<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Marriott International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Corporate Headquarters: Mailing Address:
10400 Fernwood Road Marriott Drive
Bethesda, Maryland 20817 [LOGO OF MARRIOTT] Washington, D.C.
20058
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, APRIL 28, 2000
----------------
To our Shareholders: March 23, 2000
The 2000 annual meeting of shareholders of Marriott International, Inc. (the
"Company") will be held at the J.W. Marriott Hotel, 1331 Pennsylvania Avenue,
N.W., Washington, D.C. on Friday, April 28, 2000, beginning at 10:30 a.m. Doors
to the meeting will open at 9:30 a.m. At the meeting, shareholders will act on
the following matters:
(1) Election of four directors, each for a term of three years;
(2) Ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors for fiscal 2000;
(3) Ratification of an increase of 15 million shares of the Company's Class
A common stock authorized for issuance under the Marriott
International, Inc. 1998 Comprehensive Stock and Cash Incentive Plan;
(4) Consideration of one shareholder proposal; and
(5) Any other matters that properly come before the meeting.
Shareholders of record at the close of business on March 6, 2000 will be
entitled to notice of and to vote at this meeting.
For the convenience of our shareholders, proxies may be given either by
telephone, electronically through the Internet, or by completing, signing and
returning the enclosed proxy card. In addition, shareholders may elect to
receive future shareholder communications, including proxy materials, through
the Internet. Instructions for each of these options can be found in the
enclosed materials.
By order of the Board of Directors,
[/s/ W. DAVID MANN]
W. David Mann
Secretary
PLEASE REFER TO THE OUTSIDE BACK COVER FOR DIRECTIONS TO THE MEETING
AND INFORMATION ON PARKING, PUBLIC TRANSPORTATION AND LODGING.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About the Meeting......................................................... 1
What is the purpose of the annual meeting?.............................. 1
Who is entitled to vote?................................................ 1
Who can attend the meeting?............................................. 1
What constitutes a quorum?.............................................. 2
How do I vote?.......................................................... 2
Can I vote by telephone or electronically?.............................. 2
Can I change my vote after I return my proxy card, or after I vote by
telephone or electronically?........................................... 2
What are the Board's recommendations?................................... 2
What vote is required to approve each item?............................. 3
Who will count the vote?................................................ 3
What shares are included on the proxy card(s)?.......................... 3
What does it mean if I receive more than one proxy card?................ 3
How will voting on any other business be conducted?..................... 3
When are shareholder proposals for the 2001 annual meeting of
shareholders due?...................................................... 3
Can a shareholder nominate someone to be a director of the Company?..... 4
How much did this proxy solicitation cost?.............................. 4
Can I receive future shareholder communications electronically through
the Internet?.......................................................... 4
Stock Ownership........................................................... 5
Who are the largest owners of the Company's stock?...................... 5
How much stock do the Company's directors and executive officers own?... 5
Section 16(a) Beneficial Ownership Reporting Compliance................. 7
Item 1--Election of Directors ............................................ 8
Directors Standing for Election......................................... 8
Directors Continuing in Office.......................................... 10
Committees of the Board of Directors.................................... 12
Directors' Compensation................................................. 13
Compensation Committee Interlocks and Insider Participation............. 14
Executive Compensation.................................................. 15
Summary Compensation Table............................................ 15
Stock Options......................................................... 17
Report on Executive Compensation by the Compensation Policy Committee... 19
Shareholder Return Performance Graph.................................... 23
Certain Transactions.................................................... 24
Item 2--Ratification of Appointment of Independent Auditors............... 27
Item 3--Ratification of Increase of 15 Million Shares of the Company's
Class A Common Stock Authorized for Issuance under the Marriott
International, Inc. 1998 Comprehensive Stock and Cash Incentive Plan..... 28
Item 4--Shareholder Proposal.............................................. 33
Other Matters............................................................. 34
</TABLE>
i
<PAGE>
[LOGO OF MARRIOTT]
MARRIOTT INTERNATIONAL, INC.
10400 FERNWOOD ROAD, BETHESDA, MARYLAND 20817
----------------
PROXY STATEMENT
----------------
This proxy statement contains information related to the annual meeting of
shareholders of Marriott International, Inc. (the "Company") to be held on
Friday, April 28, 2000, beginning at 10:30 a.m., at the J.W. Marriott Hotel,
1331 Pennsylvania Avenue, N.W., Washington, D.C., and at any postponements or
adjournments thereof. This Proxy Statement is first being mailed to
shareholders on March 23, 2000.
Marriott International, Inc. conducts the lodging, senior living services and
distribution services businesses formerly conducted by "old" Marriott
International, Inc. ("Old Marriott"), now known as Sodexho Marriott Services,
Inc. The Company was spun off as a separate public company from Old Marriott on
March 27, 1998 (the "Spinoff").
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the Company's annual meeting, shareholders will act upon the matters
described in the accompanying notice of meeting. This includes the election of
four directors, ratification of the Company's independent auditors,
ratification of an increase in the number of shares authorized for issuance
under the Company's 1998 Comprehensive Stock and Cash Incentive Plan, and
consideration of a shareholder proposal. In addition, the Company's management
will report on the performance of the Company during fiscal 1999 and respond to
questions from shareholders.
Who is entitled to vote?
Only shareholders of record at the close of business on the record date,
March 6, 2000, are entitled to receive notice of and to vote at the meeting, or
any postponement or adjournment of the meeting. Each outstanding share of the
Company's Class A common stock entitles its holder to cast ten votes on each
matter to be voted upon.
Who can attend the meeting?
All shareholders as of the record date, or their duly appointed proxies, may
attend the meeting. Cameras, recording devices and other electronic devices
will not be permitted at the meeting.
Directions to the meeting, and information on parking, public transportation
and lodging, can be found on the back cover of this proxy statement.
<PAGE>
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Class A common stock of the Company outstanding on
the record date will constitute a quorum. A quorum is required for business to
be conducted at the meeting. As of the record date, 241,207,510 shares of Class
A common stock of the Company were outstanding. If you submit a properly
executed proxy card, even if you abstain from voting, then you will be
considered part of the quorum. However, abstentions are not counted in the
tally of votes FOR or AGAINST a proposal. A WITHHELD vote is the same as an
abstention.
How do I vote?
Sign and date each proxy card you receive and return it in the prepaid
envelope. If you return your signed proxy card but do not mark the boxes
showing how you wish to vote, your shares will be voted FOR items 1, 2 and 3,
and AGAINST item 4.
Can I vote by telephone or electronically?
You may vote by telephone or electronically through the Internet, by
following the instructions attached to your proxy card.
The telephone and Internet voting procedures are designed to authenticate
votes cast by use of a personal identification number. The procedures, which
comply with Delaware law, allow shareholders to appoint a proxy to vote their
shares and to confirm that their instructions have been properly recorded.
Can I change my vote after I return my proxy card, or after I vote by telephone
or electronically?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised at the meeting. Regardless of the way in
which you submitted your original proxy, you may change it by:
(1) Returning a later-dated signed proxy card;
(2) Delivering a written notice of revocation to First Chicago Trust
Company of New York, P.O. Box 8089, Edison, New Jersey 08818-9355;
(3) Voting by telephone or the Internet; or
(4) Voting in person at the meeting.
What are the Board's recommendations?
The Board's recommendations are set forth after the description of each item
in this proxy statement. In summary, the Board recommends a vote:
. FOR election of the nominated directors (see Item 1 on page 8);
. FOR ratification of the appointment of Arthur Andersen LLP as the
Company's independent auditors for fiscal 2000 (see Item 2 on page 27);
. FOR ratification of an increase of 15 million shares of the Company's
Class A common stock authorized for issuance under the Marriott
International, Inc. 1998 Comprehensive Stock and Cash Incentive Plan (see
Item 3 on page 28); and
. AGAINST approval of the shareholder proposal (see Item 4 on page 33).
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors.
2
<PAGE>
What vote is required to approve each item?
For each Item, the affirmative vote of the holders of a majority of the
shares of Class A common stock represented in person or by proxy and entitled
to vote on the item will be required for approval. A properly executed proxy
marked "ABSTAIN" with respect to any item will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the items to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
items and will not be counted in determining the number of shares necessary for
approval for each Item. Shares represented by such "broker non-votes" will,
however, be counted in determining whether there is a quorum.
Who will count the vote?
Representatives of First Chicago Trust Company of New York, our independent
stock transfer agent, will count the votes and act as the inspector of
election.
What shares are included on the proxy card(s)?
The shares on your proxy card(s) represent ALL of your shares of Class A
common stock, including any shares you may hold through the DirectSERVICE
Investment Program administered by First Chicago Trust Company of New York, or
if you are a Marriott employee, any shares that may be held in custody for your
account by Bankers Trust Company as custodian for Marriott International,
Inc.'s Profit Sharing Plan (401(k) plan) for employees. If you have shares in
the Profit Sharing Plan and do not vote by proxy, or return your proxy card
with an unclear voting designation or no voting designation at all, then
Bankers Trust will vote your plan shares in proportion to the way the other
plan participants voted their shares held in the plan.
What does it mean if I receive more than one proxy card?
If your shares are registered differently and are in more than one account,
you will receive more than one proxy card. To ensure that all your shares are
voted, sign and return all proxy cards, or if you choose, vote by telephone or
through the Internet using the personal identification number printed on each
proxy card. We encourage you to have all accounts registered in the same name
and address (whenever possible). You can accomplish this by contacting our
transfer agent, First Chicago Trust Company of New York, at (800) 311-4816.
How will voting on any other business be conducted?
Although we do not know of any business to be considered at the 2000 annual
meeting other than the proposals described in this proxy statement, if any
other business is presented at the Annual Meeting, your proxy gives authority
to J.W. Marriott, Jr. and Richard E. Marriott to vote on such matters at their
discretion.
When are shareholder proposals for the 2001 annual meeting of shareholders due?
The Company's 2001 annual meeting of shareholders is scheduled to be held on
May 4, 2001. To be considered for inclusion in the Company's proxy statement
for that meeting, shareholder proposals must be received at the Company's
offices no later than November 22, 2000. Proposals must be in compliance with
Rule 14a-8 under the Securities Exchange Act of 1934 and the
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<PAGE>
Company's bylaws, and must be submitted in writing delivered or mailed to the
Secretary, Marriott International, Inc., Department 52/862, Marriott Drive,
Washington, D.C. 20058.
In addition, the Company's bylaws require that, if a shareholder desires to
introduce a shareholder proposal or nominate a director candidate from the
floor of the 2001 annual meeting of shareholders, such proposal or nomination
must be submitted in writing to the Company's Secretary at the above address
not later than January 28, 2001. The written proposal or nomination must be in
compliance with the Company's bylaws. The Chairman of the meeting may refuse
to acknowledge or introduce any shareholder proposal or the nomination of any
person made later than January 28, 2001, or not in compliance with the
Company's bylaws.
Can a shareholder nominate someone to be a director of the Company?
As a shareholder, you may recommend any person as a nominee for director of
the Company by writing to the Nominating and Corporate Governance Committee of
the Board of Directors, c/o Marriott International, Inc., Marriott Drive,
Washington, D.C. 20058. Recommendations must be received by January 28, 2001
for the 2001 annual meeting of shareholders, and must comply with the
requirements in the Company's bylaws.
How much did this proxy solicitation cost?
MacKenzie Partners, Inc. was hired to assist in the distribution of proxy
materials and solicitation of votes for $6,500, plus reimbursement of certain
out-of-pocket expenses. We also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to shareholders.
Proxies will be solicited by mail, telephone, or other means of communication.
Solicitation also may be made by directors, officers, and regular employees of
the Company not specifically employed for proxy solicitation purposes.
Can I receive future shareholder communications electronically through the
Internet?
Yes. You may elect to receive future notices of meetings, proxy materials
and annual reports electronically through the Internet. If you have previously
consented to electronic delivery, your consent will remain in effect until
withdrawn. To consent to electronic delivery:
. If your shares are registered in your own name, and not in "street name"
through a broker or other nominee, fill out the consent form at the
Internet site maintained by our transfer agent, First Chicago Trust
Company of New York, at www.econsent.com/mar.
. If your shares are registered in "street name" through a broker or other
nominee, you must first vote your shares using the Internet, at
www.proxyvote.com, and immediately after voting, fill out the consent
form that appears on-screen at the end of the Internet voting procedure.
You may withdraw this consent at any time and resume receiving shareholder
communications in print form. More information on electronic delivery of
materials is set forth in an insert accompanying this proxy statement.
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<PAGE>
STOCK OWNERSHIP
Who are the largest owners of the Company's stock?
As of January 31, 2000 the following persons or groups beneficially owned 5%
or more of the Company's outstanding shares of Class A common stock:
<TABLE>
<S> <C>
J.W. Marriott, Jr...................................................... 10.8%
Richard E. Marriott.................................................... 10.6%
Southeastern Asset Management, Inc..................................... 9.3%
Montag & Caldwell, Inc................................................. 7.8%
</TABLE>
How much stock do the Company's directors and executive officers own?
The following table sets forth the beneficial ownership of Class A common
stock by the Company's directors and executive officers as of January 31, 2000,
as well as additional information about beneficial owners of 5% or more of the
Company's Class A common stock.
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Name Owned Class(1)
---- ------------ ----------
<S> <C> <C>
Directors:
J.W. Marriott, Jr.................................. 26,787,404(2)(3) 10.8
Richard E. Marriott................................ 25,810,461(2)(4) 10.6
Henry Cheng Kar-Shun............................... 2,600(5) *
Gilbert M. Grosvenor............................... 3,600(5) *
Floretta Dukes McKenzie............................ 870(5) *
Harry J. Pearce.................................... 10,000(5) *
W. Mitt Romney..................................... 10,000(5) *
Roger W. Sant...................................... 20,000(5) *
William J. Shaw.................................... 1,371,959(6)(7) *
Lawrence M. Small.................................. 80,000(5) *
Named Executive Officers:
Joseph Ryan........................................ 237,525(6)(7) *
James M. Sullivan.................................. 372,429(6)(7) *
William R. Tiefel.................................. 985,562(7)(8) *
All Directors and Executive Officers as a Group:
(21 persons including the foregoing)............... 48,181,512(2)(9) 19.4
Other 5% Beneficial Owners:
Southeastern Asset Management, Inc................. 22,731,400(10) 9.3
Montag & Caldwell, Inc............................. 19,235,742(11) 7.8
</TABLE>
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* Less than 1 percent.
(1) Based on the number of shares outstanding (243,957,257) at, plus the
number of shares acquirable by the specified person(s) within 60 days of,
January 31, 2000.
(2) Includes: 3,150,040 shares held by J.W. Marriott, Jr. and Richard E.
Marriott as co-trustees of 16 trusts for the benefit of their children and
5,073,574 shares owned by The J. Willard & Alice S. Marriott Foundation, a
charitable foundation in which J.W. Marriott, Jr., Richard E. Marriott and
their mother serve as co-trustees. These shares are reported as
beneficially owned by both J.W. Marriott, Jr. and Richard E. Marriott, but
are included only once in reporting the number of shares owned by all
directors and executive officers as a group.
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(3) Includes, in addition to the shares referred to in footnote (2): (i)
1,817,004 shares subject to options exercisable within 60 days after
January 31, 2000, (ii) 663,860 shares held as trustee of two trusts for
the benefit of Richard E. Marriott, (iii) 138,141 shares owned by J.W.
