Exhibit 3.1
Certificate of Designation,
Preferences and Rights of the
Marriott International, Inc.
ESOP Convertible Preferred Stock
I, W. David Mann, Secretary, of Marriott International, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of this Corporation, such
Board of Directors on August 5, 1999, November 4, 1999 and June 13, 2000,
adopted resolutions creating a series of one hundred thousand (100,000) shares
of Preferred Stock designated as ESOP Convertible Preferred Stock, as follows:
RESOLVED, that, pursuant to the authority expressly granted and vested
in the Board of Directors of this Corporation in accordance with the provisions
of its Amended and Restated Certificate of Incorporation, a series of Preferred
Stock no par value, stated value of $10,000 per share, of the Corporation be and
hereby is established, and that the designation and amount thereof and voting
powers, preferences, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
1. Definitions. For purposes of this Certificate of Designation, the
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following terms shall have the meanings described:
"Affiliate" means (a) a member of a controlled group of corporations of
which the Corporation is a member; (b) a trade or business (whether or not
incorporated) which is under common control (as determined in accordance with
section 414(c) of the Code) by or with the Corporation; (c) a member of an
affiliated service group (as defined in section 414(m) of the Code) that
includes the Corporation; or (d) a member of any other entity required to be
aggregated with the Corporation pursuant to section 414(o) of the Code. A
"controlled group of corporations" shall mean a controlled group of corporations
as defined in section 1563(a) of the Code, determined without regard to sections
1563(a)(4) and 1563(e)(3)(C) of the Code.
"Base Value" shall, as of any specified date, be equal to the greater
of (a) $50,000,000 or (b) 35% of the cumulative amount that has been contributed
by the Corporation or any of its Affiliates to the ESOP and applied on or before
the specified date to pay or reduce the principal of the ESOP Note. For purposes
of calculating the Base Value, any forgiveness of principal on the ESOP Note by
the Marriott Asset Fund shall be treated as a contribution to the ESOP by the
Corporation or its Affiliates that has been applied to reduce the principal on
the ESOP Note as of the effective date of such forgiveness. For purposes of
calculating the Base Value, dividends on ESOP Convertible Preferred Stock shall
not be treated as amounts contributed by the Corporation or any of its
Affiliates to the ESOP.
"Business Day" means any day other than a Saturday, Sunday or a Legal
Holiday.
"Capped Convertible Preferred Stock" means the Capped Convertible
Preferred Stock, no par value, of the Corporation.
"Capped Convertible Preferred Stock Cap Amount" shall be 150% of the
Capped Convertible Preferred Stock Floor Price from the Original Issue Date
through the fourth anniversary of the Original Issue Date. After the fourth
anniversary of the Original Issue Date through the fifth anniversary of the
Original Issue Date, the Cap Amount will be 165% of the Capped Convertible
Preferred Stock Floor Price. After the fifth anniversary of the Original Issue
Date, the Capped Convertible Preferred Stock Cap Amount will be 175% of the
Capped Convertible Preferred Stock Floor Price.
"Capped Convertible Preferred Stock Conversion Amount Per Share" means
the number of shares of Common Stock equal to:
(a) When the Common Stock Price as of the specified date is less than
the Capped Convertible Preferred Stock Floor Price, the quotient
obtained by dividing (i) the Capped Convertible Preferred Stock
Floor Price by (ii) the Common Stock Price as of the specified
date;
(b) When the Common Stock Price as of the specified date is less than
or equal to the Capped Convertible Preferred Stock Cap Amount and
greater than or equal to the Capped Convertible Preferred Stock
Floor Price, one share; and
(c) When the Common Stock Price as of the specified date is greater
than the Capped Convertible Preferred Stock Cap Amount, the
quotient obtained by dividing (i) the Capped Convertible
Preferred Stock Cap Amount by (ii) the Common Stock Price as of
the specified date.
"Capped Convertible Preferred Stock Floor Price" means the Common Stock
Price on the Original Issue Date.
"Capped Convertible Preferred Stock Per-Share Redemption Amount" means,
as of any specified date, the product of (a) the quotient obtained by dividing
(i) $10,000 by (ii) the Capped Convertible Preferred Stock Floor Price,
multiplied by (b) the product of (i) the Capped Convertible Preferred Stock
Conversion Amount Per Share and (ii) the Common Stock Price on the specified
date.
"Certificate of Incorporation" means the Corporation's Amended and
Restated Certificate of Incorporation and any applicable certificate of
designation, as the same may be amended from time to time.
