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Exhibit 2.1
DISTRIBUTION AGREEMENT
BY AND AMONG
PATRIOT AMERICAN HOSPITALITY, INC.,
WYNDHAM INTERNATIONAL, INC.,
INTERSTATE HOTELS, LLC
AND
INTERSTATE HOTELS CORPORATION
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TABLE OF CONTENTS
Page
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Section 1. DEFINITIONS..............................................................2
Section 1.1 General.........................................................2
Section 2 REORGANIZATION AND RELATED TRANSACTIONS..................................6
Section 2.1 The Reorganization..............................................6
Section 2.2 Consideration...................................................7
Section 2.3 Representations and Warranties..................................8
Section 3 ASSUMPTION AND RETENTION OF LIABILITIES..................................9
Section 3.1 Assumed Liabilities.............................................9
Section 3.2 Retained Liabilities............................................9
Section 4 THE DISTRIBUTION.........................................................9
Section 4.1 The Distribution................................................9
Section 4.2 Fractional Shares..............................................10
Section 4.3 Patriot/Wyndham Board Action...................................10
Section 5 SURVIVAL, INDEMNIFICATION, CLAIMS, AND OTHER
MATTERS...............................................10
Section 5.1 Survival of Agreements.........................................10
Section 5.2 Indemnification................................................10
Section 5.3 Procedure for Indemnification of Third-Party Claims............13
Section 5.4 Other Claims...................................................15
Section 5.5 Certain Losses.................................................15
Section 5.6 No Third Party Beneficiaries...................................15
Section 5.7 Named Parties..................................................16
Section 6 CERTAIN ADDITIONAL MATTERS..............................................16
Section 6.1 Conveyancing and Assumption Instruments........................16
Section 6.2 No Representations or Warranties...............................16
Section 6.3 Further Assurances; Subsequent Transfers.......................16
Section 6.4 Interstate Officers and Directors..............................18
Section 6.5 Related Agreements.............................................18
Section 6.6 Joint Purchasing Arrangements..................................18
Section 6.7 St. Louis Marriott West........................................19
Section 6.8 Divestiture Payments...........................................19
Section 6.9 Settlement Agreement Provisions................................19
Section 6.10 Limitation on Claims...........................................19
Section 6.11 The Charles....................................................20
Section 6.12 Holiday Inns...................................................20
(i)
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Section 7 ACCESS TO INFORMATION AND SERVICES......................................21
Section 7.1 Provision of Corporate Records.................................21
Section 7.2 Access to Information..........................................21
Section 7.3 Production of Witnesses and Individuals........................21
Section 7.4 Retention of Records...........................................21
Section 7.5 Confidentiality................................................22
Section 7.6 Privileged Matters.............................................23
Section 7.7 Mail and Other Communications..................................24
Section 7.8 Order of Precedence............................................24
Section 8 EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS.................................24
Section 8.1 Employee and Plan Transfers....................................24
Section 8.2 Limitation on Enforcement......................................24
Section 9 INSURANCE...............................................................24
Section 9.1 General........................................................24
Section 10 DISPUTE RESOLUTION......................................................25
Section 10.1 Binding Arbitration............................................25
Section 10.2 Arbitration....................................................25
Section 10.3 Treatment of Negotiation.......................................26
Section 10.4 Equitable Relief...............................................26
Section 10.5 Consolidation..................................................26
Section 11 TAX MATTERS.............................................................26
Section 11.1 Preparation of Tax Returns........................................26
Section 11.2 Responsibility for Taxes.......................................27
Section 11.3 Credits; Refunds...............................................28
Section 11.4 Carrybacks.....................................................28
Section 11.5 Payments.......................................................28
Section 11.6 Tax Contests...................................................28
Section 11.7 Cooperation....................................................29
Section 11.8 Tax Records....................................................29
Section 11.9 Interstate Hotels, LLC.........................................30
Section 12 MISCELLANEOUS...........................................................31
Section 12.1 Amendment and Waiver...........................................31
Section 12.2 Expenses.......................................................31
Section 12.3 Notices........................................................31
Section 12.4 Termination....................................................32
Section 12.5 Successors and Assigns.........................................32
Section 12.6 Entire Agreement: Parties in Interest..........................32
Section 12.7 Severability...................................................33
Section 12.8 Captions.......................................................33
Section 12.9 Annexes, Etc...................................................33
Section 12.10 Governing Law..................................................33
Section 12.11 Counterparts...................................................33
(ii)
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DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT ("Agreement") is dated as of June 18, 1999,
by and among Patriot American Hospitality, Inc., a Delaware corporation
("Patriot"), Wyndham International, Inc., a Delaware corporation ("Wyndham" and,
together with Patriot, "Patriot/Wyndham"), Interstate Hotels, LLC, a Delaware
limited liability company (the "LLC") and Interstate Hotels Corporation, a
Maryland corporation ("Interstate"). The parties hereto are more particularly
defined below.
WHEREAS, Patriot/Wyndham and Interstate Hotels Company ("Old
Interstate") entered into an Agreement and Plan of Merger dated as of December
2, 1997 pursuant to which Old Interstate agreed to merge with and into Patriot
(the "Merger");
WHEREAS, prior to the closing of the Merger, Marriott International,
Inc. ("Marriott") sued Old Interstate in the United States District Court for
the District of Maryland seeking to block the Merger, and the Merger was
temporarily enjoined in April 1998 pending a trial on the merits of Marriott's
claims;
WHEREAS, Patriot/Wyndham, Old Interstate and Marriott entered into a
settlement agreement originally dated May 27, 1998 (as amended to date, the
"Settlement Agreement"), permitting the Merger to close on June 2, 1998;
WHEREAS, the Settlement Agreement requires Patriot/Wyndham to (i)
transfer or cause the transfer of certain assets and liabilities to Interstate
or the LLC, which assets and liabilities consist principally of the third-party
hotel management business and certain ancillary operations which Patriot/Wyndham
acquired from Old Interstate in the Merger and (ii) distribute all of the
outstanding shares of common stock of Interstate (other than shares owned by
Patriot/Wyndham and/or its Affiliates and shares to be purchased by Marriott
and/or its Affiliates) to the holders of certain securities of Patriot and
Wyndham (the "Distribution"); and
WHEREAS, Patriot and Wyndham have transferred or caused to be
transferred prior to the date hereof a portion of the assets and liabilities
required to be transferred to Interstate or the LLC pursuant to the Settlement
Agreement; and
WHEREAS, Patriot and Wyndham intend to transfer or cause to be
transferred on the date hereof the remaining assets and liabilities required to
be transferred to Interstate or the LLC pursuant to the Settlement Agreement via
the transactions (the "Restructuring Transactions") set forth on Annex I hereto.
NOW, THEREFORE, in consideration of the foregoing and the other
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
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Section 1. DEFINITIONS.
Section 1.1 General. As used in this Agreement, capitalized terms
defined immediately after their use shall have the respective meanings thereby
provided and the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
Action: any action, claim, suit, arbitration, inquiry, subpoena,
discovery request, proceeding or investigation by or before any court or grand
jury, any governmental or other regulatory or administrative agency or
commission or any arbitration tribunal.
Affiliate: with respect to any specified person or entity, a person or
entity that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
person or entity; provided, however, that, for purposes of this Agreement, (i)
Patriot/Wyndham and Interstate shall not be deemed to be Affiliates of each
other and (ii) Patriot and Wyndham shall be deemed to be Affiliates of each
other.
Affiliated Group: an affiliated group of corporations within the
meaning of Code section 1504(a) for the taxable period in question.
Agent: American Stock Transfer & Trust Company, the distribution agent
appointed by Patriot/Wyndham to distribute shares of Interstate Common Stock
pursuant to the Distribution.
Assumed Liabilities: collectively, all of the Liabilities and other
obligations of Patriot/Wyndham listed on Annex II hereto.
Books and Records: the books and records of Patriot/Wyndham (or true
and complete copies thereof), including all computerized books and records owned
by Patriot/Wyndham, which relate principally to the Interstate Business.
Code: the Internal Revenue Code of 1986, as amended.
Contributed Assets: collectively, all of the assets and properties of
Patriot/Wyndham identified on Annex III hereto. Certain of the Contributed
Assets will, pursuant to the Restructuring Transactions, be transferred or
assigned to Interstate and then transferred or assigned by Interstate to the
LLC, and certain of the Contributed Assets will be transferred or assigned
directly to the LLC. Notwithstanding the fact that such assets are ultimately
transferred to the LLC (in which Patriot/Wyndham or an Affiliate of
Patriot/Wyndham may own an equity interest) or any other Affiliate of
Interstate, such assets shall be deemed Contributed Assets for all purposes of
this Agreement.
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Conveyancing and Assumption Instruments: collectively, the various
agreements, instruments and other documents to be entered into in order to
effect the transfer to Interstate of the Contributed Assets, and the assumption
by Interstate or the LLC of the Assumed Liabilities, in the manner contemplated
by this Agreement and the Restructuring Memorandum attached as Annex I hereto.
Disclosing party: shall have the meaning set forth in Section 7.5.2
hereof.
Dispute: shall have the meaning set forth in Section 10.1 hereof.
Distribution: the distribution of 92% of the outstanding common stock
of Interstate to the holders of Patriot Securities, in accordance with the
provisions of Section 4.1 hereof, which shall be effective on the Distribution
Date.
Distribution Date: the date as of which the Distribution shall be
effected as determined by Patriot's and Wyndham's respective Boards of
Directors.
Distribution Transactions: shall have the meaning set forth in Section
4.1.1 hereof.
Form S-1: the Registration Statement on Form S-1 filed by Interstate
with the Securities and Exchange Commission to effect the registration of the
distribution of the Interstate Common Stock pursuant to the Securities Act, as
the same may be in effect as of the Distribution Date.
Indemnifiable Losses: with respect to any claim by an Indemnified Party
for indemnification authorized pursuant to Section 5 hereof, any and all losses,
liabilities, claims, damages, obligations, payments, costs and expenses
(including without limitation the costs and expenses of any and all Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and reasonable attorneys' fees and disbursements in connection therewith)
suffered by such Indemnified Party with respect to such claim.
Indemnified Party: any person or entity who is entitled to receive
payment from an Indemnifying Party pursuant to Section 5 hereof.
Indemnifying Party: any party who is required to pay any other person
or entity pursuant to Section 5 hereof.
Indemnity Payment: the amount an Indemnifying Party is required to pay
an Indemnified Party pursuant to Section 5 hereof.
Information: shall have the meaning set forth in Section 7.2 hereof.
Information Statement/Prospectus: the Information Statement/Prospectus
to be sent to the holders of Patriot Securities in connection with the
Distribution.
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Insurance Proceeds: those monies received by an insured from an
insurance carrier or paid by an insurance carrier on behalf of the insured.
Interstate: means Interstate and each of its subsidiaries (immediately
following the Distribution, including the LLC), excluding for all purposes of
this Agreement the Patriot Excluded Knowledge Parties.
Interstate Business: means the business currently conducted by the
entities listed on Annex IV-A hereto, including without limitation, management
of the hotels listed on Annex IV-B hereto pursuant to the existing management
contracts, subject to the addition and subtraction of management contracts since
March 12, 1999.
Interstate Group: for each taxable period beginning on or after the
Distribution Date, the Affiliated Group of which Interstate is the common
parent, or if Interstate is not the common parent of an Affiliated Group, then
Interstate, in each case together with each foreign subsidiary or partnership
owned directly or indirectly by any such member during such period.
Interstate Common Stock: the common stock of Interstate, par value $.01
per share.
Interstate Excluded Knowledge Parties: means Interstate, each
subsidiary of Interstate (immediately following the Distribution, including the
LLC), and each employee and officer of Interstate and of each such subsidiary
immediately following the Distribution (notwithstanding that any such employee
or officer may have been an employee or officer of Patriot or Wyndham prior to
the Distribution).
Interstate Party: shall have the meaning set forth in Section 5.5
hereof.
Interstate's Knowledge: means the knowledge of Interstate, excluding
for all purposes the Patriot Excluded Knowledge Parties.
IRS: the United States Internal Revenue Service or any successor
thereto, including, but not limited to, its agents, representatives and
attorneys.
Liabilities: any and all debts, liabilities and obligations, whether or
not accrued, contingent (known or unknown) or reflected on a balance sheet,
including without limitation those arising under any law, rule, regulation,
Action, order or consent decree of any governmental entity or any judgment of
any court of any kind or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
Merger: shall have the meaning set forth in the first WHEREAS clause
hereof.
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Patriot Excluded Knowledge Parties: means Patriot and Wyndham, each
subsidiary of Patriot and Wyndham (immediately following the Distribution), and
each employee and officer of Patriot and Wyndham and of each such subsidiary
immediately following the Distribution.
Patriot Securities: means, collectively, Patriot/Wyndham Common Stock,
Patriot Series A Preferred Stock, Wyndham Series A and Series B Preferred Stock,
Patriot American Hospitality Partnership, L.P. common and preferred limited
partnership units and Wyndham International Operating Partnership, L.P. common
and preferred limited partnership units (counting, for purposes of this
definition, paired securities as one security).
Patriot's Knowledge: means the knowledge of Patriot/Wyndham, excluding
for all purposes the Interstate Excluded Knowledge Parties.
Patriot/Wyndham: means Patriot and Wyndham and each of their respective
subsidiaries (immediately following the Distribution).
Patriot/Wyndham Common Stock: the common stock of Patriot, par value
$.01 per share, and the common stock of Wyndham, par value $.01 per share,
shares of which are paired and trade together as a single unit.
Patriot/Wyndham Group: with respect to any taxable period, the
corporations that were members of any Affiliated Group of which Patriot, Wyndham
or any of their Affiliates was a member during such period, exclusive of the
corporations that are included in the Interstate Group immediately after the
Distribution Date, together with each foreign subsidiary or partnership owned
directly or indirectly by any such member during such period, other than LLC and
its subsidiaries and partnerships.
Patriot/Wyndham Insurance Policies: all policies and contracts of any
kind pursuant to which insurance carriers provide insurance coverage to
Patriot/Wyndham in respect of claims or occurrences relating to, without
limitation, property damage, business interruption, transit, extended coverage,
fiduciary liability, employee crime, general liability, products liability,
errors and omissions, automobile liability, employer's liability and workers'
compensation.
Patriot/Wyndham Obligations: shall have the meaning set forth in
Section 5.2.1 hereof.
Patriot/Wyndham Party: shall have the meaning set forth in Section 5.5
hereof.
Privilege: shall have the meaning set forth in Section 7.6.1 hereof.
Privileged Information: shall have the meaning set forth in Section
7.6.1 hereof.
Property Taxes: shall have the meaning set forth in Section 11.2.3
hereof.
Receiving party: shall have the meaning set forth in Section 7.5.2
hereof.
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Record Date: the date determined by Patriot/Wyndham's Board of
Directors as the record date for the Distribution.
Related Agreements: the Conveyancing and Assumption Instruments and the
Escrow Agreements.
Restructuring Transactions: those transactions effected in order to
transfer the Contributed Assets to Interstate or the LLC, as set forth on the
Restructuring Memorandum attached as Annex I hereto.
Retained Liabilities: collectively, all of the Liabilities and
obligations of Patriot/Wyndham listed on Annex V hereto.
Securities Act: the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Sprint Contract: shall have the meaning set forth in Section 6.6
hereof.
Straddle Period: shall have the meaning set forth in Section 11.1
hereof.
Taxes: all Federal, state, local and foreign taxes, tariffs and charges
of any nature whatsoever (including all related interest and penalties).
Tax Returns: all returns, declarations of estimated tax payments,
reports, estimates, information returns and statements, including any related or
supporting information with respect to the foregoing, filed or required to be
filed with any governmental authority in connection with the determination,
assessment, collection or administration of Taxes.
Third-Party Claims. shall have the meaning set forth in Section 5.3.1
hereof.
Transaction Taxes: all Taxes (including without limitation all transfer
taxes and recording fees, and all interest and penalties related thereto),
incurred by any member of the Patriot/Wyndham Group or the Interstate Group
incurred as a result of the consummation of the Restructuring Transactions.
Section 2 REORGANIZATION AND RELATED TRANSACTIONS.
Section 2.1 The Reorganization.