Marriott, Jr.'s wife (Mr. Marriott disclaims beneficial ownership of such
shares), (iv) 1,340,534 shares owned by four trusts for the benefit of
J.W. Marriott, Jr.'s children, in which his wife serves as a co-trustee,
(v) 48,728 shares owned by six trusts for the benefit of J.W. Marriott,
Jr.'s grandchildren, in which his wife serves as a co-trustee, (vi)
160,000 shares owned by JWM Associates Limited Partnership, whose general
partner is J.W. Marriott, Jr. and (vii) 5,415,180 shares owned by JWM
Family Enterprises, L.P., whose general partner is a corporation in which
J.W. Marriott, Jr. is a controlling shareholder.
(4) Includes, in addition to the shares referred to in footnote (2): (i)
122,634 shares subject to options exercisable within 60 days after January
31, 2000, (ii) 541,878 shares held as trustee of two trusts established
for the benefit of J.W. Marriott, Jr., (iii) 136,438 shares owned by
Richard E. Marriott's wife, (iv) 1,207,656 shares owned by four trusts for
the benefit of Richard E. Marriott's children, in which his wife serves as
a co-trustee, and (v) 4,588,946 shares owned by First Media Limited
Partners, whose general partner is a corporation in which Richard E.
Marriott is the controlling shareholder.
(5) The shares included herein do not include non-employee director annual
deferred share awards or stock units representing fees deferred at the
election of non-employee directors under the Company's 1998 Comprehensive
Stock and Cash Incentive Plan. The combined number of shares (i) subject
to deferred share awards and (ii) in stock unit accounts of non-employee
directors as of December 31, 1999, were as follows: Dr. Cheng: 1,407; Mr.
Grosvenor: 13,873; Dr. McKenzie: 10,315; Mr. Pearce: 10,471; Mr. Romney:
10,981; Mr. Sant: 11,639; and Mr. Small: 10,572. Neither share awards nor
stock units carry voting rights or are transferable. Stock unit accounts
are credited with dividend equivalents in the form of additional stock
units. Share awards and stock units are distributed following retirement
as a director.
(6) Includes shares of unvested restricted stock awarded under the 1998
Comprehensive Stock and Cash Incentive Plan as follows: Mr. Ryan: 64,032
shares; Mr. Shaw: 40,808 shares; and Mr. Sullivan: 26,606 shares. Shares
of restricted stock are voted by the holder thereof. See "Executive
Compensation: Summary Compensation Table" at page 15.
(7) Includes shares subject to options exercisable within 60 days after
January 31, 2000, as follows: Mr. Ryan: 145,846 shares; Mr. Shaw:
1,131,614 shares; Mr. Tiefel: 862,423 shares; and Mr. Sullivan: 295,562
shares.
(8) Includes 79,350 shares held by a limited partnership of which Mr. Tiefel
is the sole general partner and Mr. Tiefel and certain family members are
limited partners.
(9) All directors, nominees and executive officers as a group (other than J.W.
Marriott, Jr. and Richard E. Marriott) beneficially owned an aggregate of
3,929,243 shares, or 1.6 percent of Class A common stock outstanding as of
January 31, 2000.
(10) Based on a Schedule 13G amendment filed with the Securities and Exchange
Commission on February 15, 2000, reflecting ownership of Class A common
stock as of December 31, 1999, and total outstanding shares of Class A
common stock as of December 31, 1999. The following information is taken
from that filing. The Schedule 13G was filed by Southeastern Asset
Management, Inc., as a registered investment advisor, and by its Chairman
and Chief Executive Officer, O. Mason Hawkins in the event he could be
deemed to be a controlling person of that firm as the result of his
official position with or ownership of its voting securities, although
Mr. Hawkins disclaims beneficial ownership of the shares covered by the
report (together, "Southeastern"). Southeastern's address is 6410 Poplar
Avenue, Suite 900, Memphis, TN 38119. All shares covered by the report are
owned legally by Southeastern's investment
6
<PAGE>
advisory clients and none are owned directly or indirectly by Southeastern.
The reporting persons reported sole voting power over 9,433,000 shares and
shared or no voting power over 13,298,400 shares, and sole dispositive
power over 11,880,300 shares and shared dispositive power over 10,823,100
shares.
(11) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 11, 2000, reflecting ownership of Class A common stock as of
December 31, 1999, and total outstanding shares of Class A common stock as
of December 31, 1999. The following information is taken from that filing.
The Schedule 13G was filed by Montag & Caldwell, Inc., as a registered
investment advisor ("Montag & Caldwell"). Montag & Caldwell's address is
3455 Peachtree Road, N.E., Suite 1200, Atlanta, GA 30326-3248. Montag &
Caldwell reported sole or shared voting power over no shares and sole
dispositive power over all 19,235,742 shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of filings with the Securities and Exchange Commission
and written representations that no other reports were required, the Company
believes that all of the Company's directors, and all of the Company's officers
who are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, complied with such reporting requirements
during fiscal 1999, other than the initial statement of beneficial ownership of
securities that was filed on an untimely basis by Linda Bartlett and one
transaction that was reported on an untimely basis by Joseph Ryan.
7
<PAGE>
ITEM 1--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with approximately one-
third of the directors standing for election each year for a three-year term.
Alice S. Marriott and Sterling D. Colton each holds the title of director
emeritus.
Directors Standing for Election
Four directors are standing for re-election: Henry Cheng Kar-Shun, Floretta
Dukes McKenzie, Roger W. Sant and Lawrence M. Small. Each has consented to
serve for an additional term ending at the 2003 annual meeting of shareholders.
If any of the nominees should become unavailable to serve as a director, the
Board may designate a substitute nominee. In that case, the persons named as
proxies will vote for the substitute nominee designated by the Board.
The Board recommends a vote FOR the nominees.
The following are the nominees for director for three-year terms ending in
2003:
Henry Cheng Kar-Shun Dr. Cheng has served as Managing Director of New
Age: 53 World Development Company Limited ("New World
Development"), a publicly held Hong Kong real
[PHOTO] estate development and investment company, since
1989. He is the Chairman of New World China Land
Limited, New World CyberBase Limited, New World
Infrastructure Limited and Tai Fook Group Limited
and a director of HKR International Limited and
Kwoon Chung Bus Holding Limited, all of which are
publicly-held Hong Kong companies. Dr. Cheng serves
as an executive officer of Chow Tai Fook
Enterprises Limited, a privately-held family
company that controls New World Development. Dr.
Cheng served as Chairman and Director of
Renaissance Hotel Group N.V. from June 1995 until
its purchase by the Company in March 1997. He is
Chairman of the Advisory Council for The Better
Hong Kong Foundation. Dr. Cheng serves as a member
of the Services Promotion Strategy Group, a unit
under the Hong Kong Financial Secretary's Office,
and as a Committee Member of the Eighth and Ninth
Chinese People's Political Consultative Committee
of the People's Republic of China. Dr. Cheng has
also served as a member of the Election Committee
of the Hong Kong Special Administrative Region. Dr.
Cheng served as a director of Old Marriott from
June 1997 to March 1998, and has served as a
director of the Company since March 1998.
8
<PAGE>
Floretta Dukes McKenzie Dr. McKenzie is the founder, Chairwoman and Chief
Age: 64 Executive Officer of The McKenzie Group, Inc. (an
educational consulting firm). She is also a
[PHOTO] director or trustee of Potomac Electric Power
Company (PEPCO), National Geographic Society,
Acacia Group, Group Hospitalization and Medical
Services, Inc. (GHMSI), Howard University, White
House Historical Association, American Association
of School Administrators Leadership of Learning
Foundation, Lightspan Partnership, Inc., Impact II-
The Teachers Network, National School Board
Foundation, Institute for Educational Leadership,
Inc., Forum for the American School Superintendent,
Harvard Graduate School of Education Urban
Superintendents Program and Johns Hopkins
Leadership Development Program. From 1981 to 1988,
she served as Superintendent of the District of
Columbia Public Schools and Chief State School
Officer. Dr. McKenzie served as a director of Old
Marriott (and prior to October 1993 of Marriott
Corporation) from 1992 to March 1998, and has
served as a director of the Company since March
1998.
Roger W. Sant Mr. Sant is Chairman of the Board of The AES
Age: 68 Corporation (a global power company) which he co-
founded in 1981. Since 1994, Mr. Sant has chaired
[PHOTO] the Board of World Wildlife Fund (U.S.). He also
chairs the Board of The Summit Foundation, and is a
Board member of WWF-International and The National
Symphony. Mr. Sant served as a director of Old
Marriott from 1993 to March 1998, and has served as
a director of the Company since March 1998.
Lawrence M. Small Mr. Small is the Secretary of the Smithsonian
Age: 58 Institution, the world's largest combined museum
and research complex, a position to which he was
[PHOTO] elected in September, 1999. Prior to becoming the
11th Secretary, he served as President and Chief
Operating Officer of Fannie Mae, the nation's
largest housing finance company, since 1991. Before
joining Fannie Mae, Mr. Small had served as Vice
Chairman and Chairman of the Executive Committee of
the Board of Directors of Citicorp and Citibank,
N.A., since January 1990. He had been associated
with Citibank since 1964. He is also a director of
The Chubb Corporation, New York City's Spanish
Repertory Theatre, the John F. Kennedy Center for
the Performing Arts, the National Gallery, the
Woodrow Wilson Center International Center for
Scholars and Mt. Sinai-NYU Medical Center and
Health System. Mr. Small served as director of Old
Marriott from 1995 to March 1998, and he has served
as a director of the Company since March 1998.
9
<PAGE>
Directors Continuing in Office
J.W. Marriott, Jr. Mr. Marriott is Chairman of the Board and Chief
(Chairman of the Board) Executive Officer of the Company. He joined
Age: 68 Marriott Corporation (now known as Host Marriott
Corporation) in 1956, became President and a
[PHOTO] director in 1964, Chief Executive Officer in 1972
and Chairman of the Board in 1985. Mr. Marriott
also is a director of Host Marriott Corporation,
General Motors Corporation 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. Mr. Marriott is currently serving
a three-year term expiring at the 2002 Annual
Meeting of Shareholders. He is the brother of
Richard E. Marriott.
Richard E. Marriott Mr. Marriott is Chairman of the Board of Host
Age: 61 Marriott Corporation. He is also Chairman of the
Board of First Media Corporation and serves as a
[PHOTO] trustee of Gallaudet University, Polynesian
Cultural Center, Primary Children's Medical Center,
Boys and Girls Clubs of America SE Region and The
J. Willard & Alice S. Marriott Foundation. He is
President and a member of the Board of Trustees of
the Marriott Foundation for People with
Disabilities and President and a director of the
R.E.M. Family Foundation, Inc. He also serves on
the Board of Trustees of Federal City Council and
the Advisory Committee for the International Hotel
and Restaurant Association. Prior to 1993,
Mr. Marriott served as an Executive Vice President
and member of the Board of Directors of Marriott
Corporation. Mr. Marriott has been a director of
Marriott Corporation (now known as Host Marriott
Corporation) since 1979, served as a director of
Old Marriott from October 1993 to March 1998, and
has served as a director of the Company since March
1998. Mr. Marriott is currently serving a three-
year term expiring at the 2001 Annual Meeting of
Shareholders. He is the brother of J.W. Marriott,
Jr.
10
<PAGE>
Gilbert M. Grosvenor Mr. Grosvenor is Chairman of the Board of the
Age: 68 National Geographic Society (a publisher of books
and magazines and producer of television
[PHOTO] documentaries) and a director or trustee of Chevy
Chase Federal Savings Bank, Ethyl Corporation, B.F.
Saul REIT and Saul Centers, Inc. He is on the Board
of Visitors of the Nicholas School of the
Environment of Duke University. Mr. Grosvenor
served as a member of the Board of Directors of Old
Marriott (and prior to October 1993 of Marriott
Corporation) from 1987 to March 1998, and has
served as a director of the Company since March
1998. He is currently serving a three-year term
expiring at the 2001 Annual Meeting of
Shareholders.
Harry J. Pearce Mr. Pearce is Vice Chairman of the Board of General
Age: 57 Motors Corporation (an automobile manufacturer) and
a director of General Motors Acceptance
[PHOTO] Corporation, Hughes Electronics Corporation,
Alliance of Automobile Manufacturers, MDU Resources
Group, Inc. and the Bone Marrow Foundation and is a
member of the U.S. Air Force Academy's Board of
Visitors. He also serves on the Board of Trustees
of Howard University and Northwestern University
and is a member of the Northwestern University
School of Law's Law Board. Mr. Pearce served as a
director of Old Marriott from 1995 to March 1998,
and has served as a director of the Company since
March 1998. He is currently serving a term expiring
at the 2001 Annual Meeting of Shareholders.
W. Mitt Romney Mr. Romney was appointed President and Chief
Age: 53 Executive Officer of the Salt Lake Olympic
Committee on February 19, 1999. He is a director,
[PHOTO] President and Chief Executive Officer of Bain
Capital, Inc. (a private equity investment firm).
He is also a director of Staples, Inc. Mr. Romney
is a member of the Executive Board of the Boy
Scouts of America and the board of the National
Points of Light Foundation. Mr. Romney served as a
member of the Board of Directors of Old Marriott
(and of Marriott Corporation prior to October 1993)
from 1993 to March 1998 and has served as a
director of the Company since March 1998. Mr.
Romney is currently serving a three-year term
expiring at the 2002 Annual Meeting of
Shareholders.
11
<PAGE>
William J. Shaw Mr. Shaw has served as President and Chief
Age: 54 Operating Officer of the Company since March 1997
(including service in the same capacity with Old
[PHOTO] 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 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. Mr. Shaw
is currently serving a three-year term expiring at
the 2002 Annual Meeting of Shareholders.
The Board of Directors met four times in 1999. No director attended fewer
than 75% of the total number of meetings of the Board and Committees on which
such director served, other than Mr. Pearce and Dr. Cheng.
Committees of the Board of Directors
The Board of Directors has four standing committees: Audit; Compensation
Policy; Nominating and Corporate Governance; and Executive.
Audit Committee
. The members of the Committee are not employees of the Company. The Audit
Committee met three times in 1999.
. There is unrestricted access between the Audit Committee and the
independent auditors and internal auditors.
Functions:
. Meets with the Company's independent auditors, management representatives
and internal auditors.
. Reviews the results of internal and external audits, the accounting
principles applied in financial reporting and financial and operational
controls.
. Approves the scope of audits and other services to be performed by the
independent and internal auditors.
. Recommends to the Board the appointment of independent auditors
considering whether any circumstance, including the performance of any
professional services, would impair their independence.
Members: Lawrence M. Small (Chair), Gilbert M. Grosvenor, W. Mitt Romney,
and Roger W. Sant.
12
<PAGE>
Compensation Policy Committee
. The members of the Committee are not employees of the Company. The
Compensation Policy Committee met five times in 1999.
Functions:
. Recommends to the Board policies and procedures relating to senior
officers' compensation and various employee stock plans.
. Approves senior officer salary adjustments, bonus payments, and stock
awards.
Members: Floretta Dukes McKenzie (Chair), Roger W. Sant, W. Mitt Romney,
and Lawrence M. Small. Harry J. Pearce became a member of the
Committee in February 2000.
Nominating and Corporate Governance Committee
. The members of the Committee are not employees of the Company. The
Nominating and Corporate Governance Committee met once in 1999.
Functions:
. Makes recommendations to the Board regarding corporate governance matters
and considers nominees for election as directors.
. Advises the Board on a range of matters affecting the Board and its
committees, including the making of recommendations with respect to
qualifications of director candidates, compensation of directors,
selection of committee chairs, committee assignments, and related matters
affecting the functioning of the Board.
Members: Gilbert M. Grosvenor (Chair), Floretta Dukes McKenzie and Harry J.
Pearce.
Executive Committee
. The Executive Committee did not meet in 1999.
Function:
. Exercises the powers of the Board when the Board is not in session,
subject to specific restrictions as to powers retained by the full Board.