"Closing Price" of any security on any date means the closing sale
price of such security on the NYSE on such date, as reported in the NYSE
Consolidated Tape, or, if such security is not listed or admitted for trading on
the NYSE on that date, as reported in the composite transactions reporting
system for the principal United States securities exchange on which such
security is so
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listed or admitted for trading, or, if such security is not so listed or
admitted, as reported on the National Association of Securities Dealers, Inc.
(the "Nasdaq") Automated Quotation System, or, if not so reported, the last
quoted bid price for such security in the over-the-counter market as reported by
the National Quotation Bureau or similar organization, or, if such bid price is
not available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for the
purpose.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Class A Common Stock, $0.01 par value per
share, of the Corporation.
"Common Stock Price" means, on any specified date, the Closing Price of
Common Stock on the last Trading Day before such date. The Common Stock Price
shall be appropriately adjusted to take into account any dividends or
distributions payable on Common Stock, or any reclassification, subdivision or
combination of, or similar transaction involving, Common Stock with respect to
which specified date is the Ex-Date.
"Conversion Date" has the meaning described in Section 7(b).
"Conversion Notice" means an irrevocable notice which shall specify (a)
the number of shares of ESOP Convertible Preferred Stock to be converted, (b)
the name or names in which the holder wishes the certificate or certificates
evidencing shares of Common Stock to be issued, and (c) the address to which
such holder wishes delivery to be made of such certificates to be issued upon
conversion.
"Conversion Price" means, as of any Conversion Date, the Common Stock
Price.
"Conversion Ratio" means, as of any Conversion Date, the product of (a)
0.00001, multiplied by (b) the quotient obtained by dividing (i) the ESOP
Convertible Preferred Stock Value as of the Conversion Date by (ii) the
Conversion Price as of such Conversion Date.
"Determination Date" means (a) when used with respect to any dividend
or other distribution, the date fixed for the determination of the holders of
the securities entitled to receive such dividend or distribution, or, if a
dividend or distribution is paid or made without fixing such a date, the date of
such dividend or distribution and (b) when used with respect to any subdivision,
combination or reclassification of securities, the date upon which such
subdivision, combination or reclassification becomes effective.
"Dividend Payment Dates" shall have the meaning set forth in Section
4(a).
"Dividend Period" means the quarterly period commencing on the date
following any Dividend Payment Date and ending on the next-following Dividend
Payment Date, or, in each such case as to particular shares of ESOP Convertible
Preferred Stock, such shorter period during which such shares are outstanding.
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"ESOP" means the employee stock ownership plan feature of the Marriott
International, Inc. Employees' Profit Sharing, Retirement and Savings Plan and
Trust and any other employee stock ownership plan and trust that is designated
by the Corporation and that assumes or becomes a transferee or a successor, by
merger, spin-off or split-up, of any of the assets and liabilities of such
employee stock ownership plan feature.
"ESOP Loan Suspense Account" means a suspense account maintained by the
ESOP pursuant to Treasury Regulation section 54.4975-11(c) (1979).
"ESOP Note" means the Promissory Note dated June 13, 2000, made by the
ESOP in favor of the Marriott Asset Fund.
"ESOP Convertible Preferred Stock Value" means, as of any specified
date, an amount equal the sum of (a) the Net Asset Value of the Marriott Asset
Fund as of the specified date and (b) the Base Value as of the specified date.
"Exchange" has the meaning described in Section 9(a).
"Exchange Consideration" means, as of the Exchange Date, (a) a number
of shares of Capped Convertible Preferred Stock equal to the product of (i) the
MAF Shares on the Exchange Date, multiplied by (ii) a fraction, the numerator of
which shall be the total number of whole and fractional shares of ESOP
Convertible Preferred Stock held by the ESOP immediately prior to the Exchange
Date, and the denominator of which shall be 100,000, plus (b), if the Marriott
Asset Fund holds any assets on the Exchange Date other than (i) Capped
Convertible Preferred Stock or (ii) any assets substituted for Capped
Convertible Preferred Stock as permitted by the constituent documents of the
Marriott Asset Fund, a portion of each such other asset (or a cash equivalent
amount) equal to the number of units (or cash equivalent value) of such other
asset multiplied by the fraction described in clause (a)(ii) of this definition.
"Exchange Date" has the meaning described in Section 9(b).
"Exchange Notice" has the meaning described in Section 9(b).
"Exchange Obligation" means the ESOP's obligation to pay in full all
principal and accrued interest under the ESOP Note by the Exchange Date.