Section 2.1.1 Subject to the terms and conditions of this Agreement,
Patriot, Wyndham, Interstate and the LLC shall use their respective best efforts
to cause, on or before the Distribution Date, (a) all of Patriot's and Wyndham's
right, title and interest in and to the Contributed Assets to be conveyed,
assigned, transferred and delivered to Interstate or the
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LLC, and (b) all of Patriot's and Wyndham's duties, obligations and
responsibilities under the Assumed Liabilities to be assumed by Interstate or
the LLC.
Section 2.1.2 Subject to Section 6.3 hereof, to the extent that any
such conveyances, assignments, transfers, deliveries and other transactions
shall not have been so consummated on or before the Distribution Date, Patriot,
Wyndham, Interstate and the LLC shall cooperate to effect such consummation as
promptly thereafter as shall be practicable, it nonetheless being understood and
agreed by Patriot, Wyndham, Interstate and the LLC that no such party shall be
liable in any manner to any person who is not a party to this Agreement for any
failure of any of the transfers contemplated by this Section 2 to be consummated
before, on or after the Distribution Date, other than any liability Patriot may
have to Marriott under the Settlement Agreement.
Section 2.l.3 In furtherance of the transfers and assumptions
contemplated by the foregoing Section 2.1.1 and subject to the terms of Section
5 hereof, Patriot/Wyndham and Interstate, as between the two of them,
acknowledge and agree as follows: (a) Patriot/Wyndham and its Affiliates shall
have no obligation or liability of any kind to Interstate or its Affiliates for
any condition existing at or prior to the Distribution Date or for any conduct,
act or omission by or on behalf of Patriot/Wyndham, its Affiliates or any other
person on, or at any time prior to, the Distribution Date, and Interstate and
its Affiliates shall have no claims, or right to bring a claim or Action,
against Patriot/Wyndham or its Affiliates with respect thereto, including
without limitation any claim or Action arising out of (i) the operation of the
Interstate Business on or before the Distribution Date, (ii) any advice, rights,
products or services made available to the Interstate Business, on or before the
Distribution Date, by Patriot/Wyndham, its Affiliates or any other person, (iii)
the Assumed Liabilities or (iv) the formation of Interstate and its Affiliates;
except for, and to the extent of, any responsibilities specifically retained by
Patriot/Wyndham or any of its Affiliates pursuant to the terms of this Agreement
or any of the Related Agreements; and (b) Interstate and its Affiliates shall
have no obligation or liability of any kind to Patriot/Wyndham or its Affiliates
for any condition existing at or prior to the Distribution Date or for any
conduct, act or omission by or on behalf of Interstate, its Affiliates or any
other person on, or at any time prior to, the Distribution Date, and
Patriot/Wyndham and its Affiliates shall have no claims, or right to bring a
claim or Action, against Interstate or its Affiliates with respect thereto,
including without limitation any claim or Action arising out of the Retained
Liabilities; except for, and to the extent of, any responsibilities specifically
assumed by Interstate or any of its Affiliates pursuant to the terms of this
Agreement or any of the Related Agreements.
Section 2.2 Consideration. In consideration of the conveyance,
assignment, transfer and delivery of the Contributed Assets being made pursuant
to Section 2.1 hereof, Interstate and the LLC agree to assume the Assumed
Liabilities and to issue and Interstate agrees to deliver to the Agent for
delivery to holders of Patriot Securities as of the Record Date certificates
representing the number of shares of Interstate Common Stock provided for in
Section 4.1 hereof.
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Section 2.3 Representations and Warranties.
Section 2.3.1 Patriot/Wyndham represents and warrants that, to
Patriot's Knowledge, assuming that all of the conveyances, assignments,
transfers, assumptions, deliveries and other transactions contemplated by this
Agreement are successfully consummated, the assets and liabilities of Interstate
and its subsidiaries will be as described in the financial statements (including
the pro forma financial data) included in the Form S-1 in all material respects.
Section 2.3.2 Patriot/Wyndham represents and warrants that, to
Patriot's Knowledge, assuming that all of the conveyances, assignments,
transfers, assumptions, deliveries and other transactions contemplated by this
Agreement are successfully consummated, the description of the Interstate
Business set forth under "BUSINESS--General," "--Operations," "--Hotel
Portfolio," "--Facilities" and "--Intellectual Property" in the Form S-1 will be
true and correct in all material respects.
Section 2.3.3 Interstate represents and warrants that, to Interstate's
Knowledge, assuming that all of the conveyances, assignments, transfers,
assumptions, deliveries and other transactions contemplated by this Agreement
are successfully consummated, the assets and liabilities of Interstate and its
subsidiaries will be as described in the financial statements (including the pro
forma financial data) included in the Form S-1 in all material respects.
Section 2.3.4 Interstate represents and warrants that, to Interstate's
Knowledge, assuming that all of the conveyances, assignments, transfers,
assumptions, deliveries and other transactions contemplated by this Agreement
are successfully consummated, the description of the Interstate Business set
forth under "BUSINESS--General," "--Operations," "--Hotel Portfolio,"
"--Facilities" and "--Intellectual Property" in the Form S-1 will be true and
correct in all material respects.
Section 2.3.5 To Patriot's Knowledge, the Contributed Assets are not
subject to any liens, pledges, mortgages, security interests, charges or other
encumbrances at the time of the Distribution, except as disclosed in the Form
S-1, including without limitation, explicit or implicit disclosure in the
financial statements contained in the Form S-1. Patriot/Wyndham has the right,
power and authority to take all actions to be taken by it as contemplated by
this Agreement. Patriot/Wyndham has, and will continue to have at the
Distribution Date, good and marketable title to the Contributed Assets. Subject
to Sections 2.1.2 and 6.3 hereof, on and after the Distribution Date, Interstate
or the LLC, as applicable, will own all of Patriot/Wyndham's right, title and
interest in and to the Contributed Assets. Notwithstanding the foregoing,
Patriot/Wyndham makes no representation or warranty with respect to ownership of
or title to any real property.
Section 2.3.6 To Patriot's Knowledge, since the date of the Merger
there have been no material amendments to or modifications of any management or
franchise agreements relating to the Interstate Business of which Interstate is
or was not aware.
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Section 3 ASSUMPTION AND RETENTION OF LIABILITIES.
Section 3.1 Assumed Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
expressly assumed by Interstate pursuant to this Agreement, the Related
Agreements or any other agreement contemplated by this Agreement, Interstate and
the LLC hereby agree with Patriot/Wyndham to assume, pay, perform and discharge
in due course any and all Assumed Liabilities.
Section 3.2 Retained Liabilities. Upon the terms and subject to the
conditions set forth in this Agreement and in addition to any other Liabilities
otherwise expressly retained by Patriot/Wyndham pursuant to this Agreement, the
Related Agreements or any other agreement contemplated by this Agreement,
Patriot/Wyndham hereby agrees with Interstate and the LLC that Patriot/Wyndham
shall pay, perform and discharge in due course any and all Retained Liabilities.
Section 4 THE DISTRIBUTION.
Section 4.1 The Distribution.
Section 4.1.1 On the Distribution Date, the transactions set forth on
Schedule 4.1.1 hereto (the "Distribution Transactions") shall be effected.
Section 4.1.2 On the Distribution Date, Patriot/Wyndham shall deliver
to the Agent the certificates for 10,000 shares of existing common stock of
Interstate which are owned by Patriot/Wyndham prior to the Distribution Date.
Upon receipt from Patriot/Wyndham or its transfer agent of a certificate as to
the number of Patriot Securities outstanding on the Record Date, Interstate
shall deliver to the Agent, for the benefit of holders of record of Patriot
Securities on the Record Date, a stock certificate representing, in the
aggregate (and rounded down to the nearest whole share), a number of shares
representing one share of Interstate Common Stock for every 30 Patriot
Securities outstanding on the Record Date, and shall instruct the Agent to
distribute as promptly as practicable following the Distribution Date to holders
of record of Patriot Securities on the Record Date, in accordance with the
Distribution Transactions set forth on Schedule 4.1.1, one share of Interstate
Common Stock for every 30 Patriot Securities and cash in lieu of fractional
shares of Interstate Common Stock in the manner provided in Section 4.2 hereof.
Notwithstanding that shares of Interstate Common Stock will be delivered by the
Agent directly to holders of Patriot Securities for convenience only to
facilitate the Distribution Transactions, such shares shall be deemed for all
purposes of this Agreement and otherwise to have been purchased, contributed
and/or distributed in accordance with the Distribution Transactions set forth on
Schedule 4.1.1, and Interstate and LLC agree to cooperate with Patriot/Wyndham
to execute any documentation requested by Patriot/Wyndham in furtherance of this
intention. Interstate agrees to provide to the Agent sufficient certificates in
such denominations as the Agent may request in order to effect the Distribution.
All of the shares of Interstate Common Stock issued in the Distribution shall be
fully paid, nonassessable and free of preemptive rights.
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Section 4.2 Fractional Shares. No certificate or scrip representing
fractional shares of Interstate Common Stock shall be issued as part of the
Distribution and, in lieu of receiving fractional shares, each holder of Patriot
Securities who would otherwise be entitled to receive a fractional share of
Interstate Common Stock pursuant to the Distribution will receive an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
$6.00 by the fraction of a share of Interstate Common Stock to which such holder
would otherwise be entitled.
Section 4.3 Patriot/Wyndham Board Action.
Section 4.3.1 This Agreement and the Related Agreements have been
approved by the Boards of Directors of Patriot and Wyndham and the consummation
of the transactions provided for herein or therein shall only be effected after
the Distribution has been declared by the Boards of Directors of Patriot and
Wyndham and the satisfaction of any other conditions as determined by the Boards
of Directors of Patriot and Wyndham.
Section 4.3.2 The Boards of Directors of Patriot and Wyndham, in their
sole discretion, shall establish the Record Date and the Distribution Date and
all appropriate procedures to be followed by holders of Patriot Securities in
connection with the Distribution.
Section 5 SURVIVAL, INDEMNIFICATION, CLAIMS, AND OTHER
MATTERS.
Section 5.1 Survival of Agreements.
Section 5.1.1 All covenants and agreements of the parties in this
Agreement shall survive the Distribution Date.
Section 5.1.2 Except as specifically provided herein, the provisions of
this Section 5 shall terminate and be of no further force and effect on the
tenth anniversary of the Distribution Date. Such termination shall in no way
limit the obligations of Interstate with respect to the Assumed Liabilities or
the obligations of Patriot/Wyndham with respect to the Retained Liabilities and
the indemnification rights under this Agreement pertaining to the Assumed
Liabilities and the Retained Liabilities, which shall survive indefinitely.
Section 5.2 Indemnification.
Section 5.2.1 Patriot/Wyndham shall indemnify, defend and hold harmless
Interstate, each of its directors, officers, employees and agents and each
Affiliate of Interstate from and against any and all Indemnifiable Losses of
Interstate or any of its Affiliates arising out of or due to, directly or
indirectly, (a) Third-Party Claims in connection with any of the Retained
Liabilities, (b) Third-Party Claims which assert that the information included
in the Information Statement/Prospectus or the Form S-1 under the captions set
forth on Schedule 5.2.1(a) hereto is false or misleading with respect to any
material fact or omits to state any
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material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, (c) Third-Party Claims which assert that Patriot/Wyndham or its
Affiliates failed to perform, or violated, any provision of this Agreement which
is to be performed or complied with by Patriot/Wyndham or its Affiliates, (d)
breaches of this Agreement by Patriot/Wyndham or its Affiliates, (e) the
obligations (the "Patriot/Wyndham Obligations") set forth on Schedule 5.2.1(b)
hereto (but only up to the maximum amounts specified on said Schedule 5.2.1(b)),
(f) any payments the LLC is obligated to make under that certain letter
agreement, dated January 1, 1999, from the LLC (and consented to by IHC Realty
Corporation) addressed to Connecticut General Life Insurance Company regarding
Interstone/CGL (WC) Partners L.P., for so long as the Warner Center Marriott is
the subject of a lease to an Affiliate of Patriot or (g) Third-Party Claims in
connection with the utilization of liquor licenses issued to Interstate or an
Affiliate of Interstate (and the related operation of the bars, lounges and
liquor facilities subject to such liquor licenses) for the benefit of hotels
owned by Patriot/Wyndham and not managed by Interstate, which claims arise
during the period prior to the applicable liquor license being transferred or
assigned to Patriot/Wyndham or an Affiliate of Patriot/Wyndham.
Section 5.2.2 Interstate shall indemnify, defend and hold harmless
Patriot/Wyndham, each of its directors, officers, employees and agents and each
Affiliate of Patriot/Wyndham from and against any and all Indemnifiable Losses
of Patriot/Wyndham or any of its Affiliates arising out of or due to, directly
or indirectly, (a) Third-Party Claims in connection with any of the Assumed
Liabilities, (b) Third-Party Claims which assert that the information included
in the Information Statement/Prospectus or the Form S-1 under the captions set
forth on Schedule 5.2.2 hereto is false or misleading with respect to any
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (c) Third-Party Claims
which assert that Interstate or its Affiliates failed to perform, or violated,
any provision of this Agreement which is to be performed or complied with by
Interstate or its Affiliates, (d) breaches of this Agreement by Interstate or
its Affiliates, (e) Third-Party Claims in connection with the utilization of
liquor licenses issued to Patriot/Wyndham or an Affiliate of Patriot/Wyndham
(and the related operation of the bars, lounges and liquor facilities subject to
such liquor licenses) for the benefit of Interstate and the Interstate Business
for the period from the Distribution Date until the applicable liquor license is
transferred or assigned to Interstate or an Affiliate of Interstate or (f) the
guaranty by Wyndham of Interstate's obligations set forth in three Franchise
Agreements with Holiday Inns (the "Holiday Inns Hotels").
Section 5.2.3 Amounts required to be paid pursuant to this Section 5
are hereinafter collectively called "Indemnity Payments" and are individually
called an "Indemnity Payment." The amount which any party (an "Indemnifying
Party") is required to pay to any other party (an "Indemnified Party") pursuant
to Section 5.2.1 or Section 5.2.2 shall be reduced (including retroactively) by
any Insurance Proceeds or other amounts actually recovered by such Indemnified
Party in reduction of the related Indemnifiable Loss. If an Indemnified Party
shall have received an Indemnity Payment in respect of an Indemnifiable Loss and
shall
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subsequently actually receive Insurance Proceeds or other amounts (such as
judgment or settlement amounts) in respect of such Indemnifiable Loss, then such
Indemnified Party shall pay to such Indemnifying Party a sum equal to the lesser
of the amount of such Insurance Proceeds or other amounts actually received or
the net amount of Indemnity Payments actually received previously. The
Indemnified Party agrees that the Indemnifying Party shall be subrogated to such
Indemnified Party under any insurance policy. In addition, any amount required
to be paid by an Indemnifying Party to an Indemnified Party pursuant to Section
5.2.1 or 5.2.2 of this Agreement shall be net of any actual Tax benefit realized
by the Indemnified Party or its Affiliates as a result of incurring an
Indemnifiable Loss, calculated using the actual statutory rate (or rates, in the
case of an item that affects more than one Tax) applicable to the recipient of
such payment for the relevant year in which the Tax benefit is realized. In lieu
of providing any confidential information necessary for the determination of the
"actual Tax benefit" resulting from the payment of any amount under this
Agreement or any Indemnifiable Loss, Patriot/Wyndham or Interstate, as the case
may be, may provide to the other party a certification of such amount from a
nationally recognized independent certified public accountant, reasonably
acceptable to such other party, which certification shall explain in reasonable
detail the method for determining such amount.
Section 5.2.4 The parties acknowledge that the Restructuring
Transactions have been structured such that the Contributed Assets are
contributed to the LLC in a manner, and by the appropriate entities, so that
following the Restructuring Transactions Patriot/Wyndham or an Affiliate of
Patriot Wyndham will own a 55% economic interest in the LLC and Interstate will
own a 45% economic interest in the LLC. The parties agree that, in the event
that an Indemnity Payment must be made to LLC pursuant to this Section 5.2, such
Indemnity Payment will be made on behalf of Patriot/Wyndham, on the one hand, or
Interstate, on the other hand, by the entity that contributed the asset (or
retained the liability) that gave rise to the obligation to make the Indemnity
Payment (as set forth on the Restructuring Memorandum), so that following the
making of any such Indemnity Payment, the respective ownership percentages in
the LLC will remain as they were prior to the making of such Indemnity Payment,
and Interstate and LLC will cooperate with Patriot/Wyndham to execute any
documentation necessary to effect the foregoing.
