Exhibit 99.4
EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
BETWEEN
HOST MARRIOTT CORPORATION
AND
HOST MARRIOTT SERVICES CORPORATION
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS........................................................ 1
1.01 Definitions........................................................ 1
Aggregate Spread................................................... 1
Aggregate Value.................................................... 1
Code............................................................... 1
Collective Bargaining Agreement.................................... 2
Commission......................................................... 2
Common Stock....................................................... 2
(i) Employer Common Stock....................................... 2
(ii) HMC Common Stock............................................ 2
(iii) Host Marriott Services Common Stock......................... 2
Company Contribution............................................... 2
1993 HMC Comprehensive Stock Plan.................................. 2
Host Marriott Services Comprehensive Stock Plan.................... 2
Conversion Award................................................... 2
Current Plan Year.................................................. 2
Cut-off Date....................................................... 2
Deferred Compensation Plan......................................... 3
(i) HMC Deferred Compensation Plan.............................. 3
(ii) HMC Executive Deferred Compensation Plan.................... 3
(iii) Host Marriott Services Corporation Executive Deferred
Compensation Plan................................................. 3
Distribution Agreement............................................. 3
Distribution Date.................................................. 3
Employee........................................................... 3
(i) HMC Terminee................................................ 3
(ii) Retained Employee........................................... 3
(iii) Retained Individual......................................... 3
(iv) Host Marriott Services Individual........................... 4
(v) Host Marriott Services Employee............................. 4
(vi) Host Marriott Services Terminee............................. 4
(vii) Marriott International Employee............................. 4
ERISA.............................................................. 4
Existing HMC Stock Option.......................................... 4
Nonqualified Stock Option.......................................... 4
HMC Closing Stock Price............................................ 4
HMC Corporation.................................................... 4
HMO................................................................ 5
IRS................................................................ 5
2
Marriott International Distribution................................ 5
Medical/Dental Plan................................................ 5
(i) HMC Medical/Dental Plans.................................... 5
(ii) Host Marriott Medical/Dental Plan........................... 5
(iii) Host Marriott Services Medical/Dental Plan.................. 5
Plan............................................................... 5
Post-Conversion Stock Price........................................ 5
Profit Sharing Plan................................................ 5
(i) Host Marriott Profit Sharing Plan........................... 6
(ii) Host Marriott Corporation (HMC) Retirement Plan............. 6
(iii) Host Marriott Services Profit Sharing Plan.................. 6
Qualified Beneficiary.............................................. 6
(i)HMC Qualified Beneficiary...................................... 6
(ii)Current Qualified Beneficiary................................. 6
(iii)Host Marriott Services Qualified Beneficiary................. 6
Restricted Stock Measurement Date.................................. 6
Retained Business.................................................. 6
Service Credit..................................................... 6
Host Marriott Services Business.................................... 7
Stock Purchase Plan................................................ 7
Subsidiary......................................................... 7
(i) Retained Subsidiary......................................... 7
(ii) Host Marriott Services Subsidiary........................... 7
Welfare Plan....................................................... 7
1.01 Certain Constructions.............................................. 7
1.02 Schedules, Sections................................................ 7
1.03 Survival........................................................... 7
ARTICLE II EMPLOYEE BENEFITS.................................................. 7
2.01 Employment......................................................... 7
(a) Allocation of Responsabilities on Distribution Date........... 7
(b) Service Credits............................................... 8
(i) Distribution Date Transfers.............................. 8
(ii) Post-Distribution Date Terminations...................... 8
3
2.02 Profit Sharing Plans............................................... 8
(a) Sponsorship of Host Marriott Profit Sharing Plan............. 8
(b) Establishment of New Host Marriott Profit Sharing Plan....... 8
(c) Obligation to Make Company Contribution...................... 9
(d) Adjustment Made to Account Balances.......................... 9
(e) Transfer and Acceptance of Account Balances.................. 9
(f) HMC to Provide Information................................... 9
(g) Regulatory Filings........................................... 9
2.03 Deferred Compensation Plans........................................ 10
(a) Host Marriott Services Deferred Compensation Plans........... 10
(b) HMC Deferred Compensation Plans.............................. 10
2.04 Other Retirement Plans............................................. 10
2.05 Stock Plans........................................................ 11
(a) Host Marriott Comprehensive Stock Plan....................... 11
(b) Host Marriott Services Comprensive Stock Plan................ 11
(c) Effect of the Distribution on Awards Made Prior to the
Cut-off Date............................................... 11
(i) Restricted Stock......................................... 11
(ii) Deferred Stock........................................... 12
(iii) Substitution of Stock Options............................ 13
(iv) Adjustment of Option Price............................... 13
(v) Adjustment of Number of Shares Covered by Options........ 14
(vi) Limitation on Adjustments................................ 14
2.06 Stock Purchase Plan................................................ 14
2.07 Medical/Dental Plan Liability and Coverage......................... 15
(a) Liability for Claims.......................................... 15
(b) Continuation Coverage Administration.......................... 15
2.08 Vacation and Sick Pay Liabilities.................................. 16
(a) Division of Liabilities....................................... 16
(b) Funded Reserves............................................... 16
4
2.09 Preservation of Right To Amend or Terminate Plans.................. 16
2.10 Notice............................................................. 16
2.11 Payroll Reporting and Withholding.................................. 17
(a) Form W-2 Reporting............................................ 17
(b) Forms W-4 and W-5............................................. 17
(c) Garnishments, Tax Levies, Child Support Orders, Medical Child
Support Orders, and Wage Assignments....................... 17
(d) Authorizations for Payroll Deductions......................... 17
ARTICLE III LABOR AND EMPLOYMENT MATTERS....................................... 18
3.01 Separate Employers................................................. 18
3.02 Employment Policies and Practices.................................. 18
3.03 Collective Bargaining Agreements................................... 18
3.04 Claims............................................................. 19
(a) Scope......................................................... 19
(b) Employment-Related Claims..................................... 19
(c) Obligation to Indemnify....................................... 19
(d) Pre-Distribution Claims....................................... 19
(e) Distribution and Other Joint Liability Claims................. 19
(f) Post-Distribution Employment-Related Claims................... 20
3.05 Funding of Union Plans............................................. 20
3.06 Notice of Claims................................................... 20
3.07 Assumption of Unemployment Tax Rates............................... 20
3.08 Intercompany Service Charge........................................ 20
3.09 Warn Claims........................................................ 21
3.10 Employees on Leave of Absence...................................... 21
3.11 No Third-Party Beneficiary Rights.................................. 21
3.12 Attorney-Client Privilege.......................................... 21
5
ARTICLE IV DEFAULT............................................................ 21
4.01 Default............................................................ 21
4.02 Force Majeure...................................................... 21
ARTICLE V MISCELLANEOUS...................................................... 22
5.01 Relationship of Parties............................................ 22
5.02 Access to Information: Cooperation................................. 22
5.03 Assignment......................................................... 22
5.04 Headings........................................................... 22
5.05 Severability of Provisions......................................... 22
5.06 Parties Bound...................................................... 22
5.07 Notices............................................................ 22
5.08 Further Action..................................................... 23
5.09 Waiver............................................................. 23
5.10 Governing Law...................................................... 23
5.11 Consent to Jurisdiction............................................ 23
5.12 Entire Agreement................................................... 23
6
EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS
ALLOCATION AGREEMENT
THIS EMPLOYEE BENEFITS & OTHER EMPLOYMENT MATTERS ALLOCATION AGREEMENT
("Agreement") is made and entered into as of December 29, 1995, by and between
HOST MARRIOTT CORPORATION, a Delaware corporation ("HMC"), and HOST MARRIOTT
SERVICES CORPORATION, a Delaware corporation ("Host Marriott Services").