Powers retained by the full Board include those relating to amendments to
the certificate of incorporation and bylaws, mergers, consolidations,
sales or exchanges involving substantially all of the Company's assets,
declarations of dividends, and issuances of stock.
Members: J. W. Marriott, Jr. (Chair) and Roger W. Sant.
Directors' Compensation
Directors are compensated partially in cash and partially in Marriott common
stock to align their interests with those of shareholders. Company officers are
not paid for their service as directors.
Annual Retainer and Attendance Fees. For 1999, each non-employee director
received a retainer fee of $28,333, together with an attendance fee of
$1,250 per Board, Committee or shareholder meeting. In May 1999, the
annual retainer fee was increased to $30,000 from $25,000.
Annual Stock Awards. Each non-employee director also receives an annual
director stock award under the Marriott International, Inc. 1998
Comprehensive Stock and Cash Incentive
13
<PAGE>
Plan. The award is for a number of shares having an aggregate market value
as of the date of grant of approximately the amount of the annual
directors' retainer fee. This award is granted immediately prior to the
annual meeting of shareholders. In 1999 each award was for 707 shares.
Deferral of Payment. Any director may elect to defer payment of all or any
portion of his or her directors' fees pursuant to the Company's Executive
Deferred Compensation Plan and/or the 1998 Comprehensive Stock and Cash
Incentive Plan. Gilbert M. Grosvenor, Floretta Dukes McKenzie, Harry J.
Pearce, W. Mitt Romney, Roger W. Sant, and Lawrence M. Small are currently
participating in one or both of these plans.
Other. Directors are also reimbursed for travel expenses and other out-of-
pocket costs incurred when attending meetings.
Compensation Committee Interlocks and Insider Participation
During 1999, the Compensation Policy Committee's members were Floretta Dukes
McKenzie (Chair), Roger W. Sant, W. Mitt Romney and Lawrence M. Small.
J. W. Marriott, Jr. serves on the Executive Compensation Committee of the
Board of Directors of General Motors Corporation. Harry J. Pearce, a director
of the Company, is an executive officer and director of General Motors
Corporation. Mr. Pearce became a member of the Company's Compensation Policy
Committee in February 2000.
14
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows the compensation paid by the
Company in 1999 and 1998 (after the Spinoff of the Company on March 27, 1998),
and by Old Marriott in 1998 (up to the Spinoff) and in 1997, to the Chief
Executive Officer and the other four most highly compensated executive officers
(other than the Chief Executive Officer) of the Company as of December 31,
1999.
<TABLE>
<CAPTION>
Restricted Stock All Other
Fiscal Salary Bonus Stock Options Compensation
Name Year (1)($) ($) (2)(3)($) (4)(#) (5)(6)($)
---- ------ ------- --------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.W. Marriott, Jr. ... 1999 992,500 981,384 196,271 300,000 150,405
Chairman and Chief 1998 950,000 1,001,300 200,246 192,000 148,048
Executive Officer 1997 900,000 990,000 198,000 287,500 79,590
William J. Shaw ....... 1999 700,000 537,950 107,602 125,000 58,752
President and Chief 1998 670,000 572,850 1,462,092 132,000 56,623
Operating Officer 1997 618,846 556,961 111,410 195,000 24,009
James M. Sullivan ..... 1999 444,000 315,240 63,051 75,000 35,500
Executive Vice
President 1998 425,000 325,125 770,498 66,000 34,375
Lodging Development 1997 400,000 320,000 63,966 100,000 29,684
Joseph Ryan ........... 1999 444,000 301,920 928,352 75,000 35,500
Executive Vice
President 1998 425,000 325,125 65,023 66,000 34,148
and General Counsel 1997 400,000 320,000 741,766 100,000 12,493
William R. Tiefel ..... 1999 400,000 297,600 59,506 50,000 39,581
Vice Chairman 1998 595,000 449,225 89,856 90,000 48,354
1997 565,000 452,000 90,431 135,000 44,714
</TABLE>
Footnotes to Summary Compensation Table.
(1) Salary amounts include both base salary earned and paid in cash during the
fiscal year, and the amount of base salary deferred at the election of the
executive officer under certain employee benefit plans.
(2) Includes restricted stock, deferred bonus stock and deferred stock
contracts, as follows:
Restricted Stock. Restricted stock awards are subject to general
restrictions, such as continued employment and non-competition, and in
some cases, additional performance restrictions such as attainment of
financial objectives. Holders of restricted stock receive dividends and
exercise voting rights on their restricted shares.
Deferred Bonus Stock. The amount of a deferred bonus stock award generally
equals 20 percent of each individual's annual cash bonus award, based on
the stock price on the first trading day for the next fiscal year. Holders
of deferred bonus awards do not receive dividends or exercise voting
rights on their deferred bonus stock until it is distributed to them. The
recipient can designate an award as current, which is distributed in 10
annual installments beginning one year after the award is granted, or
deferred, which is distributed in a lump sum or in up to 10 installments
following termination of employment. Deferred bonus stock contingently
vests in ten equal annual installments beginning one year after the award
is made.
15
<PAGE>
Deferred Stock Contracts. Deferred stock contracts are subject to general
restrictions, such as continued employment and non-competition. Holders of
deferred stock contracts do not receive dividends or exercise voting
rights on their deferred awards until shares are distributed to them. The
stock typically vests in equal annual installments beginning one year
after the award is granted. The recipient may receive awards in up to 10
annual installments following termination of employment.
(3) The total number of restricted shares held by, and the number of deferred
bonus shares or deferred contract shares (vested and unvested) awarded to,
each Named Executive as of the end of the 1999 fiscal year, and the
aggregate value of these shares, is as follows. The value is based on a per
share price for Company stock of $31.375, representing the average of the
high and low trading price on the New York Stock Exchange on December 31,
1999.
<TABLE>
<CAPTION>
Shares
-------------------------------------
Deferred Restricted Deferred Aggregate Value
Named Executive Bonus Stock Stock Contract Stock at 12/31/99
--------------- ----------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
Mr. Marriott.......... 26,003 0 0 $ 815,844
Mr. Shaw.............. 37,056 56,221 55,042 4,653,509
Mr. Sullivan.......... 24,258 28,808 22,018 2,355,761
Mr. Ryan.............. 10,991 69,032 22,018 3,201,536
Mr. Tiefel............ 151,559 0 110,428 8,219,842
</TABLE>
(4) 1997 awards reflect those denominated in Old Marriott common stock and do
not reflect redenomination of such awards into shares of the Company's
common stock as a result of the Spinoff. In connection with the Spinoff,
the awards under the Old Marriott stock plans were cancelled and substitute
awards were granted under the Marriott International, Inc. 1998
Comprehensive Stock and Cash Incentive Plan (the "Stock Plan"). The
substitute awards preserved, but did not increase or decrease, the economic
value of the awards under the Old Marriott stock plans.
(5) This column represents Company matching contributions made under the
Marriott International, Inc. Employees' Profit Sharing, Retirement and
Savings Plan and Trust (the "Profit Sharing Plan") and the Marriott
International, Inc. Executive Deferred Compensation Plan (the "Deferred
Plan") for fiscal 1999. For J. W. Marriott, Jr., it also includes the
amount described in footnote (6) below.
(6) In 1996, Mr. J. W. Marriott, Jr. waived his vested right to receive post-
retirement distributions of cash under the Deferred Plan and Old Marriott
Common Stock under the Old Marriott 1993 Comprehensive Stock Incentive Plan
(the "1993 Plan"). The payments and stock distributions waived were awarded
to Mr. Marriott in 1995 and prior years and were disclosed as required in
earlier proxy statements of Old Marriott or of Marriott Corporation. In
connection with this waiver, Old Marriott agreed to purchase life insurance
policies for the benefit of a trust established by Mr. Marriott. This
agreement to purchase life insurance policies has been assumed by the
Company. The cost of the life insurance policies to the Company will not
exceed the expected after-tax cost to Old Marriott if it had made the
payments and stock distributions that were waived by Mr. Marriott. For
1999, the taxable economic benefit to Mr. Marriott as a result of these
life insurance policies was $58,367.
16
<PAGE>
Stock Options
The following two tables show information concerning options to purchase
Common Stock granted in fiscal 1999 under the Stock Plan.
Stock Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
% of Total Stock
Stock Options Options Granted Exercise Grant Date
Granted To Employees in Price Expiration Present Value(2)
Name (#) Fiscal Year ($/Sh) Date(1) ($)
---- ------------- ---------------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
J. W. Marriott, Jr. .... 300,000 4.3% 33.1563 11/04/2014 4,326,000
William J. Shaw......... 125,000 1.8% 33.1563 11/04/2014 1,802,500
James M. Sullivan....... 75,000 1.1% 33.1563 11/04/2014 1,081,500
Joseph Ryan............. 75,000 1.1% 33.1563 11/04/2014 1,081,500
William R. Tiefel....... 50,000 0.7% 33.1563 11/04/2014 721,000
</TABLE>
- --------
(1) All options will vest over four years on the anniversary date of the grant
at a rate of 25% per year and have a 15-year term. Options held by
executive officers may be transferred only as gifts for the benefit of
specified family members.
(2) These values were established using the Black-Scholes stock option
valuation model. Assumptions used to calculate the grant date present value
of option shares granted during fiscal 1999 were in accordance with SFAS
123, as follows:
(a) Expected Volatility--The standard deviation of the continuously
compounded rates of return calculated on the average daily stock price
over a period of time immediately preceding the grant and equal in
length to the expected life. The volatility was 28.82%.
(b) Risk-Free Interest Rate--The risk-free interest rate was 6.67%.
(c) Dividend Yield--The expected annual dividend yield was $0.22 per share
based on the historical dividend yield over the expected term of the
option.
(d) Expected Life--The expected life of the grant was 7.15 years, based on
the historical expected life of previous grants.
(e) Per Share Value--The per share value for these grants was $14.42.
17
<PAGE>
Aggregated Stock Option/SAR Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Underlying In-the-Money
Shares Unexercised Options at Stock Options
Acquired Fiscal Year End(2) at Fiscal Year End(3)
on Value ------------------------- -------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name Company(1) (#) ($) (#) (#) ($) ($)
---- ---------- -------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. W. Marriott, Jr...... MI 198,146 4,168,081 1,817,004 1,047,248 36,967,029 4,097,974
HMC 209,508 2,432,912 492,723 0 2,677,594 0
--------- ---------- ---------
TOTAL 6,600,093 39,644,623 4,097,974
William J. Shaw......... MI 88,066 1,547,782 1,131,614 629,102 23,051,616 2,738,855
HMC 53,607 266,094 372,559 0 2,432,841 0
--------- ---------- ---------
TOTAL 1,813,876 25,484,457 2,738,855
James M. Sullivan....... MI 0 0 295,562 335,305 5,276,676 1,442,235
HMC 15,749 163,598 0 0 0 0
--------- ---------- ---------
TOTAL 163,598 5,276,676 1,442,235
Joseph Ryan............. MI 27,522 574,650 145,846 336,409 1,289,140 1,449,388
HMC 0 0 0 0 0 0
--------- ---------- ---------
TOTAL 574,650 1,289,140 1,449,388
William R. Tiefel....... MI 126,595 3,910,517 862,423 401,512 16,184,595 1,888,556
HMC 26,804 113,783 272,049 0 1,742,223 0
--------- ---------- ---------
TOTAL 4,024,300 17,926,818 1,888,556
</TABLE>
- --------
(1) "MI" represents options to purchase Marriott International Class A Common
Stock. "HMC" represents options to purchase shares of beneficial interest
in Host Marriott Corporation.
(2) The number and terms of these options reflect several adjustments made as a
result of the spinoff of Old Marriott from Marriott Corporation in October
1993, the spinoff of Host Marriott Services Corporation from Host Marriott
Corporation in December 1995, the spinoff of the Company from Old Marriott
in March 1998, and the conversion of Host Marriott Corporation into a real
estate investment trust (and a related spinoff transaction) in December
1998, each in accordance with the applicable employee benefit plans
covering those options. These adjustments preserved, but did not increase
or decrease, the economic value of the options.
(3) The value of the unexercised stock options is based on a per share price
for Company stock of $31.375, and a per share price for Host Marriott
Corporation common stock of $8.4063. These prices represent the average of
the high and low trading prices on the New York Stock Exchange on December
31, 1999.
18
<PAGE>
REPORT ON EXECUTIVE COMPENSATION BY
THE COMPENSATION POLICY COMMITTEE
The Compensation Policy Committee (the "Committee") is responsible for
establishing basic principles related to the compensation programs of the
Company and for providing oversight for compensation programs for senior
executive officers. The principles include building a strong relationship
between shareholder return and executive compensation, providing incentives to
achieve both short and long-term goals, and providing an overall level of
remuneration which is competitive and reflective of performance. The Committee
met five times during 1999. The Chief Executive Officer and other senior
executive officers are not present at the meetings unless requested by the
Committee.
Compensation Philosophy and Programs
In administering senior executive officer compensation, the Committee's
objective is to establish a total pay program for the Company that
appropriately balances compensation costs with salaries and incentives
sufficient to retain and motivate key executives. Senior human resources
management of the Company presents proposals and recommendations on senior
executive officer compensation to the Committee for their review and
evaluation. To establish compensation levels, the Committee uses data provided
by the Company that is obtained from independent consultants. The data reflects
compensation practices with companies of approximately Marriott's size (the
comparison group) who participate in a variety of compensation surveys. The
Committee believes that targeting compensation between the median and the 75th
percentile of other large companies appropriately reflects the conditions of
the labor market for Company executives. Companies in the comparison group may
be included in the S&P Lodging-Hotels Index used in the shareholder return
performance graph included in this Proxy Statement, although the comparison
group is not made up exclusively of companies used in that Index. As the
Company is comprised of both lodging and service lines of business and also
recruits senior executives from outside the hospitality industry, the Committee
believes that the broad-based comparison group is the appropriate basis for
establishing comparable pay programs.
Base Salary
The Company has an executive compensation salary structure approved by the
Committee, which includes salary ranges established around a salary grade
midpoint. Each position's salary grade range and target bonus opportunity are
established based on targeted levels of total cash compensation for similar
positions in the survey data. Actual base salaries are set within the
prescribed salary range, based on a subjective assessment of factors including
tenure, experience, and individual performance. This assessment is not subject
to weightings or formulas. Individual annual salary increases reflect the
position within the salary range, the merit increase guidelines established by
the Company, and individual performance over the prior year. The Committee
establishes merit increase guidelines based on survey information of annual
salary increase budgets for the comparison group, along with an assessment of
the Company's labor costs for management employees.
Annual Cash Incentives
The Company has established the 1998 Comprehensive Stock and Cash Incentive
Plan (the "Stock Plan"), which is focused on financial objectives. In addition,
the Company maintains the Executive Officer Individual Performance Plan, which
is focused on human resource and other business requirements, to help motivate
the attainment of annual objectives. Under each plan, goals
19
<PAGE>
and specific objectives are established for a minimum level, a target level,
and a maximum level of performance. Senior human resources management of the
Company provided the Committee with individual performance objectives for the
Chief Executive Officer and each of the other named executives for the
Committee's review and input. For each objective, actual performance is
measured against these levels in order to determine the actual payment. No
payment is made if performance fails to meet the minimum level for a particular
objective.
The 1999 incentive plans for the Chief Executive Officer and other senior
executive officers included objectives related to Company financial
performance, individual performance, customer satisfaction, and lodging growth
objectives.
Stock Incentives
The Committee believes that stock ownership by senior executive management is
essential for aligning management's interest with that of shareholders. To
emphasize this principle, in February 1999 the Company established stock
ownership guidelines for the Company's senior management. The guidelines
require the top 65 executives in the Company to own a multiple of their
individual salary grade midpoint in Company stock. Executives will have five
years in which to meet this goal.