Section 5.2.5 PATRIOT/WYNDHAM'S AND INTERSTATE'S RESPECTIVE OBLIGATIONS
PURSUANT TO SECTION 5.2.1(d) AND SECTION 5.2.2(d) SHALL BE LIMITED TO DIRECT AND
ACTUAL DAMAGES, TO THE EXCLUSION OF INCIDENTAL, CONSEQUENTIAL OR SPECIAL
DAMAGES. THIS SECTION 5.2.5 SHALL NOT APPLY TO (a) ANY FAILURE BY INTERSTATE OR
ITS AFFILIATES TO ASSUME, PAY, PERFORM OR DISCHARGE ANY AND ALL ASSUMED
LIABILITIES OR (b) ANY FAILURE BY PATRIOT/WYNDHAM OR ITS AFFILIATES TO PAY,
PERFORM OR DISCHARGE ANY AND ALL RETAINED LIABILITIES OR (c) ANY BREACH BY
PATRIOT/WYNDHAM OR INTERSTATE OF THEIR RESPECTIVE INDEMNITY OBLIGATIONS UNDER
THIS AGREEMENT, INCLUDING THE INDEMNITY OBLIGATIONS SET FORTH IN THIS SECTION 5.
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Section 5.2.6 Indemnification obligations contained elsewhere in this
Agreement shall be subject to the provisions of this Section 5.
Section 5.3 Procedure for Indemnification of Third-Party Claims.
Section 5.3.1 If any party shall receive notice of any claim or Action
brought, asserted, commenced or pursued by any person or entity not a party to
this Agreement (herein referred to as a "Third Party Claim"), with respect to
which any other party is or may be obligated to make an Indemnity Payment, it
shall give such other party prompt written notice thereof (including any
pleadings relating thereto) after becoming aware of such Third Party Claim,
specifying in reasonable detail the nature of the Third Party Claim and the
amount or estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim); provided, however,
that the failure of a party to give notice as provided in this Section 5.3.1
shall not relieve any other party of its indemnification obligations under this
Section 5, except to the extent that such other party is actually prejudiced by
such failure to give notice.
Section 5.3.2 The Indemnifying Party may elect to defend or seek to
settle or compromise any Third Party claim as to which a claim for
indemnification hereunder has been asserted, at the Indemnifying Party's own
expense and by counsel selected by the Indemnifying Party and reasonably
acceptable to the Indemnified Party, by so notifying the Indemnified Party
within thirty (30) days after the Indemnified Party has given notice of the
Third Party Claim in accordance with Section 5.3.1 hereof (or such earlier time
as may be necessary for the Indemnified Party to submit a responsive pleading
required in connection with the Third Party Claim). Unless the Indemnifying
Party fails to assume the defense or to seek to settle or compromise the Third
Party Claim in a timely manner, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense, settlement or compromise
of the Third Party Claim; provided, however, that if, in the reasonable judgment
of the Indemnified Party based on the advice of counsel, a conflict of interest
between the Indemnified Party and the Indemnifying Party exists with respect to
the Third Party Claim, then the Indemnified Party shall have the right to employ
one counsel selected by it and reasonably acceptable to the Indemnifying Party
and, in that event, the reasonable fees and expenses of such separate counsel
shall be paid by the Indemnifying Party. Once the Indemnifying Party has assumed
the defense of any Third Party Claim, it must actively and diligently defend or
seek to settle or compromise the Third Party Claim until conclusion of the
matter, unless the Indemnified Party agrees to the Indemnifying Party's
withdrawal.
Section 5.3.3 If the Indemnifying Party responds to a notice of Third
Party Claim by denying its obligation to indemnify the person or entity claiming
a right of defense and indemnification under this Agreement, or if the
Indemnifying Party fails to defend or seek to settle or compromise such Third
Party Claim in a timely manner, the Indemnified Party shall be entitled to
defend or seek to settle or compromise such Third Party Claim by counsel
selected by it. In addition, if it is later determined, through procedures
referenced in Section
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10 of this Agreement, or by agreement of the parties, that the Indemnifying
Party wrongly denied its indemnification obligation with respect to, or failed
to timely defend or seek to settle or compromise, such claim, then the
Indemnifying Party shall (a) reimburse the Indemnified Party for all costs and
expenses (other than salaries of officers and employees) reasonably incurred by
the Indemnified Party in connection with its defense, settlement or compromise
of the Third Party Claim and (b) be estopped from challenging a judgment, order,
settlement or compromise resolving the Third Party Claim entered into in good
faith by the Indemnified Party (if such claim has been resolved prior to the
conclusion of the proceeding between the Indemnified Party and the Indemnifying
Party). The Indemnifying Party, after initially rejecting a claim for defense or
indemnification by the Indemnified Party, may, at any time prior to the
resolution of the Third Party Claim, assume the defense of or seek to settle or
compromise said claim provided that (i) the Indemnifying Party reimburses the
Indemnified Party for all costs and expenses (other than salaries of officers
and employees) reasonably incurred by the Indemnified Party in connection with
the defense of such claim (including costs incurred in the transition of the
defense from the Indemnified Party to the Indemnifying Party) and (ii) the
assumption of the defense of the Third Party Claim will not prejudice or cause
harm to the Indemnified Party.
Section 5.3.4 With respect to any Third Party Claim relating to any
matter subject to a claim for indemnification hereunder, no party shall enter
into any compromise or settlement or consent to the entry of any judgment which
(a) does not include as a term thereof the giving by the third party of a
release to the Indemnified Party of all further liability in respect of such
Third Party Claim or (b) imposes any obligation on the Indemnified Party without
said Indemnified Party's written consent (which consent shall not be
unreasonably withheld), except an obligation to pay money which the Indemnifying
Party has agreed to pay on behalf of the Indemnified Party. In the event that an
Indemnified Party enters into any such compromise, settlement or consent without
the written consent of the Indemnifying Party (other than as contemplated by
Section 5.3.3 hereof), the entry of such compromise, settlement or consent shall
relieve the Indemnifying Party of its indemnification obligation related to the
Third Party Claim underlying such compromise, settlement or consent.
Section 5.3.5 Upon final judgment, determination, settlement or
compromise of any Third Party Claim, and unless otherwise agreed to by the
parties in writing, the Indemnifying Party shall pay promptly on behalf of the
Indemnified Party, or to the Indemnified Party in reimbursement of any amount
theretofore required to be paid by it, the amount so determined by final
judgment, determination, settlement or compromise. Upon the payment in full by
the Indemnifying Party of such amount, the Indemnifying Party shall succeed to
the rights of such Indemnified Party to the extent not waived in settlement,
against the third party who made such Third Party Claim and any other person who
may have been liable to the Indemnified Party with respect to such Third Party
Claim.
Section 5.3.6 If the Indemnifying Party elects to defend or to seek to
settle or compromise the Third Party Claim, the Indemnified Party shall make
available to the Indemnifying Party any personnel or any books, records or other
documents within its control
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or which it otherwise has the ability to make available that are necessary or
appropriate for such defense, settlement or compromise, and shall otherwise
cooperate in the defense, settlement or compromise of the Third Party Claim;
provided, however, that nothing in this Section 5.3.6 shall be deemed to require
the waiver of any privilege, including attorney-client privilege, or protection
afforded by the attorney work product doctrine. In addition, regardless of the
party actually defending a Third Party Claim for which there is an indemnity
obligation under Section 5.2 hereof, the parties shall give each other regular
status reports relating to such action with detail sufficient to permit the
other party to assert and protect its rights and obligations under this
Agreement.
Section 5.3.7 The provisions of this Section 5.3 shall survive in
perpetuity and shall be the exclusive procedures for any Third Party Claims
subject to the provisions of Section 5.2.1 or 5.2.2 hereof.
Section 5.4 Other Claims. Any claim on account of an Indemnifiable Loss
which does not result from a Third Party Claim shall be asserted by written
notice from the Indemnified Party to the Indemnifying Party. The Indemnifying
Party shall have a period of sixty (60) days (or such shorter time period as may
be required by law as indicated by the Indemnified Party in the written notice)
within which to respond. If the Indemnifying Party does not respond within such
sixty (60) day (or lesser) period, the Indemnifying Party shall be deemed to
have accepted responsibility to make payment and shall have no further right to
contest the validity of such claim. If the Indemnifying Party does respond
within such sixty (60) day (or lesser) period and rejects such claim in whole or
in part, the Indemnified Party shall be free to pursue resolution of the matter
as provided in Section 10 hereof.
Section 5.5 Certain Losses. If the indemnification provided for in
Section 5.2 is unavailable to an Indemnified Party in respect of any
Indemnifiable Loss arising out of or related to information contained in the
Information Statement/Prospectus or the Form S-1, then the Indemnifying Party,
in lieu of indemnifying the Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Indemnifiable
Loss, in such proportion as is appropriate to reflect the relative fault of
Interstate, each of its directors, each of its officers who have signed any
registration statement and each Affiliate of Interstate (an "Interstate Party")
on the one hand and Patriot/Wyndham and each Affiliate of Patriot/Wyndham (a
"Patriot/Wyndham Party") on the other hand in connection with the statements or
omissions which resulted in such Indemnifiable Loss.
Section 5.6 No Third Party Beneficiaries. Except to the extent
expressly provided otherwise in this Section 5, the indemnification provided for
by this Section 5 shall not inure to the benefit of any third party or parties
and shall not relieve any insurer who would otherwise be obligated to pay any
claim of the responsibility with respect thereto or, solely by virtue of the
indemnification provisions hereof, provide any subrogation rights with respect
thereto and each party agrees to waive such rights against the other to the
fullest extent permitted.
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Section 5.7 Named Parties. The parties hereto acknowledge that it may
not be feasible to substitute Interstate (or one of its Affiliates) for
Patriot/Wyndham (or one of its Affiliates) as a named party in Actions, whether
domestic or foreign, in respect of Assumed Liabilities. In such event,
Patriot/Wyndham (or one of its Affiliates) shall remain as a named party, but,
following the Distribution Date, Interstate (or one of its Affiliates) shall
assume the defense of any such Action in accordance with the provisions of
Section 5.3 hereof and Patriot/Wyndham and its Affiliates shall cooperate with
Interstate as contemplated by Section 5.3 and Section 7 hereof.
Section 6 CERTAIN ADDITIONAL MATTERS.
Section 6.1 Conveyancing and Assumption Instruments. In connection with
the transfer, conveyance, assignment and delivery of the Contributed Assets and
the assumption of the Assumed Liabilities contemplated by this Agreement,
Patriot/Wyndham and Interstate agree to execute or cause to be executed by the
appropriate parties and to deliver to each other, as appropriate, the
Conveyancing and Assumption Instruments.
Section 6.2 No Representations or Warranties. Except as provided in
Sections 2.1 and 2.3 hereof, Interstate understands and agrees that
Patriot/Wyndham is not in this Agreement or in any other agreement or document
contemplated by this Agreement, representing or warranting in any way as to the
value or condition of any Contributed Assets, IT BEING UNDERSTOOD THAT ALL SUCH
ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS" and without any representation or
warranty of any kind, express or implied (the implied warranties of
merchantability and fitness for a particular purpose being hereby specifically
disclaimed). Similarly, Interstate understands and agrees that Patriot/Wyndham
is not, in this Agreement or in any other agreement or document contemplated by
this Agreement, representing or warranting in any way that the obtaining of the
consents or approvals, the execution and delivery of any amendatory agreements,
and the making of the filings and applications, in each case contemplated by
this Agreement, shall satisfy the provisions of all applicable laws or
judgments, it being understood and agreed that, subject to Section 6.3 hereof,
Interstate shall bear the economic and legal risk that any necessary consents or
approvals are not obtained or that any requirements of law or judgments are not
complied with. Nothing in this Section 6.2 is intended to or shall modify any
rights or obligations of Patriot/Wyndham or Marriott under the Settlement
Agreement.
Section 6.3 Further Assurances; Subsequent Transfers.
Section 6.3.1 Each of Patriot/Wyndham and Interstate will execute and
deliver such further instruments of conveyance, transfer and assignment and will
take such other actions as each of them may reasonably request of the other in
order to effectuate the purposes of this Agreement and to carry out the terms
hereof. Without limiting the generality of the foregoing, at any time and from
time to time after the Distribution Date, at the request of Interstate and
without the payment of any further consideration, Patriot/Wyndham will execute
and deliver to Interstate or the LLC all other instruments of transfer,
conveyance, assignment and
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confirmation and take such other action as Interstate may reasonably request in
order to more effectively transfer, convey and assign to Interstate or the LLC
and to confirm Interstate's or the LLC's title to all of the Contributed Assets,
to put Interstate or the LLC in actual possession and operating control thereof
and to permit Interstate or the LLC to exercise all rights with respect thereto
(including without limitation rights under contracts and other arrangements as
to which the consent of any required third party to the transfer thereof shall
not have previously been obtained) and Interstate and the LLC will execute and
deliver to Patriot/Wyndham all instruments, undertakings or other documents and
take such other action as Patriot/Wyndham may reasonably request in order to
have Interstate or the LLC fully assume and discharge the Assumed Liabilities
and relieve Patriot/Wyndham of any Liability or obligations with respect thereto
and evidence the same to third parties. The transfers, conveyances and
assignments made, if any, pursuant to this Section 6.3 shall be structured and
effected consistent with the Restructuring Transactions and the parties hereto
will cooperate with each other in executing documentation to effect the
foregoing. Notwithstanding the foregoing, Patriot/Wyndham, Interstate and the
LLC shall not be obligated, in connection with the foregoing, to expend monies
other than reasonable out-of-pocket expenses and attorneys' fees.
Section 6.3.2 Patriot/Wyndham and Interstate will use their respective
reasonable efforts to obtain any consent, approval or amendment required to
novate and/or assign all agreements, leases, licenses and other rights of any
nature whatsoever relating to the Contributed Assets to Interstate or the LLC;
provided, however, that Patriot/Wyndham shall not be obligated to pay any
consideration therefor (except for filing fees and other administrative charges)
to the third party from whom such consents, approvals and amendments are
requested. In the event and to the extent that Patriot/Wyndham is unable to
obtain any such required consent, approval or amendment, then to the extent
feasible and permissible (a) Patriot/Wyndham shall continue to be bound thereby
and (b) Interstate or the LLC shall pay, perform and discharge fully all the
obligations of Patriot/Wyndham thereunder from and after the Distribution Date
and indemnify Patriot/Wyndham for all Indemnifiable Losses arising out of such
performance by Interstate or the LLC. Patriot/Wyndham shall, without the payment
of any further consideration, pay and remit to Interstate or the LLC promptly
any monies, rights and other considerations received in respect of such
performance. Patriot/Wyndham shall exercise or exploit its rights and options
under all such agreements, leases, licenses and other rights and commitments
referred to in this Section 6.3.2 only as reasonably directed by Interstate and
at Interstate's expense. If and when any such consent shall be obtained or such
agreement, lease, license or other right shall otherwise become assignable or
able to be novated, Patriot/Wyndham shall promptly assign and novate all its
rights and obligations thereunder to Interstate or the LLC without payment of
further consideration and Interstate or the LLC shall, without the payment of
any further consideration, assume such rights and obligations. To the extent
that the assignment of any contract or agreement (or their proceeds) pursuant to
this Section 6.3 is prohibited by law or not otherwise obtained, the assignment
provisions of this Section shall operate to create a subcontract with Interstate
or the LLC to perform each relevant unassignable Patriot/Wyndham contract at a
subcontract price equal to the monies, rights and other considerations received
by
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Patriot/Wyndham with respect to the performance by Interstate or the LLC under
such subcontract.
Section 6.3.3 Without limiting the generality of the foregoing Sections
6.2.1 and 6.2.2, Patriot/Wyndham and Interstate agree that, to the extent that
authorizations from the necessary liquor and alcoholic beverage authorities to
permit (i) Interstate or the LLC to utilize all liquor licenses required for the
operation of the Interstate Business and (ii) Patriot/Wyndham to utilize all
liquor licenses required for the operation of the business being retained by
Patriot/Wyndham have not been received on or before the Distribution Date: (a)
Patriot/Wyndham and Interstate or the LLC will as soon as practicable execute
all such forms, applications and other documents required by the applicable
liquor and alcoholic beverage authorities in order that all necessary liquor
licenses may be utilized by Interstate or the LLC in operating the Interstate
Business and Patriot/Wyndham in operating the business which it is retaining;
and (b) Patriot/Wyndham, Interstate and the LLC will cooperate to the extent
reasonably necessary to keep open the bars and lounges and liquor facilities
used in the operation of the Interstate Business and Patriot/Wyndham's business
between the Distribution Date and the time when the requisite liquor license
transfers actually become effective.