RECITALS
WHEREAS, subject to certain conditions, HMC intends to pay a special dividend
to the holders of HMC Common Stock on a one share-for-five share basis,
consisting of all outstanding shares of Host Marriott Services common stock
(the "Distribution"); and
WHEREAS, in connection with said special dividends, HMC and Host Marriott
Services have entered into a Distribution Agreement (the "Distribution
Agreement") dated as of December 29, 1995; and
WHEREAS, pursuant to the aforesaid Distribution Agreement HMC and Host Marriott
Services have agreed to enter into an agreement allocating responsibilities
with respect to employee compensation, benefits, labor and certain other
employment matters pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, HMC and Host Marriott Services agree as follows:
ARTICLE 1
DEFINITIONS
1.01 Definitions. As used in this Agreement, the following terms shall
have the meanings indicated below:
Aggregate Spread: the difference between the exercise price of an Existing
HMC Stock Option and the HMC Closing Stock Price, multiplied by the number of
shares underlying such Existing HMC Stock Option remaining unexercised on the
Cut-off Date.
Aggregate Value: the number of shares of HMC Common Stock reserved for a
holder of a deferred award of HMC Common Stock under the HMC Comprehensive
Stock Incentive Plan as of the Cut-off Date, multiplied by the HMC Closing
Stock Price.
Code: the Internal Revenue Code of 1986, as amended, or any successor
legislation.
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Collective Bargaining Agreement: any collective bargaining agreement or
other labor agreement to which HMC or any of its subsidiaries or affiliates was
a party on or before the Cut-off Date.
Commission: the Securities and Exchange Commission.
Common Stock: the common stock of HMC or Host Marriott Services, as more
specifically described below:
(i) Employer Common Stock: HMC Common Stock in the case of Retained
Employees and HMC Terminees and Host Marriott Services Common Stock in the case
of Host Marriott Services Employees; or
(ii) HMC Common Stock: the common stock, par value $1 per share, of HMC
after the Distribution Date; or
(iii) Host Marriott Services Common Stock: the common stock, par value $1
per share, of Host Marriott Services.
Company Contribution: the Company Contribution of HMC under the HMC Profit
Sharing Plan (as provided in the Host Marriott Profit Sharing Plan document),
as may be supplemented in the sole and absolute discretion of the HMC Board of
Directors.
1993 HMC Comprehensive Stock Incentive Plan: a stock-based incentive
compensation Plan providing awards of stock options, deferred stock and
restricted stock maintained for Employees of HMC and their beneficiaries
adopted in 1993 and continued pursuant to Section 2.05(a).
Host Marriott Services Comprehensive Stock Plan: the Host Marriott Services
Comprehensive Stock Plan adopted by Host Marriott Corporation as sole
shareholder of Host Marriott Services on November 2, 1995.
Conversion Award: an award of Common Stock or of an option to acquire Common
Stock made to a Host Marriott Services Individual or a Retained Individual to
reflect the effect of the Distribution on awards of HMC Common Stock or
Existing HMC Stock Options held on the Cut-off Date, in accordance with Section
2.05.
Current Plan Year: the plan year or fiscal year, whichever is applicable
with respect to any Plan, during which the Distribution occurs.
Cut-off Date: the date immediately preceding the Distribution Date.
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Deferred Compensation Plan: a plan of deferred compensation that is not tax-
qualified under Section 401(a) of the Code and that is maintained for Employees
of HMC or Host Marriott Services and their beneficiaries, as described below:
(i) HMC Deferred Compensation Plan: the new 1995 Executive Deferred
Compensation Plan to be established by HMC to accrue benefits for Retained
Employees after the Cut-off Date;
(ii) Host Marriott Corporation Executive Deferred Compensation Plan: the
current Deferred Compensation Plan, adopted as of October 8, 1993, through
which eligible executives of HMC or members of HMC's Board of Directors may
defer current compensation for retirement or other purposes, and which serves
as the means by which amounts that would otherwise exceed certain limitations
for contributions to the tax-qualified Host Marriott Corporation Profit
Sharing, Retirement and Savings Plan are credited and automatically deferred;
or
(iii) Host Marriott Services Corporation Executive Deferred Compensation
Plan: the Host Marriott Corporation Executive Deferred Compensation Plan that
is assumed, renamed, and continued by Host Marriott Services after the
Distribution Date.
Distribution Agreement: the agreement described in the second recital of
this Agreement.
Distribution Date: the date on which the Distribution occurs.
Employee: an individual who, on the Distribution Date, is identified as
being in any of the following categories:
(Host Marriott Corporation Categories of Employees)
(i) HMC Terminee: any individual formerly employed in any Retained Business
of HMC or of any Subsidiary of HMC who terminated such employment prior to the
Distribution Date, including, but not limited to, any HMC Employee who has
retired from a Retained Business prior to the Distribution Date; or
(ii) Retained Employee: any individual who is an Employee of HMC or any
Retained Subsidiary on the Distribution Date; or
(iii) Retained Individual: any individual who (i) is a Retained Employee,
or (ii) is, as of the Cut-off Date, a Host Marriott Terminee whose last
employment with HMC or a Retained Subsidiary was with a Retained Business or
any Retained Subsidiary, or (iii) is a beneficiary of any individual described
in clause (i) or (ii).
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(Host Marriott Services Categories of Employees)
(iv) Host Marriott Services Terminee: any individual formerly employed by
any Host Marriott Services Business or any subsidiary of Host Marriott Services
who terminated such employment prior to the Distribution Date, including, but
not limited to, any Host Marriott Services Employee who has retired from a Host
Marriott Services Business prior to the Distribution Date; or
(v) Host Marriott Services Employee: any individual who is an Employee of
Host Marriott Services or any Host Marriott Services Subsidiary on the
Distribution Date; or
(vi) Host Marriott Services Individual: any individual who (i) is a Host
Marriott Services Employee, or (ii) is, as of the Cut-off Date, a Host Marriott
Services Terminee whose last employment with HMC or a Retained Subsidiary was
with a Host Marriott Services Business or any Host Marriott Services
Subsidiary, or (iii) is a beneficiary of any individual specified in clause (i)
or (ii).
(Marriott International Employees)
(vii) Marriott International Employee: any individual who is an employee
of Marriott International or any Marriott International Subsidiary on the
Distribution Date or any individual formerly employed by Marriott International
who terminated such employment prior to the Distribution Date, including, but
not limited to, any Marriott International Employee who has retired from
Marriott International prior to the Distribution Date.
ERISA: the Employee Retirement Income Security Act of 1974, as amended, or
any successor legislation.
Existing HMC Stock Option: an unexercised option to purchase HMC Common
Stock held by a grantee on the Cut-off Date pursuant to the 1993 HMC
Comprehensive Stock Plan.
Nonqualified Stock Option: an award under the 1993 HMC Comprehensive Stock
Incentive Plan of a stock option which is not qualified as an incentive stock
option under Code Section 422.
HMC Closing Stock Price: the New York Stock Exchange closing price per share
for HMC Common Stock on the Distribution Date, trading regular way, with a due
▇▇▇▇ for the special dividend of Host Marriott Services Common Stock to be made
in connection with the Distribution.
HMC Corporation: Host Marriott Corporation, a Delaware corporation.
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HMO: any health maintenance organization organized under 42 U.S.C. 300e-9,
or a state health maintenance organization statute that provides medical
services for Retained Individuals or Host Marriott Services Individuals under
any Plan.
IRS: the Internal Revenue Service.
Marriott International Distribution: the 1993 Marriott Corporation
distribution to its shareholders of the capital stock of its wholly owned
subsidiary Marriott International, Inc.
Medical/Dental Plan: a Welfare Plan providing health benefits to Employees
of HMC and their dependents, or to Employees of Host Marriott Services and
their dependents, as described below:
(i) Host Marriott Corporation (HMC) Medical/Dental Plans: the
Medical/Dental Plans to be established by HMC in accordance with Section 2.07;
or
(ii) Host Marriott Medical/Dental Plans: the existing Host Marriott
Corporation Medical/Dental Plans maintained prior to the Distribution primarily
for the benefit of Retained Employees and Host Marriott Services Employees and
continued by Host Marriott Services after the Distribution Date pursuant to
Section 2.07.
(iii) Host Marriott Services Medical/Dental Plans: the Host Marriott
Medical/Dental Plans as renamed and continued after the Distribution Date by
Host Marriott Services.
