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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 1, 1999 Commission File No. 1-13881
MARRIOTT INTERNATIONAL, INC.
Delaware 52-2055918
(State of Incorporation) (I.R.S. Employer Identification Number)
10400 Fernwood Road
Bethesda, Maryland 20817
(301) 380-3000
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------------------------------------------------- ---------------------------------------------
<S> <C>
Class A Common Stock, $0.01 par value New York Stock Exchange
(244,566,605 shares outstanding as of January 31, 1999) Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
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The aggregate market value of shares of common stock held by non-affiliates at
January 31, 1999 was $6,467,559,611.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure by delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Documents Incorporated by Reference
Portions of the Proxy Statement prepared for the 1999 Annual Meeting of
Shareholders are incorporated by reference into Part III of this report.
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PART I
Throughout this report, we refer to Marriott International, Inc., together
with its subsidiaries, as "we," "us," or "the Company."
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are based on the
beliefs and assumptions of our management, and on information currently
available to our management. Forward-looking statements include the information
concerning our possible or assumed future results of operations and statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates," or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these forward-
looking statements. You are cautioned not to put undue reliance on any forward-
looking statements.
You should understand that the following important factors, in addition to
those discussed in Exhibit 99 and elsewhere in this annual report, could cause
results to differ materially from those expressed in such forward-looking
statements.
. competition for each of our business segments;
. business strategies and their intended results;
. the balance between supply of and demand for hotel rooms,
timeshare units and senior living accommodations;
. our continued ability to obtain new operating contracts and
franchise agreements;
. our ability to develop and maintain positive relations with
current and potential hotel and senior living community owners;
. the effect of international, national and regional economic
conditions;
. the availability of capital to allow us and potential hotel and
senior living community owners to fund investments;
. our ability, and the ability of other parties upon which our
businesses also rely, to modify or replace on a timely basis,
computer software and other systems in order to function properly
prior to, in and beyond, the Year 2000; and
. other risks described from time to time in our filings with the
Securities and Exchange Commission (the SEC).
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
We are a worldwide operator and franchisor of hotels and senior living
communities and provider of distribution services. Our operations are grouped
in three business segments, Lodging, Senior Living Services and Distribution
Services, which represented 79, 6, and 15 percent, respectively, of total sales
in the fiscal year ended January 1, 1999.
In our Lodging segment, we operate, develop and franchise lodging facilities
and vacation timesharing resorts under 12 separate brand names.
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In our Senior Living Services segment we develop and presently operate 113
senior living communities offering independent living, assisted living and
skilled nursing care for seniors in the United States.
Marriott Distribution Services (MDS) supplies food and related products to
external customers and to internal operations throughout the United States.
Financial information by industry segment and geographic area as of January 1,
1999 and for the three fiscal years then ended, appears in the Business Segments
note to our Consolidated Financial Statements included in this annual report.
FORMATION OF "NEW" MARRIOTT INTERNATIONAL - SPINOFF IN MARCH 1998.
We became a public company in March 1998, when we were "spun off" as a
separate entity by the company formerly named "Marriott International, Inc."
(Old Marriott). Our company - the "new" Marriott International - was formed to
conduct the lodging, senior living and distribution services businesses formerly
conducted by Old Marriott.
The Old Marriott shareholders approved the Spinoff and related transactions at
a special meeting held in March 1998. Old Marriott received a ruling from the
Internal Revenue Service that the Spinoff would be tax-free to Old Marriott and
to our shareholders.
The Spinoff was effected through a dividend of one share of our common stock
and one share of our Class A Common Stock for each share of Old Marriott Common
Stock outstanding on March 20, 1998. As the result of a shareholders' vote at
our 1998 annual meeting of shareholders, on May 21, 1998 we converted all of our
outstanding shares of common stock into shares of Class A Common Stock on a one-
for-one basis.
At the same time as the Spinoff, Old Marriott merged its remaining businesses
- - food service and facilities management - with the similar businesses of
Sodexho Alliance, S.A. (Sodexho Alliance) in the United States and Canada, to
form Sodexho Marriott Services, Inc. (SMS). SMS also successfully completed a
public cash tender offer for substantially all $720 million of Old Marriott's
public debt. We are providing certain transitional administrative services to
SMS, and MDS provides food distribution services to many of SMS's food service
locations.
LODGING
Our lodging business included 1,686 operated or franchised properties with
328,293 units at January 1, 1999, under 12 distinct brands. Although managed by
an overall lodging management organization, each brand serves a distinct tier of
the lodging industry, as follows: Marriott Hotels, Resorts and Suites (full-
service); Ritz-Carlton (luxury); Renaissance (full-service); New World (full-
service); Ramada International (moderate-price, full-service); Residence Inn
(extended-stay); Courtyard hotels (moderate-price); SpringHill Suites (upper
moderate-price, all-suites); TownePlace Suites (moderate-price, extended-stay);
Fairfield Inn (economy); Marriott Vacation Club International (vacation
timesharing); and serviced apartments including those operated internationally
under the Marriott Executive Residences brand.
Company-Operated Lodging Properties
At January 1, 1999, we operated a total of 803 properties (203,836 units)
across our 12 lodging brands under long-term management or lease agreements with
property owners (together, the Operating Agreements).
Terms of our management agreements vary, but typically include base and
incentive management fees and reimbursement of costs (both direct and indirect)
of operations. Such agreements are generally for initial periods of 20 to 30
years, with options to renew for up to 50 additional years. Our lease
agreements also vary, but typically include fixed annual rentals plus additional
rentals based on a percentage of annual revenues in excess of a fixed amount.
Many of the Operating Agreements are subordinated to mortgages or other liens
securing indebtedness of the owners. Additionally, a number of the Operating
Agreements permit the owners to terminate the agreement if financial returns
fail to meet defined levels and we have not cured such deficiencies.
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For units that we manage, we are responsible for hiring, training and
supervising the managers and employees required to operate the facilities and
for purchasing supplies, for which we are reimbursed by the owners. We provide
centralized reservation services, and national advertising, marketing and
promotional services, as well as various accounting and data processing
services. We prepare and implement annual budgets for lodging facilities that
we operate. We are also responsible for allocating funds, generally a fixed
percentage of revenue, for periodic renovation of buildings and replacement of
furnishings. We believe that our ongoing refurbishment program is adequate to
preserve the competitive position and earning power of the hotels.
Franchised Lodging Properties
We have franchising programs that permit the use of certain of our brand names
and our lodging systems by other hotel owners and operators. Under these
programs, we receive an initial application fee and continuing royalty fees,
which typically range from four percent to six percent of room revenues for all
brands, plus two percent to three percent of food and beverage revenues for
full-service hotels. In addition, franchisees contribute to our national
marketing and advertising programs, and pay fees for use of our centralized
reservation systems. At January 1, 1999, we had 883 franchised properties
(124,457 units).
Summary of Properties by Brand
- ------------------------------
The following table shows properties and units that we operated or franchised
at January 1, 1999. A total of 35 Courtyard, Renaissance and Marriott Hotels,
Resorts and Suites properties (10,017 rooms) shown on the table were "reflagged"
from Ramada International and New World during 1998.
<TABLE>
<CAPTION>
Company-operated Franchised
---------------------------------- ----------------------------------
Brand Properties Units Properties Units
- ------------------------------------------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Marriott Hotels, Resorts and Suites.............. 208 91,795 143 42,809
Ritz-Carlton..................................... 35 11,784 - -
Renaissance...................................... 69 27,350 14 5,414
New World........................................ 7 3,651 - -
Ramada International............................. 8 1,514 38 6,421
Residence Inn.................................... 124 16,527 170 18,523
Courtyard........................................ 245 37,369 170 20,507
TownePlace Suites................................ 8 812 9 887
Fairfield Inn and SpringHill Suites.............. 54 7,472 339 29,896
Marriott Vacation Club International............. 37 3,938 - -
Marriott Executive Residences and other.......... 8 1,624 - -
--------------- -------------- --------------- --------------
Total............................................ 803 203,836 883 124,457
=============== ============== =============== ==============
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We plan to open 200 hotels (approximately 30,000 rooms) during 1999. We
believe that we have access to sufficient financial resources to finance our
growth, as well as to support our ongoing operations and meet debt service and
other cash requirements. Nonetheless, our ability to sell properties that we
develop, and the ability of hotel or senior living community developers to build
or acquire new Marriott properties, which are important parts of our growth
plans, are partially dependent on the availability and price of capital.
Marriott Hotels, Resorts and Suites primarily serve business and leisure
travelers and meeting groups at locations in downtown and suburban areas, near
airports and at resort locations. Most Marriott full-service hotels contain
from 300 to 500 rooms. Marriott full-service hotels typically have swimming
pools, gift shops, convention and banquet facilities, a variety of restaurants
and lounges and parking facilities. The 19 convention hotels (approximately
19,800 rooms) are larger and contain up to 1,900 rooms. The 35 Marriott resort
hotels (approximately 15,000 rooms) have additional recreational facilities,
such as tennis courts and golf courses. The 10 Marriott Suites (approximately
2,600 rooms) are full-service suite hotels that typically contain approximately
250 suites, each consisting of a living room, bedroom and bathroom. Marriott
Suites have only limited meeting space.
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We operate conference centers located throughout the United States. Some of
the centers are used exclusively by employees of the sponsoring organization,
while others are marketed to outside meeting groups and individuals. The
centers typically include meeting room space, dining facilities, guestrooms and
recreational facilities.
Room operations contributed the majority of hotel sales for the fiscal year
1998 with the remainder coming from food and beverage operations, recreational
facilities and other services. Although business at many resort properties is
seasonal depending on location, overall hotel profits have been relatively
stable and include only moderate seasonal fluctuations.
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Marriott Hotels, Resorts and Suites
Geographic Distribution at January 1, 1999 Hotels
- ---------------------------------------------------------------------- -------------
<S> <C>
United States (40 states and the District of Columbia)................ 266 (108,565 rooms)
=============
Non-U.S. (36 countries and territories)
Americas (Non-U.S.).................................................. 19
United Kingdom....................................................... 26
Continental Europe................................................... 19
Asia................................................................. 9
Africa and the Middle East........................................... 9
Australia............................................................ 3
-------------
Total Non-U.S......................................................... 85 (26,039 rooms)
=============
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Ritz-Carlton hotels and resorts are renowned for their distinctive
architecture and the quality of their facilities, dining and guest service.
Most Ritz-Carlton hotels have 200 to 500 guest rooms and typically include
meeting and banquet facilities, a variety of restaurants and lounges, gift
shops, swimming pools and parking facilities. Guests at most of the 10 Ritz-
Carlton resorts have access to additional recreational amenities, such as tennis
courts and golf courses.
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Ritz-Carlton Luxury Hotels and Resorts
Geographic Distribution at January 1, 1999 Hotels
- ------------------------------------------------------------ ------------
<S> <C>
United States (11 states)................................... 20 (7,177 rooms)
============
Non-U.S. (14 countries and territories).................... 15 (4,607 rooms)
============
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Renaissance is a global quality tier brand which targets business travelers,
group meetings and leisure travelers. Renaissance hotels are generally located
in downtown locations of major cities, in suburban office parks, near major
gateway airports and in destination resorts. Most hotels contain 300 to 500
rooms; however, a few of the convention hotels are larger, and some hotels in
non-gateway markets, particularly in Europe, are smaller. Renaissance hotels
typically include an all-day dining restaurant, a specialty restaurant, club
floors and lounge, boardrooms, convention and banquet facilities. There are
eight Renaissance Resorts which have additional recreational facilities
including golf, tennis and water sports.
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Renaissance Hotels
Geographic Distribution at January 1, 1999 Hotels
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<S> <C> <C>
United States (15 states and the District of Columbia)................. 34 (15,573 rooms)
==============
Non-U.S. (25 countries and territories)
Americas (Non-U.S.)................................................... 7
United Kingdom........................................................ 4
Continental Europe.................................................... 16
Asia.................................................................. 15
Africa and the Middle East............................................ 6
Australia............................................................. 1
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Total Non-U.S.......................................................... 49 (17,191 rooms)
==============
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New World primarily targets international business travelers. New World hotels
are located exclusively in the Asia-Pacific region and are concentrated in the
major business districts of gateway cities in China and Southeast Asia. With
hotels in the key gateway markets to China of Beijing and Shanghai, New World
has expanded into China's secondary business centers. New World hotels typically
range in size from 300 to 600 rooms and offer multiple restaurants and lounges,
executive floors and a variety of recreational, banquet and meeting facilities.
At January 1, 1999, seven New World hotels (3,651 rooms) were located in three
countries outside the U.S. During 1998, five New World hotels (3,025 rooms) were
reflagged as Marriott or Renaissance hotels.
Ramada International is a moderately priced brand targeted at business and
leisure travelers. Each full-service Ramada International property includes a
restaurant, a cocktail lounge and full-service meeting and banquet facilities.
Ramada International hotels are located primarily in Europe in major and
secondary cities, near major international airports and suburban office park
locations. We also receive a royalty fee from Cendant Corporation (successor to
HFS, Inc.) and Ramada Franchise Canada Limited for the use of the Ramada name in
the United States and Canada, respectively.
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Ramada International
Geographic Distribution at January 1, 1999 Hotels
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Continental Europe.................................................... 31
Asia.................................................................. 7
Americas (Non-U.S.)................................................... 3
Africa and the Middle East............................................ 4
Australia............................................................. 1
--------------
Total (17 countries and territories).................................. 46 (7,935 rooms)
==============
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Residence Inn is the U.S. market leader among extended-stay lodging products,
which caters primarily to business, government and family travelers who stay
more than five consecutive nights. Residence Inns generally have 80 to 130
studio and two-story penthouse suites. Most inns feature a series of
residential style buildings with landscaped walkways, courtyards and
recreational areas. The inns do not have restaurants but offer complimentary
continental breakfast. Each suite contains a fully equipped kitchen, and many
suites have wood-burning fireplaces.
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Residence Inns
Geographic Distribution at January 1, 1999 Hotels
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<S> <C> <C>
United States (44 states)............................................ 289 (34,270 rooms)
==============
Canada............................................................... 4 (704 rooms)
==============
Mexico............................................................... 1 (76 rooms)
==============
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Courtyard is our moderate-price limited-service hotel product. Aimed at
individual business and leisure travelers as well as families, Courtyard hotels
maintain a residential atmosphere and typically have 80 to 150 rooms. Well
landscaped grounds include a courtyard with a pool and social areas. Most hotels
feature meeting rooms, limited
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restaurant and lounge facilities, and an exercise room. The operating systems
developed for these hotels allow Courtyard to be price competitive while
providing better value through superior facilities and guest service.
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<CAPTION>
Courtyard Hotels
Geographic Distribution at January 1, 1999 Hotels
- ----------------------------------------------------------------------- --------------
<S> <C> <C>
United States (42 states and the District of Columbia)................. 383 (52,633 rooms)
==============
Non-U.S. (seven countries)............................................ 32 (5,243 rooms)
==============
</TABLE>
SpringHill Suites is our newly announced all-suite brand in the upper-moderate
priced tier of lodging products. SpringHill Suites feature suites that are 25
percent larger than a typical hotel guest room and offer a broad range of
amenities, including complimentary continental breakfast and exercise
facilities. In October 1998, we announced plans to convert our Fairfield Suites
open or under construction to the SpringHill Suites brand. At January 1, 1999 17
properties (1,674 rooms) were located in 13 states.
TownePlace Suites is a moderately priced, extended-stay hotel product that
is designed to appeal to business and leisure travelers. The standard TownePlace
Suites hotel consists of two interior-corridor buildings containing 95 units
consisting of high quality one- and two-bedroom suites. Each suite has a fully
equipped kitchen and separate living area. Each hotel provides housekeeping
services and has on-site exercise facilities, an outdoor pool, 24-hour staffing
and laundry facilities. At January 1, 1999, 17 TownePlace Suites (1,699 rooms)
were located in nine states.
Fairfield Inn is our economy lodging product which competes directly with
major national economy motel chains. Aimed at cost-conscious individual business
and leisure travelers, a typical Fairfield Inn has 65 to 135 rooms and offers a
swimming pool, complimentary continental breakfast and free local phone calls.
At January 1, 1999, 376 Fairfield Inns (35,694 rooms) were located in 46 states.
Marriott Vacation Club International develops, sells and operates vacation
timesharing resorts. Profits are generated from three primary sources: (1)
selling fee simple and other forms of timeshare intervals, (2) operating the
resorts and (3) financing consumer purchases of timesharing intervals.
Many timesharing resorts are located adjacent to Marriott hotels, and
timeshare owners have access to certain hotel facilities during their vacation.
Owners can trade their annual interval for intervals at other Marriott
timesharing resorts or for intervals at certain timesharing resorts not
otherwise sponsored by the Company through an affiliated exchange company.
Owners also can trade their unused interval for points in the Marriott Rewards
program, enabling them to stay at over 1,500 Marriott hotels worldwide.
At January 1, 1999, we had 16 resorts in active sales, including one in Aruba,
our newest addition in the Caribbean; one in Palm Beach Shores, our second
Vacation Ownership resort in South Florida; and one in Mallorca, Spain our
second European resort. Additionally, we announced a joint venture with
American Skiing Company, the largest operator of alpine ski, snowboard and golf
resorts in the U.S., which will enable us to develope vacation ownership
properties at premier, alpine resort locations across the country. During 1998
we added over 20,000 new owners, taking the number of our vacation owners to
over 120,000.
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Marriott Vacation Club International
Geographic Distribution at January 1, 1999 Resorts Units
- ---------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
Continental United States............................................. 32 3,284
Hawaii................................................................ 1 232
Caribbean............................................................. 2 262
Europe................................................................ 2 160
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Total................................................................. 37 3,938
============== =============
</TABLE>
Serviced apartments provide temporary housing for business executives and
others who need quality accommodations outside their home country, usually for
30 or more days. Some serviced apartments operate under the Marriott Executive
Residences brand which is designed specifically for the long-term international
traveler. At January 1, 1999, eight serviced apartment properties (1,624
units), including two Marriott Executive Residences, were located
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in five countries and territories. In January, 1999, we announced the
acquisition of ExecuStay Corporation, which will expand our operations in the
area of serviced apartments. See "Recent Developments" below for a more
detailed discussion.
Other Activities
Marriott Golf manages 25 golf course facilities for us and for other golf
course owners.
We operate 17 systemwide hotel reservation centers, 10 of them in the U.S. and
seven internationally, that handle reservation requests for Marriott lodging
brands worldwide, including franchised units. We own one of the U.S. facilities
and lease the others.
Our Architecture and Construction Division assists in the design, development,
construction and refurbishment of lodging properties and senior living
communities and is paid a fee by the owners of such properties.
Competition
We encounter strong competition both as a lodging operator and a franchisor.
There are over 500 lodging management companies in the United States, including
several that operate more than 100 properties. These operators are primarily
private management firms, but also include several large national chains that
own and operate their own hotels and also franchise their brands. Management
contracts are typically long-term in nature, but most allow the hotel owner to
replace the management firm if certain financial or performance criteria are not
met.
Affiliation with a national or regional brand is prevalent in the U.S. lodging
industry. In 1998, the majority of U.S. hotel rooms were brand-affiliated.
Most of the branded properties are franchises, under which the operator pays the
franchisor a fee for use of its hotel name and reservation system. The
franchising business is fairly concentrated, with the three largest franchisors
operating multiple brands accounting for a significant proportion of all U.S.
rooms.
Outside the United States branding is much less prevalent, and most markets
are served primarily by independent operators. We believe that chain
affiliation will increase in overseas markets as local economies grow, trade
barriers are reduced, international travel accelerates and hotel owners seek the
economies of centralized reservation systems and marketing programs.
We have approximately a seven percent share of the U.S. hotel market (based on
number of rooms), less than a one percent share of the lodging market outside
the United States and a six percent share of annual worldwide timesharing sales
of about $6 billion. We believe that our hotel brands are attractive to hotel
owners seeking a management company or franchise affiliation, because our hotels
typically generate higher occupancies and Revenue per Available Room (REVPAR)
than direct competitors in most market areas. We attribute this performance
premium to our success in achieving and maintaining strong customer preference.
Approximately 40 percent of our ownership resort sales come from additional
purchases by or referrals from existing owners. We believe that the location and
quality of our lodging facilities, our national marketing programs, reservation
systems and our emphasis on guest service and satisfaction are contributing
factors across all of our brands.
We regularly upgrade our properties to maintain their competitiveness. The
vast majority of rooms in the Marriott lodging system either opened or have been
refurbished in the past five years. We also strive to update and improve the
products and services we offer. We believe that by operating a number of hotels
in each of our brands, we stay in direct touch with customers and react to
changes in the marketplace more quickly than chains which rely exclusively on
franchising.
The Marriott Rewards and Marriott Miles programs enhance repeat guest business
by rewarding frequent travelers with free stays at Marriott hotels or free
travel on 13 participating airlines. Marriott Rewards is a multi-brand frequent
guest program which covers eight Marriott brands. We believe that the frequent
stay programs generate substantial repeat business that might otherwise go to
competing hotels.
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MARRIOTT SENIOR LIVING SERVICES
Through our Senior Living Services business, we develop and operate both
"independent full-service" and "assisted living" senior living communities and
provide related senior care services. Most are rental communities with monthly
rates that depend on the amenities and services provided. We are the largest
U.S. operator of senior living communities in the quality tier. The senior
living services market is one of the fastest growing segments of the U.S.
economy and we are expanding our Senior Living Services division to meet this
growing demand.
As shown in the table below at January 1, 1999, we operated 113 senior living
communities in 27 states.
<TABLE>
<CAPTION>
Communities Units (1)
---------------- ----------------
<S> <C> <C>
Independent full-service
- owned........................................................... 3 1,193
- operated under long-term agreements............................. 42 11,275
---------------- ----------------
45 12,468
Assisted living
- owned........................................................... 28 3,027
- operated under long-term agreements............................. 40 5,049
---------------- ----------------
68 8,076
---------------- ----------------
Total senior living communities..................................... 113 20,544
================ ================
</TABLE>
(1) Units represent independent living apartments plus beds in assisted living
and nursing centers.
At January 1, 1999, we operated 45 independent full-service senior living
communities, which offer both independent living apartments and personal
assistance units for seniors. Most of these communities also offer licensed
nursing care.
At January 1, 1999 we also operated 68 assisted living senior living
communities under the names "Brighton Gardens by Marriott," "Village Oaks," and
"Marriott MapleRidge" (our new name for communities formerly branded as
"Hearthside"). Assisted living senior living communities are for seniors who
would benefit from assistance with daily activities such as bathing, dressing or
medication. Brighton Gardens is a quality tier assisted living concept which
generally has 90 assisted living suites and in certain locations, 30 to 45
nursing beds in a community. In some communities, separate on-site centers also
provide specialized care for residents with Alzheimer's or other memory-related
disorders. Village Oaks is a moderately priced assisted living concept which
emphasizes companion living and generally has 70 suites in a community. This
concept is geared for the cost conscious senior who benefits from the
companionship of another unrelated individual. Marriott MapleRidge assisted
living communities consist of a cluster of six or seven 14-room cottages which
offer residents a smaller scale, more intimate setting and family-like living at
a moderate price.
The assisted living concepts typically include three meals per day, linen and
housekeeping services, security, transportation, and social and recreational
activities. Additionally, skilled nursing and therapy services are generally
available to Brighton Gardens residents.
Terms of the senior living services management agreements vary but typically
include base management fees, ranging from four to six percent of revenues,
central administrative services reimbursements and incentive management fees.
Such agreements are generally for initial periods of five to 30 years, with
options to renew for up to 25 additional years. Under the leases covering
certain of the communities, we pay the owner fixed annual rent plus additional
rent equal to a percentage of the amount by which annual revenues exceed a fixed
amount.
Our Senior Living Services business competes mostly with local and regional
providers of long-term health care and senior living services, although some
national providers are emerging in the assisted living market. We compete by
operating well-maintained facilities, and by providing quality health care, food
service and other services at competitive prices. The reputation for service,
quality care and know how associated with the Marriott name is also attractive
to residents and their families. The recent launch of the Marriott Assisted
Living Education Program, chaired by actress Debbie Reynolds, also demonstrates
our commitment to leadership in the Senior Living Services
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business. This program aims to increase awareness of assisted living and to
highlight general benefits to adult children and their senior family members.
Additionally, we have focused on developing relationships with professionals who
often refer seniors to senior living communities, such as hospital discharge
planners and physicians. By educating these groups on the assisted living
concept, and familiarizing them with Marriott products and associates, we
generate a significant volume of referrals that helps our senior living
communities to quickly achieve high, stabilized occupancy levels.
MARRIOTT DISTRIBUTION SERVICES
MDS is a United States limited-line distributor of food and related supplies,
carrying an average of 3,000 product items per distribution center. This
segment originally focused on purchasing, warehousing and distributing food and
supplies to other Marriott businesses. However, MDS has increased its third-
party business to about 88 percent of total sales volume in the year ended
January 1, 1999.
MDS operated a nationwide network of 13 distribution centers at January 1,
1999. Leased facilities are generally built to our specifications, and utilize
a narrow aisle concept and technology to enhance productivity.
Through MDS, we compete with numerous national, regional and local
distribution companies in the $141 billion U.S. food distribution industry. We
attract clients by adopting competitive pricing policies and by maintaining one
of the highest order fill rates in the industry. In addition, our limited
product lines, operating systems, and other economies provide a favorable cost
structure which we are able to leverage in pursuing new business.
EMPLOYEE RELATIONS
At January 1, 1999, we had approximately 133,000 employees. Approximately
5,000 employees at properties we manage were represented by labor unions. We
believe our relations with employees are positive.
OTHER PROPERTIES
In addition to the operating properties discussed above, we lease an 870,000
square foot office building in Bethesda, Maryland which serves as our
headquarters. This lease has an initial term which expires in 2004, and
includes options for an additional 25 years.
We believe our properties are in generally good physical condition with need
for only routine repair and maintenance.
RECENT DEVELOPMENTS
On January 6, 1999, we entered into a definitive agreement to acquire
ExecuStay Corporation (ExecuStay), a provider of leased corporate apartments.
The total acquisition cost is estimated to be $115 million, to be paid as
approximately $53 million in our Class A Common Stock and $62 million in cash.
Including assumed debt, net of estimated assets, our investment will total
approximately $128 million. We now own more than 98 percent of the voting stock
of ExecuStay and expect to complete the acquisition during the 1999 first
quarter.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The range of prices of Class A Common Stock and dividends declared per share
for the period since the March 27, 1998 Spinoff are as follows. No data are
presented for the periods prior to the Spinoff since we were not a publicly-held
company during that time.
<TABLE>
<CAPTION>
Stock Price Dividends
------------------------------ Declared Per
1998 High Low Share
- -------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Second Quarter $ 37 1/4 $ 30 1/2 $ 0.095 /1/
Third Quarter 34 1/2 24 5/8 0.050
Fourth Quarter 30 1/4 19 3/8 0.050
</TABLE>
/1/ Total of $.045 for the first quarter (declared and paid in the second
quarter), and $.05 second quarter dividend.
At January 31, 1999, there were 244,566,605 shares of Class A Common Stock
outstanding held by 52,769 shareholders of record. The Company's Class A Common
Stock is traded on the New York Stock Exchange, Chicago Stock Exchange, Pacific
Stock Exchange and Philadelphia Stock Exchange.
11
<PAGE>
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table presents summary selected historical financial data for
the Company derived from our financial statements as of and for the five fiscal
years ended January 1, 1999.
Since the information in this table is only a summary and does not provide all
of the information contained in our financial statements, including the related
notes, you should read "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our Consolidated Financial Statements.
Per share data and Shareholders' Equity have not been presented for periods
prior to 1998 because we were not a publicly-held company during that time.
As discussed in the financial statements included later in this report, in the
fourth quarter of 1998 we changed our accounting policy to no longer include the
working capital and sales of managed hotels and managed senior living
communities in our financial statements. Instead, our sales include fees earned
plus costs recovered from owners of managed hotels and managed senior living
communities. The table below reflects the restatement of prior periods to
conform with this new accounting policy.
<TABLE>
<CAPTION>
Fiscal Year
---------------------------------------------------------
1998 1997 1996/1/ 1995 1994
--------- --------- -------- -------- --------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales......................................... $ 7,968 $ 7,236 $ 5,738 $ 4,880 $ 4,461
Operating Profit Before
Corporate Expenses and Interest............ 736 609 508 390 316
Net Income.................................... 390 324 270 219 162
PER SHARE DATA:
Diluted Earnings Per Share.................... 1.46
Cash Dividends Declared....................... .195
BALANCE SHEET DATA (AT END OF YEAR):
Total Assets.................................. 6,233 5,161 3,756 2,772 2,061
Long-Term and Convertible Subordinated Debt... 1,267 422 681 180 102
Shareholders' Equity.......................... 2,570
</TABLE>
_______________________
/1/Fiscal year 1996 includes 53 weeks, all other years include 52 weeks.
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion presents an analysis of results of our operations for
fiscal years ended January 1, 1999 (52 weeks), January 2, 1998 (52 weeks) and
January 3, 1997 (53 weeks). Comparable REVPAR room rate and occupancy
statistics are used throughout this report and are based upon U.S. properties
operated by us, except that beginning in fiscal 1998, data for Fairfield Inns
include comparable franchised properties. Ramada International and New World do
not have any U.S. properties.
As discussed in our financial statements, in the fourth quarter of 1998 we
changed our accounting policy to no longer include the working capital and sales
of managed hotels and managed senior living communities in our financial
statements. Instead, our sales include fees earned plus costs recovered from
owners of managed hotels and managed senior living communities. We restated
prior periods and all references in the discussion below refer to financial
statement data prepared under our new accounting policy. This restatement
reflects reductions in sales of $2,240 million, $1,810 million and $1,529
million for 1998, 1997 and 1996, respectively, compared to sales as previously
calculated for those periods.
1998 Compared to 1997
Our net income increased from $324 million in 1997 to $390 million in 1998.
The increase in our net income was driven by contributions from new unit
expansion, including acquisitions, and strong profit growth from our Lodging
segment. The increase in lodging rooms and the increase in REVPAR in excess of
inflation resulted in a 21 percent increase in systemwide sales, to $16 billion.
LODGING
<TABLE> <CAPTION>
(in millions except REVPAR,
properties and units)
-----------------------------
Percentage
1998 1997 increase
-------------- ------------ -----------
<S> <C> <C> <C>
Sales........................................ $ 6,311 $ 5,247 20%
REVPAR(all brands) .......................... $ 95 $ 90 6%
Operating profit............................. $ 704 $ 569 24%
Properties................................... 1,686 1,510 12%
Units........................................ 328,293 300,437 9%
</TABLE>
Our 1998 Lodging operating profit rose on higher sales, benefiting from
contributions from new properties. The sales increase resulted from average
REVPAR growth of six percent across all comparable U.S. properties that we
manage and the addition of new hotels. This growth resulted in higher base
management and franchise fees. Growth also contributed to higher house profits
which resulted in higher incentive management fees. Lodging operating profit
also increased due to higher financing income arising from our sale of timeshare
notes receivable.
Marriott Hotels, Resorts and Suites profits were up 18 percent in fiscal 1998
on sales growth of seven percent, reflecting the net addition of 12 units (6,924
rooms) in the U.S. and seven units (1,454 rooms) internationally. REVPAR for
comparable U.S. hotels that we operate was up six percent to $108, primarily as
a result of a seven percent increase in average room rates. Sales gains,
coupled with profit margin improvements, generated higher incentive management
fees at many properties.
Average Ritz-Carlton room rates increased nine percent to $205 although
occupancy decreased by two percentage points to 75 percent, resulting in a six
percent increase in REVPAR for comparable U.S. properties. The results of Ritz-
Carlton properties were consolidated since we increased our ownership interest
to approximately 98 percent on March 19, 1998, resulting in additional sales of
$462 million in 1998.
13
<PAGE>
REVPAR for U.S. Renaissance hotels that we operate increased seven percent due
to a five percent increase in room rates to $129 and a one percent increase in
occupancy, to 70 percent. Renaissance is now integrated into our reservation
system as well as sales, marketing and other operating programs.
Courtyard, our moderate-price brand, added a net of 48 properties (6,593
rooms) during fiscal 1998. Courtyard posted a 15 percent increase in sales,
following increases in average room rates and REVPAR of seven percent and six
percent, respectively, while occupancy declined by one percentage point to 80
percent.
Residence Inn, our extended-stay brand, added 36 properties (4,374 rooms)
during fiscal 1998 and generated 18 percent growth in sales, as average room
rates climbed four percent to $99. Occupancy dipped slightly to 83 percent
resulting in a four percent increase in REVPAR.
Fairfield Inn, our economy brand, reflected an increase of 10 percent in
sales. A four percent increase in average room rates to $56 was offset by a
slight decline in occupancy to 74 percent, resulting in a three percent increase
in REVPAR. Fairfield added 35 franchised properties (3,156 rooms) during fiscal
1998.
Marriott Vacation Club International posted an eight percent increase in the
number of timeshare intervals sold and nine percent growth in financially
reported sales under the percentage of completion method. The sales increase
resulted from strong performance in several locations, including sales at five
new locations opened during the year. Operating profit increased due to
increased profit from resort management and an increase in pre-tax gains on the
sale of timeshare notes receivable of $17 million over 1997.
MARRIOTT SENIOR LIVING SERVICES reported a sales increase of seven percent in
fiscal 1998 over 1997, primarily due to the opening of 24 communities during
1998 and maintaining 94 percent occupancy for comparable properties, partially
offset by the reduction in recorded sales resulting from properties sold subject
to long-term management agreements during 1997. Operating profit declined from
$32 million to $15 million mainly due to "ownership profits" from 29 Forum
properties sold to Host Marriott Corporation (Host Marriott) on June 21, 1997
being replaced with "managed operating profits." This decrease was partially
offset by the recognition in 1998 of $9 million of pre-tax gains relating to
sales of properties subject to long-term operating agreements, compared to $5
million in 1997.
MARRIOTT DISTRIBUTION SERVICES doubled its operating profit in 1998, from $7
million to $17 million. This was achieved despite a 24 percent reduction in
sales from $1,543 million to $1,178 million. The segment benefited from
consolidation of its food distribution facilities, and the realization of
operating efficiencies following a period of rapid expansion in 1996-97. See
"Liquidity and Capital Resources" below for a discussion of the possible future
impact to MDS of the bankruptcy filing of a major MDS customer.
CORPORATE EXPENSES rose by 25 percent to $110 million, primarily due to $12
million of year 2000 costs and personnel costs of additional corporate staff
required following continued growth of our operating segments.
INTEREST EXPENSE increased by 36 percent to $30 million due to share
repurchases and capital expenditures. Interest income of $36 million was 13
percent higher than 1997 primarily due to higher interest on cash reserves.
INCOME TAXES. Our effective income tax rate decreased to 38.25 percent from
39 percent in 1997, primarily due to the increased proportion of foreign
operations in countries with relatively low effective tax rates.
14
<PAGE>
1997 Compared to 1996
Net income increased 20 percent to $324 million in fiscal 1997, on a sales
increase of 26 percent to $7 billion, driven by contributions from new unit
expansion, including acquisitions, and strong profit growth for the Lodging
segment.
Systemwide sales increased by 33 percent to $13.2 billion, driven primarily by
a 31 percent increase in lodging rooms and REVPAR increases in excess of
inflation.
LODGING
<TABLE>
<CAPTION>
(in millions except REVPAR,
properties and units)
-----------------------------
Percentage
1997 1996 increase
----------- ----------- ----------
<S> <C> <C> <C>
Sales.............................................. $ 5,247 $ 4,340 21%
REVPAR (all brands)................................ $ 89 $ 82 9%
Operating profit................................... $ 569 $ 452 26%
Properties......................................... 1,510 1,183 28%
Units.............................................. 300,437 229,514 31%
</TABLE>
Our operating profit was up on higher sales, benefiting from favorable
conditions in the U.S. lodging market, and contributions from new properties.
The sales increase resulted from REVPAR growth across all comparable U.S.
properties that we manage and the addition of new hotels, including the
acquisition of Renaissance Hotel Group N.V. (RHG). This growth resulted in
higher base management and franchise fees which were partially offset by reduced
financing income, due to lower pre-tax gains on the sale of timeshare notes
receivable during 1997. REVPAR growth also contributed to higher house profits
which resulted in higher incentive management fees.
Profits for Marriott Hotels, Resorts and Suites increased in excess of 20
percent in fiscal 1997 on sales growth of five percent, which reflects the net
addition of two units (881 rooms) in the U.S. and eight units (2,903 rooms)
internationally. Comparable U.S. hotels that we operate achieved REVPAR
increases of nine percent as room rates grew by nine percent to $129. These
sales gains, coupled with profit margin improvements, generated substantially
higher incentive management fees at many properties. Profits for international
hotels also were higher, primarily because of contributions from new properties
in 1996 and 1997.
Ritz-Carlton reported an increase in average room rates of five percent to
$185 and an increase in occupancy of four percentage points to 79 percent,
resulting in a 10 percent increase in REVPAR.
The Renaissance, New World and Ramada International brands, contributed $445
million in sales since the March 29, 1997 acquisition. REVPAR for U.S.
Renaissance hotels that we operate increased six percent due to higher room
rates and a slight decrease in occupancy.
Courtyard, our moderate-price brand, added 53 properties (6,473 rooms) during
fiscal 1997. Courtyard posted a 17 percent increase in sales, as average room
rates and REVPAR were up eight percent, while occupancy remained at 81 percent.
Residence Inn, our extended-stay brand, added 34 properties (4,129 rooms)
during fiscal 1997 and generated 15 percent growth in sales, as average room
rates climbed eight percent to $95. Occupancy dipped slightly to 84 percent
resulting in a six percent increase in REVPAR.
Fairfield Inn and Suites, our economy brand, reflected an increase of 13
percent in sales. A two percent increase in average room rates to $51 was
offset by a slight decline in occupancy to 75 percent, resulting in no change in
REVPAR. Fairfield added 60 properties (5,603 rooms) during fiscal 1997,
primarily through franchising.
Marriott Vacation Club International posted a 21 percent increase in the
number of timeshare intervals sold and 51 percent growth in financially reported
sales under the percentage of completion method. The sales increase resulted
15
<PAGE>
from strong performance in several locations, including Marriott Vacation Club
International's first European resort in Marbella, Spain, as well as Fort
Lauderdale and Orlando, Florida and Hilton Head, South Carolina. Increased
profits from resort development were offset by a reduction from 1996 to 1997 in
pre-tax gains arising on the sale of timeshare notes receivable.
MARRIOTT SENIOR LIVING SERVICES reported a sales increase of 20 percent in
fiscal 1997 over 1996, primarily due to the opening of 17 communities during
1997 and a two percentage point increase in occupancy, to 95 percent, for
comparable properties. Operating profit declined as "ownership profits" were
replaced with "managed operating profits" for 43 properties that were sold to
investors since the beginning of 1996. This decrease was partially offset by
the recognition of $5 million of pre-tax gains relating to these and other real
estate transactions.
MARRIOTT DISTRIBUTION SERVICES generated a sharp increase in sales for fiscal
1997 as a result of the addition of several major restaurant customers and the
net addition of two new distribution centers. Profits, however, were lower in
fiscal 1997 due to start-up costs associated with the new centers, as well as
costs of integrating the new business into existing distribution centers.
CORPORATE EXPENSES rose 21 percent in 1997, due to non-cash items associated
with investments generating significant income tax benefits as well as modest
staff increases to accommodate growth and new business development.
INTEREST EXPENSE decreased 41 percent from fiscal 1996 due to the sale of the
29 Forum Group communities to Host Marriott. Interest income declined 14
percent, primarily due to collections on, and sales of, notes receivable.
INCOME TAXES. Our effective income tax rate increased to 39 percent in 1997,
compared to 38 percent in 1996, primarily due to the RHG acquisition.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Our goal is to add 150,000 hotel rooms to our worldwide system over the five
year period from 1998 to 2002. We believe that we have access to sufficient
financial resources to finance our growth, as well as to support our ongoing
operations and meet debt service and other cash requirements. Nonetheless, our
ability to sell properties that we develop, and the ability of hotel or senior
living community developers to build or acquire new Marriott properties, which
are important parts of our growth plans, are partially dependent on the
availability and price of capital. We are monitoring the status of the capital
markets, which have shown substantial volatility during the past year, and are
evaluating the effect, if any, that capital market conditions may have on our
ability to execute our announced growth plans.
Cash From Operations
- --------------------
Cash from operations was $605 million in 1998, $542 million in 1997 and $496
million in 1996. The increase in our operating cash flow from 1997 primarily
reflects higher earnings in 1998. While our timesharing business generates
strong operating cash flow, annual amounts are affected by the timing of cash
spent on the acquisition and development of new resorts and cash received from
purchaser financing. We do not include interval sales we finance in operating
cash flow until we collect the cash or the notes are sold for cash.
Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization
(EBITDA) was $802 million, $679 million and $561 million for fiscal years 1998,
1997 and 1996, respectively. This represents an 18 percent increase in 1998 and
a 21 percent increase in 1997. We consider EBITDA to be an indicator of our
operating performance because EBITDA can be used to measure our ability to
service debt, fund capital expenditures and expand our business. Nevertheless,
you should not consider EBITDA an alternative to net income, operating profit,
cash flows from operations, or any other operating or liquidity measure
prescribed by generally accepted accounting principles. A substantial portion of
our EBITDA is based on fixed dollar amounts or percentages of sales. This
includes lodging base management and franchise fees and land rent. With more
than 1,650 hotel properties, no single property is critical to our financial
results.
Our ratio of current assets to current liabilities was .94 at January 1, 1999,
compared to .79 at January 2, 1998. Each of our businesses minimizes working
capital through strict credit-granting policies, aggressive collection efforts
and high inventory turnover.
Investing Activities Cash Flows
- -------------------------------
ACQUISITIONS. We completed three major acquisitions during the last three
years: Renaissance Hotel Group N.V., a premier operator and franchisor of
approximately 150 hotels under three brands in 38 countries; Forum Group, Inc.
(Forum), a leading provider of senior living services; and a 98 percent interest
in The Ritz-Carlton Hotel Company LLC, one of the world's premier luxury hotel
brands and management companies. We expect to acquire the remaining two percent
of The Ritz-Carlton Hotel Company LLC within the next several years.
DISPOSITIONS. On December 29, 1998, we agreed to sell and leaseback, under
long-term, limited-recourse leases, 17 hotels for approximately $202 million in
cash. At the same time, we agreed to pay security deposits of $21 million which
will be refunded at the end of the leases. As of January 1, 1999, four of the
properties had been sold, resulting in a sales price which exceeded the net book
value by $13 million, which we will recognize as a reduction of rent expense
over the 15-year initial lease terms.
During 1998, we agreed to sell, subject to long-term management agreements,
eight lodging properties and 11 senior living communities for $184 million and
$178 million, respectively. As of January 1, 1999, sales of five of these hotels
and five of these senior living communities had closed, for a total of $181
million.
On April 3, 1997, we agreed to sell and leaseback, under long-term, limited-
recourse leases, 14 limited service hotels for approximately $149 million in
cash. At the same time, we agreed to pay security deposits of $15 million,
which will be refunded at the end of the leases. As of January 2, 1998, all of
the properties had been sold, resulting in a sales price which exceeded the net
book value by $20 million, which is recognized as a reduction of rent expense
over the 17-year initial lease terms. On October 10, 1997, we agreed to sell
and leaseback, under long-
17
<PAGE>
term, limited-recourse leases, another nine limited service hotels for
approximately $129 million in cash. At the same time, we agreed to pay security
deposits of $13 million, which will be refunded at the end of the leases. At
January 1, 1999, all of these nine properties had been sold, resulting in a
sales price which exceeded the net book value by $17 million, which is
recognized as a reduction of rent expense over the 15-year initial lease terms.
We can renew all of these leases at our option.
On April 11, 1997, we sold five senior living communities for approximately
$79 million in cash. On September 12, 1997, we agreed to sell another seven
senior living communities for approximately $95 million in cash. All of these
properties have been sold, and we will continue to operate these communities
under long-term management agreements.
On June 21, 1997, we sold 29 senior living communities acquired as part of the
Forum acquisition, to Host Marriott for approximately $550 million, resulting in
no gain or loss. The consideration included approximately $50 million to be
received subsequent to 1997 as expansions at certain communities are completed.
The $500 million of consideration received during 1997 consisted of $222 million
in cash, $187 million of outstanding debt and $91 million of notes receivable
bearing interest at nine percent which were repaid on April 1, 1998. Under the
terms of the sale, Host Marriott purchased all of the common stock of Forum
which, at the time of the sale, owned the 29 communities, certain working
capital and associated debt. We continue to operate these communities under
long-term management agreements.
CAPITAL EXPENDITURES AND OTHER INVESTMENTS. Capital expenditures in 1998,
1997 and 1996 of $937 million, $520 million and $293 million, respectively,
included construction and development of new senior living communities and
Courtyard, Residence Inn and TownePlace Suites properties. Over time, we expect
to sell certain lodging and senior living service properties under development,
or to be developed, while continuing to operate them under long-term agreements.
We also expect to continue to make other investments to grow our businesses,
including loans, minority equity investments and development of new timeshare
resorts in connection with adding units to our Lodging business. We also expect
to continue to invest in the development of new senior living communities.
We have made loans to owners of hotel and senior living properties which we
operate or franchise. At January 1, 1999, and January 2, 1998, loans outstanding
under this program totaled $213 million and $351 million, respectively.
Unfunded commitments aggregating $271 million were outstanding at January 1,
1999. These loans are typically secured by mortgages on the projects. We
participate in a program with an unaffiliated lender in which we may partially
guarantee loans made to facilitate third party ownership of hotels and senior
living services communities which we operate or franchise.
Most of our operating agreements require that specified percentages of sales
be set aside for renovation and refurbishment of the properties.
Cash From Financing Activities
- ------------------------------
In November 1998 we issued, through a private placement, $400 million of
unsecured senior notes (the Senior Notes) as follows:
<TABLE>
<CAPTION>
Series Face Coupon Maturity
- -------------- ------------- ------------ -------------
(in millions)
<S> <C> <C> <C>
A $ 200 6 5/8 % 2003
B $ 200 6 7/8 % 2005
</TABLE>
We received $396 million in proceeds, which reflects the original issue
discount and the initial purchasers' discount. We have agreed to promptly make
and complete a registered exchange offer for the Senior Notes and, if required,
to implement a resale shelf registration statement. If we fail to do so on a
timely basis, we will pay additional interest to the Senior Note holders.
18
<PAGE>
Non-interest bearing cash advances to or from Old Marriott were made prior to
the Spinoff to allow both the Company and Old Marriott to meet their cash
requirements. Through such advances, we had access to funds from Old Marriott's
$1.5 billion revolving credit facility and commercial paper program.
In 1996, Old Marriott received $288 million from the issuance of zero coupon
subordinated Liquid Yield Option Notes (LYONs) which have an aggregate maturity
value of $540 million in 2011. Each $1,000 LYONs was issued at a discount
representing a yield to maturity of 4.25 percent. Upon consummation of the
Spinoff, we assumed the LYONs, and SMS assumed a nine percent share of the LYONs
obligation. We calculated this percentage based on an estimate of the relative
equity values of SMS and the Company prior to the Spinoff. Each LYON is now
convertible into 17.52 shares of our Class A Common Stock and 2.19 shares of SMS
common stock. We remain liable to the holders of the LYONs for any payments that
SMS fails to make on its allocable portion.
In March, 1998 and February, 1999, respectively, we entered into $1.5 billion
and $500 million multicurrency revolving credit facilities. As of January 1,
1999, there were $73 million of letters of credit outstanding under the first
facility. The facilities also serve as a backstop for our commercial paper
program, which had an outstanding balance of $426 million at January 1, 1999.
The facilities have remaining terms of four and five years, respectively.
Borrowings bear interest at LIBOR plus a spread, based on our public debt
rating. Additionally, we pay annual fees on the facilities at a rate also based
on our public debt rating.
SHARE REPURCHASES. We purchased 13.7 million of our shares in the period from
the Spinoff through year end at a cost of $398 million. As of January 1, 1999,
we are authorized by our Board of Directors to purchase a further 6.3 million
shares.
DIVIDENDS. We declared and paid a quarterly dividend of 4.5c per share for
the first fiscal quarter of 1998, and 5c per share for the second, third, and
fourth fiscal quarters of 1998.
OTHER MATTERS
Conversion of Common Stock
On May 21, 1998, we converted, on a one-for-one-basis, all shares of our
outstanding Common Stock into shares of our Class A Common Stock. Our Board of
Directors took this action under authority granted by our certificate of
incorporation, as a result of a shareholder vote taken at our 1998 annual
meeting of shareholders.
Conversion of Host Marriott Corporation into a Real Estate Investment Trust
In December 1998, Host Marriott reorganized its business operations to qualify
as a real estate investment trust (REIT). In conjunction with its conversion to
a REIT, Host Marriott spun off, in a taxable transaction, a new company called
Crestline Capital Corporation (Crestline), acquired a portfolio of luxury hotels
for $1.5 billion, and completed partnership roll-ups representing new
acquisitions approximating $650 million. As part of the Crestline spinoff, Host
Marriott transferred to Crestline all of the senior living communities
previously owned by Host Marriott, and Host Marriott entered into lease or
sublease agreements with Crestline for substantially all of Host Marriott's
lodging properties, including the properties acquired in the acquisition and
roll-up transactions described above. Our lodging and senior living community
management and franchise agreements with Host Marriott were also assigned to
Crestline. In the case of the lodging agreements, Host Marriott remains
obligated under such agreements in the event that Crestline fails to perform its
obligations thereunder.
We continue to have the right to purchase up to 20 percent of Host Marriott's
outstanding common stock upon the occurrence of certain events generally
involving a change of control of Host Marriott. This right expires in 2017, and
Host Marriott has granted an exception to the ownership limitations in its
charter to permit full exercise of this right, subject to certain conditions
related to ownership limitations applicable to REITs generally.
We believe that these transactions have not materially changed our business or
legal rights as they previously existed with Host Marriott, although there can
be no assurance that the new structure will not adversely affect us under future
circumstances.
19
<PAGE>
Boston Market
In 1996, MDS became the exclusive provider of distribution services to Boston
Chicken, Inc. (BCI). In May 1998, BCI disclosed that its independent auditors
had expressed substantial doubt about BCI's ability to continue as a going
concern. On October 5, 1998, BCI and its Boston Market-controlled subsidiaries
filed voluntary bankruptcy petitions for protection under Chapter 11 of the
Federal Bankruptcy Code in the U.S. Bankruptcy Court in Phoenix (the Court), and
announced that it would close approximately 16 percent of the restaurants in the
Boston Market chain. Subsequently, a franchisee of BCI announced closings of a
further five percent of the chain's restaurants. MDS continues to distribute to
BCI and has been receiving payment of post-petition balances in accordance with
the terms of its contract with BCI. In addition, the Court approved, and MDS
has been paid substantially all of its pre-petition accounts receivable
balances. The impact of BCI's bankruptcy on the Company depends on numerous
uncertainties, and we are still in the process of assessing the potential effect
on our future results of operations and financial position. If our contract
were to terminate, or if BCI ceased or further curtailed its operations: (i) MDS
might be unable to recover up to $32 million in contract investment, receivables
and inventory; and (ii) MDS could have more warehouse capacity and rolling stock
than it needs.
Inflation
Since inflation has been moderate in recent years, inflation has not had a
significant impact on our businesses.
Year 2000 Readiness Disclosure
The "Year 2000 problem" has arisen because many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications
could fail or create erroneous results.
STATE OF READINESS. We have adopted the following eight-step process toward
Year 2000 readiness:
1. Awareness: fostering understanding of, and commitment to, the problem
and its potential risks;
2. Inventory: identifying and locating systems and technology components
that may be affected;
3. Assessment: reviewing these components for Year 2000 compliance, and
assessing the scope of Year 2000 issues;
4. Planning: defining the technical solutions and labor and work plans
necessary for each affected system;
5. Remediation/Replacement: completing the programming to renovate or
replace the problem software or hardware;
6. Testing and Compliance Validation: conducting testing, followed by
independent validation by a separate internal verification team;
7. Implementation: placing the corrected systems and technology back into
the business environment; and
8. Quality Assurance: utilizing an internal audit team to review
significant projects for adherence to quality standards and program
methodology.
We have grouped our systems and technology into three categories for purposes
of Year 2000 compliance:
1. Information resource applications and technology (IT Applications) --
enterprise-wide systems supported by the Company's centralized
information technology organization (IR);
2. Business-initiated systems (BIS) -- systems that have been initiated by
an individual business unit, and that are not supported by IR; and
3. Building Systems -- non-IT equipment at properties that use embedded
computer chips, such as elevators, automated room key systems and HVAC
equipment.
20
<PAGE>
We are prioritizing our efforts based on how severe an effect noncompliance
would have on customer service, core business processes or revenues, and whether
there are viable, non-automated fallback procedures (System Criticality).
We measure the completion of each phase based on documented and quantified
results weighted for System Criticality. As of January 1, 1999, the Awareness
and Inventory phases were complete for IT Applications and substantially
complete for BIS and Building Systems. For IT Applications, the Assessment,
Planning, Remediation/Replacement, and Testing phases were each over 95 percent
complete, and Compliance Validation had been completed for nearly half of key
systems, with most of the remaining work in its final stage. BIS and Building
Systems, Assessment and Planning are nearly complete. Remediation/Replacement
and Testing is 20 percent complete for BIS and we are on track for completion of
initial Testing of Building Systems by the end of the first quarter of 1999.
Compliance Validation is in progress for both BIS and Building Systems. We
remain on target for substantial completion of Remediation/Replacement and
Testing for System Critical BIS and Building Systems by June 1999 and September
1999, respectively. Quality Assurance is in progress for IT Applications, BIS
and Building Systems.
Year 2000 compliance communications with our significant third party
suppliers, vendors and business partners, including our franchisees are ongoing.
Our efforts are focused on the connections most critical to customer service,
core business processes and revenues, including those third parties that support
our most critical enterprise-wide IT Applications, franchisees generating the
most revenues, suppliers of the most widely used Building Systems and BIS, the
top 100 suppliers, by dollar volume, of non-IT products, and financial
institutions providing the most critical payment processing functions. We have
received responses from a majority of the firms in this group. A majority of
these respondents have either given assurances of timely Year 2000 compliance or
have identified the necessary actions to be taken by them or by us to achieve
timely Year 2000 compliance for their products.
We have established a common approach for testing and addressing Year 2000
compliance issues for our managed and franchised properties. This includes
guidance for properties we operate, and a Year 2000 "Toolkit" for franchisees
containing relevant Year 2000 compliance information. We are also utilizing a
Year 2000 best-practices sharing system.