Section 6.4 Interstate Officers and Directors. Interstate and
Patriot/Wyndham shall take all actions which may be required to elect or
otherwise appoint, as of or before the Distribution Date, those individuals
designated in the Information Statement/Prospectus to be directors or officers
of Interstate.
Section 6.5 Related Agreements. As of the Distribution Date,
Patriot/Wyndham and Interstate shall, and if applicable shall cause their
Affiliates to, enter into the Related Agreements.
Section 6.6 Joint Purchasing Arrangements. Interstate acknowledges that
Patriot/Wyndham has entered into a Telecommunications Services Term Agreement
with Sprint Communications Company L.P. and ASC Telecom, Inc. (as amended to
date, the "Sprint Contract") and that the terms of the Sprint Contract were
negotiated by Patriot/Wyndham in reliance in part upon use of telephone service
under the Sprint Contract by the hotels operated by the Interstate Business.
Interstate agrees that all hotels operated by the Interstate Business shall be
subject to the terms of the Sprint Contract until October 1, 2001; provided,
however, that if Interstate is requested by a third-party owner to cancel such
Sprint Contract with respect to such owner's hotel(s) (and such owner has the
right to do so under the relevant management contract), then Interstate or its
subsidiary may terminate such contract with respect to such hotel(s) (without
payment of any penalty or fee). Other than the Sprint Contract, there shall be
no cost-sharing, joint purchasing or other material contractual relationships
between Patriot/Wyndham and Interstate or the LLC following the Distribution
Date other than (i) an equity interest in Interstate and the LLC, (ii) a seat on
the board of directors of Interstate and (iii) the ownership by Patriot/Wyndham
of certain hotels managed by the LLC. In accordance with the respective
Management Agreements, Patriot/Wyndham may bind any of the hotels owned by them
and managed by Interstate (or its subsidiaries) with
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any global or master purchasing contracts. With the exception of the Sprint
Contract, all other Patriot/Wyndham purchasing or similar contracts with respect
to the hotels operated by the Interstate Business are terminable by Interstate
and the LLC, and neither Interstate nor the LLC shall have any liability or
obligation in respect of any of Patriot/Wyndham's purchasing or similar
contracts, whether such contracts were entered into before or after the
Distribution Date.
Section 6.7 St. Louis Marriott West. Patriot/Wyndham covenants and
agrees that, after the Distribution Date, it will not exercise any of its
buy/sell rights in respect of its interest in the St. Louis Marriott West if
such exercise could reasonably be anticipated to result in the termination of
Interstate's management contract in respect of the St. Louis Marriott West.
Section 6.8 Divestiture Payments. On the Distribution Date, Patriot
will pay or cause to be paid all amounts not in dispute that are then currently
past due to Marriott or any other franchisor under any franchise or license
agreement for all Patriot-owned hotels to be operated by Interstate or its
subsidiaries.
Section 6.9 Settlement Agreement Provisions. Interstate hereby
acknowledges and agrees that the Sixth Amendment to Settlement Agreement, dated
as of May 14, 1999, among Marriott, Patriot and Wyndham (the "Sixth Amendment")
contemplates a "true-up" following the Distribution of Interstate's working
capital as of April 30, 1999. Accordingly, Interstate hereby covenants and
agrees that:
(i) Interstate will deliver to Patriot and Marriott the Unaudited
Pro Forma Combined Balance Sheet dated as of April 30, 1999
referred to in Section 3(d)3 of the Sixth Amendment within
thirty days of the Distribution Date;
(ii) Interstate will cooperate in good faith with Patriot and
Marriott to resolve any disputes between Patriot and Marriott
with respect to such balance sheet; and
(iii) Interstate will make the payments, if any, to Patriot
described in the Sixth Amendment.
The parties hereto agree that any payments made pursuant to the
"true-up" provision in Section 3(d)3 of the Sixth Amendment represent an
adjustment to the contributions to Interstate pursuant to the Reorganization
Transactions and Interstate agrees to execute any documents requested by Patriot
in furtherance of the foregoing intention.
Section 6.10 Limitation on Claims. Neither Patriot/Wyndham, on the one
hand, nor Interstate, on the other hand, shall be entitled to assert any claim
hereunder (other than under Sections 2.3.2 or 2.3.3) for any misrepresentation
by the other party if the party attempting to assert such claim had knowledge,
on or prior to the Distribution Date, of any facts which should reasonably have
put such asserting party on notice that the alleged misrepresentation was not
true. Any determination hereunder whether Patriot/Wyndham, on the one hand, or
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Interstate, on the other hand, had "knowledge" of particular facts regarding an
alleged misrepresentation shall be made to Patriot's Knowledge, with respect to
Patriot/Wyndham, and to Interstate's Knowledge, with respect to Interstate.
Section 6.11 The Charles. Patriot/Wyndham and Interstate acknowledge
that the equity interests in the Charles Hotel Complex are being contributed to
the LLC subject to an agreement to sell such interests to a third party (such
agreement, together with all other instruments executed or to be executed in
connection with such sale, being collectively referred to herein as the "Charles
Sale Contract"), the LLC has assumed the obligations of the seller under the
Charles Sale Contract and Interstate has guaranteed the performance of the
seller under the Charles Sale Contract. The LLC and Interstate acknowledge that
the sale of the Charles pursuant to the Charles Sale Contract is a material
benefit to the LLC, Interstate and Patriot/Wyndham. Accordingly, the LLC and
Interstate agree that (i) Interstate and the LLC shall in good faith perform
their obligations under the Charles Sale Contract, as the same may be amended
with Patriot/Wyndham's approval (not to be unreasonably withheld or delayed);
(ii) neither Interstate nor the LLC shall enter into any modification or
termination of the Charles Sale Contract, assign or otherwise transfer any of
the rights or interests either of them may have under the Charles Sale Contract,
or waive any rights either of them may have under the Charles Sales Contract, in
each such case without Patriot/Wyndham's prior written approval (not to be
unreasonably withheld or delayed), (iii) Interstate and the LLC shall keep
Patriot/Wyndham informed as to all discussions and negotiations with the
purchase of such interests; and (iv) Patriot/Wyndham shall be entitled to
discuss the status of the transaction and any open issues directly with the
purchaser or its agent or representative (in which case Patriot/Wyndham shall
keep Interstate informed as to such discussions). In addition, if at any time
the Charles Sales Contract terminates, or the purchaser defaults in its
obligation to close the sale thereunder, or it becomes evident that the sale
contemplated thereunder is not going to occur, then Interstate and the LLC agree
that (1) Interstate shall promptly market the sale of such equity interests to
other third parties, and shall use its best efforts to enter into a binding
purchase and sale agreement to sell such equity interests prior to the first
anniversary of the Distribution Date, in which case Patriot/Wyndham shall have
the same rights with respect to such contract and the purchaser thereunder as
the rights described in clauses (i) through (iv) above; (2) Patriot/Wyndham
shall be entitled to participate in the negotiations, and to initiate
negotiations, with any third party interested in acquiring the equity interests
in the Charles; and (3) Patriot/Wyndham shall have reasonable approval rights
over the terms and conditions of any such purchase and sale agreement; and (4)
to the extent that Interstate or the LLC can enter into an agreement to sell the
equity interests in the Charles that puts Interstate and the LLC in
substantially the same position Interstate would have been in had the purchaser
closed on the sale in accordance with the Charles Sale Contract, then at
Patriot/Wyndham's request, Interstate and the LLC shall enter into such an
agreement and in good faith perform their obligations thereunder.
Section 6.12 Holiday Inns. Interstate covenants and agrees that it
shall cooperate with Patriot/Wyndham to remove Wyndham and insert Interstate as
the guarantor for the Franchise Agreements relating to the Holiday Inns Hotels.
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Section 7 ACCESS TO INFORMATION AND SERVICES.
Section 7.1 Provision of Corporate Records. As soon as practicable
after the Distribution Date, Patriot/Wyndham shall deliver to Interstate all
Books and Records in its possession. Such Books and Records shall be the
property of Interstate, but shall be retained and made available readily to
Patriot/Wyndham for review and duplication until the earlier of (a) notice from
Patriot/Wyndham that such records are no longer needed by Patriot/Wyndham or (b)
the eighth anniversary of the Distribution Date.
Section 7.2 Access to Information. From and after the Distribution
Date, Patriot/Wyndham and Interstate shall afford to each other and to each
other's authorized accountants, counsel and other designated representatives
reasonable access and duplicating rights (with copying costs to be borne by the
requesting party) during normal business hours to all books and records and
documents, communications, items and matters to the extent such material is not
subject to a Privilege (as defined in Section 7.6 hereof) that would be waived
by delivery of such material and does not relate to any actual or potential
claim or dispute between the parties to this Agreement or between
Patriot/Wyndham and Marriott or any of its Affiliates (collectively,
"Information") within each other's knowledge, possession or control and relating
to the Contributed Assets, the Interstate Business, the Assumed Liabilities and
the Retained Liabilities, insofar as such access is reasonably required by
Patriot/Wyndham or Interstate, as the case may be (and each party shall use
reasonable efforts to cause persons or firms possessing relevant Information to
give similar access). Information may be requested under this Section 7 for,
without limitation, audit, accounting, claims, Actions, litigation and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations, but not for competitive purposes.
Section 7.3 Production of Witnesses and Individuals. From and after the
Distribution Date, Patriot/Wyndham and Interstate shall each use reasonable
efforts to make available to each other, upon written request, its officers,
directors, employees and agents for fact finding, consultation and interviews
and as witnesses to the extent that any such person may reasonably be required
in connection with any Actions in which the requesting party may from time to
time be involved relating to the conduct of the Interstate Business or
Patriot/Wyndham's other businesses prior to the Distribution Date. Except as
otherwise agreed between the parties, Patriot/Wyndham and Interstate agree to
reimburse each other for reasonable out-of-pocket expenses (but not labor
charges or salary payments) incurred by the other in connection with providing
individuals and witnesses pursuant to this Section 7.3.
Section 7.4 Retention of Records. Except when a longer retention period
is otherwise required by law or agreed to in writing, Patriot/Wyndham and
Interstate shall retain, for a period of at least eight (8) years following the
Distribution Date, all material Information relating to the Interstate Business.
Notwithstanding the foregoing or any other provision hereof, in lieu of
retaining any specific Information, Patriot/Wyndham or Interstate may offer in
writing to deliver such Information to the other and, if such offer is not
accepted within ninety (90) days, the offered Information may be destroyed or
otherwise disposed of at any
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time. If the recipient of such offer shall request in writing prior to the
scheduled date for such destruction or disposal that any of the Information
proposed to be destroyed or disposed of be delivered to such requesting party,
the party proposing the destruction or disposal shall promptly arrange for the
delivery of such of the Information as was requested (at the cost of the
requesting party).
Section 7.5 Confidentiality.
Section 7.5.1 Each of Patriot/Wyndham and Interstate shall, and shall
use its best efforts to cause its officers, employees, agents, consultants,
advisors and Affiliates to, hold in strict confidence and not disclose
confidential information concerning the other party to another person, and to
not use any such confidential information, except as provided herein or unless
compelled to disclose such information by judicial or administrative process or,
in the opinion of counsel, by other requirements of law.
Section 7.5.2 For purposes of this Section 7.5, confidential
information concerning a particular party (referred to herein as the "disclosing
party") shall mean information known by the other party (referred to herein as
the "receiving party") on the Distribution Date and reasonably understood by the
receiving party to be confidential and related to the disclosing party's
business interests, or disclosed confidentially by the disclosing party to the
receiving party after the Distribution Date under the terms and for the purposes
of this Agreement or any of the Related Agreements except for: (a) information
which is or becomes generally available to the public other than as a result of
a disclosure by the receiving party; (b) information learned by the receiving
party on a non-confidential basis for the first time after the Distribution
Date, but prior to any disclosure by the disclosing party; (c) information
developed by the receiving party independent of any confidential information of
the disclosing party which is known by the receiving party on the Distribution
Date or disclosed by the disclosing party thereafter, and (d) information which
becomes available to the receiving party on a non-confidential basis from a
source other than the disclosing party if such source was not subject to any
prohibition against transmitting the information to the receiving party.
Section 7.5.3 Each party shall protect confidential information
concerning the other party by using the same degree of care, but no less than a
reasonable degree of care, to prevent the unauthorized disclosure of the other
party's confidential information as the party uses to protect its own
confidential information of a like nature.
Section 7.5.4 Each party shall use its best efforts to insure that its
officers, employees, agents, consultants, advisors and Affiliates agree to be
bound by the foregoing restrictions on use and disclosure of confidential
information concerning the other party as a condition to receiving such
information; provided, that such party will be responsible for any breach of
such confidentiality provisions by any such person.
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Section 7.6 Privileged Matters.
Section 7.6.1 Patriot/Wyndham, Interstate and the LLC agree to
maintain, preserve and assert all privileges that either party may have,
including without limitation any privilege or protection arising under or
relating to any attorney-client relationship that existed prior to the
Distribution Date ("Privilege" or "Privileges"). Patriot/Wyndham, Interstate and
the LLC shall be entitled in perpetuity to require the assertion or decide
whether to consent to the waiver of any and all Privileges which, in the case of
Interstate or the LLC, relate to the Third-Party Management Business and, in the
case of Patriot/Wyndham, relate to the Retained Liabilities. Patriot/Wyndham,
Interstate and the LLC shall each use the same degree of care as it would with
respect to itself so as not to waive any Privilege which could be asserted by
any other party under applicable law, without the prior written consent of such
other party. The rights and obligations created by this Section 7.6 shall apply
to all information as to which, but for the Distribution, Patriot/Wyndham,
Interstate or the LLC would have been entitled to assert or did assert the
protection of a Privilege ("Privileged Information"), including but not limited
to (a) all information generated prior to the Distribution Date but which, after
the Distribution, is in the possession of any other party or the Affiliates of
any other party, (b) all communications subject to a Privilege occurring prior
to the Distribution Date between counsel for Patriot/Wyndham and any person who,
at the time of the communication, was an employee of Patriot/Wyndham, regardless
of whether such employee is or becomes an employee of Interstate or the LLC, and
(c) all information generated, received or arising after the Distribution Date
that refers or relates to Privileged Information generated, received or arising
prior to the Distribution Date.
Section 7.6.2 Upon the receipt by any party of any subpoena, discovery
or other request which arguably calls for production or disclosure of Privileged
Information of any other party and whenever any party obtains knowledge that any
current or former employee of such party has received any subpoena, discovery or
other request which arguably calls for the production or disclosure of
Privileged Information of any other party, such party shall promptly notify such
other party of the existence of the request and shall provide such other party
with a reasonable opportunity to review the information and to assert any rights
it may have under this Section 7.6 or otherwise to prevent the production or
disclosure of Privileged Information. No party will produce or disclose any
information covered by a Privilege of any other party under this Section 7.6
unless (a) such other party has provided its express written consent to such
production or disclosure or (b) a court of competent jurisdiction has entered a
final, non-appealable order finding that the information is not entitled to
protection under any applicable Privilege.
Section 7.6.3 Patriot/Wyndham's transfer of Books and Records and any
other information to Interstate or the LLC, and each party's agreement to permit
the other parties to possess Privileged Information occurring or generated prior
to the Distribution Date, are made in reliance on each party's agreement, as set
forth in this Section 7.6, to maintain the confidentiality of Privileged
Information and to maintain, preserve and assert all applicable Privileges. The
access to information granted or permitted by this Agreement, the agreement
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to provide witnesses and individuals pursuant to Section 7.3 hereof and the
transfer of Privileged Information to Interstate or the LLC pursuant to this
Agreement shall not be deemed a waiver of any Privilege that has been or may be
asserted under this Section 7.6 or otherwise. Nothing in this Agreement shall
operate to reduce, minimize or condition the rights granted to any party, or the
obligations imposed upon any party, by this Section 7.6.
Section 7.7 Mail and Other Communications. Each of Patriot/Wyndham,
Interstate and the LLC agrees to forward or direct (as appropriate) to the other
parties any mail or other communications intended for such other parties which
is received by it.