Plan: any plan, policy, arrangement, contract or agreement providing
compensation or benefits for any group of Employees or former employees or for
any individual Employee or former employee, or the dependents or beneficiaries
of any such Employee or former Employee, whether formal or informal or written
or unwritten, and including, without limitation, any means, whether or not
legally required, pursuant to which any benefit is provided by an employer to
any Employee or former employee or the beneficiaries of any such Employee or
former employee. The term "Plan" as used in this Agreement does not include any
contract, agreement or understanding entered into by HMC prior to the
Distribution or by HMC or Host Marriott Services after the Distribution and
relating to settlement of actual or potential employee-related litigation
claims.
Post-Conversion Stock Price: the per share price of Host Marriott Services
Common Stock or HMC Common Stock on the Distribution Date, as determined in
accordance with Section 2.05(c) based on the HMC Closing Stock Price and the
when-issued closing price of Host Marriott Services Common Stock on the
New York Stock Exchange on the Distribution Date.
Profit Sharing Plan: a defined contribution plan maintained pursuant to
Sections 401(a) and 401(k) of the Code for Employees and their beneficiaries,
as specifically identified using one of the categories described below:
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(i) Host Marriott Profit Sharing Plan: the Host Marriott Corporation
Employees' Profit Sharing, Retirement and Savings Plan and Trust, as in effect
prior to the Distribution Date; or
(ii) Host Marriott Corporation (HMC) Retirement Plan: the Host Marriott
Corporation (HMC) Retirement Plan and Trust, to be adopted by HMC and effective
on the Distribution Date; or
(iii) Host Marriott Services Profit Sharing Plan: the Host Marriott
Services Corporation Employees' Profit Sharing, Retirement and Savings Plan and
Trust (known prior to the Distribution Date as the Host Marriott Corporation
Employees' Profit Sharing, Retirement and Savings Plan and Trust), as in effect
on the Distribution Date as continued by Host Marriott Services after the
Distribution.
Qualified Beneficiary: an individual (or dependent thereof) who either (1)
experiences a "qualifying event" (as that term is defined in Code Section
4980B(f)(3) and ERISA Section 603) while a participant in any Medical/Dental
Plan, or (2) becomes a "qualified beneficiary" (as that term is defined in Code
Section 4980B(g)(1) and ERISA 607(3)) under any Medical/Dental Plan, and who is
included in any one of the following categories:
(i) HMC Qualified Beneficiary: any person who becomes a Qualified
Beneficiary on or after the Distribution Date under any HMC Medical/Dental
Plan; or
(ii) Current Qualified Beneficiary: any person who, on or before the Cut-
off Date, was a Qualified Beneficiary under any Host Marriott Corporation
Medical/Dental Plan; or
(iii) Host Marriott Services Qualified Beneficiary: any person who
becomes a Qualified Beneficiary after the Cut-off Date under any Host Marriott
Services Medical/Dental Plan.
Restricted Stock Measurement Date: the earlier of (1) the first trading day
following 270 days after the Distribution Date or (2) September 30, 1996; or
(3) such earlier date as the Company shall permit in the "Consent to
Redenominate" between the Company and the holder of restricted stock.
Retained Business: any business or operation of HMC or its Subsidiaries
which is, pursuant to the Distribution Agreement defined as the Real Estate
Group Business, or which is to be conducted, following the Distribution, by HMC
or any Retained Subsidiary.
Service Credit: the period taken into account under any Plan for purposes of
determining length of service or plan participation to satisfy eligibility,
vesting, benefit accrual and similar requirements under such Plan.
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Host Marriott Services Business: any business or operation of HMC or its
Subsidiaries which is, pursuant to the Distribution Agreement defined as the
Operating Group Business, or which is to be conducted, following the
Distribution, by Host Marriott Services or any Host Marriott Services
Subsidiary.
Stock Purchase Plan: a stock-based Plan meeting the requirements of Section
423 of the Code, maintained for Employees of HMC or Host Marriott Services.
Subsidiary: any corporation, including each of the following categories:
(i) Retained Subsidiary: any subsidiary of HMC, except Host Marriott
Services and the Host Marriott Services Subsidiaries; or
(ii) Host Marriott Services Subsidiary: each of the Transferred
Subsidiaries as defined in the Distribution Agreement and all other
Subsidiaries of Host Marriott Services as defined in the Distribution Agreement
at the time of the Distribution.
Welfare Plan: any Plan which provides medical, health, disability, accident,
life insurance, death, dental or any other welfare benefit, including, without
limitation, any post-employment benefit.
1.01 Certain Constructions. References to the singular in this Agreement
shall refer to the plural and vice-versa and references to the masculine shall
refer to the feminine and vice-versa.
1.02 Schedules, Sections. References to a "Schedule" are, unless otherwise
specified, to one of the Schedules attached to this Agreement, and references
to a "Section" are, unless otherwise specified, to one of the Sections of this
Agreement.
10.3 Survival. Obligations described in this Agreement shall remain in
full force and effect and shall survive the Distribution Date.
ARTICLE II
EMPLOYEE BENEFITS
2.01 Employment.
(a) Allocation of Responsibilities on Distribution Date. On the
Distribution Date, except to the extent retained or assumed by HMC under this
Agreement or any other agreement relating to the Distribution, Host Marriott
Services shall retain or assume, as the case may be, responsibility as employer
for the Host Marriott Services Employees. On the Distribution Date, except to
the extent retained or assumed by Host Marriott Services under this Agreement
or any
13
other agreement relating to the Distribution, HMC shall retain or assume, as
the case may be, responsibility as employer for the Retained Employees. The
assumption or retention of responsibility as employer by HMC or Host Marriott
Services described in this Section 2.01 shall not, of itself, constitute a
severance or a termination of employment under any plan of severance or of
income extension maintained by HMC or Host Marriott Services, and no such
severance, separation or termination shall be deemed to occur.
(b) Service Credits.
(i) Distribution Date Transfers. On the Distribution Date, for purposes of
determining Service Credits under any Plans, HMC shall credit each Retained
Employee and Host Marriott Services shall credit each Host Marriott Services
Employee with such Employee's Service Credits and original hire date as are
reflected in the HMC payroll system records. Such Service Credits and hire date
shall continue to be maintained as described herein for as long as the Employee
does not terminate employment.
(ii) Post-Distribution Date Terminations. Subject to the provisions of
ERISA, Host Marriott Services may, in the case of Host Marriott Services
Employees, and HMC may, in the case of Retained Employees, each in its sole
discretion, make such decisions as it deems appropriate with respect to
determining Service Credits for such Employees who terminate employment from
the other company after the Distribution Date.
2.02 Profit Sharing Plans.
(a) Sponsorship of Host Marriott Profit Sharing Plan. Effective as of the
Distribution Date, Host Marriott Services shall adopt and assume sponsorship of
the Host Marriott Corporation Profit Sharing Plan. Further, effective as of the
Distribution Date, the Host Marriott Services Board of Directors shall ratify
the following actions taken with respect to the Host Marriott Profit Sharing
Plan by the HMC Board of Directors in a timely manner: (i) ratify adoption of
the Host Marriott Profit Sharing Plan by Host Marriott Services, and (ii)
change the name of the Host Marriott Profit Sharing Plan to the Host Marriott
Services Corporation Employees' Profit Sharing, Retirement and Savings Plan and
Trust.
(b) Establishment of the Host Marriott Corporation (HMC) Retirement
Plan. Effective as of the Distribution Date, HMC shall take, or cause to be
taken, all action necessary and appropriate to establish and administer a new
Plan named the Host Marriott Corporation (HMC) Retirement Plan and Trust in the
form approved by the Host Marriott Corporation Board of Directors. HMC shall
provide benefits under such Host Marriott Corporation (HMC) Retirement Plan
after the Distribution Date for all Retained Employees who, immediately prior
to the Distribution Date, were participants in or otherwise entitled to
benefits under the Host Marriott Profit Sharing Plan. The Plan shall be
intended to qualify for tax-favored treatment under Sections 401(a) and 401(k)
of the Code and to be in compliance with the requirements of ERISA.
