Exhibit 99.1
DISTRIBUTION AGREEMENT
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This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this
28th day of December, 1998 by and among Host Marriott Corporation, a Delaware
corporation ("Host"), Host Marriott, L.P., a Delaware limited partnership (the
"Operating Partnership"), Crestline Capital Corporation, a Maryland corporation
and currently a wholly owned subsidiary of Host ("Crestline"), Fernwood Hotel
Assets, Inc., a Delaware corporation ("Fernwood"), and Rockledge Hotel
Properties, Inc., a Delaware corporation ("Rockledge"). Unless the context
requires otherwise, (i) all references to "Host" shall be deemed to refer (x)
prior to the Merger (as defined below), to Host Marriott Corporation, a Delaware
corporation, and its Subsidiaries (as defined below) and Affiliates (as defined
below), and (y) from and after the Merger, HMC Merger Corporation, a Maryland
corporation to be renamed "Host Marriott Corporation" ("Host REIT"), and to its
Subsidiaries and Affiliates, (ii) all references to "Crestline" shall be deemed
to refer to Crestline Capital Corporation and its Subsidiaries and Affiliates,
(iii) all references to "Fernwood" shall be deemed to refer to Fernwood Hotel
Assets, Inc. and its Subsidiaries and Affiliates and (iv) and all references to
"Rockledge" shall be deemed to refer to Rockledge Hotel Properties, Inc. and its
Subsidiaries and Affiliates.
RECITALS
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WHEREAS, Host currently, directly and through its Subsidiaries and
Affiliates, (i) acquires and owns hotel properties and engages in activities
related thereto and (ii) owns certain senior living community properties;
WHEREAS, Crestline currently, through its Subsidiaries and Affiliates,
conducts a substantial portion of the business of Host relating to such senior
living community properties;
WHEREAS, Fernwood is a newly-formed corporation which, following the
REIT Conversion (as defined below), will own certain assets related to the
operation of certain hotel properties and engage in activities related thereto;
WHEREAS, Rockledge is a newly-formed corporation which, following the
REIT Conversion, will own certain hotel properties and assets related to the
operation of such hotel properties and engage in activities related thereto;
WHEREAS, the Host Board of Directors (as defined below) has determined
that it is in the best interests of Host and the stockholders of Host (the "Host
Stockholders") to reorganize the business and operations of Host so that it will
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qualify as a real estate investment trust ("REIT") for federal income tax
purposes, and has adopted a plan to restructure the business and operations of
Host so it may qualify as a REIT (the "REIT Conversion");
WHEREAS, in connection with the REIT Conversion, (i) Host and its
consolidated Subsidiaries will contribute their respective full-service hotel
properties and certain other businesses and assets to the Operating Partnership
(as defined below) and its Subsidiaries, in exchange for OP Units (as defined
below) and the assumption of liabilities and (ii) Host will merge with and into
Host REIT (the "Merger");
WHEREAS, as a REIT, Host would not be permitted under current federal
income tax law to derive revenues directly from the operation of hotels and must
distribute to the Host Stockholders prior to the end of the first full taxable
year for which the REIT election is effective all accumulated "earnings and
profits" ("E&P");
WHEREAS, as a result of these requirements, in connection with the REIT
Conversion, (i) Host will distribute approximately 93.6% of the then outstanding
shares of common stock, par value $0.01 per share ("Common Stock"), of Crestline
to the Host Stockholders (the "Distribution") to help accomplish the requisite
distribution of E&P, (ii) Host will transfer the remaining 1.4 million shares
(approximately 6.4% of the then outstanding shares) of Common Stock (the
"Contributed Shares") to the Operating Partnership for payment to the Blackstone
Entities (as defined below) as part of consideration for the Blackstone
Acquisition (as defined below), if such acquisition is consummated, (iii) Host
will lease to Subsidiaries of Crestline substantially all of the full-service
hotels currently owned by Host, as well as those hotels to be acquired in the
Blackstone Acquisition and (iv) Host will sublease to Crestline substantially
all of the limited-service hotels currently leased by Host; and
WHEREAS, in connection with the Distribution, Host, Crestline, Fernwood
and Rockledge have determined that it is necessary and desirable to set forth
the principal corporate transactions required to effect the Distribution and the
agreements that will govern certain matters following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement and in the Other Agreements (as
defined below), the parties hereby agree as follows:
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ARTICLE I
DEFINITIONS
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Section 1.01 General
As used in this Agreement, the following terms shall have the following
meanings:
"Action" shall mean any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal.
"Advisors" shall have the meaning set forth in Section 8.06.
"Affiliate" shall mean, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
The terms "controlling" and "controlled" shall have meanings correlative to the
foregoing. Notwithstanding the foregoing, (a) the Affiliates of Host shall not
include Crestline, Fernwood or Rockledge and (b) the Affiliates of Crestline
shall not include Host, Fernwood or Rockledge.
"Amended and Restated Community Noncompetition Agreement" shall mean
the Amended and Restated Noncompetition Agreement, by and among Host, Marriott
International and Crestline substantially in the form of Exhibit 10.10 to the
Crestline Registration Statement.
"Amendment to MI Noncompetition Agreement" shall mean the First
Amendment to Restated Noncompetition Agreement by and among Marriott
International, Host and Crestline substantially in the form of Exhibit 10.12 to
the Crestline Registration Statement.
"Assignment of License/Franchise Agreement" shall mean an assignment to
a Hotel Lessee by the applicable Hotel Lessor of its rights under a license or
franchise agreement with Marriott International for the term of the applicable
Lease.
"Asset Management Agreements" shall mean the Asset Management Agreement
by and between the Operating Partnership and Crestline and the Asset Management
Agreement by and between Rockledge and Crestline substantially in the form of
Exhibits 10.19 and 10.20, respectively, to the Crestline Registration Statement.
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"Blackstone Acquisition" shall mean the expected acquisition from the
Blackstone Entities of ownership of, or controlling interests in, twelve hotels,
a mortgage loan secured by a thirteenth hotel and a 25% interest in Swissotel
Management in exchange for OP Units, the assumption of certain liabilities and
other consideration, including the Contributed Shares.
"Blackstone Entities" shall mean a series of funds under common control
with Blackstone Real Estate Advisors L.P.
"Blackstone Registration Rights Agreement" shall mean the Registration
Rights Agreement by and among Crestline and the Blackstone Entities,
substantially in the form of Exhibit 10.21 to the Crestline Registration
Statement.
"Blackstone Standstill Agreement" shall mean the Standstill Agreement
by and among Crestline and the Blackstone Entities, substantially in the form of
Schedule 16 attached hereto.
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"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning set forth in the Recitals.
"Common Stock Repurchase" shall have the meaning set forth in Section
5.02.
"Contributed Shares" shall have the meaning set forth in the Recitals.
"Corporate Transitional Services Agreement" shall mean the Corporate
Transitional Services Agreement by and between the Operating Partnership and
Crestline substantially in the form of Schedule 12 attached hereto.
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"Crestline" shall have the meaning set forth in the first paragraph of
this Agreement.
"Crestline Articles" shall mean the Articles of Amendment and
Restatement of Articles of Incorporation of Crestline substantially in the form
of Exhibit 3.1 to the Crestline Registration Agreement.
"Crestline Board of Directors" shall mean the Board of Directors of
Crestline.
"Crestline Books and Records" shall mean the books and records
(including computerized records) of Crestline and the Crestline Group
Subsidiaries and any
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other books and records of Host or any Subsidiary of Host which relate
principally to the Crestline Group or the Crestline Group Assets that are
necessary to conduct the Crestline Group Business or are required by law to be
retained by Crestline or any Crestline Group Subsidiary, including, without
limitation, (a) all such books and records relating to Crestline Group
Employees, (b) all files relating to any Action being assumed by Crestline as
part of the Crestline Group Liabilities, and (c) original corporate minute
books, stock ledgers and certificates and corporate seals, and all licenses,
leases, agreements and filings relating to Crestline, the Crestline Group
Subsidiaries, the Crestline Group Assets or the Crestline Group Business (but
not including the Host Books and Records, provided that Crestline shall have
access to, and have the right to obtain duplicate copies of, the Host Books and
Records which pertain to the Crestline Group Business or any other matters
affecting Crestline and relating to the period ending on and including the
Distribution Date in accordance with the provisions of Article VIII).