COSTS. Many of the costs of Year 2000 compliance will be reimbursed to us
or otherwise paid directly by owners and clients pursuant to existing contracts.
We estimate that we will bear approximately $40-$50 million of the pre-tax costs
to address the Year 2000 problem. These costs, approximately $12 million (on a
pre-tax basis) of which have been incurred through January 1, 1999, have been
and will be expensed as incurred.
In addition, we had previously planned and/or begun implementing several
system replacement projects to modernize and improve our systems. The Year 2000
problem heightened the need for the timely completion and some project schedules
have been accelerated. These project costs have been included in our budgeting
process and internal forecasts and already form part of our financial plans.
Like the Year 2000 costs referred to in the preceding paragraph, many of these
systems replacement costs will be reimbursed to us or otherwise paid directly by
owners and clients pursuant to existing contracts. We estimate that we will bear
approximately $45-$50 million of the pre-tax costs of these system replacements,
most of which will be capitalized and amortized over the useful lives of the
assets.
The costs we will actually incur will depend on a number of factors which
cannot be accurately predicted, including the extent and difficulty of the
Remediation and other work to be done, the availability and cost of consultants,
the extent of testing required to demonstrate Year 2000 compliance, and our
ability to timely collect all payments due to us under existing contracts.
YEAR 2000 CONTINGENCY PLANS. Our centralized services and the properties we
operate, already have contingency plans in place covering a variety of possible
events, including natural disasters, interruption of utility service, general
computer failure, and the like. We are reviewing these contingency plans for
modifications to address specific Year 2000 issues, and expect modification of
master contingency plans to be substantially complete by the end of the second
quarter of 1999, with conforming changes to be added to individual unit
contingency plans during the third quarter.
21
<PAGE>
RISKS POSED BY OUR YEAR 2000 ISSUES. We currently believe that the Year
2000 problem will not have a material adverse effect on us, our business or our
financial condition. However, we cannot assure you that our Year 2000
remediation or remediation by others will be completed properly and on time, and
failure to do so could materially and adversely effect us. We also cannot
predict the actual effects of the Year 2000 problem on us, which depends on a
number of uncertainties such as:
. the factors listed above under "Costs";
. whether our franchisees and other significant third parties address
the Year 2000 issue properly and on time;
. whether broad-based or systemic economic failures may occur, which
could include
. disruptions in passenger transportation or transportation systems
generally;
. loss of utility and/or telecommunications services;
. errors or failures in financial transactions or payment
processing systems such as credit cards;
. the severity and duration of such failures; and
. whether we are sued or become subject to other proceedings regarding
any Year 2000-related events and the outcome of any such suit or
proceedings.
As part of our contingency planning, we are analyzing the most reasonably
likely worst-case scenario that could result from Year 2000-related failures.
Our best estimate of this scenario, based on current information, follows.
Failure by others to achieve Year 2000 compliance could cause short-term
disruptions in travel patterns, caused by actual or perceived problems with
travel systems (such as the air traffic control system), and temporary
disruptions in the supply of utility, telecommunications and financial services,
which may be local or regional in scope. These events could lead travelers to
accelerate travel to late 1999, postpone travel to later in 2000 or cancel
travel plans, which could in turn affect lodging patterns and occupancy. Such
failures could be more pronounced in some areas outside the U.S. where we
understand that Year 2000 compliance efforts may not be as advanced. In
addition, failure by us or others to achieve Year 2000 compliance could cause
short-term operational inconveniences and inefficiencies for us. This may
temporarily divert management's time and attention from ordinary business
activities. We will, to the extent reasonably achievable, seek to prevent and/or
mitigate these effects through our compliance and contingency planning efforts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates. We manage our
exposure to this market risk through our monitoring of available financing
alternatives and our development and application of credit granting policies.
Our strategy to manage exposure to changes in interest rates is unchanged from
January 2, 1998. Furthermore, we do not foresee any significant changes in our
exposure to fluctuations in interest rates or in how such exposure is managed in
the near future.
The following sensitivity analysis displays how our earnings and the fair
values of certain instruments we hold are affected by changes in interest rates.
We hold notes receivable that earn interest at variable rates.
Hypothetically, an immediate one percentage point change in interest rates would
change annual interest income by $3 million based on each of the balances of
these notes receivable outstanding at January 1, 1999 and January 2, 1998.
Changes in interest rates also impact the fair value of our long-term fixed
rate debt and long-term fixed rate notes receivable. Based on the balances
outstanding at January 1, 1999 and January 2, 1998, a hypothetical immediate one
percentage point change in interest rates would change the fair value of our
long-term fixed rate debt by $24 million and $5 million, respectively, and would
change the fair value of long-term fixed rate notes receivable by $2 million and
$5 million, respectively.
22
<PAGE>
Our commercial paper has been excluded from the above sensitivity analysis.
Although commercial paper is classified as long-term debt based on our ability
and intent to refinance it on a long-term basis, all commercial paper matures
within five months of year-end. As a result, there would be no material
expected change in interest expense or fair value following a reasonably
expected change in interest rates.
23
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial information is included on the pages indicated:
<TABLE>
<CAPTION>
Page
----------
<S> <C>
Report of Independent Public Accountants................................ 25
Consolidated Statement of Income........................................ 26
Consolidated Balance Sheet.............................................. 27
Consolidated Statement of Cash Flows.................................... 28
Consolidated Statement of Comprehensive Income.......................... 29
Consolidated Statement of Shareholders' Equity.......................... 30
Notes to Consolidated Financial Statements.............................. 31-46
</TABLE>
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Marriott International, Inc.:
We have audited the accompanying consolidated balance sheet of Marriott
International, Inc. as of January 1, 1999 and January 2, 1998, and the related
consolidated statements of income, cash flows and comprehensive income for each
of the three fiscal years in the period ended January 1, 1999 and the
consolidated statement of shareholders' equity for the period from March 27,
1998 to January 1, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Marriott
International, Inc. as of January 1, 1999 and January 2, 1998, and the results
of its operations and its cash flows for each of the three fiscal years in the
period ended January 1, 1999, in conformity with generally accepted accounting
principles.
As explained in the notes to the consolidated financial statements, the Company
has given retroactive effect to the change in accounting for the working capital
and sales of managed hotels and managed senior living communities.
ARTHUR ANDERSEN LLP
Washington, D.C.
January 28, 1999
25
<PAGE>
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
FISCAL YEARS ENDED JANUARY 1, 1999, JANUARY 2, 1998 AND JANUARY 3, 1997
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(52 weeks) (52 weeks) (53 weeks)
<S> <C> <C> <C>
SALES.............................................. $ 7,968 $ 7,236 $ 5,738
OPERATING COSTS AND EXPENSES....................... 7,232 6,627 5,230
---------- ---------- ----------
OPERATING PROFIT BEFORE CORPORATE EXPENSES
AND INTEREST.................................... 736 609 508
Corporate expenses................................. (110) (88) (73)
Interest expense................................... (30) (22) (37)
Interest income.................................... 36 32 37
---------- ---------- ----------
INCOME BEFORE INCOME TAXES......................... 632 531 435
Provision for income taxes......................... 242 207 165
---------- ---------- ----------
NET INCOME......................................... $ 390 $ 324 $ 270
========== ========== ==========
<CAPTION>
1998 1997 1996
---------- ---------- ----------
EARNINGS PER SHARE (pro forma, unaudited)
------------------------
<S> <C> <C> <C>
Basic Earnings Per Share............................ $ 1.56 $ 1.27 $ 1.06
========== ========== ==========
Diluted Earnings Per Share.......................... $ 1.46 $ 1.19 $ .99
========== ========== ==========
</TABLE>
See Notes To Consolidated Financial Statements
26
<PAGE>
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
JANUARY 1, 1999 AND JANUARY 2, 1998
($ IN MILLIONS)
<TABLE>
<CAPTION>
January 1, January 2,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents........................................ $ 390 $ 208
Accounts and notes receivable............................... 605 489
Inventories, at lower of average cost or market............. 75 91
Prepaid taxes............................................... 200 159
Other....................................................... 63 45
------------ ------------
1,333 992
------------ ------------
Property and equipment........................................ 2,275 1,537
Intangible assets............................................. 1,712 1,448
Investments in affiliates..................................... 228 530
Notes and other receivables................................... 434 414
Other......................................................... 251 240
------------ ------------
$ 6,233 $ 5,161
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable............................................ $ 497 $ 473
Accrued payroll and benefits................................ 345 323
Self-insurance.............................................. 42 57
Other payables and accruals................................. 528 397
------------ ------------
1,412 1,250
------------ ------------
Long-term debt................................................ 944 112
Self-insurance................................................ 179 196
Other long-term liabilities................................... 805 707
Convertible subordinated debt................................. 323 310
Shareholders' equity
Class A common stock, 255.6 million shares issued........... 3 -
Additional paid-in capital.................................. 2,713 -
Retained earnings........................................... 218 -
Treasury stock, at cost..................................... (348) -
Accumulated other comprehensive income...................... (16) -
Investments and net advances from Old Marriott.............. - 2,586
------------ ------------
2,570 2,586
------------ ------------
$ 6,233 $ 5,161
============ ============
</TABLE>
See Notes To Consolidated Financial Statements
27
<PAGE>
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEARS ENDED JANUARY 1, 1999, JANUARY 2, 1998 AND JANUARY 3, 1997
($ IN MILLIONS)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ ------------
(52 weeks) (52 weeks) (53 weeks)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income......................................... $ 390 $ 324 $ 270
Adjustments to reconcile to cash provided by
operations:
Depreciation and amortization.................. 140 126 89
Income taxes................................... 76 64 69
Timeshare activity, net........................ 28 (118) (95)
Other.......................................... (22) 88 61
Working capital changes:
Accounts receivable............................ (104) (190) 18
Inventories.................................... 15 (3) (17)
Other current assets........................... (16) (15) 11
Accounts payable and accruals.................. 98 266 90
----------- ------------ ------------
Cash provided by operations........................ 605 542 496
----------- ------------ ------------
INVESTING ACTIVITIES
Capital expenditures............................... (937) (520) (293)
Acquisitions....................................... (48) (859) (307)
Dispositions....................................... 332 571 65
Loan advances...................................... (48) (95) (89)
Loan collections and sales......................... 169 47 296
Other.............................................. (192) (190) (160)
----------- ------------ ------------
Cash used in investing activities.................. (724) (1,046) (488)
----------- ------------ ------------
FINANCING ACTIVITIES
Issuance of long-term debt......................... 1,294 16 -
Repayment of long-term debt........................ (473) (15) (133)
Issuance of convertible subordinated debt.......... - - 288
Issuance of Class A common stock................... 15 - -
Dividends paid..................................... (37) - -
Purchase of treasury stock......................... (398) - -
Advances (to) from Old Marriott.................... (100) 576 (132)
----------- ------------ ------------
Cash provided by financing activities.............. 301 577 23
----------- ------------ ------------
INCREASE IN CASH AND EQUIVALENTS...................... 182 73 31
CASH AND EQUIVALENTS, beginning of year............... 208 135 104
----------- ------------ ------------
CASH AND EQUIVALENTS, end of year..................... $ 390 $ 208 $ 135
=========== ============= =============
</TABLE>
See Notes To Consolidated Financial Statements
28
<PAGE>
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FISCAL YEARS ENDED JANUARY 1, 1999, JANUARY 2, 1998 AND JANUARY 3, 1997
($ IN MILLIONS)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(52 weeks) (52 weeks) (53 weeks)
(pro forma, unaudited)
--------------------------
<S> <C> <C> <C>
Net income.................................................... $ 390 $ 324 $ 270
Other comprehensive income (loss):
Foreign currency translation adjustments.................... (3) (10) (12)
Other....................................................... 6 1 -
----------- ----------- ------------
Total other comprehensive income (loss)....................... 3 (9) (12)
----------- ----------- ------------
Comprehensive income.......................................... $ 393 $ 315 $ 258
=========== =========== ============
</TABLE>
See Notes To Consolidated Financial Statements
29
<PAGE>
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM MARCH 27, 1998 TO JANUARY 1, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Class A Additional Accumulated other
shares common paid-in Retained Treasury stock, comprehensive
outstanding stock capital earnings at cost income
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
255.6 Spinoff at March 27, 1998....... $ 3 $ 2,711 $ - $ - $ (23)
- Net income, after the Spinoff... - - 301 - -
- Dividends ($.195 per share)..... - - (49) - -
1.5 Employee stock plan issuance and
other, after the Spinoff........ - 2 (34) 50 7
(13.7) Purchase of treasury stock...... - - - (398) -
- -----------------------------------------------------------------------------------------------------------------------
243.4 Balance, January 1, 1999........ $ 3 $ 2,713 $ 218 $ (348) $ (16)
=======================================================================================================================
</TABLE>
See Notes To Consolidated Financial Statements
30
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements present the results of operations,
financial position and cash flows of Marriott International, Inc. (together with
its subsidiaries, we, us or the Company), formerly New Marriott MI, Inc., as if
it were a separate entity for all periods presented. During periods prior to
March 27, 1998, we were a wholly owned subsidiary of the former Marriott
International, Inc. (Old Marriott) and financial statements for such periods
have been prepared on a combined basis.
On March 27, 1998, all of our issued and outstanding common stock was
distributed, on a pro rata basis, as a special dividend (the Spinoff) to
holders of common stock of Old Marriott, and the Company was renamed "Marriott
International, Inc." Old Marriott's historical cost basis in our assets and
liabilities has been carried over. Old Marriott received a private letter
ruling from the Internal Revenue Service that the Spinoff would be tax-free to
it and its shareholders. For each share of common stock in Old Marriott,
shareholders received one share of our Common Stock and one share of our Class A
Common Stock. On May 21, 1998, all outstanding shares of our Common Stock were
converted, on a one-for-one basis, into shares of our Class A Common Stock.
Also on March 27, 1998, Old Marriott was renamed Sodexho Marriott Services,
Inc. (SMS) and its food service and facilities management business was combined
with the North American operations of Sodexho Alliance, S.A. (Sodexho), a
worldwide food and management services organization.
For purposes of governing certain of the ongoing relationships between us and
SMS after the Spinoff and to provide for orderly transition, we entered into
various agreements with SMS including the Employee Benefits and Other Employee
Matters Allocation Agreement, Liquid Yield Option Notes (LYONs) Allocation
Agreement, Tax Sharing Agreement, Trademark and Trade Name License Agreement,
Noncompetition Agreement, Employee Benefit Services Agreement, Procurement
Services Agreement, Distribution Services Agreement, and other transitional
services agreements. Effective as of the Spinoff date, pursuant to these
agreements, we assumed sponsorship of certain of Old Marriott's employee benefit
plans and insurance programs and succeeded to Old Marriott's liability to LYONs
holders under the LYONs Indenture, nine percent of which was assumed by SMS.
All material intercompany transactions and balances between entities included
in these consolidated financial statements have been eliminated. Sales by us to
SMS of $434 million in 1998, $434 million in 1997, and $406 million in 1996 have
not been eliminated. Changes in Investments and Net Advances from Old Marriott
represent our net income, the net cash transferred between Old Marriott and us
and certain non-cash items.
Prior to the Spinoff, we operated as a unit of Old Marriott, utilizing Old
Marriott's centralized systems for cash management, payroll, purchasing and
distribution, employee benefit plans, insurance and administrative services. As
a result, substantially all cash received by us was deposited in and commingled
with Old Marriott's general corporate funds. Similarly, our operating expenses,
capital expenditures and other cash requirements were paid by Old Marriott and
charged directly or allocated to us. Certain assets and liabilities related to
our operations were managed and controlled by Old Marriott on a centralized
basis. Prior to the Spinoff such assets and liabilities were allocated to us
based on our use of, or interest in, those assets and liabilities. In our
opinion, the methods for allocating costs, assets and liabilities prior to the
Spinoff were reasonable. We now perform these functions independently and the
costs incurred have not been materially different from those allocated prior to
the Spinoff.
31
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
financial statements, and the reported amounts of sales and expenses during the
reporting period. Accordingly, ultimate results could differ from those
estimates. Certain amounts have been reclassified to conform to the 1998
presentation.
Fiscal Year
Our fiscal year ends on the Friday nearest to December 31. The 1996 fiscal
year includes 53 weeks, while the 1998 and 1997 fiscal years include 52 weeks.
Revenue Recognition
Our sales include fees and reimbursed costs for properties managed by us,
together with sales by lodging properties and senior living communities owned or
leased by us, and sales of our other businesses. Fees comprise management fees
and franchise fees received from third party owners of lodging properties and
senior living communities. Reimbursed costs comprise costs recovered from
owners of hotels and senior living communities.
Change in Accounting Policy
On November 20, 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus on EITF 97-2 "Application of FASB
Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements."
EITF 97-2 addresses the circumstances in which a management entity may include
the sales and expenses of a managed entity in its financial statements. As a
result of EITF 97-2, and related discussions with the staff of the Securities
and Exchange Commission, in our 1998 fourth quarter we changed our accounting
policy to no longer include in our financial statements the working capital and
sales of managed hotels and managed senior living communities. The financial
statements for prior years have been restated. The change in accounting policy
resulted in reductions of each of sales and operating expenses by $1,810 million
and $1,529 million in 1997 and 1996, respectively, and each of assets and
liabilities by $396 million as of January 2, 1998, with no impact on operating
profit, net income, earnings per share, debt or equity.
Profit Sharing Plan
We contribute to a profit sharing plan for the benefit of employees meeting
certain eligibility requirements and electing participation in the plan.
Contributions are determined annually by the Board of Directors. We recognized
compensation cost of $45 million in 1998, $36 million in 1997 and $29 million in
1996.
Self-Insurance Programs
We are self-insured for certain levels of general liability, workers'
compensation, employment practices and employee medical coverage. Estimated
costs of these self-insurance programs are accrued at the present value of
projected settlements for known and anticipated claims.
Cash and Equivalents
We consider all highly liquid investments with a maturity of three months or
less at date of purchase to be cash equivalents.
New Accounting Standards
We adopted Statement of Financial Accounting Standards (FAS) No. 130,
"Reporting Comprehensive Income," in 1998 by adding a Consolidated Statement of
Comprehensive Income. The taxes applicable to other comprehensive income are
not material.
32
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
We adopted FAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," in the fourth quarter of 1998, by increasing the number of
our reportable segments from two to three and presenting increased footnote
disclosure of segment information.
We will adopt FAS No. 133, "Accounting for Derivative Investments and Hedging
Activities," which we do not expect to have a material effect on our
consolidated financial statements, in the fourth quarter of 2000.
In April 1998 the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." We will adopt SOP 98-5 in the first quarter of 1999 by expensing
pre-opening costs for Company owned lodging and senior living communities as
incurred.
RELATIONSHIPS WITH MAJOR CUSTOMERS
In December 1998, Host Marriott Corporation (Host Marriott) reorganized its
business operations to qualify as a real estate investment trust (REIT). In
conjunction with its conversion to a REIT, Host Marriott spun off, in a taxable
transaction, a new company called Crestline Capital Corporation (Crestline),
acquired a portfolio of luxury hotels for $1.5 billion, and completed
partnership roll-ups representing new acquisitions approximating $650 million.
As part of the Crestline spinoff, Host Marriott transferred to Crestline all of
the senior living communities previously owned by Host Marriott, and Host
Marriott entered into lease or sublease agreements with Crestline for
substantially all of Host Marriott's lodging properties, including the
properties acquired in the acquisition and roll-up transactions described above.
Our lodging and senior living community management and franchise agreements with
Host Marriott were also assigned to Crestline. In the case of the lodging
agreements, Host Marriott remains obligated under such agreements in the event
that Crestline fails to perform its obligations thereunder. The lodging
agreements now provide for us to manage the Marriott hotels, Ritz-Carlton
hotels, Courtyard hotels and Residence Inns leased by Crestline. Our consent is
required for Crestline to take certain major actions relating to leased
properties that we manage.
We recognized sales of $2,144 million, $1,700 million and $1,315 million and
operating profit before corporate expenses and interest of $197 million, $140
million and $95 million during 1998, 1997 and 1996, respectively, from the
lodging properties owned or leased by Host Marriott prior to the transactions
described above. Additionally, Host Marriott was a general partner in several
unconsolidated partnerships that owned lodging properties operated by us under
long-term agreements. We recognized sales of $712 million, $1,054 million and
$1,230 million and operating profit before corporate expenses and interest of
$83 million, $122 million and $121 million in 1998, 1997 and 1996, respectively,
from the lodging properties owned by these unconsolidated partnerships. We also
leased land to certain of these partnerships and recognized land rent income of
$24 million, $23 million and $22 million in 1998, 1997 and 1996, respectively.
We have provided Host Marriott with financing for a portion of the cost of
acquiring properties to be operated or franchised by us, and may continue to
provide financing to Host Marriott or Crestline in the future. The outstanding
principal balance of these loans was $9 million and $135 million at January 1,
1999 and January 2, 1998, respectively, and we recognized $5 million, $9 million
and $17 million in 1998, 1997 and 1996, respectively, in interest and fee income
under these credit agreements with Host Marriott.
We have guaranteed the performance of Host Marriott and certain of its
affiliates to lenders and other third parties. These guarantees were limited to
$70 million at January 1, 1999. No payments have been made by us pursuant to
these guarantees. We continue to have the right to purchase up to 20 percent of
Host Marriott's outstanding common stock upon the occurrence of certain events
generally involving a change of control of Host Marriott. This right expires in
2017, and Host Marriott has granted an exception to the ownership limitations in
its charter to permit full exercise of this right, subject to certain conditions
related to ownership limitations applicable to REITs generally. We lease land
to Host Marriott that has an aggregate book value of $264 million at January 1,
1999. Most of this land has been pledged to secure debt of these lessees. We
have agreed to defer receipt of rentals on this land, if necessary, to permit
the lessees to meet their debt service requirements.
We are party to agreements which provide for us to manage the senior living
communities owned by Crestline. We recognized sales of $173 million and $115
million and operating profit before corporate expenses and interest of $5
million and $1 million under these agreements during 1998 and 1997,
respectively.
33
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
We are party to management agreements with entities owned or affiliated with
another hotel owner which provide for us to manage hotel properties owned or
leased by those entities. We recognized sales of $560 million and $407 million
during 1998 and 1997, respectively, from these properties.
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
(in millions)
<S> <C> <C>
Land................................................................ $ 580 $ 425
Buildings and leasehold improvements................................ 732 486
Furniture and equipment............................................. 399 329
Timeshare properties................................................ 438 379
Construction in progress............................................ 490 230
------------------ ------------------
2,639 1,849
Accumulated depreciation and amortization........................... (364) (312)
------------------ ------------------
$ 2,275 $ 1,537
================== ==================
</TABLE>
We record property and equipment at cost, including interest, rent and real
estate taxes incurred during development and construction. Interest capitalized
as a cost of property and equipment totaled $21 million in 1998, $16 million in
1997 and $9 million in 1996. We capitalize replacements and improvements that
extend the useful life of property and equipment. We compute depreciation
using the straight-line method over the estimated useful lives of the assets.
We amortize leasehold improvements over the shorter of the asset life or lease
term.
ACQUISITIONS AND DISPOSITIONS
The Ritz-Carlton Hotel Company LLC
On April 24, 1995, we acquired a 49 percent beneficial ownership interest in
The Ritz-Carlton Hotel Company LLC, which owns the management agreements on the
Ritz-Carlton hotels and resorts, the licenses for the Ritz-Carlton trademarks
and trade name as well as miscellaneous assets. The investment was acquired for
a total consideration of approximately $200 million. On March 19, 1998, we
increased our ownership interest in The Ritz-Carlton Hotel Company LLC to
approximately 98 percent for additional consideration of approximately $90
million. We expect to acquire the remaining two percent within the next several
years. We accounted for the acquisition using the purchase method of
accounting. We allocated the purchase cost to the assets acquired and the
liabilities assumed based on estimated fair values. We amortize the resulting
goodwill on a straight-line basis over 40 years. We amortize the amounts
allocated to management agreements on a straight-line basis over the estimated
lives of the agreements. Prior to March 19, 1998, we accounted for our
investment in The Ritz-Carlton Hotel Company LLC using the equity method of
accounting.
For periods prior to March 19, 1998, we included our income from The Ritz-
Carlton Hotel Company LLC in operating profit in the accompanying consolidated
statements of income. We received distributions of $17 million and $20 million
in 1997 and 1996 respectively, from The Ritz-Carlton Hotel Company LLC. Such
amounts were based upon an annual, cumulative preferred return on invested
capital.
34
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Renaissance Hotel Group N.V.
On March 29, 1997, we acquired substantially all of the outstanding common
stock of Renaissance Hotel Group N.V. (RHG), an operator and franchisor of
approximately 150 hotels in 38 countries under the Renaissance, New World and
Ramada International brands. The purchase cost, of approximately $937 million,
was funded by Old Marriott. The acquisition has been accounted for using the
purchase method of accounting. The purchase cost has been allocated to the
assets acquired and liabilities assumed based on estimated fair values as
follows:
<TABLE>
<CAPTION>
(in millions)
<S> <C>
Current assets................................................... $ 141
Management, franchise and license agreements..................... 380
Other assets..................................................... 7
Current liabilities.............................................. (119)
Long-term debt................................................... (12)
Other long-term liabilities...................................... (106)
Investments and net advances from Old Marriott................... (128)
Goodwill......................................................... 774
-----------------
Purchase cost.................................................... $ 937
=================
</TABLE>
Goodwill is being amortized on a straight-line basis over 40 years. Amounts
allocated to management, franchise and license agreements are being amortized on
a straight-line basis over the lives of the agreements.
We included RHG's operating results from the date of acquisition. Our
unaudited pro forma sales and net income for 1997, calculated as if RHG had been
acquired at the beginning of 1997, were $7,383 million and $319 million,
respectively. Unaudited pro forma results of operations include an adjustment
for interest expense of $12 million, as if the acquisition borrowings had been
incurred by us. Amortization expense deducted in determining net income
reflects the impact of the excess of the purchase price over the net tangible
assets acquired. The unaudited pro forma combined results of operations do not
reflect our expected future results of operations.
Forum Group, Inc.
On March 25, 1996, a wholly owned subsidiary of the Company acquired all of
the outstanding shares of common stock of Forum Group, Inc. (Forum), an operator
of 43 senior living communities, 34 of which were owned or partially owned by
Forum, for total cash consideration of approximately $303 million. We accounted
for the acquisition using the purchase method of accounting. The purchase cost
was allocated to the assets acquired and liabilities assumed based on estimated
fair values. We amortize the resulting goodwill on a straight-line basis over
35 years.
On June 21, 1997, we sold 29 senior living communities acquired as part of the
Forum acquisition to Host Marriott for approximately $550 million, resulting in
no gain or loss. The consideration included approximately $50 million to be
received subsequent to 1997, as expansions at certain communities are completed.
The $500 million of consideration received during 1997 consisted of $222 million
in cash, $187 million of outstanding debt and $91 million of notes receivable
bearing interest at nine percent which were repaid on April 1, 1998. Under the
terms of the sale, Host Marriott purchased all of the common stock of Forum,
which at the time of the sale owned the 29 communities, certain working capital
and associated debt. We continue to operate these communities under long-term
management agreements.
Other Dispositions
On December 29, 1998, we agreed to sell and leaseback, under long-term,
limited-recourse leases, 17 hotels for approximately $202 million in cash. At
the same time, we agreed to pay security deposits of $21 million which will be
refunded at the end of the leases. As of January 1, 1999, four of the
properties had been sold, resulting in a sales price which exceeded the net book
value by $13 million, which we will recognize as a reduction of rent expense
over the 15-year initial lease terms.
35
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1998, we agreed to sell, subject to long-term management agreements, a
further eight lodging properties and 11 senior living communities for
consideration of $184 million and $178 million, respectively. As of January 1,
1999, sales of five of these hotels and five of these senior living communities
had closed, for aggregate consideration of $181 million.
On April 3, 1997, we agreed to sell and leaseback, under long-term, limited-
recourse leases, 14 limited service hotels for approximately $149 million in
cash. At the same time, we agreed to pay security deposits of $15 million,
which will be refunded at the end of the leases. As of January 2, 1998, all of
the properties had been sold, resulting in a sales price which exceeded the net
book value by $20 million, which is recognized as a reduction of rent expense
over the 17-year initial lease terms. On October 10, 1997, we agreed to sell
and leaseback, under long-term, limited-recourse leases, another nine limited
service hotels for approximately $129 million in cash. At the same time, we
agreed to pay security deposits of $13 million, which will be refunded at the
end of the leases. At January 1, 1999, all of these nine properties had been
sold, resulting in a sales price which exceeded the net book value by $17
million, which is recognized as a reduction of rent expense over the 15-year
initial lease terms. We can renew all of these leases at our option.
On April 11, 1997, we sold five senior living communities for cash
consideration of approximately $79 million. On September 12, 1997, we agreed to
sell another seven senior living communities for cash consideration of
approximately $95 million. As of January 1, 1999, all 12 of these properties
had been sold, resulting in a pre-tax gain of $19 million, which is recognized
over a period of up to four years, as contingencies in the sales contracts
expire. We continue to operate all of these communities under long-term
management agreements.
During 1996, we sold and leased back four senior living communities for cash
consideration of approximately $53 million. The excess of the sales price over
the net book value of $9 million is recognized as a reduction of rent expense
over the 20-year initial lease terms.
We periodically sell, with limited recourse, notes receivable originated by
Marriott Vacation Club International in connection with the sale of timesharing
intervals. Net proceeds from these transactions totaled $165 million in 1998,
$68 million in 1997 and $148 million in 1996. Pre-tax gains from these
transactions increased by $17 million in 1998 compared to 1997. At January 1,
1999, we had a repurchase obligation of $76 million with respect to mortgage
note sales. Additionally, we sold, without recourse, first mortgage loans on
Marriott lodging and senior living properties of $18 million in 1997.
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
(in millions)
<S> <C> <C>
Management, franchise and license agreements............................. $ 717 $ 595
Goodwill................................................................. 1,133 937
Other.................................................................... 23 23
------------------- -------------------
1,873 1,555
Accumulated amortization................................................. (161) (107)
------------------- -------------------
$ 1,712 $ 1,448
=================== ===================
</TABLE>
We amortize intangible assets on a straight-line basis over periods of three
to 40 years. Amortization expense totaled $54 million in 1998, $42 million in
1997 and $12 million in 1996.
36
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INCOME TAXES
Total deferred tax assets and liabilities as of January 1, 1999 and January 2,
1998, were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
(in millions)
<S> <C> <C>
Deferred tax assets...................................................... $ 457 $ 388
Deferred tax liabilities................................................. (417) (378)
------------------- -------------------
Net deferred taxes....................................................... $ 40 $ 10
=================== ===================
</TABLE>
The tax effect of each type of temporary difference and carryforward that
gives rise to a significant portion of deferred tax assets and liabilities as of
January 1, 1999 and January 2, 1998 follows:
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
(in millions)
<S> <C> <C>
Self-insurance........................................................... $ 91 $ 103
Employee benefits........................................................ 145 93
Deferred income.......................................................... 51 32
Other reserves........................................................... 28 27
Frequent stay programs................................................... 86 99
Partnership interests.................................................... (31) (31)
Property, equipment and intangible assets................................ (199) (195)
Finance leases........................................................... (44) (44)
Other, net............................................................... (87) (74)
------------------- -------------------
Net deferred taxes....................................................... $ 40 $ 10
=================== ===================
</TABLE>
No provision for U.S. income taxes, or additional foreign taxes, has been made
on the cumulative unremitted earnings of non-U.S. subsidiaries ($138 million as
of January 1, 1999) because we consider these earnings to be permanently
invested. These earnings could become subject to additional taxes if remitted
as dividends, loaned to us or a U.S. affiliate, or if we sell our interests in
the affiliates. We cannot practically estimate the amount of additional taxes
which might be payable on the unremitted earnings.
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -------------------
(in millions)
<S> <C> <C> <C>
Current - Federal....................................... $ 164 $ 168 $ 102
- State......................................... 35 34 21
- Foreign....................................... 18 28 13
------------------- ------------------- -------------------
217 230 136
------------------- ------------------- -------------------
Deferred - Federal...................................... 25 (19) 24
- State........................................ 1 (3) 4
- Foreign...................................... (1) (1) 1
------------------- ------------------- -------------------
25 (23) 29
------------------- ------------------- -------------------
$ 242 $ 207 $ 165
=================== =================== ===================
</TABLE>
The current tax provision does not reflect the benefit attributable to us
relating to the exercise of employee stock options of $39 million in 1998, $38
million in 1997 and $27 million in 1996.
37
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of the U.S. statutory tax rate to our effective income tax
rate follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- -------------------- -------------------
<S> <C> <C> <C>
U.S. statutory tax rate................................... 35.0% 35.0% 35.0%
State income taxes, net of U.S. tax benefit............... 4.1 4.0 4.0
Corporate-owned life insurance............................ (0.3) (0.8) (0.8)
Tax credits............................................... (4.2) (3.4) (2.2)
Goodwill amortization..................................... 1.6 1.6 0.6
Other, net................................................ 2.1 2.6 1.4
-------------------- -------------------- ------------------
Effective rate............................................ 38.3% 39.0% 38.0%
==================== ==================== ==================
</TABLE>
Cash paid for income taxes, net of refunds, was $164 million in 1998, $143
million in 1997 and $96 million in 1996.
As part of the Spinoff, we entered into a tax sharing agreement with SMS which
reflects each party's rights and obligations with respect to deficiencies and
refunds, if any, of federal, state or other taxes relating to the business of
Old Marriott and the Company prior to the Spinoff.
During periods prior to the Spinoff, we were included in the consolidated
federal income tax return of Old Marriott. The income tax provision reflects
the portion of Old Marriott's historical income tax provision attributable to
our operations. We believe that the income tax provision, as reflected, is
comparable to what the income tax provision would have been if we had filed a
separate return during the periods presented.
LEASES
Our future obligations under operating leases at January 1, 1999 are summarized
below:
<TABLE>
<CAPTION>
(in millions)
--------------------
Fiscal Year
<S> <C>
1999................................................................................... $ 154
2000................................................................................... 149
2001................................................................................... 141
2002................................................................................... 139
2003................................................................................... 136
Thereafter............................................................................. 1,237
--------------------
Total minimum lease payments........................................................... $ 1,956
====================
</TABLE>
Most leases have initial terms of up to 20 years, and contain one or more
renewal options, generally for five or 10 year periods. The leases provide for
minimum rentals, and additional rentals based on the operations of the leased
property. The total minimum lease payments above include $607 million
representing obligations of consolidated subsidiaries which are non-recourse to
Marriott International, Inc.
Rent expense consists of:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
(in millions)
<S> <C> <C> <C>
Minimum rentals.............................................. $ 138 $ 123 $ 110
Additional rentals........................................... 101 127 133
------------- ------------- -------------
$ 239 $ 250 $ 243
============= ============= =============
</TABLE>
38
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LONG-TERM DEBT
Our long-term debt at January 1, 1999 and January 2, 1998, consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
----------------- ------------------
(in millions)
<S> <C> <C>
Unsecured debt
Senior notes, average interest rate of 6.8% at January 1, 1999,
maturing through 2005.......................................... $ 402 $ -
Commercial paper, interest rate of 5.8% at January 1, 1999......... 426 -
Endowment deposits (non-interest bearing).......................... 111 108
Other............................................................ 35 28
----------------- -----------------
974 136
Less current portion.................................................. 30 24
----------------- -----------------
$ 944 $ 112
================= =================
</TABLE>
In November 1998 we issued, through a private placement, $400 million of
unsecured senior notes (the Senior Notes). Proceeds net of discounts, totaled
$396 million. We have agreed to promptly make and complete a registered
exchange offer for the Senior Notes and, if required, to implement a resale
shelf registration statement. If we fail to do so on a timely basis, we will
pay additional interest to holders of the Senior Notes.
In March, 1998 and February, 1999, respectively, we entered into $1.5 billion
and $500 million multicurrency revolving credit facilities (the Facilities) each
with terms of five years. Borrowings will bear interest at the London Interbank
Offered Rate (LIBOR) plus a spread, based on our public debt rating.
Additionally, annual fees will be paid on the Facilities at a rate also based on
our public debt rating. Commercial paper, supported by the Facilities, is
classified as long-term debt based on our ability and intent to refinance it on
a long-term basis.
We are in compliance with covenants in our loan agreements which require the
maintenance of certain financial ratios and minimum shareholders' equity, and
also include, among other things, limitations on additional indebtedness and the
pledging of assets.
The 1998 statement of cash flows excludes $31 million of notes receivable
forgiven as part consideration for the March 19, 1998 acquisition of 49 percent
of The Ritz-Carlton Hotel Company LLC, and $12 million of long-term debt assumed
in 1998. The 1997 statement of cash flows excludes $226 million of debt assumed
by Host Marriott, $91 million of notes receivable related to the sale of 29
senior living communities to Host Marriott and $12 million of debt assumed in
the RHG acquisition. The 1996 statement of cash flows excludes $363 million of
debt that we assumed at the date of the Forum acquisition. Non-recourse debt of
$62 million and $29 million extinguished without cash payments in 1997 and 1996,
respectively, are not reflected in the statement of cash flows.
Aggregate debt maturities are: 1999 - $30 million; 2000 - $12 million; 2001 -
$11 million; 2002 - $11 million; 2003 - $640 million and $270 million
thereafter.
Cash paid for interest was $23 million in 1998, $11 million in 1997 and $19
million in 1996.
CONVERTIBLE SUBORDINATED DEBT
On March 25, 1996, Old Marriott issued $540 million (principal amount at
maturity) of zero coupon convertible subordinated debt in the form of LYONs due
2011. The LYONs were issued and recorded at a discount representing a yield to
maturity of 4.25 percent. Accretion is recorded as interest expense and an
increase to the carrying value. Gross proceeds from the LYONs issuance were
$288 million.
Each $1,000 LYON is convertible at anytime, at the option of the holder, into
17.52 shares of our Class A Common Stock and 2.19 shares of SMS common stock.
Upon consummation of the Spinoff, we assumed the LYONs, and SMS assumed a nine
percent share of the LYONs obligation based on the relative equity values of
39
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SMS and the Company at the Spinoff. We are liable to the holders of the LYONs
for any payments that SMS fails to make on its allocable portion.
At the option of the holder, we may be required to redeem each LYON on March
25, 1999, or March 25, 2006, for $603.71 or $810.36 per LYON, respectively.
Subject to certain notice requirements to the holder, we may elect to redeem the
LYONs for cash, common stock, or any combination thereof.
The LYONs are redeemable by the obligor at any time on or after March 25,
1999, for cash equal to the issue price plus accrued original issue discount.
The LYONs are expressly subordinated to $1.2 billion of our senior indebtedness
at January 1, 1999 including guarantees, as defined in the indenture governing
the LYONs (Senior Indebtedness). SMS's obligations under the LYONs are
subordinated to both our Senior Indebtedness and that of SMS.
SHAREHOLDERS' EQUITY
300 million shares of our Class A Common Stock with a par value of $.01 per
share, are authorized. 10 million shares of preferred stock, without par value,
are authorized, with none issued.
On March 27, 1998 our Board of Directors adopted a shareholder rights plan
under which one preferred stock purchase right was distributed for each share of
our Class A Common Stock. Each right entitles the holder to buy 1/1000/th/ of a
share of a newly issued series of junior participating preferred stock of the
Company at an exercise price of $175. The rights will be exercisable ten days
after a person or group acquires beneficial ownership of 20 percent or more of
our Class A Common Stock, or begins a tender or exchange for 30 percent or more
of our Class A Common Stock. Shares owned by a person or group on March 27,
1998 and held continuously thereafter are exempt for purposes of determining
beneficial ownership under the rights plan. The rights are nonvoting and will
expire on the tenth anniversary of the adoption of the shareholder rights plan,
unless exercised or previously redeemed by us for $.01 each. If we are involved
in a merger or certain other business combinations not approved by the Board of
Directors, each right entitles its holder, other than the acquiring person or
group, to purchase common stock of either the Company or the acquirer having a
value of twice the exercise price of the right.
As of January 1, 1999, we have been authorized by our Board of Directors to
purchase up to 6.3 million shares of our Class A Common Stock.
40
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EARNINGS PER SHARE
For periods prior to the Spinoff, the earnings per share calculations are pro
forma, and the number of weighted average shares outstanding and the effect of
dilutive securities used are based upon the weighted average number of Old
Marriott shares outstanding, and the Old Marriott effect of dilutive securities
for the applicable period, adjusted (1) for the distribution ratio in the
Spinoff of one share of our Common Stock and one share of our Class A Common
Stock for every share of Old Marriott common stock and (2) to reflect the
conversion of our Common Stock into our Class A Common Stock on May 21, 1998.
The following table illustrates the reconciliation of the earnings and number
of shares used in the basic and diluted earnings per share calculations (in
millions, except per share amounts).
<TABLE>
<CAPTION>
1998 1997 1996
--------------- ---------------- -----------------
(pro forma, unaudited)
------------------------------------------
Computation of Basic Earnings Per Share
<S> <C> <C> <C>
Net income.............................................. $ 390 $ 324 $ 270
Weighted average shares outstanding..................... 249.8 254.2 254.9
------------------- ------------------- -------------------
Basic Earnings Per Share................................ $ 1.56 $ 1.27 $ 1.06
=================== =================== ===================
Computation of Diluted Earnings Per Share
Net income.............................................. $ 390 $ 324 $ 270
After-tax interest expense on convertible
subordinated debt.................................. 8 8 6
------------------- ------------------- -------------------
Net income for diluted earnings per share............... $ 398 $ 332 $ 276
------------------- ------------------- -------------------
Weighted average shares outstanding..................... 249.8 254.2 254.9
Effect of Dilutive Securities
Employee stock purchase plan....................... - 0.1 0.5
Employee stock option plan......................... 8.1 8.7 8.9
Deferred stock incentive plan...................... 5.7 5.4 5.8
Convertible subordinated debt........................... 9.5 9.5 7.3
------------------- ------------------- -------------------
Shares for diluted earnings per share................... 273.1 277.9 277.4
------------------- ------------------- -------------------
Diluted Earnings Per Share.............................. $ 1.46 $ 1.19 $ .99
=================== =================== ===================
</TABLE>
We compute the effect of dilutive securities using the treasury stock method
and average market prices during the period. We use the if-converted method for
convertible subordinated debt.
41
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVESTMENTS AND NET ADVANCES FROM OLD MARRIOTT
The following is an analysis of Old Marriott's investment in the Company:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(in millions)
<S> <C> <C> <C>
Balance at beginning of year............................ $ 2,586 $ 1,444 $ 1,251
Net income.............................................. 89 324 270
Advances (to) from Old Marriott......................... (100) 576 (132)
Employee stock plan issuance and other.................. 116 242 55
Spinoff on March 27, 1998............................... (2,691) - -
----------------- ----------------- -----------------
Balance at end of year.................................. $ - $ 2,586 $ 1,444
================= ================= =================
</TABLE>
EMPLOYEE STOCK PLANS
In connection with the Spinoff, we issued stock options, deferred shares and
restricted shares with the same value as the respective Old Marriott awards as
of the Spinoff under our 1998 Comprehensive Stock and Cash Incentive Plan
(Comprehensive Plan). Under the Comprehensive Plan, we may award to
participating employees (1) options to purchase our Class A Common Stock (Stock
Option Program and Supplemental Executive Stock Option awards), (2) deferred
shares of our Class A Common Stock and (3) restricted shares of our Class A
Common Stock. In addition we have an employee stock purchase plan (Stock
Purchase Plan). In accordance with the provisions of Opinion No. 25 of the
Accounting Principles Board, we recognize no compensation cost for the Stock
Option Program, the Supplemental Executive Stock Option awards or the Stock
Purchase Plan.
Deferred shares granted to officers and key employees under the Comprehensive
Plan generally vest over 10 years in annual installments commencing one year
after the date of grant. Certain employees may elect to defer receipt of shares
until termination or retirement. We accrue compensation expense for the fair
market value of the shares on the date of grant, less estimated forfeitures.
Prior to the Spinoff, Old Marriott awarded 0.2 million deferred shares under the
Old Marriott plan during 1998. Compensation cost recognized during 1998, 1997
and 1996 was $12 million, $9 million and $8 million, respectively.
Restricted shares under the Comprehensive Plan are issued to officers and key
employees and distributed over a number of years in annual installments, subject
to certain prescribed conditions including continued employment. We recognize
compensation expense for the restricted shares over the restriction period equal
to the fair market value of the shares on the date of issuance. We awarded 0.1
million restricted shares under this plan during 1998. We recognized
compensation cost of $3 million, $2 million and $2 million in 1998, 1997 and
1996, respectively.
Under the Stock Purchase Plan, eligible employees may purchase our Class A
Common Stock through payroll deductions at the lower of the market value at the
beginning or end of each plan year.
Employee stock options may be granted to officers and key employees at
exercise prices equal to the market price of our Class A Common Stock on the
date of grant. Nonqualified options expire up to 15 years after the date of
grant. Most options under the Stock Option Program are exercisable in
cumulative installments of one quarter at the end of each of the first four
years following the date of grant. In February 1997, 2.1 million Supplemental
Executive Stock Option awards were awarded to certain of our officers, which
vest after eight years. However, if our stock price meets certain performance
criteria the options may vest sooner. These options have an exercise price of
$25 and 0.2 million of them were forfeited during 1998. None of them were
exercised during 1997 or 1998 and 1.9 million remained outstanding at January 1,
1999.
42
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For purposes of the following disclosures required by FAS No. 123, "Accounting
for Stock-Based Compensation," we have estimated the fair value of each option
granted on the date of grant using the Black-Scholes option-pricing model, with
the following assumptions. For periods prior to the Spinoff, data have been
restated, where applicable, (1) for the distribution ratio in the Spinoff of one
share of our Common Stock and one share of our Class A Common Stock for every
share of Old Marriott common stock and (2) to reflect the conversion of our
Common Stock into our Class A Common Stock on May 21, 1998.
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ----------------
<S> <C> <C> <C>
Annual dividends................................... $ .20 $ .18 $ .16
Expected volatility................................ 28% 24% 25%
Risk free interest rate............................ 5.8% 6.2% 6.1%
Expected life (in years)........................... 7 7 7
</TABLE>
Pro forma compensation cost for the Stock Option Program, the Supplemental
Executive Stock Option awards and employee purchases pursuant to the Stock
Purchase Plan subsequent to December 30, 1994, recognized in accordance with FAS
No. 123, would reduce our net income as follows (in millions, except per share
amounts):
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- ------------------
<S> <C> <C> <C>
Net income as reported.............................. $ 390 $ 324 $ 270
Pro forma net income................................ $ 366 $ 309 $ 261
Diluted earnings per share as reported.............. $ 1.46 $ 1.19 $ .99
Pro forma diluted earnings per share................ $ 1.38 $ 1.14 $ .96
</TABLE>
The weighted-average fair value of each option granted during 1998, 1997 and
1996 was $11, $13 and $11, respectively. Since we recognize the pro forma
compensation cost for the Stock Option Program over the vesting period, the
foregoing pro forma reductions in our net income are not representative of
anticipated amounts in future years.
A summary of our Stock Option Program activity during 1998 is presented below:
<TABLE>
<CAPTION>
1998
------------------------------------------------------
Number of Weighted average
options exercise
(in millions) price
----------------------- ------------------------
<S> <C> <C>
New awards at the Spinoff....................................... 27.3 $ 16
Granted during the year......................................... 6.4 28
Exercised during the year....................................... (1.5) 11
Forfeited during the year....................................... (0.7) 20
-----------------------
Outstanding at end of year...................................... 31.5 19
======================= ==========================
Options exercisable at end of year.............................. 19.1 $ 13
======================= ==========================
</TABLE>
At January 1, 1999, 54.4 million shares were reserved under the Comprehensive
Plan (including 31.5 million shares under the Stock Option Program and 1.9
million shares of the Supplemental Executive Stock Option awards) and five
million shares were reserved under the Stock Purchase Plan.
43
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock options issued under the Stock Option Program outstanding at January 1,
1999 were as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------------------------- --------------------------------------
Weighted Weighted Weighted
Range of Number of average average Number of average
exercise options remaining life exercise options exercise
prices (in millions) (in years) price (in millions) price
- ---------------------- --------------- ---------------- --------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
$ 3 to 5 4.3 8 $ 5 4.3 $ 5
6 to 9 2.7 9 7 2.7 7
10 to 15 7.0 9 13 7.0 13
16 to 24 5.0 12 20 3.2 19
25 to 37 12.5 14 29 1.9 28
- ---------------------- --------------- -----------------
$ 3 to 37 31.5 12 19 19.1 13
====================== =============== ================ =============== ================= =============
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
We assume that the fair values of current assets and current liabilities are
equal to their reported carrying amounts. The fair values of noncurrent
financial assets and liabilities are shown below.
<TABLE>
<CAPTION>
1998 1997
------------------------------------- --------------------------------------
Carrying Fair Carrying Fair
amount value amount value
-------------- ---------------- --------------- ------------------
(in millions) (in millions)
<S> <C> <C> <C> <C>
Notes and other receivables.................. $ 606 $ 622 $ 672 $ 685
Long-term debt, convertible subordinated debt
and other long-term liabilities............. 1,331 1,309 490 478
</TABLE>
We value notes and other receivables based on the expected future cash flows
discounted at risk adjusted rates. We determine valuations for long-term debt,
convertible subordinated debt and other long-term liabilities based on quoted
market prices or expected future payments discounted at risk adjusted rates.
CONTINGENT LIABILITIES
We issue guarantees to lenders and other third parties in connection with
financing transactions and other obligations. These guarantees were limited, in
the aggregate, to $171 million at January 1, 1999, including guarantees
involving major customers, with expected funding of zero. As of January 1,
1999, we had extended approximately $271 million of loan commitments to owners
of lodging and senior living properties. Letters of credit outstanding on our
behalf at January 1, 1999, totaled $73 million, the majority of which related to
our self-insurance programs. At January 1, 1999, we had repurchase obligations
of $76 million related to notes receivable from timeshare interval purchasers,
that have been sold with limited recourse.
New World Development and another affiliate of Dr. Cheng, a director of the
Company, have severally indemnified us for guarantees by us of leases with
minimum annual payments of approximately $59 million.
SUBSEQUENT EVENT
On January 6, 1999, we entered into a definitive agreement to acquire
ExecuStay Corporation (ExecuStay), a provider of leased corporate apartments.
The total acquisition cost is estimated to be $115 million, to be paid with
approximately $53 million in our Class A Common Stock and $62 million in cash.
Holders of more than 55 percent of the voting stock of ExecuStay have agreed to
the terms of the acquisition. Completion of the acquisition, which is expected
to occur during the 1999 first quarter, is contingent on customary conditions,
including the successful completion of a cash tender offer and expiration or
termination of the Hart-Scott-Rodino Act waiting period requirements.
44
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BUSINESS SEGMENTS
We are a diversified hospitality company with operations in three business
segments: Lodging, which includes the development, ownership, operation and
franchising of lodging properties including vacation timesharing resorts; Senior
Living Services, which consists of the development, ownership and operation of
senior living communities; and Distribution Services, which operates a wholesale
food distribution business. We evaluate the performance of our segments based
primarily on operating profit before corporate expenses and interest. We do not
allocate taxes at the segment level.
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(in millions)
Sales
<S> <C> <C> <C>
Lodging................................................... $ 6,311 $ 5,247 $ 4,340
Senior Living Services.................................... 479 446 373
Distribution Services..................................... 1,178 1,543 1,025
----------------- ----------------- -----------------
$ 7,968 $ 7,236 $ 5,738
================= ================= =================
Operating profit before corporate expenses and interest
Lodging................................................... $ 704 $ 569 $ 452
Senior Living Services.................................... 15 32 39
Distribution Services..................................... 17 7 16
Other..................................................... - 1 1
----------------- ----------------- -----------------
$ 736 $ 609 $ 508
================= ================= =================
Depreciation and amortization
Lodging................................................... $ 99 $ 89 $ 55
Senior Living Services.................................... 19 19 20
Distribution Services..................................... 6 6 4
Corporate................................................. 16 12 10
----------------- ----------------- -----------------
$ 140 $ 126 $ 89
================= ================= =================
Assets
Lodging................................................... $ 4,285 $ 3,649 $ 1,972
Senior Living Services.................................... 905 728 1,106
Distribution Services..................................... 179 190 173
Corporate................................................. 864 594 505
----------------- ----------------- -----------------
$ 6,233 $ 5,161 $ 3,756
================= ================= =================
Capital expenditures
Lodging................................................... $ 562 $ 271 $ 158
Senior Living Services.................................... 329 227 114
Distribution Services..................................... 2 6 8
Corporate................................................. 44 16 13
----------------- ----------------- -----------------
$ 937 $ 520 $ 293
================= ================= =================
</TABLE>
Sales of Distribution Services exclude sales made at market terms and
conditions to other segments of $155 million, $159 million and $150 million in
1998, 1997 and 1996, respectively.
Segment operating expenses include selling, general and administrative
expenses directly related to the operations of the businesses, aggregating $635
million in 1998, $578 million in 1997 and $446 million in 1996.
The consolidated financial statements include the following related to
international operations: sales of $323 million in 1998, $294 million in 1997,
and $185 million in 1996; operating profit before corporate expenses and
interest of $49 million in 1998, $50 million in 1997, and $21 million in 1996;
and fixed assets of $46 million in 1998, $46 million in 1997, and $53 million in
1996.
45
<PAGE>
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
QUARTERLY FINANCIAL DATA - UNAUDITED
($ in millions, except per share data)
<TABLE>
<CAPTION>
1998/1/
-------------------------------------------------------------------------------------
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
--------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Systemwide sales /2/.......................... $ 3,257 $ 4,001 $ 3,566 $ 5,200 $ 16,024
Sales......................................... 1,715 1,927 1,804 2,522 7,968
Operating profit before corporate expenses and
interest................................... 163 186 164 223 736
Net income.................................... 89 101 86 114 390
Diluted earnings per share /3,4/.............. .33 .37 .32 .44 1.46
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997/1/
-------------------------------------------------------------------------------------
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
--------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Systemwide sales /2/.......................... $ 2,586 $ 3,173 $ 3,127 $ 4,310 $ 13,196
Sales......................................... 1,542 1,738 1,664 2,292 7,236
Operating profit before corporate expenses and
interest................................... 135 159 136 179 609
Net income.................................... 69 84 74 97 324
Diluted earnings per share /3,4/.............. .26 .31 .27 .36 1.19
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The quarters consist of 12 weeks, except the fourth quarter, which includes
16 weeks.