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(c) Obligation to Make Company Contribution. HMC is responsible for HMC's
obligation to make payment of Company Contributions under the Host Marriott
Profit Sharing Plan in accordance with the terms and conditions of the Host
Marriott Profit Sharing Plan, and the Company Contribution to the Host Marriott
Corporation Profit Sharing Plan for the current 1995 Plan Year shall be paid in
accordance with the provisions of the Plan document and applicable law.
(d) Adjustment Made to Account Balances. The plan administrator of the Host
Marriott Profit Sharing Plan shall adjust the account balances of all
participants entitled under such Plan to Company Contributions and forfeitures
for the Current Plan Year to reflect such Company Contributions and
forfeitures.
(e) Transfer and Acceptance of Account Balances. As soon as practicable
after the Distribution Date, Host Marriott Services shall cause the trustees of
the Host Marriott Services Profit Sharing Plan to transfer to the trustee or
other funding agent of the Host Marriott Corporation (HMC) Retirement Plan the
amounts (in cash, securities, other property or a combination thereof)
acceptable to the HMC administrator or Trustee representing the account
balances of all Retained Individuals, and HMC shall credit the accounts of such
individuals under the Host Marriott Corporation (HMC) Retirement Plan with said
amounts. Each such transfer shall comply with Section 414(l) of the Code and
the requirements of ERISA and the regulations promulgated thereunder. HMC shall
cause the trustees or other funding agent of the Plan to accept the plan-to-
plan transfer from the Host Marriott Services Profit Sharing Plan trustees, and
to credit the accounts of such Retained Individuals under the Host Marriott
Corporation (HMC) Retirement Plan with amounts transferred on their behalf.
(f) HMC to Provide Information. HMC shall provide Host Marriott Services,
as soon as practicable after the Distribution Date (with the cooperation of
Host Marriott Services to the extent that relevant information is in the
possession of Host Marriott Services or a Host Marriott Services Subsidiary,
and in accordance with Section 5.02), with a list of Retained Individuals who,
to the best knowledge of HMC, were participants in or otherwise entitled to
benefits under the Host Marriott Profit Sharing Plan on the Cut-off Date,
together with a listing of each participant's Service Credits under such Plan
and a listing of each such Retained Individual's account balance thereunder.
HMC shall, as soon as practicable after the Distribution Date and in accordance
with Section 5.02, provide Host Marriott Services with such additional
information in the possession of HMC or a Retained Subsidiary (and not already
in the possession of Host Marriott Services or a Host Marriott Services
Subsidiary) as may be reasonably requested by Host Marriott Services and
necessary for Host Marriott Services to administer effectively the Host
Marriott Services Profit Sharing Plan.
(g) Regulatory Filings. Host Marriott Services and HMC shall, in connection
with the plan-to-plan transfer described in Section 2.02(f), cooperate in
making any and all appropriate filings required by the Commission or the IRS,
or required under the Code, ERISA, or any applicable securities laws and the
regulations thereunder, and take all such actions as may be
15
necessary and appropriate to cause such plan-to-plan transfer to take place as
soon as practicable after the Distribution Date or otherwise when required by
law. Further, the parties shall each seek favorable IRS determination letters
to the effect that the Host Marriott Services Profit Sharing Plan and the Host
Marriott Corporation (HMC) Retirement Plan, as organized, satisfy all
qualification requirements under Section 401(a) and 401(k) of the Code, and the
transfers described in Section 2.02(f) shall take place as soon as practicable.
Such transfers may take place pending issuance of favorable determination
letters, upon receipt of an opinion of counsel reasonably satisfactory to both
Host Marriott and Host Marriott Services that the aforesaid Plans so qualify,
or can be made to so qualify by retroactive amendment, and that the transfers
will not adversely affect the qualified status of either Plan or decrease the
accrued benefits of any participant.
2.03 Deferred Compensation Plans.
(a) Host Marriott Services Deferred Compensation Plans. Effective as of the
Distribution Date, Host Marriott Services or a Host Marriott Services
Subsidiary shall assume or retain sponsorship of the Host Marriott Corporation
Executive Deferred Compensation Plan. Effective as of the Distribution Date,
HMC's Board of Directors, acting on behalf of HMC as sole shareholder of Host
Marriott Services, shall restate the Host Marriott Corporation Executive
Deferred Compensation Plan to change the name to the Host Marriott Services
Corporation Executive Deferred Compensation Plan, and to provide future
deferred compensation benefits thereunder accruing after the Cut-off Date for
all Host Marriott Services Employees who are admitted to participation therein
on or after the Distribution Date. Host Marriott Services shall be responsible
for all liabilities and obligations of HMC relating to Host Marriott Services
Individuals accrued through the Cut-off Date with respect to the Host Marriott
Corporation Executive Deferred Compensation Plan, along with earnings required
to be credited to account balances included therein.
(b) HMC Deferred Compensation Plans. HMC shall adopt a new plan named the
Host Marriott Corporation (HMC) Executive Deferred Compensation Plan. HMC shall
thereafter (1) provide similar deferred compensation opportunities to Retained
Individuals as shall have been provided to participants in the HMC Executive
Deferred Compensation Plan prior to the Distribution Date of Host Marriott
Services; and (2) shall assume all liabilities and obligations of HMC relating
to Retained Individuals accrued through the Cut-off Date with respect to the
Host Marriott Corporation Executive Deferred Compensation Plan, along with
earnings required to be credited to account balances included therein. The
foregoing shall be subject to the requirements of ERISA and the Code.
2.04 Other Retirement Plans.
As of the Distribution Date, Host Marriott Services shall assume or continue
the sponsorship and responsibility and the associated liabilities (including
any and all contributions required thereunder) for the retirement plans listed
on Schedule R, and HMC shall assume or continue the sponsorship and
responsibility and the associated liabilities for the plans listed on
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Schedule RT, except that Host Marriott Services shall retain liability for
employees in the plans assumed by HMC (see Schedule RT) who are actively
employed with the Services Business as of the Distribution Date. Nothing in
this section is intended to create any requirement that either Host Marriott
Services or HMC continue Plans listed in Schedule R or RT that have been
terminated.
2.05 Stock Plans.
(a) Host Marriott Comprehensive Stock Incentive Plan. HMC shall continue
the 1993 HMC Comprehensive Stock Incentive Plan. All awards under the 1993 HMC
Comprehensive Stock Incentive Plan will continue to be denominated in HMC
Common Stock. HMC shall continue to reserve those shares already reserved under
the 1993 HMC Comprehensive Stock Plan, including those awards held by certain
Marriott International Employees which are denominated in shares of HMC Common
Stock and were granted prior to or in connection with the Marriott
International Distribution. Additionally, HMC, after the Distribution, will
cause to be reserved any additional shares identified for reservation
thereunder to the extent authorized by the shareholders. In addition, HMC shall
retain all obligations with respect to, and administer under the 1993 HMC
Comprehensive Stock Incentive Plan, any Conversion Awards denominated in HMC
Common Stock after the Distribution as described in Section 2.05(c).
(b) Host Marriott Services Comprehensive Stock Plan. As soon as practicable
after the date hereof and effective as of the Distribution Date, Host Marriott
Services shall take, or cause to be taken, all action necessary and appropriate
to ratify the adoption of the Host Marriott Services Comprehensive Stock Plan,
and to provide Conversion Awards of Host Marriott Services Common Stock or Host
Marriott Services Stock Options for all Host Marriott Services Individuals, in
accordance with Section 2.05(c). All awards under the Host Marriott Services
Comprehensive Stock Plan will be denominated in Host Marriott Services Common
Stock. Host Marriott Services will reserve as shares under the Host Marriott
Services Comprehensive Stock Plan, 6.5 million shares of Host Marriott Services
Common Stock identified for reservation thereunder, to the extent authorized by
HMC, its sole shareholder, prior to the Distribution Date. Any such shares not
used to adjust outstanding awards pursuant to Section 2.05(c) will be available
for future awards to Host Marriott Services Individuals. Host Marriott Services
shall assume all obligations with respect to, and shall administer any
Conversion Award denominated in Host Marriott Services Common Stock under the
Host Marriott Services Comprehensive Stock Plan under the terms governing such
awards.