Section 7.8 Order of Precedence. To the extent that the provisions of
this Section 7 are inconsistent with the provisions of Section 11 hereof with
respect to the subject matter thereof, the provisions of Section 11 shall
control.
Section 8 EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS.
Section 8.1 Employee and Plan Transfers. From and after the
Distribution Date, Patriot/Wyndham, Interstate and the LLC will take the actions
specified on Annex VI hereto with respect to employees and employee benefit
plans.
Section 8.2 Limitation on Enforcement. This Section 8 is an agreement
solely between Patriot/Wyndham, Interstate and the LLC. Nothing in this
Agreement or any Related Agreement, whether express or implied, confers upon any
employee or former employee of Patriot/Wyndham, Interstate or the LLC or any
other person, any rights or remedies, including without limitation (a) any right
to employment, (b) any right to continued employment for any specified period or
(c) any right to claim any particular compensation, benefit or aggregation of
benefits, of any kind or nature whatsoever.
Section 9 INSURANCE.
Section 9.1 General. Patriot/Wyndham shall keep in effect all policies
under the Patriot/Wyndham Insurance Policies in effect as of the date hereof
insuring the Contributed Assets and operations of the Interstate Business until
the end of the day on which the Distribution occurs, unless Interstate or the
LLC shall have earlier obtained appropriate coverage and notified
Patriot/Wyndham in writing to that effect. Beginning at 12:01 a.m. on the day
following the Distribution Date, Interstate and its Affiliates will cease to be
covered under the Patriot/Wyndham Insurance Policies with respect to any injury,
loss, Liability, damages or expense that is incurred or asserted by a third
party to have been incurred after the Distribution Date in, or in connection
with, the conduct of the Interstate Business or the operation of the Contributed
Assets.
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Section 10 DISPUTE RESOLUTION.
Section 10.1 Binding Arbitration. Except with respect to matters
involving Section 7.6 hereof ("Privileged Matters") and except as may be
expressly provided in any other agreement between the parties entered into
pursuant hereto, if a dispute, controversy or claim (collectively, a "Dispute")
between Patriot/Wyndham and Interstate or any of their respective Affiliates
arises out of or relates to this Agreement, the Related Agreements or any other
agreement entered into pursuant hereto or thereto, including without limitation
the breach, interpretation or validity of any such agreement or any matter
involving an Indemnifiable Loss, Patriot/Wyndham and Interstate agree to use the
following procedures, in lieu of either party pursuing other available remedies
and as the sole remedy, to resolve the Dispute.
Section 10.2 Arbitration.
Section 10.2.1 In the event that one party fails to participate in
mediation, the Dispute may be referred immediately to arbitration and the time
of such failure shall constitute the end of the mediation period. If the parties
are not successful in resolving the Dispute by the end of the mediation period,
then the parties agree to submit the matter to binding arbitration in New York,
New York pursuant to the Commercial Rules of Arbitration of the American
Arbitration Association (the "AAA"), as modified herein, by a sole arbitrator
selected in accordance with the provisions of Section 10.2.2 hereof. In the
arbitration, (a) the parties may require reasonable discovery, pursuant to the
New York Rules of Civil Procedure then in effect, (b) each party shall have the
right to cross-examine witnesses of other parties, (c) testimony shall be
transcribed and (d) any award shall be accompanied by written findings of fact
and statement of reasons. Any arbitration proceeding shall be concluded in a
maximum of sixty (60) days from the commencement of such proceeding. Any
arbitration award shall be final and binding on the parties and judgment may be
entered thereon, upon the application of either party by any court of competent
jurisdiction.
Section 10.2.2 The parties shall have ten (10) days from the end of the
mediation period to agree upon a mutually acceptable neutral person not
affiliated with either of the parties to act as arbitrator. If no arbitrator has
been selected within such time, either party may request the AAA or another
mutually agreed-upon organization to supply within ten (10) days of such request
a list of potential arbitrators with qualifications reasonably required to
settle the dispute. Within five (5) days of each party receiving the list, the
parties shall independently rank the proposed candidates, shall simultaneously
exchange rankings, and shall be deemed to have selected as the arbitrator the
individual receiving the highest combined ranking who is available to serve. If
there is a tie, then the tie shall be broken by lot. If one party shall not
cooperate in the selection of the arbitrator, the other party may solely select
the arbitrator utilizing the procedures set forth in this Section 10.2.2.
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Section 10.2.3 The costs of arbitration shall be apportioned between
Patriot/Wyndham and Interstate as determined by the arbitrator in such manner as
the arbitrator deems reasonable taking into account the circumstances of the
case, the conduct of the parties during the proceeding, and the result of the
arbitration.
Section 10.3 Treatment of Negotiation. All negotiations pursuant to
this Section 10 shall be treated as compromise and settlement negotiations for
purposes of Rule 408 of the Federal Rules of Evidence and comparable state rules
of evidence. All negotiation and arbitration proceedings under this Section 10
shall be treated as confidential information in accordance with the provisions
of Section 7.5 hereof. Any arbitrator shall be bound by an agreement containing
confidentiality provisions at least as restrictive as those contained in Section
7.5 hereof
Section 10.4 Equitable Relief. Nothing contained herein shall preclude
either party from seeking equitable relief to prevent any immediate, irreparable
harm to its interests, including multiple breaches of this Agreement or the
relevant Related Agreement by the other party. Otherwise, these procedures are
exclusive and shall be fully exhausted prior to the initiation of any
litigation. Either party may seek specific enforcement of any arbitrator's
decision under this Section 10. The other party's only defense to such a request
for specific enforcement shall be fraud by or on the arbitrator.
Section 10.5 Consolidation. The arbitrator may consolidate an
arbitration under this Agreement with any arbitration arising under or relating
to the Related Agreements or any other agreement between the parties entered
into pursuant hereto, as the case may be, if the subject of the Disputes
thereunder arise out of or relate essentially to the same set of facts or
transactions. Such consolidated arbitration shall be determined by the
arbitrator appointed for the arbitration proceeding that was commenced first in
time.
Section 11 TAX MATTERS.
Section 11.1 Preparation of Tax Returns. Interstate shall be
responsible for and control the preparation and filing of all Tax Returns with
respect to the Interstate Group. However, with respect to any such Tax Returns
for taxable periods (or portions thereof) that end before or include the
Distribution Date or otherwise reflect Taxes for which Patriot/Wyndham may be
liable under Section 11.2.2, (i) such returns shall be prepared in a manner
consistent with past practice and in a manner that does not distort taxable
income (i.e., by accelerating income to the period prior to the Distribution or
deferring deductions to the period following the Distribution), (ii) a draft of
such Tax Return shall be provided to Patriot/Wyndham for review at least 30 days
prior to the due date for filing thereof, and (iii) no such Tax Return shall be
filed or amended if Patriot or Wyndham reasonably objects in writing within such
30-day period.
Notwithstanding the foregoing, Patriot/Wyndham shall be responsible for and
control the preparation and filing of any such Tax Return relating to a member
of the Interstate Group if
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such Tax Return also includes a member of the Patriot/Wyndham Group; provided
that, with respect to any such Tax Return for a taxable period that begins
before but does not end on the Distribution Date (a "Straddle Period") or any
Tax Return that could affect the taxable income or loss of a member of the
Interstate Group after the Distribution Date, (i) such Tax Return shall be
prepared in a manner consistent with past practice and in a manner that does not
distort taxable income (e.g., by deferring income to the period after the
Distribution or accelerating deductions to the period prior to the
Distribution), (ii) a draft of such Tax Return shall be provided to Interstate
for review at least 30 days prior to the due date for filing thereof and (iii)
no such Tax Return shall be filed or amended if Interstate reasonably objects in
writing within such 30-day period.
Section 11.2 Responsibility for Taxes.
11.2.1 Interstate. Interstate shall be liable for and shall indemnify
and hold harmless the Patriot/Wyndham Group against any Taxes attributable to
any member of the Interstate Group, or otherwise attributable to the Interstate
Business, (i) for any taxable period (or portion thereof) beginning on or after
the Distribution Date, including any liability asserted against any member of
the Patriot/Wyndham Group under the provisions of Treasury Regulations section
1.1502-6 (or any comparable provision of state or local law) for Taxes
attributable to a member of the Interstate Group and (ii) for any taxable period
to the extent such Taxes are taken into account as current liabilities of
Interstate or its Affiliates for purposes of determining working capital on the
Distribution Date; provided however that the indemnity in this Section 11.2.1
shall not apply to Transaction Taxes.
11.2.2 Patriot/Wyndham. Patriot/Wyndham shall be liable for and shall
indemnify and hold harmless the Interstate Group against (i) any Taxes
attributable to any member of the Interstate Group, or otherwise attributable to
the Interstate Business, for any taxable period (or portion thereof) ending
prior to the Distribution Date; (ii) any Transaction Taxes and (iii) any Taxes
attributable to any member of the Patriot/Wyndham Group for any taxable period,
including any liability asserted against any member of the Interstate Group
under the provisions of Treasury Regulations section 1.1502-6 (or any comparable
provision of state or local law) for Taxes attributable to a member of the
Patriot/Wyndham Group.
11.2.3 Allocation of Tax Liabilities. In the case of any Taxes in
respect of a Straddle Period, (i) real, personal property and intangible Taxes
("Property Taxes") allocated and attributable to the period prior to the
Distribution shall be equal to the amount of such Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number of days
during the Straddle Period that are in the period prior to the Distribution and
the denominator of which is the number of days in the Straddle Period, and (ii)
all Taxes other than Property Taxes shall be computed and allocated based on an
actual closing of the books as if the taxable period ended as of the close of
business on the day prior to the Distribution Date (based on the principles set
forth in Sections 706 and 1502 of the Code and the Treasury Regulations
thereunder).
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Section 11.3 Credits; Refunds. The Interstate Group and the
Patriot/Wyndham Group shall each be entitled to prosecute any claims for and
receive the amount or economic benefit of any refund or credit of Taxes that
relate to Taxes for which it is responsible under Section 11.2. Each party
hereto shall, promptly upon receipt thereof, pay to the other party any such
refund or reduction that such other party is entitled to under this Section
11.3, together with any interest related thereto. A refund will be considered to
have been received by the Interstate Group or the Patriot/Wyndham Group, as the
case may be, (i) when received by a member of such Group from the applicable
taxing authority or (ii) on the due date for payment of any Taxes, to the extent
that the amount of such Taxes that any member of such Group would be required to
pay but for such refund is reduced.
Section 11.4 Carrybacks. In no event shall Patriot/Wyndham have any
obligation to pay to Interstate or its Affiliates any amount in respect of a
carryback to a period prior to the Distribution of a net operating loss, unused
credit or similar item.
Section 11.5 Payments. To the extent that a party (or its successor)
(the "Payor") is liable to the other party (or its successor) (the "Payee") for
any amount of Taxes pursuant to Section 11.2, the Payor shall pay such amount to
Payee no later than 10 days after Payee has made written demand therefore. The
Payee shall submit with its written demand a calculation of the amount
requested, showing sufficient detail so as to permit the Payor to understand the
basis of the calculations. Any payment required by this Agreement which is not
made on or before the date provided thereunder shall bear interest after such
date at the rate then in effect for underpayments of Taxes to the IRS.
Patriot/Wyndham's indemnity obligation in respect of Taxes for any
taxable period shall be reduced to reflect the amount of any such Taxes paid by
Patriot/Wyndham, Interstate or their Affiliates on or prior to the Distribution
Date (including by payment of estimated Taxes) for which a refund is not
available. If the amount of such reduction exceeds the amount of
Patriot/Wyndham's indemnity obligation with respect to any Taxes, Interstate
shall pay to Patriot/Wyndham the amount of such excess no later than the date of
filing of the return reflecting the amount of such Taxes. In addition,
Patriot/Wyndham's indemnity obligation shall be increased or decreased, as the
case may be, as necessary to reflect the fact that Interstate is to bear all
taxes, and receive the benefit of any losses, generated on the Distribution
Date, except to the extent such taxes or losses are attributable to the
Restructuring Transactions.
Section 11.6 Tax Contests. Each of Patriot/Wyndham and Interstate shall
promptly notify the other party in writing of any proposed adjustment (and shall
provide all relevant correspondence with respect to a proposed adjustment) to a
Tax Return that could result in a liability to the other party under this
Agreement; provided that the failure of a party to give notice as provided in
this Section 11.6 shall not relieve any other party of its obligations
hereunder, except to the extent that such other party is actually prejudiced by
such failure to give notice. Patriot/Wyndham shall have control of all audits
and tax contests (i) relating to Taxes that it is required to indemnify under
Section 11.2 or (ii) relating to a member of the
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Interstate Group or the operations of the Interstate Business for any taxable
period ending on or prior to the Distribution Date; provided that (x) Interstate
shall have the right to participate at its own expense in any such proceedings
and (y) no such tax contest that could affect the taxable income or loss of the
Interstate Group for periods after the Distribution shall be settled without the
prior written consent of Interstate, which consent shall not be unreasonably
withheld or delayed. Patriot/Wyndham and Interstate shall jointly control any
audit or tax contest relating to Taxes of a member of the Interstate Group for a
Straddle Period; provided that all major decisions shall be made by
Patriot/Wyndham, but no such contest shall be settled without the prior written
consent of Interstate, which consent shall not be unreasonably withheld or
delayed. No Tax contest for a taxable period (or portion thereof) ending on or
prior to the Distribution Date shall be settled without the prior written
consent of Patriot/Wyndham, which consent shall not be unreasonably withheld or
delayed.
Section 11.7 Cooperation. After the Distribution Date, the parties
hereto will cooperate with each other, and will cause their respective
Affiliates, employees, representatives and agents to cooperate, in preparing and
filing all Tax Returns and other reports and documents relating to Taxes,
resolving all disputes and audits relating to Taxes with respect to all taxable
periods, and in any other matters relating to Taxes, including by maintaining
and making available to the other parties other all records relating to Taxes.
Such cooperation will include without limitation (i) providing information and
access to records relevant to Patriot's status as a real estate investment trust
(within the meaning of Section 856 of the Code), (ii) providing prior notice of
and ongoing information reasonably requested by Patriot/Wyndham with respect to
any direct or indirect acquisition by Interstate or its Affiliates of interests
in real property (including leasehold interests), and (iii) permitting access to
Patriot/Wyndham and its representatives and agents in connection with the
analysis of the earnings and profits of Old Interstate prior to its merger into
Patriot. Interstate acknowledges that its personnel prepared Tax Returns and
records and are familiar with issues relating to Old Interstate and its business
prior to and after the Merger, and that Patriot/Wyndham may suffer irreparable
harm without access to and cooperation from employees at Interstate with respect
to tax matters relating to taxable periods before and after the Merger.
Accordingly, Interstate agrees that Patriot/Wyndham shall be entitled on an
ongoing and mutually convenient basis, upon reasonable notice to access to and
cooperation from employees of Interstate and its Affiliates who are familiar
with the operations of and tax matters relating to Old Interstate and its
subsidiaries (including Mauro Macioce and other individuals who may have direct
knowledge of the operations of Old Interstate). Without limiting the generality
of the foregoing, Patriot/Wyndham and Interstate acknowledge that the IRS has
notified Patriot/Wyndham of its intent to conduct an audit of Old Interstate and
its subsidiaries for Tax periods beginning with the taxable year ended December
31, 1996. Interstate agrees that its personnel (including Mauro Macioce) shall
be made available to assist in the audit process, but that the audit will be
supervised and controlled by Patriot/Wyndham.
Section 11.8 Tax Records. All Tax Returns and related information
relating exclusively to the Interstate Business shall be the property of
Interstate; provided that Patriot/Wyndham shall be entitled to copies of or
access to any such Tax Returns or related
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information related to taxable periods (or portions thereof) ending or prior to
the Distribution Date, upon reasonable notice to Interstate. All other Tax
Returns and related information (including Tax returns of Interstate Hotels
Company and its affiliates) shall be the property of Patriot/Wyndham; provided
that to the extent such Tax Returns or information also relates to the
Interstate Business or members of the Interstate Group, Interstate shall be
entitled to copies of or access to such returns or related information upon
reasonable notice to Patriot/Wyndham.
Patriot/Wyndham and Interstate agree to retain all Tax Returns and
related information which might contain information or provide evidence relevant
to the determination of the Tax liability of the Patriot/Wyndham Group or the
Interstate Group or the stockholders of either for any taxable period for a
period of ten years following the end of the latest taxable period to which they
relate, provided that no such records shall be discarded (i) until the
settlement of any ongoing contest relating thereto or (ii) without giving the
other party notice and the opportunity to retain such records.