"Crestline Bylaws" shall mean the Bylaws of Crestline, substantially in
the form of Exhibit 3.2 to the Crestline Registration Statement.
"Crestline Group" shall mean Crestline and the Crestline Group
Subsidiaries, collectively.
"Crestline Group Assets" shall mean all the assets and properties of
the Crestline Group, including, without limitation, the Transferred Subsidiaries
Interests and the Crestline Books and Records.
"Crestline Group Business" shall mean the business conducted by
Crestline Group.
"Crestline Group Employees" shall mean Crestline Employees (as defined
in the Employee Benefits Allocation Agreement).
"Crestline Group Liabilities" shall mean (a) all of the liabilities of
Crestline or any Crestline Group Subsidiary under, or to be retained or assumed
by Crestline or any of the Crestline Group Subsidiaries pursuant to, this
Agreement or any of the Other Agreements; (b) any guaranty obligation of
Crestline or any Crestline Group Subsidiary not constituting a Crestline
Guarantee, (c) except as and to the extent expressly provided in the Other
Agreements, all other liabilities arising out of, or in connection with, any of
the Crestline Group Assets or the Crestline Group Business, (d) all other
liabilities of Crestline or any of the Crestline Group Subsidiaries not
transferred to Host or to any Host Group Subsidiary pursuant to this Agreement
or any Other Agreement, and (e) all liabilities of Host and Crestline arising
after the Distribution Date under the Forum Indemnity Agreement and the
Transition Agreements each dated June 21, 1997, executed with respect to senior
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living communities owned by each of FRP Financing Limited, L.P., FGI Financing I
Corp., Forum Ohio Healthcare, Inc., and Forum Retirement Communities I, L.P.
"Crestline Group Subsidiaries" shall mean all Subsidiaries of Crestline
and the Transferred Subsidiaries.
"Crestline Guarantee" shall mean any guarantee by Crestline or any
Crestline Group Subsidiary of the performance or obligation of Host or any Host
Group Subsidiary under any agreement or obligation to which Host or any Host
Group Subsidiary is a party or by which it is bound.
"Crestline Indemnifiable Losses" shall have the meaning set forth in
Section 6.01.
"Crestline Indemnitees" shall have the meaning set forth in Section
6.01.
"Crestline Logo" shall mean the corporate logo of Crestline.
"Crestline Plans" shall mean the Crestline Capital Corporation 1998
Comprehensive Stock Incentive Plan (as described in the Employee Benefits
Allocation Agreement), the Crestline Capital Corporation Executive Deferred
Compensation Plan (as described in the Employee Benefits Allocation Agreement),
the Crestline Capital Corporation Non-Employee Director Deferred Compensation
Plan (as described in the Employee Benefits Allocation Agreement), the Crestline
Capital Corporation Retirement and Savings Plan (as described in the Employee
Benefits Allocation Agreement), the Crestline Capital Corporation Employee Stock
Purchase Plan (as described in the Employee Benefits Allocation Agreement) and
the Crestline Capital Corporation Non-Employees' Director Deferred Stock Plan
(as described in the Crestline Registration Statement).
"Crestline Registration Statement" shall mean the Registration
Statement on Form S-1 of Crestline, as amended (File No. 333-64657), declared
effective by the Commission by Crestline on November 23, 1998.
"Crestline Rights Plan" shall have the meaning set forth in Section
2.06.
"Distribution" shall have the meaning set forth in the Recitals.
"Distribution Agent" shall mean The Bank of New York, as distribution
agent appointed by Host to distribute the Common Stock pursuant to the
Distribution.
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"Distribution Date" shall mean the date determined by the Host Board of
Directors as the date on which the Distribution shall be effected, which
Distribution Date has been determined to be December 29, 1998.
"Distribution Record Date" shall mean the date determined by the Host
Board of Directors for taking a record of Host Stockholders entitled to
participate in the Distribution, which Distribution Record Date has been
determined to be 5:00 p.m. (EST) on December 28, 1998.
"Distribution Time" shall mean 9:00 A.M. (EST) on December 29, 1998.
"Employee Benefits Allocation Agreement" shall mean the Employee
Benefits and Other Employment Matters Allocation Agreement by and among Host,
the Operating Partnership and Crestline, substantially in the form of Exhibit
10.18 to the Crestline Registration Statement.
"E&P" shall have the meaning set forth in the Recitals.
"Fair Market Value" shall have the meaning set forth in Section 5.02.
"Fernwood" shall have the meaning set forth in the first paragraph of
this Agreement.
"FF&E Lease" shall mean a lease of furniture, fixtures and equipment by
and between Fernwood, Rockledge or a Subsidiary thereof, as lessor, and a Hotel
Lessee, as lessee, substantially in the form of Exhibit 10.15 to the Crestline
Registration Statement.
"Forum Indemnity Agreement" shall mean that certain Indemnity
Agreement, dated as of June 21, 1997, among MSLS, Marriott International,
Crestline and Host.
"Full-Service Hotel" shall mean any of the approximately 125
full-service hotels which will be owned directly or indirectly by the Operating
Partnership upon consummation of the Merger, which hotels will be leased to the
Hotel Lessees.
"Guarantees" shall mean (i) the Pool Guarantee of Crestline and a Pool
Parent for the benefit of certain Hotel Lessors substantially in the form of
Exhibit 10.16 to the Crestline Registration Statement, and (ii) the Guarantees
of Crestline for the benefit of the HPT Sublessors, substantially in the form of
Schedule 10 attached hereto.
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"Host" shall have the meaning set forth in the first paragraph of this
Agreement.
"Host Board of Directors" shall mean the Board of Directors of Host.
"Host Books and Records" shall mean the books and records (including
computerized records) of Host and the Host Group Subsidiaries and any other
books and records of Host or the Host Group Subsidiaries which relate
principally to the Host Group or the Host Group Assets that are necessary to
conduct the Host Group Business or are required by law to be retained by Host or
any Host Group Subsidiary, including, without limitation, (a) all such books and
records relating to employees of the Host Group, (b) all files relating to any
Action pertaining to the Hotel Group Liabilities, and (c) original corporate
minute books, stock ledgers and certificates and corporate seals, and all
licenses, leases, agreements and filings, relating to Host, the Host Group
Subsidiaries, the Host Group Assets or the Host Group Business (but not
including the Crestline Books and Records, provided that Host shall have access
to, and shall have the right to obtain duplicate copies of, the Crestline Books
and Records which pertain to the Host Group Business or any other matters
affecting Host and relating to the period ending on and including the
Distribution Date in accordance with the provisions of Article VIII).
"Host Group" shall mean Host and the Host Group Subsidiaries,
collectively.
"Host Group Assets" shall mean all of the assets and properties of the
Host Group.
"Host Group Business" shall mean the business conducted by the Host
Group.
"Host Group Liabilities" shall mean (a) all of the liabilities of Host
or any of the Host Group Subsidiaries under, or to be retained or assumed by
Host or any of the Host Group Subsidiaries pursuant to, this Agreement or any of
the Other Agreements, (b) any guaranty obligations of Host or any Host Group
Subsidiary not constituting a Host Guarantee, (c) except as and to the extent
expressly provided in the Other Agreements, all other liabilities arising out
of, or in connection with, any of the Host Group Assets or the Host Group
Business and (d) all other liabilities of Host or any Host Group Subsidiary not
transferred to Crestline or any Crestline Group Subsidiary pursuant to this
Agreement or any Other Agreement.
"Host Group Subsidiaries" shall mean all Subsidiaries of Host, except
the Transferred Subsidiaries.
"Host Guarantee" shall mean any guarantee by Host or any Host Group
Subsidiary of the performance or obligation of Crestline or any Crestline Group
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Subsidiary under any agreement or obligation to which Crestline or any Crestline
Group Subsidiary is a party or by which it is bound.
"Host Indemnifiable Losses" shall have the meaning set forth in
Section 6.02.
"Host Indemnitees" shall have the meaning set forth in Section 6.02.
"Host Logo" shall mean the corporate logo of Host.
"Host REIT" shall have the meaning set forth in the first paragraph of
this Agreement.
"Host Stockholders" shall have the meaning set forth in the Recitals.