(c) Effect of the Distribution on Awards Made Prior to the Cut-off Date.
(i) Restricted Stock: After the Distribution Date, the grantee of each
restricted share of HMC Common Stock awarded under the HMC Comprehensive Stock
Incentive Plan as of the Cut-off Date shall retain such share, and shall
receive as part of the Distribution one restricted share of Host Marriott
Services Common Stock for each five restricted shares of HMC Common Stock
awarded under the HMC Comprehensive Stock Plan as of the Distribution Date. For
the Retained Employees and HMC Terminees and Marriott International Employees,
the
17
restricted shares of Host Marriott Services Common Stock will be subject to
restrictions identical to those applicable to the underlying restricted shares
of HMC Common Stock. For Host Marriott Services Employees and Host Marriott
Services Terminees, all restrictions will be replaced with restrictions for the
benefit of Host Marriott Services. Restricted shares of Host Marriott Services
Common Stock awarded as part of the Distribution shall be released from
restrictions at the same time and on the same schedule as the shares of HMC
Common Stock retained, under the terms of the restrictions to which the
grantee's award under the 1993 HMC Comprehensive Stock Incentive Plan were
subject, except that: (1) release of such restricted shares shall be contingent
upon a finding by the President (or other equivalent or higher officer) of HMC
that a grantee who is a Retained Employee has satisfied conditions for such
release; (2) release of such shares shall be contingent upon a finding by the
President (or other equivalent or higher officer) of Host Marriott Services
that a grantee who is a Host Marriott Services Employee has satisfied
conditions for such release; or (3) release of such restricted shares shall be
contingent upon a finding by the President (or other equivalent or higher
officer) of Marriott International that a grantee who is a Marriott
International Employee has satisfied conditions for such release.
After the Distribution, with respect to Host Marriott Services Employees and
only upon obtaining the consent of such Host Marriott Services Employees,
outstanding awards of restricted shares of non-Employer Common Stock will be
redenominated into restricted shares of Employer Common Stock as follows: (1)
restricted shares of Host Marriott Services Common Stock will be converted to a
number of restricted shares of HMC Common Stock equal to the market value, on
the Restricted Stock Measurement Date, of the restricted shares of Host
Marriott Services Common Stock exchanged therefor; and (2) restricted shares of
HMC Common Stock will be converted to a number of restricted shares of Host
Marriott Services Common Stock equal to 115% of the market value, on the
Restricted Stock Measurement Date, of the restricted shares of HMC Common Stock
exchanged therefor. Such exchange of HMC restricted shares for Host Marriott
Services restricted shares at 115% of market is subject to opinion of counsel
that the exchange is in compliance with all applicable laws and does not result
in adverse tax consequences to HMC or Host Marriott Services.
(ii) Deferred Stock: HMC Retained Employees and Host Marriott Services
Employees with Deferred Stock Bonus Award balances denominated in HMC stock
shall have their accounts adjusted to reflect shares of both companies as
follows--one additional share of Host Marriott Services will be reserved for
every five shares of HMC.
Any Marriott International Employee that is a grantee of an award of
deferred stock denominated in shares of HMC Common Stock granted prior to or in
connection with the Marriott International Distribution will have the number of
HMC shares reserved for such grantees on the Cut-off Date multiplied by the HMC
Closing Stock Price to determine the Aggregate Value. The Aggregate Value shall
then be divided by the Post-Conversion Stock Price for HMC Common Stock to
determine the adjusted number of whole shares of HMC Common Stock reserved for
the grantee as of the Distribution Date.
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(iii) Substitution of Stock Options: On the Distribution Date, each
Retained Employee or Host Marriott Services Employee that is a grantee of a
Nonqualified Award of an Existing HMC Stock Option shall receive for each such
award, in substitution therefor, a Conversion Award, consisting of two
separately exercisable nonqualified options: one to purchase a number of shares
of HMC Common Stock equal to the number of shares covered by the Existing HMC
Stock Option (the "New HMC Nonqualified Stock Option"), and one to purchase a
number of shares of Host Marriott Services Common Stock equal to one-fifth of
the number of shares covered by the Existing HMC Stock Option (the "Host
Marriott Services Nonqualified Stock Option").
Each Marriott International Employee that is a grantee of a Nonqualified
Award of an Existing HMC Stock Option granted prior to or in connection with
the Marriott International Distribution will not receive a similar Conversion
Award. Such nonqualified options will remain an option to acquire only shares
of HMC Common Stock, except that the exercise price of, and the number of
shares underlying, such option shall be adjusted pursuant to 2.05(c)(iv) and
(v) below to maintain the Aggregate Spread with respect to such Existing HMC
Stock Options held by Marriott International Employees.
Notwithstanding the foregoing, the HMC Board of Directors reserves the right
prior to the issuance of any Conversion Awards and effective as of the
Distribution Date, to adopt resolutions modifying the terms and conditions
under which any Conversion Awards of nonqualified options shall be granted.
Modifications may include, without limitation, shortening the term within which
options to purchase shares that are not Employer Common Stock may be exercised,
and providing for Conversion Awards of such nonqualified options to be issued
solely as options to acquire shares of Employer Common Stock.
(iv) Adjustment of Option Price: For purposes of determining the adjusted
option price of a Conversion Award of a New HMC Nonqualified Stock Option and a
Host Marriott Services Nonqualified Stock Option, the following formula shall
be used to maintain the grantee's Aggregate Spread on each outstanding grant of
a Nonqualified Award of an Existing HMC Stock Option. The Aggregate Spread on
each such outstanding grant shall be maintained by setting the option prices
for the New HMC Nonqualified Stock Options and the Host Marriott Services
Nonqualified Stock Options to ensure that the difference between (1) the Post
Conversion Stock Price of the HMC Common Stock granted in the Conversion Award
multiplied by the number of shares of HMC Common Stock underlying the options
granted in the Conversion Award plus the Post Conversion Stock Price of the
Host Marriott Services Common Stock multiplied by the number of shares of Host
Marriott Services Common Stock underlying the options granted in the Conversion
Award and (2) the per Share exercise price of the New HMC Nonqualified Stock
Option multiplied by the number of shares of HMC Common Stock underlying the
options granted in the Conversion Award plus the per share exercise price of
the Host Marriott Services Nonqualified Stock Option multiplied by the number
of shares of Host Marriott Services Common Stock underlying the options granted
in the Conversion Award exercise is equal to (3) the Aggregate Spread.
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In addition, the adjusted price under each option to acquire Host Marriott
Common Stock or Host Marriott Services Common Stock granted in a Conversion
Award shall be set so that the ratio of (1) the adjusted option exercise price
for the New HMC Nonqualified Stock Option and Host Marriott Services
Nonqualified Stock Option, respectively, to (2) the Post-Conversion Stock Price
of the Common Stock purchasable under the Conversion Award (Host Marriott
Common Stock or Host Marriott Services Common Stock, respectively) shall equal
(3) the ratio of the exercise price of each Existing HMC Stock Option being
converted to the HMC Closing Stock Price.
For purposes of maintaining the Aggregate Spread of Existing HMC Stock
Options held by Marriott International Employees, the adjusted option price for
such Existing HMC Stock Options shall be set to ensure that the difference
between (1) the Post-Conversion Stock Price of the HMC Common Stock multiplied
by the number of shares underlying each such Existing HMC Stock Option, and,
(2) the adjusted per share option exercise price for each such Existing HMC
Stock Option multiplied by the number of shares underlying, is equal to (3) the
Aggregate Spread.
(v) Adjustment of Number of Shares Covered by Options: With respect to
Conversion Awards replacing Existing HMC Stock Options and with respect to
Existing HMC Stock Options held by Marriott International Employees, additional
adjustments may be made to the extent the adjustments in Section 2.05(c)(iv)
are not sufficient to maintain the Aggregate Spread and ratio described in
Section 2.05(c)(iv) or to the extent it is determined that additional
adjustments are desirable. In the case of Conversion Awards of a New HMC
Nonqualified Stock Option and a Host Marriott Services Nonqualified Stock
Option, the number of shares of HMC Common Stock and Host Marriott Services
Common Stock purchasable shall be adjusted as necessary to maintain the
Aggregate Spread and ratio described in Section 2.05(c)(iii).