/2/ Systemwide sales comprise revenues generated from guests at owned, leased,
managed and franchised hotels and senior living communities, together with
sales of our other businesses already included in reported sales.
/3/ Earnings per share data for periods prior to the Spinoff are pro forma,
because we were not publicly-held during those periods.
/4/ The sum of the earnings per share for the four quarters may differ from
annual earnings per share due to the required method of computing the
weighted average number of shares in interim periods.
46
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
47
<PAGE>
PART III
ITEMS 10, 11, 12 AND 13.
As described below, certain information appearing in our Proxy Statement to be
furnished to shareholders in connection with the 1999 Annual Meeting of
Shareholders, is incorporated by reference in this Form 10-K Annual Report.
<TABLE>
<S> <C>
ITEM 10. This information is incorporated by
reference to the "Directors Standing
For Election," "Directors Continuing In
Office" and "Section 16(a) Beneficial
Ownership Reporting Compliance"
sections of our Proxy Statement to be
furnished to shareholders in connection
with the 1999 Annual Meeting.
Information regarding executive
officers is included below.
ITEM 11. This information is incorporated by
reference to the "Executive
Compensation" section of our Proxy
Statement to be furnished to
shareholders in connection with the
1999 Annual Meeting.
ITEM 12. This information is incorporated by
reference to the "Stock Ownership"
section of our Proxy Statement to be
furnished to shareholders in connection
with the 1999 Annual Meeting.
ITEM 13. This information is incorporated by
reference to the "Certain Transactions"
section of our Proxy Statement to be
furnished to shareholders in connection
with the 1999 Annual Meeting.
</TABLE>
48
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information with respect to our executive officers.
<TABLE>
<CAPTION>
Name and Title Age Business Experience
- -------------------------------------- ------- ------------------------------------------------------------------------
<S> <C> <C>
J. W. Marriott, Jr. 66 Mr. Marriott is Chairman of the Board and Chief Executive
Chairman of the Marriott Officer of the Company. He joined Marriott Corporation in
International, Inc. Board and Chief 1956 and has served as a director of Marriott Corporation
Executive Officer (now known as Host Marriott Corporation) since 1964. He
became President of Marriott Corporation in 1964, Chief
Executive Officer in 1972 and Chairman of the Board in
1985. Mr. Marriott also is a director of Host Marriott
Services Corporation, General Motors Corporation, the
U.S.-Russia Business Council, and the Naval Academy
Endowment Trust. He serves on the Board of Trustees of
the National Geographic Society and The J. Willard &
Alice S. Marriott Foundation, and the Board of Directors
of Georgetown University, and is a member of the
Executive Committee of the World Travel & Tourism Council
and the Business Council. Mr. Marriott has served as
Chief Executive Officer of the Company since its
inception in 1997, and served as Chairman and Chief
Executive Officer of Old Marriott from October 1993 to
March 1998. Mr. Marriott has served as a director of the
Company since March 1998.
Todd Clist 57 Todd Clist joined Marriott Corporation in 1968. Mr.
Vice President; Clist served as general manager of several hotels before
President, North American Lodging being named Regional Vice President, Midwest Region for
Operations Marriott Hotels, Resorts and Suites in 1980. Mr. Clist
became Executive Vice President of Marketing for Marriott
Hotels, Resorts and Suites in 1985, and Senior Vice
President, Lodging Products and Markets in 1989. Mr.
Clist was named Executive Vice President and General
Manager for Fairfield Inn in 1990, for both Fairfield Inn
and Courtyard in 1991, and for Fairfield Inn, Courtyard
and Residence Inn in 1993. Mr. Clist was appointed to his
current position in January 1994.
Edwin D. Fuller 54 Edwin D. Fuller joined Marriott in 1972 and held several
Vice President; sales positions before being appointed Vice President of
President and Managing Director - Marketing in 1979. He became Regional Vice President of
Marriott Lodging International the Midwest Region in 1985, Regional Vice President of
the Western Region in 1988, and in 1990 was promoted to
Senior Vice President & Managing Director of
International Lodging, with a focus on developing the
international group of hotels. He was named Executive
Vice President & Managing Director of International
Lodging in 1994, and was promoted to his current position
of President & Managing Director of International Lodging
in 1997.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Name and Title Age Business Experience
- ------------------------------------- -------- ------------------------------------------------------------------------
<S> <C> <C>
Paul E. Johnson, Jr. 51 Paul E. Johnson, Jr. joined Marriott Corporation in 1983
Vice President; in Corporate Financial Planning & Analysis. In 1987, he
President - Marriott was promoted to Group Vice President of Finance and
Senior Living Services Development for the Marriott Service Group and later
assumed responsibility for real estate development for
Marriott Senior Living Services. During 1989, he served
as Vice President and General Manager of Marriott
Corporation's Travel Plazas division. Mr. Johnson
subsequently served as Vice President and General Manager
of Marriott Family Restaurants from December 1989 through
1991. In October 1991, he was appointed as Executive
Vice President and General Manager of Marriott Senior
Living Services, and in June 1996 he was appointed to his
current position.
Brendan M. Keegan 55 Brendan M. Keegan joined Marriott Corporation in 1971, in
Executive Vice President - the Corporate Organization Development Department and
Human Resources subsequently held several human resources positions,
including Vice President of Organization Development and
Executive Succession Planning. In 1986, Mr. Keegan was
named Senior Vice President, Human Resources, Marriott
Service Group. In April 1997, Mr. Keegan was appointed
Senior Vice President of Human Resources for our
worldwide human resources functions, including
compensation, benefits, labor and employee relations,
employment and human resources planning and development.
In February 1998, he was appointed to his current
position.
Robert T. Pras 57 Robert T. Pras joined Marriott Corporation in 1979 as
Vice President; Executive Vice President of Fairfield Farm Kitchens, the
President - Marriott predecessor of Marriott Distribution Services. In 1981,
Distribution Services Mr. Pras became Executive Vice President of Procurement
and Distribution. In May 1986, Mr. Pras was appointed to
the additional position of General Manager of Marriott
Corporation's Continuing Care Retirement Communities. He
was named Executive Vice President and General Manager of
Marriott Distribution Services in 1990. Mr. Pras was
appointed to his current position in January 1997.
Joseph Ryan 57 Joseph Ryan joined Old Marriott in December 1994 as
Executive Vice President and General Executive Vice President and General Counsel. Prior to
Counsel that time, he was a partner in the law firm of O'Melveny
& Myers, serving as the Managing Partner from 1993 until
his departure. He joined O'Melveny & Myers in 1967 and
was admitted as a partner in 1976.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Name and Title Age Business Experience
<S> <C> <C>
Horst H. Schulze 58 Horst H. Schulze has served as the President and Chief
Vice President; Operating Officer of The Ritz-Carlton since 1988. Mr.
President and Chief Operating Schulze joined The Ritz-Carlton in 1983 as Vice President,
Officer, The Ritz-Carlton Hotel Operations and was appointed Executive Vice President in
Company, LLC 1987. Prior to 1983, he spent nine years with Hyatt
Hotels Corporation where he held several positions
including Hotel General Manager, Regional Vice President
and Corporate Vice President. Before his association
with Hyatt, Mr. Schulze worked for Hilton Hotels. Mr.
Schulze began his hotel career in Europe where he
completed hotel school and worked in world-class hotels
including the Bellevue Palace and Le Beau Rivage in
Switzerland, the Plaza Athenee in Paris, France, the
Savoy Hotel in London and the Kurhaus/Casino Bad
Neuenahr, Germany.
William J. Shaw 53 Mr. Shaw has served as President and Chief Operating
Director, President and Chief Officer of the Company since March 1997 (including
Operating Officer service in the same capacity with Old Marriott until
March 1998). Mr. Shaw joined Marriott Corporation in
1974, was elected Corporate Controller in 1979 and a Vice
President in 1982. In 1986, Mr. Shaw was elected Senior
Vice President--Finance and Treasurer of Marriott
Corporation. He was elected Chief Financial Officer and
Executive Vice President of Marriott Corporation in April
1988. In February 1992, he was elected President of the
Marriott Service Group. Mr. Shaw is also Chairman of the
Board of Directors of Host Marriott Services Corporation
and Sodexho Marriott Services, Inc. He also serves on the
Board of Trustees of the University of Notre Dame and the
Suburban Hospital Foundation. Mr. Shaw has served as a
director of Old Marriott (now named Sodexho Marriott
Services, Inc.) since May 1997, and as a director of the
Company since March 1998.
Arne M. Sorenson 40 Arne M. Sorenson joined Old Marriott in 1996 as Senior
Executive Vice President and Chief Vice President of Business Development. He was
Financial Officer instrumental in our acquisition of the Renaissance Hotel
Group in 1997. Prior to joining Marriott, he was a
partner in the law firm of Latham & Watkins in
Washington, D.C., where he played a key role in 1992 and
1993 in the distribution of Old Marriott by Marriott
Corporation. Effective October 1, 1998, Mr. Sorenson was
appointed Executive Vice President and Chief Financial
Officer.
James M. Sullivan 55 James M. Sullivan joined Marriott Corporation in 1980,
Vice President; departed in 1983 to acquire, manage, expand and
Executive Vice President - subsequently sell a successful restaurant chain, and
Lodging Development returned to Marriott Corporation in 1986 as Vice
President of Mergers and Acquisitions. Mr. Sullivan
became Senior Vice President, Finance - Lodging in 1989,
Senior Vice President - Lodging Development in 1990 and
was appointed to his current position in December 1995.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Name and Title Age Business Experience
<S> <C> <C>
William R. Tiefel 64 William R. Tiefel joined Marriott Corporation in 1961 and
Vice Chairman; was named President of Marriott Hotels, Resorts and
Chairman - The Ritz-Carlton Hotel Suites in 1988. He had previously served as resident
Company, LLC manager and general manager at several Marriott hotels
prior to being appointed Regional Vice President and
later Executive Vice President of Marriott Hotels,
Resorts and Suites and Marriott Ownership Resorts. Mr.
Tiefel was elected Executive Vice President of Marriott
Corporation in November 1989. In March 1992, he was
elected President - Marriott Lodging Group and assumed
responsibility for all of Marriott's lodging brands. In
May 1998 he was appointed to his current position.
Stephen P. Weisz 48 Stephen P. Weisz joined Marriott Corporation in 1972 and
Vice President; was named Regional Vice President of the Mid-Atlantic
President - Marriott Vacation Club Region in 1991. Mr. Weisz had previously served as
International Senior Vice President of Rooms Operations before being
appointed as Vice President of the Revenue Management
Group. Mr. Weisz became Senior Vice President of Sales
and Marketing for Marriott Hotels, Resorts and Suites in
August 1992 and Executive Vice President - Lodging Brands
in August 1994. In December 1996, Mr. Weisz was
appointed President - Marriott Vacation Club
International.
</TABLE>
52
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS
The response to this portion of Item 14 is submitted under Item 8
of this Report on Form 10-K.
(2) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted.
(3) EXHIBITS
Any shareholder who wants a copy of the following Exhibits may
obtain one from us upon request at a charge that reflects the
reproduction cost of such Exhibits. Requests should be made to
the Secretary, Marriott International, Inc., Marriott Drive,
Department 52/862, Washington, D.C. 20058.
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE
(WHERE A REPORT OR REGISTRATION STATEMENT IS
INDICATED BELOW, THAT DOCUMENT HAS BEEN PREVIOUSLY
EXHIBIT FILED WITH THE SEC AND THE APPLICABLE EXHIBIT IS
NO. DESCRIPTION INCORPORATED BY REFERENCE THERETO)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 Distribution Agreement dated as of September Appendix A in our Form 10 filed on February 13,
30, 1997 with Sodexho Marriott Services, Inc. 1998.
2.2 Agreement and Plan of Merger dated as of Appendix B in our Form 10 filed on February 13,
September 30, 1997 with Sodexho Marriott 1998.
Services, Inc., Marriott-ICC Merger Corp.,
Sodexho Alliance, S.A. and International
Catering Corporation.
2.3 Omnibus Restructuring Agreement dated as of Appendix C in our Form 10 filed on February 13,
September 30, 1997 with Sodexho Marriott 1998.
Services, Inc., Marriott-ICC Merger Corp.,
Sodexho Alliance, S.A. and International
Catering Corporation.
2.4 Amendment Agreement dated as of January 28, 1998 Appendix D in our Form 10 filed on February 13,
among Sodexho Marriott Services, Inc., 1998.
Marriott-ICC Merger Corp., the Company, Sodexho
Alliance, S.A. and International Catering
Corporation.
3.1 Amended and Restated Certificate of Exhibit No. 2 to our Form 8-A/A filed on April 3,
Incorporation. 1998.
3.2 Certificate of Designation, Preferences and Exhibit No. 3 to our Form 8-A/A filed on April 3,
Rights of Series A Junior Participating 1998.
Preferred Stock.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE
(WHERE A REPORT OR REGISTRATION STATEMENT IS
INDICATED BELOW, THAT DOCUMENT HAS BEEN PREVIOUSLY
EXHIBIT FILED WITH THE SEC AND THE APPLICABLE EXHIBIT IS
NO. DESCRIPTION INCORPORATED BY REFERENCE THERETO)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.3 Amended and Restated Bylaws. Filed with this report.
3.4 Rights Agreement dated as of March 27, 1998 with Exhibit No.1 to our Form 8-A/A filed on April 3,
The Bank of New York, as Rights Agent. 1998.
4.1 Indenture dated November 16, 1998 with The Chase Filed with this report.
Manhattan Bank, as Trustee.
4.2 Form of 6-5/8% Series A Note due 2003. Filed with this report.
4.3 Form of 6-7/8% Series B Note due 2005. Filed with this report.
4.4 Indenture with The First National Bank of Exhibit 2.02 to Renaissance Hotel Group N.V.'s
Chicago, as Trustee, as supplemented. Annual Report on Form 20-F for the fiscal year
ended June 30, 1996; Exhibit No. 4 to Form 10-Q of
Old Marriott for the fiscal quarter ended June 20,
1997 (First and Second Supplemental Indentures);
and Exhibit No. 4.1 to our Form 10-Q for the fiscal
quarter ended March 27, 1998 (Third Supplemental
Indenture).
4.5 Indenture with The Bank of New York, as Trustee, Exhibit No. 4.1 to Form 8-K of Old Marriott dated
relating to Liquid Yield Option Notes, as March 25, 1996; Exhibit No. 4.2 to Form 8-K of Old
supplemented. Marriott dated March 25, 1996 (First Supplemental
Indenture); and Exhibit No. 4.2 to our Form 10-Q
for the fiscal quarter ended March 27, 1998 (Second
Supplemental Indenture).
10.1 Employee Benefits and Other Employment Matters Exhibit No. 10.1 to our Form 10 filed on February
Allocation Agreement dated as of September 30, 13, 1998.
1997 with Sodexho Marriott Services, Inc.
10.2 1998 Comprehensive Stock and Cash Incentive Plan. Appendix L in our Form 10 filed on February 13,
1998.
10.3 Noncompetition Agreement between Sodexho Exhibit No. 10.1 to our Form 10-Q for the fiscal
Marriott Services, Inc. and the Company. quarter ended March 27, 1998.
10.4 Tax Sharing Agreement with Sodexho Marriott Exhibit No. 10.2 to our Form 10-Q for the fiscal
Services, Inc. and Sodexho Alliance, S.A. quarter ended March 27, 1998.
10.5 Distribution Agreement with Host Marriott Exhibit No. 10.3 to Form 8-K of Old Marriott dated
Corporation, as amended. October 25, 1993; Exhibit No. 10.2 to Form 10-K of
Old Marriott for the fiscal year ended December 29,
1995 (First Amendment); Exhibit Nos. 10.4 and 10.5
to our Form 10-Q for the fiscal quarter ended March
27, 1998 (Second and Third Amendments).
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
INCORPORATION BY REFERENCE
(WHERE A REPORT OR REGISTRATION STATEMENT IS
INDICATED BELOW, THAT DOCUMENT HAS BEEN PREVIOUSLY
EXHIBIT FILED WITH THE SEC AND THE APPLICABLE EXHIBIT IS
NO. DESCRIPTION INCORPORATED BY REFERENCE THERETO)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.6 Restated Noncompetition Agreement with Host Exhibit No. 10.6 to our Form 10-Q for the fiscal
Marriott Corporation. quarter ended March 27, 1998.
10.7 LYONs Allocation Agreement with Sodexho Marriott Exhibit No. 10.9 to our Form 10 filed on February
Services, Inc. 13, 1998.
10.8 $1.5 billion Credit Agreement dated February 19, Exhibit 10.10 to our Form 10-K for the fiscal year
1998 with Citibank, N.A., as Administrative ended January 2, 1998.
Agent, and certain banks.
10.9 $500 million Credit Agreement dated February 2, Filed with this report.
1999 with Citibank, N.A. as Administrative
Agent, and certain banks.
10.10 Stock Purchase Agreement dated as of June 21, Exhibit No. 10.2 to Form 10-Q of Old Marriott for
1997 between the Company, as assignee, and Host the fiscal quarter ended September 12, 1997.
Marriott Corporation.
12 Statement of Computation of Ratio of Earnings to Filed with this report.
Fixed Charges.
21 Subsidiaries of Marriott International, Inc. Filed with this report.
23 Consent of Arthur Andersen LLP. Filed with this report.
27 Financial Data Schedule for the Company. Filed with this report.
99 Forward-Looking Statements. Filed with this report.
</TABLE>
_____________________________
(b) REPORTS ON FORM 8-K
None.
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934 we have duly caused this Form 10-K to be signed on our behalf by the
undersigned, thereunto duly authorized, on this 16th day of March, 1999.
MARRIOTT INTERNATIONAL, INC.
By /s/ J.W. Marriott, Jr.
_________________________________
J.W. Marriott, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form
10-K has been signed by the following persons on our behalf in their capacities
and on the date indicated above.
<TABLE>
<S> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ J.W. Marriott, Jr.
___________________________________
J.W. Marriott, Jr. Chairman of the Board, Chief
Executive Officer and Director
PRINCIPAL FINANCIAL OFFICER:
/s/ Arne M. Sorenson
______________________________________________
Arne M. Sorenson Executive Vice President,
Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/ Stephen E. Riffee
______________________________________________
Stephen E. Riffee Vice President, Finance and
Chief Accounting Officer
DIRECTORS:
/s/ Henry Cheng Kar-Shun /s/ W. Mitt Romney
______________________________________________ ___________________________________
Henry Cheng Kar-Shun, Director W. Mitt Romney, Director
/s/ Gilbert M. Grosvenor /s/ Roger W. Sant
______________________________________________ ___________________________________
Gilbert M. Grosvenor, Director Roger W. Sant, Director
/s/ Richard E. Marriott /s/ William J. Shaw
______________________________________________ ___________________________________
Richard E. Marriott, Director William J. Shaw, Director
/s/ Floretta Dukes McKenzie /s/ Lawrence M. Small
______________________________________________ ___________________________________
Floretta Dukes McKenzie, Director Lawrence M. Small, Director
/s/ Harry J. Pearce
______________________________________________
Harry J. Pearce, Director
</TABLE>
56
<PAGE>
EXHIBIT 3.3
AMENDED 2/3/99
AMENDED AND RESTATED BYLAWS
OF
MARRIOTT INTERNATIONAL, INC.
ARTICLE I
OFFICES
Section 1.1 The registered office shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 1.2 The Corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1 All meetings of the shareholders for the election of directors
shall be held in Montgomery County, State of Maryland, at such place as may be
fixed from time to time by the board of directors or at such other place either
within or without the State of Delaware as shall be designated from time to time
by the board of directors and stated in the notice of the meeting. Meetings of
shareholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meetings
or in a duly executed waiver of notice thereof.
Section 2.2 Annual shareholders' meetings shall be held on the second
Tuesday of May of each year, or at such other time as may be designated by the
board of directors, in the notice of the annual meeting, for the purpose of
electing directors and considering such other business as may properly come
before the meeting.
Section 2.3 Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each shareholder entitled to vote at such
meeting not less than ten days nor more than sixty days before the date of the
meeting.
Section 2.4 The officer responsible for the Corporation's stock ledger shall
prepare at least ten days before every shareholders' meeting a complete list of
shareholders entitled to vote at the meeting,
1
<PAGE>
arranged in alphabetical order, and showing the address and number of shares
registered in the name of each shareholder. The list shall be available for
examination by any shareholder for any purposes germane to the meeting, during
ordinary business hours in the Office of the Corporate Secretary at the
Corporation's Headquarters for a period of at least ten days prior to the
meeting. The list shall also be available at the shareholders' meeting for the
inspection of any shareholders.
Section 2.5 Written notice of a special meeting, stating the place, date and
hour of the meeting, and the purpose or purposes for which the meeting is
called, shall be given to each shareholder entitled to vote at such meeting, not
less than ten nor more than sixty days before the date of the meeting.
Section 2.6 Business transacted at any special meeting of shareholders shall
be limited to the purposes stated in the notice.
Section 2.7 The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than 30 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting.
Section 2.8 When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
Certificate of Incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 2.9 Each shareholder shall at every meeting of the shareholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such shareholder or such greater or lesser number of
votes per share as may be fixed by or pursuant to the Certificate of
Incorporation, but no proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period.
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ARTICLE III
DIRECTORS
Section 3.1 Except as otherwise fixed by or pursuant to the provisions of
Article FOURTH of the Certificate of Incorporation relating to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect additional directors under
specified circumstances, the number of the directors of the Corporation shall be
fixed from time to time by the board of directors but shall not be less than
three. The directors, other than those who may be elected by the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as determined by the board of directors of the Corporation, one
class to be originally elected for a term expiring at the annual meeting of
shareholders to be held in 1998, another class to be originally elected for a
term expiring at the annual meeting of shareholders to be held in 1999, and
another class to be originally elected for a term expiring at the annual meeting
of shareholders to be held in 2000, with each class to hold office until its
successor is elected and qualified. At each annual meeting of the shareholders
of the Corporation, the successors of the class of directors whose term expires
at that meeting shall be elected to hold office for a term expiring at the
annual meeting of shareholders held in the third year following the year of
their election. Advance notice of shareholder nominations for the election of
directors shall be given in the manner provided in Section 3.13 of Article III
of these Bylaws.
Section 3.2 Except as otherwise provided for or fixed by or pursuant to the
provisions of Article FOURTH of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation to elect directors under
specified circumstances, newly created directorships resulting from any increase
in the number of directors and any vacancies on the board of directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the board of directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in the number of
directors constituting the board of directors shall shorten the term of any
incumbent director. Subject to the rights of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, any director may be removed from
office, with cause and only by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all the shares
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class.
Section 3.3 The business of the Corporation shall be managed by its board of
directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised
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or done by the shareholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3.4 The board of directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 3.5 The first meeting of each newly elected board of directors shall
be held at such time and place as shall be fixed by the vote of the shareholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the shareholders to fix
the time or place of such first meeting of the newly elected board of directors,
or in the event such meeting is not held at the time and place so fixed by the
shareholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 3.6 Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 3.7 Special meetings of the board may be called by the chairman of
the board, the president, or the secretary on the written request of any two
directors. Notice thereof stating the place, date and hour of the meeting shall
be given to each director either by mail not less than forty-eight (48) hours
before the date of the meeting, by telephone or telegram not less than twenty-
four (24) hours notice before the date of the meeting, or on such shorter notice
as the person or persons calling such meeting may deem necessary or appropriate
in the circumstances.
Section 3.8 At all meetings of the board of directors such number of
directors as shall be not less than one-third of the total number of the full
board of directors nor less than two shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the board of directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 3.9 Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 3.10 The board of directors may, by resolution passed by a majority
of the whole board,
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designate one or more committees, each committee to consist of two or more of
the directors of the Corporation, which, to the extent provided in the
resolution, shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the Corporation and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
provided, in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the board of directors.
Section 3.11 Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 3.12 The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefore. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
NOMINATION OF DIRECTORS
Section 3.13 Subject to the rights of holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation, nominations for the election of directors may be made by the board
of directors or a proxy committee appointed by the board of directors or by any
shareholder entitled to vote in the election of directors. However, any
shareholder entitled to vote in the election of directors at a meeting may
nominate a director only if written notice of such shareholder's intent to make
such nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation not
later than (i) with respect to an election of directors at an annual meeting of
shareholders, ninety days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event the date of the annual
meeting is advanced more than thirty days or delayed by more than sixty days
from such anniversary date, notice by the shareholder must be so delivered not
later than the close of business on the seventh day following the day on which
notice of such meeting is first given to shareholders, and (ii) with respect to
an election to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each such notice shall
set forth: (a) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the shareholder is a holder of record of stock of the Corporation
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entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the board of directors;
and (e) the consent of each nominee to serve as a director of the Corporation if
so elected. The chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
SHAREHOLDER PROPOSAL
Section 3.14. Any shareholder entitled to vote in the election of directors
and who meets the requirements of the proxy rules under the Securities Exchange
Act of 1934, as amended, may submit to the directors proposals to be considered
for submission to the shareholders of the Corporation for their vote at the
annual meeting of shareholders. The introduction of any shareholder proposal
that the directors decide should be voted on by the shareholders of the
Corporation, shall be made by notice in writing delivered or mailed by first
class United States mail, postage prepaid, to the secretary of the Corporation,
and received by the secretary not less than ninety days prior to the first
anniversary of the preceding year's annual meeting of shareholders; provided,
however, that in the event the date of the annual meeting of shareholders is
advanced more than thirty days or delayed by more than sixty days from such
anniversary date, notice by the shareholder must be so delivered not later than
the close of business on the seventh day following the date on which notice of
such meeting is first given to shareholders. Each such notice shall set forth:
(a) the name and address of the shareholder who intends to make the proposal and
the text of the proposal to be introduced; (b) the class and number of shares of
stock held of record, owned beneficially and represented by proxy by such
shareholder as of the record date for the meeting (if such date shall then have
been made publicly available) and as of the date of such notice; and (c) a
representation that the shareholder intends to appear in person or by proxy at
the meeting to introduce the proposal or proposals, specified in the notice. The
Chairman of the meeting may refuse to acknowledge the introduction of any
shareholder proposal not made in compliance with the foregoing procedure.
Notwithstanding any other provision of these Bylaws, the Corporation shall be
under no obligation to include any shareholder proposal in its proxy statement
materials if the board of directors reasonably believes that the proponent(s)
thereof have not complied with Sections 13 and 14 of the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder, and
the Corporation shall not be required to include in its proxy statement
materials any shareholder proposal not required to be included in its proxy
materials in accordance with such Act, rules and regulations.
ARTICLE IV
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NOTICES
Section 4.1 Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these Bylaws, notice is required to be given
to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by any means not prohibited by
the provisions of the statutes, including by mail, electronic delivery
(including through the internet or similar system) or other means. If given in
writing, by mail, addressed to such director or shareholder at his address as it
appears on the records of the Corporation, with postage thereon prepaid, such
notice shall be deemed to be given at the time when the same shall be deposited
in the United States mail, and if given by electronic delivery, such notice
shall be deemed to be given at the time when such electronic delivery is
transmitted. Without limiting the foregoing, notice may be provided to directors
by telecopier or telegram.
Section 4.2 Whenever any notice is required to be given under the provisions
of the statutes or of the Certificate of Incorporation or of these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 5.1 The officers of the Corporation shall consist of a president, a
secretary, a treasurer, and, if deemed necessary, expedient, or desirable by the
board of directors, a chairman and/or a vice chairman of the board of directors,
chief executive officer, chief operating officer, chief financial officer, chief
legal officer, controller, one or more executive vice presidents, senior vice
presidents, vice presidents, assistant vice presidents, assistant secretaries,
assistant treasurers and such other officers with such titles as the resolution
of the board of directors choosing them shall designate. Except as may otherwise
be provided in the resolution of the board of directors choosing him/her, no
officer need be a director of the Corporation. Any number of offices may be held
by the same person as the directors may determine.
Section 5.2 Corporate officers shall be appointed at the first board of
directors' meeting held after the annual shareholders' meeting and at such other
meetings as the board may determine.
Section 5.3 Corporate officers shall serve for such terms and shall have
such duties and powers as may be designated in the Bylaws or by the board of
directors.
Section 5.4 Corporate officers shall hold office until a successor is
elected and qualified or until their earlier resignation or removal from office.
Any officer may resign at any time upon written notice to the Corporation.
Corporate officers may be removed at any time by majority vote of the board of
directors. Vacancies in corporate offices may be filled by the board of
directors.
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THE CHAIRMAN OF THE BOARD
Section 5.5 The chairman of the board shall preside at all meetings of
shareholders and directors.
THE VICE-CHAIRMAN OF THE BOARD
Section 5.6 The vice-chairman of the board shall preside at meetings of
shareholders and directors if the chairman of the board is absent or unable to
serve as chairman at any such meeting.
THE PRESIDENT
Section 5.7 The president shall have general and active supervision of the
business of the Corporation and shall see that all orders and resolutions of the
board of directors are carried into effect and shall be responsible to the
chairman, as well as to the board of directors for the execution of such duties
and powers. The president shall, in the absence or inability to act of the
chairman and vice-chairman of the board, assume and carry out all
responsibilities set forth with respect to such chairman and vice-chairman.
Section 5.8 He shall execute bonds, mortgages, and other contracts requiring
a seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the Corporation.
THE VICE PRESIDENTS
Section 5.9 Executive vice presidents, senior vice presidents, vice
presidents, and assistant vice presidents shall have duties and powers as the
board of directors may designate.
THE SECRETARY AND ASSISTANT SECRETARIES
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Section 5.10 The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the Corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 5.11 The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 5.12 The treasurer shall have the custody of the Corporate funds and
securities and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the board of directors.
Section 5.13 The treasurer shall have the authority to invest the normal
funds of the Corporation in the purchase and acquisition and to sell and
otherwise dispose of these investments upon such terms as he may deem desirable
and advantageous, and shall, upon request, render to the president and the
directors an accounting of all such normal investment transactions.
Section 5.14 He shall disburse the funds of the Corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
Corporation.
Section 5.15 If required by the board of directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 5.16 The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer,
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perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
Section 5.17 The controller shall keep the Corporation's accounting records
and shall prepare accounting reports of the operating results as required by the
board of directors and governmental authorities.
Section 5.18 The controller shall establish systems of internal control and
accounting procedures for the protection of the Corporation's assets and funds.
ARTICLE VI
CERTIFICATES OF STOCK
Section 6.1 The interest of holders of stock in the Corporation shall be
evidenced by certificates for shares of stock in such form as the appropriate
officers of the Corporation may from time to time prescribe; provided, that the
board of directors may provide by resolution or resolutions that all or some of
all classes or series of the stock of the Corporation shall be represented by
uncertificated shares. Notwithstanding the adoption of such a resolution by the
board of directors of the Corporation, every holder of stock represented by a
certificate and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by,
the chairman or vice-chairman of the board of directors, or the president or a
vice president, and by the secretary or an assistant secretary, or by the
treasurer or an assistant treasurer of the Corporation, representing the number
of shares owned by him in the Corporation registered in certificated form. All
certificates shall also be signed by a transfer agent and by a registrar. Except
as otherwise expressly provided by law, the rights and obligations of the
holders of uncertificated stock and the rights and obligations of the holders of
certificates representing stock of the same class and series shall be identical.
Section 6.2 All signatures which appear on the certificate may be facsimile
including, without limitation, signatures of officers of the Corporation or the
signatures of the stock transfer agent or registrar. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent, or registrar at the date of issue.
Section 6.3 If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the designations,
preferences, and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided, however, that except
as otherwise provided in Section 202 of the General Corporation Law
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of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge, to each shareholder who so requests, the designations,
preferences, and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations, or
restrictions of such preferences and/or rights.
LOST CERTIFICATES
Section 6.4 The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen, or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen, or destroyed.
TRANSFERS OF STOCK
Section 6.5 The shares of the stock of the Corporation represented by
certificates shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require. Upon receipt of proper transfer instructions from the
registered owner of uncertificated shares such uncertificated shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation. Within a reasonable time after the
issuance or transfer of uncertificated stock, the Corporation shall send or
cause to be sent to the registered owner thereof a written notice containing the
information required to be set forth or stated on certificates pursuant to
Delaware Law or, unless otherwise provided by Delaware Law, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
FIXING RECORD DATE
Section 6.6 In order that the Corporation may determine the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment
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of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any other lawful action, the board of directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
REGISTERED SHAREHOLDERS
Section 6.7 The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 7.1 Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 7.2 Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 7.3 The board of directors shall present at each annual meeting and
at any special meeting of the shareholders when called for by vote of the
shareholders a full and clear statement of the business and condition of the
Corporation.
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CHECKS
Section 7.4 All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 7.5 The fiscal year of the Corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 7.6 The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization, and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION OF OFFICERS, ETC.
Section 7.7 (a) Each person who was or is a party or is threatened to be
made a party to or is otherwise involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding") (other than an action by or in the
right of the Corporation) by reason of the fact that such person is or was a
director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (hereinafter
an "indemnitee"), whether the basis of such proceeding is alleged activity in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability and loss
(including attorneys' fees, judgments, fines and amounts paid in settlement)
actually and reasonably incurred by such person in connection with such
proceeding; provided that, (i) except with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the board of
directors, and (ii) such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo
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contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
(b) The Corporation shall indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer or employee of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer or employee of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this Section 7.7, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith. For purposes of determining the
reasonableness of any such expenses, a certification to such effect by any
member of the Bar of the State of Delaware, which member of the Bar may have
acted as counsel to any such director, officer or employee, shall be binding
upon the Corporation unless the Corporation establishes that the certification
was made in bad faith.
(d) Any indemnification under subsections (a) and (b) of this Section 7.7
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer or employee is proper in the circumstances because any such person has
met the applicable standard of conduct set forth in subsections (a) and (b) of
this Section 7.7. Such determination shall be made (i) by the board of
directors, by a majority vote of directors who were not parties to such action,
suit or proceeding, or (ii) if there are no such directors or if such directors
so direct, by independent legal counsel in a written opinion, or (iii) by the
shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer, director or
employee of the Corporation in defending any civil, criminal, administrative or
investigative action, suit or proceeding, shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director, officer or employee to repay
such
14
<PAGE>
amount if it shall ultimately be determined that any such person is not entitled
to be indemnified by the Corporation as authorized by this Section 7.7.
Notwithstanding the foregoing, no advance shall be made by the Corporation if a
determination is reasonably and promptly made by a majority vote of those
directors who are not parties to such action, suit or proceeding, or, if there
are no such directors or if such directors so direct, by independent legal
counsel in a written opinion, that, based upon the facts known to such directors
or counsel at the time such determination is made, such person acted in bad
faith and in a manner that such person did not believe to be in or not opposed
to the best interests of the corporation, or, with respect to any criminal
proceeding, that such person had reasonable cause to believe his conduct was
unlawful.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this Section 7.7 shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(g) The Corporation may but shall not be required to purchase and maintain
insurance on behalf of any person who is or was a director, officer or employee
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under this Section 7.7. The
Corporation may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to ensure the payment
of such sums as may become necessary to effect indemnification as provided
herein.
(h) For purposes of this Section 7.7, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees, so that any
person who is or was a director, officer or employee of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this Section 7.7 with respect to the resulting or surviving corporation as such
person would have had with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this Section 7.7, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer or employee of the Corporation which imposes
duties on, or involves services by, such director, officer or employee with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit
15
<PAGE>
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Section 7.7.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 7.7 shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) This Section 7.7 shall be interpreted and construed to accord, as a matter
of right, to any person who is or was a director, officer or employee of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, the full measure of indemnification and
advancement of expenses permitted by Section 145 of the Business Corporation Law
of the State of Delaware.
(l) Any costs incurred by any person in enforcing the provisions of this
Section 7.7 shall be an indemnifiable expense in the same manner and to the same
extent as other indemnifiable expenses under this Section 7.7.
(m) No amendment, modification or repeal of this Section 7.7 shall have the
effect of or be construed to limit or adversely affect any claim or right to
indemnification or advancement of expenses made by any person who is or was a
director, officer or employee of this Corporation with respect to any state of
facts which existed prior to the date of such amendment, modification or repeal,
whether or not the Corporation has been notified of such claim, or such right
has been asserted, prior to such date. Accordingly, any amendment, modification
or repeal of this Section 7.7 shall be deemed to have prospective application
only and shall not be applied retroactively.
BOOKS AND RECORDS
Section 7.8 No shareholder shall have any right of inspecting any account,
or book, or paper or document of this Corporation, except as conferred by law or
by resolution of the shareholders or directors.
Section 7.9 The accounts, books, papers and documents of this Corporation
shall be kept at the principal office of the Corporation in Montgomery County,
Maryland or at such other place or places as may be required by law or
designated by resolution of the shareholders or directors.
ARTICLE VIII
BYLAW AMENDMENTS
16
<PAGE>
Subject to the provisions of the Certificate of Incorporation, these Bylaws
may be altered, amended or repealed at any regular meeting of the shareholders
(or at any special meeting thereof duly called for that purpose) by a majority
vote of the shares represented and entitled to vote at such meeting; provided
that in the notice of such special meeting notice of such purpose shall be
given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these Bylaws, the board of directors may by majority vote of
those present at any meeting at which a quorum is present amend these Bylaws, or
enact such other Bylaws as in their judgment may be advisable for the regulation
of the conduct of the affairs of the Corporation, except that Sections 3.1, 3.2
and 3.13 of Article III and Articles VIII and IX of the Bylaws may be amended
only by the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the voting power of all the shares of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class.
ARTICLE IX
SHAREHOLDER ACTION
Any action required or permitted to be taken by the shareholders of the
Corporation must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such holders.
Except as otherwise required by law and subject to the rights of the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, special meetings of shareholders of the
Corporation may be called only by the board of directors pursuant to a
resolution approved by a majority of the entire board of directors.
END OF BYLAWS
17
<PAGE>
EXHIBIT 4.1
[CONFORMED COPY]
================================================================================
MARRIOTT INTERNATIONAL, INC.
TO
THE CHASE MANHATTAN BANK
Trustee
--------------
INDENTURE
Dated as of November 16, 1998
--------------
================================================================================
<PAGE>
.......................................................
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
(S)310(a)(1) ........................................................ 609
(a)(2) ........................................................ 609
(a)(3) ........................................................ Not Applicable
(a)(4) ........................................................ Not Applicable
(a)(5) ........................................................ 609
(b) ........................................................ 608
(c) ........................................................ 609
610
(S)311(a) ........................................................ 613
(b) ........................................................ 613
(c) ........................................................ 613
(S)312(a) ........................................................ 701
702
(b) ........................................................ 702
(c) ........................................................ 702
(S)313(a) ........................................................ 703
(b) ........................................................ 703
(c) ........................................................ 703
(d) ........................................................ 703
(S)314(a) ........................................................ 704
(a)(4) ........................................................ 101
1004
(b) ........................................................ Not Applicable
(c)(1) ........................................................ 102
(c)(2) ........................................................ 102
(c)(3) ........................................................ Not Applicable
(d) ........................................................ Not Applicable
(e) ........................................................ 102
(f) ........................................................ 102
(S)315(a) ........................................................ 601
(b) ........................................................ 602
(c) ........................................................ 601
(d) ........................................................ 601
(e) ........................................................ 514
(S)316(a) ........................................................ 101
(a)(1)(A) ........................................................ 502
512
(a)(1)(B) ........................................................ 513
(a)(2) ........................................................ Not Applicable
(b) ........................................................ 508
(c) ........................................................ 104
(S)317(a)(1) ........................................................ 503
(a)(2) ........................................................ 504
(b) ........................................................ 1003
(S)318(a) ........................................................ 107
(b) ........................................................ 107
(c) ........................................................ 107
</TABLE>
- -------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
TABLE OF CONTENTS
----------
<S> <C>
RECITALS OF THE COMPANY........................................................... -1-
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONSOF GENERAL APPLICATION................. -1-
SECTION 101. Definitions......................................................... -1-
Act...................................................................... -2-
Affiliate................................................................ -2-
control.................................................................. -2-
Acquisition Cost......................................................... -2-
Attributable Debt........................................................ -2-
Authenticating Agent..................................................... -2-
Board of Directors....................................................... -2-
Board Resolution......................................................... -2-
Business Day............................................................. -2-
Capitalized Lease Obligations............................................ -3-
Commission............................................................... -3-
Company.................................................................. -3-
Company Request.......................................................... -3-
Company Order............................................................ -3-
Consolidated Net Assets.................................................. -3-
Corporate Trust Office................................................... -3-
Cost of Construction..................................................... -3-
Covenant Defeasance...................................................... -3-
Debt..................................................................... -3-
Defaulted Interest....................................................... -3-
Defeasance............................................................... -4-
Depositary............................................................... -4-
Event of Default......................................................... -4-
Exchange Act............................................................. -4-
Expiration Date.......................................................... -4-
Global Security.......................................................... -4-
Holder................................................................... -4-
IAIs..................................................................... -4-
Indenture................................................................ -4-
interest................................................................. -4-
Interest Payment Date.................................................... -4-
</TABLE>
_______________
NOTE: This table of contents shall not, for any purpose, be deemed to
be part of a Indenture.
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Company Act................................................... -4-
Lien..................................................................... -4-
Maturity................................................................. -4-
Non- U.S. Person......................................................... -5-
Notice of Default........................................................ -5-
Officers' Certificate.................................................... -5-
Opinion of Counsel....................................................... -5-
Original Issue Discount Security......................................... -5-
Outstanding.............................................................. -5-
Paying Agent............................................................. -6-
Person................................................................... -6-
Place of Payment......................................................... -6-
Predecessor Security..................................................... -6-
Principal Property....................................................... -6-
Private Placement Legend................................................. -7-
QIBs..................................................................... -7-
Redemption Date.......................................................... -7-
Redemption Price......................................................... -7-
Regular Record Date...................................................... -7-
Regulation S Exchange Date............................................... -7-
Regulation S Global Security............................................. -7-
Regulation S Permanent Global Security................................... -7-
Regulation S Temporary Global Security................................... -7-
Responsible Officer...................................................... -7-
Restricted Definitive Security........................................... -7-
Restricted Subsidiary.................................................... -7-
Rule 144A................................................................ -8-
Rule 144A Global Security................................................ -8-
Sale and Leaseback Transaction........................................... -8-
Securities............................................................... -8-
Securities Act........................................................... -8-
Security Register" and "Security Registrar............................... -8-
Special Record Date...................................................... -8-
Stated Maturity.......................................................... -8-
Subsidiary............................................................... -8-
Transfer Restricted Securities........................................... -8-
Trust Indenture Act...................................................... -8-
Trustee.................................................................. -9-
U.S. Government Obligation............................................... -9-
Unrestricted Subsidiary.................................................. -9-
Vice President........................................................... -9-
SECTION 102. Compliance Certificates and Opinions................................ -9-
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 103. Form of Documents Delivered to Trustee............................... -10-
SECTION 104. Acts of Holders; Record Dates........................................ -10-
SECTION 105. Notices, Etc., to Trustee and Company................................ -12-
SECTION 106. Notice to Holders; Waiver............................................ -13-
SECTION 107. Conflict with Trust Indenture Act.................................... -13-
SECTION 108. Effect of Headings and Table of Contents............................. -13-
SECTION 109. Successors and Assigns............................................... -13-
SECTION 110. Separability Clause.................................................. -14-
SECTION 111. Benefits of Indenture................................................ -14-
SECTION 112. Governing Law........................................................ -14-
SECTION 113. Legal Holidays....................................................... -14-
ARTICLE TWO
SECURITY FORMS................................................... -14-
SECTION 201. Forms Generally...................................................... -14-
SECTION 202. Form of Face of Security............................................. -15-
SECTION 203. Form of Reverse of Security.......................................... -17-
SECTION 204. Form of Legend for Global Securities................................. -22-
SECTION 205. Form of Legend for Transfer Restricted Securities.................... -22-
SECTION 206. Form of Trustee's Certificate of Authentication...................... -23-
ARTICLE THREE
THE SECURITIES................................................... -23-
SECTION 301. Amount Unlimited; Issuable in Series................................. -23-
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 302. Denominations......................................................... -26-
SECTION 303. Execution, Authentication, Delivery and Dating........................ -26-
SECTION 304. Temporary Securities.................................................. -28-
SECTION 305. Registration, Registration of Transfer and Exchange................... -28-
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities...................... -30-
SECTION 307. Payment of Interest; Interest Rights Preserved........................ -31-
SECTION 308. Persons Deemed Owners................................................. -32-
SECTION 309. Cancellation.......................................................... -32-
SECTION 310. Computation of Interest............................................... -32-
ARTICLE FOUR
SATISFACTION AND DISCHARGE........................................ -33-
SECTION 401. Satisfaction and Discharge of Indenture............................... -33-
SECTION 402. Application of Trust Money............................................ -34-
ARTICLE FIVE
REMEDIES.......................................................... -34-
SECTION 501. Events of Default..................................................... -34-
SECTION 502. Acceleration of Maturity; Rescission and Annulment.................... -36-
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee....... -37-
SECTION 504. Trustee May File Proofs of Claim...................................... -37-
SECTION 505. Trustee May Enforce Claims Without Possession of Securities........... -38-
SECTION 506. Application of Money Collected........................................ -38-
SECTION 507. Limitation on Suits................................................... -39-
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest................................................ -39-
SECTION 509. Restoration of Rights and Remedies.................................... -40-
SECTION 510. Rights and Remedies Cumulative........................................ -40-
SECTION 511. Delay or Omission Not Waiver.......................................... -40-
SECTION 512. Control by Holders.................................................... -40-
SECTION 513. Waiver of Past Defaults............................................... -41-
SECTION 514. Undertaking for Costs................................................. -41-
SECTION 515. Waiver of Usury, Stay or Extension Laws............................... -41-
ARTICLE SIX
THE TRUSTEE......................................................... -42-
SECTION 601. Certain Duties and Responsibilities.................................... -42-
SECTION 602. Notice of Defaults..................................................... -42-
SECTION 603. Certain Rights of Trustee.............................................. -42-
SECTION 604. Not Responsible for Recitals or Issuance of Securities................. -43-
SECTION 605. May Hold Securities.................................................... -43-
SECTION 606. Money Held in Trust.................................................... -44-
SECTION 607. Compensation and Reimbursement......................................... -44-
SECTION 608. Conflicting Interests.................................................. -44-
SECTION 609. Corporate Trustee Required; Eligibility................................ -44-
SECTION 610. Resignation and Removal; Appointment of Successor...................... -45-
SECTION 611. Acceptance of Appointment by Successor................................. -46-
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 612. Merger, Conversion, Consolidation or Succession to Business............ -47-
SECTION 613. Preferential Collection of Claims Against Company...................... -48-
SECTION 614. Appointment of Authenticating Agent.................................... -48-
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.................... -50-
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.............. -50-
SECTION 702. Preservation of Information; Communications to Holders................. -50-
SECTION 703. Reports by Trustee..................................................... -50-
SECTION 704. Reports by Company..................................................... -51-
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE................. -51-
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms................... -51-
SECTION 802. Successor Substituted.................................................. -52-
ARTICLE NINE
SUPPLEMENTAL INDENTURES.............................................. -52-
SECTION 901. Supplemental Indentures Without Consent of Holders..................... -52-
SECTION 902. Supplemental Indentures With Consent of Holders........................ -54-
SECTION 903. Execution of Supplemental Indentures................................... -55-
SECTION 904. Effect of Supplemental Indentures...................................... -55-
SECTION 905. Conformity with Trust Indenture Act.................................... -55-
SECTION 906. Reference in Securities to Supplemental Indentures..................... -55-
</TABLE>
-vi-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE TEN
COVENANTS............................................................ -55-
SECTION 1001. Payment of Principal, Premium and Interest............................ -55-
SECTION 1002. Maintenance of Office or Agency....................................... -56-
SECTION 1003. Money for Securities Payments to Be Held in Trust..................... -56-
SECTION 1004. Statement by Officers as to Default................................... -57-
SECTION 1005. Existence............................................................. -57-
SECTION 1006. Maintenance of Properties............................................. -58-
SECTION 1007. Payment of Taxes...................................................... -58-
SECTION 1008. Limitation on Liens................................................... -58-
SECTION 1010. Exempted Liens and Sale and Lease-Back Transactions................... -60-
SECTION 1011. Furnishing Information................................................ -60-
SECTION 1012. Waiver of Certain Covenants........................................... -60-
ARTICLE ELEVEN
REDEMPTION OF SECURITIES............................................. -61-
SECTION 1101. Applicability of Article.............................................. -61-
SECTION 1102. Election to Redeem; Notice to Trustee................................. -61-
SECTION 1103. Selection by Trustee of Securities to Be Redeemed..................... -61-
SECTION 1104. Notice of Redemption.................................................. -62-
SECTION 1105. Deposit of Redemption Price........................................... -63-
SECTION 1106. Securities Payable on Redemption Date................................. -63-
SECTION 1107. Securities Redeemed in Part........................................... -63-
</TABLE>
-vii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE TWELVE
SINKING FUNDS........................................................ -64-
SECTION 1201. Applicability of Article.............................................. -64-
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities................. -64-
SECTION 1203. Redemption of Securities for Sinking Fund............................. -65-
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE................................... -65-
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance.......... -65-
SECTION 1302. Defeasance and Discharge.............................................. -65-
SECTION 1303. Covenant Defeasance................................................... -66-
SECTION 1304. Conditions to Defeasance or Covenant Defeasance....................... -66-
SECTION 1305. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions............................ -68-
SECTION 1306. Reinstatement......................................................... -69-
ARTICLE FOURTEEN
ISSUANCE OF RESTRICTED SECURITIES.................................... -69-
SECTION 1401. Transfer Restricted Securities........................................ -69-
SECTION 1402. Special Transfer Provisions........................................... -70-
</TABLE>
-viii-
<PAGE>
INDENTURE, dated as of November 16, 1998, between Marriott International,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its principal office at 10400
Fernwood Road, Bethesda, MD 20817, and The Chase Manhattan Bank, a New York
banking corporation, duly organized and existing under the laws of New York, as
Trustee (herein called the "Trustee").
Recitals of the Company
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
Now, Therefore, This Indenture Witnesseth:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities or of series thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and, except as otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the date of this instrument;
-1-
<PAGE>
(4) unless the context otherwise requires, any reference to an "Article"
or a "Section" refers to an Article or a Section, as the case may be, of this
Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition, "
control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Acquisition Cost" means all costs incurred or assumed by any Person in
connection with the acquisition by purchase or otherwise of any property or
asset which would in accordance with generally accepted accounting principles be
capitalized as the cost of such property or asset on a balance sheet of such
Person.
"Attributable Debt" with respect to any Sale and Lease-Back Transaction
that is subject to the restrictions described under Section 1010 means the
present value of the minimum rental payments called for during the term of the
lease (including any period for which such lease has been extended), determined
in accordance with generally accepted accounting principles, discounted at a
rate that, at the inception of the lease, the lessee would have incurred to
borrow over a similar term the funds necessary to purchase the leased assets.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 to act on behalf of the Trustee to authenticate Securities of one
or more series.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.
-2-
<PAGE>
"Capitalized Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under a lease that is accounted for as a
capital lease, and the amount of such obligation shall be the capitalized amount
thereof determined in accordance with generally accepted accounting principles.
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or " Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Net Assets" means the consolidated assets of the Company and
its Subsidiaries (less applicable depreciation, amortization and other valuation
reserves), after deducting therefrom all current liabilities of the Company and
its Subsidiaries (other than the current portion of long-term debt and
Capitalized Lease Obligations of the Company and its Subsidiaries), all as set
forth on the latest consolidated balance sheet of the Company prepared in
accordance with generally accepted accounting principles.
"Corporate Trust Office" means the office of the Trustee at c/o Chase
Manhattan Trust Company, National Association, 1650 Market Street, One Liberty
Place, Suite 5210, Philadelphia, Pennsylvania 19103, at which at any particular
time this Indenture will be administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Cost of Construction" means all costs incurred or assumed by any Person in
connection with the construction or development of any property or asset
including land which in accordance with generally accepted accounting principles
would be capitalized and included within the cost of such property or asset on a
balance sheet of such Person.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Debt" means notes, bonds, debentures or other similar evidences of
indebtedness for borrowed money or any guarantee of any of the foregoing,
including any Debt of any other Person (including any Unrestricted Subsidiary)
to the extent that such Debt is assumed or guaranteed by the Company or any of
its Restricted Subsidiaries.
"Defaulted Interest" has the meaning specified in Section 307.
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"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable in
whole or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"IAIs" shall have the meaning set forth in Section 1401.
"Indenture" means this instrument as originally executed and as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
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"Non- U.S. Person" means a Person who is not a U.S. Person, as such term is
defined in Rule 902 of the Securities Act.
"Notice of Default" means a written notice of the kind specified in Section
501(4) or 501(5).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company (including in-house counsel), and who shall be acceptable to the
Trustee.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture except:
(1) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities; provided that, if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(3) Securities as to which Defeasance has been effected pursuant to
Section 1302; and
(4) Securities which have been paid pursuant to Section 306 or in exchange
for or in lieu of which other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date,
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(A) the principal amount of an Original Issue Discount Security which shall be
deemed to be Outstanding shall be the amount of the principal thereof which
would be due and payable as of such date upon acceleration of the Maturity
thereof to such date pursuant to Section 502, (B) if, as of such date, the
principal amount payable at the Stated Maturity of a Security is not
determinable, the principal amount of such Security which shall be deemed to be
Outstanding shall be the amount as specified or determined as contemplated by
Section 301, (C) the principal amount of a Security denominated in one or more
foreign currencies or currency units which shall be deemed to be Outstanding
shall be the U.S. dollar equivalent, determined as of such date in the manner
provided as contemplated by Section 301, of the principal amount of such
Security (or, in the case of a Security described in Clause (A) or (B) above, of
the amount determined as provided in such Clause), and (D) Securities owned by
the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, if Securities which the Trustee knows to be so owned are so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and any premium and interest on
the Securities of that series are payable as specified as contemplated by
Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Principal Property" means (i) a parcel of improved or unimproved real
estate or other physical facility or depreciable asset of the Company or a
Subsidiary, the net book value of which on the date of determination exceeds 2%
of Consolidated Net Assets and (ii) any group of parcels of real estate, other
physical facilities, and/or depreciable assets of the Company and/or its
Subsidiaries, the net book value of which, when sold in one or a series of
related Sale and Lease-Back Transactions or securing Debt issued in respect of
such Principal Properties, on the date of determination exceeds 2% of the
Consolidated Net Assets. For purposes of the foregoing, "related Sale and
Lease-back Transactions"
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refers to any two or more such contemporaneous transactions which are on
substantially similar terms with substantially the same parties.
