Exhibit 10.5(a)
AMENDMENT NO. 4 DATED AS OF DECEMBER 28, 1998 TO
DISTRIBUTION AGREEMENT DATED AS OF SEPTEMBER 15, 1993
BETWEEN HOST MARRIOTT CORPORATION
AND MARRIOTT INTERNATIONAL, INC.
Host Marriott Corporation (f/k/a Marriott Corporation, "Host
Marriott"), Marriott International, Inc. ("MII") and Host Marriott Services
Corporation desire to adopt this Amendment to the Distribution Agreement between
Host Marriott and MII dated as of September 15, 1993 (the "Original Agreement,"
and, as amended hereby and by that certain Amendment No. 1 to the Original
Agreement dated as of December 29, 1995, that certain Amendment No. 2 to the
Original Agreement dated as of June 21, 1997, that certain Amendment No. 3 to
the Original Agreement dated as of March 3, 1998, and that certain Amendment No.
5 to the Original Agreement dated as December 18, 1998 (the "Distribution
Agreement").
WHEREAS, on or about December 29, 1998, (i) Host Marriott will
distribute approximately 93.6% of the outstanding common stock of Crestline
Capital Corporation, a Maryland corporation ("CCC"), to the shareholders of Host
Marriott and will contribute the remaining 6.4% of such CCC common stock to Host
Marriott, L.P. for delivery to Blackstone Real Estate Advisors L.P. and certain
affiliated entities thereof (or for return to CCC if not delivered to Blackstone
Real Estate Advisors L.P. and its affiliated entities) and (ii) Host Marriott
will merge (the "Merger") into HMC Merger Corporation, a Maryland corporation to
be renamed "Host Marriott Corporation" ("Host REIT"); and
WHEREAS, the parties hereto desire to amend the Distribution Agreement
in connection with such distribution and the Merger.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto hereby agree as follows:
1. Upon the effectiveness of the Merger, Section 6.07 of the
Distribution Agreement shall be amended by adding the following subsections (j)
and (k):
"(j) Notwithstanding anything to the contrary in this Agreement or
otherwise, MII's Right will be limited to the purchase and subsequent ownership
of only such number of shares, if any, as would not (i) cause MII, or any Person
in which MII owns a direct or indirect interest, to own or be deemed (taking
into account the attribution rules of Code Section 318(a), as modified by Code
Section
856(d)(5)) to own more than 9.9% (the "Disqualification Threshold") of
Host Marriott if MII, or any such other Person in which MII owns a direct or
indirect interest, also owns or would be deemed to own (taking into account the
attribution rules of Code Section 318(a), as modified by Code Section
856(d)(5)), more than 9.9% of Crestline Capital Corporation, a Maryland
corporation ("CCC") (or any Subsidiary of CCC) or any other tenant of real
property leased by Host Marriott or any Subsidiary of Host Marriott (other than
any such lease with MII of any of its Affiliates or Subsidiaries which is in
effect at the time of the effectiveness of the Merger ), (ii) cause any Person
that owns (or is deemed to own (taking into account the attribution rules of
Code Section 318(a), as modified by Code Section 856(d)(5))) a direct or
indirect interest in MII to exceed the Disqualification Threshold with respect
to Host Marriott if such Person owns or would be deemed to own (taking into
account the attribution rules of Code Section 318(a), as modified by Code
Section 856(d)(5)) more than 9.9% of CCC (or any Subsidiary of CCC) or any other
tenant of real property leased by Host Marriott or any Subsidiary of Host
Marriott (other than any such lease with MII of any of its Affiliates or
Subsidiaries which is in effect at the time of the effectiveness of the
Merger), or (iii) in the event that Host Marriott L.P. is or could be considered
a "publicly traded partnership" within the meaning of Code Section 7704, cause
Host Marriott, L.P. to own more than 9.9% of CCC (determined by taking into
account (A) the attribution rules of Code Section 318(a), as modified by Code
Sections 856(d)(5) and 7704(d)(3)(B) and (B) any stock of CCC that Host
Marriott, L.P. is deemed to own under these rules by reason of the ownership of
an interest in Host Marriott, L.P. by Blackstone Real Estate Advisors L.P. or
any of its affiliated entities or any other Person or such other Person's
affiliated entities). In the event that the Right would not be exercisable in
full solely by reason of clause (iii) of the preceding sentence (but not clause
(i) or clause (ii) thereof), MII shall, subject to the conditions set forth
below, have the right to assign that portion (but only such portion) of the
Right that is not exercisable by reason of such clause (iii) (the "Blocked
Portion of the Right"), subject to further reduction as set forth below, to a
Person whose exercise of the assigned Blocked Portion of the Right would not be
precluded by the preceding sentence (applied replacing the term "MII" each place
it appears in clauses (i) and (ii) of such sentence with the following: "MII
and/or any permitted assignee pursuant to the next sentence below"), subject to
the following conditions: (A) Host Marriott and MII shall have obtained from the
Internal Revenue Service, for the mutual benefit of Host Marriott and MII, a