The Company offers several stock-based incentive programs under the Stock
Plan. Through deferred stock incentive awards, approximately 4,000 managers,
including the Chief Executive Officer and other senior executive officers,
receive an award of shares equal in value to 20% of their annual cash bonus.
The award is distributed in equal installments over a ten-year period or at
retirement if so elected by certain levels of management, and vests over 10
years contingent upon continued employment.
In addition, the Company also grants stock options. Stock options are the
primary long-term incentive of the Company. The number of option shares granted
to each executive officer is related to a guideline number established for each
eligible salary grade or level based on the survey data described above. The
Committee establishes a range of share awards around the guideline award, and
individual awards are determined based on a subjective assessment of individual
performance, contribution and potential. Under the terms of the Stock Plan,
awards of restricted stock and deferred stock contracts are also made to key
management employees. These awards tend to be relatively infrequent and are
used to recognize special performance of key executives or as an employment
inducement. The Company considers a number of factors when determining stock
grants such as individual performance, the size of competitive long-term
awards, key contributions, and previous share grants.
1999 Compensation of the Chief Executive Officer and Named Executive Officers
The Committee reviewed the 1999 salaries for J.W. Marriott, Jr., and all
other executive officers in November 1998. Mr. Marriott received an increase in
base pay on January 2, 1999 of 4.5%, which resulted in his annual pay rate
increasing to $992,500. This salary is below the median for the comparison
group. With the exception of Mr. Tiefel, the other named executive officers
received base salary increases of 4.5%, effective January 2, 1999. As a group,
the other named executive officers have base salaries that approximate the
median of the comparison group.
Under the Stock Plan, Mr. Marriott's maximum annual incentive opportunity as
a percentage of base salary was 33% based on attaining a corporate cash flow
objective and 33% related to earnings
20
<PAGE>
per share. Under the Executive Officer Individual Performance Plan, his maximum
opportunity was 22% related to individual objectives, 11% on growth objectives,
and 11% related to customer satisfaction. In 1999, the Company achieved 100.2%
of cash flow objectives and 97% of earnings per share objectives. Mr. Marriott
did not achieve the maximum level of performance for both corporate cash flow
and earnings per share objectives. Mr. Marriott accomplished the majority of
his individual objectives and customer satisfaction objectives, and exceeded
growth objectives. The aggregate target level of bonus award for Mr. Marriott
was 80% and the maximum level of bonus award was equal to 110% of eligible
fiscal year salary. The total award payment of $981,384 corresponded to 98.9%
of salary. Mr. Marriott's annual cash incentive payment was below the median
for the comparison group. From a total cash compensation perspective (base plus
bonus), his annual compensation is below the median for the comparison group.
In addition, Mr. Marriott received 6,313 shares of Deferred Bonus Stock that
was equal in value to 20% of his bonus.
The other named executive officers are also participants in the Stock Plan.
Performance measures utilized include Company and, in some cases, business-
group cash flow, customer satisfaction, lodging rooms growth objectives and
individual objectives. The aggregate target payments for these other named
executives were set at 50% to 60% of salary and the maximum aggregate payments
from 70% to 90% of salary. Actual total award payments for 1999 ranged from 68%
to 76.9% of salary.
Based on outstanding contributions during the year, and to continue to offer
a competitive total compensation program, Mr. Ryan received a restricted stock
award in 1999 of 25,000 shares.
In 1999, stock option grants were made to Mr. Marriott and the other named
executive officers. Mr. Marriott received an option in November 1999 to acquire
300,000 shares, with vesting over four years. This grant, as well as similar
grants to the other named executive officers, was within guideline ranges
established for their specific salary grade.
Impact of Internal Revenue Code Section 162(m)
Under the Omnibus Budget Reconciliation Act of 1993, provisions were added to
the Internal Revenue Code under Section 162(m) that limit the tax deduction for
compensation expense in excess of one million dollars paid to each of certain
executive officers. However, performance-based compensation can be excluded
from the limit so long as it meets certain requirements. The Committee believes
the Stock Plan satisfies the requirements for exemption under Internal Revenue
Code Section 162(m). Payments made under this Plan qualify as performance-based
compensation and constitute the majority of the aggregate annual incentive
payment for Mr. Marriott and all other named executive officers.
Although the Executive Officer Individual Performance Plan does not meet the
requirement necessary for exemption as performance-based compensation, the
Committee believes that incentives for performance relative to certain Company
objectives, such as personnel planning, customer satisfaction and other non-
financial business requirements, are relevant and appropriate. For 1999, the
annual salary plus the bonus paid to Mr. Marriott and the other named executive
officers were in each case less than one million dollars after amounts deferred
into the Executive Deferred Compensation Plan. The Committee reserves the right
to pay non-deductible compensation if it considers that to be in the best
interest of the shareholders and the Company. The stock option awards made
under the terms of the Stock Plan are exempt as performance-based compensation
for purposes of calculating the one million-dollar limit. Due to the Company's
focus on performance-
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based compensation plans and continued deferral of compensation by certain
executive officers, the Committee expects to continue to qualify most
compensation paid to the group as tax deductible.
Summary
The Compensation Policy Committee believes that the compensation programs of
the Company are well structured to encourage attainment of objectives and
foster a shareholder perspective in management. The Committee feels that the
awards made in 1999 were competitive and appropriate and serve shareholders'
long-term interests.
Members of The Compensation Policy Committee in 1999.
Floretta Dukes McKenzie, Chair
Roger W. Sant
W. Mitt Romney
Lawrence M. Small
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SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the performance of the Company's Class A common
stock from the Spinoff of the Company on March 27, 1998 to the end of fiscal
1999, and prior to the Spinoff, the performance of Old Marriott's common stock
since December 30, 1994, with the performance of the Standard & Poor's
Corporation Composite 500 Index and the Standard and Poor's Corporation
Lodging-Hotels Composite Index. The graph assumes an initial investment of $100
on December 30, 1994, and reinvestment of dividends. In addition, the Sodexho
Marriott Services, Inc. shares received in connection with the Spinoff are
assumed to be sold on March 27, 1998, and immediately reinvested in the
Company's Class A common stock.
The Company believes that this shareholder return information has only
limited relevance to an understanding of its or Old Marriott's compensation
policies during the indicated periods and does not reflect all matters
appropriately considered by it or by Old Marriott in developing their
compensation strategies.
[GRAPH]
COMPARISON OF SHAREHOLDER RETURNS AMONG MARRIOTT INTERNATIONAL,
THE S&P 500 INDEX AND THE S&P LODGING - HOTELS INDEX
12/30/94 12/29/95 1/3/97 1/2/98 1/1/99 12/31/99
Marriott International, Inc. $100.00 $137.0 $198.2 $247.2 $230.8 $252.7
S&P Lodging-Hotels Index $100.00 $118.2 $140.8 $194.3 $159.7 $159.6
S&P 500 Index $100.00 $137.5 $169.1 $220.5 $289.6 $350.6
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CERTAIN TRANSACTIONS
JWM Family Enterprises, L.P. ("Family Enterprises") is a Delaware limited
partnership owned by J.W. Marriott, Jr., the Chairman and Chief Executive
Officer of the Company, and members of his immediate family. Family Enterprises
owns a Courtyard hotel in Long Beach, California, a Residence Inn in San
Antonio, Texas, a Fairfield Inn in Anaheim, California, and a Spring Hill
Suites hotel in Herndon, Virginia. In addition, in October 1999 Family
Enterprises purchased three newly-built hotel properties from the Company: a
Courtyard hotel in Novato, California, and a Courtyard hotel and a TownePlace
Suites hotel in Milpitas, California. The aggregate purchase price for these
three properties was approximately $39.3 million, which was paid in cash upon
purchase. Subsidiaries of the Company operate each of these properties pursuant
to management agreements with Family Enterprises. In fiscal 1999, the Company
received management fees of approximately $1.65 million, plus reimbursement of
certain expenses, from its operation of these hotels.
McIntosh Mill Ltd. ("McIntosh Mill") is a Utah limited partnership in which
Richard E. Marriott, a director of the Company, has a 40 percent limited
partnership interest. McIntosh Mill sold certain parcels of land in Park City,
Utah to Marriott Ownership Resorts, Inc. ("MORI"), a subsidiary of the Company,
on which MORI has built a mixed-use development, including commercial
condominium units and a timeshare resort. McIntosh Mill purchased the
commercial condominium units from MORI for a cash purchase price of
approximately $3.95 million, which is the pro rata share of the total project
development and construction costs allocable to the commercial condominium
units, less (i) the value of the land allocated to the residential condominium
units retained by MORI for its timeshare resort, and (ii) an agreed-upon
development fee earned by McIntosh Mill. McIntosh Mill expects to pay this
purchase price with part of the proceeds from long-term mortgage financing it
is seeking to obtain. MORI has secured payment of the purchase price with
purchase money mortgages on the commercial condominium units.
Dr. Henry Cheng Kar-Shun, a director of the Company, together with members of
the Cheng family, directly or indirectly owns or leases hotel properties that
are operated by subsidiaries of the Company. In fiscal 1999, the Company
recognized sales of $531 million from its operation of these properties. Dr.
Cheng serves as Managing Director of New World Development, which is 35.99
percent owned by Dr. Cheng and members of the Cheng family, its affiliates or
affiliates of Dr. Cheng. New World Development has indemnified Renaissance
Hotel Group N.V. ("RHG"), a subsidiary of the Company, RHG's subsidiaries, and
the Company for certain lease and other obligations in connection with the
formation of RHG as a hotel management company in 1995, when Dr. Cheng and his
family members and affiliates owned a majority of RHG's stock. In 1999 the
Company entered into an agreement with certain affiliates of Dr. Cheng. Under
the agreement, the Cheng affiliates assumed a number of administrative and
asset management functions from RHG. Although these functions are typically
performed by hotel owners, RHG was obligated to perform them under hotel
operating agreements which were in place at the time the Company acquired RHG.
The agreement also clarified and amended certain provisions of the Company's
hotel operating agreements with these affiliates of Dr. Cheng, including
provisions relating to management fees and cost reimbursements, and included a
limited operating profit guarantee by RHG for fiscal years 1999, 2000 and 2001.
The Company paid $24 million to the Cheng affiliates in exchange for this
assumption of responsibilities and the other agreements reached with them. The
Company does not believe that a guarantee payment is required to be made for
fiscal 1999. Any guarantee payments may be recouped to the extent that
operating profit targets are exceeded in 2000, 2001, 2002 or 2003. In addition,
in 1999 the Company purchased a 15-acre parcel of raw land in Kauai, Hawaii
from an affiliate of Dr. Cheng for approximately $23.7 million in cash.
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Transactions with Host Marriott Corporation and Crestline Capital Corporation
On October 8, 1993, Old Marriott was spun off as a separate public company
from its former parent company, Marriott Corporation (which changed its name to
Host Marriott Corporation) ("Host Marriott"). Host Marriott retained the
ownership of lodging properties and certain other assets. Old Marriott
continued the businesses of lodging management, senior living services,
distribution services and certain other businesses.
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 hotel property 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 leased or subleased to Crestline substantially all of Host Marriott's
lodging properties, including the properties acquired in the acquisition and
roll-up transactions described above. Host Marriott also assigned to Crestline
the lodging and senior living community management and franchise agreements
with the Company. 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 Company believes that the transactions described above have not
materially changed its 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 the Company in the future.
At December 31, 1999, J.W. Marriott, Jr. and Richard E. Marriott and their
respective immediate family members beneficially owned approximately 5.9
percent and 6.6 percent, respectively, of the common stock of Host Marriott.
Richard E. Marriott is the Chairman of the Board of Host Marriott, and J.W.
Marriott, Jr. is a director of Host Marriott.
At December 31, 1999, J.W. Marriott, Jr. and Richard E. Marriott and their
respective immediate family members beneficially owned approximately 5.1
percent and 4.8 percent, respectively, of the common stock of Crestline. John
W. Marriott III, the son of J.W. Marriott, Jr., is a director of Crestline.
Pursuant to agreements between the Company and Host Marriott, and the Company
and Crestline, as the case may be, in 1999 the Company:
. operated lodging properties leased by Crestline from Host Marriott, which
are in turn owned or leased by Host Marriott;
. operated senior living communities owned by Crestline;
. guaranteed Host Marriott's performance in connection with certain loans
or other obligations; and
. provided Host Marriott with various administrative and consulting
services and a sublease of office space at the Marriott headquarters
building.
Lodging. The Company recognized sales of $2,553 million and operating profit
(before corporate expenses and interest) of $221 million in 1999 from its
operation of lodging properties
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owned or leased by Host Marriott and leased to Crestline. During 1999, Host
Marriott also served as the general partner of several unconsolidated
partnerships that own lodging properties. The Company recognized sales of $562
million and operating profit (before corporate expenses and interest) of $64
million in 1999 from its operation of these lodging properties. The Company
also leases land to certain of these partnerships and recognized land rent
income of $24 million in 1999.
Senior Living Services. During 1999, Marriott Senior Living Services, Inc., a
subsidiary of the Company, managed 31 senior living communities owned by
Crestline. The Company recognized sales of $177 million and operating profit
(before corporate expenses and interest) of $3 million from its operation of
these communities in 1999.
The Company believes that its lodging and senior living community operating
agreements with Host Marriott and Crestline reflect market terms and conditions
existing at the time the agreements were entered into, and are substantially
similar to operating agreements between the Company and other third parties for
facilities of a similar type.
Financing. The Company has provided financing to Host Marriott for a portion
of the cost of acquiring properties to be operated or franchised by the Company
and may continue to provide financing to Host Marriott or Crestline in the
future. In 1999, the Company recognized $1 million in interest and fee income
from loans to Host Marriott. At December 31, 1999, the outstanding principal
balance of loans to Host Marriott was $11 million.
Guarantees. The Company has guaranteed Host Marriott's performance to certain
lenders and other third parties. These guarantees were limited to $14 million
at December 31, 1999. The Company has not been required to make any payments
under these guarantees.
Administrative Services. The Company also provides certain administrative and
consulting services to Host Marriott, and subleases space at its headquarters
building to Host Marriott. In 1999, the Company was paid approximately $4.6
million for these items, including reimbursements. The Company provides similar
services to Crestline. In 1999 the Company was paid approximately $336,000,
including reimbursements, for these services.
The Company continues 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.
On February 23, 2000, the Company entered into an agreement to resolve
pending litigation involving certain limited partnerships formed in the mid- to
late 1980s by Marriott Corporation. The Company, Host Marriott, and certain of
their subsidiaries and affiliates are defendants in these proceedings. Under
the agreement, the Company and Host Marriott will form an unconsolidated joint
venture to acquire all of the limited partners' interests in two limited
partnerships that own a total of 120 Courtyard by Marriott hotels, Courtyard by
Marriott Limited Partnership ("CBM I") and Courtyard by Marriott II Limited
Partnership ("CBM II"), for approximately $372 million. The purchase price will
be financed with $185 million in mezzanine debt loaned to the joint venture by
the Company and with equity contributed in equal shares by the Company and Host
Marriott. A subsidiary of the Company will continue to manage these 120 hotels
under long-term agreements. The Company and Host Marriott each will also pay
approximately $31 million to the limited partners in several other limited
partnerships in exchange for dismissal of the complaints and full releases.
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Two lawsuits are the subject of the settlement. In Whitey Ford, et al. v.