"Private Placement Legend" means the legend set forth in Section 205.
"QIBs" shall have the meaning set forth in Section 1401.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.
"Regulation S Exchange Date" shall have the meaning set forth in Section
1401.
"Regulation S Global Security" shall have the meaning set forth in Section
1401.
"Regulation S Permanent Global Security" shall have the meaning set forth
in Section 1401.
"Regulation S Temporary Global Security" shall have the meaning set forth
in Section 1401.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Security" means a Restricted Transfer Security that
is not also a Global Security.
"Restricted Subsidiary" means any Subsidiary organized and existing under
the laws of the United States of America and the principal business of which is
carried on within the United States of America (x) which owns or is a lessee
pursuant to a capital lease of any property of the type described in clause (i)
of the definition of Principal Property or (y) in which the investment of the
Company and all its Subsidiaries exceeds 5% of Consolidated Net Assets as of the
date of such determination other than, in the case of
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either clause (x) or (y), (i) Subsidiaries of which the principal business is
the Company's timeshare or senior living services businesses, (ii) each
Subsidiary the major part of whose business consists of finance, banking,
credit, leasing, insurance, financial services or other similar operations, or
any combination thereof and, (iii) each Subsidiary formed or acquired after the
date hereof for the purpose of developing new assets or acquiring the business
or assets of another person and which does not acquire all or any substantial
part of the business or assets of the Company or any Restricted Subsidiary.
"Rule 144A" shall have the meaning set forth in Section 1401.
"Rule 144A Global Security" means a Global Security that is Transfer
Restricted and issued and sold exclusively to QIBs.
"Sale and Leaseback Transaction" shall have the meaning set forth in
Section 1009 hereof.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"Transfer Restricted Securities" shall have the meaning set forth in
Section 1401.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
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"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"U.S. Government Obligation" has the meaning specified in Section 1304.
"Unrestricted Subsidiary" means any Subsidiary of the Company other than a
Restricted Subsidiary.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (except for certificates provided for in
Section 1004) shall include,
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the
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authority of the Person executing the same, may also be proved in any other
manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders of Securities of such series, provided that the Company may not set a
record date for, and the provisions of this paragraph shall not apply with
respect to, the giving or making of any notice, declaration, request or
direction referred to in the next paragraph. If any record date is set pursuant
to this paragraph, the Holders of Outstanding Securities of the relevant series
on such record date, and no other Holders, shall be entitled to take the
relevant action, whether or not such Holders remain Holders after such record
date; provided that no such action shall be effective hereunder unless taken on
or prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities of such series on such record date. Nothing in
this paragraph shall be construed to prevent the Company from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Trustee in writing and to
each Holder of Securities of the relevant series in the manner set forth in
Section 106.
The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for
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which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be cancelled and of no effect), and nothing in this paragraph
shall be construed to render ineffective any action taken by Holders of the
requisite principal amount of Outstanding Securities of the relevant series on
the date such action is taken. Promptly after any record date is set pursuant to
this paragraph, the Trustee, at the Company's expense, shall cause notice of
such record date, the proposed action by Holders and the applicable Expiration
Date to be given to the Company in writing and to each Holder of Securities of
the relevant series in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
Section 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Global
Trust Services, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
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Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
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Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
The Securities of each series shall be in substantially the form set forth
in this Article, or in such other form as shall be established by or pursuant to
a Board Resolution or in one or more indentures supplemental hereto, in each
case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution
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thereof. If the form of Securities of any series is established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
Section 202. Form of Face of Security.
[Insert any legend required by the Internal Revenue Code and the
regulations thereunder.]
[Insert any legend required by Sections 204 and 205 and Article Fourteen]
Marriott International, Inc.
..........................................................
No. ......... $ ........
Marriott International, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to
..............................................., or registered assigns, the
principal sum of ...................................... Dollars on
........................................................ [if the Security is to
bear interest prior to Maturity, insert -- , and to pay interest thereon from
............. or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on ............ and
............ in each year, commencing ........., at the rate of ....% per annum,
until the principal hereof is paid or made available for payment [if applicable,
insert -- , provided that any principal and premium, and any such installment of
interest, which is overdue shall bear interest at the rate of ...% per annum (to
the extent that the payment of such interest shall be legally enforceable), from
the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. [All such payments of
principal, interest and premium, if any, shall be paid in immediately available
funds.] The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities)
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<PAGE>
is registered at the close of business on the Regular Record Date for such
interest, which shall be the ....... or ....... (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid or duly provided for will forthwith cease to be payable
to the Holder on such Regular Record Date and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ....% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. [Any such interest on overdue
principal or premium which is not paid on demand shall bear interest at the rate
of ......% per annum (to the extent that the payment of such interest on
interest shall be legally enforceable), from the date of such demand until the
amount so demanded is paid or made available for payment. Interest on any
overdue interest shall be payable on demand.]]
Payment of the principal of (and premium, if any) and [if applicable,
insert-- any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in [the Place of Payment], in
such coin or currency of [the United States of America] as at the time of
payment is legal tender for payment of public and private debts [if applicable,
insert -- ; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register].
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
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<PAGE>
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
Marriott International, Inc.
By.......................................
Attest:
..........................
Section 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of ............... (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and The Chase Manhattan Bank, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof [if applicable,
insert -- , limited in aggregate principal amount to $...........].
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert --
(1) on ........... in any year commencing with the year ...... and ending with
the year ...... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [if
applicable, insert -- on or after .........., 19..], as a whole or in
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<PAGE>
part, at the election of the Company, at the following Redemption Prices
(expressed as percentages of the principal amount): If redeemed [if applicable,
insert -- on or before ..............., ...%, and if redeemed] during the 12-
month period beginning ............. of the years indicated,
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
- ---- ---------- ---- ----------
<S> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [if
applicable, insert -- on or after ............], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning ............ of the years indicated,
<TABLE>
<CAPTION>
Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
- ---- ----------------- ----------------------
<S> <C> <C>
</TABLE>
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<PAGE>
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert -- Notwithstanding the foregoing, the Company may
not, prior to ............., redeem any Securities of this series as
contemplated by [if applicable, insert -- Clause (2) of] the preceding paragraph
as a part of, or in anticipation of, any refunding operation by the application,
directly or indirectly, of moneys borrowed having an interest cost to the
Company (calculated in accordance with generally accepted financial practice) of
less than .....% per annum.]
[If applicable, insert -- The sinking fund for this series provides for the
redemption on ............ in each year beginning with the year ....... and
ending with the year ...... of [if applicable, insert -- not less than
$.......... ("mandatory sinking fund") and not more than] $......... aggregate
principal amount of Securities of this series. Securities of this series
acquired or redeemed by the Company otherwise than through [if applicable,
insert -- mandatory] sinking fund payments may be credited against subsequent
[if applicable, insert -- mandatory] sinking fund payments otherwise required to
be made [if applicable, insert -- , in the inverse order in which they become
due].]
[If the Security is subject to redemption of any kind, insert -- In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert paragraph regarding subordination of the Security.]
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.
[If the Security is not an Original Issue Discount Security, insert -- If
an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -- insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
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<PAGE>
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 50% in principal amount of the Securities at the time
Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
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<PAGE>
[Pursuant to the Exchange and Registration Rights Agreement, the Company
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the holders of this Security shall, subject to
certain limitations, have the right to exchange this Security for an Exchange
Security (as defined in such agreement), which will be registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as this Security. The Holders shall be entitled to receive
certain additional interest in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Exchange and Registration Rights Agreement.]
The Securities of this series are issuable only in registered form without
coupons in denominations of $....... and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
The following abbreviations, when used in the inscription on the face of the
within Security, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<CAPTION>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN Act -- ______ Custodian _______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors Act __________
survivorship and not as tenants (State)
in common
</TABLE>
Additional abbreviations may also be used though not in the above list
_____________________________
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- -----------------------------
- ----------------------------- _______________________________________________
(Name and Address of Assignee, including zip
code, must be printed or typewritten)
________________________________________________________________________________
the within Security, and all rights thereunder, hereby irrevocably constituting
and appointing
Attorney
______________________________________________________________________
to transfer said Security on the books of the Company, with full power
of substitution in the premises.
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<PAGE>
Dated:
____________________________
NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Security in every particular, without
alteration or enlargement or any change whatever.
Section 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Security may not be exchanged in whole or in part for a
Security registered, and no transfer of this Security in whole or in part may be
registered, in the name of any Person other than such Depositary or a nominee
thereof, except in the limited circumstances described in the Indenture.
Section 205. Form of Legend for Transfer Restricted Securities.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Transfer Restricted Security authenticated
and delivered hereunder shall bear a legend in substantially the following form:
This Security has not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities laws. Neither this
Security nor any interest or participation herein may be offered, sold,
assigned, transferred, pledged, encumbered or otherwise disposed of in the
absence of such registration unless such transaction is exempt from, or not
subject to, registration.
The Holder of this Security by its acceptance hereof agrees to offer, sell
or otherwise transfer such Security, before the date (the "Resale
RestrictionTermination Date") which is two years after the later of the original
issue date hereof and the last date on which the Company or any Affiliate of the
Company was the owner of this Security (or any predecessor of such Security),
only (a) to the Company, (b) pursuant to a registration statement that has been
declared effective under the Securities Act, (c) for so long as the Securities
are eligible for resale pursuant to rule 144a under the Securities Act, to a
person it reasonably believes is a "Qualified Institutional Buyer" as defined in
Rule 144a under the Securities Act that purchases for its own account or for the
account of a Qualified Institutional Buyer to whom notice is given that the
transfer is being made in reliance on Rule 144a, (d) pursuant to offers and
sales to non-U.S. persons that occur outside the United States within the
meaning of Regulation S under the Securities Act or (e) to an "Accredited
Investor" within the meaning of rule 501(a)(1), (2), (3) or (7) under the
securities act that is an
-22-
<PAGE>
institutional investor acquiring the Security in a transaction exempt from the
registration requirements of the Securities Act (if available), and, in each
case (a) through (e), in accordance with all applicable securities laws of the
states of the united states and other jurisdictions and subject to the Company's
and the Trustee's right prior to any such offer, sale or transfer pursuant to
clause (d) or (e) to require the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them, and in the
case of any of the foregoing clauses (a) through (e), a certificate of transfer
in the form appearing on the other side of this Security is completed and
delivered by the transferor to the Company and the Trustee. This legend will be
removed upon the request of the Holder after the Resale Restriction Termination
Date.
Section 206. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially the
following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
The Chase Manhattan Bank
As Trustee
By..................................
Authorized Officer
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from Securities of any other series);
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<PAGE>
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 304, 305, 306, 906 or 1107 and except for any
Securities which, pursuant to Section 303, are deemed never to have been
authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates on which the principal of any Securities of the
series is payable;
(5) the rate or rates at which any Securities of the series shall bear
interest, if any, the date or dates from which any such interest shall
accrue, the Interest Payment Dates on which any such interest shall be
payable and the Regular Record Date for any such interest payable on any
Interest Payment Date;
(6) the place or places where the principal of and any premium and
interest on any Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which any Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other
than by a Board Resolution, the manner in which any election by the Company
to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of the Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which any Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Securities of the series shall be
issuable;
(10) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be
determined;
(11) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any
premium or interest on any Securities of the series shall be payable and
the manner of determining the equivalent thereof in the currency of the
United States of America for any purpose, including for purposes of the
definition of "Outstanding" in Section 101;
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<PAGE>
(12) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or the
Holder thereof, in one or more currencies or currency units other than that
or those in which such Securities are stated to be payable, the currency,
currencies or currency units in which the principal of or any premium or
interest on such Securities as to which such election is made shall be
payable, the periods within which and the terms and conditions upon which
such election is to be made and the amount so payable (or the manner in
which such amount shall be determined);
(13) if other than the entire principal amount thereof, the portion of
the principal amount of any Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 502;
(14) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to be
the principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof which shall
be due and payable upon any Maturity other than the Stated Maturity or
which shall be deemed to be Outstanding as of any date prior to the Stated
Maturity (or, in any such case, the manner in which such amount deemed to
be the principal amount shall be determined);
(15) if applicable, that the Securities of the series, in whole or any
specified part, shall be defeasible pursuant to Section 1302 or Section
1303 or both such Sections and, if other than by a Board Resolution, the
manner in which any election by the Company to defease such Securities
shall be evidenced;
(16) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities
and, in such case, the respective Depositaries for such Global Securities,
the form of any legend or legends which shall be borne by any such Global
Security in addition to or in lieu of that set forth in Section 204 and any
circumstances in addition to or in lieu of those set forth in Clause (2) of
the last paragraph of Section 305 in which any such Global Security may be
exchanged in whole or in part for Securities registered, and any transfer
of such Global Security in whole or in part may be registered, in the name
or names of Persons other than the Depositary for such Global Security or a
nominee thereof;
(17) any addition to or change in the Events of Default which applies
to any Securities of the series and any change in the right of the Trustee
or the requisite Holders of such Securities to declare the principal amount
thereof due and payable pursuant to Section 502;
(18) any addition to or change in the covenants set forth in Article
Ten which applies to Securities of the series; and
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<PAGE>
(19) whether the Securities will be Transfer Restricted Securities,
and whether any transfers will be permitted pursuant to Section 1402(e) and
the terms and conditions thereof; and
(20) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 901(5)).
All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided in or pursuant to the
Board Resolution referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officers' Certificate referred to
above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 302. Denominations.
The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 201
-26-
<PAGE>
and 301, in authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 201, that such form has been
established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such terms
have been established in conformity with the provisions of this Indenture;
and
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
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<PAGE>
Section 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount. Until so exchanged, the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series and tenor.
Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Place of Payment by the Trustee a
register (the register maintained in such office and in any other office or
agency of the Company in a Place of Payment being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series at
the office or agency of the Company in a Place of Payment for that series and
subject to any restrictions imposed by Article Fourteen on a Transfer Restricted
Security, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount.
At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
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All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing and any certificates required by Article
Fourteen.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor) are
to be redeemed in part, the Company shall not be required (A) to issue, register
the transfer of or exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of any
such Securities selected for redemption under Section 1103 and ending at the
close of business on the day of such mailing, or (B) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered,
in the name of any Person other than the Depositary for such Global
Security or a nominee thereof unless (A) such Depositary (i) has notified
the Company that it is unwilling or unable to continue as Depositary for
such Global Security or (ii) has ceased to be a clearing agency registered
under the Exchange Act, (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Security or (C) there shall
exist such circumstances, if any, in addition to or in lieu of the
foregoing as have been specified for this purpose as contemplated by
Section 301.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a
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Global Security or any portion thereof shall be registered in such names as
the Depositary for such Global Security shall direct in writing.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 304, 306, 906 or
1107 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by one or both of them to save
each of them and any agent of either of them harmless, then, in the absence of
written notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
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Section 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301 with respect to
any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be given to each Holder of Securities of such series in the manner set
forth in Section 106, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
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Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and any premium and
(subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be disposed of as directed by a
Company Order.
Section 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
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ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other than
(i) Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose money in an amount sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and any
premium and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company, including fees and expenses of the Trustee; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any
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Authenticating Agent under Section 614 and, if money shall have been deposited
with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the
obligations of the Trustee under Section 402 and the last paragraph of Section
1003 shall survive until performed or waived.
Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of or any premium on any
Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has expressly been included in this
Indenture solely for the benefit of series of Securities other than that
series), and continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a
written notice specifying
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such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(5) a default (i) in the payment of any principal on any debt for
borrowed money of the Company or any Restricted Subsidiary of the Company
(excluding any non-recourse debt), in an aggregate principal amount in
excess of the greater of (a) $100 million or (b) 4% of Consolidated Net
Assets, when due at its final maturity after giving effect to any
applicable grace period and the holder thereof shall have taken affirmative
action to enforce the payment thereof, or (ii) in the performance of any
term or provision of any debt for borrowed money of the Company or any
Restricted Subsidiary of the Company (excluding any non-recourse debt) in
an aggregate principal amount in excess of the greater of (a) $100 million
or (b) 4% of Consolidated Net Assets that results in such debt becoming or
being declared due and payable prior to the date on which it would
otherwise become due and payable, unless, in the case of either clause (i)
or (ii) above, (x) such acceleration or action to enforce payment, as the
case may be, has been rescinded or annulled, (y) such debt has been
discharged or (z) a sum sufficient to discharge in full such debt has been
deposited in trust by or on behalf of the Company, in each case, within a
period of 10 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the Outstanding
Securities of such series, a written notice specifying such default or
defaults and stating that such notice is a "Notice of Default" hereunder;
provided, however, that, subject to the provisions of Sections 601 and 602,
the Trustee shall not be deemed to have knowledge of such default unless
either (A) a Responsible Officer of the Trustee shall have actual knowledge
of such default or (B) the Trustee shall have received written notice
thereof from the Company, from any Holder, from the holder of any such
indebtedness or from the trustee under any such mortgage, indenture or
other instrument; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition
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or answer or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by it to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or
the taking of corporate action by the Company in furtherance of any such
action; or
(8) any other Event of Default provided with respect to Securities of
that series.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
501(6) or 501(7)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount of all the Securities of that
series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 501(6)
or 501 (7) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and any interest thereon at the rate or rates
prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
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(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will promptly pay to the Trustee, for the benefit of the Holders of
such Securities, the whole amount then due and payable on such Securities for
principal and any premium and interest and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal and
premium and on any overdue interest, at the rate or rates prescribed therefor in
such Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions
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authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee shall
be authorized to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section 607; and
Second: To the payment of the amounts then due and unpaid for principal of
and any premium and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and any premium and interest, respectively.
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Section 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
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Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
Section 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
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Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Inden ture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.
Section 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by the
Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of any series and
is known to a Responsible Officer of the Trustee, the Trustee shall give the
Holders of Securities of such series notice of such default as and to the extent
provided by the Trust Indenture Act; provided, however, that in the case of any
default of the character specified in Section 501(4) with respect to Securities
of such series, no such notice to Holders shall be given until at least 30 days
after the occurrence thereof. For the purpose of this Section and Section 1004,
the term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting
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any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely
upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
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Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel including the allocated costs
and expenses of its in-house counsel and legal staff), except any such
expense, disbursement or advance as may be attributable to its negligence
or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
Section 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder with
respect to the Securities of each series, which may be Trustee hereunder for
Securities of one or more other series. Each Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such, and has a combined
capital and surplus of at least
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$50,000,000. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section and to the extent permitted by
the Trust Indenture Act, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee with respect to the
Securities of any series shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of one or
more series by giving written notice thereof to the Company. If the instrument
of acceptance by a successor Trustee required by Section 611 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
The Trustee may be removed at any time with respect to the Securities of
any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
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If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Trustee for any cause, with respect to
the Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such successor Trustee may
be appointed with respect to the Securities of one or more or all of such series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
The Company shall give notice of each resignation and each removal of the
Trustee with respect to the Securities of any series and each appointment of a
successor Trustee with respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee with respect to
all Securities, every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with respect to
the Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
series shall execute and
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deliver an indenture supplemental hereto wherein each successor Trustee shall
accept such appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates, (2) if the retiring Trustee is
not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
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Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or
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in case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to the Company and
shall give notice of such appointment in the manner provided in Section 106 to
all Holders of Securities of the series with respect to which such
Authenticating Agent will serve. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
The Chase Manhattan Bank,
As Trustee
By.................................,
As Authenticating Agent
By..................................
Authorized Officer
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ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than January 15th and June 15th in each
year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders of Securities of each series as of the
preceding January 1st or June 1st, as the case may be, and
(2) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.
Section 703. Reports by Trustee.
The Trustee shall transmit to Holders such reports concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
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A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust,
shall be organized and validly existing under the laws of the United States
of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest on all
the Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or any
Subsidiary as a result of such transaction as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing;
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(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, any Principal Property of the Company or any
Restricted Subsidiary would become subject to a Lien which would not be
permitted by this Indenture, the Company or such successor Person, as the
case may be, shall take such steps as shall be necessary effectively to
secure the Securities equally and ratably with (or prior to) all
indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each addressed to the Trustee and stating that
such consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction have
been complied with.
Section 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for
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the benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events
of Default are to be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly being included
solely for the benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any
such addition, change or elimination (A) shall neither (i) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (ii) modify the
rights of the Holder of any such Security with respect to such provision or
(B) shall become effective only when there is no such Security Outstanding;
or
(6) to secure the Securities pursuant to the requirements of Section
1008 or otherwise; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611; or
(9) to comply with any requirement of the Commission in connection
with qualifying this Indenture under the Trust Indenture Act; or
(10) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, including, without limitation, to
supplement any of the provisions of this Indenture to such extent as shall
be necessary to permit or facilitate the defeasance and discharge of any
series of Securities, provided that such action pursuant to this Clause (9)
shall not adversely affect the interests of the Holders of Securities of
any series in any material respect.
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Section 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than 50% in principal amount of
the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Maturity of the principal of, or any installment of
principal of or interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original
Issue Discount Security or any other Security which would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 502, or change any Place of Payment where, or the coin or
currency in which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby;
provided, however, that this clause shall not be deemed to require the
consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of this
proviso, in accordance with the requirements of Sections 611 and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
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Section 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; pro vided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in each Place of Payment for Securities of any series for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
Section 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, on or before each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will (1) comply with the provisions of the
Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of
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the Securities of that series, upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York, New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
Section 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company.
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Section 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary.
Section 1007. Payment of Taxes.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, all taxes, assessments and governmental
charges levied or imposed upon the Company or any Restricted Subsidiary or upon
the income, profits or property of the Company or any Restricted Subsidiary;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment or charge whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
Section 1008. Limitation on Liens.
Except as described below under "Exempted Liens and Sale and Lease-Back
Transactions," so long as any of the Securities shall be Outstanding the Company
will not create, assume or suffer to exist, or permit any Restricted Subsidiary
to create, assume or suffer to exist, any Lien of or upon any (i) Principal
Property of the Company or any Restricted Subsidiary or (ii) any shares of
capital stock or Debt issued by any Restricted Subsidiary and owned by the
Company or any Restricted Subsidiary, without making effective provision whereby
all of the Securities (together with, if the Company shall so determine, any
other indebtedness or any other obligation of the Company or such Restricted
Subsidiary then existing or thereafter created that is not subordinate to the
Securities of each series) shall be secured equally and ratably with (or prior
to) any Debt thereby secured as long as such Debt shall be so secured; provided
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that the foregoing restriction shall not apply to:
(a) Liens existing on the date of this Indenture;
(b) Liens existing on (i) Principal Property at the time of
acquisition thereof by the Company or a Restricted Subsidiary or (ii)
property or indebtedness of, or an equity interest in, any corporation at
the time such corporation becomes a Restricted Subsidiary;
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(c) Liens to secure Debt in an amount no greater than the Acquisition
Cost or the Cost of Construction or improvement of one or more Principal
Properties acquired or constructed by the Company or a Restricted
Subsidiary, provided such Debt is incurred and related Liens are created
not later than 24 months after acquisition or completion of construction
(including any improvements on an existing property), whichever is later;
(d) Liens on shares of capital stock or Debt issued by one or more
Restricted Subsidiaries to secure Debt in an amount no greater than the
Acquisition Cost of such Restricted Subsidiary or Restricted Subsidiaries;
provided such Debt is incurred and related Liens are created not later than
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24 months after the acquisition of such Restricted Subsidiary or Restricted
Subsidiaries;
(e) Liens created or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business;
(f) Liens in favor of the Company or a Subsidiary; and
(g) any extension, renewal or replacement, in whole or in part, of any
Liens referred to in the foregoing clauses (a) through (f) or of any Debt
secured thereby, including the extension, renewal or replacement of any
Lien on any individual property with a Lien on one or more different
properties; provided, however, that the principal amount of Debt secured
thereby shall not exceed (x) the greater of (i) the principal amount
secured thereby at the time of such extension, renewal or replacement and
(ii) 80% of the fair market value (in the opinion of the Company) of the
properties subject to such extension, renewal or replacement plus (y) any
costs incurred in connection with such extension, renewal or replacement.
Section 1009. Restrictions on Sale and Lease-Back Transactions.
Except as described below under "Exempted Liens and Sale and Lease-Back
Transactions," so long as any of the Debt Securities shall be Outstanding the
Company will not enter into, or permit any Restricted Subsidiary to enter into,
any arrangement with any lessor (other than the Company or a Subsidiary),
providing for the leasing to the Company or a Restricted Subsidiary for a period
of more than three years (including renewals at the option of the lessee) of any
Principal Property that has been or is to be sold or transferred by the Company
or such Restricted Subsidiary to such lessor or to any other Person, to which
funds have been or are to be advanced by such lessor or other Person on the
security of the leased property (referred to herein as "Sale and Lease-Back
Transactions") unless either:
(a) the Company or such Restricted Subsidiary would be entitled,
pursuant to Section 1008, to create, assume or suffer to exist a Lien on
the property to be leased back in an amount equal to the Attributable Debt
of such Sale and Lease-Back Transaction without equally and ratably
securing the Securities, or
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(b) the Company within 240 days after the effective date of such Sale
and Lease-Back Transaction (whether made by the Company or a Restricted
Subsidiary) applies to the retirement, repayment or other discharge of the
Securities, or Debt ranking prior to, or on a parity with, the Securities,
an amount not less than (x) the greater of (i) the net cash proceeds of the
sale of the property leased pursuant to such Sale and Lease-Back
Transaction or (ii) the fair market value (in the opinion of the Company)
of such property at the time of entering into such Sale and Lease-Back
Transaction less (y) the fair market value (in the opinion of the Company)
of any non-cash proceeds of the sale of such property provided, that, such
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non-cash proceeds shall be considered "Principal Property" acquired on the
date the property sold in the Sale and Lease-Back Transaction was acquired
by the Company or any of its Subsidiaries for purposes of Sections 1008 and
1009.
Section 1010. Exempted Liens and Sale and Lease-Back Transactions.
Notwithstanding the restrictions on Liens and Sale and Lease-Back
Transactions contained in Section 1008 and 1009, the Company or any Restricted
Subsidiary may create, assume or suffer to exist Liens or enter into Sale and
Lease-Back Transactions not otherwise permitted as contained in Sections 1008
and 1009, provided that at the time of such event, and after giving effect
thereto, the sum of outstanding Debt secured by such Liens plus all Attributable
Debt in respect of such Sale and Lease-Back Transactions entered into, measured
in each case, at the time any Lien is incurred or any Sale and Lease-Back
Transaction is entered into, by the Company and Restricted Subsidiaries does not
exceed the greater of (i) $400 million or (ii) 10% of Consolidated Net Assets.
For purposes of the foregoing sentence, the Debt of any Person other than the
Company or any Restricted Subsidiary which is secured by a Lien on Principal
Property of the Company or any Restricted Subsidiary or capital stock or Debt
issued by any Restricted Subsidiary shall be deemed to be an amount equal to the
lesser of (i) the amount of such Debt or (ii) the fair market value (in the
opinion of the Company) of the property of the Company and its Restricted
Subsidiaries which is encumbered by such Lien.
Section 1011 Furnishing Information.
As long as any Transfer Restricted Securities are subject to such resale
restrictions, unless the Company is subject to Section 13 or 15(d) of the
Exchange Act, the Company shall furnish to the Holders and to prospective
investors in the Securities, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 1012 Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301 for Securities
of such series, the Company may, with respect to the Securities of any series,
omit in any particular instance to comply with any term, provision or condition
set forth in any covenant provided pursuant to Section 301(18), 901(2) or 901(7)
for the benefit of the Holders of such series or in any of Sections 1008 to
1010, inclusive, if before the time for such compliance the Holders of at least
50% in principal amount of the Outstanding
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Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for such Securities) in accordance with
this Article.
Section 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
a Board Resolution or in another manner specified as contemplated by Section 301
for such Securities. In case of any redemption at the election of the Company of
less than all the Securities of any series (including any such redemption
affecting only a single Security), the Company shall, at least 60 days (or such
shorter period specified in the applicable Board Resolution creating the terms
of such Securities) prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, of the principal amount of Securities of such series to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed. In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed (unless
all the Securities of such series and of a specified tenor are to be redeemed or
unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days (or such
shorter period specified in the applicable Board Resolution creating the terms
of such Securities) prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series not previously called for redemption, by
lot or by such other method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of a portion of the principal
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amount of any Security of such series, provided that the unredeemed portion of
the principal amount of any Security shall be in an authorized denomination
(which shall not be less than the minimum authorized denomination) for such
Security. If less than all the Securities of such series and of a specified
tenor are to be redeemed (unless such redemption affects only a single
Security), the particular Securities to be redeemed shall be selected not more
than 60 days (or such shorter period specified in the applicable Board
Resolution creating the terms of such Securities) prior to the Redemption Date
by the Trustee, from the Outstanding Securities of such series and specified
tenor not previously called for redemption in accordance with the preceding
sentence.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption as aforesaid and, in case of any Securities selected for
partial redemption as aforesaid, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply with respect
to any redemption affecting only a single Security, whether such Security is to
be redeemed in whole or in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
Section 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days (or such period specified in the
applicable Board Resolution creating the terms of such Securities) prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series consisting of
more than a single Security are to be redeemed, the identification (and, in
the case of partial redemption of any such Securities, the principal
amounts) of the particular Securities to be redeemed and, if less than all
the Outstanding Securities of any series consisting of a single Security
are to be redeemed, the principal amount of the particular Security to be
redeemed,
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(4) that on the Redemption Date the Redemption Price will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) the place or places where each such Security is to be surrendered for
payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
Section 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities which
are to be redeemed on that date.
Section 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.
Section 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee
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duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge to such Holder, a
new Security or Securities of the same series and of like tenor, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms of
any Securities is herein referred to as a "mandatory sinking fund payment", and
any payment in excess of such minimum amount provided for by the terms of such
Securities is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities as provided for by
the terms of such Securities.
Section 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to any Securities of such series required to be made pursuant to the terms of
such Securities as and to the extent provided for by the terms of such
Securities; provided that the Securities to be so credited have not been
previously so credited. The Securities to be so credited shall be received and
credited for such purpose by the Trustee at the Redemption Price, as specified
in the Securities so to be redeemed, for redemption through operation of the
sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.
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Section 1203. Redemption of Securities for Sinking Fund.
Not less than sixty days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than forty-five days prior to each such sinking fund payment
date, the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section 1302 or
Section 1303 applied to any Securities or any series of Securities, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set forth below
in this Article. Any such election shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.
Section 1302. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, the
Company shall be deemed to have been discharged from its obligations with
respect to such Securities as provided in this Section on and after the date the
conditions set forth in Section 1304 are satisfied (hereinafter called
"Defeasance"). For this purpose, such Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by such
Securities and to have satisfied all its other obligations under such Securities
and this Indenture insofar as such Securities are concerned (and the Trustee, at
the expense of the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until otherwise terminated
or discharged hereunder: (1) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 1304 and as more fully
set forth in such Section, payments in respect of the principal of and any
premium and interest on such Securities when
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payments are due, (2) the Company's obligations with respect to such Securities
under Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (4) this Article. Subject to
compliance with this Article, the Company may exercise its option (if any) to
have this Section applied to any Securities notwithstanding the prior exercise
of its option (if any) to have Section 1303 applied to such Securities.
Section 1303. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, (1)
the Company shall be released from its obligations under Section 801(3),
Sections 1006 through 1010, inclusive, and any covenants provided pursuant to
Section 301(18), 901(2) or 901(7) for the benefit of the Holders of such
Securities, and (2) the occurrence of any event specified in Sections 501(4)
(with respect to any of Section 801(3), Sections 1006 through 1010, inclusive,
and any such covenants provided pursuant to Section 301(18), 901(2) or 901(7)),
501(5) and 501(8) shall be deemed not to be or result in an Event of Default, in
each case with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 1304 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 501(4)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Securities shall be unaffected thereby.
Section 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section 1302 or
Section 1303 to any Securities or any series of Securities, as the case may be:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefits of the Holders of such
Securities, (A) money in an amount, or (B) U.S. Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of and any premium
and interest on such Securities on the
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respective Stated Maturities, in accordance with the terms of this
Indenture and such Securities. As used herein, "U.S. Government Obligation"
means (x) any security which is (i) a direct obligation of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case (i) or (ii), is not callable or redeemable
at the option of the issuer thereof, and (y) any depositary receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation which is specified
in Clause (x) above and held by such bank for the account of the holder of
such depositary receipt, or with respect to any specific payment of
principal of or interest on any U.S. Government Obligation which is so
specified and held, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific
payment of principal or interest evidenced by such depositary receipt.
(2) In the event of an election to have Section 1302 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that (A)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this instrument, there
has been a change in the applicable Federal income tax law, in either case
(A) or (B) to the effect that, and based thereon such opinion shall confirm
that, the Holders of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit, Defeasance and
discharge to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit, Defeasance and
discharge were not to occur.
(3) In the event of an election to have Section 1303 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit and Covenant
Defeasance to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit and Covenant Defeasance
were not to occur.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that neither such Securities nor any other
Securities of the same series, if then listed on any securities exchange,
will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Securities or any other
Securities shall have occurred and be continuing at the time of such
deposit or, with regard to any such event specified in Sections 501(6) and
(7), at any time on or prior to the 90th day after the
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date of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee
to have a conflicting interest within the meaning of the Trust Indenture
Act (assuming all Securities are in default within the meaning of such
Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the
trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act unless such trust shall be
registered under such Act or exempt from registration thereunder.
(9) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.
Section 1305. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (solely for purposes of this Section and
Section 1306, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1304 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in
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excess of the amount thereof which would then be required to be deposited to
effect the Defeasance or Covenant Defeasance, as the case may be, with respect
to such Securities.
Section 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1305 with respect to such Securities
in accordance with this Article; provided, however, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.
ARTICLE FOURTEEN
Issuance of Restricted Securities
Section 1401. Transfer Restricted Securities.
(a) Any Security initially offered and sold to (and any Security issued
upon registration of transfer of, or in exchange for, or in lieu of, such
Security) (i) "qualified institutional buyers" (as defined in Rule 144A under
the Securities Act) ("QIBs") in accordance with Rule 144A under the Securities
Act (such rule or any successor provision thereto, "Rule 144A") or (ii)
"accredited investors" within the meaning of Rule 501(a)(1)(2)(3) or (7) under
the Securities Act ("IAIs") or (iii) in offshore transactions in reliance on
Regulation S, shall be deemed "Transfer Restricted Securities" during the period
beginning on the later of the date such Security was issued and the last date on
which either the Company or any Affiliate of the Company was the owner of the
Security (or any predecessor Security) and ending on the date two years (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) from any such date; provided, however, that
the term "Transfer Restricted Security" shall not include (i) any Security which
is issued upon transfer of, or in exchange for, any Security which is not a
Transfer Restricted Security or (ii) any Security as to which such restrictions
on transfer have been terminated in accordance with this Article Fourteen.
(b) All Transfer Restricted Securities shall bear the Private Placement
Legend and be subject to the restrictions on transfer provided in the Private
Placement Legend and the Holder of each Transfer Restricted Security or Holder
of a beneficial interest therein, by such Holder's or holder's acceptance
thereof, agrees to be bound by such restrictions on transfer.
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(c) All Securities initially offered and sold to IAIs shall be in
registered certificated form and any Securities initially offered and sold to
QIBs may be in registered global form. Securities initially offered and sold in
offshore transactions in reliance on Regulation S shall be issued initially in
the form of one or more temporary global Securities in registered form (the
"Regulation S Temporary Global Securities"). The Regulation S Temporary Global
Securities shall be registered in the name of, and held by, a temporary
certificate holder until the 40th day after the later of the commencement of the
distribution of such Series and the date such Security was issued with respect
to the offer and sale of such series (the "Regulation S Exchange Date"). The
Company shall promptly notify the Trustee in writing of the occurrence of the
Regulation S Exchange Date and, within a reasonable time after the Regulation S
Exchange Date, upon receipt by the Trustee and the Company of one or more
certificates substantially in the form of Exhibit C hereto from one or more
Holders of interests in the applicable Regulation S Temporary Global Securities,
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more permanent global Securities in registered form (the "Regulation S
Permanent Global Securities", and together with the related Regulation S
Temporary Global Securities, the "Regulation S Global Securities") in exchange
for the Regulation S Temporary Global Securities of like tenor and amount.
(d) The restrictions on transfer on any Transfer Restricted Security
imposed by this Article Fourteen shall cease and terminate and the Private
Placement Legend shall no longer be necessary (i) in the case of the Regulation
S Global Securities, on the Regulation S Exchange Date or (ii) in the case of a
Rule 144A Global Security or Restricted Definitive Security, on (x) the later of
two years (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) after the later of the
date the Security was issued or the last date on which the Company or any
Affiliate of the Company was the owner of such Transfer Restricted Security (or
any predecessor of such Transfer Restricted Security) or (y) (if earlier) if and
when such Transfer Restricted Security has been sold pursuant to an effective
registration statement under the Securities Act or, unless the Holder thereof is
an Affiliate of the Company, transferred pursuant to Rule 144 under the
Securities Act (or any successor provision). The Company shall inform the
Security Registrar in writing of the effective date of any registration
statement registering any Transfer Restricted Securities under the Securities
Act.
Section 1402. Special Transfer Provisions.
As long as the restrictions on transfer on a Transfer Restricted Security
or an interest therein is applicable, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The following
provisions shall apply with respect to the registration of any proposed transfer
of an interest in a Transfer Restricted Security to any IAI which is not a QIB
that is consistent with the Private Placement Legend:
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(i) The Security Registrar shall register the transfer of any
Security, whether or not such Security bears the Private Placement Legend,
if (x) the requested transfer is at least two years after the later of the
date such Security was issued and the last date on which the Company or any
of its Affiliates was the owner of such Security or (y) the proposed
transferor has delivered to the Security Registrar a certificate
substantially in the form set forth in Exhibit A hereto and the proposed
transferee has delivered to the Security Registrar a certificate
substantially in the form set forth in Exhibit B hereto.
(ii) If the proposed transferor is a participant of the Depositary
holding a beneficial interest in a Rule 144A Global Security seeking to
transfer a Restricted Definitive Security to another Person, upon receipt
by the Security Registrar of (x) the documents, if any, required by
paragraph (i) and (y) instructions given in accordance with the
Depositary's and the Security Registrar's procedures therefor, the Security
Registrar shall reflect on its books and records the date and a decrease in
the principal amount of such Rule 144A Global Security in an amount equal
to the principal amount of the beneficial interest in such Rule 144A Global
Security to be transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Restricted Definitive
Securities of like tenor and amount.
(iii) An IAI which is not a QIB shall only hold Restricted Definitive
Securities.
(b) Transfers to QIBs. The following provisions shall apply with respect
to the registration of any proposed transfer of an interest in a Transfer
Restricted Security to a QIB:
(i) If the Security to be transferred consists of (x) Restricted
Definitive Securities, the Security Registrar shall register the transfer
if such transfer is being made by a proposed transferor who has delivered
to the Trustee a certificate substantially in the form set forth in Exhibit
A hereto or (y) an interest in the Rule 144A Global Security, the transfer
of such interest may be effected only through the book entry system
maintained by the Depositary.
(ii) If the Security to be transferred consists of Restricted
Definitive Securities, upon receipt by the Trustee of instructions given in
accordance with the Depositary's and the Security Registrar's procedures
therefor, the Security Registrar shall reflect on its books and records the
date and an increase in the principal amount of the Rule 144A Global
Security in an amount equal to the principal amount of the Restricted
Definitive Security, to be transferred, and the Trustee shall cancel the
Restricted Definitive Security so transferred.
(c) Transfers of Interests in the Regulation S Global Security or the
Regulation S Temporary Global Security to U.S. Persons. The following provisions
shall apply with respect to any transfer of an interest in the Regulation S
Global Security or the Regulation S Temporary Global Security to U.S. Persons:
(i) If the beneficial interest to be transferred is in a Regulation
S Temporary Global Security, transfers by an owner of a beneficial interest
in such Regulation S Temporary
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Global Security to a transferee who takes delivery of such interest through
the corresponding Rule 144A Global Security will be made only upon the
receipt by the Trustee from the transferor of a certificate substantially
in the form of Exhibit D hereto to the effect that such transfer is being
made to a Person whom the transferor reasonably believes is a QIB within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A.
(ii) If the beneficial interest to be transferred is in a Regulation
S Permanent Global Security, the Security Registrar shall register the
transfer of any such Security without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following provisions
shall apply with respect to any transfer of an interest in a Security to a Non-
U.S. Person:
(i) The Security Registrar shall register any proposed transfer to
any Non-U.S. Person if the Security to be transferred is a Restricted
Definitive Security or an interest in a Rule 144A Global Security only upon
receipt of a certificate substantially in the form set forth in Exhibit E
hereto from the proposed transferor. Prior to the Regulation S Exchange
Date, any Non-U.S. Person shall be delivered a beneficial interest in the
corresponding Regulation S Temporary Global Security.
(ii) (x) If the proposed transferor holds a beneficial interest in
the Rule 144A Global Security, upon receipt by the Security Registrar of
(1) the documents required by paragraph (i) of this paragraph (d) and (2)
instructions in accordance with the Depositary's and the Security
Registrar's procedures, the Security Registrar shall reflect on its books
and records the date and a decrease in the principal amount of such Rule
144A Global Security in an amount equal to the principal amount of the
beneficial interest in such Rule 144A Global Security to be transferred and
(y) upon receipt by the Security Registrar of instructions given in
accordance with the Depositary's and the Security Registrar's procedures,
the Security Registrar shall reflect on its books and records the date and
an increase in the principal amount of the corresponding Regulation S
Global Security in an amount equal to the principal amount of the
Restricted Definitive Security or such Rule 144A Global Security, as the
case may be, to be transferred, and the Security Registrar shall cancel the
Restricted Definitive Security so transferred or decrease the principal
amount of such Rule 144A Global Security, as the case may be.
(e) Other Transfers, If Specified. If so specified by Section 301 for
the Securities evidenced thereby, the registration of any proposed transfer
of a Transfer Restricted Security other than pursuant to paragraphs (a)-(d)
of this Section 1402 shall be governed by the provisions of said Section
301.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Security Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Security Registrar shall deliver
only Securities that bear the Private Placement Legend unless either (i)
the
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Private Placement Legend is no longer required pursuant to this Article
Fourteen or (ii) there is delivered to the Security Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act.
(g) General. By its acceptance of any Security, or any beneficial
interest in any Global Security, bearing the Private Placement Legend, each
Holder of such Security or holder of such beneficial interest acknowledges
the restrictions on transfer of such Security set forth in this Indenture
and in the Private Placement Legend and agrees that it will transfer such
Security only as provided in this Indenture. The Security Registrar shall
not register a transfer of any Security unless such transfer complies with
the restrictions on transfer of such Security set forth in this Indenture.
In connection with any transfer of Securities to an IAI, each such Holder
or beneficial owner agrees by its acceptance of the Securities to furnish
the Security Registrar or the Company such certifications, legal opinions
or other information as such Person may reasonably require to confirm that
such transfer is being made pursuant to an exemption from, or a transaction
not subject to, the registration requirements of the Securities Act;
provided, that the Security Registrar shall not be required to determine
(but may rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Article Fourteen. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Security Registrar.
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
In Witness Whereof, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Marriott International, Inc.
By /s/ Carolyn B. Handlon
...............................
Carolyn B. Handlon
Vice President and
Assistant Treasurer
Attest:
/s/ W.D. Mann
............................
The Chase Manhattan Bank
By /s/ Joseph C. Progar
.................................
Joseph C. Progar
Vice President
Attest:
/s/ J. Gordon
............................
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State of Maryland )
) ss.:
County of Montgomery )
On the 12th day of November, 1998, before me personally came Carolyn B.
Handlon, to me known, who, being by me duly sworn, did depose and say that she
is Vice President and Assistant Treasurer of Marriott International, Inc., one
of the corporations described in and which executed the foregoing instrument;
that she knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that she signed her name thereto by
like authority.
/s/ Suzanne M. Ricci
----------------------------------
[notorial seal]
State of Pennsylvania )
) ss:
County of Philadelphia)
On the 13th day of November, 1998, before me personally came Joseph C.
Progar, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of The Chase Manhattan Bank, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
/s/ Caroline N. Hunter
----------------------------------
[Notorial Seal]
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EXHIBIT A
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED
SECURITIES
This certificate relates to $__________ principal amount of ___% Notes Due
____ (the "Securities") issued by Marriott International, Inc. (the "Company")
held in (check applicable space) [__] book-entry or [__] definitive form by the
undersigned.
The undersigned (check one box below):
[ ] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depository a Security or
Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above), subject to the restrictions
in the Indenture;
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such principal amount of Securities are being transferred in accordance
with its terms:
CHECK ONE BOX BELOW:
(1) [ ] to the Company; or
(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [ ] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that such transfer is being made in reliance on Rule 144A, in each case
pursuant to and in compliance with Rule 144A under the Securities Act of 1933;
or
(4) [ ] outside the United States in an offshore transaction meeting the
requirements of Rule 904 under the Securities Act of 1933; or
(5) [ ] inside the United States to an "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is an
institutional investor acquiring in a transaction exempt from the registration
requirements of the Securities Act.
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Unless one of the boxes is checked, the Company or the Trustee will refuse
to register any of the Securities evidenced by this certificate in the name of
any person other than the registered holder thereof; provided, however, that if
box (4) or (5) is checked, the Company or the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and/or other information satisfactory to each of them to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933.
______________________________
Signature
Signature Guarantee:
(Signature must be guaranteed)
______________________________
Signature
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:________ ______________________
Signature
NOTICE: To be executed by an executive officer
This certificate is in addition to any other certificates that may be required
under the Indenture.
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EXHIBIT B
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS WHICH ARE NOT QIBS
This certificate is delivered to request a transfer of $[__________] principal
amount of the __% Notes Due _____, (the "Securities") issued by Marriott
International, Inc. (the "Company").
Upon transfer, the Securities would be registered in the name of the new
beneficial owner as follows:
Name:_____________________________
Address:_____________________________
Taxpayer ID Number:_____________________________
The undersigned represents and warrants to you that:
1. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act")) purchasing for its own account or for the
account of an institutional "accredited investor" Securities in a transaction
exempt from the registration requirements of the Securities Act. The undersigned
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of its investment in the Securities
and invests in or purchase securities similar to the Securities in the normal
course of our business. The undersigned and any accounts for which it is acting
are each able to bear the economic risk of its investment.
2. The undersigned understands that the Securities have not been
registered under the Securities Act and, unless so registered, may not be sold
except as permitted in the following sentence. The undersigned agrees on its own
behalf and on behalf of any investor account for which it is purchasing
Securities to offer, sell or otherwise transfer such Securities prior to the
date which is two years after the later of the date of original issue and the
last date on which the Company or any affiliate of the Company was the owner of
such Securities (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c) in a
transaction complying with the requirements of Rule 144A under the Securities
Act, to a person it reasonably believes is a qualified institutional buyer under
Rule 144A (a "QIB") that purchases for its own account or for the account of a
QIB and to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) pursuant to offers and sales to Non-U.S. Persons that occur
outside the United States within the meaning of Regulation S under the
Securities Act, or
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(e) to an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its
own account or for the account of such an institutional "accredited investor",
in a transaction exempt from the registration requirements of the Securities Act
(if available) and, in each case (a) through (e), in accordance with all
applicable securities laws of the states of the United States and other
jurisdictions. The foregoing restrictions on resale will not apply subsequent to
the Resale Restriction Termination Date. If any resale or other transfer of the
Securities is proposed to be made pursuant to clause (d) or (e) above prior to
the Resale Restriction Termination Date, the transferor shall deliver a letter
from the transferee substantially in the form of this letter to the Company and
the Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act and that it is acquiring such Securities for
investment purposes and not for distribution in violation of the Securities Act.
Each purchaser acknowledges that the Company and the Trustee reserve the right
prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Securities pursuant to clause (d) and (e) above to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
TRANSFEREE:_________________________
BY:_________________________
-B-2-
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED UPON TERMINATION OF RESTRICTED PERIOD
This certificate relates to Securities represented by a temporary global
Security certificate (the "Temporary Certificate"). Pursuant to Section 1401 of
the Indenture dated as of November 16, 1998 relating to the Securities (the
"Indenture"), the undersigned hereby certifies that (1) the undersigned is the
beneficial owner of $[__________] principal amount of initial Securities
represented by the Temporary Certificate and (2) the undersigned is a Non-U.S.
Person (as defined in the Indenture) to whom the initial Securities could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
Securities Act of 1933, as amended. Accordingly, you are hereby requested to
transfer the principal amount of initial Securities represented by the Temporary
Certificate into a permanent global certificate, all in the manner provided by
the Indenture.
The Trustee and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:_________________________
Authorized Signature
<PAGE>
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO RULE 144A GLOBAL SECURITY BEARING A
SECURITIES ACT LEGEND
Reference is hereby made to the Indenture dated as of November 16, 1998
between Marriott International, Inc. and The Chase Manhattan Bank (the
"Indenture"). Capitalized terms used but not defined herein will have the
meaning given them in the Indenture.
This certificate relates to $[______] aggregate principal amount of the
Securities which are held in [the form of a beneficial interest in the
Regulation S Temporary Global Security (CINS No. __________) with the Depositary
in the name of the undersigned.
The undersigned has requested transfer of such Securities to a Person who
will take delivery thereof in the form of a beneficial interest in the Rule 144A
Global Security (CUSIP No. ___________). In connection with such transfer, the
undersigned does hereby confirm that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and on the
Securities and pursuant to and in accordance with Rule 144A under the U.S.
Securities Act of 1933, as amended, and accordingly, the undersigned represents
that:
1. The Securities are being transferred to a transferee that the
undersigned reasonably believes is purchasing the Securities for its own
account or one or more accounts with respect to which the transferee
exercises sole investment discretion; and
2. The undersigned reasonably believes that transferee and any such
account is a "qualified institutional buyer" within the meaning of Rule
144A, in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United
States or any other jurisdiction.
[NAME OF TRANSFEROR]
By:___________________________
Name:
Title:
Dated:_______________________
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO
REGULATION S
Reference is hereby made to the Indenture dated as of November 16, 1998
between Marriott International, Inc. and The Chase Manhattan Bank as Trustee.
Capitalized terms used but not defined herein will have the meaning given them
in the Indenture.
In connection with our proposed sale of $[__________] aggregate principal
amount of the Securities, the undersigned confirms that such sale has been
effected pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the
undersigned represents that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the transferee was
outside the United States or the undersigned and any person acting on its behalf
reasonably believed that the transferee was outside the United States or (b) the
transaction was executed in, on or through the facilities of a designated off-
shore securities market and neither the undersigned nor any person acting on its
behalf knows that the transaction has been prearranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during the restricted period and the
provisions of Rule 903(c)(2) or Rule 904(c)(1) of Regulation S are applicable
thereto, the undesigned confirms that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(2) or Rule 904(c)(1), as the case may
be.
<PAGE>
The Trustee and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
____________________________
[Name of Transferor]
By:____________________________
Authorized Signature
Name:
Title:
Date:
Upon transfer, the Securities should be registered in the name of the new
beneficial owner as follows:
Name:___________________________
Address:________________________
Taxpayer ID Number:_____________
-E-2-
<PAGE>
EXHIBIT 4.2
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY BEFORE THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-
U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
(I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
1
<PAGE>
Marriott International, Inc.
6-5/8% Series A Notes due November 15, 2003
No. R-1 $ 200,000,000.00
CUSIP 571900 AJ 8
Marriott International, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company" which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of Two Hundred Million Dollars on November 15, 2003, and to pay
interest thereon from November 16, 1998 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually on May
15 and November 15 in each year, commencing May 15, 1999, at the rate of 6-5/8%
per annum, until the principal hereof is paid or made available for payment. All
such payments of principal, interest and premium, if any, shall be paid in
immediately available funds. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the April 30 or October 31
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee maintained for that
purpose in Dallas, Texas, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register; and provided, further, that notwithstanding the
foregoing, the Person in whose name this Security is registered may elect to
receive payments of interest on this Security (other than at Maturity) by
electronic funds transfer of immediately available funds to an account
maintained by such Person, provided such Person so elects by giving written
notice to a Paying Agent designating such account, no later than the April 15 or
the October 15 immediately preceding the May 15 or November 15 Interest Payment
Date, as the case may be. Unless such designation is revoked by such Person,
any such designation made by such Person with respect to such Securities shall
remain in effect with respect to any future payments with respect to such
2
<PAGE>
Securities payable to such Person.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: November 16, 1998
Marriott International, Inc.
By.....................................
Carolyn B. Handlon, Vice President
and Assistant Treasurer
Attest:
..............
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
The Chase Manhattan Bank,
As Trustee
By.......................
Authorized Officer
3
<PAGE>
[Reverse of Security]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of November 16, 1998 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and The Chase Manhattan Bank, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $200,000,000.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 50% in principal amount of the Securities at the time
Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable
4
<PAGE>
indemnity, and the Trustee shall not have received from the Holders of a
majority in principal amount of Securities of this series at the time
Outstanding a direction inconsistent with such request, and shall have failed to
institute any such proceeding, for 60 days after receipt of such notice, request
and offer of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of principal
hereof or any premium or interest hereon on or after the respective due dates
expressed herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
Pursuant to the Exchange and Registration Rights Agreement, the Company
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the holders of this Security shall, subject to
certain limitations, have the right to exchange this Security for an Exchange
Security (as defined in such agreement), which will be registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as this Security. The Holders shall be entitled to receive
certain additional interest in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Exchange and Registration Rights Agreement.
The Securities of this series are issuable only in registered form without
coupons in denominations of $100,000 and integral multiples of $1,000 in excess
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be
5
<PAGE>
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
____________________________
The following abbreviations, when used in the inscription on the face of the
within Security, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN Act ______Custodian______
TEN ENT -- as tenants bythe entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act _______
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list
_____________________________
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_______________________________
_______________________________
________________________________________________________________________________
(Name and Address of Assignee, including zip code, must be printed or
typewritten)
________________________________________________________________________________
the within Security, and all rights thereunder, hereby irrevocably constituting
and appointing
____________________________________________________________________ Attorney to
transfer said Security on the books of the Company, with full power of
substitution in the premises.
Dated:
-----------------------------------
NOTICE: The signature to this assignment must correspond with
the name as it appears upon the face of the within Security in every
particular, without alteration or enlargement of any change whatever.
6
<PAGE>
EXHIBIT 4.3
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY BEFORE THE DATE WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-
U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
(I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
1
<PAGE>
Marriott International, Inc.
