by such certificate. The Rights will separate from the Company Common Stock and an Occurrence Date will occur upon the earlier of (i) 10 days following the date (a "Stock Acquisition Date") of a public announcement that a person or group of affiliates or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding Company Common Stock or (ii) 10 business days following the commencement of or announcement of an intention to make a tender offer or exchange offer, the consummation of which would result in the Acquiring Person becoming the beneficial owner of 30% or more of such outstanding Company Common Stock (such date being called the Occurrence Date). For purposes of the Rights Agreement, a person shall not be deemed to beneficially own "Exempt Shares" which include (i) shares of Company Common Stock acquired by such person by gift, bequest and certain other transfers, which shares were Exempt Shares immediately prior to such transfer and were held by such person continuously thereafter and (ii) shares acquired by such person in connection with certain distributions of Company Common Stock with respect to Exempt Shares which were held by such person continuously thereafter. In connection with the Marriott International Distribution, the Board amended the Rights Agreement to provide that the shares of Company Common Stock acquired by Marriott International upon exercise of the Marriott International Purchase Right will be deemed "Exempt Shares" under the Rights Agreement, such that the exercise of such right by Marriott International will not cause Marriott International to be deemed an "Acquiring Person" under the Rights Agreement and thus trigger a distribution of the Rights. See "Relationship Between the Company and Marriott International--Marriott International Purchase Right." As soon as practicable following an Occurrence Date, Rights Certificates will be mailed to holders of record of Company Common Stock as of the close of business on the Occurrence Date. After such time, such separate Rights Certificates alone will evidence the Rights and could trade independently from the Company Common Stock. In the event (i) the Company is the surviving corporation in a merger with an Acquiring Person and the Company Common Stock is not changed or exchanged, or (ii) an Acquiring Person becomes the beneficial owner of 30% or more of the then outstanding shares of Company Common Stock (except pursuant to an offer for all outstanding shares of Company Common Stock which the Board determines to be fair to and otherwise in the 25 best interests of the Company and its shareholders), each holder of a Right will, in lieu of the right to receive one one-thousandth of a share of Junior Preferred Stock, thereafter have the right to receive, upon exercise, Company Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right. Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph, all Rights that are (or, under certain circumstances specified in the Rights Agreement, were) beneficially owned by any Acquiring Person will be null and void. However, the Rights are not exercisable following the occurrence of either of the events set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. For example, at an exercise price of $150 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $300 worth of Company Common Stock (or other consideration, as noted above) for $150. Assuming that the Company Common Stock had a per share value of $30 at such time, the holder of each valid Right would be entitled to purchase 10 shares of Company Common Stock for $150. In the event that, at any time following the Stock Acquisition Date, (i) the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation (other than a merger described in the second preceding paragraph or a merger which follows an offer described in the second preceding paragraph), or (ii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the Right. In general, the Board may redeem the Rights in whole, but not in part, at any time until 10 days following the Stock Acquisition Date, at a price of $.01 per Right. After the redemption period has expired, the Company's right of redemption may be reinstated if an Acquiring Person reduces its beneficial ownership to 10% or less of the outstanding shares of Company Common Stock in a transaction or series of transactions not involving the Company. Immediately upon the action of the Board ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $.01 per Right redemption price. The purchase price payable, and the number of shares of Junior Preferred Stock or other securities or property issuable upon exercise of the Rights are subject to adjustment upon the occurrence of certain events with respect to the Company, including stock dividends, subdivisions, combinations, reclassifications, rights or warrants offerings of Junior Preferred Stock at less than the then current market price and certain distributions of property or evidences of indebtedness of the Company to holders of Junior Preferred Stock, all as set forth in the Rights Agreement. The Rights have certain antitakeover effects. The Rights may cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Board, except pursuant to an offer conditioned on a substantial number of Rights being acquired. The Rights should not interfere with any merger or other business combination approved by the Board since the Rights may be redeemed by the Company as set forth above. See "Purposes and Antitakeover Effects of Certain Provisions of the Company Certificate and Bylaws and the Marriott International Purchase Right." Junior Preferred Stock. In connection with the Rights Agreement, 300,000 shares of Junior Preferred Stock are authorized and reserved for issuance by the Board. No shares of Junior Preferred Stock are currently outstanding. The material terms of the Junior Preferred Stock are summarized herein; however, such summary is subject to the terms of the Company Certificate and the certificate of designation relating to the Junior Preferred Stock (the "Junior Preferred Stock Certificate of Designation"). Subject to the prior payment of cumulative dividends on any class of preferred stock ranking senior to the Junior Preferred Stock, a holder of Junior Preferred Stock will be entitled to cumulative dividends out of funds legally available therefor, when, as and if declared by the Board, at a quarterly rate per share of Junior Preferred 26 Stock equal to the greater of (a) $10.00 or (b) 1000 times (subject to adjustment upon certain dilutive events) the aggregate per share amount of all cash dividends and 1000 times (subject to adjustment upon certain dilutive events) the aggregate per share amount (payable in kind) of all noncash dividends or other distributions (other than dividends payable in Company Common Stock or a sub-division of the outstanding shares of Company Common Stock) declared on Company Common Stock, since the immediately preceding quarterly dividend payment date for the Junior Preferred Stock (or since the date of issuance of the Junior Preferred Stock if no such dividend payment date has occurred). A holder of Junior Preferred Stock will be entitled to 1000 votes (subject to adjustment upon certain dilutive events) per share of Junior Preferred Stock on all matters submitted to a vote of shareholders of the Company. Such holders will vote together with the holders of the Company Common Stock as a single class on all matters submitted to a vote of shareholders of the Company. In the event of a merger or consolidation of the Company which results in Company Common Stock being exchanged or changed for other stock, securities, cash and/or other property, the shares of Junior Preferred Stock shall similarly be exchanged or changed in an amount per share equal to 1000 times (subject to adjustment upon certain dilutive events) the aggregate amount of stock, securities, cash and/or other property, as the case may be, into which each share of Company Common Stock has been exchanged or changed. In the event of liquidation, dissolution or winding up of the Company, a holder of Junior Preferred Stock will be entitled to receive $1000 per share, plus accrued and unpaid dividends and distributions thereon, before any distribution may be made to holders of shares of stock of the Company ranking junior to the Junior Preferred Stock, and the holders