Host Marriott Corporation, et al., in the 285th Judicial District Court of
Bexar County, Texas, the plaintiff limited partners allege breach of fiduciary
duty, breach of contract, fraud, negligent misrepresentation, tortious
interference, violation of the Texas Free Enterprise and Antitrust Act of 1983
and conspiracy in connection with the formation, operation and management of
CBM II and its hotels, with additional claims relating to the 1993 split of
Marriott Corporation and to the 1995 refinancing of CBM II's indebtedness. In
Robert M. Haas, Sr. and Irwin Randolph Joint Tenants, et al. v. Marriott
International, Inc., et al., in the 57th Judicial District Court of Bexar
County, Texas, the plaintiff limited partners allege that the defendants
conspired to sell hotels to certain partnerships for inflated prices and that
they charged the partnerships excessive management fees to operate the
partnerships' hotels. The plaintiffs further allege that the defendants
committed fraud, breached fiduciary duties and violated the provisions of
various contracts.
Consummation of the settlement is subject to numerous conditions, including
court approval. Because of the numerous conditions to be satisfied, there can
be no assurance that the settlement transactions will be consummated, and if
consummated those transactions could differ materially from those described
above.
Transactions with Host Marriott Services Corporation
In December 1995, Host Marriott Services was spun off as a separate public
company from its former parent, Host Marriott. Host Marriott Services is a
food, beverage and retail concessionaire at travel and entertainment venues. On
August 27, 1999, Host Marriott Services was acquired by AutoGrill SpA through a
cash tender offer.
Until the acquisition of Host Marriott Services by AutoGrill SpA, J.W.
Marriott, Jr. and Richard E. Marriott and their respective immediate family
members beneficially owned approximately 5.7 percent and 5.6 percent,
respectively, of the common stock of Host Marriott Services. Until such
acquisition, William J. Shaw, President and Chief Operating Officer and a
director of the Company, was the Chairman of the Board of Host Marriott
Services, and J.W. Marriott, Jr. and Richard E. Marriott served as directors of
Host Marriott Services.
The Company procures and distributes food and supplies to Host Marriott
Services, for which the Company recognized sales of approximately $80.7 million
in 1999, including the cost of food and supplies purchased. The Company also
provides certain administrative and consulting services to Host Marriott
Services similar to those provided to Host Marriott. The Company received
payments aggregating approximately $8.6 million, including reimbursements, for
these services in 1999.
ITEM 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Acting upon the recommendation of the Audit Committee, the Board of Directors
has appointed Arthur Andersen LLP as the Company's independent auditors for
fiscal 2000. Arthur Andersen LLP, a firm of independent public accountants, has
served as the Company's independent auditors since the Spinoff in March 1998.
Arthur Andersen LLP also served as Old Marriott's independent auditors from
October 1993 (when Old Marriott was spun off as a public company) to March
1998. Arthur Andersen LLP will examine and report to shareholders on the
consolidated financial statements of the Company and its subsidiaries.
Representatives of Arthur Andersen LLP will be present at the annual meeting,
will be given an opportunity to make a statement, and are expected to be
available to respond to questions.
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The Board of Directors recommends a vote FOR ratification of Arthur Andersen
LLP as the Company's independent auditors for fiscal 2000.
ITEM 3--RATIFICATION OF INCREASE OF 15 MILLION SHARES OF THE COMPANY'S CLASS A
COMMON STOCK AUTHORIZED FOR ISSUANCE UNDER THE MARRIOTT INTERNATIONAL,
INC. 1998 COMPREHENSIVE STOCK AND CASH INCENTIVE PLAN
The Company is asking shareholders to ratify an amendment to the Marriott
International, Inc. 1998 Comprehensive Stock and Cash Incentive Plan (the
"Stock Plan") to increase by 15 million the number of shares authorized for
issuance under the Stock Plan. The Board of Directors approved this amendment
on February 3, 2000, subject to ratification by the shareholders. This
amendment would increase the number of shares authorized for issuance under the
Stock Plan from 56 million to 71 million. At March 1, 2000, approximately 51.9
million shares of the Company's Class A common stock ("Common Stock") either
were subject to awards granted under the Stock Plan or had been issued under
the Stock Plan, and approximately 4.1 million shares remained available for
future issuance.
The Stock Plan's purpose is to promote and enhance the long-term growth of
the Company by aligning the interests of the officers and directors of the
Company with those of the Company's stockholders. The proposed share increase
will ensure that a sufficient reserve of Common Stock is available under the
Stock plan to attract and retain the services of key individuals essential to
the Company's long-term growth and success.
Old Marriott shareholders approved the Stock Plan at a special meeting on
March 17, 1998. The Stock Plan became effective on March 28, 1998, immediately
following the Spinoff of the Company from Old Marriott.
The principal terms of the Stock Plan are summarized below.
Shares Available Under the Plan
The Stock Plan currently provides for the issuance of 56 million shares of
the Company's Common Stock. Approximately 36.7 million shares of the original
share authorization for the Stock Plan were used to convert then-existing
awards under Old Marriott's 1996 Comprehensive Stock Incentive Plan following
the Spinoff, leaving approximately 19.3 million shares available for new awards
since March 28, 1998. During 1998 and 1999, awards were granted with respect to
approximately 7.4 million shares and 7.8 million shares, respectively, under
the Stock Plan.
The Plan provides that no employee will be eligible to receive awards
covering more than 500,000 shares of Common Stock in any one fiscal year
(excluding for this purpose any conversion awards in connection with the
Spinoff described below). These limitations will be appropriately adjusted by
the Compensation Policy Committee in the event of any change in capitalization,
such as a stock split, or a corporate transaction, such as a merger,
consolidation, separation, including a spin-off or other distribution of stock
or property of the Company, any reorganization (whether or not taxable) or any
partial or complete liquidation of the Company.
Administration
The Stock Plan is administered by the Compensation Policy Committee appointed
by the Board of Directors of the Company, the members of which are non-employee
directors of the Company.
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The Compensation Policy Committee has broad discretion to determine the
employees eligible for awards and the type of awards to be granted and to
interpret the provisions of the Stock Plan. The Stock Plan provides that, upon
a change in control of the Company, the Compensation Policy Committee or the
Board will provide for the substitution, vesting, distribution, exercise,
cancellation or exchange for value of the outstanding awards.
Eligibility
Employees of the Company (including employees who are also members of the
Board) are eligible to participate in the Stock Plan. The Compensation Policy
Committee has discretion to determine which employees will receive awards. Non-
employee directors of the Company are eligible solely for purposes of receiving
certain director stock awards and making deferral elections with respect to
director fees. In addition, employees and non-employee directors of the
Company, and certain individuals who are former employees of the Company and
its predecessors, received certain conversion awards in connection with the
Spinoff.
Types of Awards
Stock Option Awards. Under the Stock Plan, options may be granted to
employees either on a nonqualified tax basis or as "incentive stock options"
within the meaning of Section 422 of the Code. The option price may not be less
than 100 percent of the fair market value of Common Stock on the date the
option is granted. Approximately 2,200 employees are eligible for stock option
awards.
No option may be exercised within one year from the date of its grant. Each
option may have a term of up to 15 years, as determined by the Compensation
Policy Committee. If an optionee ceases to be an employee or goes on leave of
absence for more than 12 months (except in the case of a leave approved by the
Compensation Policy Committee) while holding an exercisable option, the option
will generally terminate if not exercised within the following three months
(one year in the case of a permanently disabled employee). Nonqualified options
granted to optionees who subsequently become "approved retirees" (retirement
with approval from the Compensation Policy Committee after 20 years of service
or after attaining age 55 with 10 years of service and while a noncompetition
agreement is honored) will not expire until the earlier of (i) the expiration
of the option in accordance with its original term or (ii) five years from the
date of retirement. If an optionee dies while employed by the Company more than
one year after the date the options are granted, the remaining options may be
exercised until the earlier of the expiration date for such options or one year
after the optionee's death. If an optionee dies while an approved retiree, all
the optionee's options become fully vested and may be exercised until the
earlier of the expiration date for such options or one year after the
optionee's death. If an optionee who is not an approved retiree dies after
termination of employment, the optionee's remaining options may be exercised to
the same extent and during the same period that the optionee could have
exercised the options if the optionee had not died.
Restricted Stock Awards. The Stock Plan provides additional compensation
incentives to key employees in the form of shares of restricted stock of the
Company. Approximately 40 key employees are eligible to receive restricted
stock awards under the plan. Delivery of shares is subject to the lapse of a
restriction period, continued employment with the Company and satisfaction of
such other requirements as may be imposed by the Compensation Policy Committee,
including, but not limited to, achievement of specific performance objectives
of the Company, the business unit or the
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individual. A percentage of the shares subject to an award of restricted stock,
as determined by the Compensation Policy Committee, may be released from
restriction following an employee's retirement with the Committee's approval at
or beyond age 55 with 10 years of service or with 20 years of service. Shares
are also released from restriction upon the employee's death or permanent
disability.
Deferred Stock Awards. Deferred shares of Common Stock may be granted to
employees annually as Deferred Stock Bonus Awards or Deferred Stock Agreements.
Approximately 4,000 employees are eligible For Deferred Stock Bonus Awards and
approximately 85 key employees are eligible for Deferred Stock Agreements.
Deferred Stock Bonus Awards represent a part of the annual performance bonus
awards to employees. Eligible award recipients are able to elect either a
current award or a deferred award. A current award is distributed in 10 annual
installments commencing one year after the award is granted. Any undistributed
shares subject to a current award will be forfeited and the award terminated if
the employee's employment with the Company is terminated for any reason other
than termination of employment at or beyond age 55 with 10 years of service,
termination of employment after 20 years of service with retirement approval
from the Compensation Policy Committee, permanent disability or death. Any
undistributed shares not subject to forfeiture will continue to be paid to the
employee or the employee's beneficiary under the distribution schedule that
would have applied to those shares if the employee had not terminated
employment, or over such shorter period as the Compensation Policy Committee
may determine.
A deferred award will be distributed to the recipient, as elected by such
recipient, either in a lump sum or in up to 10 installments beginning the
January following termination of employment. Deferred award shares contingently
vest pro rata in annual installments commencing one year after the award is
granted to the employee, and continuing on each January 2 thereafter until the
expiration of a 10-year period from the commencement date. All shares subject
to the deferred award will vest upon termination of employment after reaching
age 55 with 10 years of service, termination of employment after 20 years of
service with retirement approval from the Compensation Policy Committee,
permanent disability or death. Vesting will stop when employment terminates for
any other reason.
Deferred shares awarded pursuant to a Deferred Stock Agreement are
distributed in 10 consecutive annual installments or over such shorter period
as the Compensation Policy Committee may direct. The distribution will commence
in the January following the date the employee retires or becomes permanently
disabled or attains at least age 65 and is not an employee of the Company.
Shares will vest contingently over a specified term or in pro rata annual
installments until age 65. A percentage of the shares subject to a Deferred
Stock Agreement, as determined by the Compensation Policy Committee, will vest
following an employee's retirement with the Committee's approval at or beyond
age 55 with 10 years of service or with 20 years of service. Shares also vest
upon the employee's death or permanent disability.
Special Recognition Stock Awards. The Stock Plan provides for awards designed
to provide recognition of employee performance for special efforts on behalf of
the Company. While all full-time, nonunion employees will be eligible, actual
awards are limited in the discretion of the Compensation Policy Committee.
Other Awards. The Compensation Policy Committee may grant to employees any
other awards denominated or payable in cash, Common Stock, a Common Stock
equivalent or appreciation
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unit or security convertible into Common Stock or in any combination of these
forms. The other share-based awards may be issued alone or in tandem with other
awards and made subject to any terms and conditions as determined by the
Compensation Policy Committee and specified in the award agreements. The
Compensation Policy Committee also may grant cash performance-based awards not
based on Common Stock on such terms and conditions as the Committee shall
determine. No individual may receive a payment with respect to a cash
performance-based award in excess of $4 million in any calendar year.
Performance Measures. In order to comply with the requirements for exclusion
from the limit on the tax deduction of executive compensation under Section
162(m) of the Code, the Compensation Policy Committee may condition the grant
or payment of awards to employees on the attainment of performance objectives.
The performance objectives are measured by one or more of the following factors
regarding the Company or the applicable business unit: (i) consolidated cash
flows, (ii) consolidated financial reported earnings, (iii) consolidated
economic earnings, (iv) earnings per share of Common Stock, (v) business unit
financial reported earnings, (vi) business unit economic earnings, (vii)
business unit cash flow and (viii) appreciation in the price of the Company's
Common Stock, considered alone or as measured against the performance of a
group of companies approved by the Compensation Policy Committee.
Directors' Stock Awards and Fee Deferral Elections. The Board may, after each
annual meeting of the stockholders, designate certain non-employee directors
who will receive awards of deferred shares of Common Stock. The awards are
fully vested when granted. The awards are distributed in shares of Common Stock
over a ten-year period following retirement from the Board. Non-employee
directors are directors who are not full-time, salaried employees of the
Company.
The Stock Plan also provides for the deferral of fees for non-employee
directors at their election. The election must be made before the fees would be
earned. The amounts deferred are credited, as of the date of deferral, to a
bookkeeping account as stock units. The number of stock units credited to the
account is equal to the fee amount divided by the per share value of Common
Stock on the date the fee amount would have been paid. The stock units are
fully vested when credited to the accounts. The accounts are credited with
additional stock units as of each dividend payment date on the Common Stock, to
reflect the dividend payment payable on shares of Common Stock. Upon a non-
employee director's resignation, retirement or death (or if the non-employee
director is not re-elected), the stock units in the director's account will be
paid in an equal number of shares of Common Stock in a lump sum or in equal
annual installments over a period as elected by the director.
The Stock Plan also provides for non-employee directors to elect to receive
all or any part of his or her annual retainer in the form of a stock option.
The stock option, if elected, has a value, determined by the Compensation
Policy Committee based on a Black-Scholes option pricing model, equal to the
amount of the annual retainer the non-employee director elects to receive in
the form of a stock option. The election is made on or before each Annual
Meeting and the valuation is made as of the first full trading day following
the Annual Meeting (the date of grant). The option becomes fully vested on the
date of the next Annual Meeting. The exercise price is the fair market value of
a share of Common Stock on the date of grant.
Non-employee directors are not eligible for other stock awards.
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Conversion Awards. Pursuant to agreements entered into in connection with the
Spinoff, certain conversion awards were made under the Stock Plan in shares of
Common Stock, in replacement of certain awards denominated in shares of Common
Stock of Old Marriott outstanding on the effective date of the Spinoff and held
by individuals who were not employees of Old Marriott after the Spinoff. These
conversion awards are administered under the Stock Plan. The awards are subject
to the terms and conditions substantially similar to those governing the awards
as they were in effect before the Spinoff. Approximately 4,000 individuals,
including ten directors, received conversion awards under the Stock Plan,
covering a total of approximately 36.7 million shares of Common Stock.
Federal Income Tax Consequences. The following is a brief description of the
federal income tax consequences generally arising with respect to stock option
awards that may be granted under the Stock Plan. This discussion is intended
for the information of shareholders considering how to vote at the Annual
Meeting and not as tax guidance to participants in the Stock Plan.
To the extent that any option does not satisfy the requirements for an
incentive stock option, it will be treated as a nonqualified stock option. An
option holder generally will not recognize income for federal income tax
purposes at the time a nonqualified stock option is granted. An option holder
generally will recognize ordinary income upon exercise of a nonqualified stock
option in an amount equal to the difference between the fair market value of
the Common Stock on the exercise date and the exercise price. When shares
acquired upon exercise of a nonqualified stock option are sold or otherwise
disposed of, the option holder generally will recognize gain (or loss) equal to
the difference between the amount realized and the option holder's tax basis in
the shares. An option holder's tax basis in shares of Common Stock received
upon exercise of a nonqualified stock option generally is the sum of the
exercise price paid and the ordinary income recognized as a result of
exercising the nonqualified stock option. The Company generally will be
entitled to a deduction for federal income tax purposes with respect to the
exercise of a nonqualified stock option at the same time and in the same amount
as ordinary income is recognized by the option holder.