"Ex-Date" shall mean (a) when used with respect to any dividend or
distribution, the first date on which the securities on which the dividend or
distribution is payable trade regular way on the relevant exchange or in the
relevant market without the right to receive such dividend or distribution, and
(b) when used with respect to any subdivision, combination or reclassification
of securities, the first date on which the securities trade regular way on such
exchange or in such market to reflect such subdivision, combination or
reclassification becoming effective.
"Ex-Dividend Period" shall have the meaning set forth in Section 4(a).
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"Investment Manager" means the investment manager of the ESOP from time
to time or, if no person is serving as investment manager of the ESOP at any
time, the trustee or trustees of the Plan.
"Legal Holiday" means any day on which banking institutions are
authorized or obligated by law or executive order to close in New York, New
York.
"Marriott Asset Fund" means the grantor trust established and owned by
the Corporation for the purpose of holding and investing in the Capped
Convertible Preferred Stock, subject to the terms of the Trust Agreement between
the Corporation and the trustee of the Marriott Asset Fund.
"MAF Shares" means, as of any specified date, the number of shares of
Capped Convertible Preferred Stock held by the Marriott Asset Fund as of the
close of business on such date; provided, however, that, in the event the
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Corporation, prior to the Exchange Date, withdraws any shares of Capped
Convertible Preferred Stock from the Marriott Asset Fund and substitutes assets
of equivalent value (other than in connection with a redemption of Capped
Convertible Preferred Stock to the extent permitted by the Certificate of
Incorporation), then as of any specified date after such withdrawal, "MAF
Shares" shall mean a number of whole and fractional shares of Capped Convertible
Preferred Stock equal to the excess of (a) 100,000, over (b) the sum of the
lesser of the quotients in clause (i) or (ii), separately determined and
calculated as of each of the due dates for quarterly interest payments on the
Purchase Money Note which precedes or corresponds with the specified date (each
such due date, an "Interest Payment Date"), where (i) is equal to the quotient
obtained by dividing (A) the excess of (I) the product of (x) a fraction, the
numerator of which is the excess, if any, of the Common Stock Price on the
applicable Interest Payment Date over the Capped Convertible Preferred Stock
Floor Price, and the denominator of which is the Capped Convertible Preferred
Stock Floor Price, multiplied by (y) $1,000,000,000, over (II) the cumulative
dollar amount of the sum of the lesser of the amounts calculated pursuant to
clause (i) and (ii) with respect to each Interest Payment Date prior to the
applicable Interest Payment Date, by (B) the Capped Convertible Preferred Stock
Per-Share Redemption Amount as of the applicable Interest Payment Date, and (ii)
is equal to the quotient obtained by dividing (A) the excess, if any, as of such
Interest Payment Date of (i) the sum of the outstanding principal balance and
any interest that has become due and payable but is unpaid on the Purchase Money
Note, over (ii) the sum of the outstanding principal balance and any interest
that has become due and payable but is unpaid on the ESOP Note, by (B) the
Capped Convertible Preferred Stock Per-Share Redemption Amount.
"Net Asset Value of the Marriott Asset Fund" means, as of any specified
date, an amount equal to (a) the sum of (i) the product of (A) the Common Stock
Price on the specified date, multiplied by (B) the number of shares of Common
Stock into which a number of shares of Capped Convertible Preferred Stock equal
to the number of MAF Shares would be converted if such Capped Convertible
Preferred Shares were then transferred to a holder other than the Marriott Asset
Fund or the ESOP Loan Suspense Account, all determined as of the specified date,
plus (ii) the amount that would be received upon liquidation of any assets held
by the Marriott Asset Fund on the specified date other than Capped Convertible
Preferred Stock and any
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assets substituted for Capped Convertible Preferred Stock as permitted by the
constituent documents of the Marriott Asset Fund, less (b) the sum of (i) the
outstanding principal balance and any interest that has become due and payable
but is unpaid on the Purchase Money Note as of the specified date and (ii) any
other liabilities of the Marriott Asset Fund as of the specified date, including
but not limited to any and all liabilities to the Corporation. In determining
the Net Asset Value of the Marriott Asset Fund as of any specified date, the
ESOP Note shall be deemed to have no liquidation or other value and shall be
disregarded.
"NYSE" means the New York Stock Exchange.
"Original Issue Date" means the date of the original issuance of the
Capped Convertible Preferred Stock.
"Plan" means the Marriott International, Inc. Employees' Profit
Sharing, Retirement and Savings Plan and Trust, and any other plan and trust
qualified under Section 401(a) of the Code that is designated by the Corporation
and that becomes a transferee or a successor by merger, spin-off or split-up, of
any of the assets and liabilities of such plan.