private letter ruling (the user fees and legal fees related to which shall be
shared equally by Host Marriott and MII, provided, however, that in no event
shall Host Marriott be required to pay more than a total of $50,000 with respect
to such fees) to the effect that neither the existence of such assignment right
nor the exercise of such assignment right shall cause MII (or any Person that is
considered pursuant to Code Section 318(a) to own any stock of Host Marriott
considered owned by MII, actually or constructively pursuant to Code Section
318(a)) to be considered for purposes of Code Sections 318(a), 856(d)(2), and
7704(d)(1)(C) and (d)(3)(B) to own all or any portion of the Host Marriott stock
that
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is subject to the Blocked Portion of the Right, (B) the proposed assignee
shall not be a Person who owns (as opposed to operates) more than fifteen (15)
full-service hotels in competition with full-service hotels owned, directly or
indirectly, by Host Marriott or Host Marriott, L.P. (so long as Host Marriott,
L.P. is controlled by Host Marriott), and in addition, with respect to any
assignment made hereunder at any time following October 8, 2000, the proposed
assignee shall not be a Person who operates a branded hotel chain (whether or
not such operator is also the owner of the brand) that includes, in the
aggregate, more than fifteen (15) full-service hotels, in competition with full-
service hotels operated by Host Marriott or Host Marriott, L.P. (so long as Host
Marriott, L.P. is controlled by Host Marriott), (it being understood that a
Person shall not be deemed to be an owner or operator of full-service hotels in
competition with Host Marriott or Host Marriott, L.P. (so long as Host Marriott,
L.P. is controlled by Host Marriott) solely by virtue of (x) the ownership of
non-controlling interests in hotels or hotel operating companies, either
directly or indirectly through subsidiaries, affiliates or partnerships (where
"control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract, or otherwise) or (y) holding a
mortgage or mortgages secured by one or more hotels) and (C) if, at the time of
such assignment, the proposed assignee or any of its Affiliates holds Voting
Stock or options, warrants or other rights (including conversion rights) to
acquire Voting Stock ("Acquisition Rights"), the portion of the Blocked Portion
of the Right which may be assigned to such proposed assignee shall be reduced
such that, immediately following such assignment, the aggregate number of shares
of Voting Stock which the proposed assignee and its Affiliates would own
(assuming for such purpose the exercise in full at such time of the assigned
portion of the Blocked Portion of the Right and the Acquisition Rights) would
not exceed twenty percent (20%) of the total outstanding shares of Voting Stock
(assuming for such purposes the exercise in full at such time of all outstanding
Acquisition Rights). Host Marriott agrees that, upon request of MII, it will
assist MII in preparing the private letter ruling referred to in clause (A) of
the preceding sentence and will join MII in such ruling request.
(k) In the event that Host Marriott shall be advised by its outside
tax counsel in writing after December 29, 1998 that, as the result of a change
in law (including published interpretations by the Internal Revenue Service)
after such date, there is a significant risk to Host Marriott that the
restrictions set forth in the subsection (j) above, would not be effective to
protect the status of Host Marriott as a "real estate investment trust" (a
"REIT") under the applicable provisions of the Code, the parties agree to
negotiate in good faith to develop a modification to subsection (j) in a manner
that would protect the interests of MII in being able to exercise the Right
substantially as and to the extent contemplated in subsection (j) while
permitting Host Marriott to continue to qualify as a REIT under the applicable
provisions of the Code. Conversely, in the event that Host Marriott shall be
advised by its outside tax counsel in writing after December 29, 1998 that, as
the
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result of a change in law (including published interpretations by the Internal
Revenue Service) after such date, part or all of the restrictions set forth in
the subsection (j) above are not necessary under reasonably foreseeable
circumstances to protect the status of Host Marriott as a REIT under the
applicable provisions of the Code, the parties agree to negotiate in good faith
to develop a modification to subsection (j) in a manner that would protect the
interests of MII in being able to exercise the Right to the maximum extent
practicable without regard to the limitations contemplated in subsection (j)
while ensuring that no such exercise (or right to exercise) will jeopardize Host
Marriott's ability to continue to qualify as a REIT under the applicable
provisions of the Code. In the absence of an agreement between the parties to a
change to subsection (j) in either such event, the limitations in subsection (j)
as set forth herein shall remain in full force and effect.