"Hotel Lessee" shall mean any of the Subsidiaries of Crestline which
will lease one or more Full-Service Hotels from a Hotel Lessor or sublease one
or more Limited Service Hotels from an HPT Sublessor, respectively.
"Hotel Lessor" shall mean the Operating Partnership or any of the
Subsidiaries of the Operating Partnership which will lease one or more
Full-Service Hotels to a Hotel Lessee.
"HPT Sublessors" shall mean HMH HPT Courtyard LLC and HMH HPT Residence
Inn LLC, both of which are Delaware limited liability companies.
"Indemnifiable Losses" shall have the meaning set forth in Section
6.02.
"Indemnification Payment Tax Opinion" shall have the meaning set forth
in Section 6.06.
"Indemnifying Party" shall have the meaning set forth in Section 6.03.
"Indemnitee" shall have the meaning set forth in Section 6.03.
"Information" shall have the meaning set forth in Section 8.02.
"Insurance Proceeds" shall mean those moneys (a) received by an insured
from an insurance carrier, or (b) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
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"Lease" shall mean a lease or sublease agreement to be entered into
between a Hotel Lessor and Hotel Lessee in respect of any Full-Service Hotel to
be substantially in the form of Exhibit 10.1 to the Crestline Registration
Statement.
"Leisure Park Bonds" shall mean those certain Series 1997A tax-exempt
bonds issued pursuant to that certain Indenture, dated December 1, 1997, between
the New Jersey Economic Development Authority and Marine Midland Bank.
"Leisure Park Guaranty" shall mean the Guaranty Agreement, dated
December 1, 1997, of HMC in favor of Marine Midland Bank relating to the Leisure
Park Bonds.
"Limited-Service Hotel" shall mean any of the approximately 71 limited
service hotels which will be subleased by an HPT Sublessor to a Hotel Lessee.
"Marriott Financial" shall mean Marriott Financial Services, Inc., a
Delaware corporation.
"Marriott International" shall mean Marriott International, Inc., a
Delaware corporation.
"Merger" shall have the meaning set forth in the Recitals.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated as
of November 23, 1998 by and among Host, Host REIT and the Operating Partnership
substantially in the form of Exhibit 2.1 to the Registration Statement of Host
and Host REIT on Form S-4, as amended (File No. 333-64783), declared effective
by the Commission on November 23, 1998.
"MI Noncompetition Agreement" shall mean the Restated Noncompetition
Agreement, dated as of March 3, 1998, by and between Host and Marriott
International.
"MSLS" shall mean Marriott Senior Living Services, Inc., a subsidiary
of Marriott International.
"Noncompetition Agreement" shall mean the Noncompetition Agreement by
and among Host, Crestline, Fernwood and Rockledge, substantially in the form of
Schedule 14 attached hereto.
"Operating Partnership" shall have the meaning set forth in the first
paragraph of this Agreement.
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"OP Units" shall mean the limited partnership units of the Operating
Partnership.
"Other Agreements" shall mean (a) the Amended and Restated Community
Noncompetition Agreement, (b) the Amendment to MI Noncompetition Agreement; (c)
the Asset Management Agreements, (d) the Assignment of License/Franchise
Agreements, including, without limitation, those listed on Schedule 1 attached
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hereto, (e) the Corporate Transitional Services Agreement, (f) the Employee
Benefits Allocation Agreement, (g) the FF&E Leases, including, without
limitation, those listed on Schedule 2 attached hereto, (h) the Guarantees,
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including, without limitation, those listed on Schedule 3 attached hereto, (i)
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the Leases, including, without limitation, those listed on Schedule 4 attached
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hereto, (j) the Noncompetition Agreement, (k) the Owner's Agreements, including,
without limitation, those listed on Schedule 5 attached hereto, (l) the Pooling
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Agreements, including, without limitation, those listed on Schedule 6 attached
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hereto, (m) the Subleases, including, without limitation, those listed on
Schedule 7 attached hereto, (n) the Tax Sharing Agreement, (o) the Working
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Capital Notes, including, without limitation, those listed on Schedule 8
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attached hereto, (p) the Working Capital Security Agreements, including, without
limitation, those listed on Schedule 9 attached hereto, (q) the Supplement to
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Noncompetition Agreement between Host and Crestline and substantially in the
form of Schedule 11 attached hereto, (r) the Facility Mortgagee Agreements,
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including, without limitation, those listed on Schedule 15 hereto, and (s) such
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other agreements, instruments, understandings, assignments or other arrangements
set forth in writing, which one or more of the parties or their respective
Affiliates or Subsidiaries agree to enter into in connection with the
transactions contemplated hereby.
"Owner's Agreements" shall mean the Consent, Assignment and Assumption
and Amendment of Management Agreements, by and among a Hotel Lessor, the
applicable Hotel Lessee and the manager of the applicable hotel, each to be
substantially in the form of Exhibit 10.5 to the Crestline Registration
Statement.
"Person" shall mean any individual, person, firm, corporation, general
or limited partnership, association, or other entity or organization, including
any governmental entity or authority.
"Pool Parent" shall mean each Crestline Group Subsidiary which directly
or indirectly owns the equity interest in any Hotel Lessee.
"Pooling Agreements" shall mean the Pooling and Security Agreements, by
and among Crestline, a Pool Parent, the Hotel Lessees whose outstanding equity
interests are directly or indirectly owned by such Pool Parent, the Operating
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Partnership, and the Hotel Lessors of the applicable hotels, each to be
substantially in the form of Exhibit 10.17 to the Crestline Registration
Statement.
"Privileges" shall mean all privileges that may be asserted under
applicable law including, without limitation, privileges arising under or
relating to the attorney-client relationship (including but not limited to the
attorney-client and work product privileges), the accountant-client privilege
and privileges relating to internal evaluative processes.
"Privileged Information" shall mean all Information as to which Host,
Crestline or any of their respective Subsidiaries is entitled to assert the
protection of a Privilege.
"Publicly Traded" shall have the meaning set forth in Section 5.02.
"Qualifying Income" shall have the meaning set forth in Section 6.06.
"REIT" shall have the meaning set forth in the Recitals.
"REIT Commencement Date" shall mean the first day of the first taxable
year for which Host intends to qualify as a REIT, which currently is expected to
be January 1, 1999.
"REIT Conversion" shall have the meaning set forth in the Recitals.
"REIT Requirements" shall have the meaning set forth in Section 6.06.
"Required Indemnification Payments" shall have the meaning set forth in
Section 6.06.
"Rockledge" shall have the meaning set forth in the first paragraph of
this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sublease" shall mean a sublease agreement to be entered into between a
Hotel Lessee and an HPT Sublessor substantially in the form of Exhibit 10.3 to
the Crestline Registration Statement.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation or other entity of which at least a majority in interest of the
outstanding voting stock or similar equity interests (having by the terms
thereof voting power under ordinary circumstances to elect a majority of the
directors or similar managers of
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such corporation, irrespective of whether or not at the time stock or other
equity interests of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned or controlled by such Person or one or more
Subsidiaries of such Person, or (b) any corporation or other entity in which
such Person or one or more Subsidiaries of such Person, directly or indirectly,
has an ownership interest which is included in the consolidated financial
reports of such Person consistent with generally accepted accounting principles.
Notwithstanding the foregoing, the Subsidiaries of Host shall include none of
Crestline or any of its Subsidiaries, Fernwood or any of its Subsidiaries or
Rockledge or any of its Subsidiaries.
"Swissotel Management" shall mean Swissotel Management (U.S.A.) LLC.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement, by and
between Host and Crestline substantially in the form of Exhibit 10.14 to the
Crestline Registration Statement.
"Third Party Claim" shall have the meaning set forth in Section 6.04.
"Transferred Subsidiaries" shall mean Marriott Realty Sales, Inc. and
HMC Boynton Beach, Inc.
"Transferred Subsidiaries Interests" shall mean all of capital stock,
partnership interests or limited liability company interests of the Transferred
Subsidiaries.
"Working Capital" shall have the meaning set forth in a Lease.
"Working Capital Note" shall mean the Working Capital Note and
Agreement, by and between a Hotel Lessee and the Hotel Lessor of the applicable
hotel, substantially in the form of Exhibit 10.13 to the Crestline Registration
Statement.