6-7/8% Series B Notes due November 15, 2005
No. R-1 $ 200,000,000.00
CUSIP 571900 AM 1
Marriott International, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company" which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of Two Hundred Million Dollars on November 15, 2005, and to pay
interest thereon from November 16, 1998 or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semi-annually on May
15 and November 15 in each year, commencing May 15, 1999, at the rate of 6-7/8%
per annum, until the principal hereof is paid or made available for payment. All
such payments of principal, interest and premium, if any, shall be paid in
immediately available funds. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the April 30 or October 31
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Trustee maintained for that
purpose in Dallas, Texas, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register; and provided, further, that notwithstanding the
foregoing, the Person in whose name this Security is registered may elect to
receive payments of interest on this Security (other than at Maturity) by
electronic funds transfer of immediately available funds to an account
maintained by such Person, provided such Person so elects by giving written
notice to a Paying Agent designating such account, no later than the April 15 or
the October 15 immediately preceding the May 15 or November 15 Interest Payment
Date, as the case may be. Unless such designation is revoked by such Person,
any such designation made by such Person with respect to such Securities shall
remain in effect with respect to any future payments with respect to such
2
<PAGE>
Securities payable to such Person.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: November 16, 1998
Marriott International, Inc.
By.....................................
Carolyn B. Handlon, Vice President
and Assistant Treasurer
Attest:
......................
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
The Chase Manhattan Bank,
As Trustee
By...................................
Authorized Officer
3
<PAGE>
[Reverse of Security]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of November 16, 1998 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and The Chase Manhattan Bank, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $200,000,000.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 50% in principal amount of the Securities at the time
Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable
4
<PAGE>
indemnity, and the Trustee shall not have received from the Holders of a
majority in principal amount of Securities of this series at the time
Outstanding a direction inconsistent with such request, and shall have failed to
institute any such proceeding, for 60 days after receipt of such notice, request
and offer of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of principal
hereof or any premium or interest hereon on or after the respective due dates
expressed herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
Pursuant to the Exchange and Registration Rights Agreement, the Company
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the holders of this Security shall, subject to
certain limitations, have the right to exchange this Security for an Exchange
Security (as defined in such agreement), which will be registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as this Security. The Holders shall be entitled to receive
certain additional interest in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Exchange and Registration Rights Agreement.
The Securities of this series are issuable only in registered form without
coupons in denominations of $100,000 and integral multiples of $1,000 in excess
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be
5
<PAGE>
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
____________________________
The following abbreviations, when used in the inscription on the face of the
within Security, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN Act ______Custodian______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to
survivorship and not as Minors Act _______
Tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list
_____________________________
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________
________________________________
________________________________________________________________________________
(Name and Address of Assignee, including zip code, must be printed or
typewritten)
________________________________________________________________________________
the within Security, and all rights thereunder, hereby irrevocably constituting
and appointing
___________________________________________________________________ Attorney to
transfer said Security on the books of the Company, with full power of
substitution in the premises.
Dated:
_________________________
NOTICE: The signature to this assignment must correspond with the
name as it appears upon the face of the within Security in every
particular, without alteration or enlargement of any change whatever.
6
<PAGE>
EXHIBIT 10.9
================================================================================
U.S. $500,000,000
CREDIT AGREEMENT
dated as of February 2, 1999
among
MARRIOTT INTERNATIONAL, INC.
THE BANKS NAMED HEREIN
CITIBANK, N.A.,
as Administrative Agent,
THE BANK OF NOVA SCOTIA,
as Syndication Agent,
THE CHASE MANHATTAN BANK,
as Documentation Agent
and
SALOMON SMITH BARNEY INC.
and
THE BANK OF NOVA SCOTIA,
as Joint Arrangers and Bookrunners
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1.01. Certain Defined Terms............................................................. 1
SECTION 1.02. Computation of Time Periods....................................................... 25
SECTION 1.03. Accounting Terms.................................................................. 25
SECTION 2.01. The Revolving Loans............................................................... 25
SECTION 2.02. The Competitive Bid Loans......................................................... 26
SECTION 2.03. The Swing Loans................................................................... 27
SECTION 2.04. Fees.............................................................................. 27
SECTION 2.05. Reductions of the Commitments..................................................... 28
SECTION 2.06. Repayment......................................................................... 28
SECTION 2.07. Interest.......................................................................... 29
SECTION 2.08. Interest Rate Determinations...................................................... 30
SECTION 2.09. Prepayments....................................................................... 31
SECTION 2.10. Payments and Computations......................................................... 33
SECTION 2.11. Taxes............................................................................. 34
SECTION 2.12. Sharing of Payments, Etc.......................................................... 38
SECTION 2.13. Conversion of Revolving Loans..................................................... 38
SECTION 2.14. Extension of Termination Date..................................................... 39
SECTION 2.15. Borrowings by Designated Borrowers................................................ 42
SECTION 3.01. Making the Revolving Loans........................................................ 43
SECTION 3.02. Making the Competitive Bid Loans.................................................. 45
SECTION 3.03. Making the Swing Loans, Etc....................................................... 48
SECTION 3.04. Increased Costs................................................................... 50
SECTION 3.05. Illegality........................................................................ 51
SECTION 3.06. Reasonable Efforts to Mitigate.................................................... 52
SECTION 3.07. Right to Replace Affected Person or Lender........................................ 52
SECTION 3.08. Use of Proceeds................................................................... 52
SECTION 4.01. Conditions Precedent to Initial Borrowing......................................... 53
SECTION 4.02. Conditions Precedent to Each Revolving Loan Borrowing and Swing Loan Borrowing.... 54
SECTION 4.03. Conditions Precedent to Each Competitive Bid Loan Borrowing....................... 54
SECTION 5.01. Representations and Warranties of the Company..................................... 56
SECTION 6.01. Affirmative Covenants............................................................. 58
SECTION 6.02. Negative Covenants................................................................ 61
SECTION 7.01. Events of Default................................................................. 64
SECTION 8.01. Authorization and Action.......................................................... 66
SECTION 8.02. Reliance, Etc..................................................................... 67
SECTION 8.03. Citibank, BNS and Chase and Affiliates............................................ 67
SECTION 8.04. Lender Credit Decision............................................................ 68
SECTION 8.05. Indemnification................................................................... 68
SECTION 8.06. Successor Administrative Agent.................................................... 68
SECTION 9.01. Amendments, Etc................................................................... 69
SECTION 9.02. Notices, Etc...................................................................... 69
SECTION 9.03. No Waiver; Remedies............................................................... 70
SECTION 9.04. Costs and Expenses................................................................ 70
<PAGE>
ii
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 9.05. Right of Set-off.................................................................. 71
SECTION 9.06. Binding Effect.................................................................... 72
SECTION 9.07. Assignments and Participations.................................................... 72
SECTION 9.08. Governing Law..................................................................... 76
SECTION 9.09. Execution in Counterparts......................................................... 76
SECTION 9.10. Confidentiality................................................................... 76
SECTION 9.11. Jurisdiction, Etc................................................................. 77
SECTION 9.12. WAIVER OF JURY TRIAL.............................................................. 77
SECTION 9.13. Judgment Currency................................................................. 78
SECTION 9.14. European Monetary Union........................................................... 78
SECTION 10.01. Guarantee........................................................................ 80
SECTION 10.02. Obligations Unconditional........................................................ 81
SECTION 10.03. Reinstatement.................................................................... 81
SECTION 10.04. Subrogation...................................................................... 81
SECTION 10.05. Remedies......................................................................... 81
SECTION 10.06. Continuing Guarantee............................................................. 82
</TABLE>
<PAGE>
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule I - Applicable Lending Offices; Addresses for Notices; Commitments
Schedule II - Existing Liens
EXHIBITS
Exhibit A-1 - Form of Revolving Loan Note
Exhibit A-2 - Form of Competitive Bid Loan Note
Exhibit B-1 - Notice of Revolving Loan Borrowing
Exhibit B-2 - Notice of Competitive Bid Loan Borrowing
Exhibit C-1 - Form of Assignment and Acceptance
Exhibit C-2 - Form of Participation Agreement
Exhibit C-3 - Form of New Commitment Acceptance
Exhibit D - Form of Opinion of the Company's Law Department
Exhibit E - Form of Opinion of Special New York Counsel to the Administrative Agent
Exhibit F-1 - Form of Designation Letter
Exhibit F-2 - Form of Termination Letter
Exhibit G - Form of Effective Date Notification
</TABLE>
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of February 2, 1999, among MARRIOTT INTERNATIONAL,
INC., a Delaware corporation (the "Company"), the banks listed on the signature
-------
pages hereof under the heading "Banks" (the "Banks"), CITIBANK, N.A., as
-----
administrative agent (in such capacity, the "Administrative Agent") for the
--------------------
Lenders hereunder, THE BANK OF NOVA SCOTIA, as syndication agent (in such
capacity, the "Syndication Agent") and THE CHASE MANHATTAN BANK, as
-----------------
documentation agent (in such capacity, the "Documentation Agent").
-------------------
The Company has requested the Banks to provide the credit facilities
hereinafter referred to for the general corporate purposes of the Company, and
the Banks are prepared to provide such credit facilities on and subject to the
terms and conditions hereof. Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, 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):
"Acceptance" means an Assignment and Acceptance or a New Commitment
----------
Acceptance.
"Adjusted Total Debt" means, as at any date, the sum for the Company
-------------------
and its Subsidiaries (determined on a Consolidated basis without duplication in
accordance with GAAP) of:
(a) the aggregate principal amount of Debt for Borrowed Money of the
Company and its Subsidiaries (other than any such Debt for Borrowed Money
constituting Non-Recourse Indebtedness) outstanding on such date plus
----
(b) the excess, if any, of (i) the aggregate of all Guarantees by the
Company and its Subsidiaries of Debt for Borrowed Money of others as of
such date over (ii) $400,000,000.
----
"Administrative Agent" has the meaning specified in the recital of
--------------------
parties to this Agreement.
"Administrative Agent's Account" means, in respect of any Currency,
------------------------------
such account as the Administrative Agent shall designate in a notice to the
Company and the Lenders.
Credit Agreement
<PAGE>
2
"Affected Person" has the meaning specified in Sections 2.11(j),
--------------
3.04(d), 3.05 and 3.07.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, controls, is controlled by or is under common control with such
Person or, unless the reference is to an Affiliate of a Lender, is a Marriott
Family Member or is a partner, member, director or officer of such Person. For
purposes of this definition, the term "control" (including the terms
"controlling", "controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power to vote 5% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
"Alternate Currency" means, at any time, any currency other than
-----------------
Dollars, provided that, at such time, (i) such Currency is dealt with in the
--------
London (or, in the case of Pounds Sterling, Paris) interbank deposit market,
(ii) such Currency is freely transferable and convertible into Dollars in the
London (or, in the case of Pounds Sterling, Paris) foreign exchange market and
(iii) no central bank or other governmental authorization in the jurisdiction of
issue of such currency is required to permit use of such Currency by any Lender
for making any Loan and/or to permit the relevant Borrower to borrow and repay
the principal thereof and to pay the interest thereon (unless such authorization
has been obtained and is in full force and effect).
"Applicable Lending Office" means, with respect to each Lender, and
for each Type and Currency of Loan, such Lender's Domestic Lending Office in the
case of a Base Rate Loan and such Lender's Eurocurrency Lending Office in the
case of a Eurocurrency Rate Loan and, in the case of a Competitive Bid Loan, the
office of such Lender notified by such Lender to the Administrative Agent as its
Applicable Lending Office with respect to such Competitive Bid Loan, or in any
case such other office of such Lender or of an Affiliate of such Lender as such
Lender may from time to time specify to the Administrative Agent and the
Company.
"Applicable Margin" means, subject to the proviso below, as of any
-----------------
date, the applicable margin set forth below under the Eurocurrency Rate column
set forth below, based upon the Public Debt Rating in effect on such date:
Credit Agreement
<PAGE>
3
<TABLE>
<CAPTION>
Public Debt
Rating Eurocurrency Rate
S&P/Moody's
===========================================================
<S> <C>
Level 1
-------
A/A2 or higher 0.215%
- -----------------------------------------------------------
Level 2
-------
A-/A3 0.295%
- -----------------------------------------------------------
Level 3
-------
BBB+/Baa1 0.375%
- -----------------------------------------------------------
Level 4
-------
BBB/Baa2 0.475%
- -----------------------------------------------------------
Level 5
-------
BBB-/Baa3 0.675%
- -----------------------------------------------------------
Level 6
-------
Lower than Level 5 0.900%
===========================================================
</TABLE>
provided that at any time (1) the aggregate outstanding principal amount of all
- --------
Loans (for which purpose the amount of any Loan that is denominated in an
Alternate Currency shall be deemed to be the Dollar Equivalent thereof as of the
date of determination) exceeds (2) an amount equal to 25% of the then Current
Aggregate Commitment, the "Applicable Margin" shall be the applicable margin set
-----------------
forth below under the Eurocurrency Rate column set forth below, based upon the
Public Debt Rating in effect on such date:
Credit Agreement
<PAGE>
4
<TABLE>
<CAPTION>
Public Debt
Rating Eurocurrency Rate
S&P/Moody's
===========================================================
<S> <C>
Level 1
-------
A/A2 or higher 0.290%
- -----------------------------------------------------------
Level 2
-------
A-/A3 0.395%
- -----------------------------------------------------------
Level 3
-------
BBB+/Baa1 0.500%
- -----------------------------------------------------------
Level 4
-------
BBB/Baa2 0.600%
- -----------------------------------------------------------
Level 5
-------
BBB-/Baa3 0.800%
- -----------------------------------------------------------
Level 6
-------
Lower than Level 5 1.050%
===========================================================
</TABLE>
"Applicable Percentage" means, as of any date, the applicable percentage set
---------------------
forth below under the Facility Fee column based upon the Public Debt Rating in
effect on such date:
Credit Agreement
<PAGE>
5
<TABLE>
<CAPTION>
Public Debt
Rating Facility
S&P/Moody's Fee
===============================================================================
<S> <C>
Level 1
--------
A/A2 or higher 0.085%
- -------------------------------------------------------------------------------
Level 2
-------
A-/A3 0.105%
- -------------------------------------------------------------------------------
Level 3
-------
BBB+/Baa1 0.125%
- -------------------------------------------------------------------------------
Level 4
-------
BBB/Baa2 0.150%
- -------------------------------------------------------------------------------
Level 5
------
BBB-/Baa3 0.200%
- -------------------------------------------------------------------------------
Level 6
-------
Lower than Level 5 0.300%
===============================================================================
</TABLE>
"Assignment and Acceptance" means an assignment and acceptance entered into by
-------------------------
a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in
accordance with Section 9.07 and in substantially the form of Exhibit C-1
hereto.
"BNS" means The Bank of Nova Scotia and its successors.
---
"Banks" has the meaning specified in the recital of parties to this Agreement.
-----
"Base Rate" means, for any period, a fluctuating interest rate per annum as
---------
shall be in effect from time to time which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by Citibank in New York,
New York, from time to time, as its "base rate";
(b) the sum (adjusted to the nearest 1/4 of one percent, or if there
is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of
(i) 1/2 of one percent per annum, plus (ii) the rate obtained by dividing
(A) the latest three-week moving average of secondary market morning
offering rates in the United States for three-month certificates of deposit
of major United States money market banks, such three-week moving average
(adjusted to the basis of a year of 365/366 days) being determined weekly
on each Monday (or, if any such date is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the previous
Friday by Citibank on the basis of such rates reported by certificate of
deposit dealers to and
Credit Agreement
<PAGE>
6
published by the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations for such rates
received by Citibank from three New York certificate of deposit dealers of
recognized standing selected by Citibank, by (B) a percentage equal to 100%
minus the average of the daily percentages specified during such three-week
period by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, but
not limited to, any emergency, supplemental or other marginal reserve
requirement) for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. dollar non-personal
time deposits in the United States, plus (iii) the average during such
three-week period of the annual assessment rates for determining the then
current annual assessment payable by Citibank to the FDIC for insuring U.S.
dollar deposits in the United States; and
(c) 1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Loan" means a Loan which bears interest as provided in
--------------
Section 2.07(a)(i).
"Base Rate Swing Loan" has the meaning specified in Section 3.03(b).
--------------------
"Bondable Lease Obligation" of any Person means the obligation of
-------------------------
such Person as tenant under an operating lease, upon the occurrence of a
significant underinsured casualty, an under-compensated governmental taking or
the practical inability to operate the premises for an extended period of time
due to force majeure or loss of a material permit, to make a payment to the
-------------
landlord (or to make an irrevocable offer to purchase the landlord's fee
interest to avoid termination of such lease) in an amount that is calculated
with reference to the landlord's leasehold indebtedness.
"Borrowers" means, at any time, collectively, the Company (both as a
---------
Borrower and as guarantor under Article X of Loans made to the Designated
Borrowers) and each Designated Borrower.
"Borrowing" means a Revolving Loan Borrowing, a Swing Loan Borrowing
---------
or a Competitive Bid Loan Borrowing.
"Business Day" means a day of the year on which commercial banks are
------------
not required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurocurrency Rate Loans, on which dealings are
carried on in the London (and, in the case of Pounds Sterling, Paris) interbank
market and, if such day relates to a Borrowing of, a payment or prepayment of
principal of or interest on, or an Interest Period for, any Loan denominated in
an Alternate Currency, or a notice with respect to any such Borrowing, payment,
prepayment or Interest Period, also on which foreign exchange trading is carried
out in the London (and, in the case of Pounds Sterling, Paris) interbank market
and on which banks are open in the place of payment in the country in whose
Currency such Loan is denominated.
Credit Agreeement
<PAGE>
7
"Change of Control" means:
-----------------
(i) any Person or two or more Persons acting in concert (other than a
Significant Shareholder or group of Significant Shareholders) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of Voting Stock of the Company (or other securities
convertible into such Voting Stock) representing not less than 30% of the
combined voting power of all Voting Stock of the Company; or
(ii) during any period of up to 24 consecutive months, commencing on the
date of this Agreement, individuals who at the beginning of such 24-month period
were directors of the Company (together with any new director whose election by
the board of directors or whose nomination for election by the stockholders of
the Company was approved by a vote of at least two-thirds of the directors then
in office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) shall cease for
any reason (other than solely as a result of (a) death or disability or (b)
voluntary retirement of any individual in the ordinary course and not for
reasons related to an actual or proposed change in control of the Company) to
constitute a majority of the board of directors of the Company; or
(iii) any Person or two or more Persons acting in concert (other than a
Significant Shareholder or group of Significant Shareholders) shall have
acquired the power to exercise, directly or indirectly, effective control for
any purpose over Voting Stock of the Company (or other securities convertible
into such securities) representing not less than 30% of the combined voting
power of all Voting Stock of the Company.
"Chase" means The Chase Manhattan Bank and its successors.
-----
"Citibank" means Citibank, N.A. and its successors.
--------
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
----
and the regulations promulgated and rulings issued thereunder.
"COLI Debt" means all Indebtedness of the Company or any of its Subsidiaries
---------
to the insurance company issuing the COLI Policies, if and for so long as:
(a) the aggregate principal amount of such Indebtedness is equal to or
less than the aggregate account value of all COLI Policies at the time such
Indebtedness is incurred by the Company and such Subsidiaries and at all
times thereafter; and
(b) the documentation with respect to such Indebtedness limits the
recourse of the insurance company issuing the COLI Policies, as lender,
against the Company and such
Credit Agreement
<PAGE>
8
Subsidiaries for the payment of such Indebtedness directly to the ownership
interest of the Company and its Subsidiaries in the COLI Policies.
"COLI Policies" means all corporate-owned life insurance policies
-------------
purchased and maintained by the Company or any of its Subsidiaries to insure the
lives of certain employees of the Company and its Subsidiaries.
"Commitment" means, as to any Lender, (i) the Dollar amount set forth
----------
opposite its name on Schedule I hereto or (ii) if such Lender has entered into
one or more Acceptances, the amount set forth for such Lender in the Register,
in each case as the same may be reduced as expressly provided herein (including,
without limitation, pursuant to Sections 2.05, 2.14(c) and 3.07).
"Company" has the meaning specified in the recital of parties to this
-------
Agreement.
"Competitive Bid Loan" means a loan by a Lender to a Borrower as part
--------------------
of a Competitive Bid Loan Borrowing resulting from the auction bidding procedure
described in Section 3.02.
"Competitive Bid Loan Borrowing" means a Borrowing by a Borrower from
------------------------------
each of the Lenders whose offer to make one or more Competitive Bid Loans as
part of such borrowing has been accepted by the Company under the auction
bidding procedure described in Section 3.02.
"Competitive Bid Loan Note" means a promissory note of a Borrower
-------------------------
payable to the order of any Lender, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of such Borrower to such Lender resulting
from a Competitive Bid Loan made by such Lender.
"Competitive Bid Loan Reduction" has the meaning specified in Section
------------------------------
2.01.
"Confidential Information" means information that the Company or any
------------------------
of its Subsidiaries or Affiliates furnishes to the Administrative Agent, the
Syndication Agent, the Documentation Agent or any Lender on a confidential basis
by informing the recipient that such information is confidential or marking such
information as such, but does not include any such information that (i) is or
becomes generally available to the public or (ii) is or becomes available to
such Person or Persons from a source other than the Company or any of its
Subsidiaries or Affiliates, unless such Person has actual knowledge that (a)
such source is bound by a confidentiality agreement or (b) such information has
been previously furnished to such Person on a confidential basis.
"Consolidated" refers to the consolidation of accounts of the Company
------------
and its Subsidiaries in accordance with GAAP.
CREDIT AGREEMENT
<PAGE>
9
"Conversion", "Convert" and "Converted" each refer to a conversion of
---------- ------- ---------
Revolving Loans of one Type into Revolving Loans of the other Type pursuant to
Section 2.13.
"Currency" means Dollars or any Alternate Currency.
--------
"Current Aggregate Commitment" means, at any time, the aggregate amount
----------------------------
of the Commitments as then in effect (computed without regard to any Competitive
Bid Loan Reduction or any Swing Loan Reduction).
"Debt for Borrowed Money" of any Person means:
-----------------------
(i) all indebtedness of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase
price of property or services (other than trade payables and accruals
incurred in the ordinary course of such Person's business);
(iv) all obligations of such Person as lessee under leases which shall
have been or should be, in accordance with GAAP, recorded as capital
leases; and
(v) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities to the extent that such
obligations support an obligation described in clauses (i) through (iv)
above.
"Default" means any Event of Default or any event that would constitute
-------
an Event of Default but for the requirement that notice be given or time elapse
or both.
"Designated Borrower" means any Wholly-Owned Subsidiary of the Company,
-------------------
as to which a Designation Letter has been delivered to the Administrative Agent
and as to which a Termination Letter has not been delivered to the
Administrative Agent in accordance with Section 2.15.
"Designation Letter" has the meaning specified in Section 2.15(a).
------------------
"Documentation Agent" has the meaning specified in the recital of
-------------------
parties to this Agreement.
"Dollar Equivalent" means, with respect to any principal of or interest
-----------------
on any Loan denominated in an Alternate Currency, the amount of Dollars that
would be required to purchase the amount of the Alternate Currency of such
principal or interest on the date such Loan is requested (or (x) as otherwise
provided in Section 2.06(d), (y) in the case of any
CREDIT AGREEMENT
<PAGE>
10
Competitive Bid Loan, the date of the related Notice of Competitive Bid Loan
Borrowing, and (z) in the case of any redenomination under Section 2.10(e), on
the date of such redenomination), based upon the arithmetic mean (rounded
upwards, if necessary, to the nearest 1/100 of 1%), as determined by the
Administrative Agent, of the spot selling rate at which the Reference Banks
offer to sell such Alternate Currency for Dollars in the London foreign exchange
market at approximately 11:00 a.m. London time for delivery two Business Days
thereafter.
"Dollars" and "$" mean lawful money of the United States of America.
------- -
"Domestic Lending Office" means, with respect to any Lender, the office of
-----------------------
such Lender specified as its "Domestic Lending Office" opposite its name on
Schedule I hereto or in the Acceptance pursuant to which it became a Lender, or
such other office of such Lender as such Lender may from time to time specify to
the Company and the Administrative Agent.
"EBITDA" means, for any period, net income (or net loss) plus the sum of (a)
------ ----
Interest Expense, (b) income tax expense, (c) depreciation expense, (d)
amortization expense and (e) non-recurring non-cash charges (including the
cumulative effect of accounting changes), in each case determined in accordance
with GAAP for such period.
"Effective Date" has the meaning set forth in Section 4.01.
--------------
"Eligible Assignee" means:
-----------------
(i) a Lender and any Affiliate of such Lender;
(ii) a commercial bank organized under the laws of the United States, or any
State thereof, and having total assets in excess of $1,000,000,000;
(iii) a savings bank organized under the laws of the United States, or any
State thereof, and having total assets in excess of $500,000,000;
(iv) a commercial bank organized under the laws of any other country which
is a member of the OECD or a political subdivision of any such country, and
having total assets in excess of $1,000,000,000; and
(v) a finance company, insurance company or other financial institution or
fund (whether a corporation, partnership or other entity) which is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business, and having total assets in excess of $150,000,000.
"Environmental Law" means any federal, state or local law, rule, regulation,
-----------------
order, writ, judgment, injunction, decree, determination or award relating to
the environment, health, safety or hazardous materials, including, without
limitation, CERCLA, the Resource Conservation and Recovery Act, the Hazardous
Materials Transportation Act, the Clean Water
CREDIT AGREEMENT
<PAGE>
11
Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking
Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and
Rodenticide Act and the Occupational Safety and Health Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of Title IV of
-----
ERISA is a member of the Company's controlled group, or under common control
with the Company, within the meaning of Section 414(b) or 414(c) of the Code.
"ERISA Event" means, with respect to any Person, (a) the occurrence
-----------
of a reportable event, within the meaning of Section 4043 of ERISA, with respect
to any Plan of such Person or any of its ERISA Affiliates unless the 30-day
notice requirement with respect to such event has been waived by the PBGC; (b)
the provision by the administrator of any Plan of such Person or any of its
ERISA Affiliates of a notice of intent to terminate such Plan pursuant to
Section 4041(a)(2) of ERISA with respect to a termination described in Section
4041(c)(2) of ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (c) the cessation of operations at a
facility of such Person or any of its ERISA Affiliates in the circumstances
described in Section 4062(e) of ERISA; (d) the withdrawal by such Person or any
of its ERISA Affiliates from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(e) the failure by such Person or any members of its controlled group (within
the meaning of Section 302(f)(6)(B) of ERISA) to make a payment to a Plan
required under Section 302(f)(1)(A) and (B) of ERISA; (f) the adoption of an
amendment to a Plan of such Person or any of its ERISA Affiliates requiring the
provision of security to such Plan, pursuant to Section 307 of ERISA; or (g) the
institution by the PBGC of proceedings to terminate a Plan of such Person or any
of its ERISA Affiliates, pursuant to Section 4042 of ERISA.
"Eurocurrency Lending Office" means, with respect to any Lender, the
---------------------------
office of such Lender specified as its "Eurocurrency Lending Office" opposite
its name on Schedule I hereto or in the Acceptance pursuant to which it became a
Lender (or, if no such office is specified, its Domestic Lending Office), or
such other office of such Lender as such Lender may from time to time specify to
the Company and the Administrative Agent.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurocurrency Rate" means, for any Interest Period for each
-----------------
Eurocurrency Rate Loan in any Currency comprising part of the same Revolving
Loan Borrowing, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of one percent) appearing on the Screen for such Currency as the
London Interbank Offered Rate for deposits in such Currency at approximately
11:00 A.M. London time (or as soon thereafter as practicable) two Business Days
prior to the first day of the Interest Period for such Loan; provided that if
--------
such rate does not
CREDIT AGREEMENT
<PAGE>
12
appear on such Screen (or, if such Screen shall cease to be publicly available
or if the information contained on such Screen, in the Administrative Agent's
reasonable judgment, shall cease accurately to reflect such London Interbank
Offered Rate, as reported by any publicly available source of similar market
data selected by the Administrative Agent that, in the Administrative Agent's
reasonable judgment, accurately reflects such London Interbank Offered Rate),
the "Eurocurrency Rate" for such Interest Period for such Eurocurrency Rate Loan
in such Currency shall be (a) the arithmetic average (rounded to the nearest
1/100 of one percent) of the rates per annum at which deposits in such Currency
are offered by the principal office of each of the Reference Banks in London,
England to prime banks in the London (or, in the case of Pounds Sterling, Paris)
interbank market at approximately 11:00 A.M. (London time) two Business Days
before the first day of the Interest Period for such Loan in an amount
substantially equal to such Reference Bank's Eurocurrency Rate Loan comprising
part of such Revolving Loan Borrowing to be outstanding during such Interest
Period; provided, further, that in the case of each Lender that is subject to
-------- -------
the jurisdiction of the Financial Services Authority of England (or any
successor) (the "FSA"), the Eurocurrency Rate shall be increased for each
---
Interest Period by the associated cost rate (if any) applicable to Loans
denominated for such Interest Period in the lawful currency of England or a
foreign currency pursuant to applicable regulations of the FSA.
The Eurocurrency Rate for any Interest Period for each Eurocurrency
Rate Loan comprising part of the same Revolving Loan Borrowing shall be
determined by the Administrative Agent on the basis of the applicable Screen or
the applicable rates furnished to and received by the Administrative Agent from
the Reference Banks, as the case may be, two Business Days before the first day
of such Interest Period, subject, however, to the provisions of Section 2.08.
------- -------
"Eurocurrency Rate Loan" means a Loan which bears interest as
----------------------
provided in Section 2.07(a)(ii).
"Eurocurrency Rate Reserve Percentage" of any Lender for any
------------------------------------
Interest Period for any Eurocurrency Rate Loan means the reserve percentage
applicable during such Interest Period (or if more than one such percentage
shall be so applicable, the daily average of such percentages for those days in
such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a term equal
to such Interest Period.
"Events of Default" has the meaning specified in Section 7.01.
-----------------
"Excluded Representations" means the representations and warranties
------------------------
set forth in (i) the last sentence of Section 5.01(b) (to the extent the
representations and warranties set forth in such sentence relate to matters
other than the Loan Documents), (ii) the last sentence of Section 5.01(e) and
(iii) Sections 5.01(g), 5.01(h), 5.01(i), 5.01(j) and 5.01(l).
CREDIT AGREEMENT
<PAGE>
13
"FDIC" means the Federal Deposit Insurance Corporation or any
----
successor.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Final Termination Date" means, at any time, the latest occurring
----------------------
Termination Date in effect at such time.
"Foreclosure Guarantee" means any guarantee of secured
---------------------
Indebtedness the obligations under which guarantee are limited to providing that
following foreclosure (or sale in lieu thereof) on all such security the
guarantor will pay the holder of such Indebtedness the amount (if any) by which
the aggregate proceeds received by such holder from such foreclosure or sale
fall short of a specified amount, provided that such specified amount does not
--------
exceed 25% of the original principal amount of such secured Indebtedness.
"Foreign Currency Equivalent" means, with respect to any amount in
---------------------------
Dollars, the amount of an Alternate Currency that could be purchased with such
amount of Dollars using the reciprocal of foreign exchange rate(s) specified in
the definition of the term "Dollar Equivalent", as determined by the
Administrative Agent.
"GAAP" means generally accepted accounting principles in the
----
United States of America as in effect from time to time, except that, with
respect to the determination of compliance by the Company with the covenant set
forth in Section 6.01(j), "GAAP" shall mean such principles in the United States
----
of America as in effect as of the date of, and used in, the preparation of the
audited financial statements of the Company referred to in Section 5.01(e).
"Guarantee" of any Person means (a) any obligation, contingent or
---------
otherwise, directly or indirectly guaranteeing any Debt for Borrowed Money of
any other Person and (b) any other arrangement having the economic effect of a
Guarantee and the principal purpose of which is to assure a creditor against
loss in respect of Debt for Borrowed Money, in each case other than (i) the
endorsement for collection or deposit in the ordinary course of business, (ii)
any Foreclosure Guarantee and (iii) any Bondable Lease Obligation. The amount of
any Guarantee (other than for purposes of determining the Company's obligations
under Article X) shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Guarantee is made, and (b) the maximum amount for which such Person may be
liable pursuant to the instrument embodying such Guarantee, unless such primary
obligation and the maximum amount for which such guaranteeing Person
CREDIT AGREEMENT
<PAGE>
14
may be liable are not stated or determinable, in which case the amount of such
Guarantee shall be such Person's maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
"Guaranteed Obligations" has the meaning specified in Section
----------------------
10.01.
"Indebtedness" of any Person means (i) all Debt for Borrowed Money
------------
of such Person, (ii) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person and (iii) all Guarantees of such Person.
"Indemnified Party" has the meaning specified in Section 9.04(b).
-----------------
"Insufficiency" means, with respect to any Plan, the amount, if
-------------
any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Interest Expense" means, for any period, gross interest expense
----------------
plus capitalized interest for such period, in each case determined in accordance
with GAAP.
"Interest Period" means: (a) with respect to each Eurocurrency
---------------
Rate Loan, the period commencing on the date of such Eurocurrency Rate Loan
and ending on the numerically corresponding day in the first, second, third
or sixth (or, if requested by the Company and acceptable to each of the
Lenders, ninth or twelfth) calendar month thereafter, as the Company (on
its own behalf and on behalf of any other Borrower) may, upon notice
received by the Administrative Agent not later than 12:00 noon (New York
City time) on the third Business Day prior to the first day of such
Interest Period, select;
(b) with respect to each Base Rate Loan, the period commencing on
the date of such Base Rate Loan and ending on the first Quarterly Date
thereafter; and
(c) with respect to each Competitive Bid Loan, the period
commencing on the date of such Competitive Bid Loan and ending on the
maturity date thereof determined in accordance with Section 2.02(c);
provided that:
- --------
(i) the Company may not select any Interest Period that ends after
the Final Termination Date;
(ii) Interest Periods commencing on the same date for Revolving
Loans comprising part of the same Revolving Loan Borrowing shall be of the
same duration; and
CREDIT AGREEMENT
<PAGE>
15
(iii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
provided in the case of any Interest Period for a Eurocurrency Rate Loan,
--------
that if such extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day.
"Lenders" means the Banks listed on the signature pages hereof and each
-------
Eligible Assignee that shall become a party hereto pursuant to Section 9.07.
"Leverage Ratio" means, as at the last day of any fiscal quarter of the
--------------
Company ending on or after the date hereof, the ratio of:
(a) Adjusted Total Debt as of such day, to
(b) Consolidated EBITDA for the period of four fiscal quarters ending
on such day.
"Lien" means any lien, security interest or other charge or encumbrance
----
of any kind, or any other type of preferential arrangement having the practical
effect of any of the foregoing, including, without limitation, the lien or
retained security title of a conditional vendor and any easement, right of way
or other encumbrance on title to real property.
"Loans" means all Revolving Loans, all Swing Loans and all Competitive
-----
Bid Loans.
"Loan Documents" means this Agreement, the Notes, each Designation
--------------
Letter and each Termination Letter.
"Local Time" means, with respect to any Loan denominated, or any
----------
payment to be made, in Dollars, New York City time, and with respect to any Loan
denominated, or any payment to be made, in an Alternate Currency, the local time
in the Principal Financial Center for such Currency.
"Margin Regulations" means, collectively, Regulations T, U and X, as
------------------
from time to time in effect, and any regulation replacing the same, of the Board
of Governors of the Federal Reserve System, or any successor thereto.
"Marriott Family Member" means Alice Marriott, J.W. Marriott, Jr.,
----------------------
Richard E. Marriott, any brother or sister of J.W. Marriott, Sr., any children
or grandchildren of any of the foregoing, any spouses of any of the foregoing,
or any trust or other entity established primarily for the benefit of one or
more of the foregoing.
CREDIT AGREEMENT
<PAGE>
16
"Material Adverse Change" means any material adverse change in the
-----------------------
business, condition (financial or otherwise), operations or properties of the
Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a)
-----------------------
the business, condition (financial or otherwise), operations or properties of
the Company and its Subsidiaries taken as a whole, (b) the rights and remedies
of the Administrative Agent or any Lender under the Loan Documents or (c) the
ability of the Company to perform its obligations under the Loan Documents.
"Material Subsidiary" means, at any time, a Subsidiary of the
-------------------
Company having (i) at least 10% of the total Consolidated assets of the Company
and its Subsidiaries (determined as of the last day of the most recent fiscal
quarter of the Company) or (ii) at least 10% of the Consolidated revenues of the
Company and its Subsidiaries for the fiscal year of the Company then most
recently ended.
"MICC" means Marriott International Capital Corporation, a
----
Delaware corporation.
"Moody's" means Moody's Investors Service, Inc., or any successor
-------
by merger or consolidation to its business.
"Multiemployer Plan" of any Person means a multiemployer plan, as
------------------
defined in Section 4001(a)(3) of ERISA, and which is a defined benefit plan, to
which such Person or any of its ERISA Affiliates is making or accruing an
obligation to make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.
"Multiple Employer Plan" of any Person means a single employer
----------------------
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and at least one Person
other than such Person and its ERISA Affiliates or (b) was so maintained and in
respect of which such Person or any of its ERISA Affiliates could have liability
under Section 4064 or Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"MVCI" means Marriott Ownership Resorts, Inc. (d/b/a Marriott
----
Vacation Club International).
"New Commitment Acceptance" means a New Commitment Acceptance
-------------------------
executed and delivered by a New Lender, and accepted by the Administrative
Agent, in accordance with Section 9.07 and in substantially the form of Exhibit
C-3 hereto.
"New Lender" means, for purposes of Sections 2.14(c) and 9.07(c),
----------
an Eligible Assignee (which may be a Lender) approved by the Administrative
Agent (which approval shall
CREDIT AGREEMENT
<PAGE>
17
not be unreasonably withheld) that the Company has requested to become a Lender
hereunder pursuant to said Section 2.14(c).
"Non-Recourse Indebtedness" means any Indebtedness of the Company or
-------------------------
any of its Subsidiaries if, and so long as, such Indebtedness meets the
requirements of clause (i), clause (ii), clause (iii) or clause (iv) below:
(i) Such Indebtedness is secured solely by Purchase Money Liens and:
(a) the instruments governing such Indebtedness limit the recourse
(whether direct or indirect) of the holders thereof against the
Company and its Subsidiaries for the payment of such Indebtedness to
the property securing such Indebtedness (with customary exceptions,
including, without limitation, recourse for fraud, waste,
misapplication of insurance or condemnation proceeds, and
environmental liabilities); provided that any partial Guarantee by, or
--------
any other limited recourse for payment of such Indebtedness against,
the Company or its Subsidiaries which is not expressly excluded from
the definition of "Guarantee" in this Section 1.01 shall, to the
extent thereof, constitute a Guarantee for purposes of the calculation
of Adjusted Total Debt but shall not prevent the non-guaranteed and
non-recourse portion of such Indebtedness from constituting Non-
Recourse Indebtedness; and
(b) if such Indebtedness is incurred after the date hereof by the
Company or a Subsidiary of the Company which is organized under the
laws of the United States or any of its political subdivisions,
either:
(x) (1) the holders of such Indebtedness shall have
irrevocably agreed that in the event of any bankruptcy,
insolvency or other similar proceeding with respect to the
obligor of such Indebtedness, such holders will elect (pursuant
to Section 1111(b) of the Federal Bankruptcy Code or otherwise)
to be treated as fully secured by, and as having no recourse
against such obligor or any property of such obligor other than,
the property securing such Indebtedness, and (2) if,
notwithstanding any election pursuant to clause (1) above, such
holders shall have or shall obtain recourse against such obligor
or any property of such obligor other than the property securing
such Indebtedness, such recourse shall be subordinated to the
payment in full in cash of the obligations owing to the Lenders
and the Administrative Agent hereunder and under the Notes; or
(y) the property securing such Indebtedness is not
material to the business, condition (financial or otherwise),
operations or properties of the Company and its Subsidiaries,
taken as a whole, as determined at the time such Indebtedness is
incurred;
CREDIT AGREEMENT
<PAGE>
18
(ii) (a) The sole obligor of such Indebtedness (such obligor, a
"Specified Entity") is a corporation or other entity formed solely for the
---------------
purpose of owning (or owning and operating) property which is (or may be)
subject to one or more Purchase Money Liens, (b) such Specified Entity owns
no other material property, (c) the sole collateral security provided by
the Company and its Subsidiaries with respect to such Indebtedness (if any)
consists of property owned by such Specified Entity and/or the capital
stock of (or equivalent ownership interests in) such Specified Entity
(provided that any partial Guarantee by, or any other limited recourse for
--------
payment of such Indebtedness against, the Company or its Subsidiaries which
is not expressly excluded from the definition of "Guarantee" in this
Section 1.01 shall, to the extent thereof, constitute a Guarantee for
purposes of the calculation of Adjusted Total Debt but shall not prevent
the non-guaranteed and non-recourse portion of such Indebtedness from
constituting Non-Recourse Indebtedness), and (d) such Specified Entity
conducts its business and operations separately from that of the Company
and its other Subsidiaries;
(iii) Such Indebtedness is COLI Debt; or
(iv) Such Indebtedness is non-recourse Indebtedness in an aggregate
principal amount not exceeding $53,782,000 owing by Essex House Condominium
Corporation (a Subsidiary of the Company), as Owner Participant under the
Trust Indenture and Security Agreement (Delta 1993-6) dated as of June 1,
1993 with NationsBank of Georgia, N.A., as indenture trustee, which
Indebtedness is secured by a Boeing 767 aircraft leased to Delta Airlines
and by an assignment of such lease.
"Note" means a Revolving Loan Note or a Competitive Bid Loan Note.
----
"Notice of Competitive Bid Loan Borrowing" has the meaning specified
----------------------------------------
in Section 3.02(a).
"Notice of Revolving Loan Borrowing" has the meaning specified in
----------------------------------
Section 3.01(a).
"Notice of Swing Loan Borrowing" has the meaning specified in
------------------------------
Section 3.03(a).
"OECD" means the Organization for Economic Cooperation and
----
Development.
"Operating Agreement" means an agreement between the Company or one
-------------------
of its Subsidiaries and the owner of a lodging or senior living facility
pursuant to which the Company or such Subsidiary operates such lodging or senior
living facility.
"Other Taxes" has the meaning specified in Section 2.11(b).
-----------
CREDIT AGREEMENT
<PAGE>
19
"Participation Agreement" means a loan participation agreement in
-----------------------
substantially the form of Exhibit C-2 hereto, with such modifications, if any,
as may be approved by the Company.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor.
----
"Permitted Liens" means any of the following:
---------------
(a) Liens for taxes, assessments and governmental charges or levies
which are not yet due or are payable without penalty or of which the
amount, applicability or validity is being contested by the Company or the
Subsidiary whose property is subject thereto in good faith by appropriate
proceedings as to which adequate reserves are being maintained;
(b) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's Liens and other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable
without penalty or which are being contested or defended in good faith by
appropriate proceedings, or which are suspended or released by the filing
of lien bonds, or deposits to obtain the release of such Liens;
(c) pledges, deposits and other Liens made in the ordinary course of
business to secure obligations under worker's compensation laws,
unemployment insurance, social security legislation or similar legislation
or to secure public or statutory obligations;
(d) Liens to secure the performance of bids, tenders, contracts, leases
or statutory obligations, or Liens to secure obligations under the Self-
Insurance Program, or to secure surety, stay or appeal or other similar
types of deposits, Liens or pledges (to the extent such Liens do not secure
obligations for the payment of Debt for Borrowed Money);
(e) attachment or judgment Liens to the extent such Liens are being
contested in good faith and by proper proceedings, as to which adequate
reserves are being maintained (provided that any such Liens as to which
--------
enforcement has been commenced and is unstayed, by reason of pending appeal
or otherwise, for a period of more than thirty consecutive days, do not, in
the aggregate, secure judgments in excess of $25,000,000);
(f) Liens on any property of any Subsidiary of the Company to secure
Indebtedness owing by it to the Company or another Subsidiary of the
Company;
(g) easements, rights of way and other encumbrances on title to real
property that do not render title to the property encumbered thereby
unmarketable or materially adversely affect the use of such property for
its present purposes;
CREDIT AGREEMENT
<PAGE>
20
(h) Liens arising in connection with operating leases incurred in the
ordinary course of business of the Company and its Subsidiaries;
(i) Liens created in connection with the L/C Cash Collateral Account,
as defined in the $1,500,000,000 Credit Agreement dated as of February 19,
1998, among the Company, the lenders parties thereto, The Chase Manhattan
Bank and The First National Bank of Chicago, as managing agents, The Bank
of Nova Scotia, as documentation agent and letter of credit agent, and
Citibank, N.A., as administrative agent, as from time to time amended; or
any similar cash collateral account arrangement in relation to letters of
credit under any credit agreement that replaces said Credit Agreement;
(j) (i) subordination of any Operating Agreement to any ground lease
and/or any mortgage debt of the owner or landlord, and (ii) any agreement
by the Company or any of its Subsidiaries as operator to attorn to the
holder of such mortgage debt, the lessor under such ground lease or any
successor to either; and
(k) additional Liens upon cash and investment securities; provided that
(i) the only obligations secured by such Liens are obligations arising
under Swap Transactions entered into with one or more counterparties who
are not Affiliates of the Company or any of its Subsidiaries and (ii) the
aggregate fair market value of cash and investment securities covered by
such Liens does not at any time exceed the aggregate amount of the
respective termination or liquidation payments that would be payable to
such counterparties upon the occurrence of an event of default or other
similar event as to which the Company or any of its Subsidiaries is the
defaulting or affected party (subject to the application of any customary
and reasonable collateral valuation discount percentages and minimum
collateral transfer thresholds contained in the respective security and
margin agreements).
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association,
limited liability company, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Pounds Sterling" means the lawful money of England.
---------------
"Principal Financial Center" means, in the case of any Currency, the
--------------------------
principal financial center of the country of issue of such Currency, as
determined by the Administrative Agent.
"property" or "properties" means any right or interest in or to
-------- ----------
property of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
CREDIT AGREEMENT
<PAGE>
21
"Public Debt Rating" means, as of any date, the lowest rating that has
------------------
been most recently announced by either S&P or Moody's, as the case may be, for
any class of long-term senior unsecured, non-credit enhanced debt issued by the
Company. For purposes of the foregoing:
(a) if no Public Debt Rating shall be available from either S&P or
Moody's, the Applicable Margin and the Applicable Percentage will be set in
accordance with Level 6 under the definition of "Applicable Margin" or
"Applicable Percentage", as the case may be;
(b) if only one of S&P and Moody's shall have in effect a Public Debt
Rating, the Applicable Margin and the Applicable Percentage shall be
determined by reference to the available rating;
(c) if the ratings established by S&P and Moody's shall fall within
different levels, the Applicable Margin and the Applicable Percentage shall
be based upon the higher rating, provided that if the lower rating falls
--------
more than one level below the higher rating (or in any event if the higher
split rating is Level 5), then the Applicable Margin and the Applicable
Percentage shall be based on the rating set forth in the level under the
definition of "Applicable Margin" or "Applicable Percentage" immediately
above the level for such lower rating; and
(d) if any rating established by S&P or Moody's shall be changed, such
change shall be effective as of the date on which such change is first
announced publicly by the rating agency making such change.
"Purchase Money Lien" means any Lien on property, real or personal,
-------------------
acquired or constructed by the Company or any Subsidiary of the Company after
December 30, 1994:
(i) to secure the purchase price of such property;
(ii) that was existing on such property at the time of acquisition
thereof by the Company or such Subsidiary and assumed in connection with
such acquisition;
(iii) to secure Indebtedness otherwise incurred to finance the
acquisition or construction of such property (including, without
limitation, Indebtedness incurred to finance the cost of acquisition or
construction of such property within 24 months after such acquisition or
the completion of such construction); or
(iv) to secure any Indebtedness incurred in connection with any
extension, refunding or refinancing of Indebtedness (whether or not secured
and including Indebtedness under this Agreement) incurred, maintained or
assumed in connection with, or otherwise related to, the acquisition or
construction of such property;
CREDIT AGREEMENT
<PAGE>
22
provided in each case that (1) such Liens do not extend to or cover or otherwise
- --------
encumber any property other than property acquired or constructed by the Company
and its Subsidiaries after December 30, 1994, and (2) such Liens do not cover
current assets of the Company or any of its Subsidiaries other than current
assets that relate solely to other property subject to such Lien.
"Quarterly Dates" means the last Business Day of each March, June, September
---------------
and December, commencing on the first such date to occur after the Effective
Date.
"Quoted Rate Swing Loan" has the meaning specified in Section 3.03(b).
----------------------
"Reference Banks" means Citibank, BNS and Chase.
---------------
"Register" has the meaning specified in Section 9.07(d).
--------
"Required Lenders" means Lenders having at least 51% of the aggregate amount
----------------
of the Commitments or, if the Commitments shall have terminated, Lenders holding
at least 51% of the aggregate unpaid principal amount of the Loans (provided
--------
that, for purposes hereof, neither any Borrower, nor any of its Affiliates, if a
Lender, shall be included in (i) the Lenders holding such amount of the Loans or
having such amount of the Commitments or (ii) determining the aggregate unpaid
principal amount of the Loans or the total Commitments).
"Revolving Loan" means a Loan by a Lender to a Borrower as part of a Revolving
--------------
Loan Borrowing and refers to a Base Rate Loan or a Eurocurrency Rate Loan, each
of which shall be a "Type" of Revolving Loan.
----
"Revolving Loan Borrowing" means a borrowing consisting of simultaneous
------------------------
Revolving Loans of the same Type made by each of the Lenders pursuant to Section
2.01.
"Revolving Loan Note" means a promissory note of a Borrower payable to the
-------------------
order of any Lender, in substantially the form of Exhibit A-1 hereto, evidencing
the aggregate indebtedness of such Borrower to such Lender resulting from the
Revolving Loans made by such Lender to such Borrower.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
---
Companies, Inc., or any successor by merger or consolidation to its business.
"Screen" means, with respect to any Currency, the relevant display page as
------
determined by the Administrative Agent of the Dow Jones Markets Service on which
appears the London Interbank Offered Rate for deposits in such Currency.
"Self-Insurance Program" means the self-insurance program (including related
----------------------
self-funded insurance programs) established and maintained by the Company in the
ordinary course of its business.
Credit Agreement
<PAGE>
23
"Significant Shareholder" means any Person that:
-----------------------
(i) is either a Marriott Family Member or on the date hereof possesses,
directly or indirectly, and such possession has been publicly disclosed,
the power to vote 5% or more of the outstanding shares of common stock of
the Company,
(ii) is or hereafter becomes a spouse of or any other relative (by
blood, marriage or adoption) of a Person described in clause (i),
(iii) is or becomes a transferee of the interests of any of the
foregoing Person or Persons by descent or by trust or similar arrangement
intended as a method of descent, or
(iv) is (x) an employee benefit or stock ownership plan of the Company
or (y) a grantor trust established for the funding, directly or indirectly,
of the Company's employee benefit plans and programs.
"Single Employer Plan" of any Person means a single employer plan, as defined
--------------------
in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of such
Person or any of its ERISA Affiliates and no Person other than such Person and
its ERISA Affiliates or (b) was so maintained and in respect of which such
Person or any of its ERISA Affiliates could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"SLS Entity" means any of Marriott Senior Living Services, Inc. and Marriott
----------
Senior Living Services Investment 10, Inc. and each other Subsidiary of the
Company that owns or operates a senior living services facility.
"Subsidiary" of any Person means any corporation, partnership, limited
----------
liability company, joint venture, trust or estate of which more than 50% of (a)
the issued and outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, limited liability
company or joint venture or (c) the beneficial interest in such trust or estate
is at the time directly or indirectly owned or controlled by such Person, by
such Person and one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries.
"Swap Transaction" means (a) any rate, basis, commodity, currency, debt or
----------------
equity swap, (b) any cap, collar or floor agreement, (c) any rate, basis,
commodity, currency, debt or equity exchange or forward agreement, (d) any rate,
basis, commodity, currency, debt or equity option, (e) any other similar
agreement, (f) any option to enter into any of the foregoing, (g) any investment
management, master or other agreement providing for any of the foregoing and (h)
any combination of any of the foregoing.
Credit Agreement
<PAGE>
24
"Swing Loan" means a Loan made by (a) a Swing Loan Bank pursuant to Section
----------
3.03 or (b) any Lender pursuant to Section 3.03.
"Swing Loan Bank" means Citibank or such other Lender as shall, with the
---------------
consent of the Administrative Agent and the Company, have agreed to become a
Swing Loan Bank for purposes hereof or, as to any Swing Loan Bank, such other
Lender as shall, with the consent of such Swing Loan Bank, the Administrative
Agent and the Company, have assumed the obligations of such Swing Loan Bank with
respect to any or all of such Swing Loan Bank's Swing Loans (and its ability to
make Swing Loans) hereunder.
"Swing Loan Borrowing" means a borrowing consisting of a Swing Loan made by a
--------------------
Swing Loan Bank.
"Swing Loan Facility" means, as to any Swing Loan Bank, an aggregate amount
-------------------
not to exceed at any time outstanding such aggregate amount as the Company may
separately agree in writing with such Swing Loan Bank and, as to all Swing Loan
Banks collectively, an aggregate amount not to exceed $50,000,000 at any time
outstanding.
"Swing Loan Rate" has the meaning specified in Section 3.03.
---------------
"Swing Loan Reduction" has the meaning specified in Section 2.01.
--------------------
"Syndication Agent" has the meaning specified in the recital of parties to
-----------------
this Agreement.
"Taxes" has the meaning specified in Section 2.11(a).
-----
"Termination Date" of any Lender means the date five (5) years after the
----------------
Effective Date (as the same may be extended or changed pursuant to Section 2.14
or 9.07(a)(vi)) or, if earlier, the date of termination in whole of the
Commitments pursuant to the second sentence of Section 2.05 or pursuant to
Section 7.01.
"Type" has the meaning specified in the definition of "Revolving Loan".
----
"Unused Commitments" means, at any time, the aggregate amount of the
------------------
Commitments then unused and outstanding after giving effect to the Competitive
Bid Loan Reduction and the Swing Loan Reduction.
"Voting Stock" means capital stock issued by a corporation or equivalent
------------
interests in any other Person, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even though the right to
so vote has been suspended by the happening of such contingency.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA.
------------
Credit Agreement
<PAGE>
25
"Wholly-Owned Subsidiary" of any Person means any Subsidiary of such Person
-----------------------
100% of the Voting Stock of which (other than directors' qualifying shares or
other shares held to satisfy legal or regulatory requirements) are directly or
indirectly owned by such Person, or by one or more Wholly-Owned Subsidiaries of
such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such
Person.
"Withdrawal Liability" has the meaning specified in Part 1 of Subtitle E of
--------------------
Title IV of ERISA.
