Exhibit 10.16
Amendment to the
Distribution Agreement
between
Host Marriott Corporation
and
Host Marriott Services Corporation
WHEREAS, Host Marriott Corporation ("Host Marriott") and Host Marriott
Services Corporation ("Services"), made and entered into a Distribution
Agreement (the "Agreement") as of December 22, 1995;
WHEREAS, Section 11.05 of the Agreement provides that the Agreement
may be amended in writing executed by the parties; and
WHEREAS, Host Marriott intends to enter into certain transactions
pursuant to a plan to reorganize its business operations so that effective as of
January 1, 1999 it will qualify as a "real estate investment trust" under
Sections 856 through 859 of the Internal Revenue Code of 1986, as amended ("Host
REIT Conversion"); and
WHEREAS, the Internal Revenue Code may limit certain payments that may
be received by Host Marriott after the Host REIT Conversion;
NOW, THEREFORE, BE IT
RESOLVED, that the Agreement be, and it hereby is, amended as follows:
1. Section 1.01 shall be amended by adding the following terms and
their definitions:
Code: the Internal Revenue Code of 1986, as amended.
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Host REIT Conversion: certain transactions entered into by Host
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Marriott pursuant to a plan to reorganize its business operations so that it
will qualify as a real estate investment trust as of January 1, 1999.
2. Article XI shall be amended by adding the following new Section
11.15 to the end:
Section 11.15 Limits on Payments to Host Marriott. This Section
-----------------------------------
11.15 shall become effective as of the Host REIT Conversion. Notwithstanding
any other provision of this Agreement to the contrary, the
payments otherwise to be made by Services to Host Marriott under this Agreement
(the "Required Payments"), shall not exceed (i) the sum of (A) the maximum
amount that can be paid to Host Marriott in any taxable year without causing
Host Marriott to fail to meet the requirements of Code Sections 856(c)(2) and
(3), determined as if the payment of such amount did not constitute income
described in Code Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) ("Qualifying
Income"), as determined by independent accountants to Host Marriott, and (B) in
the event Host Marriott receives a letter from outside counsel (the
"Indemnification Payment Tax Opinion") indicating that Host Marriott has
received a ruling from the IRS holding that Host Marriott's receipt of the
Required Payments otherwise to be paid under this Agreement would either
constitute Qualifying Income or would be excluded from gross income of Host
Marriott within the meaning of Code Sections 856(c)(2) and (3) (the "REIT
Requirements") or that the receipt by Host Marriott of the remaining balance of
the Required Payments to be made under this Agreement following the receipt of
and pursuant to such ruling would not be deemed constructively received prior
thereto, the Required Payments less the amount otherwise paid or payable under
clause (A) above. Services' obligation to pay any unpaid portion of any Required
Payment shall terminate three years from the date such payment otherwise would
have been made but for this Section 11.15. In the event that Host Marriott is
not able to receive the full Required Payment that otherwise would be due under
this Agreement as and when such payments otherwise would be required to be made,
Services shall place the unpaid amount in escrow and shall not release any
portion thereof to Host Marriott unless and until Services, receives either one
of the following: (i) a letter from Host Marriott's independent accountants
indicating the maximum amount that can be paid at that time to Host Marriott
without causing Host Marriott to fail to meet the REIT Requirements or (ii) an
Indemnification Payment Tax Opinion, in either of which events Services shall
pay to Host Marriott the lesser of the unpaid Required Payments or the maximum
amount stated in the letter referred to in (i) above.
2
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Agreement as of December 28, 1998.
HOST MARRIOTT CORPORATION
By:
--------------------------------
Name:
Title:
HOST MARRIOTT SERVICES
CORPORATION
By:
--------------------------------
Name:
Title:
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