"Purchase Money Note" means the Promissory Note dated June 13, 2000,
made by the ESOP in favor of the Corporation.
"Qualifying Employer Securities" means securities that, with respect to
the holder thereof, constitute "qualifying employer securities" within the
meaning of section 407(d)(5) of the Employee Retirement Income Security Act of
1974, as amended, and "employer securities" within the meaning of section 409(l)
of the Code.
"Record Date" shall have the meaning set forth in Section 4(a).
"Redemption Date" means the Business Day that is the effective date of
a redemption pursuant to Section 8.
"Redemption Notice" means the notice described in Section 8(b).
"Redemption Price" means the amount specified in Section 8(a).
"Trading Day" means, with respect to any security, (a) if the principal
trading market for the applicable security is the NYSE or another national
securities exchange, a day on which the NYSE or such other national securities
exchange, as applicable, is open for business, (b) if the principal trading
market for the applicable security is the Nasdaq, a day on which a trade may be
made on the Nasdaq National Market, or (c) if the applicable security is not
listed, admitted for trading or quoted as provided in clause (a) or (b), any
Business Day. Any day for which there is no reported sale of Common Stock on the
applicable exchange or market shall not be treated as a Trading Day.
2. Designation of the Series; Rank. The shares of such series of
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Preferred Stock shall be designated as "ESOP Convertible Preferred Stock" and
the number of shares constituting
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such series shall be 100,000. The ESOP Convertible Preferred Stock shall have no
par value. Upon liquidation, dissolution or winding up, the ESOP Convertible
Preferred Stock shall rank senior to the Common Stock and the Capped Convertible
Preferred Stock and, unless otherwise provided in the Certificate of
Incorporation, junior to all other existing and future classes or series of
preferred stock of the Corporation.
3. Issuance and Automatic Conversion.
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(a) Shares of ESOP Convertible Preferred Stock shall be issued
or sold by the Corporation only to the ESOP for allocation to the ESOP Loan
Suspense Account.
(b) In the event of any sale, transfer or other disposition of
the ESOP Convertible Preferred Stock from the ESOP Loan Suspense Account
(including, without limitation, any transfer to any account in the Plan other
than the ESOP Loan Suspense Account, any transfer to any participant in the
Plan, or any transfer upon a foreclosure or other realization upon shares of
ESOP Convertible Preferred Stock pledged as security for any loan or loans made
to the ESOP, but excluding any transfer to the Corporation pursuant to an
Exchange) (hereafter a "transfer") of shares of ESOP Convertible Preferred Stock
without the written consent of the Corporation, which may be withheld by the
Corporation in its sole and absolute discretion, the shares of ESOP Convertible
Preferred Stock so transferred, upon such transfer and without any further
action by the Corporation or any other person, shall automatically convert into
a whole number of shares of fully paid and nonassessable Common Stock equal to
the product of the number of shares of ESOP Convertible Preferred Stock so
transferred multiplied by the Conversion Ratio, with the Conversion Date for
such conversion being the effective date of such transfer. A cash adjustment in
lieu of any fractional share of Common Stock shall be paid as provided in
Section 7(c). Thereafter the person to whom the shares of ESOP Convertible
Preferred Stock are transferred, or the Plan in the event shares of ESOP
Convertible Preferred Stock are released or transferred from the ESOP Loan
Suspense Account (hereinafter, such person, or the Plan in such event, referred
to as a "transferee"), shall not have any of the powers, preferences or
relative, participating, optional or special rights ascribed to the shares of
ESOP Convertible Preferred Stock transferred, but, rather, shall have only the
powers and rights pertaining to the shares of Common Stock into which such
shares of ESOP Convertible Preferred Stock shall have been so converted. In the
event of any such automatic conversion pursuant to this Section 3, such
transferee shall be treated for all purposes as the recordholder of the shares
of Common Stock into which its shares of ESOP Convertible Preferred Stock shall
have been converted as of the close of business on the Conversion Date.
(c) Shares of ESOP Convertible Preferred Stock shall be
uncertificated shares within the meaning of Section 158 of the General
Corporation Law of the State of Delaware. Transfers of shares of ESOP
Convertible Preferred Stock may only be effected by applicable entry or entries
in the stock transfer books of the Corporation. The Corporation shall, as soon
as practicable after surrender of the shares of ESOP Convertible Preferred Stock
converted pursuant to this Section 3 and payment of any transfer or similar tax
payable by the holder (or provision to the Corporation of evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid),
deliver to such transferee a certificate or certificates evidencing shares of
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Common Stock into which such shares of ESOP Convertible Preferred Stock shall
have been so converted together with a cash payment in respect of any fractional
share of Common Stock otherwise issuable.