SECTION 1.02. Computation of Time Periods.
---------------------------
In this Agreement in the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding".
SECTION 1.03. Accounting Terms.
----------------
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. The Revolving Loans.
-------------------
(a) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Revolving Loans to the Company and any
Designated Borrower in Dollars or (in the case of any Eurocurrency Rate
Loan only) in any Alternate Currency from time to time on any Business Day
during the period from the Effective Date until the Termination Date of
such Lender in an aggregate amount as to all Borrowers not to exceed at any
time outstanding the amount of such Lender's Commitment; provided that the
--------
aggregate amount of the Commitments of the Lenders shall be deemed used
from time to time to the extent of (i) the aggregate amount of Competitive
Bid Loans then outstanding and (ii) the aggregate amount of Swing Loans
then outstanding, and such deemed uses of the aggregate amount of the
Commitments shall be applied to the Lenders ratably according to their
respective Commitments as in effect from time to time (such deemed uses of
the aggregate amount of the Commitments with respect to (a) Competitive Bid
Loans being a "Competitive Bid Loan Reduction" and (b) Swing Loans being a
------------------------------
"Swing Loan Reduction").
--------------------
(b) Each Revolving Loan Borrowing shall be in an aggregate amount not
less than $10,000,000 or, in the case of Eurocurrency Rate Loans
denominated in an Alternate Currency, the Foreign Currency Equivalent
thereof (or, if less, an aggregate amount equal to the lesser of (x) the
difference between the aggregate amount of a proposed Competitive Bid Loan
Borrowing requested by the Company and the aggregate amount of Competitive
Bid Loans offered to be made by the Lenders and accepted by the
Credit Agreement
<PAGE>
26
Company in respect of such Competitive Bid Loan Borrowing, if such
Competitive Bid Loan Borrowing is made on the same date as such Revolving
Loan Borrowing and (y) the then remaining Unused Commitments of the Lenders
participating in such Borrowing, as applicable) and (subject to Section
2.08(d)) shall consist of Revolving Loans of the same Type in the same
Currency made on the same day by the Lenders ratably according to their
respective Commitments.
(c) Within the limits of each Lender's Commitment, each Borrower may
from time to time borrow, repay pursuant to Section 2.06 or prepay pursuant
to Section 2.09 and reborrow under this Section 2.01.
(d) For purposes of determining (i) whether the amount of any
Borrowing, together with all other Loans then outstanding, would exceed the
aggregate amount of the Commitments, and (ii) whether the aggregate
outstanding principal amount of the Loans is such as to require prepayment
under Section 2.06(d), the outstanding principal amount of any Loan that is
denominated in an Alternate Currency shall be deemed to be the Dollar
Equivalent of the Alternate Currency amount of such Loan.
SECTION 2.02. The Competitive Bid Loans.
-------------------------
(a) The Company may request the making of Competitive Bid Loan
Borrowings to any Borrower in Dollars or in any Alternate Currency from
time to time on any Business Day during the period from the Effective Date
until the date occurring 30 days prior to the Final Termination Date in the
manner set forth in Section 3.02, provided that, following the making of
--------
each Competitive Bid Loan Borrowing, the aggregate amount of the Loans then
outstanding shall not exceed the lesser of (i) the Current Aggregate
Commitment and (ii) the aggregate amount of the Commitments scheduled to be
in effect on the scheduled maturity date of the Competitive Bid Loans to be
made as part of such Borrowing.
(b) Within the limits and on the conditions set forth in this Section
2.02, each Borrower may from time to time borrow under this Section 2.02,
repay or prepay pursuant to subsection (c) below, and reborrow under this
Section 2.02, provided that a Competitive Bid Loan Borrowing shall not be
--------
made within three Business Days of the date of any other Competitive Bid
Loan Borrowing.
(c) Each Borrower shall repay to the Administrative Agent for the
account of each Lender which has made a Competitive Bid Loan to such
Borrower, or each other holder of a Competitive Bid Loan Note of such
Borrower, on the maturity date of each Competitive Bid Loan made to such
Borrower (such maturity date being that specified by the Company for
repayment of such Competitive Bid Loan in the related Notice of Competitive
Bid Loan Borrowing delivered pursuant to Section 3.02 and provided in the
Competitive Bid Loan Note evidencing such Competitive Bid Loan), the then
unpaid
Crdit Agreement
<PAGE>
27
principal amount of such Competitive Bid Loan. Unless otherwise
agreed by the relevant Lender in its sole discretion, no Borrower shall
have the right to prepay any principal amount of any Competitive Bid Loan
of such Lender except, and then only on the terms, specified by the Company
for such Competitive Bid Loan in the related Notice of Competitive Bid Loan
Borrowing delivered pursuant to Section 3.02 and set forth in the
Competitive Bid Loan Note evidencing such Competitive Bid Loan.
(d) Each Borrower shall pay interest on the unpaid principal amount of
each Competitive Bid Loan made to such Borrower from the date of such
Competitive Bid Loan to the date the principal amount of such Competitive
Bid Loan is repaid in full, at the rate of interest for such Competitive
Bid Loan specified by the Lender making such Competitive Bid Loan in its
notice with respect thereto delivered pursuant to Section 3.02, payable on
the interest payment date or dates specified by the Company for such
Competitive Bid Loan in the related Notice of Competitive Bid Loan
Borrowing delivered pursuant to Section 3.02, as provided in the
Competitive Bid Loan Note evidencing such Competitive Bid Loan.
(e) The indebtedness of each Borrower resulting from each Competitive
Bid Loan made to such Borrower as part of a Competitive Bid Loan Borrowing
shall be evidenced by a separate Competitive Bid Loan Note of such Borrower
payable to the order of the Lender making such Competitive Bid Loan.
SECTION 2.03. The Swing Loans. The Company may request each Swing Loan Bank to
---------------
make, and each Swing Loan Bank may from time to time, in its sole discretion,
make, on the terms and conditions hereinafter set forth, Swing Loans to any
Borrower in Dollars from time to time on any Business Day during the period from
the date of the initial Borrowing until 60 days before the Final Termination
Date in an aggregate amount as to all Borrowers not to exceed at any time
outstanding the lesser of (i) the Swing Loan Facility and (ii) the then Unused
Commitments of Lenders having Termination Dates falling on or after the proposed
maturity date of such Swing Loan. Each Swing Loan Borrowing shall be in an
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and
shall bear interest at the Base Rate or at the Swing Loan Rate for such Loan as
provided in Section 3.03. Within the limits of the Swing Loan Facility and the
Unused Commitments as aforesaid, each Borrower may borrow under this Section
2.03, repay pursuant to Section 2.06 or prepay pursuant to Section 2.09 and
reborrow under this Section 2.03.
SECTION 2.04. Fees.
----
(a) Facility Fees. The Company agrees to pay to the Administrative
-------------
Agent for the account of each Lender a facility fee on the average daily
amount (whether used or unused) of such Lender's Commitment (computed
without regard to any Competitive Bid Loan Reduction or any Swing Loan
Reduction) from the Effective Date (in the case of each Bank), and from the
effective date specified in the Acceptance pursuant to which it became a
Lender (in the case of each other Lender), until the Termination Date of
such
Credit Agreement
<PAGE>
28
Lender, payable in arrears on each Quarterly Date during the term of such
Lender's Commitment, and on the Termination Date of such Lender, at a rate
per annum equal to the Applicable Percentage in effect from time to time.
(b) Up-Front Fees. The Company agrees to pay to the Administrative
-------------
Agent on the date of this Agreement for account of the Banks such fees as
have previously been agreed upon between the Company and the Administrative
Agent.
(c) Competitive Bid Loan Fee. The Company agrees to pay to the
------------------------
Administrative Agent for its own account a fee in the amount of $2,500 for
each request made by the Company for a Competitive Bid Loan Borrowing
pursuant to Section 3.02.
(d) Other Fees. The Company agrees to pay to the Administrative Agent
----------
for its account such fees as from time to time may be separately agreed
between the Company and the Administrative Agent.
SECTION 2.05. Reductions of the Commitments. The Commitment of each Lender
-----------------------------
shall be automatically reduced to zero on the Termination Date of such Lender.
In addition, the Company shall have the right, upon at least three Business
Days' notice to the Administrative Agent, to terminate in whole or reduce
ratably in part the unused portions of the respective Commitments of the
Lenders, provided that (i) the aggregate amount of the Commitments of the
--------
Lenders shall not be reduced pursuant to this sentence to an amount which is
less than the aggregate principal amount of the Loans then outstanding and (ii)
each partial reduction shall be in an aggregate amount of at least $10,000,000.
Each Commitment reduction pursuant to this Section 2.05 shall be permanent.
SECTION 2.06. Repayment.
---------
(a) Revolving Loans. Each Borrower shall repay the principal amount of
---------------
each Revolving Loan made by each Lender to such Borrower, in the Currency
of such Revolving Loan, and each Revolving Loan made by such Lender shall
mature, on the last day of the Interest Period for such Revolving Loan.
(b) Competitive Bid Loans. Each Borrower shall repay the principal
---------------------
amount of each Competitive Bid Loan made by each Lender to such Borrower,
in the Currency of such Loan, as provided in Section 2.02(c).
(c) Swing Loans. Each Borrower shall repay to each Swing Loan Bank
-----------
(with notice to the Administrative Agent), and to the Administrative Agent
for the account of each other Lender that has made a Swing Loan, the
outstanding principal amount of each Swing Loan to such Borrower made by
each of them on the earlier of the maturity date specified in the
applicable Notice of Swing Loan Borrowing (which maturity shall be no later
than the seventh day after the requested date of such Borrowing) and the
Termination Date of such Lender.
Credit Agreement
<PAGE>
28
(d) Certain Prepayments.
-------------------
(i) If at any time (1) the aggregate amount of all Loans (for
which purpose the amount of any Loan that is denominated in an
Alternate Currency shall be deemed to be the Dollar Equivalent thereof
as of the date of determination) exceeds (2) 103% of the then Current
Aggregate Commitment, the Administrative Agent shall use all
reasonable efforts to give prompt written notice thereof to the
Company, specifying the amount to be prepaid under this clause (i),
and the Company shall, within two Business Days of the date of such
notice, prepay the Loans, or cause Loans to be prepaid, in an amount
so that after giving effect thereto the aggregate outstanding
principal amount of the Loans (determined as aforesaid) does not
exceed the aggregate amount of the Commitments; provided that any such
--------
payment shall be accompanied by any amounts payable under Section
9.04(c). The determinations of the Administrative Agent hereunder
shall be conclusive and binding on the Company and the other Borrowers
in the absence of manifest error.
(ii) In addition, if on the last day of any Interest Period the
aggregate outstanding principal amount of the Loans (after giving
effect to any Loans being made to repay Loans maturing on that date)
would exceed 100% of the aggregate amount of the Commitments, the
Administrative Agent shall use all reasonable efforts to give prompt
written notice thereof to the Company, specifying the amount to be
prepaid under this clause (ii), and the Company shall, within two
Business Days of the date of such notice, prepay the Loans, or cause
Loans to be prepaid, or reduce the requested Loans in such amounts
that after giving effect to such action the aggregate outstanding
principal amount of the Loans (after giving effect to any Loans being
made to repay Loans maturing on that date) does not exceed the
aggregate amount of the Commitments; provided that any such payment
--------
shall be accompanied by any amounts payable under Section 9.04(c). The
determinations of the Administrative Agent hereunder shall be
conclusive and binding on the Company and the other Borrowers in the
absence of manifest error.
SECTION 2.07. Interest.
--------
(a) Ordinary Interest. Each Borrower shall pay interest on the unpaid
-----------------
principal amount of each Loan made by each Lender to such Borrower, in the
Currency of such Loan, from the date of such Loan until such principal
amount shall be paid in full, at the following rates per annum:
(i) Base Rate Loans and Swing Loans. If such Loan is a Revolving
-------------------------------
Loan or a Swing Loan (other than a Quoted Rate Swing Loan) which bears
interest at the Base Rate, a rate per annum equal at all times to the
Base Rate in effect from
Credit Agreement
<PAGE>
30
time to time, payable on each Quarterly Date while such Revolving Loan
or Swing Loan is outstanding and on the date such Revolving Loan or
Swing Loan shall be paid in full.
(ii) Eurocurrency Rate Loans. If such Revolving Loan is a
Eurocurrency Rate Loan, a rate per annum equal at all times during
each Interest Period for such Revolving Loan to the sum of the
Eurocurrency Rate for such Interest Period plus the Applicable Margin,
----
payable on the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, at three-month
intervals following the first day of such Interest Period.
(b) Default Interest. Notwithstanding the foregoing, each Borrower
----------------
shall pay interest on (x) the unpaid principal amount of each Loan made by
each Lender to such Borrower that is not paid when due, payable in arrears
on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per
annum equal at all times to two percentage points (2%) per annum above the
rate per annum required to be paid on such Loan pursuant to said clause
(a)(i) or (a)(ii) and (y) the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount
shall be due until such amount shall be paid in full, payable in arrears on
the date such amount shall be paid in full and on demand, at a rate per
annum equal at all times to two percentage points (2%) per annum above the
rate per annum required to be paid on Base Rate Loans pursuant to clause
(a)(i) above.
SECTION 2.08. Interest Rate Determinations.
----------------------------
(a) Each Reference Bank agrees to furnish to the Administrative Agent
timely information for the purpose of determining each Eurocurrency Rate.
If any one or more of the Reference Banks shall not furnish such timely
information to the Administrative Agent for the purpose of determining any
such interest rate, the Administrative Agent shall determine such interest
rate on the basis of timely information furnished by the remaining
Reference Banks.
(b) The Administrative Agent shall give prompt notice to the Company
and the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.07(a)(i) or (ii), and the
applicable rate, if any, displayed on the relevant Screen or furnished by
each Reference Bank, as the case may be, for the purpose of determining the
applicable interest rate under Section 2.07(a)(ii).
(c) If prior to 10:00 A.M. (New York City time) on any date on which an
interest rate is to be determined pursuant to the proviso to the definition
of "Eurocurrency Rate", the Administrative Agent receives notice from two
or more of the Reference Banks that deposits in the relevant Currency are
not being offered by such Reference Bank or Banks to prime banks in the
London (or, in the case of Pounds Sterling, Paris) interbank market for the
applicable Interest Period or in the applicable amounts, the Administrative
Agent
Credit Agreement
<PAGE>
31
shall so notify the Company of such circumstances, whereupon the right of
the Company to select Eurocurrency Rate Loans in such Currency for any
requested Revolving Loan Borrowing or any subsequent Revolving Loan
Borrowing shall be suspended until the first date on which the
circumstances causing such suspension cease to exist. If the Company shall
not, in turn, before 11:00 a.m. (New York City time) on such date notify
the Administrative Agent that its Notice of Revolving Loan Borrowing with
respect to which such Eurocurrency Rate was to be determined shall be
converted to a Notice of Revolving Loan Borrowing for Eurocurrency Rate
Loan in a different Currency or a Base Rate Loan, such Notice of Revolving
Loan Borrowing shall be deemed to be canceled and of no force or effect,
and Company shall not be liable to the Administrative Agent or any Lender
with respect thereto except as set forth in Section 3.01(c). In the event
of such a suspension, the Administrative Agent shall review the
circumstances giving rise to such suspension at least weekly and shall
notify the Company and the Lenders promptly of the end of such suspension,
and thereafter the Borrowers shall be entitled, on the terms and subject to
the conditions set forth herein, to borrow Eurocurrency Rate Loans in such
Currency.
(d) Notwithstanding anything in this Agreement to the contrary, no
Lender whose Termination Date falls prior to the last day of any Interest
Period for any Eurocurrency Rate Loan (a "Relevant Lender") shall
---------------
participate in such Loan. Without limiting the generality of the foregoing,
no Relevant Lender shall (i) participate in a Borrowing of any Eurocurrency
Rate Loan having an initial Interest Period ending after such Lender's
Termination Date, (ii) have any outstanding Eurocurrency Rate Loan
continued for a subsequent Interest Period if such subsequent Interest
Period would end after such Lender's Termination Date or (iii) have any
outstanding Base Rate Loan Converted into a Eurocurrency Rate Loan if such
Eurocurrency Rate Loan would have an initial Interest Period ending after
such Lender's Termination Date. If any Relevant Lender has outstanding a
Eurocurrency Rate Loan that cannot be continued for a subsequent Interest
Period pursuant to clause (ii) above or has outstanding a Base Rate Loan
that cannot be Converted into a Eurocurrency Rate Loan pursuant to clause
(iii) above, such Lender's ratable share of such Eurocurrency Rate Loan (in
the case of said clause (ii)) shall be repaid by the relevant Borrower on
the last day of its then current Interest Period and such Lender's ratable
share of such Base Rate Loan (in the case of said clause (iii)) shall be
repaid by the relevant Borrower on the day on which the Loans of Lenders
unaffected by said clause (iii) are so Converted. Subject to the terms and
conditions of this Agreement, the Borrowers may fund the repayment of the
Relevant Lenders' ratable shares of such Eurocurrency Rate Loans and Base
Rate Loans by borrowing from Lenders hereunder that are not Relevant
Lenders.
SECTION 2.09. Prepayments.
-----------
(a) The Borrowers shall have no right to prepay any principal amount of
any Revolving Loan or Swing Loan other than as provided in subsection (b)
below.
Credit Agreement
<PAGE>
32
(b) Each Borrower may, (i) upon at least the number of Business Days'
prior notice specified in the first sentence of Section 3.01(a) with
respect to any Revolving Loan of the same Type, or (ii) upon notice by no
later than 11:00 A.M. (New York time) on the date of prepayment of any
Swing Loan, in either case given to the Administrative Agent stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given, such Borrower shall, prepay the outstanding principal
amounts of the Loans made to such Borrower comprising part of the same
Revolving Loan Borrowing or Swing Loan Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that (x) each partial
-----------------
prepayment shall be in an aggregate principal amount not less than
$10,000,000 (or $5,000,000 in the case of Swing Loans) or an integral
multiple of $1,000,000 in excess thereof (or the Foreign Currency
Equivalent of such respective amounts) and (y) if any prepayment of any
Eurocurrency Rate Loans shall be made on a date which is not the last day
of an Interest Period for such Loans (or on a date which is not the
maturity date of such Swing Loans), such Borrower shall also pay any
amounts owing to each Lender pursuant to Section 9.04(c) so long as such
Lender makes written demand upon such Borrower therefor (with a copy of
such demand to the Administrative Agent) within 20 Business Days after such
prepayment.
(c) Upon the occurrence of a Change of Control, if so requested in
writing by the Required Lenders through the Administrative Agent within
sixty (60) days after the Company notifies the Administrative Agent of the
occurrence of such Change of Control, (i) the Company shall, on a day not
later than five Business Days after the date of such request, prepay and/or
cause to be prepaid the full principal of and interest on the Loans and the
Notes and all other amounts whatsoever payable under this Agreement
(including without limitation amounts payable under Section 9.04(c) as a
result of such prepayment) and (ii) the Commitments shall, on the date of
such request, forthwith terminate.
(d) If (i) the obligations of the Company under Article X with respect
to any outstanding Guaranteed Obligations owing by any Designated Borrower
(herein, the "Affected Borrower") shall for any reason (x) be terminated,
-----------------
(y) cease to be in full force and effect or (z) not be the legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with its terms, and (ii) such condition continues unremedied for
15 days after written notice thereof shall have been given to the Company
by the Administrative Agent or any Lender, then the Affected Borrower
shall, no later than the 15th day after the date of such notice, prepay
(and the Company shall cause to be prepaid) the full principal of and
interest on the Loans owing by, and the Notes payable by, such Affected
Borrower and all other amounts whatsoever payable hereunder by such
Affected Borrower (including, without limitation, all amounts payable under
Section 9.04(c) as a result of such prepayment).
Credit Agreement
<PAGE>
33
SECTION 2.10. Payments and Computations.
-------------------------
(a) (i) Except to the extent otherwise provided herein, all payments of
principal of and interest on Loans made in Dollars, and all other amounts
(other than the principal of and interest on any Loan denominated in an
Alternate Currency) payable by a Borrower under this Agreement and the
Notes, shall be made in Dollars, and all payments of principal of and
interest on Loans denominated in an Alternate Currency shall (subject to
Section 2.10(e)) be made in such Alternate Currency, in each case in
immediately available funds, without deduction, setoff or counterclaim, to
the Administrative Agent's Account for the relevant Currency, not later
than 11:00 A.M. (New York City time) (in the case of Loans denominated in
Dollars and other amounts payable in Dollars) or 11:00 A.M. Local Time in
the location of the Administrative Agent's Account (in the case of Loans
denominated in an Alternate Currency), on the day when due, provided
--------
that if a new Loan is to be made by any Lender to any Borrower on a ate on
which such Borrower is to repay any principal of an outstanding Loan of
such Lender in the same Currency, such Lender shall apply the proceeds of
such new Loan to the payment of the principal to be repaid and only an
amount equal to the difference between the principal to be borrowed and the
principal to be repaid shall be made available by such Lender to the
Administrative Agent as provided in Article III or paid by such Borrower to
the Administrative Agent pursuant to this Section 2.10, as the case may be.
(ii) The Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Section 2.02,
2.08(d), 2.11, 2.14(c) or 3.04) to the Lenders entitled thereto for the
account of their respective Applicable Lending Offices, and like funds
relating to the payment of any other amount payable to any Lender to such
Lender for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement.
(iii) Upon its acceptance of an Acceptance and recording of the
information contained therein in the Register pursuant to Section 9.07(d),
from and after the effective date specified in such Acceptance the
Administrative Agent shall make all payments hereunder and under the Notes
in respect of the interest assigned or assumed thereby to the Lender
assignee or New Lender thereunder (as the case may be). The parties to each
Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between
themselves.
(b) All computations of interest based on the Base Rate and of fees shall
be made by the Administrative Agent on the basis of a year of 365 or 366 days,
as the case may be, and all computations of interest based on the Eurocurrency
Rate or the Federal Funds
Credit Agreement
<PAGE>
34
Rate shall be made by the Administrative Agent on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or facility fees are payable. Each determination by the
Administrative Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, however, if such extension would cause payment of interest on
-----------------
or principal of Eurocurrency Rate Loans to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from a
Borrower prior to the date on which any payment is due to the Lenders hereunder
that such Borrower will not make such payment in full, the Administrative Agent
may assume that such Borrower has made such payment in full to the
Administrative Agent on such date and the Administrative Agent may, in reliance
upon such assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent that such
Borrower shall not have so made such payment in full to the Administrative
Agent, each Lender shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Administrative Agent, at the Federal Funds
Rate.
(e) Anything in Sections 2.06 or 2.07 to the contrary notwithstanding, and
without prejudice to Sections 2.07(b) or 7.01(a), if any Borrower shall fail to
pay any principal or interest denominated in an Alternate Currency within one
Business Day after the due date therefor in the case of principal and three
Business Days after the due date therefor in the case of interest (without
giving effect to any acceleration of maturity under Article VII), the amount so
in default shall automatically be redenominated in Dollars on the day one
Business Day after the due date therefor in the case of a principal payment and
three Business Days after the due date therefor in the case of an interest
payment in an amount equal to the Dollar Equivalent of such principal or
interest.
SECTION 2.11. Taxes.
-----
(a) Any and all payments by each Borrower hereunder or under the Notes shall
be made, in accordance with Section 2.10, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
---------
the case of each Lender, the Syndication Agent, the Documentation Agent and the
Administrative Agent, taxes imposed on or
Credit Agreement
<PAGE>
35
measured by its net income (including alternative minimum taxable income), and
franchise taxes imposed on it, by any jurisdiction under the laws of which such
Person is organized or in which such Person is resident or doing business, or
any political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from
-----
or in respect of any sum payable hereunder or under any Notes to any such
Person, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.11) such Person receives an amount equal to
the sum it would have received had no such deductions been made, (ii) such
Borrower shall make such deductions and (iii) such Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Notes or the other Loan Documents (hereinafter referred to as
"Other Taxes").
-----------
(c) Each Borrower will indemnify each Lender and the Administrative Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.11) paid in good faith by such Lender or the Administrative Agent (as
the case may be) and any liability (including, without limitation, penalties,
additions to tax, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted; provided, however, that (i) no Borrower shall be liable to any Person
-----------------
for any liability arising from or with respect to Taxes or Other Taxes, which
results from the gross negligence or willful misconduct of the Administrative
Agent or such Lender, (ii) so long as no Event of Default has occurred and is
continuing, the Administrative Agent or such Lender, as applicable, shall use
its reasonable best efforts to cooperate with each Borrower in contesting any
Taxes or Other Taxes which such Borrower reasonably deems to be not correctly or
legally asserted or otherwise not due and owing and (iii) no Borrower shall be
liable to the Administrative Agent or such Lender (as the case may be) for any
such liability arising prior to the date 120 days prior to the date on which
such Person first makes written demand upon such Borrower for indemnification
therefor. This indemnification shall be made within 30 days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes by a Borrower,
such Borrower will furnish to the Administrative Agent, at its address referred
to in Section 9.02, the original or a certified copy of a receipt evidencing
payment thereof.
Credit Agreement
<PAGE>
36
(e) (i) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank and on the date of
the Acceptance pursuant to which it becomes a Lender in the case of
each other Lender, on or before the date that such form expires or
becomes obsolete or after the occurrence of any event within the
control of such Lender (including a change in Applicable Lending
Office but not including a change in law) requiring a change in the
most recent form so delivered by it, and from time to time thereafter
if requested in writing by the Company (but only so long thereafter as
such Lender remains lawfully able to do so), shall provide the Company
with Internal Revenue Service Form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service,
certifying that such Lender is entitled to benefits under an income
tax treaty to which the United States is a party which reduces the
rate of withholding tax on payments of interest by any Borrower that
is organized under the laws of the United States or any State thereof
(a "U.S. Borrower") or certifying that the income receivable pursuant
-------------
to this Agreement from any U.S. Borrower is effectively connected with
the conduct of a trade or business in the United States. If the form
provided by a Lender at the time such Lender first becomes a party to
this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered
excluded from "Taxes" as defined in Section 2.11(a) unless and until
such Lender provides the appropriate form certifying that a lesser
rate applies, whereupon withholding tax at such lesser rate only shall
be considered excluded from Taxes for periods governed by such form;
provided, however, that, if at the date of the Assignment and
-------- -------
Acceptance pursuant to which a Lender assignee becomes a party to this
Agreement, the Lender assignor was in compliance with the provisions
of Section 9.07(h) and was entitled to payments under Section 2.11(a)
in respect of United States withholding tax with respect to interest
paid at such date, then, to such extent, the term "Taxes" shall
-----
include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in Taxes) United States
interest withholding tax, if any, applicable with respect to the
Lender assignee on such date. If any form or document referred to in
this Section 2.11(e) requires the disclosure of information, other
than information necessary to compute the tax payable and information
required on the date hereof by Internal Revenue Service form 1001 or
4224, that the relevant Lender considers to be confidential, such
Lender shall give notice thereof to the Company and shall not be
obligated to include in such form or document such confidential
information.
(ii) In addition, upon the reasonable request of the Company
(through the Administrative Agent) on behalf of any Borrower that is
not a U.S. Borrower, each Lender will use all reasonable efforts to
provide to such Borrower (if it can do so without material cost to
such Lender) such forms or other documentation as may be requested by
such Borrower in order to cause interest on Loans to such Borrower, to
the fullest extent permitted by applicable law, to be subject to a
Credit Agreement
<PAGE>
37
reduced rate of withholding under the laws of the jurisdiction of
organization of such Borrower; and if any such form or document
requires the disclosure of information, other than information
necessary to compute the tax payable and information required on the
date hereof, that the relevant Lender considers to be confidential,
such Lender shall give notice thereof to the Company and shall not be
obligated to include in such form or document such confidential
information.
(f) For any period with respect to which a Person that is required
pursuant to Section 2.11(e) to provide a Borrower with any documentation
described therein but has failed to provide a Borrower with such
documentation or notice that it cannot provide such form or other
documentation (other than if such failure is due to a change in law
----------
occurring subsequent to the date on which a form or other documentation
originally was required to be provided, or if such form or other
documentation otherwise is not required under the first sentence of
subsection (e) above), such Person shall not be entitled to indemnification
under Section 2.11(a) with respect to Taxes; provided, however, that should
-----------------
a Lender become subject to Taxes because of its failure to deliver a form
or other documentation required hereunder, the relevant Borrower shall take
such steps as the Lender shall reasonably request to assist the Lender to
recover such Taxes.
(g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.11 shall use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of
its Applicable Lending Office if the making of such a change would avoid
the need for, or reduce the amount of, any such additional amounts that may
thereafter accrue and would not, in the reasonable judgment of such Lender,
be otherwise disadvantageous to such Lender.
(h) Notwithstanding any contrary provisions of this Agreement, in the
event that a Lender that originally provided such form or other
documentation as may be required under Section 2.11(e) thereafter ceases to
qualify for complete exemption from withholding tax, such Lender may assign
its interest under this Agreement to any Eligible Assignee and such
assignee shall be entitled to the same benefits under this Section 2.11 as
the assignor provided that the rate of withholding tax applicable to such
assignee shall not exceed the rate then applicable to the assignor.
(i) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this Section 2.11 shall survive the payment in full of
principal and interest hereunder and under the Notes and the termination of
the Commitments.
(j) If a Borrower is required to pay any Lender any Taxes under Section
2.11(c), such Lender shall be an "Affected Person", and the Company shall
---------------
have the rights set forth in Section 3.07 to replace such Affected Person.
Credit Agreement
<PAGE>
38
SECTION 2.12. Sharing of Payments, Etc. If any Lender shall obtain any payment
------------------------
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Revolving Loans or the Swing Loans made by it
(other than pursuant to Section 2.08(d), 2.11, 2.14(c), 3.04, 3.07 or 9.04(c))
in excess of its ratable share of payments on account of the Revolving Loans or
the Swing Loans obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Revolving Loans or
the Swing Loans made by them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them, provided, however,
------------------
that, if all or any portion of such exces s payment is thereafter recovered from
such purchasing Lender, such purchase from each Lender shall be rescinded and
such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lender's ratable
share (according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. Each Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.12
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of such Borrower in the amount of such
participation.
SECTION 2.13. Conversion of Revolving Loans.
-----------------------------
(a) Optional. Each Borrower may on any Business Day, upon notice given
--------
to the Administrative Agent not later than 12:00 noon (New York City time)
on (x) the third (or the fourth, in the case of Eurocurrency Rate Loans
denominated in an Alternate Currency) Business Day prior to the date of the
proposed Conversion into Eurocurrency Rate Loans and (y) the first Business
Day prior to the date of the proposed Conversion into Base Rate Loans, and,
in each case, subject to the provisions of Section 3.04, Convert all or any
portion of the Revolving Loans of one Type in the same Currency comprising
the same Revolving Loan Borrowing into Revolving Loans of the other Type in
the same Currency; provided, however, that any Conversion of Eurocurrency
-------- -------
Rate Loans into Base Rate Loans shall be made only on the last day of an
Interest Period for such Eurocurrency Rate Loans and any Conversion of Base
Rate Loans into Eurocurrency Rate Loans shall be in an amount not less than
the minimum amount specified in Section 3.01(b). Each such notice of
Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Revolving Loans to be Converted and (iii)
if such Conversion is into Eurocurrency Rate Loans, the duration of the
initial Interest Period for such Revolving Loans. Each notice of
Conversion shall be irrevocable and binding on the Borrowers.
(b) Mandatory. If the Company shall fail to select the duration of any
---------
Interest Period for any Eurocurrency Rate Loans in accordance with the
provisions contained in the definition of "Interest Period" in Section
1.01, the Administrative Agent will forthwith so notify the Company and the
Lenders, whereupon each such Eurocurrency
Credit Agreement
<PAGE>
39
Rate Loan will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Loan.
(c) Conversions Generally. Each Borrower and the Lenders hereby
---------------------
acknowledge that Conversions pursuant to this Section 2.13 do not
constitute Borrowings and, accordingly, do not result in the remaking of
any of the Company's representations and warranties pursuant to Section
4.02 or Section 4.03.
SECTION 2.14. Extension of Termination Date.
-----------------------------
(a) The Company may, by notice to the Administrative Agent (which shall
promptly notify the Lenders) not less than 45 days and not more than 60
days prior to each anniversary (each such anniversary, an "Anniversary
-----------
Date") of the Effective Date, request that each Lender extend such Lender's
Termination Date to the date (the "New Termination Date") that is one year
--------------------
after the then Final Termination Date. Each Lender, acting in its sole
discretion, shall, by written notice to the Administrative Agent given no
later than the date (the "Consent Date") that is the earlier of (i) 15 days
------------
after the date of the notice referred to in the preceding sentence and (ii)
30 days prior to the Anniversary Date (provided that, if such earlier date
--------
is not a Business Day, the Consent Date shall be the next succeeding
Business Day), advise the Administrative Agent as to:
(1) whether or not such Lender agrees to such extension of its
Termination Date (each Lender so agreeing to such extension being an
"Extending Lender"); and
-----------------
(2) only if such Lender is an Extending Lender, whether or not
such Lender also irrevocably offers to increase the amount of its
Commitment (each Lender so offering to increase its Commitment being
an "Increasing Lender" as well as an Extending Lender) and, if so, the
-----------------
amount of the additional Commitment such Lender so irrevocably offers
to assume hereunder (such Lender's "Proposed Additional Commitment").
------------------------------
Each Lender that determines not to extend its Termination Date (a "Non-Extending
-------------
Lender") shall notify the Administrative Agent (which shall notify the Lenders)
- ------
of such fact promptly after such determination but in any event no later than
the Consent Date, and any Lender that does not advise the Administrative Agent
in writing on or before the Consent Date shall be deemed to be a Non-Extending
Lender. The election of any Lender to agree to such extension shall not obligate
any other Lender to so agree. The Administrative Agent shall notify the Company
of each Lender's determination under this Section 2.14(a) no later than the date
25 days prior to the Anniversary Date (or, if such date is not a Business Day,
on the next preceding Business Day).
(b) (i) If all of the Lenders are Extending Lenders, then, effective
as of the Consent Date, the Termination Date of each Lender shall be
extended to the New
Credit Agreement
<PAGE>
40
Termination Date, and the respective Commitments of the Lenders will
not be subject to change at such Consent Date pursuant to this Section
2.14.
(ii) If and only if the sum of (x) the aggregate amount of the
Commitments of the Extending Lenders plus (y) the aggregate amount of
----
the Proposed Additional Commitments of the Increasing Lenders (such
sum, the "Extending Commitments") shall be equal to at least 80% of
---------------------
the then Current Aggregate Commitment, then:
(1) effective as of the Consent Date, the Termination Date
of each Extending Lender shall be extended to the New Termination
Date; and
(2) the Company shall (so long as no Default shall have
occurred and be continuing) have the right, but not the
obligation, to take either of the following actions with respect
to each Non-Extending Lender during the period commencing on the
Consent Date and ending on the immediately succeeding Anniversary
Date:
(X) the Company may elect by notice to the
Administrative Agent and such Non-Extending Lender that the
Termination Date of such Non-Extending Lender be changed to
a date (which date shall be specified in such notice) on or
prior to the Anniversary Date (and, upon the giving of such
notice, the Termination Date of such Non-Extending Lender
shall be so changed); or
(Y) the Company may replace such Non-Extending Lender
as a party to this Agreement in accordance with Section
2.14(c).
(iii) If neither of the conditions specified in clause (i) or
clause (ii) of this Section 2.14(b) is satisfied, then neither the
Termination Date nor the Commitment of any Lender will change pursuant
to this Section 2.14 on such Consent Date, and the Company will not
have the right to take any of the actions specified in Section
2.14(b)(ii)(2).
(c) Replacement by the Company of Non-Extending Lenders pursuant to
Section 2.14(b)(ii)(2)(Y) shall be effected as follows (certain terms being
used in this Section 2.14(c) having the meanings assigned to them in
Section 2.14(d)) on the relevant Assignment Date:
(1) the Assignors shall severally assign and transfer to the
Assignees, and the Assignees shall severally purchase and assume from
the Assignors, all of the Assignors' rights and obligations
(including, without limitation, the Assignors' respective Commitments)
hereunder and under the Notes;
Credit Agreement
<PAGE>
41
(2) each Assignee shall pay to the Administrative Agent, for
account of the Assignors, an amount equal to such Assignee's Share of
the aggregate outstanding principal amount of the Loans then held by
the Assignors;
(3) the Company shall pay to the Administrative Agent, for
account of the Assignors, all interest, fees and other amounts (other
than principal of outstanding Loans) then due and owing to the
Assignors by the Company hereunder (including, without limitation,
payments due such Assignors, if any, under Sections 2.11, 3.04 and
9.04(c)); and
(4) the Company shall pay to the Administrative Agent for account
of the Administrative Agent the $2,500 processing and recordation fee
for each assignment effected pursuant to this Section 2.14(c).
The assignments provided for in this Section 2.14(c) shall be effected on the
relevant Assignment Date in accordance with Section 9.07 and pursuant to one or
more Assignments and Acceptances. After giving effect to such assignments, each
Assignee shall have a Commitment hereunder (which, if such Assignee was a Lender
hereunder immediately prior to giving effect to such assignment, shall be in
addition to such Assignee's existing Commitment) in an amount equal to the
amount of its Assumed Commitment.
(d) For purposes of this Section 2.14 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):
"Assigned Commitments" means the Commitments of Non-Extending Lenders to be
--------------------
replaced pursuant to Section 2.14(b)(ii)(2)(Y).
"Assignees" means, at any time, Increasing Lenders and, if the Assigned
---------
Commitments exceed the aggregate amount of the Proposed Additional
Commitments, one or more New Lenders.
"Assignment Date" means the Anniversary Date or such earlier date as shall
---------------
be acceptable to the Company, the relevant Assignors, the relevant
Assignees and the Administrative Agent.
"Assignors" means, at any time, the Lenders to be replaced by the Company
---------
pursuant to Section 2.14(b)(ii)(2)(Y).
Credit Agreement
<PAGE>
42
The "Assumed Commitment" of each Assignee shall be determined as
------------------
follows:
-------
(a) If the aggregate amount of the Proposed Additional
Commitments of all of the Increasing Lenders shall exceed the
aggregate amount of the Assigned Commitments, then (i) the amount
of the Assumed Commitment of each Increasing Lender shall be
equal to (x) the aggregate amount of the Assigned Commitments
multiplied by (y) a fraction, the numerator of which is equal to
-------------
such Increasing Lender's Commitment as then in effect and the
denominator of which is the aggregate amount of the Commitments
of all Increasing Lenders as then in effect; and (ii) no New
Lender shall be entitled to become a Lender hereunder pursuant to
Section 2.14(c) (and, accordingly, each New Lender shall have an
Assumed Commitment of zero).
(b) If the aggregate amount of the Proposed Additional
Commitments of all of the Increasing Lenders shall be less than
or equal to the aggregate amount of the Assigned Commitments,
then: (i) the amount of the Assumed Commitment of each Increasing
Lender shall be equal to such Increasing Lender's Proposed
Additional Commitment; and (ii) the excess, if any, of the
aggregate amount of the Assigned Commitments over the aggregate
----
amount of the Proposed Additional Commitments shall be allocated
among New Lenders in such a manner as the Company and the
Administrative Agent may agree.
"Share" means, as to any Assignee, a fraction the numerator of which is
-----
equal to such Assignee's Assumed Commitment and the denominator of which is the
aggregate amount of the Assumed Commitments of all the Assignees.
SECTION 2.15. Borrowings by Designated Borrowers.
----------------------------------
(a) The Company may, at any time or from time to time, designate
one or more Wholly-Owned Subsidiaries as Borrowers hereunder by
furnishing to the Administrative Agent a letter (a "Designation
-----------
Letter") in duplicate, in substantially the form of Exhibit F-1, duly
------
completed and executed by the Company and such Subsidiary. Upon any
such designation of a Subsidiary, such Subsidiary shall be a
Designated Borrower and a Borrower entitled to borrow Revolving Loans
and Competitive Bid Loans on and subject to the terms and conditions
of this Agreement.
(b) So long as all principal of and interest on all Loans made to
any Designated Borrower have been paid in full, the Company may
terminate the status of such Borrower as a Borrower hereunder by
furnishing to the Administrative Agent a letter (a "Termination
Letter") in substantially the form of Exhibit F-2, duly completed and
CREDIT AGREEMENT
<PAGE>
43
executed by the Company. Any Termination Letter furnished hereunder shall
be effective upon receipt by the Administrative Agent, which shall promptly
notify the Lenders, whereupon the Lenders shall promptly deliver to the
Company (through the Administrative Agent) the Notes, if any, of such
former Borrower. Notwithstanding the foregoing, the delivery of a
Termination Letter with respect to any Borrower shall not terminate (i) any
obligation of such Borrower that remains unpaid at the time of such
delivery (including without limitation any obligation arising thereafter in
respect of such Borrower under Section 2.11 or 3.04) or (ii) the
obligations of the Company under Article X with respect to any such unpaid
obligations.
ARTICLE III
MAKING THE LOANS
SECTION 3.01. Making the Revolving Loans.
--------------------------
(a) Each Revolving Loan Borrowing shall be made on notice, given
not later than (x) 12:00 noon (New York City (or, in the case of a
Borrowing in an Alternate Currency, London) time) on the third (or, in
the case of a Borrowing to be denominated in an Alternate Currency,
fourth) Business Day prior to the date of a Eurocurrency Rate Loan
Borrowing, and (y) 11:00 A.M. (New York City time) on the day of a
Base Rate Loan Borrowing, by the Company (on its own behalf and on
behalf of any Designated Borrower) to the Administrative Agent, which
shall give to each Lender prompt notice thereof by telecopier, telex
or cable. Each such notice of a Revolving Loan Borrowing (a "Notice of
---------
Revolving Loan Borrowing") shall be made in writing, or orally and
------------------------
confirmed immediately in writing, by telecopier, telex or cable, in
substantially the form of Exhibit B-1 hereto, specifying therein the
requested (i) date of such Revolving Loan Borrowing (which shall be a
Business Day), (ii) Currency and Type of Revolving Loan comprising
such Revolving Loan Borrowing, (iii) aggregate amount of such
Revolving Loan Borrowing, (iv) in the case of a Revolving Loan
Borrowing comprised of Eurocurrency Rate Loans, the Interest Period
for each such Revolving Loan and (v) the name of the Borrower (which
shall be the Company or a Designated Borrower). Each Lender shall (A)
before 11:00 A.M. Local Time on the date of such Borrowing (in the
case of a Eurocurrency Rate Loan Borrowing) and (B) before 1:00 P.M.
(New York City time) on the date of such Borrowing (in the case of a
Base Rate Loan Borrowing), make available for the account of its
Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account for the relevant Currency in same day
funds, such Lender's ratable portion of such Revolving Loan Borrowing;
provided that, with respect to Borrowings of Eurocurrency Rate Loans,
--------
no Lender having a Termination Date prior to the last day of the
initial Interest Period for such Eurocurrency Rate Loans shall
participate in such Borrowing. After the Administrative Agent's
receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article IV, the Administrative Agent will make
such funds available to the relevant Borrower in such manner as the
Administrative Agent and the Company may agree; provided, however,
-------- -------
CREDIT AGREEMENT
<PAGE>
44
that the Administrative Agent shall first make a portion of such funds
equal to the aggregate principal amount of any Swing Loan as to which a
Borrower has received timely notice made by the Swing Loan Bank, and by any
other Lender and outstanding on the date of such Revolving Loan Borrowing,
plus interest accrued and unpaid thereon to and as of such date, available
to the Swing Loan Bank, and such other Lenders for repayment of such Swing
Loans.
(b) Anything in subsection (a) above to the contrary notwithstanding,
the Company may not select Eurocurrency Rate Loans for any Revolving Loan
Borrowing if the aggregate amount of such Revolving Loan Borrowing is less
than $10,000,000 or the Foreign Currency Equivalent thereof.
(c) Subject to Sections 2.08(c) and 3.05, each Notice of Revolving
Loan Borrowing shall be irrevocable and binding on the Company and the
relevant Borrower. In the case of any Revolving Loan Borrowing by a
Borrower which the related Notice of Revolving Loan Borrowing specifies is
to be comprised of Eurocurrency Rate Loans, such Borrower shall indemnify
each Lender against any loss, cost or expense incurred by such Lender as a
result of any failure to fulfill on or before the date specified in such
Notice of Revolving Loan Borrowing for such Revolving Loan Borrowing the
applicable conditions set forth in Article IV, including, without
limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Lender to fund the Revolving Loan to be
made by such Lender as part of such Revolving Loan Borrowing when such
Revolving Loan, as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the time any Revolving Loan Borrowing is required to be
made that such Lender will not make available to the Administrative Agent
such Lender's ratable portion of such Revolving Loan Borrowing, the
Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Revolving Loan
Borrowing in accordance with subsection (a) of this Section 3.01 and the
Administrative Agent may, in reliance upon such assumption, make available
to the relevant Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion
available to the Administrative Agent, such Lender and the relevant
Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each
day from the date such amount is made available to such Borrower until the
date such amount is repaid to the Administrative Agent, at (i) in the case
of such Borrower, the interest rate applicable at the time to Revolving
Loans comprising such Revolving Loan Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate, provided that such Borrower retains its
--------
rights against such Lender with respect to any damages it may incur as a
result of such Lender's failure to fund, and notwithstanding anything
herein to the contrary, in no event shall such Borrower be liable to such
Lender or any other Person for the interest payable by such Lender to the
Administrative Agent
CREDIT AGREEMENT
<PAGE>
45
pursuant to this sentence. If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount so repaid shall constitute
such Lender's Revolving Loan as part of such Revolving Loan Borrowing for
purposes of this Agreement.
(e) The failure of any Lender to make the Revolving Loan to be made by
it as part of any Revolving Loan Borrowing shall not relieve any other
Lender of its obligation, if any, hereunder to make its Revolving Loan on
the date of such Revolving Loan Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Revolving Loan
to be made by such other Lender on the date of any Revolving Loan
Borrowing.
SECTION 3.02. Making the Competitive Bid Loans.
--------------------------------
(a) The Company (on its own behalf and on behalf of any Designated
Borrower) may request a Competitive Bid Loan Borrowing under this Section 3.02
by delivering to the Administrative Agent a notice (made in writing, or orally
and confirmed immediately in writing, by telecopier, telex or cable) of a
Competitive Bid Loan Borrowing (a "Notice of Competitive Bid Loan Borrowing"),
----------------------------------------
in substantially the form of Exhibit B-2 hereto, specifying the date (which
shall be a Business Day) and aggregate amount of the proposed Competitive Bid
Loan Borrowing, the Currency thereof, the maturity date for repayment of each
Competitive Bid Loan to be made as part of such Competitive Bid Loan Borrowing
(which maturity date may not be later than 180 days or six months, as
applicable, after the date of such Competitive Bid Loan Borrowing (or, if
earlier, the Final Termination Date)), the interest payment date or dates
relating thereto, the name of the Borrower (which shall be the Company or a
Designated Borrower), and any other terms to be applicable to such Competitive
Bid Loan Borrowing, not later than (i) 10:00 A.M. New York (or, in the case of a
Borrowing in an Alternate Currency, London) time at least one Business Day prior
to the date of the proposed Competitive Bid Loan Borrowing, if the Company shall
specify in the Notice of Competitive Bid Loan Borrowing that the rates of
interest to be offered by the Lenders shall be fixed rates per annum and (ii)
12:00 noon New York (or, in the case of a Borrowing in an Alternate Currency,
London) time at least four Business Days prior to the date of the proposed
Competitive Bid Loan Borrowing, if the Company shall instead specify in the
Notice of Competitive Bid Loan Borrowing the basis to be used by the Lenders in
determining the rates of interest to be offered by them. The Administrative
Agent shall in turn promptly notify each Lender of each request for a
Competitive Bid Loan Borrowing received by it from the Company by sending such
Lender a copy of the related Notice of Competitive Bid Loan Borrowing.
(b) Each Lender may, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more Competitive Bid Loans to a Borrower as
part of such proposed Competitive Bid Loan Borrowing at a rate or rates of
interest specified by such Lender in its sole discretion, by notifying the
Administrative Agent (which shall give prompt notice thereof to the Company),
before 10:00 A.M. New York (or, in the case of a Borrowing in
CREDIT AGREEMENT
<PAGE>
46
an Alternate Currency, London) time (i) on the date of such proposed Competitive
Bid Loan Borrowing, in the case of a Notice of Competitive Bid Loan Borrowing
delivered pursuant to clause (i) of paragraph (a) above and (ii) three Business
Days before the date of such proposed Competitive Bid Loan Borrowing, in the
case of a Notice of Competitive Bid Loan Borrowing delivered pursuant to clause
(ii) of paragraph (a) above, of the minimum amount and maximum amount of each
Competitive Bid Loan which such Lender would be willing to make as part of such
proposed Competitive Bid Loan Borrowing (which amounts may, subject to the
proviso to the first sentence of Section 2.02(a), exceed such Lender's
Commitment), the rate or rates of interest therefor and such Lender's Applicable
Lending Office with respect to such Competitive Bid Loan; provided that if the
--------
Administrative Agent in its capacity as a Lender shall, in its sole discretion,
elect to make any such offer, it shall notify the Company of such offer before
9:00 A.M. New York (or, in the case of a Borrowing in an Alternate Currency,
London) time on the date on which notice of such election is to be given to the
Administrative Agent by the other Lenders. If any Lender shall elect not to make
such an offer, such Lender shall so notify the Administrative Agent, before
10:00 A.M. New York (or, in the case of a Borrowing in an Alternate Currency,
London) time on the date on which notice of such election is to be given to the
Administrative Agent by the other Lenders, and such Lender shall not be
obligated to, and shall not, make any Competitive Bid Loan as part of such
Competitive Bid Borrowing; provided that the failure by any Lender to give such
--------
notice shall not cause such Lender to be obligated to make any Competitive Bid
Loan as part of such proposed Competitive Bid Loan Borrowing.
(c) The Company shall, in turn, (i) before 11:30 A.M. New York (or, in the
case of a Borrowing in an Alternate Currency, London) time on the date of such
proposed Competitive Bid Loan Borrowing, in the case of a Notice of Competitive
Bid Loan Borrowing delivered pursuant to clause (i) of paragraph (a) above and
(ii) before 1:00 P.M. New York (or, in the case of a Borrowing in an Alternate
Currency, London) time three Business Days before the date of such proposed
Competitive Bid Loan Borrowing, in the case of a Notice of Competitive Bid Loan
Borrowing delivered pursuant to clause (ii) of paragraph (b) above, either:
(A) cancel such Competitive Bid Loan Borrowing by giving the
Administrative Agent notice to that effect, or
(B) accept one or more of the offers made by any Lender or Lenders
pursuant to paragraph (b) above, in its sole discretion, by giving notice
to the Administrative Agent of the amount of each Competitive Bid Loan
(which amount shall be equal to or greater than the minimum amount, and
equal to or less than the maximum amount, notified to the Company by the
Administrative Agent on behalf of such Lender for such Competitive Bid Loan
pursuant to paragraph (b) above) to be made by each Lender as part of such
Competitive Bid Loan Borrowing, and reject any remaining offers made by
Lenders pursuant to paragraph (b) above by giving the Administrative Agent
notice to that effect.
CREDIT AGREEMENT
<PAGE>
47
(d) If the Company notifies the Administrative Agent that such
Competitive Bid Loan Borrowing is canceled pursuant to paragraph (c)(A)
above, the Administrative Agent shall give prompt notice thereof to the
Lenders and such Competitive Bid Loan Borrowing shall not be made.
(e) If the Company accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (c)(B) above, the Administrative
Agent shall in turn promptly notify (i) each Lender that has made an offer
as described in paragraph (b) above, of the date and aggregate amount of
such Competitive Bid Loan Borrowing and whether or not any offer or offers
made by such Lender pursuant to paragraph (b) above have been accepted by
the Company, (ii) each Lender that is to make a Competitive Bid Loan as
part of such Competitive Bid Loan Borrowing, of the amount of each
Competitive Bid Loan to be made by such Lender as part of such Competitive
Bid Loan Borrowing, and (iii) each Lender that is to make a Competitive Bid
Loan as part of such Competitive Bid Loan Borrowing, upon receipt, that the
Administrative Agent has received forms of documents appearing to fulfill
the applicable conditions set forth in Article IV. Each Lender that is to
make a Competitive Bid Loan as part of such Competitive Bid Loan Borrowing
shall, before 1:00 P.M. New York (or, in the case of a Borrowing in an
Alternate Currency, London) time on the date of such Competitive Bid Loan
Borrowing specified in the notice received from the Administrative Agent
pursuant to clause (i) of the preceding sentence or any later time when
such Lender shall have received notice from the Administrative Agent
pursuant to clause (iii) of the preceding sentence, make available for the
account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account for the relevant Currency such Lender's
portion of such Competitive Bid Loan Borrowing, in same day funds. Upon
fulfillment of the applicable conditions set forth in Article IV and after
receipt by the Administrative Agent of such funds, the Administrative Agent
will make such funds available to the relevant Borrower at the
Administrative Agent's aforesaid address. Promptly after each Competitive
Bid Loan Borrowing the Administrative Agent will notify each Lender of the
amount of the Competitive Bid Loan Borrowing, the consequent Competitive
Bid Loan Reduction and the dates upon which such Competitive Bid Loan
Reduction commenced and will terminate.
(f) Following the making of each Competitive Bid Loan Borrowing, the
Company shall be in compliance with the limitation set forth in the proviso
to the first sentence of Section 2.02(a).
(g) Notwithstanding anything to the contrary in Section 2.02 or in the
foregoing provisions of this Section 3.02, no Lender whose Termination Date
occurs prior to the maturity date for any Competitive Bid Loan requested in
a Notice of Competitive Bid Loan Borrowing shall be entitled to receive or
to make a quote pursuant to such Notice of Competitive Bid Loan Borrowing
or otherwise to participate in such Competitive Bid Loan Borrowing.
CREDIT AGREEMENT
<PAGE>
48
SECTION 3.03. Making the Swing Loans, Etc.
----------------------------
(a) The Company (on its own behalf and on behalf of any Designated
Borrower) may request a Swing Loan Borrowing from a Swing Loan Bank under
this Section 3.03 by delivering to the Administrative Agent and such Swing
Loan Bank, no later than 2:00 p.m. (New York City time) on the date of the
proposed Swing Loan Borrowing, a notice of a Swing Loan Borrowing (a
"Notice of Swing Loan Borrowing"), which shall be made in writing, or
-------------------------------
orally and confirmed immediately in writing, by telecopier, telex or cable,
and shall specify therein (i) the Borrower (which shall be the Company or a
Designated Borrower), (ii) the requested Swing Loan Bank, (iii) the date of
such Borrowing (which shall be a Business Day), (iv) the amount of such
Borrowing, (v) the maturity of such Borrowing (which maturity shall be no
later than the seventh day after the requested date of such Borrowing) and
(vi) the account of the relevant Borrower to which the proceeds of such
Borrowing are to be made available.