of Junior Preferred Stock are entitled to receive an aggregate amount per share equal to 1000 times (subject to adjustment upon certain dilutive events) the aggregate amount to be distributed per share to holders of Company Common Stock. In the event that dividends on the Junior Preferred Stock are in arrears in an amount equal to six quarterly dividends thereon, all holders of Junior Preferred Stock, voting separately as a class with the holders of any other series of preferred stock of the Company with dividends in arrears, will be entitled to elect two directors pursuant to provisions of the Company Certificate. Such right to elect two additional directors shall continue at each annual meeting until all dividends in arrears (including the then-current quarterly dividend payment) have been paid or declared and set apart for payment. Upon payment or declaration and reservation of funds for payment of all such dividends, the term of office of each director elected shall immediately terminate and the number of directors shall be such number as may be provided for in the Company Certificate or Bylaws. The Junior Preferred Stock is not subject to redemption. The terms of the Junior Preferred Stock provide that the Company is subject to certain restrictions with respect to dividends and distributions on and redemptions and purchases of shares of stock of the Company ranking junior to or on a parity with the Junior Preferred Stock in the event that payments of dividends or other distributions payable on the Junior Preferred Stock are in arrears. WARRANTS The Company agreed to issue warrants (the "Warrants") to acquire 7,700,000 shares of the Company Common Stock in connection with the settlement of class action lawsuits instituted against the Company and certain individual defendants by certain holders and purchasers of senior notes and debentures of the Company. As adjusted to reflect the Special Dividend, each Warrant entitles the holder, at any time prior to 5:00 p.m. on October 8, 1998 (the "Expiration Time"), to purchase one share of Company Common Stock from the Company and one-fifth of one share of Services Common Stock at a price (the "Exercise Price") of (i) $8.00, if exercised on or before 5:00 p.m. New York City time on October 8, 1996, or (ii) $10.00, if exercised after 5:00 p.m. New York City time on October 8, 1996, but on or before 5:00 p.m. New York City time on October 8, 1998. The portion of the Exercise Price attributable to the Services Common Stock is payable to HM Services. See "Relationship Between the Company and HM Services After the Special Dividend." Both the Exercise Price and the number of shares subject to the Warrants are subject to certain adjustments. Warrants that are not 27 exercised prior to the Expiration Time expire and become void. The Company did not receive any proceeds from the issuance of the Warrants. Warrantholders will not be entitled to vote or to consent or to receive notice as shareholders in respect of the meeting of shareholders or the election of directors of the Company or any other matter, or possess any rights whatsoever as shareholders of the Company. The Company has also agreed to use its reasonable best efforts to obtain any required approvals or registration under state securities laws for the issuance of the Company Common Stock upon exercise of the Warrants. Under the Warrant Agreement, however, Warrants may not be exercised by or, shares of Company Common Stock issued to, any Warrant holder in any state where such exercise or issuance would be unlawful. The Warrants have no established trading market and no assurance can be given that any such markets will develop. As of May 17, 1996, approximately 7,130,000 Warrants were outstanding or reserved for issuance. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion is a summary of the material federal income tax consequences expected to result from the ownership and disposition of the Warrants. This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations promulgated and proposed thereunder, judicial authority and current administrative rulings and practice, any of which may be altered with retroactive effect, thereby changing the federal income tax consequences discussed below. There can be no assurance that the Internal Revenue Service ("the Service") will not take a contrary view, and no ruling from the Service has been or will be sought. The tax treatment of a Warrantholder may vary depending upon such holder's particular situation. Certain Warrantholders, including certain financial institutions, insurance companies, broker-dealers, tax-exempt organizations, foreign corporations, nonresident alien individuals and persons holding the Warrants as part of a "straddle," "hedge" or "conversion transaction," may be subject to special rules not discussed below. This discussion is limited to holders who will hold the Warrants (and any Company Common Stock acquired pursuant to the exercise of a Warrant) as "capital assets" (within the meaning of Section 1221 of the Code). Moreover, this discussion does not address the federal income tax treatment of the receipt of the Warrants by the Initial Warrantholders, and such treatment will vary depending on the facts and circumstances of each such holder. Initial Warrantholders should consult their own tax advisors regarding the proper federal income tax treatment of the receipt of the Warrants. SALE OR EXCHANGE OF THE WARRANTS Generally, a Warrantholder will recognize gain or loss upon the sale or exchange of a Warrant in an amount equal to the difference between (i) the amount of cash and the fair market value of other property received therefor and (ii) the Warrantholder's adjusted tax basis in the Warrant. Such gain or loss generally will be capital gain or loss if the Company Common Stock to which the Warrant relates would be a capital asset in the hands of the Warrantholder, and will be long-term if the Warrant was held for more than a year. A repurchase of the Warrant by the Company may not qualify for capital gain or loss treatment, however, and a Warrantholder instead may be required to treat such gain or loss as ordinary income or loss. EXERCISE OF THE WARRANTS The exercise of a Warrant with cash will not result in a taxable event to the Warrantholder (except to the extent of cash, if any, received in lieu of fractional shares of Company Common Stock). Upon such exercise, the Warrantholder's basis in the shares of Company Common Stock issued thereunder will be the sum of (i) the 28 Warrantholder's basis in the Warrant and (ii) the exercise price of the Warrant. The holding period for the shares of Company Common Stock acquired upon exercise of a Warrant will not include the period during which the Warrant was held. If any cash is received in lieu of fractional shares, the Warrantholder will recognize gain or loss, and the character and amount of gain or loss will be determined as if the Warrantholder had received such fractional shares and then such shares were immediately redeemed for cash. Accordingly, a Warrantholder will recognize gain or loss in an amount equal to the difference between the amount of cash received for the fractional shares and the Warrantholder's tax basis in the fractional shares. EXPIRATION OF THE WARRANTS Upon the expiration of an unexercised Warrant, the Warrantholder will recognize a loss equal to the Warrantholder's adjusted tax basis in the Warrant. Such loss generally will be a capital loss if the Company Common Stock to which the Warrant relates would be a capital asset in the hands of the Warrantholder, and will be long-term if the Warrant was held for more than one year. ADJUSTMENTS UNDER THE WARRANTS Adjustments to the Exercise Price of a Warrant, or the failure to make such adjustments, may in certain circumstances result in the receipt of constructive distributions by the Warrantholder which could be taxable as a dividend, in which event the Warrantholder's tax basis in the Warrant would be increased by an amount equal to such constructive dividend. The rules with respect to adjustments are complex and Warrantholders should consult their own tax advisors in the event of an adjustment. BACKUP WITHHOLDING The backup withholding rules require the Company to deduct and withhold federal income tax at the rate of 31% with respect to payments made to noncorporate payees who are not otherwise exempt if (a) the payee fails to furnish a taxpayer identification number ("TIN") to the Company, (b) the Service notifies the Company that the TIN furnished by the payee is incorrect, (c) there has been notified payee underpaying, or (d) there has been payee certification failure. Any amounts withheld from a payment to a payee under the backup withholding rules will be allowed as a refund or credit against such payee's federal income tax, provided that the required information is furnished to the Service. THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS DOES NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR PROSPECTIVE WARRANTHOLDER'S SITUATION OR STATUS. THE SUMMARY IS BASED ON THE PROVISIONS OF THE CODE, REGULATIONS, PROPOSED REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ANY OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY ON A RETROACTIVE BASIS. EACH WARRANTHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO SUCH WARRANTHOLDER, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAW, ARISING OUT OF THE OWNERSHIP AND DISPOSITION OF THE WARRANTS. 