Section 11.9 Interstate Hotels, LLC. The LLC shall comply, and
Interstate shall cause the LLC to comply, with the provisions of the LLC's
Amended and Restated Limited Liability Company Operating Agreement relating to
Taxes.
Section 11.10 Tax Elections. Except as required by the Code or the
regulations promulgated thereunder, no corporation, partnership or limited
liability company that will become a member of the Interstate Group before or on
the Distribution Date shall make any new election, change any existing election,
change any annual accounting period or adopt or change any accounting method
after May 13, 1999 and before the Distribution Date if any such election,
adoption or change could have the effect of increasing the tax owed by any
member of the Interstate Group on or after the Distribution Date; provided that
this Section 11.10(i) shall not prevent (x) the filing of new elections for
members of the Interstate Group upon the filing of their first applicable Tax
Returns, (y) elections, adoptions or changes made in consultation with
Interstate personnel, or (z) any other elections, adoptions or changes to the
extent that Patriot/Wyndham obtains Interstate's consent, which consent shall
not be unreasonably withheld or delayed. To Patriot's Knowledge, no election,
adoption or change described in the foregoing sentence has occurred since April
30, 1999, except that certain elections, adoptions or changes may have been made
in consultation with Interstate. Notwithstanding the foregoing, the restrictions
set forth in this Section 11.10 shall not apply if the Distribution has not
occurred by September 1, 1999.
Patriot/Wyndham covenants and agrees that no corporation that will
become a member of the Interstate Group on or before the Distribution Date has
made or will make prior to the Distribution Date any election under Section
341(f) of the Code.
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Section 12 MISCELLANEOUS.
Section 12.1 Amendment and Waiver. No amendment of any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by the parties hereto. Any failure of any party to comply
with any obligation, agreement or condition hereunder may only be waived in
writing by the other party but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. No failure by any
party to take any action against any breach of this Agreement or default by the
other party shall constitute a waiver of such party's right to enforce any
provisions hereof or to take any such action.
Section 12.2 Expenses. Except as otherwise provided in this Agreement,
any Related Agreement or any other agreement being entered into by
Patriot/Wyndham and Interstate pursuant to this Agreement, Patriot/Wyndham shall
pay all investment banking, legal, accounting, printing, governmental filing,
listing, distribution agent and similar fees, costs and expenses incurred in
connection with the Distribution (whether or not payable as of the Distribution
Date) and with the consummation of the transactions contemplated by this
Agreement.
Section 12.3 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) on the date of service if served personally on the
party to whom notice is given, (b) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, provided that
telephonic confirmation of receipt is obtained promptly after completion of the
transmission, (c) on the business day after delivery to a nationally recognized
overnight courier service or the Express Mail service maintained by the United
States Postal Service, provided receipt of delivery has been confirmed, or (d)
on the fifth day after mailing, provided receipt of delivery is confirmed, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed and return receipt
requested, to the party as follows:
31
35
If to Patriot/Wyndham, at:
Patriot American Hospitality, Inc.
1950 Stemmons Freeway
Suite 6001
Dallas, Texas 75207
Attn.: Carla S. Moreland
Fax: (214) 863-1986
If to Interstate or the LLC, at:
Interstate Hotels Corporation
680 Andersen Drive, Foster Plaza Ten
Pittsburgh, Pennsylvania 15220
Attn.: Timothy Q. Hudak
Fax: (412) 937-3265
Either party may change its address for receiving notices by written
notice given to the other party in the manner provided above.
Section 12.4 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of Patriot/Wyndham without the approval of Interstate. Except as
set forth in the Settlement Agreement, in the event of such termination, no
party shall have any liability of any kind to any other party. From and after
the Distribution Date, this Agreement may not be terminated.
Section 12.5 Successors and Assigns. This Agreement shall inure to the
benefit of, and be binding upon and enforceable against the respective
successors and assigns of the parties hereto, provided that this Agreement may
not be assigned by either party without the prior written consent of the other
party, and any attempt to assign any rights or obligations hereunder without
such consent shall be void.
Section 12.6 Entire Agreement: Parties in Interest: This Agreement
(including the schedules, annexes and exhibits hereto) comprises the entire
agreement between the parties hereto as to the subject matter hereof and
supersedes all prior agreements and understandings between them relating thereto
and, except as provided in Section 5.2 hereof, is not intended to confer upon
any person other than the parties hereto (including their successors and
permitted assigns) any rights or remedies hereunder.
32
36
Section 12.7 Severability. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application of
such terms or provisions to persons or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby and each term
and provision of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
Section 12.8 Captions. Captions and headings are supplied herein for
convenience only and shall not be deemed a part of this Agreement for any
purpose.
Section 12.9 Annexes, Etc. The Annexes, Schedules and Exhibits shall be
construed with and as part of this Agreement to the same extent as if the same
had been set forth verbatim herein.
Section 12.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Delaware, without giving effect to the principles of conflicts of laws thereof.
Section 12.11 Counterparts. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
33
37
IN WITNESS WHEREOF, Patriot/Wyndham, Interstate and the LLC have caused
this Agreement to be duly executed by their authorized representatives as an
agreement under seal, all as of the day and year first written above.
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ WILLIAM W. EVANS, III
-------------------------------------
Name: William W. Evans, III
Title: President and Chief Operating Officer
WYNDHAM INTERNATIONAL, INC.
By: /s/ WILLIAM W. EVANS, III
-------------------------------------
Name: William W. Evans, III
Title: Executive Vice President
INTERSTATE HOTELS CORPORATION
By: /s/ TIMOTHY Q. HUDAK
-------------------------------------
Name: Timothy Q. Hudak
Title: Senior Vice President and Secretary
INTERSTATE HOTELS, LLC
By Interstate Hotels Corporation, its
Managing Member
By: /s/ TIMOTHY Q. HUDAK
-------------------------------------
Name: Timothy Q. Hudak
Title: Senior Vice President and Secretary
38
Annex I
-------
Restructuring Memorandum
------------------------
DEFINED TERMS:
- - --------------
Newco or IHC Interstate Hotels Corporation
Patriot Patriot American Hospitality, Inc.
REIT OP Patriot American Hospitality Partnership, L.P.
Wyndham Wyndham International, Inc.
Wyndham OP Wyndham International Operating Partnership, L.P.
Interstate Holdings PAH-Interstate Holdings, Inc.
Interstate LLC Interstate Hotels, LLC
PAH-Management PAH-Management Corporation
This section outlines the steps Patriot will take to transfer various
assets to Newco in connection with the spin-off.
I. NORTHRIDGE INSURANCE COMPANY.
----------------------------
A. Wyndham OP contributes its 100 shares of Class A Common Stock (1%
interest) of Northridge Holdings, Inc. to Interstate Holdings.
B. Patriot and Interstate Holdings then contribute to Newco their
respective interests in Northridge Holdings, Inc.
C. Northridge Holdings, Inc. contributes the stock of Northridge
Insurance Company to Interstate LLC.
II. PAH-CROSSROADS HOLDINGS, INC.
----------------------------
A. Patriot purchases from Wyndham OP and REIT OP their 1.01% (102
shares of Class C Common Stock) and 0.99% (100 shares of Class A Common Stock)
interests, respectively, in PAH-Crossroads Holdings, Inc. (valued at $7,285,282,
including the value of the Paired Shares held by Crossroads/Memphis Partnership,
L.P. (at $5,00 per Paired Share) and the value of PAH-Crossroads Member, Inc.),
for $73,581 and $72,124, respectively.
B. PAH-Crossroads Holdings, Inc. is liquidated.
39
C. Following the dissolution of PAH-Crossroads Holdings, Inc. into
Patriot, Crossroads/Memphis Partnership, L.P. distributes its owned 499,979
Paired Shares pro-rata up the ownership chain to Patriot (where they will be
canceled). Wyndham will purchase from Patriot the Wyndham shares.
D. Patriot contributes to Newco a 55% interest in the following assets
previously held by PAH-Crossroads Holdings, Inc.:
(i) 99% interest in Crossroads Future Company, LLC
(ii) 99% interest in Crossroads Memphis Company, LLC
(iii) 16.7671% LP interest in Crossroads/Memphis Partnership, L.P.
(iv) 99% interest in Crossroads Hospitality Tenant Company, LLC
(v) 100% interest in PAH-Crossroads Member, Inc.
(vi) 100% interest in Crossroads/Memphis Financing Corporation
The interests listed in (i) through (vi) above are referred to collectively
herein as the "Crossroads Transferred Assets."
E. Interstate Holdings contributes cash or other property to Newco.
F. Patriot contributes a 45% interest in the Crossroads Transferred
Assets to Interstate Holdings.
G. Wyndham OP contributes cash or other property to Interstate
Holdings.
H. Newco contributes a 55% interest in the Crossroads Transferred
Assets (excluding PAH-Crossroads Member, Inc. and Crossroads/Memphis Financing
Corporation) to Interstate LLC.
I. Interstate Holdings contributes a 45% interest in the Crossroads
Transferred Assets (excluding PAH-Crossroads Member, Inc. and Crossroads/Memphis
Financing Corporation) to Interstate LLC.
J. Interstate Holdings contributes a 45% interest in each of
PAH-Crossroads Member, Inc. and Crossroads/Memphis Financing Corporation to
Newco.
K. Patriot contributes cash or other property to Newco.
L. Interstate LLC contributes the Crossroads Transferred Assets
(excluding PAH-Crossroads Member, Inc. and Crossroads/Memphis Financing
Corporation) to Crossroads Hospitality Company L.L.C.
M. PAH-Interstate Member, Inc. contributes related party accounts
receivable from Interstate LLC in the amount of $47,915 to Crossroads
Hospitality Company L.L.C.
40
III. PAH-MANAGEMENT CORPORATION.
--------------------------
A. PAH Management contributes 100% of the outstanding stock of
PAH-Member, Inc. and the following interests to Interstate Holdings in exchange
for stock (items #1 through #4, collectively, the "PAH-Management Transferred
Assets"):
1. 100% of PAH-Cambridge Holdings, LLC (which
holds a 25% interest in Cambridge Hotel
Associates);
2. 99% of Continental Design & Supplies Company,
LLC;
3. 100% of PAH-Hilltop GP LLC (which holds a 99% general
partner interest in Hilltop Equipment Leasing
Company, L.P.); and
4. the seven Gencom management contracts and the
St. Louis management contract (together, the
"Eight Contracts").
B. Interstate Holdings contributes 100% of PAH-Member, Inc. to Newco.
C. Interstate Holdings then contributes the PAH-Management Transferred
Interests to Interstate LLC.
IV. INTERCARP/CHARLES HOTEL.
-----------------------
A. IHC/Chaz Corporation is liquidated into Patriot, so that Patriot
will own directly a 1% GP interest in Intercarp Limited Partnership.
B. The 1% GP interest in Intercarp Limited Partnership is then
contributed by Patriot to Interstate Holdings.
C. Wyndham OP contributes cash or other property to Interstate
Holdings.
D. Interstate Holdings then contributes the 1% GP interest in Intercarp
Limited Partnership to Interstate LLC.
E. Newco contributes cash or other property to Interstate LLC.
F. PAH-Management contributes a 82.9102% limited partner interest in
Intercarp Limited Partnership to Interstate Holdings.
G. Wyndham OP contributes cash or other property to Interstate
Holdings.
H. Interstate Holdings contributes the 82.9102% interest in Intercarp
Limited Partnership to Interstate LLC.
V. PAH-INTERSTATE MEMBER, INC.
--------------------------
This entity will be contributed by Interstate Holdings to Newco (with a
corresponding contribution to Newco of cash or other property by Patriot).
41
VI. TROY MARRIOTT.
-------------
A. Patriot purchases 100% of the interests in the Troy Marriott
Management Agreement (the "Troy Management Agreement") from CHC REIT Management
Corp. for $250,000.
B. Patriot contributes a 55% interest in the Troy Management Agreement
to Interstate Holdings.
C. Patriot contributes a 45% interest in the Troy Management Agreement
to Newco.
D. Interstate Holdings contributes a 55% interest in the Troy
Management Agreement to Interstate LLC.
E. Newco contributes a 45% interest in the Troy Management Agreement to
Interstate LLC.
VII. CONTRIBUTIONS TO PAH-INTERSTATE HOLDINGS, INC.
---------------------------------------------
A. By Wyndham OP in exchange for 147.58 shares of Class A
Common Stock:
100 shares of Class A Common $202,277.55
Stock (1% interest) of Northridge
Holdings, Inc.
Cash $131,504
Related Party Accounts Receivable $112,721
from Interstate LLC
B. By Patriot in exchange for 3,043.34 shares of Class B
Common Stock:
1% GP interest in Intercarp Limited $229,167
Partnership
45% interest in the Crossroads $2,153,424
Transferred Assets
55% interest in the Troy $137,500
Management Agreement
Related Party Accounts Receivable $6,687,463
from Interstate LLC
C. By PAH-Management in exchange for 11,567.15 shares of Class B
Common Stock:
100% of PAH-Cambridge Holdings $1.00
LLC (which holds a 25% interest in
Cambridge Hotel Associates)
99% of Continental Design & $1,495,266
Supplies Company, LLC
42
100% of PAH-Hilltop GP LLC $999,539
(which hold a 99% general partner
interest in Hilltop Equipment Leasing
Company, L.P.)
the Eight Contracts $13,455,440
100 shares of common stock (100%) $25,099
of PAH Member, Inc. (which holds
1% of Hilltop Equipment Leasing
Company, L.P. and 1% of
Continental Design & Supplies
Company, L.L.C.)
82.9102% LP interest in Intercarp $19,020,833
Limited Partnership
VIII. CONTRIBUTIONS TO NEWCO.
----------------------
A. By Patriot in exchange for 8,837,924 (including the shares
to be returned from the FET counterparties and canceled) shares of Class A
Common Stock:
9,900 shares of Class B Common $20,025,477
Stock (99%) of Northridge Holdings,
Inc.
55% interest in the Crossroads $2,631,964
Transferred Assets
9,900 shares of Old Class B $16,128,159
Common Stock
45% interest in the Troy $112,500
Management Agreement
Cash $6,853,496
Related Party Accounts Receivable $21,709,816
from Interstate LLC
B. By Interstate Holdings in exchange for 60,639 shares (1%) of
Class C Common Stock:
100 shares of Class A Common $202,277.55
Stock (1%) of Northridge Holdings,
Inc.
100% of PAH-Member, Inc. $25,099
100% of PAH-Interstate Member, $107,899
Inc.
100 shares of Old Class A Common $162,911
Stock
43
45% interest in PAH-Crossroads $18,826
Member, Inc.
45% interest in Crossroads/Memphis $0.45
Financing Corporation
Cash $131,504
Related Party Accounts Receivable $47,915
from Interstate LLC
C. By Marriott in exchange for 242,555 shares (4%) of Class
B Common Stock:
Cash $2,120,000
IX. CONTRIBUTIONS TO INTERSTATE LLC.
-------------------------------
A. By Northridge Holdings, Inc.:
100% of the capital stock of $20,227,755
Northridge Insurance Company
B. By Newco (resulting in a collective
45% interests held by Northridge
Holdings, Inc. and Newco):
55% interest in the Crossroads $2,608,954
Transferred Assets (excluding PAH-
Crossroads Member, Inc. and
Crossroads/Memphis Financing
Corporation)
45% interest in the Troy $112,500
Management Agreement
Related Party Accounts Receivable $21,709,816
from Interstate LLC
C. By Interstate Holdings, resulting in a 55% interest in
Interstate LLC:
45% interest in the Crossroads $2,134,598
Transferred Assets (excluding PAH-
Crossroads Member, Inc. and
Crossroads/Memphis Financing
Corporation)
55% interest in the Troy $137,500
Management Agreement
The PAH-Management Transferred $15,940,250
Assets
1% GP interest in Intercarp Limited $229,167
Partnership
44
82.9102% LP interest in Intercarp $19,020,833
Limited Partnership
Related Party Accounts Receivable $6,752,269
from Interstate LLC
X. CONTRIBUTION TO PAH-INTERSTATE MEMBER, INC.
------------------------------------------
A. Newco contributes related party accounts receivable from
Interstate LLC in the amount of $47,915 to PAH-Interstate Member, Inc.