(b) The relevant Swing Loan Bank may, if, in its sole discretion, it
elects to do so, irrevocably offer to make such Swing Loan to the relevant
Borrower by telephonic notice, such notice specifying whether such Swing
Loan will bear interest (i) at the rate of interest specified in Section
2.07(a)(i) (such Swing Loan, a "Base Rate Swing Loan") or (ii) at a
--------------------
different rate of interest specified in such notice by such Swing Loan Bank
in its sole discretion (such Swing Loan, a "Quoted Rate Swing Loan"). If
----------------------
such Swing Loan Bank shall elect not to make such an offer, such Swing Loan
Bank shall so notify the Administrative Agent and the Company; provided
--------
that the failure by such Swing Loan Bank to give such notice shall not
cause such Swing Loan Bank to be obligated to make such Swing Loan.
(c) If such Swing Loan Bank shall have offered to make a Swing Loan as
provided in paragraph (b) above, the Company shall, in turn, before the
earlier of one hour after its receipt of such offer and 2:30 P.M. (New York
City time) on the date of the proposed Swing Loan Borrowing either (A)
cancel such Swing Loan Borrowing or (B) accept such offer, in each case by
giving notice to such effect to the Administrative Agent and such Swing
Loan Bank.
(d) If the Company cancels such Swing Loan Borrowing pursuant to
paragraph (c)(A) above, such Swing Loan Borrowing shall not be made. If the
Company accepts such offer pursuant to paragraph (c)(B) above, the relevant
Swing Loan Bank will (subject to the applicable conditions set forth in
Article IV) make the amount of such Swing Loan available to the relevant
Borrower at the account specified in the relevant Notice of Swing Loan
Borrowing. In the case of any Borrowing of Quoted Rate Swing Loans, the
Company shall indemnify the relevant Swing Loan Bank against any loss, cost
or expense incurred by such Swing Loan Bank as a result of any failure to
fulfill on or before the date of such Swing Loan the applicable conditions
set forth in Article IV, including, without limitation, any loss (excluding
loss of anticipated profits), cost or
CREDIT AGREEMENT
<PAGE>
49
expense incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Swing Loan Bank to fund the Quoted Rate
Swing Loan to be made by such Swing Loan Bank as part of such Borrowing
when such Quoted Rate Swing Loan, as a result of such failure, is not made
on such date.
(e) If the Company accepts an offer by a Swing Loan Bank for a Quoted
Rate Swing Loan as provided above, such Swing Loan Bank will provide the
Company and the Administrative Agent with written confirmation (a "Swing
-----
Loan Rate Confirmation") of the agreed interest rate (the "Swing Loan
---------------------- ----------
Rate") for such Quoted Rate Swing Loan by the Business Day next succeeding
----
the date on which the related Notice of Swing Loan Borrowing was given, and
the rate specified in such Swing Loan Rate Confirmation shall for all
purposes be the interest rate payable in respect of such Quoted Rate Swing
Loan notwithstanding any disagreement by the Company with the contents of
such written confirmation.
(f) Upon demand by a Swing Loan Bank through the Administrative Agent,
each other Lender having a Termination Date on or after the scheduled
maturity date of such Swing Loan shall purchase from such Swing Loan Bank,
and such Swing Loan Bank shall sell and assign to each other Lender, such
other Lender's pro rata share (determined based on the aggregate
Commitments of all Lenders having Termination Dates on or after the
scheduled maturity date of such Swing Loan) of each outstanding Base Rate
Swing Loan made by such Swing Loan Bank (and related claims for accrued and
unpaid interest), by making available for the account of its Applicable
Lending Office to the Administrative Agent for the account of such Swing
Loan Bank by deposit to the Administrative Agent at its aforesaid address,
in same day funds, an amount equal to the sum of (x) the portion of the
outstanding principal amount of such Base Rate Swing Loans to be purchased
by such Lender plus (y) interest accrued and unpaid to and as of such date
----
on such portion of the outstanding principal amount of such Base Rate Swing
Loans (it being understood that this sentence shall not apply to any Quoted
Rate Swing Loan). Each Lender's obligations to make such payments to the
Administrative Agent for account of the Swing Loan Banks under this
paragraph (f), and each Swing Loan Bank's right to receive the same, shall
be absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the failure of any other Lender
to make its payment under this paragraph (f), the financial condition of
the Company (or any other Person), the existence of any Default, the
failure of any of the conditions set forth in Article IV to be satisfied,
or the termination of the Commitments. Each such payment to a Swing Loan
Bank shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender agrees to purchase its pro rata share of such
outstanding Base Rate Swing Loans on (i) the Business Day on which demand
therefor is made by such Swing Loan Bank, provided that notice of such
--------
demand is given not later than 11:00 a.m. (New York City time) on such
Business Day or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. Upon any such assignment
by a Swing Loan Bank to any other Lender of a portion of such Swing Loan
Bank's Base Rate Swing Loans, such Swing Loan Bank represents
CREDIT AGREEMENT
<PAGE>
50
and warrants to such other Lender that such Swing Loan Bank is the legal
and beneficial owner of such interest being assigned by it, but makes no
other representation or warranty and assumes no responsibility with respect
to such Swing Loan, the Loan Documents or any party thereto. If and to the
extent that any Lender shall not have so made the amount of such Swing Loan
available to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent for the account of such Swing Loan Bank forthwith on
demand such amount together with interest thereon, for each day from the
date of demand by such Swing Loan Bank until the date such amount is paid
to the Administrative Agent, at the Federal Funds Rate. If such Lender
shall pay to the Administrative Agent such amount for the account of such
Swing Loan Bank, such amount so paid in respect of principal shall
constitute a Swing Loan by such Lender for purposes of this Agreement, and
the outstanding principal amount of the Swing Loans made by such Swing Loan
Bank shall be reduced by such amount.
SECTION 3.04. Increased Costs.
---------------
(a) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
included in the Eurocurrency Rate Reserve Percentage, in each case as of
the date of determination thereof) in or in the interpretation of any law
or regulation, in each case as of the date hereof or (ii) the compliance
with any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) which implements any
introduction or change specified in clause (i) above, there shall be any
increase in the cost to any Lender of agreeing to make or making, funding
or maintaining Eurocurrency Rate Loans, then the Company shall from time to
time, within ten Business Days after written demand by such Lender (with a
copy of such demand to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost incurred during the 90-day
period prior to the date of such demand. A certificate as to the amount of
such increased cost, submitted to the Company and the Administrative Agent
by such Lender and showing in reasonable detail the basis for the
calculation thereof, shall be prima facie evidence of such costs.
----- -----
(b) If any Lender determines that compliance with (i) the introduction
of or any change in or in the interpretation of, any law or regulation, in
each case after the date hereof, or (ii) any guideline or request from any
central bank or other governmental authority (whether or not having the
force of law) which implements any introduction or change specified in
clause (i) above, affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation controlling
such Lender and that the amount of such capital is increased by or based
upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type, then, within ten Business Days after written
demand by such Lender (with a copy of such demand to the Administrative
Agent), the Company shall from time to time pay to the
CREDIT AGREEMENT
<PAGE>
51
Administrative Agent for the account of such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the light of
such circumstances incurred during the 90-day period prior to the date of
such demand, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's
commitment to lend hereunder. A certificate as to such amounts submitted to
the Company and the Administrative Agent by such Lender and showing in
reasonable detail the basis for the calculation thereof shall be prima
-----
facie evidence of such costs.
-----
(c) Without limiting the effect of the foregoing, the Company shall
pay to each Lender on the last day of each Interest Period so long as such
Lender is maintaining reserves against Eurocurrency Liabilities (or so long
as such Lender is maintaining reserves against any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurocurrency Rate Loans is determined as provided in this Agreement or
against any category of extensions of credit or other assets of such Lender
that includes any Eurocurrency Rate Loans) an additional amount (determined
by such Lender and notified to the Company through the Administrative
Agent) equal to the product of the following for each Eurocurrency Rate
Loan for each day during such Interest Period:
(i) the principal amount of such Eurocurrency Rate Loan
outstanding on such day; and
(ii) the remainder of (x) a fraction the numerator of which is
the rate (expressed as a decimal) at which interest accrues on such
Eurocurrency Rate Loan for such Interest Period as provided in this
Agreement (less the Applicable Margin) and the denominator of which is
one minus the Eurocurrency Rate Reserve Percentage in effect on such
-----
day minus (y) such numerator; and
-----
(iii) 1/360.
(d) If the Company is required to pay any Lender any amounts under
this Section 3.04, the applicable Lender shall be an "Affected Person", and
---------------
the Company shall have the rights set forth in Section 3.07 to replace such
Affected Person.
SECTION 3.05. Illegality. Notwithstanding any other provision of this
----------
Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Eurocurrency
Lending Office to perform its obligations hereunder to make Eurocurrency Rate
Loans or to fund or maintain Eurocurrency Rate Loans hereunder, then, subject to
the provisions of Section 3.07, (i) the obligation of such Lender to make
Eurocurrency Rate Loans hereunder shall be suspended until the first date on
which the circumstances causing such suspension cease to exist, (ii) any
Eurocurrency Rate Loans made or to be made by such Lender shall be converted
automatically to Base Rate Loans and (iii) such Lender shall be an "Affected
--------
Person", and the Company shall
- ------
CREDIT AGREEMENT
<PAGE>
52
have the right set forth in Section 3.07 to replace such Affected Person. In the
event of such a suspension, such Lender shall review the circumstances giving
rise to such suspension at least weekly and shall notify the Company, the
Administrative Agent and the Lenders promptly of the end of such suspension, and
thereafter the Company shall be entitled to borrow Eurocurrency Rate Loans from
such Lender.
SECTION 3.06. Reasonable Efforts to Mitigate. Each Lender shall use
------------------------------
its reasonable best efforts (consistent with its internal policy and legal and
regulatory restrictions) to minimize any amounts payable by the Company under
Section 3.04 and to minimize any period of illegality described in Section 3.05.
Without limiting the generality of the foregoing, each Lender agrees that, to
the extent reasonably possible to such Lender, it will change its Eurocurrency
Lending Office if such change would eliminate or reduce amounts payable to it
under Section 3.04 or eliminate any illegality of the type described in Section
3.05, as the case may be. Each Lender further agrees to notify the Company
promptly, but in any event within five Business Days, after such Lender learns
of the circumstances giving rise to such a right to payment or such illegality
have changed such that such right to payment or such illegality, as the case may
be, no longer exists.
SECTION 3.07. Right to Replace Affected Person or Lender. In the
------------------------------------------
event the Company is required to pay any Taxes with respect to an Affected
Person pursuant to Section 2.11(c) or any amounts with respect to an Affected
Person pursuant to Section 3.04, or receives a notice from an Affected Person
pursuant to Section 3.05, or is required to make a payment to any Lender (which
Lender shall be deemed to be an "Affected Person" for purposes of this Section
---------------
3.07) under Section 9.14, the Company may elect, if such amounts continue to be
charged or such notice is still effective, to replace such Affected Person as a
party to this Agreement, provided that, concurrently therewith, (i) another
--------
financial institution which is an Eligible Assignee and is reasonably
satisfactory to the Company and the Administrative Agent (or if the Lender then
serving as Administrative Agent is the Person to be replaced and the
Administrative Agent has resigned its position, the Lender becoming the
successor Administrative Agent) shall agree, as of such date, to purchase for
cash and at par the Loans of the Affected Person, pursuant to an Assignment and
Acceptance and to become a Lender for all purposes under this Agreement and to
assume all obligations (including all outstanding Loans) of the Affected Person
to be terminated as of such date and to comply with the requirements of Section
9.07 applicable to assignments (other than clause (a)(iv) thereof), and (ii) the
Company shall pay to such Affected Person in same day funds on the day of such
replacement all interest, fees and other amounts then due and owing to such
Affected Person by the Company hereunder to and including the date of
termination, including without limitation payments due such Affected Person
under Section 2.11, costs incurred under Section 3.04 or Section 9.14 and
payments owing under Section 9.04(c).
SECTION 3.08. Use of Proceeds. The proceeds of the Loans shall be
---------------
available (and each Borrower agrees that it shall use such proceeds) for general
corporate purposes (including, without limitation, repurchases of shares of the
Company, commercial paper backup and to finance acquisitions) of the Company and
its Subsidiaries; provided that neither any
--------
CREDIT AGREEMENT
<PAGE>
53
Lender, the Syndication Agent, the Documentation Agent nor the Administrative
Agent shall have any responsibility for the use of any of the proceeds of Loans.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to Initial Borrowing. The
-----------------------------------------
obligation of each Lender to make a Loan on the occasion of the initial
Borrowing shall be subject to the conditions precedent that, on a date (the
"Effective Date") not later than February 16, 1999, the Administrative Agent
--------------
shall have received each of the following:
(a) Each of the following documents, which shall be in form and
substance satisfactory to the Administrative Agent and (except for the
Notes) in sufficient copies for each Lender:
(i) The Revolving Loan Notes payable by the Company and any
Designated Borrower to the order of the Lenders, respectively.
(ii) Certified copies of (x) the charter and by-laws of the
Company, (y) the resolutions of the Board of Directors of the Company
authorizing and approving this Agreement and the Notes, and (z) all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant Secretary of
the Company certifying the names and true signatures of the officers
of the Company authorized to sign this Agreement and the Notes and the
other documents to be delivered hereunder.
(iv) A favorable opinion of the Company's Law Department,
substantially in the form of Exhibit D and covering such other matters
relating hereto as any Lender, through the Administrative Agent, may
reasonably request.
(v) A favorable opinion of Milbank, Tweed, Hadley & McCloy LLP,
special New York counsel to the Administrative Agent, substantially in
the form of Exhibit E.
(vi) A certificate of a senior officer of the Company to the
effect that (x) the representations and warranties contained in
Section 5.01 are correct (other than any such representations or
warranties which, by their terms, refer to a prior date) and (y) no
event has occurred and is continuing which constitutes a Default.
CREDIT AGREEMENT
<PAGE>
54
(b) Confirmation that the Company has paid all accrued fees and
expenses of the Administrative Agent and the fees of the Syndication Agent,
the Documentation Agent and the Lenders hereunder (including the fees and
expenses of counsel to the Administrative Agent to the extent then
payable), to the extent the same have been invoiced to the Company at least
two (2) Business Days prior to the Effective Date.
SECTION 4.02. Conditions Precedent to Each Revolving Loan Borrowing
-----------------------------------------------------
and Swing Loan Borrowing. The obligation of each Lender to make a Loan (other
- ------------------------
than a Swing Loan made by a Lender pursuant to Section 3.03 or a Competitive Bid
Loan) on the occasion of each Borrowing (including the initial Borrowing), and
the right of the Company to request a Swing Loan Borrowing, shall be subject to
the further conditions precedent that:
(i) in the case of the first Borrowing by a Designated Borrower
the Company shall have furnished to the Administrative Agent such Revolving
Loan Notes, corporate documents, resolutions and legal opinions relating to
such Designated Borrower as the Administrative Agent may reasonably
require, and
(ii) on the date of such Borrowing following statements shall be
true (and the acceptance by a Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty by the Company and such
Borrower that on the date of such Borrowing or issuance such statements are
true):
(a) The representations and warranties contained in Section 5.01
(except the Excluded Representations) are correct on and as of the
date of such Borrowing or issuance, before and after giving effect to
such Borrowing or issuance and to the application of the proceeds
therefrom, as though made on and as of such date other than any such
representations or warranties that, by their terms, refer to a date
other than the date of such Borrowing or issuance; and
(b) No event has occurred and is continuing, or would result from
such Borrowing or issuance or from the application of the proceeds
therefrom, which constitutes a Default;
provided that the conditions set forth in clause (ii) of this Section 4.02 shall
- --------
not be applicable to a Borrowing if, as a result of and immediately after giving
effect to such Borrowing and to the application of proceeds thereof, the
aggregate outstanding principal amount of the Revolving Loans and Swing Loans is
not increased thereby.
SECTION 4.03. Conditions Precedent to Each Competitive Bid Loan
-------------------------------------------------
Borrowing. The obligation of each Lender which is to make a Competitive Bid
- ---------
Loan on the occasion of a Competitive Bid Loan Borrowing (including the initial
Competitive Bid Loan Borrowing) to make such Competitive Bid Loan as part of
such Competitive Bid Loan Borrowing is subject to the conditions precedent that:
CREDIT AGREEMENT
<PAGE>
55
(a) the Administrative Agent shall have received the written
confirmatory Notice of Competitive Bid Loan Borrowing with respect thereto;
(b) on or before the date of such Competitive Bid Loan Borrowing, but
prior to such Competitive Bid Loan Borrowing, the Administrative Agent
shall have received a Competitive Bid Loan Note payable to the order of
such Lender for each of the one or more Competitive Bid Loans to be made by
such Lender as part of such Competitive Bid Loan Borrowing, in a principal
amount equal to the principal amount of the Competitive Bid Loan to be
evidenced thereby and otherwise on such terms as were agreed to for such
Competitive Bid Loan in accordance with Sections 2.02 and 3.02; and
(c) on the date of such Competitive Bid Loan Borrowing the following
statements shall be true (and the acceptance by the Company of the proceeds
of such Competitive Bid Loan Borrowing shall constitute a representation
and warranty by the Company that on the date of such Competitive Bid Loan
Borrowing such statements are true):
(i) The representations and warranties contained in Section 5.01
(except the Excluded Representations) are correct on and as of the
date of such Competitive Bid Loan Borrowing, before and after giving
effect to such Competitive Bid Loan Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date other
than any such representations or warranties which, by their terms,
refer to a date other than the date of such Competitive Bid Loan
Borrowing;
(ii) No event has occurred and is continuing, or would result
from such Competitive Bid Loan Borrowing or from the application of
the proceeds therefrom, which constitutes a Default; and
(iii) No event has occurred and no circumstance exists as a
result of which the information concerning the Company that has been
provided to the Administrative Agent and each Lender by the Company in
connection herewith would include an untrue statement of a material
fact or omit to state any material fact or any fact necessary to make
the statements contained therein taken as a whole, in the light of the
time and circumstances under which they were made, not misleading.
CREDIT AGREEMENT
<PAGE>
56
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants as follows:
(a) The Company (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would not
have a Material Adverse Effect and (iii) has all the requisite corporate
power and authority to own or lease and operate its properties and to carry
on its business as now conducted except where the failure to do so would
not have a Material Adverse Effect.
(b) The execution, delivery and performance by the Company of the Loan
Documents, and the consummation of the transactions contemplated hereby,
are within the Company's corporate powers, have been duly authorized by all
necessary corporate action, and do not (i) contravene the Company's
certificate of incorporation or by-laws, (ii) violate any law, rule or
regulation (including, without limitation, the Securities Act of 1933 and
the Securities Exchange Act of 1934 and the regulations thereunder, and
Regulations U and X issued by the Board of Governors of the Federal Reserve
System, each as amended from time to time), or order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or result
in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting the Company or any of its Subsidiaries or any of
their properties, except if such conflict, breach or default would not have
a Material Adverse Effect, or (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of the
Company or its Subsidiaries. The Company is not in violation of any such
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or in breach of any contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument, except for
such violation or breach which would not have a Material Adverse Effect.
(c) Except as have been obtained, no authorization or approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other third party is required for the
due execution, delivery and performance by the Company of the Loan
Documents, or for consummation of the transactions contemplated hereby,
except and to the extent that any failure to obtain such authorization,
approval or other action would not have a Material Adverse Effect.
CREDIT AGREEMENT
<PAGE>
57
(d) Each of the Loan Documents is, and the Notes when delivered
hereunder will be, legal, valid and binding obligations of the Company
enforceable against the Company in accordance with its terms.
(e) (i) The Company has heretofore furnished to each of the Lenders
unaudited consolidated balance sheets of the Company and its Subsidiaries
as at September 11, 1998 and the related unaudited consolidated statements
of income, retained earnings and cash flows of the Company and its
Subsidiaries for the period of 36 weeks ended on said date, and
consolidated balance sheets of the Company and its Subsidiaries as at
January 3, 1998 and the related consolidated statements of income, retained
earnings and cash flows of the Company and its Subsidiaries for the fiscal
year ended January 3, 1998, with the opinion thereon (in the case of said
consolidated balance sheet and statements for the fiscal year ended January
3, 1998) of Arthur Andersen LLP. All such financial statements are complete
and correct and fairly present the consolidated financial condition of the
Company and its Subsidiaries as at said respective dates and the
consolidated results of their operations for the respective periods so
presented all in accordance with GAAP. Since September 11, 1998, there has
been no Material Adverse Change.
(f) No information, exhibit or report furnished by or on behalf of the
Company to the Administrative Agent or any Lender in connection with the
execution of the Loan Documents contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements made therein taken as a whole, in the light of the time and
circumstances under and the time at which they were made, not misleading.
(g) There is no pending or threatened action or proceeding affecting
the Company or any of its Subsidiaries before any court, governmental
agency or arbitrator which (i) is reasonably likely to have a Material
Adverse Effect or (ii) purports to affect this Agreement or the
transactions contemplated hereby.
(h) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan that has resulted or could reasonably be expected
to result in a liability to the Company or its ERISA Affiliates in excess
of $5,000,000.
(i) Neither the Company nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan that it has incurred any
Withdrawal Liability, and neither the Company nor any of its ERISA
Affiliates, to the best of the Company's knowledge and belief, is
reasonably expected to incur any Withdrawal Liability to any Multiemployer
Plan, in each case other than any Withdrawal Liability that would not have
a Material Adverse Effect.
(j) Neither the Company nor any of its ERISA Affiliates has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has
CREDIT AGREEMENT
<PAGE>
58
been terminated, within the meaning of Title IV of ERISA, except where such
reorganization or termination would not have a Material Adverse Effect.
(k) The Company and each of its Subsidiaries have filed, have caused
to be filed or have been included in all tax returns (federal, state, local
and foreign) required to be filed and have paid (or have accrued any taxes
shown that are not due with the filing of such returns) all taxes shown
thereon to be due, together with applicable interest and penalties, except
in any case where the failure to file any such return or pay any such tax
is not in any respect material to the Company or the Company and its
Subsidiaries taken as a whole.
(l) The Company and its Subsidiaries have implemented measures to have
all critical business systems of the Company and its Subsidiaries "Year
2000 Compliant" (that is, such business systems will be able to recognize
and perform properly date-sensitive functions involving certain dates prior
to, in and following year 2000) on or before September 30, 1999, and the
advent of the year 2000 and its impact on such business systems is not
expected to have a Material Adverse Effect.
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01 Affirmative Covenants. So long as any obligations under
---------------------
this Agreement or any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, the Company will, unless the Required Lenders shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
--------------------------
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA, the Securities Act of 1933 and all
Environmental Laws, except, in each case, any non-compliance which would
not have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
---------------------
Subsidiaries to pay and discharge, before the same shall become delinquent,
all taxes, assessments, claims and governmental charges or levies imposed
upon it or upon its property, except to the extent that any failure to do
so would not have a Material Adverse Effect; provided, however, that
-------- -------
neither the Company nor any of its Subsidiaries shall be required to pay or
discharge any such tax, assessment, claim or charge that is being contested
in good faith and by proper proceedings and as to which appropriate
reserves are being maintained.
(c) Maintenance of Insurance. Maintain, and cause each of its
------------------------
Subsidiaries to maintain, appropriate and adequate insurance with
responsible and reputable insurance companies or associations or with self-
insurance programs to the extent consistent with
CREDIT AGREEMENT
<PAGE>
59
prudent practices of the Company and its Subsidiaries or otherwise
customary in their respective industries in such amounts and covering such
risks as is customary in the industries in which the Company or such
Subsidiary operates.
(d) Payment of Welfare Plans. Pay, and cause each of its Material
------------------------
Subsidiaries to pay, the aggregate annualized cost (including, without
limitation, the cost of insurance premiums) with respect to post-retirement
benefits under Welfare Plans for which the Company and its Material
Subsidiaries are liable.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
-----------------------------------------
and cause each of its Material Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory) and franchises;
provided, however, that (i) the Company and its Material Subsidiaries may
-----------------
consummate any transaction permitted under Section 6.02(b) and (ii) neither
the Company nor such Subsidiary shall be required to preserve any right or
franchise (other than the corporate existence of each Borrower) when, in
the good faith business judgment of the Company, such preservation or
maintenance is neither necessary nor appropriate for the prudent management
of the business of the Company.
(f) Visitation Rights. At any reasonable time during normal business
-----------------
hours and upon reasonable prior notice and from time to time, permit the
Administrative Agent or any of the Lenders or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Company and any of
its Subsidiaries, and to discuss the affairs, finances and accounts of the
Company and any of its Subsidiaries with any of their officers or directors
and with their independent certified public accountants.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to
----------------
keep, proper books of record and account as are necessary to prepare
Consolidated financial statements in accordance with GAAP, in which full
and correct entries shall be made of all financial transactions and the
assets and business of the Company and each such Subsidiary in accordance
with GAAP.
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
------------------------------
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted, except where failure
to do so would not have a Material Adverse Effect.
(i) Reporting Requirements. Furnish to the Lenders:
----------------------
(i) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the
Company, quarterly condensed and consolidated balance sheets and
consolidated statement of cash flows of the Company as of the end of
such quarter and statements of income of the Company for the period
commencing at the end of the previous fiscal year and
CREDIT AGREEMENT
<PAGE>
60
ending with the end of such quarter, certified by the chief accounting
officer of the Company (or another appropriate officer of the Company
designated by said chief accounting officer) and certificates as to
compliance with the terms of this Agreement and setting forth in
reasonable detail the calculations necessary to demonstrate compliance
with Section 6.01(j), provided that in the event of any change in GAAP
--------
used in prepara tion of such financial statements, the Company shall
also provide, if necessary for the determination of compliance with
Section 6.01(j), a statement of reconciliation conforming any
information in such certificates with GAAP;
(ii) as soon as available and in any event within 105 days after
the end of each fiscal year of the Company commencing with fiscal year
1998 of the Company, certificates as to compliance with the terms of
this Agreement which are otherwise provided under clause (i) above at
the end of each fiscal quarter other than the last fiscal quarter of
the fiscal year and a copy of the annual report for such year for the
Company, containing audited financial statements for such year
certified by (a) Arthur Andersen LLP, (b) any other "Big Six"
accounting firm or (c) other independent public accountants acceptable
to the Required Lenders;
(iii) as soon as possible and in any event within five days after
the Company obtains notice of the occurrence of each Event of Default
and each Default continuing on the date of such statement, a statement
of the chief accounting officer of the Company setting forth details
of such Event of Default or Default and the action which the Company
has taken and proposes to take with respect thereto;
(iv) promptly after request therefor, copies of all regular and
periodic financial and/or other reports which the Company may from
time to time make available to any of its public security holders or
bond holders;
(v) promptly after the commencement thereof, notice of any action
or proceeding of the kind referred to in Section 5.01(g);
(vi) promptly and in any event within 15 days after the Company
or any ERISA Affiliate knows or should reasonably know that any ERISA
Event has occurred with respect to which the liability or potential
liability of the Company or any of its ERISA Affiliates exceeds or
could reasonably be expected to exceed $10,000,000, a statement of a
principal financial officer of the Company describing such ERISA Event
and the action, if any, which the Company or such ERISA Affiliate
proposes to take with respect thereto;
(vii) promptly and in any event within 10 Business Days after
receipt thereof by the Company or any ERISA Affiliate, copies of each
notice from the
CREDIT AGREEMENT
<PAGE>
61
PBGC stating its intention to terminate any Plan or to have a trustee
appointed to administer any Plan where such action would have a
Material Adverse Effect;
(viii) with respect to liabilities or potential liabilities of
the Company or any of its ERISA Affiliates of $10,000,000 or more,
promptly and in any event within 20 Business Days after receipt
thereof by the Company or any ERISA Affiliate from the sponsor of a
Multiemployer Plan, a copy of each notice received by the Company or
any ERISA Affiliate concerning (1) the imposition of Withdrawal
Liability by a Multiemployer Plan, (2) the reorganization or
termination, within the meaning of Title IV of ERISA, of any
Multiemployer Plan or (3) the amount of liability incurred, or which
may be incurred, by the Company or any ERISA Affiliate in connection
with any event described in clause (1) or (2) above;
(ix) forthwith upon the occurrence of a Change of Control, notice
thereof with a reasonable description thereof; and
(x) promptly after request therefor, such other business and
financial information respecting the condition or operations,
financial or otherwise, of the Company or any of its Subsidiaries that
any Lender through the Administrative Agent may from time to time
reasonably request.
(j) Leverage Ratio. Maintain, as at the last day of each fiscal
--------------
quarter of the Company, a Leverage Ratio of not greater than 4.0 to 1.0.
SECTION 6.02 Negative Covenants. So long as any obligations under
------------------
this Agreement or any Note shall remain unpaid or any Lender shall have any
Commitment hereunder, the Company, unless the Required Lenders shall otherwise
consent in writing:
(a) Liens, Etc. Will not create, incur, assume or suffer to exist, or
----------
permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Lien on or with respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to assign,
any right to receive income, other than:
(i) Permitted Liens;
(ii) Liens outstanding on the Effective Date and described on
Schedule II as of the Effective Date ("Existing Liens"), and any
--------------
renewal, extension or replacement (or successive renewals, extensions
or replacements) thereof which does not encumber any property of the
Company or its Subsidiaries other than (1) the property encumbered by
the Lien being renewed, extended or replaced, (2) property acquired by
the Company or its Subsidiaries in the ordinary course of business to
replace property covered by Existing Liens, and (3) de minimis other
property incidental to the property referred to in clause (1) or (2)
above;
CREDIT AGREEMENT
<PAGE>
62
(iii) Purchase Money Liens;
(iv) Liens on properties of (X) MVCI, any SLS Entity or any of
their respective Subsidiaries, and (Y) MICC and any other Subsidiary
of the Company principally engaged in the business of finance,
banking, credit, leasing, insurance or other similar operations;
(v) Liens on properties of Subsidiaries of the Company, which
properties are located outside the United States of America;
(vi) Liens securing COLI Debt; and
(vii) other Liens securing an aggregate principal amount of
Indebtedness or other obligations not to exceed $300,000,000 at any
time outstanding.
(b) Restrictions on Fundamental Changes. Will not, and will not permit
-----------------------------------
any of its Material Subsidiaries to:
(i) merge or consolidate with or into, or
(ii) convey, transfer, lease or otherwise dispose of (whether in
one transaction or a series of transactions) all or substantially all
of the property (whether now owned or hereafter acquired) of the
Company and its Subsidiaries, taken as a whole, to, or
(iii) convey, transfer, lease or otherwise dispose of (whether in
one transaction or a series of transactions, and whether by or
pursuant to merger, consolidation or any other arrangement), any
property (whether now owned or hereafter acquired) essential to the
conduct of the lodging group of the Company and its Subsidiaries,
taken as a whole, to, or
(iv) enter into any partnership, joint venture, syndicate, pool
or other combination with,
any Person, in each case unless:
(w) no Default shall have occurred and then be continuing or
would result therefrom, and
(x) in the case of a merger or consolidation of the Company, (1)
the Company is the surviving entity or (2) the surviving entity
expressly assumes by an amendment to this Agreement duly executed by
such surviving entity all of the
CREDIT AGREEMENT
<PAGE>
63
Company's obligations hereunder and under the other the Loan Documents
in a manner satisfactory to the Administrative Agent and the Required
Lenders.
(c) Transactions with Affiliates. Will not enter into, or permit any of
----------------------------
its Subsidiaries to enter into, any transaction with an Affiliate of the
Company (other than the Company's Subsidiaries) that would be material in
relation to the Company and its Subsidiaries, taken as a whole, even if
otherwise permitted under this Agreement, except on terms that are fair and
reasonable to the Company and its Subsidiaries and on terms no less
favorable to the Company or such Subsidiary (considered as a whole in
conjunction with all other existing arrangements and relationships with
such Affiliate) than the Company or such Subsidiary would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
(d) Dividends, Etc. Will not declare or make any dividend payment or
--------------
other distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of capital stock of the
Company, or purchase, redeem or otherwise acquire for value (or permit any
of its Subsidiaries to do so) any shares of any class of capital stock of
the Company or any warrants, rights or options to acquire any such shares,
now or hereafter outstanding, in each case if, at the time thereof or after
giving effect thereto, an Event of Default has occurred and is continuing.
(e) Change in Nature of Business. Will not engage in, or permit any of
----------------------------
its Subsidiaries to engage in, any business that is material to the Company
and its Subsidiaries, taken as a whole, that is not carried on by the
Company or its Subsidiaries as of the Effective Date (or directly related
to a business carried on as of such date) and which would have a Material
Adverse Effect.
(f) Accounting Changes. Will not make or permit, or permit any of its
------------------
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by GAAP.
(g) Margin Stock. Will not directly or indirectly use, or permit any
------------
other Borrower or any Subsidiary to use, any of the proceeds of any Loan in
a manner that violates or contravenes the Margin Regulations. Without
limiting the foregoing, the Company (i) will promptly notify the
Administrative Agent if at any time more than 20% of the value of the
assets of the Company and its Subsidiaries (as determined in good faith by
the Company) that are subject to Section 6.02(a) or Section 6.02(b) consist
of or are represented by margin stock within the meaning of the Margin
Regulations, and (ii) will give the Administrative Agent at least 15
Business Days' prior written notice of any direct or indirect use of any of
the proceeds of any Loan to buy or carry margin stock within the meaning of
the Margin Regulations if, after giving effect thereto, more than 20% of
the value of the assets of the Company and its Subsidiaries (as determined
in good faith by the Company) that are subject to Section 6.02(a) or
Section 6.02(b) consist of or are represented by margin stock within the
meaning of the Margin Regulations, and
CREDIT AGREEMENT
<PAGE>
64
will, if requested by the Administrative Agent, provide to the
Administrative Agent prior to the making of such Loan a legal opinion of
counsel reasonably acceptable to the Administrative Agent confirming that
such use of proceeds will not contravene this Section 6.02(g) together with
appropriately executed and completed purpose statements on Form FR U-1;
provided that in lieu of such legal opinion and purpose statements, the
--------
Company may provide to the Administrative Agent, together with such written
notice, a certificate of the Company stating that at the date of such
certificate and after applying the proceeds of such Loan not more than 25%
of the value of the assets of the Company and its Subsidiaries (as
determined in good faith by the Company) that are subject to Section
6.02(a) or Section 6.02(b) consist of or are represented by margin stock
within the meaning of the Margin Regulations. Each Lender hereby confirms
to the Company and to the Administrative Agent that in extending or
maintaining credit hereunder it has not relied upon such margin stock as
collateral.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
-----------------
(a) (i) Any Borrower shall fail to pay any principal of any Loan when
the same becomes due and payable; or (ii) any Borrower shall fail to pay
any interest on any Loan, or any other payment under any Loan Document, for
a period of three Business Days after the same becomes due and payable; or
(b) Any representation or warranty made by any Borrower herein or by
any Borrower (or any of its officers) under or in connection with any Loan
Document shall prove to have been incorrect in any material respect when
made; or
(c) The Company shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 6.01(j) or in Section 6.02(b),
(c), (d), (e) or (g), or (ii) any other term, covenant or agreement
contained in this Agreement on its part to be performed or observed if the
failure to perform or observe such other term, covenant or agreement shall
remain unremedied for 30 days after written notice thereof shall have been
given to the Company by the Administrative Agent or the Required Lenders;
or
(d) The Company or any of its Material Subsidiaries shall fail to pay
any principal of or premium or interest on any Indebtedness which is
outstanding in a principal amount of at least $50,000,000 in the aggregate
(but excluding Indebtedness evidenced by the Notes and Non-Recourse
Indebtedness) of the Company or such Subsidiary (as the case may be), when
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement
CREDIT AGREEMENT
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65
or instrument relating to such Indebtedness; or any such Indebtedness shall
be declared to be due and payable, or required to be prepaid (other than by
a regularly scheduled required prepayment, including, without limitation, a
prepayment required in connection with the sale of the sole asset or all
assets securing such Indebtedness), redeemed, purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case prior to the stated maturity thereof;
provided, however, that if there is acceleration of any Indebtedness which
-------- -------
is included under this clause (d) solely because of a Guarantee by the
Company or one of its Material Subsidiaries, an Event of Default will not
exist under this clause (d) so long as the Company or such Material
Subsidiary, as the case may be, fully performs its obligations in a timely
manner under such Guarantee upon demand therefor by the beneficiary
thereof; or
(e) The Company or any of its Material Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Company or any of its Material Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in
the case of any such proceeding instituted against it (but not instituted
by it), either such proceeding shall remain undismissed or unstayed for a
period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur;
or the Company or any of its Material Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this subsection
(e); or
(f) Any judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Company or any of its Material
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(g) Any ERISA Event shall have occurred with respect to a Plan and the
sum (determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other Plans
with respect to which an ERISA Event shall have occurred and then exist (or
the liability of the Company or any ERISA Affiliate related to such ERISA
Event) exceeds $20,000,000; or
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66
(h) The Company or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability
to such Multiemployer Plan in an amount which, when aggregated with all
other amounts required to be paid to Multiemployer Plans by the Company and
its ERISA Affiliates as Withdrawal Liability (determined as of the date of
such notification), exceeds $20,000,000 or requires payments exceeding
$10,000,000 per annum; or
(i) The Company or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Company and its ERISA Affiliates to all
Multiemployer Plans which are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the respective plan years of such Multiemployer
Plans immediately preceding the plan year in which the reorganization or
termination occurs by an amount exceeding $20,000,000;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the express consent, of the Required Lenders, by notice to the
Company, declare the obligation of each Lender to make Loans to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the express consent, of the Required Lenders, by notice to the Company,
declare the Notes, all interest thereon and all other amounts payable under this
Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by each Borrower;
provided, however, that in the event of an actual or deemed entry of an order
- -------- -------
for relief with respect to the Company or any of its Material Subsidiaries under
the Federal Bankruptcy Code, (A) the obligation of each Lender to make Loans
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Borrower.
ARTICLE VIII
THE ADMINISTRATIVE AGENT, THE SYNDICATION
AGENT AND THE DOCUMENTATION AGENT
SECTION 8.01. Authorization and Action. Each Lender hereby appoints
------------------------
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully
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67
protected in so acting or refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be binding upon all Lenders and
all holders of Notes; provided that the Administrative Agent shall not be
--------
required to take any action which exposes the Administrative Agent to personal
liability or which is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Lender prompt notice of each notice
given to it by any Borrower pursuant to the terms of this Agreement.
SECTION 8.02. Reliance, Etc.
--------------
(a) None of the Administrative Agent, the Syndication Agent, the
Documentation Agent or any of their respective directors, officers, agents
or employees shall be liable for any action taken or omitted to be taken by
it or them under or in connection with the Loan Documents, except for its
or their own gross negligence or willful misconduct. Without limitation of
the generality of the foregoing, the Administrative Agent: (i) may treat
the payee of any Note as the holder thereof until the Administrative Agent
receives and accepts an Assignment and Acceptance entered into by the
Lender which is the payee of such Note, as assignor, and an Eligible
Assignee, as assignee, as provided in Section 9.07; (ii) may consult with
legal counsel (including counsel for any Borrower), independent public
accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel, accountants or experts; (iii) makes no
warranty or representation to any Lender and shall not be responsible to
any Lender for any statements, warranties or representations (whether
written or oral) made in or in connection with this Agreement; (iv) shall
not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement
on the part of any Borrower or to inspect the property (including the books
and records) of any Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telecopier, telegram, cable
or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
(b) The Syndication Agent, as such, and the Documentation Agent, as
such, shall have no duties or obligations whatsoever with respect to this
Agreement, the Notes or any other document or any matter related thereto.
SECTION 8.03. Citibank, BNS and Chase and Affiliates. With respect
--------------------------------------
to its respective Commitment, the Loans made by it and the Notes issued to it,
each of Citibank, BNS and Chase shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Administrative Agent, the Syndication Agent or the Documentation Agent, as
the case may be; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include each of Citibank, BNS and Chase in its individual
capacity. Citibank, BNS and Chase and their respective affiliates may accept
deposits from, lend
CREDIT AGREEMENT
<PAGE>
68
money to, act as trustee under indentures of, and generally engage in any kind
of business with, any Borrower, any of its Subsidiaries and any Person who may
do business with or own securities of any Borrower or any such Subsidiary, all
as if each of Citibank, BNS and Chase were not the Administrative Agent, the
Syndication Agent or the Documentation Agent, as the case may be, and without
any duty to account therefor to the Lenders.
SECTION 8.04. Lender Credit Decision. Each Lender acknowledges that
----------------------
it has, independently and without reliance upon the Administrative Agent, the
Syndication Agent, the Documentation Agent or any other Lender and based on the
financial statements referred to in Section 5.01 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent, the
Syndication Agent, the Documentation Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.
SECTION 8.05. Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent, the Syndication Agent and the Documentation Agent (in each
case to the extent not reimbursed by the Company), ratably according to their
respective pro rata share, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent, the Syndication
Agent or the Documentation Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Administrative Agent, the
Syndication Agent or the Documentation Agent under this Agreement in their
respective capacities as an agent hereunder, provided that no Lender shall be
--------
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Administrative Agent's, the Syndication Agent's or the Documentation
Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Administrative Agent, the
Syndication Agent and the Documentation Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees but
excluding normal administrative expenses expressly excluded under Section
9.04(a)) incurred by the Administrative Agent, the Syndication Agent or the
Documentation Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that the
Administrative Agent, the Syndication Agent or the Documentation Agent is not
reimbursed for such expenses by the Company as required under Section 9.04(a).
SECTION 8.06. Successor Administrative Agent. The Administrative
------------------------------
Agent may resign at any time by giving written notice thereof to the Lenders and
the Company and may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint a successor Administrative Agent with the consent of the
Company, which consent shall not be unreasonably
CREDIT AGREEMENT
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69
withheld. If no successor Administrative Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be an Eligible Assignee and a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
----------------
provision of this Agreement or the Revolving Loan Notes, nor consent to any
departure by any Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
-------- -------
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) waive any of the conditions specified in Section 4.01, (b)
increase the Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the Revolving Loan
Notes or any fees or other amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Revolving Loan Notes
or any fees or other amounts payable hereunder, (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Revolving Loan
Notes, or the number of Lenders, which shall be required for the Lenders or any
of them to take any action hereunder, (f) release the guarantee set forth in
Section 10.01 or (g) amend this Section 9.01; and provided further that (1) no
-------- -------
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent, the Documentation Agent, the Syndication Agent or a Swing
Loan Bank, as the case may be, in addition to the Lenders required above to take
such action, affect the rights or duties of the Administrative Agent, the
Documentation Agent, the Syndication Agent or such Swing Loan Bank, as the case
may be, under this Agreement or any Note and (2) no amendment, waiver or consent
shall, unless in writing and signed by a Lender that has made a Competitive Bid
Loan, in addition to the Lenders required above to take such action, affect the
rights or duties of such Lender in respect of such Competitive Bid Loan.
SECTION 9.02. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing (including telecopy, telegraphic,
telex or cable communication)
CREDIT AGREEMENT
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70
and mailed, telegraphed, telecopied, telexed, cabled or delivered, if to any
Borrower, to the Company at 10400 Fernwood Road, Bethesda, Maryland 20817,
Attention: Assistant Treasurer, Dept. 52/924.11, with a copy to the same
address, Attention: Assistant General Counsel - Corporate Finance, Dept. 52/923;
if to any Bank, to its Domestic Lending Office specified opposite its name on
Schedule I hereto; if to any other Lender, to its Domestic Lending Office
specified in the Acceptance pursuant to which it became a Lender; if to the
Syndication Agent or the Documentation Agent, to its address specified on the
signature pages hereto; and if to the Administrative Agent, at its address at 2
Penns Way, Suite 200, New Castle, Delaware 19720, Attention: Savas Divan,
telephone no. 302-894-6030, telecopier no. 302-894-6120, with copies to Jackie
Lai, telephone no. 302-894-6022, telecopier no. 302-894-6120; or to the Company
or the Administrative Agent, at such other address as shall be designated by
such party in a written notice to the other parties and, to each other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Administrative Agent. All such notices and communications
shall, (a) when mailed, be effective three Business Days after the same is
deposited in the mails, (b) when mailed for next day delivery by a reputable
freight company or reputable overnight courier service, be effective one
Business Day thereafter, and (c) when sent by telegraph, telecopy, telex or
cable, be effective when the same is telegraphed, telecopied and receipt thereof
is confirmed by telephone or return telecopy, confirmed by telex answerback or
delivered to the cable company, respectively, except that notices and
communications to the Administrative Agent pursuant to Article II, III or VIII
shall not be effective until received by the Administrative Agent.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any
-------------------
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses.
------------------
(a) The Company agrees to pay, whether or not any of the transactions
contemplated hereby are consummated, on demand (x) all reasonable costs and
expenses in connection with the preparation (excluding normal travel and
related expenses incurred by the personnel of the Administrative Agent),
execution, delivery, administration (excluding those which are customarily
borne by the Administrative Agent), modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder, and
(y) the reasonable fees and expenses of counsel to the Administrative Agent
and with respect to advising the Administrative Agent as to its rights and
responsibilities under this Agreement. The Company further agrees to pay on
demand all reasonable expenses of the Lenders (including, without
limitation, reasonable counsel (including, without duplication, internal
counsel) fees and expenses) in connection with the enforcement (whether
through negotiations, legal proceedings or otherwise) of this Agreement,
the Notes and the other documents to be delivered hereunder, including,
CREDIT AGREEMENT
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71
without limitation, reasonable counsel fees and expenses in connection with
the enforcement of rights under this Section 9.04(a).
(b) The Company agrees to indemnify and hold harmless the
Administrative Agent, the Syndication Agent, the Documentation Agent, each
Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and
-----------------
against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel)
that may be incurred by or asserted or awarded against any Indemnified
Party in its agent or lending capacity under, or otherwise in connection
with, the Loan Documents, in each case arising out of or in connection with
or by reason of, or in connection with the preparation for a defense of,
any investigation, litigation or proceeding arising out of, related to or
in connection with the Loan Documents, the proposed or actual use of the
proceeds therefrom or any of the other transactions contemplated hereby,
whether or not such investigation, litigation or proceeding is brought by
the Company, its shareholders or creditors or an Indemnified Party or any
other person or an Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated, except
to the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful
misconduct.
(c) If (i) any payment of principal of any Eurocurrency Rate Loan is
made other than on the last day of the Interest Period for such Loan (or
any payment of principal of any Quoted Rate Swing Loan is made other than
on the maturity date of such Swing Loan), as a result of a payment pursuant
to Section 2.14(c) or 3.04 or acceleration of the maturity of the Notes
pursuant to Section 7.01 or for any other reason, or (ii) the Company gives
notice of a Loan conversion pursuant to Section 2.08(c), then the Company
shall, upon demand by any Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of
such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably incur as a
result of such payment, including, without limitation, any loss (excluding
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Loan.
SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during the
----------------
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 7.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 7.01, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held (other than deposits at any account with respect to which such
account states that the Company is acting in a fiduciary capacity) and other
indebtedness at any time owing by such Lender to or for the credit or the
account of the Company against any and all of the obligations of the Company now
or
CREDIT AGREEMENT
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72
hereafter existing under this Agreement and any Note held by such Lender,
whether or not such Lender shall have made any demand under this Agreement or
such Note and although such obligations may be unmatured. Each Lender agrees
promptly to notify the Company after any such set-off and application made by
such Lender, provided that the failure to give such notice shall not affect the
--------
validity of such set-off and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
SECTION 9.06. Binding Effect. This Agreement shall become effective
--------------
when it shall have been executed by the Company, the Syndication Agent, the
Documentation Agent and the Administrative Agent and when the Administrative
Agent shall have been notified by each Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of the Borrowers, the
Administrative Agent, the Syndication Agent, the Documentation Agent and each
Lender and their respective successors and assigns, except that no Borrower
shall have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
SECTION 9.07. Assignments and Participations.
------------------------------
(a) Each Lender may assign to one or more banks or other entities
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Loans owing to it
and the Note or Notes held by it); provided, however, that:
-------- -------
(i) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement (other than
any Competitive Bid Loans or Competitive Bid Loan Notes),
(ii) the amount of the Commitment of the assigning Lender being
assigned pursuant to each such assignment other than an assignment to
another Lender (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than $10,000,000
and shall be an integral multiple of $1,000,000 in excess thereof,
(iii) each such assignment shall be to an Eligible Assignee, and
(unless such assignment shall be to a Subsidiary of the assigning Lender or
to a Subsidiary of the bank holding company of which the assigning Lender
is a Subsidiary) the Company and the Administrative Agent shall have
consented to such assignment (which consents shall not be unreasonably
withheld or delayed),
(iv) after giving effect to such assignment, the assigning Lender
(together with all Affiliates of such Lender) shall continue to hold no
less than 25% of its original Commitment hereunder and of the Loans owing
to it, unless the Company shall otherwise agree,
CREDIT AGREEMENT
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73
(v) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with any Note or Notes subject to
such assignment and a processing and recordation fee of $2,500, and
(vi) unless the Company and the Administrative Agent otherwise agree,
the Termination Date of the assignee under each such assignment shall be
deemed to be the then Final Termination Date.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall relinquish its rights and be released from its
obligations under this Agreement, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 5.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, the Syndication Agent, the Documentation
Agent, such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
CREDIT AGREEMENT
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74
(c) Each New Lender shall execute and deliver to the Administrative Agent
(for its acceptance and recording in the Register) a New Commitment Acceptance
in accordance with the provisions of this Section 9.07, together with a
processing and recordation fee of $2,500. Upon the execution, delivery,
acceptance and recording of a New Commitment Acceptance, from and after the date
thereof such New Lender shall be a party hereto and have the rights and
obligations of a Lender hereunder having the Commitment specified therein (or
such lesser Commitment as shall be allocated to such New Lender in accordance
with Section 2.14(d)). By executing and delivering a New Commitment Acceptance,
the New Lender thereunder confirms to and agrees with the other parties hereto
as follows: (i) such New Lender hereby agrees that no Lender has made any
representation or warranty, or assumes any responsibility with respect to, (x)
any statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto or (y) the financial condition of any Borrower or the
performance or observance by any Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (ii)
such New Lender confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 5.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such New Commitment Acceptance; (iii)
such New Lender will, independently and without reliance upon the Administrative
Agent, any Syndication Agent, the Documentation Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (iv) such New Lender confirms that it is an Eligible
Assignee; (v) such New Lender appoints and authorizes the Administrative Agent
to take such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vi) such
New Lender agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) The Administrative Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assignment and Acceptance and each New Commitment
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitment of, and principal
amount of the Revolving Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for
- ---------
all purposes, absent manifest error, and each Borrower, the Administrative Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Company or any Lender at any reasonable time and
from time to time upon reasonable prior notice. The Administrative Agent shall
provide the Company with a copy of the Register upon request.
(e) (i) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Loan Note or Notes subject to such
assignment, the Administrative
Credit Agreement
<PAGE>
75
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C-1 hereto, (1) accept such Assignment
and Acceptance, (2) record the information contained therein in the
Register and (3) give prompt notice thereof to the Company. Within five
Business Days after its receipt of such notice, the relevant Borrower, at
its own expense, shall execute and deliver to the Administrative Agent in
exchange for the surrendered Revolving Loan Note or Notes a new Revolving
Loan Note to the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such Assignment and Acceptance and a
new Revolving Loan Note to the order of the assigning Lender in an amount
equal to the Commitment retained by it hereunder. Such new Revolving Loan
Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Revolving Loan Note or Notes, shall be
dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit A-l hereto. Such
surrendered Revolving Note or Notes shall be marked "canceled" and shall be
returned promptly to the Company.
(ii) Upon its receipt of a New Commitment Acceptance executed by a New
Lender representing that it is an Eligible Assignee, the Administrative
Agent shall, if such New Commitment Acceptance has been completed and is in
substantially the form of Exhibit C-3 hereto, (1) accept such New
Commitment Acceptance, (2) record the information contained therein in the
Register and (3) give prompt notice thereof to the Company. Within five
Business Days after its receipt of such notice, the relevant Borrower, at
its own expense, shall execute and deliver to the Administrative Agent a
new Revolving Loan Note to the order of such New Lender in an amount equal
to the Commitment assumed by it pursuant to such New Commitment Acceptance.
Such new Revolving Loan Note shall be dated the date of the New Commitment
Acceptance and shall otherwise be in substantially the form of Exhibit A-l
hereto.
(f) Each Lender may sell participations to one or more banks or other
entities in or to a portion of its rights and obligations under this Agreement
(including, without limitation, a portion of its Commitment, the Loans owing to
it and the Note or Notes held by it); provided, however, that (i) such Lender's
-------- -------
obligations under this Agreement (including, without limitation, its Commitment
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrowers, the Administrative Agent, the Syndication
Agent, the Documentation Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, (v) except in the case of a participation
involving a Lender and one of its Affiliates (and this exception shall apply
only so long as the participant remains an Affiliate of such Lender), the
parties to each such participation shall execute a participation agreement in
substantially the form of the Participation Agreement, and (vi) no participant
under any such participation shall have any right to approve any amendment to or
waiver of any provision of any Loan Document, or any consent to any departure by
any Borrower therefrom, except to the extent that such amendment, waiver or
consent would alter the
Credit Agreement
<PAGE>
76
principal of, or interest on, the Loan or Loans in which such participant is
participating or any fees or other amounts payable to the Lenders hereunder, or
postpone any date fixed for any payment of principal of, or interest on, the
Loans or any fees or other amounts payable hereunder. Each Lender shall provide
the Company with a list of entities party to all Participation Agreements with
such Lender upon request.
(g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 9.07, disclose to
the assignee or participant or proposed assignee or participant, any
information, including Confidential Information, relating to the Borrowers
furnished to such Lender by or on behalf of the Borrowers; provided that, prior
--------
to any such disclosure of Confidential Information, the assignee or participant
or proposed assignee or participant shall be informed of the confidential nature
of such Confidential Information and shall agree to (i) preserve the
confidentiality of any Confidential Information relating to the Borrowers
received by it from such Lender and (ii) be bound by the provisions of Section
9.10.
(h) Notwithstanding any other provision in this Section 9.07, no Lender may
assign its interest to an Eligible Assignee if, as of the effective date of such
assignment, such assignment would increase the amount of Taxes, Other Taxes or
increased costs payable under Sections 2.11 or 3.04, respectively.