An option holder will not recognize ordinary taxable income upon the grant or
exercise of an incentive stock option. However, the option holder may be
subject to the alternative minimum tax upon exercise of an award that qualifies
as an incentive stock option. Upon sale of the shares acquired upon exercise of
an incentive stock option, any gain recognized generally will be taxed as
capital gain if such shares have been held for at least two years from the date
the incentive stock option was granted and at least one year from the date the
shares were transferred to the option holder. Any sale or other disposition of
the shares acquired upon exercise of an incentive stock option prior to the
expiration of the holding period described in this paragraph is deemed a
"disqualifying disposition" unless the option is exercised after the option
holder's death by the option holder's estate or by the person who acquired the
right to exercise the option by reason of the option holder's death. Upon a
disqualifying disposition, an option holder generally will recognize ordinary
income in an amount equal to the lesser of (a) the excess of the fair market
value of the shares on the date the option was exercised over the exercise
price or (b) the excess of the amount realized upon such disposition over the
exercise price. If the amount realized exceeds the fair market value of the
shares on the date of the exercise, the excess will be treated as capital gain.
An option holder's tax basis in shares of Common Stock received upon exercise
of an incentive stock option generally is equal to the exercise price paid. The
Company will not be entitled to a deduction for federal income tax purposes at
the time an incentive stock option is granted or exercised or, unless a
disqualifying disposition has occurred, at the time the shares acquired upon
exercise of an incentive
32
<PAGE>
stock option are sold. If an option holder makes a disqualifying disposition,
the Company generally will be entitled to take a deduction at the same time and
in the same amount as the ordinary income recognized by the option holder.
The Board recommends a vote FOR ratification of an increase of 15 million
shares of the Company's Class A common stock authorized for issuance under the
Stock Plan.
ITEM 4--SHAREHOLDER PROPOSAL TO ADOPT CUMULATIVE VOTING FOR ELECTION OF
DIRECTORS
A shareholder (Ms. Evelyn Y. Davis, Editor, Highlights and Lowlights,
Watergate Office Building, 2600 Virginia Avenue, N.W., Suite 215, Washington,
D.C. 20037), who owns 400 shares of Class A common stock, has notified the
Company of her intention to propose the following resolution at the Annual
Meeting:
"RESOLVED: That the shareholders of Marriott International, assembled in
Annual Meeting in person and by proxy, hereby request the Board of
Directors to take the necessary steps to provide for cumulative voting in
the election of directors, which means each shareholder shall be entitled
to as many votes as shall equal the number of shares he or she owns
multiplied by the number of directors to be elected, and he or she may cast
all of such votes for a single candidate, or any two or more of them as he
or she may see fit."
In support of the resolution, Ms. Davis has submitted the following
statement:
"Many states have mandatory cumulative voting, so do National Banks. In
addition, many corporations have adopted cumulative voting. Last year the
owners of shares representing 165,618,800 votes, representing approximately
14.2% of the voting power of shares voting, voted for this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
The Board, and the Nominating and Corporate Governance Committee, have
considered this proposal. The Board recommends that shareholders vote against
it for the following reasons:
Each director of the Company currently is elected by the holders of a
majority of the voting power of the Company's shares. This permits the
directors to administer the affairs of the Company for the benefit of all
shareholders. The Board believes that cumulative voting is undesirable because
it is directed toward the election of one or more directors by a special group
of shareholders. The shareholder or special group electing a director by
cumulative voting may seek to have that director represent the shareholder's or
group's special interest, rather than the interests of the shareholders as a
whole. This partisanship among directors and voting on behalf of special
interests could interfere with the effectiveness of the Board, and could be
contrary to the interests of the Company and its shareholders as a whole.
The vast majority of states, including Delaware, where the Company is
incorporated, do not require cumulative voting. The Company's present method of
electing directors is employed by over 88% of companies in the Standard and
Poor's 500 Index, and by most companies listed on the New York Stock Exchange.
The Board believes that this method is appropriate to ensure that directors
will represent all shareholders, and not just a particular group.
The Board recommends a vote AGAINST this proposal.
33
<PAGE>
OTHER MATTERS
The Company's management knows of no other matters which may be presented for
consideration at the 2000 annual meeting. However, if any other matters
properly come before the annual meeting, it is the intention of the persons
named in the proxy to vote such proxy in accordance with their judgment on such
matters.
Any shareholder who desires a copy of the Company's 1999 Annual Report on
Form 10-K may obtain one, without charge, by addressing a request to the
Secretary, Marriott International, Inc., Dept. 52/862, Marriott Drive,
Washington, D.C. 20058. The Company's copying costs will be charged if copies
of exhibits to the 10-K are requested.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ W. DAVID MANN
W. David Mann
Secretary
34
<PAGE>
2000 ANNUAL MEETING INFORMATION
Time and Location. The 2000 Annual Meeting will begin at 10:30 a.m. at the
J.W. Marriott Hotel. Coffee, tea, and juice will be provided to shareholders
attending the meeting.
Parking. Due to anticipated needs of other hotel guests on April 28, minimal
parking is expected to be available to shareholders in the parking garage
adjacent to the hotel. Several public lots are located within three blocks of
the hotel.
Public Transportation. As parking is limited in the general area, it is
recommended that shareholders attending the annual meeting consider using
public transportation. Two Metro subway stations, Federal Triangle and Metro
Center, are located less than three blocks from the hotel, and the area is
served by Metro buses.
Lodging. A "Shareholder Annual Meeting" rate will be offered at two local
Marriott hotels for Thursday, April 27, 2000, the night before the meeting. To
receive these rates, call the hotel directly and ask for the shareholder annual
meeting rate for April 27, 2000. Please note that a limited number of rooms are
offered at this rate. Applicable taxes and gratuities are extra and advance
reservations are required. This discount may not be used in conjunction with
other discounts, coupons, or group rates.
J.W. Marriott Hotel--$175
1331 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
202/393-2000
Near Federal Triangle Metro Station
[MAP]
Washington Courtyard--$125
1900 Connecticut Avenue, N.W.
Washington, D.C. 20009
202/332-9300
Near Dupont Circle Metro Station
<PAGE>
MARRIOTT INTERNATIONAL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
P on April 28, 2000, 10:30 a.m.
R
O The undersigned appoints J.W. Marriott, Jr. and Richard E. Marriott as
X Proxies. Each shall have the power to appoint a substitute. They are
Y authorized to represent and vote, as designated on the reverse side, all
shares of Marriott International, Inc. Class A common stock held of record
by the undersigned on March 6, 2000, at the Annual Meeting of Shareholders
to be held on April 28, 2000, or any adjournment or postponement thereof.
The Board of Directors recommends votes FOR Proposals 1, 2, and 3 and
AGAINST Proposal 4.
(change of address/comments)
------------------------------------
------------------------------------
------------------------------------
------------------------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE -------------
SEE REVERSE
SIDE
-------------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERES
INTERNET ACCESS TO SHAREHOLDER ACCOUNTS
Marriott International, Inc. and First Chicago Trust remind you that you can
access your account information via the Internet. Visit
http://gateway.equiserve.com. You will need your account number and social
security number to access your account and a password which you can receive by
calling First Chicago Trust at the toll-free number listed below.
DEDICATED TOLL FREE CUSTOMER SERVICE NUMBER
Marriott International, Inc. shareholders should call the toll-free number
indicated below for customer assistance.
1-800-311-4816
<PAGE>
- --------------------------------------------------------------------------------
2771
[ X ] Please mark your
votes as in this
example.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder(s). If no instruction is indicated, such proxy
will be voted "FOR" Proposals 1, 2, and 3 and "AGAINST" Proposal 4, and at the
discretion of the Proxies on any other matter that may properly occur.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1, 2, and 3.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of [ ] [ ] 01. Henry Cheng Kar-Shun
Director Nominees: 02. Floretta Dukes McKenzie
03. Roger W. Sant
04. Lawrence M. Small
For, except vote withheld from the
following nominee(s):
- ----------------------------------
2. Ratify appointment of Arthur FOR AGAINST ABSTAIN
Andersen LLP as independent auditors. [ ] [ ] [ ]
3. Ratify increase of 15 million shares of [ ] [ ] [ ]
Class A common stock authorized for
issuance under the Marriott International,
Inc. 1998 Comprehensive Stock and Cash
Incentive Plan.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 4.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Shareholder proposal to adopt cumulative [ ] [ ] [ ]
voting for the election ofdirectors.
- --------------------------------------------------------------------------------
MARK HERE FOR ADDRESS [ ]
CHANGE AND MARK ON
REVERSE SIDE
SIGNATURE (S)__________________________ DATE_____________
Sign exactly as name appears hereon. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, give full title. If a corporation, sign full corporate name by
President, or other authorized officer. If a partnership, sign in partnership
name by authorized trustee or partner.
- --------------------------------------------------------------------------------
Please carefully detach here and return this proxy in the enclosed envelope.
Dear Shareholder:
Marriott International, Inc. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the Internet or by telephone. This eliminates the need to
return the proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the telephone: Using a touch-tone telephone, call 1-877-PRX-VOTE
(1-877-779-8683)
2. To vote over the Internet: Log onto the Internet and go to the web site
http://www.eproxyvote.com/mar
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
Your vote is important. Thank you for voting.
<PAGE>
1998 Comprehensive
Stock And Cash Incentive Plan
Amended and Restated Effective March 1, 2000
Marriott International, Inc.
<PAGE>
Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Article 1. Establishment, Objectives, and Duration 1
Article 2. Definition 1
Article 3. Administration 6
Article 4. Shares Subject to the Plan and Maximum Awards 6
Article 5. Eligibility and Participation 7
Article 6. Stock Options 7
Article 7. Restricted Stock 10
Article 8. Deferred Stock 10
Article 9. Special Recognition Stock Awards 15
Article 10. Other Awards 15
Article 11. Performance Measures for Awards 15
Article 12. Directors' Share Awards, Fee Deferral Elections, and
Director Options 16
Article 13. 1998 Conversion Awards 19
Article 14. Beneficiary Designation 19
Article 15. Deferrals 19
Article 16. Rights of Participants 19
Article 17. Amendment, Modification, and Termination 20
Article 18. Withholding 21
Article 19. Indemnification 21
Article 20. Successors 21
Article 21. Legal Construction 22
</TABLE>
-i-
<PAGE>
MARRIOTT INTERNATIONAL, INC.
1998 COMPREHENSIVE STOCK AND CASH INCENTIVE PLAN
Amended and Restated Effective April 30, 1999
Article 1. Establishment, Objectives, and Duration
1.1 Establishment of the Plan. New Marriott MI, Inc., a Delaware
corporation and, prior to the Distribution, a wholly-owned subsidiary of
Marriott International, Inc., to be renamed Marriott International, Inc. after
the Distribution (the "Company"), hereby establishes an incentive compensation
plan to be known as the "Marriott International, Inc. 1998 Comprehensive Stock
and Cash Incentive Plan" (hereinafter referred to as the "Plan"), as set forth
in this document.
The Plan shall become effective as of the Distribution Date (as defined
below, the "Effective Date") and shall remain in effect as provided in Section
1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote and
enhance the long-term growth of the Company by aligning the personal interests
of Employees and Non-Employee Directors to those of Company shareholders and
allowing such Employees and Non-Employee Directors to participate in the growth,
development and financial success of the Company.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of key individuals.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 17 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "Allocation Agreement" means the Employee Benefits and Other
Employment Matters Allocation Agreement by and between Marriott International,
Inc. (To Be Renamed Sodexho Marriott Services, Inc.) and New Marriott MI, Inc.
(To Be Renamed Marriott International, Inc.) dated as of September 30, 1997.
2.1.1 "Annual Meeting" means the annual meeting of the stockholders of the
Company at which Directors are elected.
-1-
<PAGE>
2.2 "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
Deferred Stock, Special Recognition Stock Awards, 1998 Conversion Awards, Other
Share-Based Awards, Other Cash Performance-Based Awards, Non-Employee Director
Share Awards, Stock Units, and Director Options.
2.3 "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.4 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5 "Beneficiary" means the person or persons designated pursuant to
Article 14 hereof.
2.6 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.8 "Committee" means the Compensation Policy Committee of the Board, as
specified in Article 3 herein, or such other Committee appointed by the Board to
administer the Plan with respect to grants of Awards.
2.9 "Company" means New Marriott MI, Inc. which, after the Distribution,
will be renamed Marriott International, Inc., together with any and all
Subsidiaries, and any successor thereto as provided in Article 20 herein.
2.10 "Current Award" means a Deferred Stock Bonus Award granted under the
terms and conditions described in Section 8.2(c) hereof.
2.11 "Covered Employee" means a Participant who, as of the date of grant,
vesting and/or payout of an Award, as applicable, is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
2.12 "Deferred Award" means a Deferred Stock Bonus Award granted under the
terms and conditions described in Section 8.2(b) hereof.
2.13 "Deferred Stock" means an Award granted to a Participant as described
in Article 8 herein.
2.14 "Deferred Stock Bonus Award" means a grant of a right to receive
Shares on a deferred basis, pursuant to Article 8.2 hereof.
2.15 "Deferred Stock Agreement" means an Award granted to a Participant as
described in Article 8.3 herein.
-2-
<PAGE>
2.16 "Director" means any member of the Board.
2.16.1 "Director Option" means a Nonqualified Stock Option as described in
Article 12 herein.
2.17 "Disability" means a permanent and total disability, within the
meaning of Code Section 22(e)(3), as determined by the Committee in good faith,
upon receipt of sufficient competent medical advice from one or more
individuals, selected by or satisfactory to the Committee, who are qualified to
give professional medical advice.
2.18 "Distribution" means the distribution of all the outstanding shares
of capital stock of the Company as provided in the Distribution Agreement.
2.19 "Distribution Agreement" means the Distribution Agreement between
Marriott International, Inc. (To Be Renamed Sodexho Marriott Services, Inc.) and
the Company dated as of September 30, 1997.
2.20 "Distribution Date" means the date on which the Distribution shall
be effected pursuant to the Distribution Agreement.
2.21 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.22 "Employee" means any individual who is, or will become, a full-
time, active, non-union employee of the Company. Any Employee who, at the
request and on the assignment of the Company specifically referencing this
provision of the Plan, becomes an employee of another employer shall continue to
be treated as an Employee for all purposes hereunder during the period of such
assignment. Directors who are not employed by the Company shall not be
considered Employees under this Plan.
2.23 "Engaging in Competition" means (i) engaging, individually or as an
employee, consultant or owner (more than 5%) of any entity, in any business
engaged in significant competition with any business operated by the Company;
(ii) soliciting and hiring a key employee of the Company in another business,
whether or not in significant competition with any business operated by the
Company; or (iii) using or disclosing confidential Company information, in each
case, without the approval of the Company.
2.24 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.25 "Fair Market Value" means the average of the highest and lowest
quoted selling prices for the Shares on the relevant date, or (if there were no
sales on such date) the average so computed on the nearest day before or the
nearest day after the relevant date, as reported in The Wall Street Journal or a
similar publication selected by the Committee.
-3-
<PAGE>
2.26 "Fee Deferral Election" means an election made by a Non-Employee
Director to defer the receipt of Fees, as described in Section 12.3 hereof.
2.27 "Fees" means all or part of any retainer and/or fees payable to a
Non-Employee Director in his or her capacity as such.
2.28 "Incentive Stock Option" or "ISO" means an option to purchase
Shares granted under Article 6 herein, which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.
2.29 "Insider" shall mean an individual who is, on the relevant date, an
officer, Director or more than ten percent (10%) beneficial owner of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act.