XI. CONTRIBUTION TO NORTHRIDGE HOLDINGS, INC.
----------------------------------------
A. Newco contributes its interest in Interstate LLC into
Northridge Holdings, Inc.
XII. CONTRIBUTIONS TO CROSSROADS HOSPITALITY COMPANY, L.L.C.
------------------------------------------------------
A. By Interstate LLC, the Crossroads Transferred Assets
(excluding PAH-Crossroads Member, Inc. and Crossroads/Memphis
financing corporation), including:
99% interest in Crossroads Future $1,184,383.29
Company, LLC
99% interest in Crossroads Memphis $2,957,389.65
Company LLC
16.7671% LP interest in $601,777.96
Crossroads/Memphis Partnership LP
99% interest in Crossroads $1
Hospitality Tenant Company, LLC
B. By PAH-Interstate Member, Inc.:
Related party accounts receivable $47,915
from Interstate LLC
XIII. MISCELLANEOUS.
-------------
A. Merger of PAH-Member, Inc. and PAH-Crossroads
Member, Inc. into PAH-Interstate Member, Inc. and name change to
Interstate Member, Inc.
45
Annex II
--------
Assumed Liabilities
-------------------
All liabilities and obligations relating to and arising from the
operation of the Interstate Business (except contingent liabilities in existence
on the date hereof which are within Patriot's Knowledge and are not disclosed in
Schedule 5.2.1(b) hereto), whether arising or accruing before or after the
Distribution Date, including but not limited to:
(a) All liabilities and obligations which should be set forth,
reflected, disclosed or reserved for on a combined balance sheet for Interstate
as of the Distribution Date prepared in the same manner as the December 31, 1998
combined balance sheet of Interstate included in the Information
Statement/Prospectus (after giving effect to any pro forma adjustments reflected
or described in the Information Statement/Prospectus);
(b) All liabilities and obligations of Patriot/Wyndham pursuant to,
under or relating to all agreements, contracts and leases of Patriot/Wyndham
relating to the Interstate Business;
(c) All liabilities and obligations being assumed by or agreed to be
performed by Interstate pursuant to any other agreement being entered into in
connection with this Agreement, including without limitation the Related
Agreements;
(d) All liabilities and obligations relating to all Actions relating
principally to or arising principally out of the operations of the Interstate
Business; and
(e) All liabilities and obligations relating to or arising from the
failure or other malfunction of any computer or other electronic system used or
useable in the Interstate Business due or relating to the year 2000.
46
Annex III
---------
Contributed Assets
------------------
1. 100% of the outstanding capital stock of Northridge Holdings, Inc.
2. A 99% membership interest in Crossroads Future Company, L.L.C.
3. A 99% membership interest in Crossroads/Memphis Company, L.L.C.
4. A 99% membership interest in Crossroads Hospitality Tenant Company,
L.L.C.
5. 100% of the outstanding capital stock of PAH-Crossroads Member, Inc.
6. A 16.7671% limited partnership interest in Crossroads/Memphis
Partnership, L.P.
7. 100% of the outstanding capital stock of Crossroads/Memphis Financing
Corporation.
8. 100% of the membership interests in PAH-Hilltop GP, L.L.C.
9. A 99% membership interest in Continental Design & Supplies Company,
L.L.C.
10. 100% of the membership interests in PAH-Cambridge Holdings, L.L.C.
11. 100% of the outstanding capital stock of PAH-Member, Inc.
12. 100% of the outstanding capital stock of PAH-Interstate Member, Inc.
13. A 1% general partner interest in Intercarp Limited Partnership
14. An 82.9102% limited partner interest in Intercarp Limited Partnership
15. Cash in the amount of $6,985,000 and related party accounts receivable
from Interstate Hotels, LLC in the amount of $28,510,000
16. Rights under the Management Agreements relating to the following
hotels:
Chicago Embassy Suites
Phoenix Embassy Suites
Schaumburg Embassy Suites
Denver Hilton
Parsippany Hilton
Lisle Radisson
San Jose Radisson
St. Louis Marriott
Troy Marriott
17. All tangible and intangible assets owned by Patriot/Wyndham relating
principally to the Interstate Business as of the Distribution Date,
including but not limited to:
(a) All assets and properties which should be set forth or
reflected on a combined balance sheet for Interstate as of the
Distribution Date prepared in the same manner as the December
31, 1998 combined balance sheet of Interstate included in the
Information Statement/Prospectus (after giving effect to the
pro forma adjustments reflected or described in the
Information Statement/Prospectus);
(b) All of Patriot/Wyndham's right and interest in, to, under and
relating to all agreements, contracts and leases of
Patriot/Wyndham relating to the Interstate Business;
47
(c) All rights and interests of Patriot/Wyndham in and with
respect to the patents, trademarks, copyrights, trade secrets
and other intellectual property concerning the Interstate
Business;
(d) All of the Books and Records; and
(e) All permits and licenses held by Patriot/Wyndham which are
transferrable and which relate principally to the Interstate
Business.
ANYTHING CONTAINED IN THIS ANNEX III TO THE CONTRARY NOTWITHSTANDING,
CONTRIBUTED ASSETS SHALL NOT INCLUDE:
(i) Cash and cash equivalents, including cash on hand or
in bank accounts, certificates of deposit, commercial
paper and other similar securities or other
marketable securities other than the $6,985,000 cash
payment pursuant to item 15 above;
(ii) Any books and records relating to the Interstate
Business which Patriot/Wyndham is required by law to
retain in its possession; and
(iii) Any right, title or interest of Patriot/Wyndham in
any federal, state or local tax refund (including any
income in respect thereto) relating to the operations
of the Interstate Business prior to the Distribution
Date.
48
Annex IV-A
----------
Entities Comprising the Interstate Business
-------------------------------------------
Interstate Hotels Corporation
IHC II, LLC
Northridge Holdings, Inc.
PAH-Crossroads Member, Inc.
PAH-Interstate Member, Inc.
PAH-Member, Inc.
IHC Services Company, L.L.C.
Crossroads Hospitality Company, L.L.C.
Crossroads Future Company, L.L.C.
Crossroads/Memphis Company, L.L.C.
Crossroads Hospitality Tenant Company, L.L.C.
Crossroads/Memphis Financing Corporation (Special Member)
Crossroads/Memphis Partnership, L.P.
Crossroads/Memphis Financing Company, L.L.C.
Oak Hill Catering Company, Inc.
Equity Bluefield, Inc.
State College BBQ/Concord Joint Venture
CHR Consulting Company, L.L.C.
Colony International Management Company, L.L.C.
Colony de Mexico, S.A. de C.V.
CHR Services Company, L.L.C.
Interstate Hotels, LLC
IHC/Moscow Corporation
PAH-Hilltop GP, LLC
Hilltop Equipment Leasing Company, L.P.
Northridge Insurance Company
Continental Design & Supplies Company, L.L.C.
PAH-Cambridge Holdings, LLC
Cambridge Hotel Associates
Intercarp Limited Partnership*
Charles Sq. Associates; CH&S Ltd.
Colony Hotels and Resorts Company
Crossroads/Memphis Financing II Corporation
Future Financing Member Corporation
Crossroads/Memphis Financing Company II, L.L.C.
Crossroads Future Financing Company, L.L.C.
IHC International Development (U.K.) L.L.C.
* Patriot/Wyndham's interests under contract to be sold
49
Annex IV-B
----------
HOTELS OPERATED BY THE INTERSTATE BUSINESS
------------------------------------------
STATE/ # OF
HOTEL CITY COUNTRY FRANCHISE DATE ROOMS
----- ---- ------- --------- ---- -----
LEXINGTON HOTEL PHOENIX AZ INDEPENDENT Nov-93 180
RADISSON HOTEL LOS ANGELES WESTSIDE CULVER CITY CA RADISSON Jan-98 368
MARRIOTT'S LAGUNA CLIFFS RESORT DANA POINT CA MARRIOTT Oct-94 346
WESTIN BONAVENTURE LOS ANGELES CA WESTIN Dec-95 1,354
ONTARIO AIRPORT MARRIOTT ONTARIO CA MARRIOTT Sep-97 299
AMERISUITES HOTEL ONTARIO ONTARIO CA AMERISUITES Dec-98 128
SAN FRANCISCO MARRIOTT FISHERMAN'S WHARF SAN FRANCISCO CA MARRIOTT Oct-88 285
SAN FRANCISCO HOLIDAY INN GOLDEN GATEWAY SAN FRANCISCO CA HOLIDAY INN Aug-92 498
CLIFFS AT SHELL BEACH RESORT SHELL BEACH CA INDEPENDENT Oct-94 165
WARNER CENTER MARRIOTT WOODLAND HILLS CA MARRIOTT Feb-94 463
TORONTO DELTA MEADOWVALE MISSISSAUGA, CANADA DELTA Feb-96 374
ONTARIO
TORONTO COLONY HOTEL TORONTO, ONTARIO CANADA COLONY Dec-93 717
TRUMBULL MARRIOTT TRUMBULL CT MARRIOTT Dec-85 323
BOCA RATON MARRIOTT BOCA RATON FL MARRIOTT Aug-87 256
FORT LAUDERDALE MARRIOTT NORTH FORT LAUDERDALE FL MARRIOTT Dec-86 321
SHERATON BISCAYNE BAY MIAMI FL SHERATON Oct-86 598
ORLANDO AIRPORT MARRIOTT ORLANDO FL MARRIOTT Nov-88 484
MARRIOTT AT SAWGRASS RESORT PONTE VEDRA FL MARRIOTT Aug-88 510
BEACH
DON CESAR BEACH RESORT ST. PETE BEACH FL INDEPENDENT Dec-92 275
DON CESAR BEACH HOUSE ST. PETE BEACH FL INDEPENDENT Jan-97 70
LAWAI BEACH RESORT KOLOA, KAUAI HI COLONY Jun-94 171
THE CHARLES HOTEL IN HARVARD SQUARE CAMBRIDGE MA INDEPENDENT Feb-85 296
HARBOR VIEW HOTEL EDGARTOWN MA INDEPENDENT Jul-94 124
KELLEY HOUSE EDGARTOWN MA INDEPENDENT Jul-94 53
GAITHERSBURG HILTON GAITHERSBURG MD HILTON Jun-93 301
CHARLOTTE MARRIOTT EXECUTIVE PARK CHARLOTTE NC MARRIOTT Sep-83 297
THE INN AT GREAT NECK GREAT NECK NY INDEPENDENT May-96 85
ROOSEVELT HOTEL NEW YORK NY INDEPENDENT Apr-97 1,033
COLUMBUS EMBASSY SUITES COLUMBUS OH EMBASSY SUITES Jun-98 220
WATERFORD MARRIOTT OKLAHOMA CITY OK MARRIOTT Dec-94 197
PITTSBURGH GREEN TREE MARRIOTT PITTSBURGH PA MARRIOTT Nov-72 467
PITTSBURGH MARRIOTT CITY CENTER PITTSBURGH PA MARRIOTT Jul-96 401
PROVIDENCE MARRIOTT PROVIDENCE RI MARRIOTT Nov-75 345
HOTEL TVERSKAYA MOSCOW RUSSIA COLONY Sep-95 122
MOSCOW MARRIOTT GRAND HOTEL MOSCOW RUSSIA MARRIOTT Aug-97 392
MOSCOW MARRIOTT CITY CENTER MOSCOW RUSSIA MARRIOTT Jan-99 232
MEMPHIS MARRIOTT MEMPHIS TN MARRIOTT Oct-87 320
SEATTLE CROWNE PLAZA SEATTLE WA CROWNE PLAZA Dec-92 415
SCHAUMBURG EMBASSY SUITES SPIN 209
OFF
EMBASSY SUITES PHOENIX NORTH SPIN 314
OFF
EMBASSY SUITES CHICAGO SPIN 358
OFF
SAN JOSE RADISSON AIRPORT PLAZA HOTEL SPIN 185
OFF
LISLE RADISSON SPIN 242
OFF
DENVER HILTON SOUTH SPIN 305
OFF
PARSIPPANY HILTON SPIN 510
OFF
TROY MARRIOTT SPIN 350
OFF
TOTAL PROPERTIES INTERSTATE 46
TOTAL ROOMS INTERSTATE 15,958
HAMPTON INN BIRMINGHAM - MT. BROOK (mgmt 6/25/97) BIRMINGHAM MT. AL HAMPTON INN Aug-97 131
BROOK
HAMPTON INN BIRMINGHAM - VESTAVIA HILLS BIRMINGHAM AL HAMPTON INN Jun-97 123
VESTAVIA HILLS
COMFORT INN ENTERPRISE ENTERPRISE AL COMFORT INN Nov-96 78
COURTYARD BY MARRIOTT GULF SHORES GULF SHORES AL COURTYARD BY Nov-97 92
MARRIOTT
HAMPTON INN NORTH LITTLE ROCK NORTH LITTLE ROCK AR HAMPTON INN Jun-97 123
FLAGSTAFF SUPER 8 MOTEL FLAGSTAFF AZ SUPER 8 Dec-94 86
HOMEWOOD SUITES PHOENIX PHOENIX AZ HOMEWOOD SUITES Nov-96 124
HAMPTON INN SCOTTSDALE-OLD TOWN SCOTTSDALE AZ HAMPTON INN Nov-96 126
RESIDENCE INN BY MARRIOTT TUCSON TUCSON AZ RESIDENCE INN BY Jan-97 128
MARRIOTT
FREMONT HAMPTON INN FREEMONT CA HAMPTON INN Apr-99 100
HAMPTON INN LIVERMORE LIVERMORE CA HAMPTON INN Jun-97 76
HAMPTON INN AURORA AURORA CO HAMPTON INN Jun-97 132
RESIDENCE INN BY MARRIOTT COLORADO SPRINGS NORTH COLORADO CO RESIDENCE INN BY Jan-97 96
SPRINGS MARRIOTT
HAMPTON INN COLORADO SPRINGS COLORADO CO HAMPTON INN Jun-97 128
SPRINGS
DANBURY RADISSON SUITES DANBURY CT RADISSON Dec-98 76
HAMPTON INN MERIDEN MERIDEN CT HAMPTON INN Nov-96 125
HAMPTON INN MILFORD MILFORD CT HAMPTON INN Nov-96 148
COURTYARD BY MARRIOTT ORANGE ORANGE CT COURTYARD BY Sep-97 121
MARRIOTT
HOMEWOOD SUITES HARTFORD/WINDSOR LOCKS WINDSOR LOCKS CT HOMEWOOD SUITES Nov-96 132
HAMPTON INN DESTIN (11/14/96) DESTIN FL HAMPTON INN Jun-97 104
JACKSONVILLE COUNTRY INN & SUITES JACKSONVILLE FL COUNTRY INN & Jun-99 120
SUITES
HAMPTON INN JACKSONVILLE JACKSONVILLE FL HAMPTON INN Nov-96 122
COMFORT INN JACKSONVILLE BEACH JACKSONVILLE FL COMFORT INN Nov-96 177
BEACH
KENDALL RADISSON MIAMI FL RADISSON Feb-99 160
THE CADILLAC HOTEL MIAMI BEACH FL INDEPENDENT Jul-97 271
HAMPTON INN MIAMI-SOUTH BEACH/SURFCOMBER MIAMI BEACH FL INDEPENDENT Dec-97 212
HAMPTON INN SARASOTA SARASOTA FL HAMPTON INN Nov-96 97
50
HOTELS OPERATED BY THE INTERSTATE BUSINESS
------------------------------------------
STATE/ # OF
HOTEL CITY COUNTRY FRANCHISE DATE ROOMS
----- ---- ------- --------- ---- -----
AZURE TIDES INN SARASOTA-LIDO KEY FL INDEPENDENT Dec-95 59