"Working Capital Security Agreement" shall mean the HL Security
Agreement by and between the Hotel Lessee and the Hotel Lessor of the applicable
hotel substantially in the form of Schedule 13 attached hereto.
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ARTICLE II
ACTIONS TO BE TAKEN IN CONNECTION WITH THE DISTRIBUTION
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Section 2.01. Transfers of Certain Assets
(a) Transferred Subsidiaries. At or before the Distribution Time, Host
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shall take or cause to be taken all actions necessary to cause the transfer,
assignment, delivery and conveyance to Crestline of all of Host's and its
Subsidiaries' right, title and interest in and to the Transferred Subsidiaries
Interests.
(b) Cash Contribution to Capital. At or before the Distribution Time,
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Host shall make a cash contribution in respect of the capital of Crestline in
the amount of $54 million.
(c) Cancellation of Certain Intercompany Receivables. Prior to the
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Distribution Time, Host shall make a contribution in respect of the capital of
Crestline by cancellation of all outstanding intercompany receivables arising
after June 21, 1997 and relating to the senior living business.
(d) Blackstone Matters. Upon the consummation of the Blackstone
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Acquisition, Crestline and the Blackstone Entities shall enter into the
Blackstone Registration Rights Agreement and the Blackstone Standstill Agreement
and Host shall take or cause to be taken all actions necessary to cause the
transfer, assignment, delivery and conveyance to Crestline of all of Host's and
its Subsidiaries' member interests in Swissotel Management for a purchase price
equal to Four Million Five Hundred Thousand Dollars ($4,500,000).
(e) Host Loan to Crestline. On or prior to the Distribution Time,
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Host will make a loan to Crestline in the principal amount of $1.7 million and
otherwise on terms mutually satisfactory to Host and Crestline.
Section 2.02. Other Agreements
At or before the Distribution Time, Host, Crestline, Fernwood and
Rockledge shall execute and deliver (or cause their respective Subsidiaries to
execute and deliver) each of the Other Agreements to which it is a party, in the
form approved by the officers executing the same, such approval to be
conclusively (but not exclusively) evidenced by such execution and delivery.
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Section 2.03. Employees and Related Matters
At or before the Distribution Time, Host and Crestline shall take or
cause to be taken all actions necessary for Crestline to establish and
administer the Crestline Plans. At or before the Distribution Time, Host and
Crestline shall take or cause to be taken all actions necessary to transfer the
employment of Crestline Employees to Crestline or one or more of the Crestline
Group Subsidiaries, and immediately after such transfer, Crestline or one or
more of the Crestline Group Subsidiaries shall assume responsibility as employer
for the Crestline Employees.
Section 2.04. Crestline Board
Host and Crestline shall take all actions which may be required to
constitute, effective immediately following the Distribution Time, the following
persons as the directors of Crestline: Xxxxx X. Xxxxxxxxx, Xxxxxxxxxxx X.
Xxxxxxxx, Xxxx X. Xxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxx, Xxxx X. Marriott
III, Xxxx X. Xxxxx, Xx. and Xxxxxxx X. Xxxxxxx.
Section 2.05. Articles and Bylaws
At or before the Distribution Time, the Crestline Board of Directors
shall adopt the Crestline Articles and the Crestline Bylaws, and shall cause the
Crestline Articles to be filed with the Secretary of State of the State of
Maryland. Host shall consent to the adoption of the Crestline Articles.
Section 2.06. Crestline Rights Plan
At or before the Distribution Time, Crestline shall adopt a
stockholders rights plan (the "Crestline Rights Plan"), which shall be
substantially consistent with the description thereof in the Crestline
Registration Statement.
Section 2.07. The Distribution
At or before the Distribution Time, Host shall deliver to the
Distribution Agent, as distribution agent for the benefit of Host Stockholders
of record as of the Distribution Record Date, a share certificate representing
20,526,206 shares of Common Stock, and shall instruct the Distribution Agent to
deliver, on or as soon as practicable following the Distribution Date, share
certificates evidencing such shares of Common Stock and checks for cash in lieu
of fractional shares, if any, to the Host Stockholders of record as of the
Distribution Record Date. Crestline shall cause the transfer agent of the Common
Stock to reflect the Distribution Agent as the record owner of such shares of
Common Stock from and after the Distribution Time until certificates actually
are delivered to the Host Stockholders. Crestline shall provide all share
certificates that the Distribution Agent shall require in order to effect the
Distribution. Host also shall deliver or cause to be delivered to the
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Distribution Agent, at or before the Distribution Time, cash in an amount
sufficient to pay cash in lieu of fractional shares of Common Stock, and Host
shall be entitled to any amounts so delivered which are not so paid. Any shares
of Common Stock delivered to the Distribution Agent which are not delivered to
the Host Stockholders as a result of the payment of cash in lieu of fractional
shares shall be delivered to Crestline for cancellation.
Section 2.08. The Contribution to the Operating Partnership
On or before the Distribution Date, Host shall contribute to the
Operating Partnership a share certificate representing the Contributed Shares,
and shall cause the Operating Partnership to hold such shares in accordance with
this Agreement.
ARTICLE III
LIABILITIES AND RELATED MATTERS
-------------------------------
Section 3.01. Assumption and Satisfaction of Liabilities
Except as set forth in any of the Other Agreements and in Section 3.04
below, effective as of and after the Distribution Time, (a) Crestline shall
assume, pay, perform and discharge in due course all of the Crestline Group
Liabilities and (b) Host shall assume, pay, perform and discharge in due course
all of the Host Group Liabilities.
Section 3.02. Leisure Park Bonds
Notwithstanding Section 3.03, Crestline will be primarily liable, and
Host will be secondarily liable, for the full satisfaction of the Leisure Park
Bonds. In connection with the Leisure Park Bonds, promptly after the
Distribution Time Host REIT shall comply, or cause compliance, with all the
terms and conditions under the Leisure Park Guaranty with respect to the Merger,
including, but not limited to, (a) provision by Host REIT of a written
assumption of all of Host's obligations under the Leisure Park Guaranty, (b)
delivery by Host of an opinion from a nationally recognized bond counsel opining
that the Merger will not affect the tax-exempt status of the interest on the
Leisure Park Bond and (c) obtaining for Host REIT a senior unsecured long-term
debt rating from a nationally recognized rating agency which is at least equal
to the senior unsecured long-term debt rating of Host immediately prior to the
Merger.
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Section 3.03. Host Guarantees
Crestline shall use its commercially reasonable best efforts to obtain
the release of any Host Guarantee, other than the Leisure Park Guaranty or as
otherwise expressly contemplated by any of the Other Agreements, existing on and
after the Distribution Date. For purposes of this Section 3.03, "commercially
reasonable best efforts" shall include offering to assume liability under any
Host Guarantee in substitution for the party obligated thereunder.
Section 3.04. Crestline Guarantees
Host shall use its commercially reasonable best efforts to obtain the
release of any Crestline Guarantee existing as of and after the Distribution
Time. For purposes of this Section 3.04, "commercially reasonable best efforts"
shall include offering to assume liability under any Crestline Guarantee in
substitution for the party obligated thereunder.
Section 3.05. No Representations or Warranties; Consents;
Further Action
No party is, in this Agreement, in any Other Agreement (except as
expressly set forth therein), or otherwise, representing or warranting (a) as to
the value or freedom from encumbrance of, or any other matter concerning, any
assets of such party or (b) as to the legal sufficiency to convey title to any
asset transferred pursuant to this Agreement or any Other Agreement. There are
no warranties, express or implied, as to the merchantability or fitness of any
of the assets either transferred to or retained by the parties, as the case may
be, and all such assets shall be "as is, where is" and "with all faults,"
provided, however, that the absence of warranties shall have no effect upon the
-------- -------
allocation of liabilities under this Agreement. No party is, in this Agreement,
in any Other Agreement or otherwise, representing or warranting as to whether or
not the obtaining of any consents or approvals, or the making of any filings or
applications, in each case contemplated by this Agreement, any Other Agreement
or otherwise, is required pursuant to any applicable laws or judgments or other
instruments or agreements relating to such assets.