29 PLAN OF DISTRIBUTION The Warrants offered hereby were distributed to the Initial Warrantholders as part of the Class Action Settlement pursuant to the Settlement Agreement, which was approved by the United States District Court for the District of Maryland (the "Court") on September 10, 1993. As part of the Class Action Settlement, 5,775,000 Warrants were distributed to purchasers of the Company's senior notes between July 11, 1991 and October 5, 1992 who sold such senior notes on or after October 5, 1992 and prior to September 10, 1993 and who suffered a loss on such purchase and sale. Under the terms of the Class Action Settlement, in order to receive Warrants, members of the plaintiff class satisfying the above criteria were required to file a proof of claim with the settlement fund administrator retained by the Class Action Plaintiffs to determine the total recognized loss from eligible claims. Pursuant to the Court's order dated June 10, 1994, the total recognized loss approved by the Court was $14,329,027, which means that each approved claimant received .403 Warrants for each dollar of recognized loss, except that no fractional warrants were issued. See "Description of Warrants-- No Fractional Shares." Also, as part of the Class Action Settlement, counsel to the plaintiffs in the Class Action Lawsuits received 1,925,000 Warrants in payment of such counsel's fees and expenses. The plaintiffs who received Warrants as part of the Class Action Settlement and counsel to plaintiffs in the Class Action Lawsuit are sometimes referred to in this Prospectus as the "Initial Warrantholders." 30 PURPOSES AND ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY CERTIFICATE AND BYLAWS AND THE MARRIOTT INTERNATIONAL PURCHASE RIGHT COMPANY CERTIFICATE AND BYLAWS The Company Certificate contains several provisions that will make difficult an acquisition of control of the Company by means of a tender offer, open market purchases, a proxy fight or otherwise, that is not approved by the Board. The Company's Bylaws (the "Bylaws") also contain provisions that could have an antitakeover effect. The purposes of the relevant provisions of the Company Certificate and Bylaws are to discourage certain types of transactions, described below, which may involve an actual or threatened change of control of the Company and to encourage persons seeking to acquire control of the Company to consult first with the Board to negotiate the terms of any proposed business combination or offer. The provisions are designed to reduce the vulnerability of the Company to an unsolicited proposal for a takeover that does not contemplate the acquisition of all outstanding shares or is otherwise unfair to shareholders of the Company or an unsolicited proposal for the restructuring or sale of all or part of the Company. The Company believes that, as a general rule, such proposals would not be in the best interests of the Company and its shareholders. There has been a history of the accumulation of substantial stock positions in public companies by third parties as a prelude to proposing a takeover or a restructuring or sale of all or part of the company or another similar extraordinary corporate action. Such actions are often undertaken by the third-party without advance notice to, or consultation with, the management or board of directors of the target company. In many cases, the purchaser seeks representation on the company's board of directors in order to increase the likelihood that its proposal will be implemented by the company. If the company resists the efforts of the purchaser to obtain representation on the company's board, the purchaser may commence a proxy contest to have its nominees elected to the board in place of certain directors or the entire board. In some cases, the purchaser may not truly be interested in taking over the company, but may use the threat of a proxy fight and/or a bid to take over the company as a means of forcing the company to repurchase its equity position at a substantial premium over market price. The Company believes that the imminent threat of removal of the Company's management or Board in such situations would severely curtail the ability of management or the Board to negotiate effectively with such purchasers. The management or the Board would be deprived of the time and information necessary to evaluate the takeover proposal, to study alternative proposals and to help ensure that the best price is obtained in any transaction involving the Company which may ultimately be undertaken. If the real purpose of a takeover bid were to force the Company to repurchase an accumulated stock interest at a premium price, management or the Board would face the risk that, if it did not repurchase the purchaser's stock interest, the Company's business and management would be disrupted, perhaps irreparably. Certain provisions of the Company Certificate and Bylaws, the Company believes, will help ensure that the Board, if confronted by a surprise proposal from a third party which has acquired a block of stock, will have sufficient time to review the proposal and appropriate alternatives to the proposal and to act in what it believes to be the best interests of the shareholders. In addition, certain other provisions of the Company Certificate are designed to prevent a purchaser from utilizing two-tier pricing and similar inequitable tactics in the event of an attempt to take over the Company. These provisions, individually and collectively, will make difficult and may discourage a merger, tender offer or proxy fight, even if such transaction or occurrence may be favorable to the interests of the shareholders, and may delay or frustrate the assumption of control by a holder of a large block of stock of the Company and the removal of incumbent management, even if such removal might be beneficial to the shareholders. Furthermore, these provisions may deter or could be utilized to frustrate a future takeover attempt which is not approved by the incumbent Board, but which the holders of a majority of the shares may deem to be in their best 31 interests or in which shareholders may receive a substantial premium for their stock over prevailing market prices of such stock. By discouraging takeover attempts, these provisions might have the incidental effect of inhibiting certain changes in management (some or all of the members of which might be replaced in the course of a change of control) and also the temporary fluctuations in the market price of the stock which often result from actual or rumored takeover attempts. Set forth below is a description of such provisions in the Company Certificate and Bylaws. Such description is intended as a summary only and is qualified in its entirety by reference to the Company Certificate and Bylaws which are exhibits to the Registration Statement on Form S-3 of which this Prospectus is a part. Classified Board of Directors. The Company Certificate provides for the Board to be divided into three classes serving staggered terms so that directors' current terms will expire at the 1996, 1997 or 1998 annual meeting of shareholders. The classification of directors will have the effect of making it more difficult for shareholders to change the composition of the Board in a relatively short period of time. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in a majority of the Board. Such a delay may help ensure that the Board, if confronted by a holder attempting to force a stock repurchase at a premium above market prices, a proxy contest or an extraordinary corporate transaction, will have sufficient time to review the proposal and appropriate alternatives to the proposal and to act in what it believes are the best interests of the shareholders. The classified board provision could have the effect of discouraging a third party from making a tender offer or otherwise attempting to obtain control of the Company, even though such an attempt might be beneficial to the Company and its shareholders. The classified board provision could thus increase the likelihood that incumbent directors will retain their positions. In addition, since the classified board provision is designed to discourage accumulations of large blocks of the Company's stock by purchasers whose objective is to have such stock repurchased by the Company at a premium, the classified board provision could tend to reduce the temporary fluctuations in the market price of the Company's stock that could be caused by accumulations of large blocks of such stock. Accordingly, shareholders could be deprived of certain opportunities to sell their stock at a temporarily higher market price. The Company believes that a classified board of directors helps to assure the continuity and stability of the Board and business strategies and policies as determined by the Board, because generally a majority of the directors at any given time will have had prior experience as directors of the Company. The classified board provision also helps assure that the Board, if confronted with an unsolicited proposal from a third party that has acquired a block of the voting stock of the Company, will have sufficient time to review the proposal and appropriate alternatives and to seek the best available result for all shareholders. Removal; Filling Vacancies. The Company Certificate provides that, subject to any rights of the holders of preferred stock, only a majority of the Board then in office shall have the authority to fill any vacancies on the Board, including vacancies created by an increase in the number of directors. In addition, the Company Certificate provides that a new director elected to fill a vacancy on the Board will serve for the remainder of the full term of his or her class and that no decrease in the number of directors shall shorten the term of an incumbent. Moreover, the Company Certificate provides that directors may be removed with or without cause only by the affirmative vote of holders of at least 66 2/3% of the voting power of the shares entitled to vote at the election of directors, voting together as a single class. These provisions relating to removal and filling of vacancies on the Board will preclude shareholders from enlarging the Board or removing incumbent directors and filling the vacancies with their own nominees. Limitations on Shareholder Action By Written Consent; Special Meetings. The Company Certificate and Bylaws provide that shareholder action can be taken only at an annual or special meeting of shareholders and prohibit shareholder action by written consent in lieu of a meeting. The Company Certificate and Bylaws provide 32 that, subject to the rights of holders of any series of preferred stock, special meetings of shareholders can be called only by a majority of the entire Board. Shareholders are not permitted to call a special meeting or to require that the Board call a special meeting of shareholders. Moreover, the business permitted to be conducted at any special meeting of shareholders is limited to the business brought before the meeting by or at the direction of the Board. The provisions of the Company Certificate and Bylaws restricting shareholder action by written consent may have the effect of delaying consideration of a shareholder proposal until the next annual meeting unless a special meeting is called by a majority of the entire Board. These provisions would also prevent the holders of a majority of the voting power of the voting stock from using the written consent procedure to take shareholder action and from taking action by consent without giving all the shareholders of the Company entitled to vote on a proposed action the opportunity to participate in determining such proposed action. Moreover, a shareholder could not force shareholder consideration of a proposal over the opposition of the Board by calling a special meeting of shareholders prior to the time the Board believed such consideration to be appropriate. The Company believes that such limitations on shareholder action will help to assure the continuity and stability of the Board and the Company's business strategies and policies as determined by the Board, to the benefit of all of the Company's shareholders. If confronted with an unsolicited proposal from Company shareholders, the Board will have sufficient time to review such proposal and to seek the best available result for all shareholders, before such proposal is approved by such shareholders by written consent in lieu of a meeting or through a special meeting of shareholders. Nominations of Directors and Shareholder Proposals. The Bylaws establish an advance notice procedure with regard to the nomination, other than by or at the direction of the Board, of candidates for election as directors (the "Nomination Procedure") and with regard to shareholder proposals to be brought before an annual or special meeting of shareholders (the "Business Procedure"). The Nomination Procedure provides that only persons who are nominated by or at the direction of the Board, or by a shareholder who has given timely prior written notice to the Secretary of the Company prior to the meeting at which directors are to be elected, will be eligible for election as directors. The Business Procedure provides that shareholder proposals must be submitted in writing in a timely manner in order to be considered at any annual or special meeting. To be timely, notice must be received by the Company (i) in the case of an annual meeting, not less than 90 days prior to the annual meeting for a director nomination, and not less than 120 days prior to the annual meeting for a shareholder proposal or (ii) in the case of a special meeting not later than the seventh day following the day on which notice of such meeting is first given to shareholders for both a director nomination and a shareholder proposal. Under the Nomination Procedure, notice to the Company from a shareholder who proposes to nominate a person at a meeting for election as a director must contain certain information about that person, including age, business and residence addresses, principal occupation, the class and number of shares of Company Common Stock beneficially owned, the consent to be nominated and such other information as would be required to be included in a proxy statement soliciting proxies for the election of the proposed nominee, and certain information about the shareholder proposing to nominate that person. Under the Business Procedure, notice relating to a shareholder proposal must contain certain information about such proposal and about the shareholder who proposes to bring the proposal before the meeting, including the class and number of shares of Company Common Stock beneficially owned by such shareholder. If the Chairman or other officer presiding at a meeting determines that a person was not nominated in accordance with the Nomination Procedure, such person will not be eligible for election as a director, or if he determines that the shareholder proposal was not properly brought before such meeting, such proposal will not be introduced at such meeting. Nothing in the Nomination Procedure or the Business Procedure will preclude discussion by any shareholder of any nomination or proposal properly made or brought before an annual or special meeting in accordance with the above-mentioned procedures. 