(i) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time and without the consent of the Administrative Agent or
any Borrower create a security interest in all or any portion of its rights
under this Agreement (including, without limitation, the Loans owing to it and
the Notes held by it) in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System.
SECTION 9.08. Governing Law. This Agreement and the Notes shall be governed
-------------
by, and construed in accordance with, the laws of the State of New York.
SECTION 9.09. Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 9.10. Confidentiality. None of the Administrative Agent, the
---------------
Syndication Agent, the Documentation Agent or any Lender shall disclose any
Confidential Information to any Person without the consent of the Company, other
than (a) to such Person's Affiliates and their officers, directors, employees,
agents, counsel, auditors and advisors of such Person or such Person's
Affiliates, (b) to a proposed assignee or to a proposed participant; provided
--------
that prior to any such disclosure, the proposed assignee or the participant
shall deliver to the Company a written agreement to preserve the confidentiality
of any Confidential Information to the extent required by this Agreement, and
then only on a confidential basis, (c)
Credit Agreement
<PAGE>
77
as required by any law, rule or regulation or judicial process, (d) in
connection with any litigation to which any Lender or the Administrative Agent
is a party or in connection with the exercise of any remedy hereunder or under
any Note (provided that, in the case of this clause (d), such Lender or the
---------
Administrative Agent, as the case may be, uses reasonable efforts under the
circumstances to obtain reasonable assurances that confidential treatment will
be accorded to such information in connection with such litigation or exercise)
and (e) as requested or required by any state, federal or foreign authority or
examiner regulating banks or banking or any aspects of any Lender's activities.
SECTION 9.11. Jurisdiction, Etc.
------------------
(a) Each of the parties hereto (and each Designated Borrower, by its
acceptance of the proceeds of Loans made to it) hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or the
other Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto and each Designated Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State or, to the
extent permitted by law, in such federal court. Each of the parties hereto and
each Designated Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents in
the courts of any jurisdiction.
(b) Each of the parties hereto and each Designated Borrower irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or federal court. Each of the
parties hereto and each Designated Borrower hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
SECTION 9.12. WAIVER OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT,
--------------------
THE SYNDICATION AGENT, THE DOCUMENTATION AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS, THE LOANS OR THE ACTIONS OF THE
ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE DOCUMENTATION AGENT OR ANY
LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Credit Agreement
<PAGE>
78
SECTION 9.13. Judgment Currency. This is an international loan transaction in
-----------------
which the specification of Dollars or an Alternate Currency, as the case may be
(the "Specified Currency"), any payment in New York City or the country of the
------------------
Specified Currency, as the case may be (the "Specified Place"), is of the
---------------
essence, and the Specified Currency shall be the currency of account in all
events relating to Loans denominated in the Specified Currency. The payment
obligations of the Borrowers under this Agreement and the Notes shall not be
discharged by an amount paid in another currency or in another place, whether
pursuant to a judgment or otherwise, to the extent that the amount so paid on
conversion to the Specified Currency and transfer to the Specified Place under
normal banking procedures does not yield the amount of the Specified Currency at
the Specified Place due hereunder. If for the purpose of obtaining judgment in
any court it is necessary to convert a sum due hereunder in the Specified
Currency into another currency (the "Second Currency"), the rate of exchange
---------------
which shall be applied shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the Specified Currency with
the Second Currency on the Business Day next preceding that on which such
judgment is rendered. The obligation of each Borrower in respect of any such sum
due from it to the Administrative Agent or any Lender hereunder (an "Entitled
--------
Person") shall, notwithstanding the rate of exchange actually applied in
- ------
rendering such judgment, be discharged only to the extent that on the Business
Day following receipt by such Entitled Person of any sum adjudged to be due
hereunder or under the Notes in the Second Currency such Entitled Person may in
accordance with normal banking procedures purchase and transfer to the Specified
Place the Specified Currency with the amount of the Second Currency so adjudged
to be due; and each Borrower hereby, as a separate obligation and
notwithstanding any such judgment, agrees to indemnify such Entitled Person
against, and to pay such Entitled Person on demand in the Specified Currency,
any difference between the sum originally due to such Entitled Person in the
Specified Currency and the amount of the Specified Currency so purchased and
transferred.
SECTION 9.14. European Monetary Union. (a) If, as a result of the
-----------------------
implementation of European monetary union, (i) any European Currency ceases to
be lawful currency of the nation issuing the same and is replaced by a European
common currency (the "Euro"), or (ii) any European Currency and the Euro are at
----
the same time recognized by the governmental authority which is responsible for
issuance or regulation of the relevant European Currency in the nation issuing
such European Currency as lawful currency of such nation and the Administrative
Agent or the Required Lenders shall so request in a notice delivered to the
Company, then any amount payable hereunder by any party hereto in such European
Currency shall instead be payable in the Euro or, to the extent then permitted
by applicable law, in the Euro or such European Currency at the election of the
Company, and the amount so payable shall, if payable in the Euro, be determined
by translating the amount payable in such European Currency to the Euro at the
exchange rate recognized by the European Central Bank for the purpose of
implementing European monetary union. Prior to the occurrence of the event or
events described in clause (i) or (ii) of the preceding sentence, each amount
payable hereunder in any European Currency will, except as otherwise provided
herein, continue to be payable only in that European Currency.
Credit Agreement
<PAGE>
79
(b) The Company agrees, at the request of any Lender, to compensate such
Lender for any loss, cost, expense or reduction in return, incurred or suffered
by such Lender upon or after any of the occurrence of any of the events referred
to in clauses (i) or (ii) of the first sentence of Section 9.14(a), that such
Lender shall reasonably determine shall be incurred or sustained by such Lender
as a result of the implementation of European monetary union and that would not
have been incurred or sustained but for the transactions provided for herein,
and that was incurred or sustained during the 90-day period prior to the date of
demand therefor by such Lender. A certificate of a Lender setting forth in
reasonable detail such Lender's calculation of the amount or amounts necessary
to compensate such Lender shall be delivered to the Company and shall be
conclusive absent manifest error so long as such determination is made on a
reasonable basis. The Company shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
(c) The parties hereto agree, at the time of or at any time following the
implementation of European monetary union, to use reasonable efforts to enter
into an agreement amending this Agreement in order to reflect the implementation
of such monetary union, to permit (if feasible) the Euro to qualify as an
Alternate Currency under the terms and conditions of the definition of such term
and to place the parties hereto in the position with respect to the settlement
of payments of the Euro as they would have been with respect to the settlement
of the Currencies it replaced.
(d) Each Lender shall use its reasonable best efforts (consistent with its
internal policy and legal and regulatory restrictions) to minimize any amounts
payable by the Company under this Section 9.14.
(e) With respect to the payment of any amount denominated in the Euro or in a
National Currency, as defined below, the Administrative Agent shall not be
liable to any Borrower or any of the Lenders, and, if any Borrower shall have
made timely payment to the Administrative Agent in the manner specified
hereunder, such Borrower shall not be liable to the Lenders, in any way
whatsoever for any delay, or the consequences of any delay, in the crediting to
any account of any amount required by this Agreement to be paid by the
Administrative Agent if the Administrative Agent shall have taken all relevant
steps to achieve, on the date required by this Agreement, the payment of such
amount in immediately available, freely transferable, cleared funds (in the Euro
or, as the case may be, in a National Currency) to the account of any Lender in
the Principal Financial Center which such Borrower or, as the case may be, such
Lender shall have specified for such purpose. In this paragraph (d), "all
relevant steps" means all such steps as may be prescribed from time to time by
the regulations or operating procedures of such clearing or settlement system as
the Administrative Agent may from time to time reasonably determine for the
purpose of clearing or settling payments of the Euro. For purposes hereof,
"National Currency" means any Alternate Currency (other than the Euro) of a
- ------------------
state described as a "Participating Member State" in any legislative measures of
the European Council for the introduction of, changeover to or operation of the
Euro (as so described, a "Participating Member State").
--------------------------
Credit Agreement
<PAGE>
80
(f) For the purposes of determining the date on which the Eurocurrency Rate
is determined under this Agreement for any Loan denominated in the Euro (or in
any National Currency) for any Interest Period therefor, references in this
Agreement to Business Days shall be deemed to be references to Target Operating
Days, as defined below. In addition, if the Administrative Agent determines
that there is no Eurocurrency Rate displayed on the Screen for deposits
denominated in the National Currency in which any Loans are denominated, the
Eurocurrency Rate for such Advances shall be based upon the rate displayed on
the Screen for the offering of deposits denominated in the Euro. For purposes
hereof, "Target Operating Days" means any day that is not (i) a Saturday or
---------------------
Sunday, (ii) Christmas Day or New Year's Day (which shall include any day
designated as a public holiday in respect of such day) or (iii) any other day on
which the Trans-European Real-Time Gross Settlement Operating System (or any
successor settlement system) is not operating (as determined by the
Administrative Agent).
(g) If the basis of accrual of interest or fees expressed in this Agreement
with respect to the Currency of any state that becomes a Participating Member
State shall be inconsistent with any convention or practice in the London (or,
in the case of Pounds Sterling, Paris) interbank deposit market for the basis of
accrual of interest or fees in respect of the Euro, such convention or practice
in respect of the Euro shall replace such expressed basis effective as of and
from the date on which such state becomes a Participating Member State,
provided, that if any Loan in the Currency of such state is outstanding
- --------
immediately prior to such date, such replacement shall take effect, with respect
to such Loan, at the end of the then current Interest Period.
ARTICLE X
GUARANTEE
SECTION 10.01. Guarantee. The Company hereby guarantees to each Lender and the
---------
Administrative Agent and their respective successors and assigns the prompt
payment in full when due (whether at stated maturity, by acceleration, by
optional prepayment or otherwise) of the principal of and interest on the Loans
made by the Lender to, and the Notes held by each Lender of, each Designated
Borrower and all other amounts from time to time owing to the Lenders or the
Administrative Agent by any Designated Borrower under this Agreement pursuant to
its Designation Letter and under the Notes, in each case strictly in accordance
with the terms thereof (such obligations being herein collectively called the
"Guaranteed Obligations"). The Company hereby further agrees that if any
----------------------
Designated Borrower shall fail to pay in full when due (whether at stated
maturity, by acceleration, by optional prepayment or otherwise) any of the
Guaranteed Obligations, the Company will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
Credit Agreement
<PAGE>
81
SECTION 10.02. Obligations Unconditional.
-------------------------
(a) The obligations of the Company hereunder are unconditional
irrespective of (i) the value, genuineness, validity, regularity or
enforceability of any of the Guaranteed Obligations, (ii) any modification,
amendment or variation in or addition to the terms of any of the Guaranteed
Obligations or any covenants in respect thereof or any security therefor,
(iii) any extension of time for performance or waiver of performance of any
covenant of any Designated Borrower or any failure or omission to enforce
any right with regard to any of the Guaranteed Obligations, (iv) any
exchange, surrender, release of any other guaranty of or security for any
of the Guaranteed Obligations, or (v) any other circumstance with regard to
any of the Guaranteed Obligations which may or might in any manner
constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent hereof that the obligations of the Company
hereunder shall be absolute and unconditional under any and all
circumstances.
(b) The Company hereby expressly waives diligence, presentment,
demand, protest, and all notices whatsoever with regard to any of the
Guaranteed Obligations and any requirement that the Administrative Agent or
any Lender exhaust any right, power or remedy or proceed against any
Designated Borrower hereunder or under the Designation Letter of such
Designated Borrower or any Note of such Designated Borrower or any other
guarantor of or any security for any of the Guaranteed Obligations.
SECTION 10.03. Reinstatement. The guarantee in this Article X shall be
-------------
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Designated Borrower in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder(s) of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.
SECTION 10.04. Subrogation. Until the termination of the Commitments and the
-----------
payment in full of the principal of and interest on the Loans and all other
amounts payable to the Administrative Agent or any Lender hereunder, the Company
hereby irrevocably waives all rights of subrogation or contribution, whether
arising by operation of law (including, without limitation, any such right
arising under the Federal Bankruptcy Code) or otherwise, by reason of any
payment by it pursuant to the provisions of this Article X.
SECTION 10.05. Remedies. The Company agrees that, as between the Company on
--------
the one hand and the Lenders and the Administrative Agent on the other hand, the
obligations of any Designated Borrower guaranteed under this Agreement may be
declared to be forthwith due and payable, or may be deemed automatically to have
been accelerated, as provided in Article VII, for purposes of Section 10.01
hereof notwithstanding any stay, injunction or other prohibition (whether in a
bankruptcy proceeding affecting such Designated Borrower or otherwise)
preventing such declaration as against such Designated Borrower and that, in the
event of such declaration or automatic acceleration such obligations (whether or
not due and
Credit Agreement
<PAGE>
82
payable by such Designated Borrower) shall forthwith become due and payable by
the Company for purposes of said Section 10.01.
SECTION 10.06. Continuing Guarantee. The guarantee in this Article X is a
--------------------
continuing guarantee and shall apply to all Guaranteed Obligations whenever
arising.
Credit Agreement
<PAGE>
83
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
The Borrower
------------
MARRIOTT INTERNATIONAL, INC.
By /s/ Raymond G. Murphy
------------------------
Name: Raymond G. Murphy
Title: Senior Vice President & Treasurer
The Administrative Agent
------------------------
CITIBANK, N.A.,
as Administrative Agent
By /s/ Robert T. Wetrus
----------------------
Name: Robert T. Wetrus
Title: Attorney-in-Fact
The Syndication Agent
---------------------
THE BANK OF NOVA SCOTIA,
as Syndication Agent
By /s/ J.R. Trimble
--------------------
Name: J.R. Trimble
Title: Senior Relationship Manager
Address for Notices:
1 Liberty Plaza
New York, NY 10006
Att: Tilsa Cora
Tel: 212-225-5044
Fax: 212-225-5145
Credit Agreement
<PAGE>
84
The Documentation Agent
-----------------------
THE CHASE MANHATTAN BANK,
as Documentation Agent
By /s/ Karen M. Sharf
---------------------
Name: Karen M. Sharf
Title: Vice President
Address for Notices:
270 Park Avenue, 47th Floor
New York, NY 10017
Att: Vito S. Cipriano
Tel: 212-552-7402
Fax: 212-552-5662
BANKS
-----
CITIBANK, N.A.
By /s/ Diane L. Pockaj
---------------------
Name: Diane L. Pockaj
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ J.R. Trimble
-------------------
Name: J.R. Trimble
Title: Senior Relationship Manager
Credit Agreement
<PAGE>
85
THE CHASE MANHATTAN BANK
By /s/ Karen M. Sharf
---------------------
Name: Karen M. Sharf
Title: Vice President
THE BANK OF NEW YORK
By /s/ Ronald R. Reedy
---------------------
Name: Ronald R. Reedy
Title: Vice President
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Andreas Neumeier
----------------------
Name: Andreas Neumeier
Title: Vice President
By /s/ Joel Makowsky
-------------------
Name: Joel Makowsky
Title: Vice President
Credit Agreement
<PAGE>
86
FIRST UNION NATIONAL BANK
By /s/ Barbara K. Angel
----------------------
Name: Barbara K. Angel
Title: Vice President
MELLON BANK, N.A.
By /s/ Laurie G. Dunn
-----------------------------
Name: Laurie G. Dunn
Title: Vice President
NATIONSBANK, N.A.
By /s/ M. David Howard
-----------------------------
Name: M. David Howard
Title: Senior Vice President
BANCA COMMERCIALE ITALIANA-NEW
YORK BRANCH
By /s/ Charles Dougherty
-----------------------------
Name: Charles Dougherty
Title: Vice President
By /s/ Karen Purelis
-----------------------------
Name: Karen Purelis
Title: Vice President
Credit Agreement
<PAGE>
87
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Gregory A. Gilbert
------------------------
Name: Gregory A. Gilbert
Title: Vice President
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By /s/ Cynthia D. Eggers
----------------------
Name: Cynthia D. Eggers
Title: Vice President
WACHOVIA BANK, N.A.
By /s/ Fitzhugh L. Wickham III
-----------------------------
Name: Fitzhugh L. Wickham
Title: Vice President
THE FIRST NATIONAL BANK OF
MARYLAND, A DIVISION OF FMB BANK
By /s/ Shelly M. Trimble
-------------------------
Name: Shelly M. Trimble
Title: Assistant Vice President
Credit Agreement
<PAGE>
88
FIRST HAWAIIAN BANK
By /s/ Scott R. Nahme
--------------------
Name: Scott R. Nahme
Title: Vice President
THE NORTHERN TRUST COMPANY
By /s/ Eric Strickland
----------------------
Name: Eric Strickland
Title: Vice President
Credit Agreement
NY3:#7196054v9
<PAGE>
MARRIOTT INTERNATIONAL, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
($ in millions, except ratio)
Exhibit 12
<TABLE>
<CAPTION>
Fiscal year ended
------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income before income taxes $632 $531 $435 $361 $275
Loss/(income) related to equity method investees 8 8 4 (2) (1)
---- ---- ---- ---- ----
640 539 439 359 274
Add/(deduct):
Fixed charges 103 85 89 59 52
Interest capitalized (21) (16) (9) (8) (4)
Distributed income of equity method investees 5 -- -- -- --
---- ---- ---- ---- ----
Earnings available for fixed charges $727 $608 $519 $410 $322
==== ==== ==== ==== ====
Fixed charges:
Interest expensed and capitalized(1) $51 $38 $46 $17 $11
Estimate of the interest within rent expense 52 47 42 39 38
Share of interest expense of certain equity
method investees -- -- 1 3 3
---- ---- ---- ---- ----
Total fixed charges $103 $85 $89 $59 $52
==== ==== ==== ==== ====
---- ---- ---- ---- ----
Ratio of earnings to fixed charges 7.1 7.2 5.8 6.9 6.2
==== ==== ==== ==== ====
</TABLE>
(1) "Interest expensed and capitalized" includes amortized premiums, discounts
and capitalized expenses related to indebtedness.
<PAGE>
EXHIBIT 21
MARRIOTT INTERNATIONAL, INC.
DOMESTIC SUBSIDIARIES
STATE OF INCORPORATION
State : Arizona
Camelback Country Club, Inc. (d/b/a Camelback Golf Club)
State : California
Rancho San Antonio Retirement Services, Inc., A non-profit Corporation
State : Colorado
Senior Living of Denver, LLC
State : Delaware
Aeropuerto Shareholder, Inc.
BG Operations, Inc.
Big Boy Properties, Inc.
Brooklyn Hotel Services, Inc.
CBM Annex, Inc.
CR14 Tenant Corporation
CR9 Tenant Corporation
CRTM17 Tenant Corporation
CTYD III Corporation
Camelback Properties Inn, Inc.
Capitol Employment Services, Inc.
Capitol Hotel Services, Inc.
Charleston Marriott, Inc.
Chicago Hotel Services, Inc.
Corporate General, Inc.
Courtyard Annex, Inc.
Courtyard Annex, L.L.C.
Courtyard Management Corporation
Customer Survey Associates, Inc.
Desert Springs Real Estate Corporation
Detroit CY Inc.
Detroit Hotel Services, Inc.
Detroit MHS, Inc.
East Side Hotel Services, Inc.
Essex House Condominium Corporation
Fairfield FMC Corporation
Forum Group II, Inc.
Forum Group Payroll, Inc.
Forum-NGH, Inc.
Franchise System Holdings, Inc.
Hearthside Operations, Inc.
Hearthside of Crete, Inc.
Hearthside of Tinley Park, Inc.
HomeSolutions by Marriott, Inc.
Host Restaurants, Inc.
Hunt Valley Courtyard, Inc.
LAX Properties, LLC
LLB C - HOTEL, L.L.C.
1
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LLB F - INN, L.L.C.
LLB F-Suites, L.L.C.
MC Logding Investment Opportunities, Inc.
MI Hotels (Virgin Islands), Inc.
MI Member, LLC
MI Subsidary I, Inc.
MORI Residences, Inc.
MORI SPC Corp.
State : Delaware
MRC I Funding Corporation
MSLS Investments 12, Inc.
MSLS Investments 16, Inc.
MSLS Investments 17, Inc.
MSLS Investments 18, Inc.
MSLS Investments 19, Inc.
MSLS Investments 20, Inc.
MSLS-MapleRidge, Inc.
MTMG Corporation
MarketPlace by Marriott, L.L.C.
Marketplace By Marriott, Inc.
Marriott Braselton Corporation
Marriott College Food Services, Inc.
Marriott Continuing Care, Inc.
Marriott Distribution Services, Inc.
Marriott Hotel Plano, L.L.C.
Marriott Hotel Services, Inc.
Marriott Hotels of Panama, Inc.
Marriott Hurghada Management, Inc.
Marriott Information Services, Inc.
Marriott International Administrative Services, Inc.
Marriott International Capital Corporation
Marriott International Design & Construction Services, Inc.
Marriott International JBS Corporation
Marriott International, Inc.
Marriott Kauai Ownership Resorts, Inc.
Marriott Kauai, Inc.
Marriott Lincolnshire Theatre Corporation
Marriott Market Street Hotel, Inc.
Marriott Mirage City Management, Inc.
Marriott Overseas Company, L.L.C.
Marriott Overseas Owners Services Corporation
Marriott Ownership Resorts, Inc.
Marriott P.R. Management Corporation
Marriott Payroll Services, Inc.
Marriott Ranch Properties, Inc.
Marriott Resort at Seaview, Inc.
Marriott Resorts Sales Company, Inc.
Marriott Resorts, Travel Company, Inc.
Marriott Rewards, Inc.
2
<PAGE>
Marriott SLS Investments 10, Inc.
Marriott Senior Living Services, Inc.
Marriott Sharm El Sheikh Management, Inc.
Marriott U.K. Holdings, Ltd.
Marriott Vacation Properties of Florida, Inc.
Marriott Wardman Park Investment, Inc.
Marriott Worldwide Management, Inc.
Marriott Worldwide Payroll Corp.
Marriott Worldwide Sales and Marketing, Inc.
Marriott's Desert Springs Development Corporation
Marriott's Greenbelt Hotel Services, Inc.
Meridian-Indianapolis, L.L.C.
Mid-Atlantic Specialty Restaurants, Inc.
Musicians, Inc.
Nashville Airport Hotel, LLC
State : Delaware
New York Retirement Properties, Inc.
North Drury Lane Productions, Inc.
Osage Beach Hotel, LLC
Potomac Advertising, Inc.
RC Marriott II, Inc.
RC Marriott III, Inc.
RC Marriott, Inc.
RC-UK, Inc.
RHG Finance Corporation
RHG Investments, Inc.
RHHI Acquisition Corp.
RHHI Investment Corp.
RHOC (Canada), Inc.
RHOC (Mexico), Inc.
RINA (International) Inc.
ROCK Partners, L.L.C.
Ramada Franchise Systems (Caribbean), Inc.
Ramada Garni Franchise Systems, Inc.
Renaissance Florida Hotel, Inc.
Renaissance Hotel Holdings, Inc.
Renaissance Hotel Operating Company
Renaissance International, Inc.
Renaissance Reservations, Inc.
Renaissance Services, Inc.
Residence Inn by Marriott, Inc.
Ritz-Carlton (Virgin Islands), Inc.
Rock Lynnwood/Snohomish GenPar, Inc.
SC Orlando, L.L.C.
SHC Eastside II, L.L.C.
Schaumberg/Oakbrook Marriott Hotels, Inc.
Shady Grove Courtyard, Inc.
Springhill SMC Corporation
St. Louis Airport Hotel, LLC
Staffing Services, Inc.
3
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The Ritz-Carlton Hotel Company of Puerto Rico, Inc.
The Ritz-Carlton Hotel Company, L.L.C.
TownePlace Management Corporation
West Street Hotels, Inc.
Weststock Corporation
State : Florida
Marriott Resorts Title Company, Inc.
Redi-Medical Alert, Inc.
State : Georgia
The Dining Room Corporation
State : Hawaii
F. L. Insurance Corporation
State : Indiana
Excepticon of Indiana, Inc.
Forum Cupertino Lifecare, Inc.
Forum Lifecare, Inc.
National Guest Homes, LLC
State : Kansas
Kansas Hospitality Services, Inc.
State : Maryland
Columbia Courtyard, Inc.
MHS Realty Sales, Inc.
MII Conference Center, Inc.
Marriott International Hotels Inc.
Marriott Worldwide Corporation
VCS, Inc.
Vanguard Charles Street, LLC
State : Nevada
MI Hotels of Las Vegas, Inc.
State : South Carolina
Marriott Resorts Hospitality Corporation
State : Texas
Dalrich Club (a non-profit corporation)
Hospitality International, Inc.
Hospitality Services, Inc.
Inn Club, a Non-Profit Corp.
MHSI Conference Centers of Texas, Inc.
Marriott Claims Services Corporation
The Finish Line Club, A Texas non-profit corporation
The Fossil Creek Club No. 1
The Gazebo Club
The Hearthroom Club
The Legacy Park Club (Non-Profit)
4
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The Plano Club (Non-Profit)
WinBeer, Inc.
State : Utah
Gambits A Nonprofit Corporation (Incorporated Club)
State : Virginia
Marriott Senior Living Insurance Services, Inc.
State : West Virginia
West Virginia Marriott Hotels, Inc.
5
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MARRIOTT INTERNATIONAL, INC.
DOMESTIC SUBSIDIARIES
ASSUMED NAMES
Corporation : CTYD III Corporation
State Assumed Name
CA Courtyard by Marriott
FL Courtyard by Marriott
IL Courtyard by Marriott
IN Courtyard by Marriott
KY Courtyard by Marriott
MD Courtyard by Marriott
NJ Courtyard by Marriott
NM Courtyard by Marriott
NV Courtyard by Marriott
WA Courtyard by Marriott
Corporation : Courtyard Management Corporation
State Assumed Name
AR Little Rock CbM
AZ Phoenix Mesa CbM, Camelback CbM, Phoenix Airport CbM,
Scottsdale CbM, Tuscon CbM
AZ Phoexnix MetroCenter CbM
CA Courtyard by Marriott
CA
Pleasant Hills Courtyard
CO Denver Airport CbM, Boulder CbM, Denver SE CbM
CT Norwalk CbM, Hartford CbM
DE Wilmington CbM, (1102 West Street & 48 Geofry Drive)
FL Courtyard by Marriott
GA Executive Park CbM, Roswell CbM, Atlanta Perimeter CbM,
Atlanta Airport CbM, Midtown CbM
GA Macon CbM, Atlanta Delk Road CbM, Agusta CbM
GA Peachtree Corners CbM, Atlanta Airport South CbM
GA Peachtree-Dunwoody CbM, Cumberland Center CbM, Gwinnett
Mall CbM, Jimmy Carter CbM
GA Savannah CbM, Columbus CbM
GA Windy Hill CbM, Northlake CbM, Atlanta Airport South CbM,
Atlanta Preimeter CbM, Atlanta Airport CbM
IA Des Moines/Clive CbM, Quad Cities CbM
IL Arlington Heights CbM, Arlington Heights South CbM,
Chicago/Deerfield CbM, Chicago Downtown CbM
IL Chicago-Highland Park CbM, Chicago/Lincolnshire CbM,
Glenview CbM, Naperville CbM
IL Oakbrook Terrace CbM, O'Hare CbM, Rockford CbM, Waukegan
CbM, Wood Dale CbM
IN Courtyard by Marriott
KY
Courtyard by Marriott
LA Baton Rouge CbM
MA Lowell CbM, Stoughton CbM, Milford CbM
MD Courtyard by Marriott
MI Dearborn CbM, Detroit Airport CbM, Livonia CbM, Warren
CbM, Southfield CbM, Troy CbM
MI Detriot/Novi CbM
6
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MI Southfield CbM, Livonia CbM, Warren CbM, Detroit Airport
CbM, Dearborn CbM, Auburn Hills CbM
MI Troy CbM, Auburn Hills CbM
MN Eden Prairie CbM, Medota Heights CbM
MO Creve Coeur CbM
MO Earth City CBM
MO Kansas City Airport CbM, St. Louis-Westport CbM
MO St. Louis CbM, South Kansas City CbM
NC Charlotte Arrowood CbM
Corporation : Courtyard Management Corporation
State Assumed Name
NC Charlotte South Park CbM, Charlotte University CbM
NC Fayetteville CbM, Greensboro CbM
NC Raleigh Airport CbM, Raleigh-Cary Cbm, Raleigh CbM
NJ Courtyard by Marriott
NM Courtyard by Marriott
NV Courtyard by Marriott
NY Fishkill CbM, Poughkeepsie CbM, Rochester CbM, Rye CbM,
Syracuse CbM, Tarrytown CbM
OH Blue Ash CbM, Dayton Mall CbM, Toledo CbM, Worthington CbM
OK Oklahoma City CbM
OR Portland CbM
PA Pittsburg CbM
PA Willow Grove CbM, Pittsburgh CbM, Devon CbM, Valley Forge
CbM, Philadelphia CbM
RI
Middletown CbM
SC Columbia NW CbM
TN Nashville Airport CbM, Park Avenue, Memphis CbM, Memphis
Airport CbM, Chattanooga CbM, Brentwood CbM
TX DFW Courtyard North
TX Las Colinas CbM, Dallas North Park CbM, Arlington CbM, San
Antonio CbM
TX Plano CbM, Fort Worth CbM, Dallas Northeast CbM, Dallas
Stemmons CbM
TX San Antonio Airport CbM, San Antonio Medical Center CbM,
Bedford CbM, Addison CbM, LBJ @ Josey CbM
VA Brookfield CbM
VA Dulles South CbM, Rosslyn CbM
VA Fairoaks CbM
VA Herndon CbM,
VA Manassas CbM, Charlottesville CbM
VA Richmond Innsbrook CbM (Henrico County)
WA Courtyard by Marriott
Corporation : Detroit Hotel Services, Inc.
State Assumed Name
MI Detroit Marriott at Renaissance Center - PENDING
Corporation : Detroit MHS, Inc.
State Assumed Name
MI Detroit Marriott At Renaissance Center
7
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Corporation : Fairfield FMC Corporation
State Assumed Name
AZ Scottsdale FIbM (Fairfield Inn by Marriott), Phoenix FIbM,
Flagstaff FIbM
CA Anaheim Fairfield Inn
CA Buena Park FIbM, Placentia FIbM, Rancho Cordova FIbM,
Ontario FIbM
CT Hartford Airport FIbM (Windsor/Windsor Lock)
DE Wilmington FIbM
FL ainesville FIbM, Miami West FbM, Orlando International
Drive FbM, Orlando South FbM, Winter Park FbM
GA Atlanta Gwinnett Mall FIbM, Atlanta Northlake FIbM
IA
Cedar Rapids FIbM, Des Moines FIbM
Corporation : Fairfield FMC Corporation
State Assumed Name
IL Bloomington/Normal FbM, Chicago Lansing FbM, Glenview FbM,
Peoria FbM, Rockford FbM, Willowbrook FbM
IN Fort Wayne FIbM
IN Indianapolis Castleton FIbM, Indianapolis Castelton FIbM,
Indianapolis College Park FIbM
KY Florence FIbM, Louisville East FIbM
ME Portland FIbM
MI Detroit Airport FIbM, Detroit Madison FIbM, Detroit West
FIbM, Detroit Warren FIbM, Kalmazoo FIbM
MO St. Louis Hazelwood FIbM
NC Charlotte Airport FIbM, Charlotte Northeast FIbM
NC Greensboro Highpoint FIbM, Durham FIbM
NC Rocky Mount FIbM, Fayetteville FIbM, Raleigh Northeast
FIbM, Wilmington FIbM
NH Merrimack Fairfield FIbM
NV Las Vegas FIbM
NY
Lancaster FIbM, Syracuse FIbM
OH Akron FIbM, Cincinnati Sharonville FIbM, Cleveland Brook
Park FIbM, Cleveland Willoughby FIbM
OH Columbus North & West FIbM, Dayton FIbM, Toledo Holland
FIbM
PA Pittsburgh/Warrendale FIbM, Harrisburg West FIbM
SC Greenville FIbM, Hilton Head FIbM
TN Johnson City FIbM, Jackson FIbM, Chattanooga FIbM
TX Arlington Fairfield Suites
VT Burlington Colchester FIbM
WI Milwaukee FIbM, Madison FIbM
Corporation : Forum-NGH, Inc.
State Assumed Name
AL Galleria Oaks Guest Home
AZ Village Oaks at Glendale
FL Village Oaks at Melbourne (Reg. No. G98300900080)
FL Village Oaks at Orange Park
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FL Village Oaks at Southpoint
IN Village Oaks at Fort Wayne
IN Village Oaks at Greenwood
NV VIllage Oaks at Las Vegas
TX VIllage Oaks at Cielo Vista, NGH/Marriott
TX
Village Oaks at Farmers Branch
TX Village Oaks at Hollywood Park
Corporation : MI Hotels of Las Vegas, Inc.
State Assumed Name
NV Courtyard by Marriott, Residence Inn by Marriott, Las
Vegas Marriott Suites
NV
Residence Inn by Marriott
Corporation : Marriott Continuing Care, Inc.
State Assumed Name
FL Calusa Harbor
Corporation : Marriott Hotel Services, Inc.
State Assumed Name
AZ Marriott Camelback Inn Resort
CA Anaheim Marriott Hotel, Los Angeles Airport Marriott,
Newport Beach Marriott Hotel
CA Marriott's Desert Springs Resort and Spa
CA Marrott's Rancho Las Palmas Resort
CA Napa Valley Marriott Hotel
CA Rancho Las Palmas Marriott Resort, Warner Center Marriott
Hotel
CO Denver West Marriott Hotel
CT Stamford Marriott Hotel (Stamford & Rocky Hill)
FL Fort Lauderdale Marina, Tampa Airport
FL Miami International Airport Marriott
GA Atlanta Norcross Marriott Hotel
GA Atlanta Perimeter Center Hotel
IL
Chicago Deerfield Marriott Suites, Chicago Marriott
Downtown Hotel, Chicago Marriott Oakbrook Hotel
IL Lincolnshire Catering
MA Marriott Long Wharf
MD Bethesda Marriott Hotel, Washington Gaithersburg Marriott
Hotel
MI Detroit Romulus Marriott Hotel, Detroit Metro Airport
Marriott Hotel
MN Minneapolis City Center Marriott Hotel
MO St. Louis Pavilion Marriott Hotel, St. Louis Airport
Marriott, Kansas City Airport Marriott
MO Tan-Tar-A Marriott Resort
NH Nashua Marriott Hotel
NJ Glenpoint Marriott Hotel, Princeton Marriott Hotel,
Somerset Marriott Hotel
NJ Hanover Marriott Hotel
NJ Park Ridge Marriott Hotel, Newark Airport Marriott Hotel,
Marriott's Seaview Golf Resort
9
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NY Long Island Marriott Hotel, Westchester Marriott Hotel
OK Oklahoma City Marriott Hotel
OR Portland Marriott Hotel
PA Philadelphia Airport Marriott Hotel
PA
Philadelphia Marriott Hotel
TN Nashville Airport Marriott Hotel
TX Dallas Marriott Quorum, Houston Airport Marriott
VA Crystal City Marriott Hotel
VA Marriott's Westfields Conference Center
VA Westfield's Marriott
Corporation : Marriott International, Inc.
State Assumed Name
AZ Mountain Shadows Resort, Mountain Shadows, Marriott's
Mountain Shadows Resort
CA Irvine Marriott Hotel
CA La Jolla Marriott Hotel
CA Los Angeles Airport Marriott
CA San Diego Marriott Hotel Marina
IL Chicago Marriott O'Hare
MI Courtyard by Marriott, Fairfield Inn
NY Laguardia Marriott
NY Marriott's Wind Watch Hotel and Golf Club, Long Island
Marriott Hotel and Conference Center
Corporation : Marriott International, Inc.
State Assumed Name
NY New York Marriott East Side
NY New York Marriott Financial Center Hotel
NY New York Marriott Marquis Hotel
NY Westchester Marriott, New York Marriott Marquis
OH Fairfield Inn
TN Fairfield Inn 12/18/03 renew date
VA HomeSolutions By Marriott , Inc.
Corporation : Marriott Kauai Ownership Resorts, Inc.
State Assumed Name
CA (MVCI) Orange County
CA Marriott Vacation Club International (MVCI)
CO MVCI
HI MVCI - Registration Number: 223458
NY MVCI
TX MVCI
UT MVCI
Corporation : Marriott Ownership Resorts, Inc.
State Assumed Name
AL Marriott Vacation Club International (MVCI)
CA MVCI
CO MVCI
CT
10
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MVCI
DE MVCI
FL Faldo Golf Institute by Marriott
FL MVCI
GA MVCI
IL MVCI
KY MVCI
MA MVCI
MD MVCI
MN MVCI
NC MVCI
NH MVCI
NJ MVCI
NV MVCI
NY MVCI
OH MVCI
OR
MVCI
RI MVCI
SC MVCI
TX MVCI
UT MVCI
VA MVCI
WA MVCI
Corporation : Marriott Resorts Hospitality Corporation
State Assumed Name
CA Marriott Vacation Club International (MVCI)
CO MVCI
FL MVCI
GA MVCI
KY MVCI One
Corporation : Marriott Resorts Hospitality Corporation
State Assumed Name
MA MVCI
MD MVCI
MN MVCI
NC MVCI
NH MVCI
NJ MVCI
NV MVCI
OH MVCI
OR MVCI
SC MVCI
TX MVCI
UT MVCI
VA
MVCI
VA Tidewater's Sweets and Sundries
WA MVCI
Corporation : Marriott Resorts Sales Company, Inc.
State
11
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Assumed Name
CO Marriott Vacation Club International (MVCI)
Corporation : Marriott Resorts, Travel Company, Inc.
State Assumed Name
CA Marriott Vacation Club International (MVCI)
FL
MVCI
GA MVCI
KY MVCI Two
MD MVCI
MN MVCI
NC MVCI
NH MVCI
NJ MVCI
NV MVCI
OH MVCI
OR MVCI
SC MVCI
TX MVCI
UT MVCI
VA MVCI
Corporation : Marriott Senior Living Services, Inc.
State Assumed Name
AZ Brighton Gardens
CA Brighton Gardens
CA Brighton Gardens Carlsbad
CA
Brighton Gardens Carmel Valley
CA Brighton Gardens of Yorba Linda
CA Marriott's MapleRidge of Hemet
CA Marriott's MapleRidge of Laguna Creek
CA Villa Valencia
CT Brighton Gardens of Stamford
CT Edgehill/Continuing Care Retirement Community of Greater
Stamford, Inc.
FL Brighton Gardens (in Boynton Beach, Port Saint Lucie)
FL Brighton Gardens by Marriott of Maitland
Corporation : Marriott Senior Living Services, Inc.
State Assumed Name
FL Brighton Gardens by Marriott of Venice
FL Brighton Gardens by Marriott of West Palm Beach
FL Brighton Gardens of Boca Raton
FL Brighton Gardens of Boynton Beach
FL Brighton Gardens of Naples
FL Calusa Harbour (in Ft. Meyer)
FL Marriott Home Health Services
FL Stratford Court (in Boca Raton, Palm Harbour)
FL The Horizon Club (in Deerfield)
GA Brighton Gardens of Buckhead
IL Brighton Gardens by Marriott of Prospect Heights and Burr
Ridge
12
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NC Brighton Gardens of Raleigh
NC
Brighton Gardens of Winston-Salem
NJ Brighton Gardens of Edison
NJ Brighton Gardens of Middletown
PA The Quadrangle (in Pennsylvania)
TN Brighton Gardens of Brentwood
TX Brighton Gardens by Marriott of Austin
TX Brighton Gardens by Marriott of San Antonio & Bexar County
TX Brighton Gardens by Marriott of Tanglewood
TX Brighton Gardens, (in Dallas County)
VA Belvoir Woods Health Care Center
VA Brighton Gardens (in Virginia Beach)
VA The Colonnades
VA The Fairfax
Corporation : National Guest Homes, LLC
State Assumed Name
TX HGH Assisted Living
Corporation : Renaissance Hotel Operating Company
State Assumed Name
MA Renaissance Bedford Hotel
Corporation : Residence Inn by Marriott, Inc.
State Assumed Name
AZ Phoenix Airport-Tempe RI, Scottsdale RI, Flagstaff RI
AZ Tucson RI
CA
CA Anaheim RI, Fountain Valley RI, Irvine RI, Placentia RI,
Costa Mesa RI
CA Bakersfield RI
CA Beverly Hills RI
CA Costa Mesa RI, Silicon Valley I & II RI, San Jose RI,
Mountain View RI
CA Fremont RI
CA
LaJolla RI, Rancho Bernardo RI, Kearney Mesa RI
CA Long Beach RI, Arcadia RI, Manhattan Beach RI, Torrance RI
CA Pleasant Hills RI, San Ramon RI
CA Sacramento-Natomas RI
CA San Mateo RI
CO Colorado Springs RI, Denver Downtown RI, Boulder RI,
Denver South RI
Corporation : Residence Inn by Marriott, Inc.
State Assumed Name
DE Wilmington RI
FL Boca Raton RI, Lake Buena Vista RI, Pensacola RI
FL Jacksonville RI
FL St. Petersburg RI
GA Atlanta Midtown RI, Atlanta Alpharetta RI, Atlanta Airport
13
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RI, Atlanta Buckhead RI
GA Atlanta Perimeter Mall RI
IL Chicago O'Hare RI, Deerfield-Chicago RI, Chicago Downtown
RI, Chicago Lombard RI
IN Fort Wayne RI
IN Indianapolis North RI
KY Louisville RI, Lexington RI
LA Bossier City RI
MA Boston Tewksbury RI, Meriden RI, Boston Westborough RI,
Danvers RI
MA
Cambridge Residence Inn by Marriott
MD Annapolis RI, Bethesda RI
MI East Lansing RI, Dearborn RI, Ann Arbor RI, Troy Central
RI
MI Troy South RI, Southfield Michigan RI, Warren RI, Grand
Rapids RI, Kalamazoo RI
MN Eden Prairie RI
MO St. Louis Chesterfield RI, St. Louis Galleria RI, St.
Louis Westport RI
NC Charlotte North RI
NC Durham RI, Greensboro RI
NC Raleigh RI,
NC Winston-Salem RI
NE Omaha Central RI
NM Santa Fe RI, Albuquerque RI
NV Las Vegas Hughes Center
NV Las Vegas RI
NY East Syracuse RI
OH Akron RI, Blue Ash RI, Cincinnati North RI, Columbus East
& North RI
OH
Dayton North & South RI, Dublin Ohio RI, Toledo RI
OK Oklahoma City RI
PA Willow Grove RI, Philadelphia Airport RI, Greentree RI,
Berwyn RI
SC Columbia RI
TN Maryland Farms RI, Memphis RI
TX Dallas Central Expressway RI, Dallas Market Center RI,
Houston Astrodome RI, Houston Clear Lake RI
TX Houston Southwest RI, Las Colinas RI, Lubbock RI, Tyler RI
TX San Antonio Residence Inn by Marriott (Bexar, Travis
Counties)
VA Herndon RI
WA Residence Inn Redmon
WI Green Bay RI
Corporation : The Ritz-Carlton Hotel Company, L.L.C.
State Assumed Name
DC The Fairfax Club (see remarks)
VA The Ritz-Carlton, Tysons Corner
14
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MARRIOTT INTERNATIONAL, INC.
NON-U.S. SUBSIDIARIES
Country: Argentina
------------------
Marriott Argentina S.A.
Country : Aruba
----------------
Marriott Vacation Club International of Aruba, N.V.
Marriott Aruba N.V.
Marriott Resorts Hospitality of Aruba N.V.
Plant Hotel N.V.
Marriott International Service Ltd.
Country : Australia
--------------------
Mirmar Hotels Pty Limited
Country : Austria
------------------
Marriott Hotel Betriebsgesellschaft, GmbH
Country : Bahamas
------------------
Marriott Ownership Resorts (Bahamas) Limited
Marriott Resorts Hospitality (Bahamas) Limited
Country: Barbados
-----------------
Marriott Foreign Sales Corporation
Country : Bermuda
------------------
Marriott International Services, Ltd.
Crest Management Services, Limited
CL International Insurance Company Ltd.
Marriott International Lodging Ltd.
Renaissance International Lodging Ltd.
Ramada International Lodging Ltd.
Country: Brazil
---------------
Renaissance de Brasil Hoteleria
Country : British Virgin Islands
---------------------------------
Ramasia International Limited Ltd.
Country: Canada
----------------
Marriott Lodging (Canada) Ltd.
Renaissance Hotels Canada Limited
Marriott Hotels of Canada Ltd.
MCL Hotel Corporation
Toronto Realty Airport Hotel, Ltd.
Toronto Hotel Land Holding Ltd.
Country: Cayman Islands
-----------------------
Renaissance Caribbean Ltd.
Country : Chile
----------------
MORI Chile S.A.
Marriott Chile S.A.
Marriott Inversiones y Servicios Limitada
Hotelera Cincuenta y Siete Cuarenta y Uno, S.A.
Country : China - Hong Kong
----------------------------
Marriott Asia Pacific Management Limited
Country: France
---------------
Renaissance France SARL
Marriott de Gestion Hoteliere SNC
15
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Country : Germany
------------------
Muenchen Marriott Hotelmanagement GmBH
Frankfurt Marriott Hotelmanagement GmBH
Bremen Marriott Hotelmanagement GmBH
Leipzig Marriott Hotelmanagement GmbH
Marriott Hotel Holding GmbH
Hamburg Marriott Hotelmanagement GmbH
Middle Ring Properties GMBH Hotelbetriebsgesellschaft
MVCI Holidays GmbH
The Ritz-Carlton Hotel Company of Germany, GmbH
Country : Greece
-----------------
Oceanic Special Shipping Company Incorporated
Greek Line Special Shipping Company Incorporated
Marriott Hotels Hellas, S.A.
Country : Hong Kong
--------------------
Renaissance Management Hong Kong Limited
Marriott Hong Kong Limited
The Ritz-Carlton Limited
Marriott Properties (International) Limited
Ramada Pacific Limited
Marriott Asia Pacific Ltd.
Country : India, Bombay
------------------------
Marriott Hotels India Private Limited
Country : Italy
MVCI Holidays S.r.l.
Country : Japan
----------------
Tokyo Convention Hotel Co., Ltd.
The Ritz-Carlton Japan, Inc.
Country: Luxembourg
-------------------
Marriott International Licensing Company S.A.R.L.
International Hotel Licensing Company S.A.R.L.
Country : Mexico
-----------------
ElCrisa, S.A. de C.V.
Servimarr, S.A. de C.V.
Polserv, S.A. de C.V.
Marriott Mexicana S.A. de C.V.
Marriott Hotels, S.A. de C.V.
Operadora Marriott, S.A. de C.V.
Promociones Marriott, S.A. de C.V.
Empresas Turisticas Cemex-Marriott, S.A. de C.V.
The Ritz-Carlton Hotel Company of Mexico, S.A. de C.V.
R.C. Management Company of Mexico, S.A. de C.V.
16
<PAGE>
Country : Netherlands
----------------------
Marriott RHG Acquisition B.V.
Renaissance Hotel Group N.V.
Renaissance Management B.V.
Marriott European Venture B.V.
Marriott Hotels of Amsterdam B.V.
Diplomat Properties B.V.
Chester Eaton Properties B.V.
Marriott International Holding Company B.V.
Marriott Hotels International B.V.
Renaissance Hotels International B.V.
Ramada Hotels International B.V.
Marriott International Finance Company B.V.
Country: Netherlands Antilles
-----------------------------
Marriott International Lodging N.V.
Renaissance International Lodging N.V.
Ramada International Lodging N.V.
Country : New Zealand
----------------------
Ramada Inns Limited
Country : Panama
-----------------
Panmar Construction Services, Inc. (Inactive)
Country : Poland
-----------------
LIM Joint Venture Ltd.
Country : Samoa, Western
-------------------------
Marriott Hotels Western Samoa Limited
Country : Singapore
--------------------
Marriott Hotels Singapore Pte Ltd
The Ritz-Carlton Hotel Company of Singapore PTE LTD
Country : Spain
----------------
MVCI Espana, S.L.
Marriott Hotels, S.L.
MVCI Holidays, S.L.
MVCI Mallorca, S.L.
MVCI Management, S.L.
R-C Spain, S.L.
Country : Switzerland
----------------------
Marriott (Schweiz) GmbH
Marriott (Switzerland) Liability Ltd.
Country : The U.S. Virgin Islands
----------------------------------
Ramada Island, Inc. (dissolved)
17
<PAGE>
Country : United Kingdom
-------------------------
MVCI Management (Europe) Limited
Marriott Hotels, Ltd.
Marriott Restaurants Limited
Marriott Hotels and Catering (Holdings) Limited
Consolidated Supplies Limited
Adachi Marriott European Partnership
Lomar Hotel Company Ltd.
Marriott Catering Limited
MVCI Europe Limited
Cheshunt Hotel Limited
Marriott Hotels (Reading) Limited
Marriott In-Flite Services Limited
The Ritz-Carlton Hotel Limited
18
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Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report, dated January 28, 1999, included in this Form 10-K, into the Company's
previously filed Registration Statements Files No. 333-58747, No. 333-48417, and
No. 333-48407.
Washington, D.C.
March 16, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> JAN-03-1997<F1> JAN-02-1998<F1> JAN-01-1999
<PERIOD-START> DEC-30-1995 JAN-04-1997 JAN-03-1998
<PERIOD-END> JAN-03-1997 JAN-02-1998 JAN-01-1999
<CASH> 135 208 390
<SECURITIES> 0 0 0
<RECEIVABLES> 145 489 605
<ALLOWANCES> 0 0 0
<INVENTORY> 88 91 75
<CURRENT-ASSETS> 545 992 1,333
<PP&E> 1,824 1,537 2,275
<DEPRECIATION> 297 312 364
<TOTAL-ASSETS> 3,756 5,161 6,233
<CURRENT-LIABILITIES> 962 1,250 1,412
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 3
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<TOTAL-REVENUES> 5,738 7,236 7,968
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<EXTRAORDINARY> 0 0 0
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<NET-INCOME> 270 324 390
<EPS-PRIMARY> 1.06 1.27 1.56
<EPS-DILUTED> 0.99 1.19 1.46
<FN>
<F1>
Data have been restated compared to previously presented data, due to the
change in the Company's accounting policy for managed hotels and managed senior
living communities. Refer to Summary of Significant Accounting Policies
footnote in the Consolidated Financial Statements included elsewhere herein.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JAN-01-1999<F1> JAN-01-1999<F1> JAN-01-1999<F1>
<PERIOD-START> JAN-03-1998 JAN-03-1998 JAN-03-1998
<PERIOD-END> MAR-27-1998 JUN-19-1998 SEP-11-1998
<CASH> 341 182 180
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<CURRENT-ASSETS> 1,171 1,039 1,041
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0 0 0
0 0 0
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<TOTAL-REVENUES> 1,715 3,642 5,446
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<LOSS-PROVISION> 0 0 0
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<INCOME-TAX> 56 119 173
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<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 89 190 276
<EPS-PRIMARY> 0.35 0.75 1.09
<EPS-DILUTED> 0.33 0.70 1.02
<FN>
<F1>Data have been restated compared to previously presented data, due to the
change in the Company's accounting policy for managed hotels and managed senior
living communities. Refer to Summary of Significant Accounting Policies
footnote in the Consolidated Financial Statements included elsewhere herein.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
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<PERIOD-START> JAN-04-1997 JAN-04-1997 JAN-04-1997
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<ALLOWANCES> 0 0 0
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<CURRENT-ASSETS> 0 0 0
<PP&E> 0 0 0
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 0 0 0
<CURRENT-LIABILITIES> 0 0 0
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0 0
<SALES> 1,542 3,280 4,944
<TOTAL-REVENUES> 1,542 3,280 4,944
<CGS> 0 0 0
<TOTAL-COSTS> 1,407 2,986 4,514
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<LOSS-PROVISION> 0 0 0
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<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 69 153 227
<EPS-PRIMARY> 0.27 0.60 0.89
<EPS-DILUTED> 0.26 0.57 0.84
<FN>
<F1>Data have been restated compared to previously presented data, due to the
change in the Company's accounting policy for managed hotels and managed senior
living communities. Refer to Summary of Significant Accounting Policies
footnote in the Consolidated Financial Statements included elsewhere herein.
<F2>No balance sheet data are presented in this restated financial data schedule
since such balance sheet data were not presented on financial data schedules
previously filed.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99
FORWARD-LOOKING STATEMENTS
The following factors, among others, could cause actual results to differ
materially from those contained in forward-looking statements made in this
report or presented elsewhere by management.
Dependence on Others: Our present growth strategy for development of additional
lodging and senior living facilities entails entering into and maintaining
various arrangements with present and future property owners, including Host
Marriott Corporation and New World Development Company Limited. There can be no
assurance that any of our current strategic arrangements will continue, or that
we will be able to enter into future collaborations.
Contract Terms for New Units: The terms of the operating contracts, distribution
agreements, franchise agreements and leases for each of our lodging facilities
and senior living communities are influenced by contract terms offered by our
competitors at the time such agreements are entered into. Accordingly, we
cannot assure you that contracts entered into or renewed in the future will be
on terms that are as favorable to us as those under existing agreements.
Competition: The profitability of hotels, vacation timeshare resorts, senior
living communities, and distribution centers we operate is subject to general
economic conditions, competition, the desirability of particular locations, the
relationship between supply of and demand for hotel rooms, vacation timeshare
resorts, senior living facilities, and distribution services, and other factors.
We generally operate in markets that contain numerous competitors and our
continued success will depend, in large part, upon our ability to compete in
such areas as access, location, quality of accommodations, amenities,
specialized services, cost containment and, to a lesser extent, the quality and
scope of food and beverage services and facilities.
Supply and Demand: The lodging industry may be adversely affected by (1) supply
additions, (2) international, national and regional economic conditions, (3)
changes in travel patterns, (4) taxes and government regulations which influence
or determine wages, prices, interest rates, construction procedures and costs,
and (5) the availability of capital to allow us and potential hotel and senior
living community owners to fund investments. Our timeshare and senior living
service businesses are also subject to the same or similar uncertainties and,
accordingly, we cannot assure you that the present level of demand for timeshare
intervals and senior living communities will continue, or that there will not be
an increase in the supply of competitive units, which could reduce the prices at
which we are able to sell or rent units.
Year 2000 Compliance: Our failure or a failure by third parties with whom we do
business to successfully address the Year 2000 problem, as described in Part II,
Item 7 of this Report (Management's Discussion and Analysis of Financial
Condition and Results of Operations), could materially and adversely effect us,
our business or financial condition.