Section 3.06. Cash Management
Crestline shall establish and maintain a separate cash management
system and accounting records with respect to the Crestline Group, effective as
of the Distribution Time. In connection therewith, (a) any payments by the Host
Group on behalf of the Crestline Group made after such time in connection with
the Crestline Group Business or the Crestline Group Assets (including, without
limitation, any
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such payments in respect of any Crestline Group Liabilities) shall be recorded
in the accounts of the Crestline Group as a payable from the Crestline Group to
the Host Group, (b) any payments by the Crestline Group on behalf of the Host
Group made after such time in connection with the Host Group Business or the
Host Group Assets (including, without limitation, any such payments in respect
of Host Group Liabilities) shall be recorded in the accounts of the Host Group
as a payable from the Host Group to the Crestline Group, (c) any cash payments
received by the Host Group relating to the Crestline Group Business or the
Crestline Group Assets after such time shall be recorded in the accounts of the
Host Group as a payable from the Host Group to the Crestline Group, (d) any cash
payments received by the Crestline Group relating to the Host Group Business or
the Host Group Assets after such time shall be recorded in the accounts of the
Crestline Group as a payable from the Crestline Group to the Host Group, (e)
Crestline and Host shall make adjustments for late deposits, checks returned for
not sufficient funds and other transactions following the Distribution Date as
shall be reasonable under the circumstances and consistent with the purpose and
intent of this Agreement and the Other Agreements, and (f) the net balance due
to the Host Group or the Crestline Group, as the case may be, in respect of the
aggregate amounts of clauses (a), (b), (c), (d) and (e) shall be paid by Host or
Crestline, as appropriate, as promptly as practicable following the date such
net balance is determinable. For purposes of this Section 3.06, the parties
contemplate that their respective businesses, including, but not limited to,
administration of accounts payable and accounts receivable, will be conducted in
the normal course.
Section 3.07. Ownership Limitations in Crestline Articles
Crestline shall comply with the provisions of Article VIII of the
Crestline Charter.
ARTICLE IV
COVENANTS AND CONDITIONS REGARDING THE DISTRIBUTION
---------------------------------------------------
Section 4.01. Cooperation Prior to the Distribution
(a) Host and Crestline shall cooperate in preparing, filing
with the Commission and causing to become effective any registration statements
or amendments thereof which are necessary or appropriate to accomplish the
Distribution or to reflect the establishment of, or amendments to, the Crestline
Plans or any employee benefit plans or arrangements contemplated by the Employee
Benefits Allocation Agreement.
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(b) Host and Crestline shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement and the Other Agreements.
(c) Host, Crestline, Fernwood and Rockledge shall use all
reasonable efforts to obtain any third-party consents or approvals and to make
any filings or applications necessary or desirable in connection with the
transactions contemplated hereby and by the Other Agreements.
(d) Host, Crestline, Fernwood and Rockledge shall use all
reasonable efforts to take or cause to be taken all actions, and to do or cause
to be done all things, necessary or desirable under applicable law to consummate
the transactions contemplated hereby and by the Other Agreements.
Section 4.02. Conditions Precedent to the Distribution
In no event shall the Distribution occur unless the following
conditions shall have been satisfied:
(a) the transactions contemplated by Sections 2.01 through
2.06 shall have been consummated in all material respects;
(b) all of directors (other than Xxxxxxxxxxx X. Xxxxxxxx) and
officers of Crestline and all Crestline Group Employees shall have tendered
their resignations, effective no later than the Distribution Date, from all
boards of directors or similar governing bodies of Host or any of its
Subsidiaries on which they serve, and from all positions as officers or
employees of Host or any of its Subsidiaries in which they serve, except as
otherwise set forth in Schedule 17 and
(c) the parties shall have performed their obligations under
this Agreement and each Other Agreement to the extent required to be performed
at or prior to the Distribution Time.
Section 4.03. Cooperation After the Distribution
From and after the Distribution Time, each party shall execute and
deliver such further documents and take such other actions as may be reasonably
requested by the other to effectuate the transactions contemplated by this
Agreement. In furtherance thereof, during the period ending March 31, 1999, the
parties shall work together to correct any mistakes or oversights that the
parties mutually agree in good faith do not reflect the intentions of the
parties, and shall cooperate with each other in connection therewith,
particularly when third parties are involved.
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ARTICLE V
REPURCHASE AND RESALE OF COMMON STOCK
-------------------------------------
Section 5.01. Repurchase of Common Stock from Host
In the event that the Blackstone Acquisition does not occur prior to
the close of business on December 31, 1998 and Host shall have determined to
convert into a REIT effective for its taxable year beginning January 1, 1999,
effective as of the close of business on December 31, 1998, Host shall cause the
Operating Partnership to return such Contributed Shares to Host and shall resell
the Contributed Shares to Crestline, and Crestline shall repurchase such
Contributed Shares from Host (or the Operating Partnership for the account of
Host), for a consideration of $0.01 per Contributed Share (the "Common Stock
Repurchase"). Such transaction shall be treated by all parties for federal
income tax purposes as a contribution by Host to the capital of Crestline.
Section 5.02 Resale of Contributed Shares by Crestline to
Blackstone
In the event that, at any time after the date of any Common Stock
Repurchase and on or prior to June 30, 1999, Host notifies Crestline that the
Blackstone Acquisition is likely to occur, Host and Crestline shall cooperate in
good faith to develop an arrangement whereby the Blackstone Entities would be
entitled to purchase from Crestline the Contributed Shares on or after the
closing of the Blackstone Acquisition (to occur no later than June 30, 1999) for
a per share price equal to the Fair Market Value (as defined below) of a share
of Common Stock on the date of the purchase thereof. Without limiting the
foregoing, Crestline shall, if requested by Host as aforesaid, issue to the
Operating Partnership an option to purchase the Contributed Shares on, or at any
time and from time to time after, the date of the closing of the Blackstone
Acquisition for a per share price equal to the Fair Market Value of a share of
Common Stock on the date of the purchase thereof, which option would be
assignable solely to, and exercisable solely by, the Blackstone Entities or
their respective distributees or permitted designees and would contain such
other terms as to which the parties shall mutually agree. For purposes of the
foregoing, (i) the term "Fair Market Value" means, as to a share of Common
Stock, (A) if the Common Stock is Publicly Traded (as defined below) on the
relevant date, the average of the daily market price for a share of Common Stock
for the five consecutive trading days immediately preceding such date, which
market price for each such trading day shall be the closing price, regular way,
on such day, or if no such sale takes place on such day, the average of the
closing bid and asked prices on such day and (B) if the Common Stock is not
Publicly Traded on the relevant date, the value determined by the Crestline
Board of Directors acting
34
in good faith and based upon a commercially reasonable estimate of the amount
that would be realized by Crestline if each asset of Crestline (and each asset
of each corporation, partnership, limited liability company, trust, joint
venture or other entity in which Crestline owns a direct or indirect interest)
were sold to an unrelated purchaser in an arms' length transaction where neither
the purchaser nor the seller were under economic compulsion to enter into the
transaction (without regard to any discount in value as a result of Crestline's
minority interest in any property or any illiquidity of Crestline's interest in
any property) and (ii) the term "Publicly Traded" means listed or admitted to
trading on the New York Stock Exchange, the American Stock Exchange or another
national securities exchange or designated for quotation on the Nasdaq National
Market, or any successor to any of the foregoing.
ARTICLE VI
INDEMNIFICATION
---------------
Section 6.01. Indemnification by Host
Except as otherwise expressly set forth in an Other Agreement, Host
shall indemnify, defend and hold harmless Crestline and each of its
Subsidiaries, and each of their respective directors, officers, employees,
agents and Affiliates and each of the heirs, executors, successors and assigns
of any of the foregoing (the "Crestline Indemnitees") from and against any and
all losses, liabilities and damages, including, without limitation, the costs
and expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements (with Host's consent) and compromises (with Host's
consent) relating thereto, and attorneys' fees and any other expenses reasonably
incurred in investigating, preparing for or defending against any such Actions
or threatened Actions (collectively, the "Crestline Indemnifiable Losses"), of
the Crestline Indemnitees arising out of or due to the failure of Host or any of
its Affiliates or Subsidiaries to pay, perform or otherwise discharge in due
course any of the Host Group Liabilities.