2.30 "1998 Conversion Award" means an Award made pursuant to Article 13
to reflect the effect of the Distribution on outstanding awards which were made
under the Predecessor Plans and which were held by the grantee immediately
before the Distribution.
2.31 "Non-Employee Director" means a Director who is not an Employee of
the Company.
2.32 "Non-Employee Director Share Award" shall mean an award of Shares
to a Non-Employee Director, as described in Section 12.2 herein.
2.33 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.
2.34 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein, or a Director Option as described in
Article 12 herein.
2.35 "Option Price" means the price at which a Share may be purchased by
a Participant pursuant to an Option.
2.36 "Other Cash Performance-Based Awards" means an Other Cash
Performance-Based Award, as described in Article 10 herein.
2.37 "Other Share-Based Award" means an Other Share-Based Award, as
described in Article 10 herein.
2.38 "Participant" means an individual who has an outstanding Award
granted under the Plan.
2.39 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
-4-
<PAGE>
2.40 "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance objectives, or upon the occurrence of other
events as determined by the Committee, in its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 7 herein.
2.41 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.42 "Predecessor Plans" means the Marriott International, Inc. 1993
Comprehensive Stock Incentive Plan, the Marriott International, Inc. 1996
Comprehensive Stock Incentive Plan and the Marriott International, Inc. 1995
Non-Employee Directors' Deferred Stock Compensation Plan.
2.43 "Restricted Stock" means an Award granted to a Participant pursuant
to Article 7 herein.
2.44 "Shares" means shares of Class A Common Stock of the Company or of
any successor company adopting this Plan.
2.45 "Special Recognition Stock Award" means an Award granted to a
Participant pursuant to Article 9 herein.
2.46 "Stock Units" means the credits to a Non-Employee Director's Stock
Unit Account, each of which represents the right to receive one Share upon
settlement of the Stock Unit Account.
2.47 "Stock Unit Account" means the bookkeeping account established by
the Company pursuant to Section 12.3.
2.48 "Subsidiary" means any corporation, partnership, joint venture or
other entity in which the Company owns a majority of the equity interest by vote
or by value or in which the Company has a majority capital or profits interest.
2.49 "Termination of Service" means termination of service as a Non-
Employee Director in any of the following circumstances:
(a) Where the Non-Employee Director voluntarily resigns or
retires;
(b) Where the Non-Employee Director is not re-elected (or elected
in the case of an appointed Non-Employee Director) to the Board by the
shareholders; or
(c) Where the Non-Employee Director dies.
2.50 "Year of Service" means a period of twelve (12) consecutive
calendar months during which an Employee was paid for 1200 or more hours of work
for the Company.
-5-
<PAGE>
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the Compensation
Policy Committee of the Board, or by any other Committee appointed by the Board,
the members of which shall be "Non-Employee Directors" within the meaning of
Rule 16b-3 under the Exchange Act, or any successor provision. The members of
the Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.
3.2 Authority of the Committee. Except as limited by law or by the
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees and
Directors who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan's administration; and (subject to the provisions of Article 17
herein) amend the terms and conditions of any outstanding Award to the extent
such terms and conditions are within the discretion of the Committee as provided
in the Plan. Further, the Committee shall make all other determinations which
may be necessary or advisable for the administration of the Plan. The
Committee's determinations under the Plan (including without limitation,
determinations of the persons to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the Award Agreements
evidencing such Awards) need not be uniform and may be made by the Committee
selectively among persons who receive, or are eligible to receive, Awards under
the Plan, whether or not such persons are similarly situated. As permitted by
law, the Committee may delegate its authority under the Plan to a Director or
Employee.
3.3 Decisions Binding. All determinations and decisions made by the
Committee or its designee pursuant to the provisions of the Plan and all related
orders and resolutions of the Board shall be final, conclusive and binding on
all parties.
3.4 Unanimous Consent in Lieu of Meeting. A memorandum signed by all
members of the Committee shall constitute the act of the Committee without the
necessity in such event to hold a meeting.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1 Number of Shares. Subject to Sections 4.2 and 4.3 herein, (a) no more
than 71 million shares of Class A Common Stock of the Company may be issued
pursuant to Awards granted under the Plan, and (b) the maximum aggregate number
of Shares that may be subject to any Awards (other than 1998 Conversion Awards)
granted in any one fiscal year to any single Employee shall be 500,000. No more
than 20% of the Shares available for Awards will be issued with respect to
Awards other than the Options and Non-Employee Director Awards.
-6-
<PAGE>
4.2 Lapsed Awards. If any Award granted under the Plan is canceled,
terminates, expires, or lapses for any reason, any Shares subject to such Award
shall again be available for the grant of an Award under the Plan.
4.3 Adjustments in Authorized Shares and Awards. In the event of any
change in corporate capitalization, such as a stock split, or a corporate
transaction, such as any merger, consolidation, separation, including a spin-
off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368) or any partial or complete liquidation of the
Company, (a) such adjustment shall be made in the number and class of Shares
which may be delivered under Section 4.1 and the Award limits set forth in
Section 4.1 as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights;
and (b) the Committee or the board of directors, compensation committee or
similar body of any other legal entity assuming the obligations of the Company
hereunder, shall either (i) make appropriate provision for the protection of
outstanding Awards by the substitution on an equitable basis of appropriate
equity interests or awards similar to the Awards, provided that the substitution
neither enlarges nor diminishes the value and rights under the Awards; or (ii)
upon written notice to the Participants, provide that Awards will be exercised,
distributed, canceled or exchanged for value pursuant to such terms and
conditions (including the waiver of any existing terms or conditions) as shall
be specified in the notice. Any adjustment of an ISO under this paragraph shall
be made in such a manner so as not to constitute a "modification" within the
meaning of Section 424(h)(3) of the Code.
Article 5. Eligibility and Participation
5.1 Eligibility. Employees shall be eligible to participate in this Plan
with respect to Awards specified in Articles 6 through 10. Non-Employee
Directors shall be eligible to participate in the Plan with respect to Awards
specified in Article 12. Persons eligible to receive 1998 Conversion Awards
under the Allocation Agreement shall be eligible to participate in the Plan with
respect to Awards specified in Article 13.
5.2 Actual Participation by Employees. Subject to the provisions of the
Plan, the Committee may, from time to time, select from all eligible Employees,
those to whom Awards shall be granted and shall determine the nature and amount
of each Award.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Employees in such number, and upon such terms, and at
any time and from time to time as shall be determined by the Committee. Options
may include provisions for reload of Options exercised by the tender of Shares
or the withholding of Shares with respect to the exercise of the Options.
-7-
<PAGE>
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO whose grant is intended not to fall under the provisions of Code Section
422.
6.3 Option Price. The Option Price for each grant of an Option under this
Article 6 shall be at least equal to one hundred percent (100%) of the Fair
Market Value of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option granted under this Article 6 shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than the fifteenth
(15th) anniversary date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Employee.
The ability of an Employee to exercise an Option is conditioned upon the
Employee not committing any criminal offense or malicious tort relating to or
against the Company.
6.6 Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) if permitted in
the governing Award Agreement, by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy the
Option Price), or (c) if permitted in the governing Award Agreement, by a
combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
6.8 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed or traded, and under any blue sky or state securities laws applicable to
such Shares.
6.9 Termination of Employment or Leave of Absence. In the event that an
Employee, during the Employee's lifetime has been on leave of absence for a
period of greater
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than twelve (12) months (except a leave of absence approved by the Board or the
Committee, as the case may be), or ceases to be an Employee of the Company or of
any Subsidiary for any reason, including retirement, the portion of any Option
which is not exercisable on the date on which the Employee ceased to be an
Employee or has been on leave for over twelve (12) months (except a leave of
absence approved by the Board or the Committee, as the case may be) shall expire
on such date and any unexercised portion thereof which was otherwise exercisable
on such date shall expire unless exercised within a period of three (3) months
(one year in the case of a Participant who is Disabled) from such date, but in
no event after the expiration of the term for which the Option was granted;
provided, however, that in the case of an optionee of an NQSO who is an
"Approved Retiree" (as hereinafter defined), said optionee may exercise such
Option until the sooner to occur of (i) the expiration of such Option in
accordance with its original term; or (ii) the expiration of five years from the
date of retirement. For purposes of the proviso to the preceding sentence:
(a) An "Approved Retiree" is any optionee who (A) retires from
employment with the Company with the specific approval of the Committee on
or after such date on which the optionee has completed 20 Years of Service
or has attained age 55 and completed 10 Years of Service, and (B) has
entered into and has not breached an agreement to refrain from Engaging in
Competition in form and substance satisfactory to the Committee;
(b) Any time period during which an optionee may continue to exercise
an Option within clause (ii) of said proviso shall count in determining
compliance with any schedule established pursuant to Section 6.5 herein;
and
(c) If an Approved Retiree is subsequently found by the Committee to
have violated the provisions of the agreement to refrain from Engaging in
Competition referred to in clause (a)(B) of this sentence, such Approved
Retiree shall have ninety (90) days from the date of such finding within
which to exercise any Options or portions thereof which are exercisable on
such date, any Options or portions thereof which are not exercised within
such ninety- (90-) day period shall expire and any Options or portion
thereof which are not exercisable on such date shall be canceled on such
date.
In the event of the death of an optionee during the three-month period
described above for exercise of an Option by a terminated optionee or one on
leave for over 12 months (except a leave of absence approved by the Board or the
Committee, as the case may be), the Option shall be exercisable by the
optionee's personal representatives, heirs or legatees to the same extent and
during the same period that the optionee could have exercised the Option if the
optionee had not died.
Notwithstanding anything in Section 6.5 to the contrary, in the event of
the death of an optionee while an Employee or Approved Retiree of the Company or
any Subsidiary, an outstanding Option held by such optionee upon death shall
become fully vested upon death and shall be exercisable by the optionee's
personal representatives, heirs or legatees at any time prior to the expiration
of one (1) year from the date of death of the optionee, but in no event after
the expiration of the term for which the Option was granted.
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6.10 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.
Article 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Employees in such amounts as the Committee shall determine.
7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.
7.3 Transferability. Except as provided in this Article 7, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant.
7.4 Other Restrictions. The Committee shall impose such conditions and/or
restrictions on any Shares of Restricted Stock granted pursuant to the Plan as
it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance objectives
(Company-wide, business unit, and/or individual), time-based restrictions on
vesting following the attainment of the performance objectives, and/or
restrictions under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
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Except as otherwise provided in this Article 7, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
Distribution of Shares of Restricted Stock is conditioned upon the
Participant not committing any criminal offense or malicious tort relating to or
against the Company.
7.5 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
7.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. Such dividends may be paid currently, accrued as
contingent cash obligations, or converted into additional shares of Restricted
Stock, upon such terms as the Committee establishes.
The Committee may apply any restrictions to the dividends that the
Committee deems appropriate. Without limiting the generality of the preceding
sentence, if the grant or vesting of Restricted Stock granted to a Covered
Employee is designed to comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Restricted Stock, such that
the dividends and/or the Restricted Stock maintain eligibility for the
Performance-Based Exception.
7.7 Termination of Employment. In the event a Participant's employment
with the Company is terminated because of the Participant's Disability or death
during the Period of Restriction, the Period of Restriction shall end and the
Participant's rights thereunder shall inure to the benefit of his or her
Beneficiary.
In the event that a Participant's employment with the Company is terminated
during the Period of Restriction because of either the Participant's: (a)
retirement with specific approval from the Committee following attainment of age
55 and with ten (10) Years of Service or (b) retirement with specific approval
from the Committee and with twenty (20) Years of Service, the Committee shall
have complete discretion in determining the percentage, if any, of a
Participant's outstanding Restricted Shares as to which the Period of
Restriction shall end. In the event that a Participant's employment with the
Company is terminated for any other reason during the Period of Restriction,
such Participant's outstanding Restricted Shares shall be forfeited to the
Company without payment.
Article 8. Deferred Stock
8.1 Award of Deferred Stock. Subject to the terms and provisions of the
Plan, Deferred Stock Bonus Awards or Deferred Stock Agreements may be granted to
Employees at any time and from time to time as shall be determined by the
Committee. The Committee shall have complete discretion in determining the
amount of Deferred Stock granted to each Employee
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(subject to Article 4 herein) and, consistent with the provisions of the Plan,
in determining the terms and conditions pertaining to such Awards of Deferred
Stock.
8.2 Deferred Stock Bonus Awards. Deferred Stock Bonus Awards may be
granted as part of a management incentive program under which part of the annual
performance bonus awarded to managers and other key Employees is made in
Deferred Stock. Subject to the terms of the Plan, Deferred Stock Bonus Awards
shall have such terms and conditions as determined by the Committee. As
determined by the Committee and subject to the terms of the Plan, Participants
selected by the Committee in its discretion may elect to receive their Deferred
Stock Bonus Award in the form of either a Current Award or a Deferred Award.
(a) Method of Election. Each Participant who is granted a Deferred
Stock Bonus Award and selected by the Committee in its discretion may
elect, in writing, on a form to be furnished by the Company, to receive a
Current Award or a Deferred Award. Notwithstanding the foregoing, any
eligible Participant who does not elect to receive a Deferred Award within
the time designated by the Company shall be granted a Current Award.
(b) Deferred Award.
(i) Vesting. Deferred Stock granted in connection with a
Deferred Award shall contingently vest, pro rata, in annual
installments commencing one year after the date of the Deferred Stock
Bonus Award and continuing on each January 2 thereafter until the
expiration of a ten-year period from such commencement date.
Notwithstanding the foregoing, all unvested Deferred Stock subject to
a Deferred Award shall vest upon the Participant's: (1) termination
of employment following attainment of age 55 with ten (10) Years of
Service; (2) termination of employment with retirement approval from
the Committee and with twenty (20) Years of Service; (3) Disability,
or (4) death. Subject to Section 4.3 herein, unvested Deferred Stock
shall not continue to vest following termination of employment for any
other reason.
(ii) Distribution of Shares. Vested Shares will be distributed
to the Participant in two (2) to ten (10) approximately equal annual
installments, as elected by the Participant, or over such shorter
period as determined by the Committee. Such distribution shall
commence in the month of January following the date the Participant
terminates employment; provided, however, that the Participant may
elect to receive his or her vested Shares in a single distribution
which shall take place in the month of January following his or her
termination of employment.
All such elections made pursuant to this Section 8.2(b)(ii),
shall be made at the time the Deferred Stock Bonus Award is granted,
and shall be made, in writing, on a form prescribed by the Committee.
Upon a Participant's death, all undistributed vested Deferred Stock
will be distributed in one distribution as provided in Article 10
herein.
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(c) Current Award.
(i) Distribution of Shares. Shares subject to a Current Award
will be distributed in ten (10) consecutive, approximately equal,
annual installments, commencing one (1) year after the date of the
Deferred Stock Bonus Award. If a Participant dies prior to
distribution of all Shares to which he or she is entitled, the
remaining Shares will be distributed in one distribution as provided
in Article 10 herein.
(ii) Forfeiture of Shares. Any undistributed Shares subject to
a Current Award will be forfeited and the Deferred Stock Bonus Award
relating thereto terminated, without payment, if the Participant's
employment with the Company is terminated for any reason other than
the Participant's: (1) termination of employment at or beyond age 55
with 10 Years of Service, (2) retirement after 20 Years of Service
with approval from the Committee, (3) Disability, or (4) death. Any
undistributed Shares not subject to forfeiture shall continue to be
distributed to the Participant under the distribution schedule which
would have applied to those Shares if the Participant had not
terminated employment, or over such shorter period as may be
determined by the Committee.
(d) Conditions. Distribution of Shares under Current Awards and
Deferred Awards is conditioned upon:
(i) the Participant not committing any criminal offense or
malicious tort relating to or against the Company;
(ii) the Participant not Engaging in Competition; and
(iii) the Participant having provided the Committee with a
current address where the Deferred Stock Bonus Award may be
distributed.