33 The purpose of the Nomination Procedure is, by requiring advance notice of nomination by shareholders, to afford the Board a meaningful opportunity to consider the qualifications of the proposed nominees and, to the extent deemed necessary or desirable by the Board, to inform shareholders about such qualifications. The purpose of the Business Procedure is, by requiring advance notice of shareholder proposals, to provide a more orderly procedure for conducting annual meetings of shareholders and, to the extent deemed necessary or desirable by the Board, to provide the Board with a meaningful opportunity to inform shareholders, prior to such meetings, of any proposal to be introduced at such meetings, together with any recommendation as to the Board's position or belief as to action to be taken with respect to such proposal, so as to enable shareholders better to determine whether they desire to attend such meeting or grant a proxy to the Board as to the disposition of any such proposal. Although the Bylaws do not give the Board any power to approve or disapprove shareholder nominations for the election of directors or of any other proposal submitted by shareholders, the Bylaws may have the effect of precluding a nomination for the election of directors or precluding the conducting of business at a particular shareholder meeting if the proper procedures are not followed, and may discourage or deter a third-party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company, even if the conduct of such solicitation or such attempt might be beneficial to the Company and its shareholders. Fair Price Provision. Article Fifteen of the Company Certificate (the "Fair Price Provision") requires approval by the holders of 66 2/3% of the voting power of the outstanding capital stock of the Company entitled to vote generally in the election of directors (the "Voting Stock") as a condition for mergers and certain other business combinations ("Business Combinations") involving the Company and any holder of more than 25% of such voting power (an "Interested Shareholder") unless the transaction is either (i) approved by a majority of the members of the Board who are not affiliated with the Interested Shareholder and who were directors before the Interested Shareholder became an Interested Shareholder (the "Disinterested Directors") or (ii) certain minimum price and procedural requirements are met. The Fair Price Provision is designed to prevent a third party from utilizing two-tier pricing and similar inequitable tactics in a takeover attempt. The Fair Price Provision is not designed to prevent or discourage tender offers for the Company. It does not impede an offer for at least 66 2/3% of the Voting Stock in which each shareholder receives substantially the same price for his or her shares as each other shareholder or which the Board has approved in the manner described herein. Nor does the Fair Price Provision preclude a third party from making a tender offer for some of the shares of Voting Stock without proposing a Business Combination in which the remaining shares of Voting Stock are purchased. Except for the restrictions on Business Combinations, the Fair Price Provision will not prevent an Interested Shareholder having a controlling interest of the Voting Stock from exercising control over the Company or increasing its interest in the Company. Moreover, an Interested Shareholder could increase its ownership to 66 2/3% and avoid application of the Fair Price Provision. However, the separate provisions contained in the Company Certificate and the Bylaws relating to "Classified Boards of Directors" discussed above will, as therein indicated, curtail an Interested Shareholder's ability to exercise control in several respects, including such shareholder's ability to change incumbent directors who may oppose a Business Combination or to implement a Business Combination by written consent without a shareholder meeting. The Fair Price Provision would, however, discourage some takeover attempts by persons intending to acquire the Company in two steps and to eliminate remaining shareholder interests by means of a business combination involving less consideration per share than the acquiring person would propose to pay for its initial interest in the Company. In addition, acquisitions of stock by persons attempting to acquire control through market purchases may cause the market price of the stock to reach levels which are higher than would otherwise be the case. The Fair Price Provision may thereby deprive some holders of the Common Stock of an opportunity to sell their shares at a temporarily higher market price. Although the Fair Price Provision is designed to help assure fair treatment of all shareholders vis-a-vis other shareholders in the event of a takeover, it is not the purpose of the Fair Price Provision to assure that shareholders will receive a premium price for their shares in a takeover. Accordingly, the Board is of the view that the adoption of the Fair Price Provision does not preclude the Board's opposition to any future takeover proposal 34 which it believes would not be in the best interests of the Company and its shareholders, whether or not such a proposal satisfies the minimum price criteria and procedural requirements of the Fair Price Provision. In addition, under Section 203 of the Delaware General Corporation Law as applicable to the Company, certain "business combinations" (defined generally to include (i) mergers or consolidations between a Delaware corporation and an interested shareholder (as defined below) and (ii) transactions between a Delaware corporation and an interested shareholder involving the assets or stock of such corporation or its majority-owned subsidiaries, including transactions which increase the interested shareholder's percentage ownership of stock) between a Delaware corporation, whose stock generally is publicly traded or held of record by more than 2,000 shareholders, and an interested shareholder (defined generally as those shareholders, who, on or after December 23, 1987, become beneficial owners of 15% or more of a Delaware corporation's voting stock) are prohibited for a three-year period following the date that such shareholder became an interested shareholder, unless (i) prior to the date such shareholder became an interested shareholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder, (ii) upon consummation of the transaction that made such shareholder an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding voting stock owned by officers who also are directors and voting stock held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan), or (iii) the business combination was approved by the board of directors of the corporation and ratified by two-thirds of the voting stock which the interested shareholder did not own. The three-year prohibition also does not apply to certain business combinations proposed by an interested shareholder following the announcement or notification of certain extraordinary transactions involving the corporation and a person who had been an interested shareholder during the previous three years or who became an interested shareholder with the approval of a majority of the corporation's directors. Shareholder Rights Plan. The Company has adopted a shareholder rights plan which may have anti-takeover effects. See "Description of Capital Stock-Rights and Junior Preferred Stock." Amendment of the Company Certificate and Bylaws. The Company Certificate contains provisions requiring the affirmative vote of the holders of at least 66 2/3% the voting power of the stock entitled to vote generally in the election of directors to amend certain provisions of the Company Certificate and Bylaws (including the provisions discussed above). These provisions make it more difficult for shareholders to make changes in the Company Certificate or Bylaws, including changes designed to facilitate the exercise of control over the Company. In addition, the requirement for approval by at least a 66 2/3% shareholder vote will enable the holders of a minority of the Company's capital stock to prevent holders of a less-than-66 2/3% majority from amending such provisions of the Company's Certificate or Bylaws. MARRIOTT INTERNATIONAL PURCHASE RIGHT The Company granted to Marriott International, for a period of ten years following the Marriott International Distribution (i.e., until October 2003), the right to purchase a number of shares equal in amount of up to 20% of each class of the Company's outstanding voting stock at the then fair market value upon the occurrence of certain change of control events involving the Company. The Marriott International Purchase Right may be exercised for a 30-day period following the date a person or group of affiliated persons has (i) become the beneficial owner of 20% or more of the total voting power of the then outstanding shares of the Company's voting stock or (ii) announced a tender offer for 30% or more of the total voting power of the then outstanding shares of the Company's voting stock. These change of control events upon which the Marriott International Purchase Right becomes exercisable are substantially identical to those events that cause a distribution of the Rights under the Rights Agreement (see "Description of Capital Stock--Rights and Junior Preferred Stock"). Accordingly, certain share ownership of the Company's voting stock by specified persons is exempt under the Rights Agreement, and consequently will not result in a distribution of Rights, and will not cause the Marriott International Purchase Right to become exercisable. 