(vi) Limitation on Adjustments: To the extent that any adjustment or
limitation of this section 2.05(c) is inconsistent with the 1993 HMC
Comprehensive Stock Plan, the Host Marriott Services Comprehensive Stock Plan
or the intended tax or accounting treatment of the Distribution or any option,
it shall not apply, and Host Marriott Corporation and Host Marriott Services
Corporation shall mutually agree on an alternative adjustment.
2.06 Stock Purchase Plan.
The 1995 Plan Year for the Host Marriott Corporation Stock Purchase Plan
shall end on December 15, 1995 or such other date as the Plan Administrator
shall specify, and shares of HMC common stock shall be purchased for all
eligible Plan participants so as to allow Plan participants to participate in
the Distribution of the shares of Host Marriott Services. The 1996 Plan Year
for the 1996 HM Corporate Stock Purchase Plan shall begin on February 1, 1996,
or such other date as the Plan Administrator shall specify.
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The Host Marriott Services Stock Purchase Plan, approved by Host Marriott
Corporation in its role as sole shareholder of Host Marriott Services on
November 2, 1995, shall begin its 1996 Plan Year on February 1, 1996, or such
other date as Plan Administrator shall specify.
2.07 Medical/Dental Plan Liability and Coverage.
(a) Liability for Claims. After the Distribution Date, HMC shall be
responsible for providing medical/dental coverage and assuming responsibility
for the associated liabilities and accrued obligations of and relating to all
Retained Employees and their eligible dependents who will be offered
participation in a Host Marriott Corporation (HMC) medical/dental plan or plans
on terms and conditions deemed appropriate by HMC. Retained Employees shall
have no preexisting condition limitation imposed other than that which is or
was imposed under their existing plan or plans, and they will be credited with
any expenses incurred toward deductibles, out-of-pocket expenses, maximum
benefit payments, and any benefit usage toward plan limits which would have
been applicable to the plan in which they were enrolled prior to the
Distribution.
Host Marriott Services shall sponsor and continue the existing HMC
medical/dental plans and be responsible for providing medical/dental coverage,
including appropriate stop-loss insurance, and assuming responsibility for the
associated liabilities and accrued obligations of these plans relating to Host
Marriott Services Employees and Host Marriott Services Individuals, and
Retained Individuals. Solely for purposes of this Section 2.07, Retained
Individuals shall also include any Employee of HMC and their Qualified
Beneficiaries, who are deemed employees of HMC as of the result of the terms of
any management contract between HMC and Host Marriott Services. HMC must
reimburse Host Marriott Services for any incurred obligations relating to such
covered Retained Individuals after the Distribution Date. Host Marriott
Services Employees, Host Marriott Services Individuals and Retained Individuals
shall have no pre-existing condition limitation imposed other than that which
is or was imposed under the existing plan or plans, and they will be credited
with any expenses incurred toward deductibles, out-of-pocket expenses, maximum
benefit payments, and any benefit usage toward plan limits which would have
been applicable to the plan in which they were enrolled prior to the
Distribution. The medical/dental plans to be sponsored and continued by Host
Marriott Services are listed on Schedule MD attached to and incorporated into
this Agreement.
(b) Continuation Coverage Administration. As of the Distribution Date, Host
Marriott Services or a Host Marriott Services Subsidiary shall assume or retain
and shall be solely responsible for, or cause its insurance carriers or HMOs to
be responsible for, the administration of the continuation coverage
requirements imposed by Code Section 4980B and ERISA Sections 601 through 608
as they relate to any current Qualified Beneficiary or any Host Marriott
Services Qualified Beneficiary. As of the Distribution Date, Host Marriott
Services or a Host Marriott Services Subsidiary shall assume or retain and
shall be responsible for, or cause its insurance carriers or HMOs to be
responsible for, all liabilities and obligations in connection with coverage to
be provided, claims incurred and premiums owed on or after the Cut-off Date
under
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any HMC Medical/Dental Plan or any HMC Medical/Dental Plan in respect of any
current Qualified Beneficiary or any Host Marriott Services Qualified
Beneficiary.
2.08 Vacation and Sick Pay Liabilities.
(a) Division of Liabilities. Effective on the Distribution Date, Host
Marriott Services shall assume, as to the Host Marriott Services Employees, and
HMC shall retain, as to the Retained Employees, all accrued liabilities
(whether vested or unvested, and whether funded or unfunded) for vacation and
sick leave in respect of employees of HMC as of the Cut-off Date. Host Marriott
Services shall be solely responsible for the payment of such vacation or sick
leave to Host Marriott Services Employees after the Cut-off Date, and HMC shall
be solely responsible for the payment of such vacation or sick leave to
Retained Employees after the Cut-off Date. Each party shall provide to its own
Employees on the Distribution Date the same vested and unvested balances of
vacation and sick leave as credited to such Employee on the HMC payroll system
on the Cut-off Date. The preceding sentence shall not be construed as in any
way limiting the right of either Host Marriott Services or HMC to change its
vacation or sick leave policies as it deems appropriate.
(b) Funded Reserves. Assets attributable to funded reserves for the
vacation or sick leave liabilities being divided in accordance with Section
2.09(a) (whether held in a trust, a voluntary employees beneficiary
association, or any other funding vehicle) shall be allocated in an appropriate
and equitable manner between HMC and Host Marriott Services.
2.09 Preservation of Right To Amend or Terminate Plans. Except as
otherwise expressly provided in Article II, no provisions of this Agreement,
including, without limitation, the agreement of HMC or Host Marriott Services,
or any Retained Subsidiary or Host Marriott Services Subsidiary, to make a
contribution or payment to or under any Plan herein referred to for any period,
shall be construed as a limitation on the right of HMC or Host Marriott
Services or any Retained Subsidiary or Host Marriott Services Subsidiary to
amend such Plan or terminate its participation therein which HMC or Host
Marriott Services or any Retained Subsidiary or Host Marriott Services
Subsidiary would otherwise have under the terms of such Plan or otherwise. No
provision of this Agreement shall be construed to create a right in any
employee or former employee, or dependent or beneficiary of such employee or
former employee, under a Plan which such person would not otherwise have under
the terms of the Plan itself.
2.10 Notice: HMC and Host Marriott Services acknowledge that HMC and the
Retained Subsidiaries, on the one hand, and Host Marriott Services and the Host
Marriott Services Subsidiaries, on the other hand, may incur costs and
expenses, including, but not limited to, contributions to Plans and the payment
of insurance premiums arising from or related to any of the Plans which are, as
set forth in the Agreement, the responsibility of the other party hereto.
Accordingly, HMC (and any Retained Subsidiary responsible therefor) and Host
Marriott Services (and any Host Marriott Services Subsidiary responsible
therefor) shall give notice to the other party of the costs to be incurred
prior to payment and demand that the other party which has the obligation to
pay shall pay the cost and expense.
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2.11 Payroll Reporting and Withholding.
(a) Form W-2 Reporting. Host Marriott Services and HMC hereby adopt the
"alternative procedure" for preparing and filing IRS Forms W-2 (Wage and Tax
Statements), as described in Section 5 of Revenue Procedure 84-77, 1984-2 IRS
Cumulative Bulletin 753 ("Rev. Proc. 84-77"). Under this procedure Host
Marriott Services as the successor employer shall provide all required Forms W-
2 to all Host Marriott Services Individuals reflecting all wages paid and taxes
withheld by both HMC as the predecessor and Host Marriott Services as the
successor employer for the entire year during which the Distribution takes
place. HMC shall provide all required Forms W-2 to all Retained Individuals
reflecting all wages and taxes paid and withheld by HMC before, on and after
the Distribution Date.
In connection with the aforesaid agreement under Rev. Proc. 84-77, each
business unit or business operation of HMC shall be assigned to either HMC or
Host Marriott Services, depending upon whether it is a Retained Business or a
Host Marriott Services Business, and each Retained Individual or Host Marriott
Services Individual associated with such business unit or business operation
shall be assigned for payroll reporting purposes to HMC or Host Marriott
Services, as the case may be.