2. Upon the effectiveness of the Merger, the term "Voting Stock" in
Section 6.07(a) of the Distribution Agreement shall mean shares of common stock,
par value $.01 per share, of Host REIT and any other class of capital stock
having, or capable of having, general voting rights to elect the Directors of
Host REIT, whether or not now authorized or issued."
3. Upon the effectiveness of the Merger, Section 9.06 of the
Distribution Agreement shall be amended by adding the following sentence:
"The foregoing sentence is not intended to, and shall not, cause this
Agreement to bind or to inure to the benefit of CCC or to grant MII any rights
with respect to CCC."
4. Upon effectiveness of the Merger, (i) the Distribution Agreement
shall be binding upon and inure to the benefit of Host REIT and Host REIT shall
assume all the rights and obligations of Host Marriott thereunder and (ii) all
references to "Host Marriott" and "Marriott" in the Distribution Agreement shall
mean "Host REIT."
5. Host REIT represents that, prior to the effectiveness of the
Merger, its Board of Directors shall have duly adopted a resolution and a bylaw
provision exempting the exercise by MII of the Right as to Host REIT, as set
forth in Paragraph 1 above, from the Maryland Business Combination Statute and
the Maryland Control Share Acquisition Statute, respectively, as well as a
resolution exempting certain other transactions between Host REIT and MII or
their respective subsidiaries and a resolution granting MII an irrevocable
exemption under Section 8.2.7 of the Amended and Restated Articles of
Incorporation of Host REIT from the Ownership Limit (as defined in Section 8.1
of the Amended and Restated Articles of Incorporation of Host REIT) to permit
MII to exercise the Right. A copy of such resolutions and bylaw provision are
attached as Annex A
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hereto. Host REIT covenants that, for as long as MII has the right to exercise
the Right, Host REIT will not revoke or amend such resolutions or amend, alter
or repeal such bylaw provision without the prior written consent of MII. Host
REIT covenants that in the event it adopts a shareholders' rights plan, such
plan shall contain provisions which are consistent with Section 6.07 of the
Distribution Agreement. Host REIT agrees that MII would suffer irreparable
damage in the event any of the foregoing provisions of this Paragraph 5 were not
to be performed in accordance with the terms hereof, and that, in such event,
MII's remedy at law would be inadequate. Host REIT agrees and consents that
temporary and permanent injunctive relief may be granted in favor of MII in any
proceeding which may be brought to enforce any provision of this Paragraph 5
without the necessity of proof of actual damage.
6. Except as specifically amended hereby, the Distribution Agreement
continues in full force and effect without modification and is hereby ratified
and confirmed in all respects.
7. This Amendment may be executed in any number of counterparts,
which, when taken together, shall constitute a single binding instrument.
[signatures appear on the following page]
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IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to be
duly executed and delivered as of December 28, 1998.
MARRIOTT INTERNATIONAL, INC.
By: /s/ Myron D. Walker
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Name: Myron Walker
Title: Vice President
HOST MARRIOTT CORPORATION
By: /s/ C. G. Townsend
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Name: C. G. Townsend
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Title: Senior Vice President
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HOST MARRIOTT SERVICES CORPORATION
By: /s/ Joe P. Martin
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Name: J P Martin
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Title: Senior Vice President
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The undersigned is executing this Amendment solely for the purpose of
acknowledging and consenting to the provisions of Paragraphs 4 and 5 hereof.
HMC MERGER CORPORATION
By: /s/ C. G. Townsend
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Name: C. G. Townsend
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Title: Senior Vice President
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