Section 6.02. Indemnification by Crestline
Except as otherwise expressly set forth in an Other Agreement,
Crestline shall indemnify, defend and hold harmless Host and each of its
Subsidiaries, and each of their directors, officers, employees, agents and
Affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (the "Host Indemnitees," and, together with the Crestline
Indemnitees, the "Indemnitees") from and against any and all losses, liabilities
and damages, including, without limitation, the costs and expenses of any and
all Actions, threatened Actions,
35
demands, assessments, judgments, settlements (with Crestline's consent) and
compromises (with Crestline's consent) relating thereto, and attorneys' fees and
any other expenses reasonably incurred in investigating, preparing for or
defending against any such Actions or threatened Actions (collectively, the
"Host Indemnifiable Losses" and, together with the Crestline Indemnifiable
Losses, the "Indemnifiable Losses"), of the Host Indemnitees arising out of or
due to the failure of Crestline or any of its Affiliates or Subsidiaries to pay,
perform or otherwise discharge in due course any of the Crestline Group
Liabilities or arising out of any liabilities incurred by Host under the Leisure
Park Guaranty.
Section 6.03. Insurance Proceeds
The amount which any party (an "Indemnifying Party") is or may be
required to pay to an "Indemnitee" pursuant to Section 6.01 or Section 6.02
shall be reduced (including, without limitation, retroactively) by any Insurance
Proceeds or other amounts actually recovered by or on behalf of such Indemnitee
in reduction of the related Indemnifiable Loss. If an Indemnitee shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of an Indemnifiable Loss and shall subsequently receive Insurance
Proceeds or other amounts in respect of such Indemnifiable Loss, then such
Indemnitee shall pay to such Indemnifying Party a sum equal to the amount of
such Insurance Proceeds or other amounts received.
Section 6.04. Procedure for Indemnification
(a) Except as may be set forth in an Other Agreement, if an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including, without limitation, any governmental entity) who is not a party to
this Agreement or to any Other Agreement (or a successor to such party) of any
claim or of the commencement by any such Person of any Action with respect to
which an Indemnifying Party may be obligated to provide indemnification pursuant
to this Agreement (a "Third-Party Claim"), such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; provided, however, that the failure of any Indemnitee to give
-------- -------
notice as required by this Section 6.04 shall not relieve the Indemnifying Party
of its obligations under this Article VI, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the Indemnifiable Loss that has been or
may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to
settle or compromise, at such Indemnifying Party's own expense and by counsel
chosen by such Indemnifying Party (which may include such Indemnifying Party's
in-house
36
corporate counsel), any Third-Party Claim, provided that such Indemnifying Party
has confirmed in writing that it agrees that the Indemnitee is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 30 days
of the receipt of notice from an Indemnitee in accordance with Section 6.04(a)
(or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether to assume
responsibility for such Third-Party Claim (provided that if the Indemnifying
Party does not so notify the Indemnitee of its election within 30 days after
receipt of such notice from the Indemnitee, the Indemnifying Party shall be
deemed to have elected not to assume responsibility for such Third-Party Claim),
and such Indemnitee shall cooperate in the defense or settlement or compromise
of such Third-Party Claim. After notice from an Indemnifying Party to an
Indemnitee of its election to assume responsibility for a Third-Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article VI for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, however, that if the defendants
-------- -------
in any such claim include both the Indemnifying Party and one or more
Indemnitees and in such Indemnitees' reasonable judgment a conflict of interest
between such Indemnitees and such Indemnifying Party exists in respect of such
claim, such Indemnitees shall have the right to employ separate counsel of its
own choosing (but not more than one separate counsel reasonably satisfactory to
the Indemnifying Party) and in that event the reasonable fees and expenses of
such separate counsel shall be paid by such Indemnifying Party. If an
Indemnifying Party elects not to assume responsibility for a Third-Party Claim
(which election may be made only in the event of a good faith dispute that such
claim was not subject to Section 6.01 or 6.02, as the case may be), such
Indemnitee may defend or (subject to the following sentence) seek to compromise
or settle such Third-Party Claim. Notwithstanding the foregoing, an Indemnitee
may not settle or compromise any claim without prior written notice to the
Indemnifying Party, which shall have the option within ten days following the
receipt of such notice (i) to disapprove the settlement and assume all past and
future responsibility for the claim, including reimbursing the Indemnitee for
prior expenditures in connection with the claim, (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnifying Party shall have no further right to
contest the amount or reasonableness of the settlement if the Indemnitee elects
to proceed therewith, (iii) to approve the amount of the settlement, reserving
the Indemnifying Party's right to contest the Indemnitee's right to indemnity,
or (iv) to approve and agree to pay the settlement. In the event the
Indemnifying Party makes no response to such written notice from the Indemnitee,
the Indemnifying Party shall be deemed to have elected the option described in
clause (ii).
(c) If an Indemnifying Party chooses to defend or to seek to
compromise any Third-Party Claim, the Indemnitee shall make available to such
37
Indemnifying Party any personnel and any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense.
(d) Any claim on account of an Indemnifiable Loss which does
not result from a Third-Party Claim shall be asserted by written notice given by
the Indemnitee to the Indemnifying Party. Such Indemnifying Party shall have a
period of fifteen (15) days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have rejected such claim. If
such Indemnifying Party does not respond within such 15-day period or rejects
such claim in whole or in part, such Indemnitee shall be free to pursue such
remedies as may be available to such party under applicable law or under this
Agreement.
(e) In addition to any adjustments required pursuant to
Section 6.03, if the amount of any Indemnifiable Loss shall, at any time
subsequent to the payment required by this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnitee to
the Indemnifying Party.
(f) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
Section 6.05. Remedies Cumulative
The remedies provided in this Article VI shall be cumulative and shall
not preclude assertion by any Indemnitee of any other rights or the seeking of
any and all other remedies against any Indemnifying Party consistent with the
provisions of Section 9.10.
Section 6.06. Survival of Indemnities
Subject to the provisions of Section 6.07, the obligations of each of
Host and Crestline under this Article VI shall survive the sale merger,
consolidation, or other transfer by it of any assets or businesses or the
assignment by it of any liabilities, with respect to any Indemnifiable Loss of
the other related to such assets, businesses or liabilities.
38
Section 6.07. Limitation on Indemnification Payments to Host REIT.
Notwithstanding any other provisions in this Article VI, in the event
the Merger is consummated, the payments otherwise to be made by Crestline to
Host REIT under this Article VI (the "Required Indemnification Payments") shall
not exceed the sum of (A) the maximum amount that can be paid to Host REIT in
any taxable year without causing Host REIT to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code, determined as if the payment of such
amount did not constitute income described in Sections 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income") , as determined by
independent accountants to Host REIT, and (B) in the event Host REIT receives a
letter from outside counsel (the "Indemnification Payment Tax Opinion")
indicating that Host REIT has received a ruling from the IRS holding that Host
REIT's receipt of the additional amount otherwise to be paid under this Article
VI would either constitute Qualifying Income or would be excluded from gross
income of Host REIT within the meaning of Sections 856(c)(2) and (3) of the Code
(the "REIT Requirements") or that the receipt by Host REIT of the remaining
balance of the Required Indemnification Payments to be made under this Article
VI following the receipt of and pursuant to such ruling would not be deemed
constructively received prior thereto, the Required Indemnification Payments
less the amount otherwise paid or payable under clause (A) above. Crestline's
obligation to pay any unpaid portion of any Required Indemnification Payment
shall terminate three years from the date such payment otherwise would have been
made but for this Section 6.07. In the event that Host REIT is not able to
receive the full Required Indemnification Payments that otherwise would be due
under this Article VI as and when such payments otherwise would be required to
be made, Crestline shall place the unpaid amount in escrow and shall not release
any portion thereof to Host REIT unless and until Crestline receives either one
of the following: (i) a letter from Host REIT's independent accountants
indicating the maximum amount that can be paid at that time to Host REIT without
causing Host REIT to fail to meet the REIT Requirements or (ii) an
Indemnification Payment Tax Opinion, in either of which events Crestline shall
pay to Host REIT the lesser of the unpaid Required Indemnification Payments or
the maximum amount stated in the letter referred to in (i) above. At the end of
the three year period referred to above in this Section 6.07 with respect to any
amount placed in such escrow, if neither of the events referred to in item (i)
or item (ii) of the preceding sentence shall have occurred, such amount shall be
released from such escrow to be used as determined by Crestline in its sole and
absolute discretion.