HAMPTON INN ATLANTA - NORTHLAKE ATLANTA GA HAMPTON INN Jun-97 130
AUGUSTA HOMEWOOD SUITES AUGUSTA GA HOMEWOOD SUITES Jul-97 65
HAMPTON INN COLUMBUS AIRPORT COLUMBUS GA HAMPTON INN Nov-96 119
HAMPTON INN SAVANNAH SAVANNAH GA HAMPTON INN Feb-97 129
RESIDENCE INN BY MARRIOTT BOISE BOISE ID RESIDENCE INN BY Apr-98 104
MARRIOTT
HILTON GARDEN INN CHICAGO CHICAGO IL HILTON GARDEN INN Oct-99 357
HAMPTON INN CHICAGO/GURNEE GURNEE IL HAMPTON INN Nov-96 134
HAMPTON INN CHICAGO/NAPERVILLE NAPERVILLE IL HAMPTON INN Nov-96 130
HAMPTON INN INDIANAPOLIS NE INDIANAPOLIS IN HAMPTON INN Nov-96 129
HAMPTON INN KANSAS CITY KANSAS CITY KS HAMPTON INN Jun-97 120
HAMPTON INN OVERLAND PARK OVERLAND PARK KS HAMPTON INN Apr-97 134
HAMPTON INN LOUISVILLE LOUISVILLE KY HAMPTON INN Nov-96 119
COURTYARD BY MARRIOTT WESTBOROUGH WESTBOROUGH MA COURTYARD BY Nov-97 98
MARRIOTT
HAMPTON INN GLEN BURNIE GLEN BURNIE MD HAMPTON INN Nov-96 115
HAMPTON INN ANN ARBOR SOUTH ANN ARBOR MI HAMPTON INN Nov-96 150
HAMPTON INN MADISON HEIGHTS MADISON HEIGHTS MI HAMPTON INN Jun-97 124
HAMPTON INN DETROIT NORTHVILLE MI HAMPTON INN Nov-96 125
HAMPTON INN TRAVERSE CITY TRAVERSE CITY MI HAMPTON INN Nov-96 127
RESIDENCE INN BY MARRIOTT EAGAN EAGAN MN RESIDENCE INN BY Nov-96 120
MARRIOTT
HAMPTON INN ST. LOUIS ST. LOUIS MO HAMPTON INN Jun-97 122
COURTYARD BY MARRIOTT ST. LOUIS ST. LOUIS MO COURTYARD BY Dec-98 122
MARRIOTT
JACKSON SLEEP INN JACKSON MS SLEEP INN May-98 80
FAIRFIELD INN BY MARRIOTT JACKSON JACKSON MS FAIRFIELD INN BY Jan-99 106
MARRIOTT
HAMPTON INN SOUTHAVEN (11/14/96) SOUTHAVEN MS HAMPTON INN Mar-97 86
SOUTHAVEN FAIRFIELD INN BY MARRIOTT SOUTHAVEN MS FAIRFIELD INN BY Jan-99 94
MARRIOTT
VICKSBURG FAIRFIELD INN BY MARRIOTT VICKSBURG MS FAIRFIELD INN BY Jul-95 81
MARRIOTT
HAMPTON INN CHAPEL HILL CHAPEL HILL NC HAMPTON INN Jun-97 122
HAMPTON INN FAYETTEVILLE FAYETVILLE NC HAMPTON INN Nov-96 122
HAMPTON INN GASTONIA GASTONIA NC HAMPTON INN Nov-96 109
THE INN AT WILKSBORO WILKSBORO NC INDEPENDENT Nov-96 101
BROOKSTOWN INN WINSTON-SALEM NC INDEPENDENT Jul-94 71
WINSTON-SALEM INN WINSTON-SALEM NC INDEPENDENT Nov-96 160
RESIDENCE INN BY MARRIOTT OMAHA OMAHA NE RESIDENCE INN BY Nov-96 80
MARRIOTT
RESIDENCE INN BY MARRIOTT PRINCETON PRINCETON NJ RESIDENCE INN BY Sep-97 208
MARRIOTT
HOLIDAY INN SADDLE BROOK SADDLE BROOK NJ HOLIDAY INN Jul-97 144
RESIDENCE INN BY MARRIOTT TINTON FALLS TINTON FALLS NJ RESIDENCE INN BY Nov-96 96
MARRIOTT
HAMPTON INN ALBUQUERQUE ALBUQUERQUE NM HAMPTON INN Nov-99 131
COURTYARD BY MARRIOTT ALBANY ALBANY NY COURTYARD BY Jan-96 78
MARRIOTT
HAMPTON INN ALBANY ALBANY NY HAMPTON INN Nov-96 154
THE PILLARS HOTEL AKA MEDICAL INN BUFFALO BUFFALO NY INDEPENDENT Nov-98 100
CANTON BEST WESTERN UNIVERSITY INN CANTON NY BEST WESTERN Apr-95 102
HOLIDAY INN FISHKILL FISHKILL NY HOLIDAY INN Jan-97 156
HAMPTON INN FISHKILL FISHKILL NY HAMPTON INN Aug-98 156
COMFORT INN MURRAY HILL NEW YORK NY COMFORT INN Nov-95 128
MANHATTAN COURTYARD BY MARRIOTT TIMES SQUARE NEW YORK NY COURTYARD BY Dec-98 244
SOUTH MARRIOTT
HAMPTON INN CLEVELAND DOWNTOWN CLEVELAND OH HAMPTON INN Jun-98 194
HAMPTON INN DUBLIN DUBLIN OH HAMPTON INN Jun-97 123
SHARONVILLE HOMEWOOD SUITES SHARONVILLE OH HOMEWOOD SUITES Apr-98 111
HAMPTON INN CLEVELAND/WESTLAKE WESTLAKE OH HAMPTON INN Nov-96 123
RESIDENCE INN BY MARRIOTT OKLAHOMA CITY OKLAHOMA CITY OK RESIDENCE INN BY Jan-97 135
MARRIOTT
RESIDENCE INN BY MARRIOTT PORTLAND PORTLAND OR RESIDENCE INN BY Apr-98 168
MARRIOTT
CHAMBERSBURG FAIRFIELD INN BY MARRIOTT CHAMBERSBURG PA FAIRFIELD INN BY Aug-96 74
MARRIOTT
PHILADELPHIA HOLIDAY INN AIRPORT PHILADELPHIA PA HOLIDAY INN Oct-97 303
RESIDENCE INN BY MARRIOTT PITTSBURGH AIRPORT PITTSBURGH PA RESIDENCE INN BY May-98 156
MARRIOTT
RESIDENCE INN BY MARRIOTT OAKLAND PITTSBURGH PA RESIDENCE INN BY Nov-99 176
MARRIOTT
HOLIDAY INN EXPRESS PITTSTON PITTSTON PA HOLIDAY INN Nov-97 100
HAMPTON INN SCRANTON SCRANTON PA HAMPTON INN Nov-96 129
HAMPTON INN STATE COLLEGE STATE COLLEGE PA HAMPTON INN Nov-96 120
HAMPTON INN UNIONTOWN UNIONTOWN PA HAMPTON INN Jun-97 86
HOLIDAY INN MT. PLEASANT MT PLEASANT SC HOLIDAY INN Nov-96 158
HAMPTON INN CHARLESTON NORTH SC HAMPTON INN Jun-97 125
CHARLESTON
HAMPTON INN COLUMBIA WEST WEST COLUMBIA SC HAMPTON INN Jun-97 121
HAMPTON INN AND SUITES BARTLETT BARTLETT TN HAMPTON INN AND May-98 125
SUITES
HAMPTON INN NASHVILLE BRENTWOOD TN HAMPTON INN Jun-97 114
HAMPTON INN CHATTANOOGA CHATTANOOGA TN HAMPTON INN Nov-96 168
HAMPTON INN COLLIERVILLE COLLIERVILLE TN HAMPTON INN Mar-97 90
GERMANTOWN HOMEWOOD SUITES (11/14/96) GERMANTOWN TN HOMEWOOD SUITES Jun-97 92
HAMPTON INN KNOXVILLE AIRPORT KNOXVILLE/ALCOA TN HAMPTON INN Nov-96 118
HAMPTON INN MEMPHIS - POPLAR MEMPHIS TN HAMPTON INN Jun-97 126
HAMPTON INN MEMPHIS - SYCAMORE MEMPHIS TN HAMPTON INN Jun-97 117
HAMPTON INN NASHVILLE - BRILEY NASHVILLE TN HAMPTON INN Jun-97 120
HAMPTON INN PICKWICK DAM (11/14/96) PICKWICK DAM TN HAMPTON INN Mar-97 50
HAMPTON INN DALLAS - ADDISON ADDISON TX HAMPTON INN Jun-97 160
HAMPTON INN ARLINGTON SOUTH ARLINGTON TX HAMPTON INN Nov-96 141
HAMPTON INN AUSTIN NORTH AUSTIN TX HAMPTON INN Nov-96 121
AUSTIN DOUBLETREE AUSTIN TX DOUBLETREE CLUB Sep-97 155
HAMPTON INN COLLEGE STATION COLLEGE STATION TX HAMPTON INN Nov-96 135
HAMPTON INN FORT WORTH WEST FORT WORTH TX HAMPTON INN Nov-96 125
HAMPTON INN GARLAND GARLAND TX HAMPTON INN Nov-96 125
HAMPTON INN DALLAS - RICHARDSON RICHARDSON TX HAMPTON INN Jun-97 130
HOMEWOOD SUITES SAN ANTONIO SAN ANTONIO TX HOMEWOOD SUITES Nov-96 123
HAMPTON INN SAN ANTONIO (mgmt 11/14/98) SAN ANTONIO TX HAMPTON INN Apr-98 169
HAMPTON INN NORFOLK NORFOLK VA HAMPTON INN Mar-97 119
51
HOTELS OPERATED BY THE INTERSTATE BUSINESS
------------------------------------------
STATE/ # OF
HOTEL CITY COUNTRY FRANCHISE DATE ROOMS
----- ---- ------- --------- ---- -----
VIRGINIA BEACH DAYS INN AIRPORT VIRGINIA BEACH VA DAYS INN Nov-94 148
POINT PLEASANT ST. THOMAS VIRGIN COLONY Sep-95 110
ISLANDS
RESIDENCE INN BY MARRIOTT BURLINGTON BURLINGTON VT RESIDENCE INN BY Nov-96 96
MARRIOTT
COMFORT INN TROLLEY SQUARE RUTLAND VT COMFORT INN Nov-96 104
GOLDEN EAGLE RESORT STOWE VT COLONY Jun-94 89
STRATTON MOUNTAIN INN STRATTON VT COLONY Jun-94 119
MOUNTAIN
STRATTON VILLAGE LODGE STRATTON VT COLONY Jun-94 91
MOUNTAIN
HAMPTON INN WHITE RIVER JUNCTION WHITE RIVER VT HAMPTON INN Oct-97 96
JUNCTION
HOMEWOOD SUITES SEATTLE SEATTLE WA HOMEWOOD SUITES Aug-98 161
RESIDENCE INN BY MARRIOTT MADISON MADISON WI RESIDENCE INN BY Nov-96 80
MARRIOTT
HAMPTON INN BECKLEY BECKLEY WV HAMPTON INN Nov-96 108
HOLIDAY INN BLUEFIELD BLUEFIELD WV HOLIDAY INN Nov-96 120
HAMPTON INN MORGANTOWN MORGANTOWN WV HAMPTON INN Nov-96 108
HOLIDAY INN OAK HILL OAK HILL WV HOLIDAY INN Nov-96 119
HAMPTON INN SOUTH SAN FRANCISCO May-99 90
HOMEWOOD SUITES ORLANDO Jun-99 252
HOMEWOOD SUITES CHICAGO Jun-99 233
COURTYARD BY MARRIOTT BEECHWOOD SPIN 113
OFF
TOTAL PROPERTIES CROSSROADS 129
TOTAL ROOMS CROSSROADS 16,411
TOTAL PROPERTIES 175
TOTAL ROOMS 32,369
52
Annex V
-------
Retained Liabilities
--------------------
All liabilities and obligations of Patriot/Wyndham and its subsidiaries
(other than Interstate and its subsidiaries, including without limitation, the
LLC), except those set forth on Annex II.
53
Annex VI
--------
Employment and Employee Benefit Plan Matters
--------------------------------------------
From and after the date of the distribution, Patriot/Wyndham,
Interstate and LLC will cooperate, in good faith, with one another to transfer
employees from their respective payrolls and employee benefit plans as of the
dates on which Patriot/Wyndham or LLC cease or assume management of various
hotels in order to avoid any legal or financial liabilities to any of such
entities or their respective subsidiaries and affiliates arising out of such
transfer or the timing thereof.
54
Schedule 4.1.1
--------------
Distribution Transactions
-------------------------
A. Patriot distributes shares of Newco Class A Common Stock to:
1. Paired Share holders
2. Series A Preferred Stock holders
B. Patriot contributes shares of Newco Class A Common Stock and
cash in lieu of fractional shares to REIT OP.
C. REIT OP makes the following distributions:
1. 45,480 shares of Newco Class A Common Stock and $2.33 in
lieu of fractional shares to holders of Class A Preferred
Units (which are paired with Class B Preferred Units of
Wyndham OP)
2. 456,889 shares of Newco Class A Common Stock and $297.81 in
lieu of fractional shares to holders of Common Units.
D. Wyndham purchases from Patriot shares of Newco Class A Common
Stock and distributes these shares to holders of Wyndham Series A and Series B
Preferred Stock.
E. Wyndham OP purchases from Patriot shares of Newco Class A Common
Stock and distributes these shares to holders of Wyndham OP Series A and Series
C Preferred Units.
F. Patriot issues Paired Shares to the forward counterparties in
exchange for shares of Newco Class A Common Stock.
G. Newco purchases for $1 from Patriot 3,239,196 shares of Newco
Class A Common Stock for cancellation.
55
Schedule 5.2.1(a)
-----------------
The information contained under the following captions of the
Information Statement/Prospectus and Form S-1 is subject to the indemnification
provisions of Section 5.2.1 of the Agreement:
INFORMATION STATEMENT/PROSPECTUS COVER PAGE
QUESTIONS AND ANSWERS ABOUT THE SPIN-OFF AND INTERSTATE MANAGEMENT - The
information contained in the first seven questions and answers.
SUMMARY - The Spin-off; Reasons for the Spin-off.
THE SPIN-OFF - Background of the Spin-off; Distribution of Interstate Shares;
Distribution Agreement*, Allocation of Shared Expenses*, Distribution Agent,
Federal Income Tax Consequences of the Spin-off.
- - --------
* Liability to be shared between Patriot/Wyndham, on the one hand, and
Interstate, on the other hand, on a 50/50 basis.
56
Schedule 5.2.1(b)
-----------------
Patriot/Wyndham Obligations
---------------------------
INDEMNITY OBLIGATION OF
PATRIOT/WYNDHAM, INCLUDING
CONTINGENT LIABILITY DESCRIPTION MAXIMUM LIABILITY
- - -------------------- ----------- -----------------
Y2K Non-Compliance Equity Inns DMR survey Patriot to indemnify the LLC
(corporate office) plus remedies for costs and expenses up to
an aggregate of $1,193,500
incurred in connection with
Y2K compliance required
under existing contracts or
leases with Equity Inns
Trezevant litigation Reserve for uninsured Patriot to indemnify the LLC
lawsuit pending on the for costs and expenses up to
date of this Agreement an aggregate of $500,000
incurred in connection with
the Trezevant litigation
General employment Reserves for deductibles Patriot to indemnify the LLC
lawsuits deductible relating to employment- up to an aggregate of
related lawsuits $250,000 for amounts paid
for deductibles relating to
employment-related lawsuits
pending on the date of this
Agreement
Up to $750,000 for Interstate Hotels, LLC Patriot to cause the
unfunded loans relating has committed to fund non-managing member to
to the Marriott Grand preopening costs in the contribute to the LLC its
Hotel, Moscow, Russia form of loans up to a pro rata portion (up to
predetermined maximum $412,500) if and to the
amount extent Interstate
contributes its pro rata
portion
Loan Forgiveness under Certain employees have Patriot to indemnify for any
Employment Agreements options for up to 90 days losses incurred by
following the Interstate as a result of
Distribution Date (the forgiveness of employee
"Free Look Period") to loans due to elections to
elect to leave Interstate. leave Interstate during the
These employees are Free Look Period, up to $1.5
entitled to forgiveness of million
outstanding loans
57
Schedule 5.2.2
--------------
The information set forth below is subject to the indemnification
provisions of Section 5.2.2 of the Agreement:
All information contained in the Information Statement/Prospectus and
Form S-1 other than the information contained under the captions set forth on
Schedule 5.2.1(a); provided, that the information set forth under "THE
SPIN-OFF--Distribution Agreement" and "--Allocation of Shared Expenses" shall be
shared between Patriot/Wyndham, on the one hand, and Interstate, on the other
hand, on a 50/50 basis.