(b) Forms W-4 and W-5. Host Marriott Services and HMC agree to adopt the
alternative procedure of Rev. Proc. 84-77 for purposes of filing IRS Forms W-4
(Employee's Withholding Allowance Certificate) and W-5 (Earned Income Credit
Advance Payment Certificate). Under this procedure HMC shall provide to Host
Marriott Services as the successor employer all IRS Forms W-4 and W-5 on file
with respect to each Host Marriott Services Individual, and Host Marriott
Services will honor these forms until such time, if any, that such Host
Marriott Services Individual submits a revised form.
(c) Garnishments, Tax Levies, Child Support Orders, Qualified Medical Child
Support Orders, and Wage Assignments. With respect to Employees with
garnishments, tax levies, child support orders, qualified medical child support
orders, and wage assignments in effect with HMC on the Cut-off Date, Host
Marriott Services with respect to each Host Marriott Services Individual shall
honor such payroll deduction authorizations or court or governmental orders
applicable to Host Marriott Services Plans, and will continue to make payroll
deductions and payments to any authorized payee, as specified by the court or
governmental order which was filed with HMC. Likewise, HMC with respect to each
Retained Individual shall honor such payroll deduction authorization or court
or governmental orders applicable to HMC Plans and will continue to make
payroll deductions and payments to any authorized payee, as specified by the
court or governmental order which was filed with HMC.
(d) Authorizations for Payroll Deductions. Unless otherwise prohibited by
this or another agreement entered into in connection with the Distribution, or
by a Plan document, with respect to Employees with authorizations for payroll
deductions in effect with HMC on the Cut-off Date, Host Marriott Services as
the successor employer will honor such payroll deduction
23
authorizations relating to each Host Marriott Services Individual, and shall
not require that such Host Marriott Services Individual submit a new
authorization to the extent that the type of deduction by Host Marriott
Services does not differ from that made by HMC. Such deduction types include,
without limitation, contributions to any Plan, U.S. Savings Bonds, and United
Giver's Fund; scheduled loan repayments to the Profit Sharing Plan or to an
employee credit union; and Direct Deposit of Payroll, bonus advances, union
dues, employee relocation loans, and other types of authorized company
receivables usually collectible through payroll deductions.
ARTICLE III
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other Agreement
between Host Marriott Services and HMC to the contrary, Host Marriott Services
and HMC understand and agree that:
3.01 Separate Employers. After the Distribution Date and the separation of
Employees into their respective companies, Host Marriott Services and HMC will
be separate and independent employers.
3.02 Employment Policies and Practices. Host Marriott Services and HMC may
adopt, continue, modify or terminate such employment policies, compensation
practices, retirement plans, welfare benefit plans, and other employee benefit
plans or policies of any kind or description, as each may determine, in its
sole discretion, are necessary and appropriate.
3.03 Collective Bargaining Agreements. With regard to employees of HMC
covered by a Collective Bargaining Agreement on the Cut-off Date who become
Host Marriott Services Employees or Retained Employees, Host Marriott Services
and HMC promise and covenant to each other not to take any action which
disrupts or otherwise negatively impacts the labor relations of the other.
Where necessary, Host Marriott Services and HMC will diligently work to
substitute Host Marriott Services for HMC in Collective Bargaining Agreements
covering Host Marriott Services employees, and HMC for Host Marriott Services
in Collective Bargaining Agreements covering Retained Employees. Further, Host
Marriott Services or a Host Marriott Services Subsidiary, as appropriate, shall
assume and discharge all liabilities and obligations relating to Host Marriott
Services Employees effective as of the Distribution Date under all Collective
Bargaining Agreements to which HMC or a Retained Subsidiary is a party on the
Distribution Date, and HMC or a Retained Subsidiary, as appropriate, shall
retain or assume and discharge all liabilities and obligations relating to
Retained Employees effective as of the Distribution Date under all such
Collective Bargaining Agreements.
24
3.04 Claims.
(a) Scope. This section is intended to allocate all liabilities for
employment-related claims involving HMC or Host Marriott Services including,
but not limited to, claims against either or both HMC and Host Marriott
Services and their officers, directors, agents and employees, or against or by
their various employee benefit plans and plan administrators and fiduciaries
provided, however, that this section shall not apply to any indemnification
between the parties regarding employees under a management agreement by which
Host Marriott Services employees manage a unit or operation for HMC including
but not limited to a certain management agreement and indemnification agreement
between the parties dated May 25, 1995 regarding MFR matters.
(b) Employment-Related Claims. An employment-related claim shall include
any actual or threatened lawsuit, arbitration, ERISA claim, or federal, state,
or local judicial or administrative proceeding of whatever kind involving a
demand by or on behalf of or relating to Retained Individuals or Host Marriott
Services Individuals, or by or relating to a collective bargaining agent of
Employees, or by or relating to any federal, state or local government agency
alleging liability against HMC or Host Marriott Services, or against any
employee health, welfare, deferred compensation or other benefit plan and/or
their respective officers, directors, agents, employees, administrators,
trustees and fiduciaries.
(c) Obligation to Indemnify. The duty of a party to indemnify, defend and
hold harmless the other party under this Section 3.04 shall include the
following obligations of the party having such duty: to provide a legal defense
and incur all attorneys' fees and litigation costs which may be associated with
such a defense; to pay all costs of settlement or judgment where the
indemnifying party has the full duty to do so or to pay the full percentage of
the party's share when the duty is only a percentage of the full settlement or
judgment; and to hold harmless from all claims and costs which may be asserted
with or arising from the duty of the indemnifying party to defend and
indemnify.
(d) Pre-Distribution Claims.
(i) Host Marriott Services shall indemnify, defend and hold harmless HMC
from any employment-related claims of a Host Marriott Services Individual
arising on or before the Cut-off Date.
(ii) HMC shall indemnify, defend and hold harmless Host Marriott Services
from any employment-related claims of a Retained Individual arising on or
before the Cut-off Date.
(e) Distribution and Other Joint Liability Claims. Where employment-related
claims alleging or involving joint and several liability asserted against Host
Marriott Services and HMC are not separately traceable to liabilities relating
to Host Marriott Services Individuals or Retained Individuals, any liability
shall be apportioned between Host Marriott Services and HMC in
25
accordance with the percentage that each party's Employees represents of the
combined total number of Employees of both parties, as described below. The
percentage of the liability assumed by Host Marriott Services shall equal the
ratio of (i) the total number of Host Marriott Services Employees on the
Distribution Date, to (ii) the combined total number of Host Marriott Services
Employees and Retained Employees on such date. The percentage of the liability
assumed by HMC shall equal the ratio of (i) the total number of HMC Employees
on the Distribution Date to (ii) the combined total number of Host Marriott
Services Employees and Retained Employees on such date. Each party will
indemnify, defend, and hold harmless the other to the extent of the
indemnifying party's apportioned percentage determined in accordance herewith.
(f) Post-Distribution Employment-Related Claims. Employment related claims
arising after the Distribution and division of the Employees between the
parties and not relating to, arising from, or in connection with the
Distribution will be the sole responsibility of Host Marriott Services as to
Host Marriott Services Individuals and of HMC as to Retained Individuals. Each
Company will indemnify, defend, and hold harmless the other from employment-
related claims of the other company.
3.05 Funding of Union Plans. Without limitation to the scope and
application of Section 3.04, any claims by or on behalf of employees or their
collective bargaining agent or any federal, state or local governmental agency
for alleged underfunding of, or failure to make payments to, union health,
welfare and pension funds based on acts or omissions occurring on or before the
Distribution Date or arising from or in connection with the Distribution, or
resulting from actuarial recalculation by auditors of the union plans and
funds, will be the sole responsibility of each party as to its own employees
(i.e., Host Marriott Services with respect to Host Marriott Services
Individuals, and HMC with respect to Retained Individuals), and the responsible
party will indemnify, defend, and hold harmless the other from any such claims.