39
ARTICLE VII
CERTAIN ADDITIONAL MATTERS
Section 7.01. Use of the "Host" Name and the Host Logo
Notwithstanding anything to the contrary in this Agreement or in any
Other Agreement, Host shall retain the right to use the name "Host" and the
right to use the Host Logo following the Distribution, in each case without
limitation or expiration. Neither Crestline nor any member of the Crestline
Group shall have any right to use the name "Host" or the Host Logo without the
prior written consent of Host, which consent may be withheld at the sole
discretion of Host.
Section 7.02. Use of the "Crestline" Name and the Crestline Logo
Notwithstanding anything to the contrary in this Agreement or in any
Other Agreement, Crestline shall retain the right to use the name "Crestline"
and the right to use the Crestline Logo following the Distribution, in each case
without limitation or expiration. Neither Host nor any member of the Host Group
shall have any right to use the name "Crestline" or the Crestline Logo without
the prior written consent of Crestline, which consent may be withheld at the
sole discretion of Crestline.
Section 7.03. Use of Host Photographs
Except as otherwise prohibited or limited by any agreement between Host
and any Person, upon request from Crestline from time to time following the
Distribution Date and with the prior written approval of Host, which shall not
be unreasonably withheld, Crestline may make use of photographs of properties
taken prior to the date hereof which are subject to Leases and which are owned
or otherwise held by Host solely for Crestline corporate purposes (such as
inclusion in annual reports or documentation or other presentations prepared for
lenders, prospective lenders, investors or prospective investors). Crestline
shall comply with any use limitations imposed upon Host by any agreement with
another Person and shall indemnify Host and each of its Subsidiaries, and each
of their directors, officers, employees, agents and Affiliates and each of their
executors, successors and assigns of any of the foregoing from and against any
Host Indemnifiable Losses (as defined in Section 6.02) arising out of or due to
the failure of Crestline or any of its Subsidiaries or Affiliates to perform its
obligations under this Section 7.03.
Section 7.04. Assignment of Times Square Marquis Lease
On or before January 31, 1999, Host and Crestline shall negotiate in
good faith the terms upon which the Lease between Times Square Marquis Hotel,
L.P., and Spectacolor Communications, Inc., dated as of April 1, 1985, as
amended, shall
40
be assigned from Times Square Marquis Hotel, L.P. to CCMH Times Square LLC (or
such other entity designated by Crestline as acceptable to Host), such terms to
be mutually acceptable to Host and Crestline.
ARTICLE VIII
ACCESS TO INFORMATION AND SERVICES
Section 8.01. Delivery of Corporate Records
(a) Except as may be otherwise provided in an Other Agreement,
Host shall arrange as soon as practicable following the Distribution Time, to
the extent not previously delivered in connection with the transactions
contemplated in Article II, for the delivery to Crestline of the Crestline Books
and Records in Host's possession, except to the extent such items are already in
the possession of Crestline or a Crestline Group Subsidiary. The Crestline Books
and Records shall be the property of Crestline, but, as to matters which
occurred prior to the Distribution Time, shall be available to Host for review
and duplication until Host shall notify Crestline in writing that such records
are no longer of use to Host.
(b) Except as may be otherwise provided in an Other Agreement,
Crestline shall arrange as soon as practicable following the Distribution Date,
to the extent not previously delivered in connection with the transactions
contemplated in Article II, for the delivery to Host of the Host Books and
Records in Crestline's possession, except to the extent such items are already
in the possession of Host or a Host Group Subsidiary. The Host Books and Records
shall be the property of Host, but any of the Host Books and Records that
reasonably relate to the Crestline Group Business as to matters which occurred
prior to the Distribution Time shall be available to Crestline for review and
duplication until Crestline shall notify Host in writing that such records are
no longer of use to Crestline.
Section 8.02. Access to Information
Except as otherwise provided in an Other Agreement, from and after the
Distribution Time, Host shall afford to Crestline and its authorized
accountants, counsel, financial advisors, lenders, ground lessors and other
designated representatives reasonable access (including using reasonable efforts
to give access to Persons possessing information) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information relating to operations prior to the
Distribution Time (collectively, "Information") within Host's possession,
insofar as such access is reasonably required by Crestline with regard to the
Crestline Group Assets or for the conduct of the Crestline Group Business,
subject to appropriate restrictions for classified or
41
Privileged Information. Similarly, except as otherwise provided in an Other
Agreement, from and after the Distribution Time, Crestline shall afford to Host
and its authorized accountants, counsel, financial advisors, lenders, ground
lessors and other designated representatives reasonable access (including using
reasonable efforts to give access to Persons possessing information) and
duplicating rights during normal business hours to Information within
Crestline's possession, insofar as such access is reasonably required by Host
for the conduct of the Host Group Business, subject to appropriate restrictions
for classified or Privileged Information. Information may be requested under
this Section 8.02 for the legitimate business purposes of either party,
including without limitation, audit, accounting, claims (including claims for
indemnification hereunder), litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations and for performing this
Agreement and the transactions contemplated hereby, but such information shall
be treated by the recipient thereof as set forth in Section 8.06 below.
Section 8.03. Production of Witnesses
From and after the Distribution Time, each of Crestline and Host shall
use reasonable efforts to make available to the other, upon written request, its
and its Subsidiaries' current and former officers, directors, employees and
agents as witnesses to the extent that such persons may reasonably be required
in connection with any Action.
Section 8.04. Reimbursement
Except as otherwise provided in an Other Agreement or as otherwise
provided by law, a Party providing Information or witness services to the other
party under this Article VIII shall be entitled to receive from the recipient,
upon the presentation of invoices therefor, payments of such amounts, relating
to supplies, disbursements and other out-of-pocket expenses (at cost) and direct
and indirect expenses of employees (including without limitation salary and
fringe benefits of such employees) who are witnesses or otherwise furnish
assistance (at cost), as may be reasonably incurred in providing such
Information or witness services.
Section 8.05. Retention of Records
Except as otherwise required by law or provided in an Other Agreement,
each party may destroy or otherwise dispose of any Information at any time after
the tenth anniversary of this Agreement, provided, however, that, prior to such
-------- -------
destruction or disposal, (a) it shall provide no less than 90 or more than 120
days prior written notice to the other party, specifying in reasonable detail
the Information proposed to be destroyed or disposed of, and (b) if such other
party shall request in writing prior to the scheduled date for such destruction
or disposal that
42
any of the Information proposed to be destroyed or disposed of be delivered to
such other party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of the other party.
Section 8.06. Confidentiality
Each of Host and its Subsidiaries on the one hand, and Crestline and
its Subsidiaries on the other hand, shall hold, and shall cause its auditors,
attorneys, financial advisors, rating agencies, bankers and other consultants
and advisors ("Advisors") to hold, in strict confidence, all Information
concerning the other in its or their possession (except to the extent that such
Information has been (a) in the public domain through no fault of such party, or
(b) later lawfully acquired from other sources by such party). Neither party
shall release or disclose such Information to any other Person other than its
Advisors, unless compelled to disclose by judicial or administrative process or,
as reasonably advised by its counsel, by other requirements of law, or unless
such Information is reasonably required to be disclosed in connection with (x)
any litigation with any third parties or between Host and Crestline, or (y) any
contractual agreement to which Host and its Subsidiaries or Crestline and its
Subsidiaries are currently parties.
Section 8.07. Privileged Information
Crestline and Host recognize that legal and other professional services
have been and will be provided prior to the Distribution Time for the benefit of
both Host and Crestline, and that both Host and Crestline have common interests
in such Privileged Information and that both Host and Crestline are hereby
deemed to be the client for the purposes of asserting any Privileges. To
allocate the invocation of the interests of each Party in the Privileged
Information, Host and Crestline agree as follows:
(a) Except with respect to proceedings to enforce Host's
obligations under Section 6.01, Host shall be entitled, in perpetuity, to
control the assertion or waiver of all Privileges in connection with Privileged
Information which relates solely to the Host Group, the Host Group Business or
the Host Group Assets whether or not such Privileged Information is in the
possession of or under the control of Host or Crestline. Host shall also be
entitled, in perpetuity, to control the assertion or waiver of all Privileges in
connection with Privileged Information which relates solely to the subject
matter of any claims constituting Host Group Liabilities, now pending or which
may be asserted in the future, whether or not the Privileged Information is in
the possession of or under the control of Host or Crestline.