35 In connection with the Marriott International Distribution, the Board amended the terms of the Rights Agreement to provide that the exercise of the Marriott International Purchase Right will not result in a distribution of the Rights. Accordingly, upon exercise of the Marriott International Purchase Right, Marriott International will be entitled to receive the Rights associated with the Company Common Stock and will not be deemed an "Acquiring Person" under the Rights Agreement. The purchase price for the Company Common Stock to be purchased upon the exercise of the Marriott International Purchase Right is determined by taking the average of the closing sale price of the Company Common Stock during the 30 consecutive trading days preceding the date the Marriott International Purchase Right becomes exercisable. The specific terms of the Marriott International Purchase Right are set forth in the Marriott International Distribution Agreement. The Marriott International Purchase Right will have an antitakeover effect. Any person considering acquiring a substantial or controlling block of Company Common Stock would face the possibility that its ability to exercise control would be impaired by Marriott International's 20% ownership resulting from exercise of the Marriott International Purchase Right. Moreover, so long as the Marriott family's current percentage of ownership of Company Common Stock continues, the combined Marriott family (including various trusts established by members of the Marriott family) and Marriott International ownership following exercise of the Marriott International Purchase Right may effectively block control by others (see "Description of Capital Stock"). It is also possible that the exercise price of the Marriott International Purchase Right would be lower than the price at which a potential acquiror might be willing to purchase a 20% block of shares of Company Common Stock because the purchase price for the Marriott International Purchase Right is based on the average trading price during a 30-day period which may be prior to the announcement of the takeover event. This potential price differential may have a further antitakeover effect by discouraging potential acquirers of the Company. The antitakeover effect of the Marriott International Purchase Right will be in addition to the antitakeover effects of the provisions contained in the Company Certificate and Bylaws. LEGAL MATTERS The validity of the Company Common Stock offered hereby has been passed upon for the Company by Christopher G. Townsend, Esq., Senior Vice President and Deputy General Counsel of the Company, and certain legal matters with respect to the Company Common Stock offered hereby has been passed upon for the Company by Potter, Anderson & Corroon, Wilmington, Delaware. Mr. Townsend owns Company Common Stock, and holds stock options, deferred stock and restricted stock awards under the Comprehensive Stock Plan and may receive additional awards under the plan in the future. EXPERTS The audited consolidated financial statements and schedules of the Company and the financial statements of the Dallas/Fort Worth Airport Marriott, Pacific Landmark Hotel, Ltd. and Pacific Gateway, Ltd., San Antonio Marriott Riverwalk, and TEC Entities incorporated by reference into this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said reports. The combined financial statements of Pacific Landmark Hotel, Ltd. and Pacific Gateway, Ltd. as of December 31, 1994 and 1993, and for each of the years in the two-year period ended December 31, 1994, are incorporated by reference in this registration statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The audited financial statements of the New York Vista (now the Marriott World Trade Center) incorporated by reference in this registration statement have been audited by Ernst & Young LLP, independent public accountants, as indicated in their report with respect thereto and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said reports. 36 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR- MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO- SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES COVERED BY THIS PROSPECTUS TO ANY PERSON OR BY ANY PERSON IN ANY JU- RISDICTION WHERE IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIR- CUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS COR- RECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ----------------- TABLE OF CONTENTS
PAGE ---- Available Information..................................................... 2 Information Incorporated by Reference..................................... 2 Prospectus Summary........................................................ 4 Risk Factors.............................................................. 9 The Company............................................................... 12 Use of Proceeds........................................................... 12 Dividend Policy........................................................... 12 The Distribution and the Special Dividend................................. 13 Relationship Between the Company and HM Services.............................................................. 13 Relationship Between the Company and Marriott International............... 16 Description of the Warrants............................................... 22 Description of Capital Stock.............................................. 24 Certain Federal Income Tax Consequences................................... 28 Plan of Distribution...................................................... 30 Purposes and Antitakeover Effects of Certain Provisions of the Company Certificate and Bylaws and the Marriott International Purchase Right..... 31 Legal Matters............................................................. 36 Experts................................................................... 36 Material Changes.......................................................... 36
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7,700,000 WARRANTS TO PURCHASE COMMON STOCK 7,700,000 SHARES OF COMMON STOCK HOST MARRIOTT CORPORATION ----------------- PROSPECTUS , 1996 ----------------- , 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following is an itemized statement of all expenses in connection with the issuance and distribution of the securities registered hereby. Except for the SEC registration fee, all amounts provided are estimated. Registration Fee................................................ $ Blue Sky Fees and Expenses...................................... Stock Exchange Fees............................................. Legal Fees...................................................... Accounting Fees................................................. Printing........................................................ --- $