If said conditions are not met, all undistributed Shares will be forfeited
and the Deferred Stock Bonus Award terminated, without payment.
(e) Lump Sum Payments. Notwithstanding anything in the Plan to the
contrary, any Participant entitled upon termination of employment to
receive a distribution pursuant to this Article 8 which has a total Fair
Market Value at the time of such termination of $3,000 or less shall
receive such distribution in one lump sum as soon as possible following
termination of employment.
8.3 Deferred Stock Agreements. Deferred Stock Agreements represent
Deferred Stock granted to a Participant subject to the following conditions:
(a) Vesting. Deferred Stock granted pursuant to this Section 8.3
shall contingently vest over a specified number of years, as determined by
the Committee. Notwithstanding the foregoing, the Committee shall have
complete discretion in
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determining the vested percentage, if any, of all unvested Deferred Stock
subject to a Deferred Stock Agreement upon either the Participant's (1)
termination of employment with retirement approval from the Committee
following attainment of age 55 and with ten (10) Years of Service or (2)
termination of employment with retirement approval from the Committee and
with twenty (20) Years of Service. All unvested Deferred Stock subject to a
Deferred Stock Agreement shall immediately vest upon the Participant's
termination of employment as a result of the Participant's Disability or
death. Subject to Section 4.3 herein, unless otherwise provided in the
Deferred Stock Agreement, if the Participant's employment with the Company
is terminated for any other reason, all Deferred Stock which is not vested
before such termination of employment shall be forfeited and the Deferred
Stock Agreement terminated without payment.
(b) Distribution of Shares. Vested Deferred Stock granted pursuant to
this Section 8.3 shall be distributed to the Participant in the form of
Shares in the manner specified in the Deferred Stock Agreement, or over
such shorter period as the Committee may direct. Such distribution shall
commence on January 2 following the first to occur of the date the
Participant (i) retires, (ii) becomes Disabled, or (iii) attains at least
age 65 and is no longer employed by the Company. Upon the Participant's
death or as soon as practicable thereafter, all unpaid vested Deferred
Stock shall be distributed in the form of Shares, in one distribution, as
provided in Article 13 hereof.
(c) Conditions. Distribution of Shares subject to Deferred Stock
Agreements is conditioned upon:
(i) the Participant not Engaging in Competition,
(ii) the Participant not committing any criminal offense or
malicious tort relating to or against the Company; and
(iii) the Participant having provided the Committee with a
current address where the Deferred Stock may be distributed.
If said conditions are not met, all undistributed Deferred Stock will
be forfeited and the Deferred Stock Agreement terminated without payment.
8.4 Assignment. A Participant's rights under a Deferred Stock Agreement
or Deferred Stock Bonus Award may not, without the Company's written consent, be
assigned or otherwise transferred, nor shall they be subject to any right or
claim of a Participant's creditors, provided that the Company may offset any
amounts owing to or guaranteed by the Company, or owing to any credit union
related to the Company against the value of Deferred Stock and underlying Shares
to be distributed under Deferred Stock Agreements and Deferred Stock Bonus
Awards.
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Article 9. Special Recognition Stock Awards
Subject to the terms and provisions of the Plan, the Committee or its
designee, at any time and from time to time, may grant Special Recognition Stock
Awards to Employees in such amounts and upon such conditions as the Committee or
its designee shall determine.
Article 10. Other Awards
10.1 Grant of Other Share-Based Awards. The Committee may grant Other
Share-Based Awards to Participants in such number, and upon such terms, and at
any time and from time to time, as shall be determined by the Committee.
10.2 Terms of Other Share-Based Awards. Other Share-Based Awards shall
contain such terms and conditions as the Committee may from time to time specify
and may be denominated in cash, in Shares, in Share-equivalent units, in Share
appreciation units, in securities or debentures convertible into Shares or in a
combination of the foregoing and may be paid in cash or in Shares, all as
determined by the Committee. Other Share-Based Awards may be issued alone or in
tandem with other Awards granted to Employees.
10.3 Other Share-Based Award Agreement. Each Other Share-Based Award
shall be evidenced by an Award Agreement that shall specify such terms and
conditions as the Committee shall determine.
10.4 Other Cash Performance-Based Awards. The Committee may grant Other
Cash Performance-Based Awards based on performance measures set forth in Article
11 not based on Shares upon such terms and at any time and from time to time as
shall be determined by the Committee. Each such Other Cash Performance-Based
Award shall be evidenced by an award agreement that shall specify such terms and
conditions as the Committee shall determine. An Other Cash Performance-Based
Award not based upon Shares shall not decrease the number of Shares under
Article 4 which may be issued pursuant to other Awards. No individual shall be
eligible to receive a payment with respect to cash performance-based awards in
excess of $4 million in any calendar year. Other Cash Performance-Based Awards
may relate to annual bonus or long-term performance awards.
Article 11. Performance Measures for Awards
11.1 Performance Measures. Unless and until the Committee proposes for
shareholder vote and shareholders approve a change in the general performance
measures set forth in this Article 11, the attainment of which may determine the
degree of payout and/or vesting with respect to Awards granted to Covered
Employees which are designed to qualify for the Performance-Based Exception, the
performance measure(s) to be used for purposes of such Awards shall be chosen
from among the following alternatives:
(a) Consolidated cash flows,
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(b) Consolidated financial reported earnings,
(c) Consolidated economic earnings,
(d) Earnings per share,
(e) Business unit financial reported earnings,
(f) Business unit economic earnings,
(g) Business unit cash flows, and
(h) Appreciation in the Fair Market Value of Shares either alone or
as measured against the performance of the stocks of a group of companies
approved by the Committee.
11.2 Adjustments. The Committee shall have the discretion to adjust the
determinations of the degree of attainment of the preestablished performance
objectives; provided, however, that Awards which are designed to qualify for the
Performance-Based Exception, and which are held by Covered Employees, may not be
adjusted upward (the Committee shall retain the discretion to adjust such Awards
downward).
11.3 Committee Discretion. In the event that applicable tax and/or
securities laws change to permit Committee discretion to alter the governing
performance measures without obtaining shareholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee determines
that it is advisable to grant Awards which shall not qualify for the
Performance-Based Exception, the Committee may make such grants without
satisfying the requirements of Code Section 162(m).
Article 12. Directors' Share Awards, Fee Deferral Elections, and Director
Options '
12.1 Eligibility. Only Non-Employee Directors shall be eligible to
receive Non-Employee Director Share Awards and Director Options and to make Fee
Deferral Elections.
12.2 Non-Employee Director Share Awards. On the first full trading day
immediately following each Annual Meeting, each Non-Employee Director designated
by the Board shall receive a Non-Employee Director Share Award of a number of
Shares determined by the Board before such Annual Meeting. Each Non-Employee
Director Share Award shall be fully vested and nonforfeitable when granted.
12.3 Fee Deferral Elections.
(a) Elections to Defer Payment of Fees. Payment of all or any part of
any Fees payable to a Non-Employee Director may be deferred by election of the
Non-Employee Director. Each such election must be made in writing on a form
prescribed by the Committee
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and delivered to the Company prior to the month during which the Fees will be
earned and must be irrevocable for that month. Each election shall remain in
effect for subsequent months until revoked in writing, and any such revocation
shall become effective no earlier than the first day of the first month
commencing after such revocation is received by the Company. No election may be
made under this Section 12.3(a) with respect to Fees for which an election is
made under Section 12.5.
(b) Crediting Stock Units to Accounts. Amounts deferred pursuant to a
Fee Deferral Election shall be credited as of the date of the deferral to a
Stock Unit Account in Stock Units. The number of Stock Units credited to a
Stock Unit Account with respect to any Non-Employee Director shall equal
(i) the amount deferred pursuant to the Fee Deferral Election divided by
(ii) the Fair Market Value of a Share on the date on which the Fees subject
to the Fee Deferral Election would have been paid but for the Fee Deferral
Election, with fractional units calculated to at least three (3) decimal
places.
(c) Fully Vested Stock Units. All Stock Units credited to a Non-
Employee Director's Stock Unit Account pursuant to this Section 12.3 shall
be at all times fully vested and nonforfeitable.
(d) Credit of Dividend Equivalents. As of each dividend payment date
with respect to Shares, each Non-Employee Director shall have credited to
his or her Stock Unit Account an additional number of Stock Units equal to
the product of (i) the per-share cash dividend payable with respect to a
Share on such dividend payment date multiplied by the number of Stock Units
credited to his or her Stock Unit Account as of the close of business on
the record date for such dividend, divided by (ii) the Fair Market Value of
a Share on such dividend payment date. If dividends are paid on Shares in
a form other than cash, then such dividends shall be notionally converted
to cash, if their value is readily determinable, and credited in a manner
consistent with the foregoing and, if their value is not readily
determinable, shall be credited "in kind" to the Non-Employee Director's
Stock Unit Account.
(e) Payment of Stock Units. Upon Termination of Service, the Stock
Units credited to a Non-Employee Director's Stock Unit Account shall be
paid to the Non-Employee Director in an equal number of shares of Stock in
a single lump sum or in substantially equal annual installments over a
period not to exceed ten (10) years, as elected by the Non-Employee
Director pursuant to rules established from time to time by the Committee.
(f) Delivery of Stock Certificates. The Company shall issue and
deliver to the Non-Employee Director a stock certificate for Shares in
payment of Stock Units as soon as practicable following the date on which
Stock Units are payable, provided, however, that no stock certificate shall
be delivered with respect to the payment of any Stock Unit prior to the
expiration of six (6) months from the date such Stock Unit was credited to
the Non-Employee Director's Stock Unit Agreement.
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12.4 Unfunded Status. The interest of each Non-Employee Director in any
Fees deferred under this Article 12 (and any Stock Units or Stock Unit Account
relating thereto) or in any Director Stock Award shall be that of a general
creditor of the Company. Stock Unit Accounts and Stock Units (and, if any, "in
kind" dividends) credited thereto shall at all times be maintained by the
Company as bookkeeping entries evidencing unfunded and unsecured general
obligations of the Company.
12.5 Director Options.
(a) Elections to Receive Payment of Fees in the Form of Options. A
Non-Employee Director may elect to receive payment of all or any part of
his or her cash retainer in the form of Director Options in lieu of cash.
Each such election must be made in writing on a form prescribed by the
Committee and delivered to the Company prior to each Annual Meeting which
marks the commencement of the annual period of service during which such
Fees are earned. Each election is irrevocable for that annual period.
Elections under this Section 12.5 may not be made with respect to Fees
deferred under Section 12.3.
(b) Grant of Director Options. On the first full trading day
immediately following each Annual Meeting, each Non-Employee Director who
has filed an election under Section 12.5(a) for the annual period of
service that commences with such Annual Meeting shall be granted Director
Options that have a value on the date of grant substantially equal to the
amount of Fees otherwise payable to the Director in cash but for the
election to receive Director Options. The value of Director Options shall
be determined by the Committee in its sole discretion, at a meeting held
prior to the Annual Meeting, based on a Black-Scholes option pricing model
or other valuation model that the Committee determines to be appropriate in
its sole discretion.
(c) Terms of Director Options. Each Director Option shall be
evidenced by an Award Agreement that shall specify the Option Price, the
duration of the Option, and the number of Shares to which the Option
pertains. Each Director Option shall (i) have an Option Price equal to the
Fair Market Value of a Share on the date the Option is granted; (ii) become
100% vested and first exercisable on the last business day immediately
preceding the Annual Meeting next following the date the Option is granted
or, if earlier, upon the Director's Termination of Service due to death or
Disability; (iii) expire on the tenth (10th) anniversary of the date of its
grant; and (iv) be nontransferable unless otherwise specified by the
Committee.
(d) Payment. Director Options granted under this Article 12 shall be
exercised by the delivery of a written notice of exercise to the Company,
setting forth the number of Shares with respect to which the Option is to
be exercised, accompanied by full payment for the Shares. The Option Price
upon exercise of any Director Option shall be payable to the Company in
full either: (i) in cash or its equivalent, (ii) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which
are tendered must have
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been held by the Director for at least six (6) months prior to their tender
to satisfy the Option Price), or (iii) by a combination of (i) and (ii).
The Committee also may allow cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
Article 13. 1998 Conversion Awards
All 1998 Conversion Awards which, under the Allocation Agreement, are to be
denominated in equal numbers of shares of Common Stock and Class A Common Stock
of the Company, shall be issued under the Plan as provided in the Allocation
Agreement. The Committee shall administer all such 1998 Conversion Awards under
this Plan, giving service credit to the grantee of each such 1998 Conversion
Award to the extent required under the Allocation Agreement. All 1998 Conversion
Awards shall be subject to substantially similar terms and conditions as
provided in the holder's corresponding awards under the Predecessor Plan.
Article 14. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the Participant's death
before the Participant has received any or all of such benefit. Each such
designation shall revoke all prior designations by the same Participant, shall
be in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Company during the Participant's lifetime.
In the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 15. Deferrals
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option, or the payment of or the lapse or waiver of restrictions with respect to
any other Award. If any such deferral election is required or permitted, the
Committee shall, in its sole discretion, establish rules and procedures for such
payment deferrals.
Article 16. Rights of Participants
16.1 Employment or Service. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant's
employment or service at any time, nor confer upon any Participant any right to
continue in the employ or service of the Company.
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16.2 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
Article 17. Amendment, Modification, and Termination
17.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that the Board may, in its sole discretion,
condition the adoption of any amendment of the Plan on the approval thereof by
the requisite vote of the shareholders of the Company entitled to vote thereon.
17.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. Subject to the restriction set forth in Article 11 herein
on the exercise of upward discretion with respect to Awards which have been
designed to comply with the Performance-Based Exception, the Committee may make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4.3 hereof) affecting the Company or the
financial statements of the Company or of changes in applicable laws,
regulations, or accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan.
17.3 Awards Previously Granted. No termination, amendment, or
modification of the Plan or any Award shall adversely affect in any material way
any Award previously granted under the Plan, without the written consent of the
Participant holding such Award.
17.4 Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award or Awards available under the Plan, the Committee may, subject to this
Article 17, make any adjustments it deems appropriate.
17.5 Substitution of Awards in Mergers and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for awards held by
employees or directors of entities who become or are about to become employees
or directors of the Company or a Subsidiary as the result of a merger,
consolidation or other acquisition of the employing entity or the acquisition by
the Company or a Subsidiary of the assets or stock of the employing entity. The
terms and conditions of any substitute awards so granted may vary from the terms
and conditions set forth herein to the extent that the Committee deems
appropriate at the time of grant to conform the substitute awards to the
provisions of the awards for which they are substituted.
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Article 18. Withholding
18.1 Tax Withholding. The Company shall have the power and the right to
deduct from any amount otherwise due to the Participant, or withhold, or require
a Participant to remit to the Company, an amount sufficient to satisfy Federal,
state, and local taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result of this Plan.
18.2 Share Withholding. With respect to withholding required in
connection with any Award, the Company may require, or the Committee may permit
a Participant to elect, that the withholding requirement be satisfied, in whole
or in part, by having the Company withhold Shares having a Fair Market Value on
the date the tax is to be determined equal to the minimum statutory total tax
which could be withheld on the transaction. Any election by a Participant shall
be irrevocable, made in writing, signed by the Participant, and shall be subject
to any restrictions or limitations that the Committee, in its sole discretion,
deems appropriate.
Article 19. Indemnification
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
Article 20. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase, of
all or substantially all of the business and/or assets of the Company, or a
merger, consolidation or otherwise.
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Article 21. Legal Construction
21.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular and the singular shall include the plural.
21.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
21.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
21.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
21.5 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Maryland.
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