43
(b) Except with respect to proceedings to enforce Crestline's
obligations under Section 6.02, Crestline shall be entitled, in perpetuity, to
control the assertion or waiver of all Privileges in connection with Privileged
Information which relates solely to the Crestline Group, the Crestline Group
Business or the Crestline Group Assets whether or not such Privileged
Information is in the possession of or under the control of Host or Crestline.
Crestline shall also be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the subject matter of any claims constituting Crestline Group
Liabilities, now pending or which may be asserted in the future, whether or not
the Privileged Information is in the possession of or under the control of Host
or Crestline.
(c) Each of Host and Crestline shall have a shared Privilege,
with equal right to assert or waive, subject to the restrictions in this Section
8.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 8.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters which involve both Crestline and Host or
in respect of which both Crestline and Host retain any responsibility or
liability under this Agreement, shall be subject to a shared Privilege.
(d) Neither Host nor Crestline may waive any Privilege in
which the other has a shared Privilege, without the written consent of the
other, except to the extent reasonably required connection with any litigation
with third-parties or as provided in subsection (e) below. Consent shall be
deemed to be granted unless written objection to the party requesting such
consent is made within twenty (20) days after written notice of such request is
received by the non-requesting party.
(e) In the event of any litigation or dispute between a member
of the Host Group and a member of the Crestline Group, either Host or Crestline
may waive a Privilege in which the other has a shared Privilege, without
obtaining the consent of the other party, provided, however, that such waiver of
-------- -------
a shared Privilege shall be effective only as to the use of Information with
respect to such litigation or dispute and shall not operate as a waiver of the
shared Privilege with respect to third parties.
(f) If a dispute arises between Host and Crestline regarding
whether a Privilege should be waived to protect or advance the interest of
either of them, each of them shall negotiate in good faith, shall endeavor to
minimize any prejudice to the rights of the other, and shall not unreasonably
withhold consent to any request for waiver by the other. Each of Host and
Crestline will withhold consent to waiver of any Privilege only to protect its
own legitimate interests.
44
(g) Upon receipt by either Host or Crestline of any subpoena,
discovery or other request which arguably calls for the production or disclosure
of Information subject to a shared Privilege or as to which the other has the
sole right hereunder to assert a Privilege, or if either Host or Crestline
obtains knowledge that any of its current or former directors, officers, agents
or employees have received any subpoena, discovery or other request which
arguably calls for the production or disclosure of such Privileged Information,
such party shall promptly notify the other party of the existence of the request
and shall provide the other party a reasonable opportunity to review the
Information and to assert any rights it may have under this Section 8.07 or
otherwise to prevent the production or disclosure of such Privileged
Information.
(h) The delivery of the Crestline Books and Records and the
Host Books and Records pursuant to Section 8.01, the access to Information
between Host and its Subsidiaries and Crestline and its Subsidiaries pursuant to
Section 8.02, and the agreement to provide witnesses pursuant to Section 8.03,
are made in reliance on the agreement of Crestline and Host, as set forth in
Sections 8.06 and 8.07, to maintain the confidentiality of Privileged
Information and to assert and maintain all applicable Privileges and shall not
be deemed to waive any Privilege.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Complete Agreement; Construction
This Agreement and the Other Agreements shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter. Notwithstanding anything to the contrary in this
Agreement or in any Other Agreement, in the event and to the extent that there
shall be a conflict between the provisions of this Agreement and the provisions
of any Other Agreement, then the provisions of such Other Agreement shall
control.
Section 9.02. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland, without regard to the principles of conflicts
of laws thereof.
45
Section 9.03. Notices
All notices and other communications hereunder shall be in writing and
shall be delivered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
addresses as shall be specified by like notice) and shall be deemed given on the
date on which such notice is received:
To Host:
Host Marriott Corporation
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxxx
Senior Vice President, General Counsel and Corporate
Secretary
To Crestline:
Crestline Capital Corporation
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. X. Xxxxxx
Senior Vice President, General Counsel and Corporate
Secretary
To Fernwood:
Fernwood Hotel Assets, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: President
46
with a copy to:
Host Marriott Corporation - Law Department, as
agent for Fernwood Hotel Assets, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxxx
To Rockledge:
Rockledge Hotel Properties, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: President
with a copy to:
Host Marriott Corporation - Law Department, as
agent for Rockledge Hotel Properties, Inc.
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxxx
Section 9.04. Amendments
This Agreement may not be modified or amended except by an agreement in
writing signed by the parties.
Section 9.05. Successors and Assigns
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. No party may assign this Agreement without the prior written
consent of the other parties. Host REIT and the Operating Partnership shall be
deemed to be the successor of Host upon consummation of the Merger. Immediately
following the consummation of the Merger and in connection with the REIT
Conversion, the Operating Partnership shall be considered to have assumed all
obligations of Host REIT hereunder and, as between Host and Crestline and
Crestline's Subsidiaries and Affiliates and all Crestline Indemnitees, Host REIT
shall be released from all obligations hereunder.
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Section 9.06. Subsidiaries
Each party shall cause to be performed, and hereby guarantees the
performance of, all actions, agreements and obligations set forth herein to be
performed by any Subsidiary of such party on and after the Distribution Date.
Section 9.07. No Third Party Beneficiaries
Except for the provisions of Article VI, this Agreement is solely for
the benefit of the parties and their respective Subsidiaries, Affiliates,
successors and permitted assigns, and should not be deemed to confer upon any
third party any remedy, claim, claim of action or other right.
Section 9.08. Titles and Headings
Titles and headings to sections herein are inserted for the convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
Section 9.09. Legal Enforceability
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available to
any party, each party acknowledges that damages would be an inadequate remedy
for any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically enforceable.
Section 9.10. Arbitration of Disputes
(a) Any controversy or claim arising out of this Agreement
shall be settled by arbitration before a single arbitrator in accordance with
the Rules of the American Arbitration Association then in effect, as modified by
this Section 9.10 or by the further agreement of the parties.
(b) Such arbitration shall be conducted in Xxxxxxxxxx County,
Maryland.
(c) Any judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. The arbitrators shall
not, under any circumstances, have any authority to award punitive, exemplary or
similar
48
damages, and may not, in any event, make any ruling, finding or award that does
not conform to the terms and conditions of this Agreement.
(d) Nothing contained in this Section 9.10 shall limit or
restrict in any way the right or power of a party at any time to seek injunctive
relief in any court or to litigate the issues relevant to such request for
injunctive relief before such court (i) to restrain the other Party from
breaching this Agreement, or (ii) for specific enforcement of this Section 9.10.
(e) The parties hereby consent to the jurisdiction of the
federal courts located in the State of Maryland for all purposes under this
Agreement.
(f) Neither party nor the arbitrators may disclose the
existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of the other parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
(g) Each party shall bear its own costs incurred in the
arbitration. If any party refuses to submit to arbitration any dispute required
to be submitted to arbitration pursuant to this Section 9.10, and instead
commences any other proceeding, then the party who seeks enforcement of the
obligation to arbitrate shall be entitled to its attorneys' fees and costs
incurred in any such proceeding.
Section 9.11. Prompt Payment
Where the terms of this Agreement require payment of an amount "as
promptly as possible," "as soon as practicable" or "as soon as possible,"
following a specified event, occurrence or date, such payment shall be made
within five (5) business days of such event, occurrence or date.
Section 9.12. Counterparts
This Agreement may be executed in any number of counterparts, which,
when taken together, shall constitute a single binding instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
HOST MARRIOTT CORPORATION
By:/s/ Xxxxxxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
-------------------------------------
Title: Senior Vice President and Secretary
------------------------------------
HOST MARRIOTT L.P.
By:/s/ Xxxxxxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
------------------------------
Title: Executive Vice President
-----------------------------
CRESTLINE CAPITAL CORPORATION
By:/s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title President and Chief Executive Officer
50
FERNWOOD HOTEL ASSETS, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
------------------------------
Title: Vice President & Secretary
-----------------------------
ROCKLEDGE HOTEL PROPERTIES, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
------------------------------
Title: Vice President & Secretary
-----------------------------
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