-------- * To be filed by amendment ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS Article Eleven and Article Sixteen of the Company's Certificate and Section 7.7 of the Bylaws limit the personal liability of directors to the Company or its shareholders for monetary damages for breach of fiduciary duty. The provisions of the Company Certificate and Bylaws are collectively referred to herein as the "Director Liability and Indemnification Provisions." The Company Certificate and the Bylaws are included as exhibits to this Registration Statement on Form S-3 of which this Prospectus is a part. Set forth below is a description of the Director Liability and Indemnification Provisions. Such description is intended as a summary only and is qualified in its entirety by reference to the Company Certificate and the Bylaws. Elimination of Liability in Certain Circumstances. Article Sixteen of the Company Certificate protects directors against monetary damages for breaches of their fiduciary duty of care, except as set forth below. Under the Delaware General Corporation Law, absent such limitation of liability provisions as are provided in Article Sixteen, directors could generally be held liable for gross negligence for decisions made in the performance of their duty of care but not for simple negligence. Article Sixteen eliminates liability of directors for negligence in the performance of their duties, including gross negligence. In a context not involving a decision by the directors (i.e., a suit alleging loss to the Company due to the directors' inattention to a particular matter) a simple negligence standard might apply. Directors remain liable for breaches of their duty of loyalty to the Company and its shareholders, as well as acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law and transactions from which a director derives improper personal benefit. Article Sixteen does not eliminate director liability under Section 174 of the Delaware General Corporation Law, which makes directors personally liable for unlawful dividends or unlawful stock repurchases or redemptions and expressly sets forth a negligence standard with respect to such liability. While the Director Liability and Indemnification Provisions provide directors with protection from awards of monetary damages for breaches of the duty of care, they do not eliminate the directors' duty of care. Accordingly, these provisions will have no effect on the availability of equitable remedies such as an injunction or rescission based upon a director's breach of the duty of care. The provisions of Article Sixteen, which eliminates liability as described above, will apply to officers of the Company only if they are directors of the Company and are acting in their capacity as directors, and will not apply to officers of the Company who are not directors. The elimination of liability of directors for monetary damages in the circumstances described above may deter persons from bringing third-party or derivative actions against directors to the extent such actions seek monetary damages. II-1 Indemnification and Insurance. Under Section 145 of the Delaware General Corporation Law, directors and officers as well as other employees and individuals may be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation--a "derivative action") if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of the derivative actions, except that indication only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action, and the Delaware General Corporation Law requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. Section 7.7 of the Bylaws provides that the Company shall indemnify any person to whom, and to the extent, indemnification may be granted pursuant to Section 145 of the Delaware General Corporation law. Article Eleven of the Company Certificate provides that a person who was or is made a party to, or is involved in, any action, suit or proceeding by reason of the fact that he is or was a director, officer or employee of the Company will be indemnified by the Company against all expenses and liabilities, including counsel fees, reasonably incurred by or imposed upon him, except in such cases where the director, officer or employee is adjudged guilty of willful misconduct or malfeasance in the performance of his duties. Article Eleven also provides that the right of indemnification shall be in addition to and not exclusive of all other rights to which such director, officer or employee may be entitled. ITEM 16. EXHIBITS (a) Exhibits
EXHIBIT NO. DESCRIPTION ----------- ----------- **2.(i) Memorandum of Understanding between Marriott Corporation and Certain Bondholders dated as of March 10, 1993 (incorporated by reference from Current Report on Form 8-K dated March 17, 1993). **2.(ii) Stipulation and Agreement of Compromise and Settlement (incorporated by reference from Registration Statement No. 33- 62444). **3.1(i) Restated Certificate of Incorporation of Marriott Corporation (incorporated by reference to Current Report on Form 8-K dated October 23, 1993). **3.1(ii) Certificate of Correction filed to correct a certain error in the Restated Certificate of Incorporation of Host Marriott Corporation filed in the Office of the Secretary of State of Delaware on August 11, 1992, filed in the Office of the Secretary of State of Delaware on October 11, 1994 (incorporated by reference to Registration Statement No. 33-54545). **3.2 Amended Marriott Corporation Bylaws (incorporated by reference to Current Report on Form 8-K dated October 23, 1993). **4.1(i) Third Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of December 1, 1986 (incorporated by reference from Current Report on Form 8-K dated December 10, 1986). **4.1(ii) Fourth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of May 1, 1987 (incorporated by reference from Current Report on Form 8-K dated May 7, 1987).
II-2
EXHIBIT NO. DESCRIPTION ----------- ----------- **4.1(iii) Fifth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of June 12, 1987 (incorporated by reference from Current Report on Form 8-K dated June 18, 1987). **4.1(iv) Sixth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of October 23, 1987 (incorporated by reference from Current Report on Form 8-K dated October 30, 1987). **4.1(v) Twelfth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of July 11, 1991 (incorporated by reference from Current Report on Form 8-K dated July 19, 1991). **4.1(vi) Thirteenth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of April 22, 1992 (incorporated by reference from Current Report on Form 8-K dated April 29, 1992). **4.1(vii) Fourteenth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of April 28, 1992 (incorporated by reference from Current Report on Form 8-K dated May 5, 1992). **4.1(viii) Fifteenth Supplemental Indenture between Marriott Corporation and Bank One, Columbus, NA. dated as of October 8, 1993 ((incorporated by reference from Current Report on Form 8-K dated October 23, 1993). **4.2(i) Rights Agreement between Marriott Corporation and the Bank of New York as Rights Agent dated February 3, 1989 (incorporated by reference to Registration Statement No. 33-62444). **4.2(ii) First Amendment to Rights Agreement between Marriott Corporation and Bank of New York as Rights Agent dated as of October 8, 1993 (incorporated by reference to Registration Statement No. 33- 51707). **4.3 Indenture by and among HMC Acquisition Properties, Inc., as Issuer, HMC SFO, Inc., as Subsidiary Guarantors, and Marine Midland Bank, as Trustee (incorporated by reference to Registration Statement No. 333-00768). **4.4 Indenture by and among HMH Properties Inc., as Issuer, HMH Courtyard Properties, Inc., HMC Retirement Properties, Inc., Marriott Financial Services, Inc., Marriott SBM Two Corporation, HMH Pentagon Corporation and Host Airport Hotels, Inc., as Subsidiary Guarantors, and Marine Midland Bank, as Trustee (incorporated by reference to Registration Statement No. 33- 95058). **4.5(i) Warrant Agreement dated as of October 14, 1994 by and between Host Marriott Corporation and First Chicago Trust Company of New York as Warrant Agent (incorporated by reference to Registration Statement No. 33-80801). **4.5(ii) First Supplemental Warrant Agreement dated December 22, 1995 by and among Host Marriott Corporation, Host Marriott Services Corporation and First Chicago Trust Company as Warrant Agent (incorporated by reference to Registration Statement No. 33- 80801). **5 Opinion of Christopher G. Townsend, Esq. as to legality of securities being registered. *23.1 Consent of Arthur Andersen LLP. *23.2 Consent of KPMG Peat Marwick LLP. *23.3 Consent of Ernst & Young LLP. **23.4 Consent of Christopher G. Townsend, Esq. (included in his opinion filed as Exhibit 5).