3.06 Notice of Claims. Without limitation to the scope and application to
each party in the performance of its duties under Sections 3.04 and 3.05
herein, each party will notify in writing and consult with the other party
prior to making any settlement of an employee claim, for the purpose of
avoiding any prejudice to such other party arising from the settlement.
3.07 Assumption of Unemployment Tax Rates. Changes in state unemployment
tax experience as of the Cut-off Date shall be handled as follows. In the event
an option exists to allocate state unemployment tax experience of HMC, the HMC
experience shall be transferred to Host Marriott Services if this results in
the lowest aggregate unemployment tax costs for both HMC and Host Marriott
Services combined, and the HMC experience shall be retained by HMC if this
results in the lowest aggregate unemployment tax costs for HMC and Host
Marriott Services combined.
3.08 Intercompany Service Charge. Legal, professional, managerial,
administrative, clerical, consulting, and support or production services
provided to one party by personnel of the other party, upon the request of the
first party or when such services are otherwise required by
26
this Agreement between Host Marriott Services and HMC, shall be charged to the
party receiving such services on commercially reasonable terms to be negotiated
(or in accordance with the provisions of any applicable agreement between the
parties).
3.09 WARN Claims. Before and after the Distribution Date, each party shall
comply in all material respects with the Worker Adjustment and Retraining Act
("WARN"). HMC shall be responsible for WARN claims relating to Retained
Individuals or to Employees who prior to the Distribution Date were employed in
a Retained Business. Host Marriott Services shall be responsible for WARN
Claims relating to Host Marriott Services Individuals or to Employees who prior
to the Distribution Date were employed in a Host Marriott Services Business.
Each party shall indemnify, defend and hold harmless the other in connection
with WARN Claims for which the indemnitor is responsible and which are brought
against the indemnitee.
3.10 Employees on Leave of Absence. After the Distribution Date, Host
Marriott Services shall assume responsibility, if any, as employer for all
Employees returning from an approved leave of absence who prior to the
Distribution Date were employed in a Host Marriott Services Business. After the
Distribution Date, HMC shall assume responsibility, if any, as employer for all
Employees returning from an approved leave of absence who prior to the
Distribution Date were employed in a Retained Business.
3.11 No Third-Party Beneficiary Rights. Neither this Agreement nor any
other intercompany agreement between Host Marriott Services and HMC is intended
to nor does it create any third party contractual or other common law rights.
No person shall be deemed a third-party beneficiary of the agreements between
Host Marriott Services and HMC.
3.12 Attorney-Client Privilege. The provisions herein requiring either
party to this Agreement to cooperate shall not be deemed to be a waiver of the
attorney/client privilege for either party nor shall it require either party to
waive its attorney/client privilege.
ARTICLE IV
DEFAULT
4.01 Default. If either party materially defaults hereunder, the non-
defaulting party shall be entitled to all remedies provided by law or equity
(including reasonable attorney's fees and costs of suit incurred).
4.02 Force Majeure. Host Marriott Services and HMC shall incur no
liability to each other due to a default under the terms and conditions of this
Agreement resulting from fire, flood, war, strike, lock-out, work stoppage or
slow-down, labor disturbances, power failure, major equipment breakdowns,
construction delays, accident, riots, acts of God, acts of United States'
enemies, laws, orders or at the insistence or result of any governmental
authority or any other delay beyond each other's reasonable control.
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ARTICLE V
MISCELLANEOUS
5.01 Relationship of Parties. Nothing in this Agreement shall be deemed or
construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provision contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
5.02 Access to Information: Cooperation. HMC and Host Marriott Services
and their authorized agents will be given reasonable access to and may take
copies of all information relating to the subjects of this Agreement (to the
extent permitted by federal and state confidentiality laws) in the custody of
the other party, including any agent, contractor, subcontractor, agent or any
other person or entity under the contract of such party. The parties will
provide one another with such information within the scope of this Agreement as
is reasonably necessary to administer each party's Plans. The parties will
cooperate with each other to minimize the disruption caused by any such access
and providing of information.
5.03 Assignment. Neither party shall, without the prior written consent of
the other, have the right to assign any rights or delegate any obligations
under this Agreement.
5.04 Headings. The headings used in this Agreement are inserted only for
the purpose of convenience and reference, and in no way define or limit the
scope or intent of any provision or part hereof.
5.05 Severability of Provisions. Neither HMC nor Host Marriott Services
intends to violate statutory or common law by executing this Agreement or any
contractual obligations of Host Marriott Corporation to Marriott International
under the 1993 Distribution Agreement with Marriott International and any
related agreements to the 1993 Distribution of Marriott International to the
shareholders of Marriott Corporation. If any section, sentence, paragraph,
clause or combination of provisions in this Agreement is in violation of any
law, such sections, sentences, paragraphs, clauses or combinations shall be
inoperative and the remainder of this Agreement shall remain in full force and
effect and shall be binding upon the parties.
5.06 Parties Bound. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing herein, expressed or implied, shall be construed to give any
other person any legal or equitable rights hereunder.
5.07 Notices. All notices, consents, approvals and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given when delivered personally or by overnight courier or three days
after being mailed by registered or certified mail (postage prepaid, return
receipt requested) to the named representatives of the parties at the
28
following addresses (or at such other address for a party as shall be specified
by like notice, except that notices of changes of address shall be effective
upon receipt):
(a) if to HMC
HOST MARRIOTT CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, General Counsel
(b) if to Host Marriott Services
HOST MARRIOTT SERVICES CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel
Host Marriott Services agrees that, upon the request of HMC, Host Marriott
Services will give copies of all notices, consents, approvals and other
communications hereunder to any lender to HMC or other person specified by HMC.
5.08 Further Action. Host Marriott Services and HMC each shall cooperate
in good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
5.09 Waiver. Host Marriott Services and HMC each agree that the waiver of
any default under any term or condition of this Agreement shall not constitute
a waiver of any subsequent default or nullify the effectiveness of that term or
condition.
5.10 Governing Law. All controversies and disputes arising out of or under
this Agreement shall be determined pursuant to the laws of the State of
Maryland, regardless of the laws that might be applied under applicable
principles of conflicts of laws.
5.11 Consent to Jurisdiction. The parties irrevocably submit to the
exclusive jurisdiction of (a) the Courts of the State of Maryland, ▇▇▇▇▇▇▇▇▇▇
County, or (b) any federal district court where there is federal jurisdiction
for the purpose of any suit, action or other Court proceeding arising out of
this Agreement. The parties hereby irrevocably designate, appoint and empower
Prentice Hall Corporation System, Inc. in each case as its true and lawful
agent and attorney-in-fact in its name, place, and stead to receive on its
behalf service of process in any action, suit, or proceeding with respect to
any matters as to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence.
5.12 Entire Agreement. This Agreement and the Distribution Agreement
constitute the entire understanding between the parties hereto, and supersede
all prior written or oral
29
communications, relating to the subject matter covered by said agreements. No
amendment, modification, extension or failure to enforce any condition of this
Agreement by either party shall be deemed a waiver of any of its rights herein.
This Agreement shall not be amended except by a writing executed by the
parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HOST MARRIOTT CORPORATION,
a Delaware corporation
By:________________________________________
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President and
Deputy General Counsel
HOST MARRIOTT SERVICES CORPORATION
a Delaware corporation
By: _______________________________________
▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President and
General Counsel
30
SCHEDULE RT
HOST MARRIOTT OTHER PLANS
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Prime & Exeter) Retirement Award
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Company Executive Retirement Plan
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Retirement Plan (Long & Loyal)
Marriott Family Restaurants, Inc. Retirement Savings Plan (assets remaining)*
Big Boy Cleveland Disposition Deferred Stock Plan
31
SCHEDULE R
HOST MARRIOTT SERVICES OTHER PLAN
Host International Inc., Cleveland Retirement Plan
Bird-Marriott, Inc. Pension Plan
Host Annuity Contract Plan
Supplemental Retirement Plan for Officers of Host International
32
SCHEDULE MD
The Host Marriott Corporation Enhanced Protection Plan
The Host Marriott Corporation Dental Care Plan
The Host Marriott Corporation Med*Connection Health Plan
The Host Marriott Corporation Minimum Protection Health Plan
33