- -------- * Filed herewith. ** Previously filed. II-3 ITEM 17: UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of registrant pursuant to the provisions described under Item 14 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of such registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim information. II-4 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BETHESDA, STATE OF MARYLAND, ON JUNE 20, 1996. Host Marriott Corporation /s/ Robert E. Parsons, Jr. By___________________________________ Robert E. Parsons, Jr. Executive Vice President and Chief Financial Officer POWER OF ATTORNEY Each person whose signature appears below appoints Christopher G. Townsend as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in- fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE President, Chief /s/ Terence C. Golden Executive Officer June 20, 1996 - ------------------------------------- (Principal TERENCE C. GOLDEN Executive Officer) and Director Executive Vice /s/ Robert E. Parsons, Jr. President and Chief June 20, 1996 - ------------------------------------- Financial Officer ROBERT E. PARSONS, JR. (Principal Financial Officer) /s/ Donald D. Olinger Vice President and June 20, 1996 - ------------------------------------- Corporate DONALD D. OLINGER Controller (Principal Accounting Officer) Chairman of the Board of Directors June , 1996 - ------------------------------------- RICHARD E. MARRIOTT
II-5 SIGNATURE TITLE DATE Director /s/ R. Theodore Ammon June 20, 1996 - ------------------------------------ R. THEODORE AMMON Director /s/ J.W. Marriott, Jr. June 20, 1996 - ------------------------------------ J.W. MARRIOTT, JR. Director June , 1996 - ------------------------------------ ANN DORE MCLAUGHLIN Director /s/ Harry L. Vincent June 20, 1996 - ------------------------------------ HARRY L. VINCENT II-6 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ----------- ----------- **2.(i) Memorandum of Understanding between Marriott Corporation and Certain Bondholders dated as of March 10, 1993 (incorporated by reference from Current Report on Form 8-K dated March 17, 1993). **2.(ii) Stipulation and Agreement of Compromise and Settlement (incorporated by reference from Registration Statement No. 33- 62444). **3.1(i) Restated Certificate of Incorporation of Marriott Corporation (incorporated by reference to Current Report on Form 8-K dated October 23, 1993). **3.1(ii) Certificate of Correction filed to correct a certain error in the Restated Certificate of Incorporation of Host Marriott Corporation filed in the Office of the Secretary of State of Delaware on August 11, 1992, filed in the Office of the Secretary of State of Delaware on October 11, 1994 (incorporated by reference to Registration Statement No. 33-54545). **3.2 Amended Marriott Corporation Bylaws (incorporated by reference to Current Report on Form 8-K dated October 23, 1993). **4.1(i) Third Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of December 1, 1986 (incorporated by reference from Current Report on Form 8-K dated December 10, 1986). **4.1(ii) Fourth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of May 1, 1987 (incorporated by reference from Current Report on Form 8-K dated May 7, 1987). **4.1(iii) Fifth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of June 12, 1987 (incorporated by reference from Current Report on Form 8-K dated June 18, 1987). **4.1(iv) Sixth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of October 23, 1987 (incorporated by reference from Current Report on Form 8-K dated October 30, 1987). **4.1(v) Twelfth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of July 11, 1991 (incorporated by reference from Current Report on Form 8-K dated July 19, 1991). **4.1(vi) Thirteenth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of April 22, 1992 (incorporated by reference from Current Report on Form 8-K dated April 29, 1992). **4.1(vii) Fourteenth Supplemental Indenture between Marriott Corporation and The First National Bank of Chicago dated as of April 28, 1992 (incorporated by reference from Current Report on Form 8-K dated May 5, 1992). **4.1(viii) Fifteenth Supplemental Indenture between Marriott Corporation and Bank One, Columbus, NA. dated as of October 8, 1993 ((incorporated by reference from Current Report on Form 8-K dated October 23, 1993). **4.2(i) Rights Agreement between Marriott Corporation and the Bank of New York as Rights Agent dated February 3, 1989 (incorporated by reference to Registration Statement No. 33-62444).
E-1
EXHIBIT NO. DESCRIPTION ----------- ----------- **4.2(ii) First Amendment to Rights Agreement between Marriott Corporation and Bank of New York as Rights Agent dated as of October 8, 1993 (incorporated by reference to Registration Statement No. 33- 51707). **4.3 Indenture by and among HMC Acquisition Properties, Inc., as Issuer, HMC SFO, Inc., as Subsidiary Guarantors, and Marine Midland Bank, as Trustee (incorporated by reference to Registration Statement No. 333-00768). **4.4 Indenture by and among HMH Properties Inc., as Issuer, HMH Courtyard Properties, Inc., HMC Retirement Properties, Inc., Marriott Financial Services, Inc., Marriott SBM Two Corporation, HMH Pentagon Corporation and Host Airport Hotels, Inc., as Subsidiary Guarantors, and Marine Midland Bank, as Trustee (incorporated by reference to Registration Statement No. 33- 95058). **4.5(i) Warrant Agreement dated as of October 14, 1994 by and between Host Marriott Corporation and First Chicago Trust Company of New York as Warrant Agent (incorporated by reference to Registration Statement No. 33-80801). **4.5(ii) First Supplemental Warrant Agreement dated December 22, 1995 by and among Host Marriott Corporation, Host Marriott Services Corporation and First Chicago Trust Company as Warrant Agent (incorporated by reference to Registration Statement No. 33- 80801). **5 Opinion of Christopher G. Townsend, Esq. as to legality of securities being registered. *23.1 Consent of Arthur Andersen LLP. *23.2 Consent of KPMG Peat Marwick LLP. *23.3 Consent of Ernst & Young LLP. **23.4 Consent of Christopher G. Townsend, Esq. (included in his opinion filed as Exhibit 5).
- -------- * Filed herewith. ** Previously filed. E-2 EX-23.1 2 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated February 26, 1996 included in the Company's Form 10-K for the year ended December 29, 1995 and to the incorporation by reference in this registration statement of our reports dated November 3, 1995 of the Dallas/Fort Worth Airport Marriott, February 22, 1996 of the Pacific Landmark Hotel, Ltd. and Pacific Gateway, Ltd., August 18, 1995 of the San Antonio Marriott Riverwalk and December 15, 1995 of TEC Entities included in the Company's Form 8-K dated February 28, 1996 and to all references to our Firm included in this registration statement. Arthur Andersen LLP Washington, DC June 14, 1996 EX-23.2 3 EXHIBIT 23.2 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS The General Partners Pacific Landmark Hotel, Ltd. and Pacific Gateway, Ltd. We consent to incorporation by reference in this registration statement of Host Marriott Corporation of our report dated March 10, 1995, except as to note 6 to the combined financial statements, which is as of January 5, 1996, relating to the combined financial statements of Pacific Landmark Hotel, Ltd. and Pacific Gateway Ltd., as of December 31, 1994 and 1993, and for each of the years in the two-year period ended December 31, 1994, and to the reference of our firm under the heading "Experts" in this prospectus. KPMG Peat Marwick LLP San Diego, California June 17, 1996 EX-23.3 4 EXHIBIT 23.3 EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated January 20, 1995 (except for the matter discussed in Notes 6, 7 and 8, as to which the date is February 22, 1996), with respect to the financial statements of the New York Vista for the years ended December 31, 1994, 1993 and 1992 included in the Post Effective Amendment No. 4 on Form S-3 to the Registration Statement Form S-1 No. 333-00147 and related prospectus of Host Marriott Corporation for the registration of its common stock. Ernst & Young LLP New York, New York June 17, 1996 -----END PRIVACY-ENHANCED MESSAGE-----