4. Dividends.
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(a) Holders of shares of ESOP Convertible Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation at the time legally available
therefor, cash dividends at a quarterly rate of $100.00 per share (including a
pro rated amount for any fractional share), and no more, which shall be fully
cumulative, shall accumulate without interest from the Original Issue Date, and
shall be payable, in cash, in arrears on September 13, December 13, March 13,
and June 13, of each year (the "Dividend Payment Dates"), commencing September
13, 2000 (except that, if any such date is not a Business Day, then such
dividend shall be payable on the first preceding Business Day), to holders of
record as they appear upon the stock transfer books of the Corporation at the
close of business on such record dates, not more than ninety (90) days preceding
the related Dividend Payment Dates, as are fixed by the Board of Directors
(each, a "Record Date"). The Record Date for any Dividend Payment Date may be
such Dividend Payment Date. Holders at the close of business on a Record Date of
shares of ESOP Convertible Preferred Stock that are redeemed on a Redemption
Date during the period (the "Ex-Dividend Period") between such Record Date and
the corresponding Dividend Payment Date shall not (unless the Corporation elects
otherwise, in its sole discretion), in their capacity as such, be entitled to
receive the dividend payment on such Dividend Payment Date, but shall be
entitled to receive accumulated and unpaid dividends on the Redemption Date as
part of the Redemption Price.
(b) For any Dividend Period which does not end on a Dividend
Payment Date, the dividend payable on each such share of the ESOP Convertible
Preferred Stock shall be computed on the basis of a 360-day year consisting of
twelve 30-day months and four quarters consisting of three months each. The
aggregate dividend paid to a holder of shares of ESOP Convertible Preferred
Stock shall be based on the aggregate number of whole and fractional shares of
ESOP Convertible Preferred Stock held by such holder at the close of business on
the applicable Record Date and rounded to the nearest whole cent (with one-half
cent rounded upward). Unless otherwise provided herein, dividends on each share
of ESOP Convertible Preferred Stock will be cumulative from and including the
Original Issue Date to and excluding the earliest to occur of (i) the date of
redemption of such share, (ii) the date of conversion of such share, and (iii)
the date of final distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation. Holders of shares of
the ESOP Convertible Preferred Stock shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends, or to any interest, or sum of money in lieu of interest, in respect
of any dividend payment or payments on shares of the ESOP Convertible Preferred
Stock that may be in arrears. Any dividend payment made on shares of the ESOP
Convertible Preferred Stock shall first be credited against the earliest
accumulated but unpaid dividend with respect to shares of the ESOP Convertible
Preferred Stock.
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5. Liquidation Preference.
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(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of shares
of ESOP Convertible Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders, after and subject to the payment in full of all amounts required
to be distributed to the holders of any other class or series of stock of the
Corporation ranking on liquidation senior and in preference to the ESOP
Convertible Preferred Stock (collectively referred to as "Senior Preferred
Stock"), but before any payment shall be made to the holders of Common Stock,
Capped Convertible Preferred Stock or any other class or series of stock ranking
on liquidation junior to the ESOP Convertible Preferred Stock (such Common
Stock, Capped Convertible Preferred Stock and other stock being collectively
referred to as "Junior Stock") by reason of their ownership thereof, an amount
equal to $10,000 per share plus any dividends declared or accrued but unpaid
thereon. If upon any such liquidation, dissolution or winding up of the
Corporation, the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of ESOP
Convertible Preferred Stock the full amount to which they shall be entitled, the
holders of shares of ESOP Convertible Preferred Stock and any class or series of
stock ranking on liquidation on a parity with the ESOP Convertible Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts which would otherwise
be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(b) After the payment of all preferential amounts required
to be paid to the holders of Senior Preferred Stock, ESOP Convertible Preferred
Stock and any other class or series of stock of the Corporation ranking on
liquidation on a parity with the ESOP Convertible Preferred Stock, upon the
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Junior Stock then outstanding shall be entitled to receive the remaining
assets and funds of the Corporation available for distribution to its
stockholders.
6. Voting.
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(a) General. The holders of outstanding whole shares of
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ESOP Convertible Preferred Stock shall be entitled to one vote per share at each
meeting of stockholders of the Corporation (and written actions of stockholders
in lieu of meetings) with respect to any and all matters presented to the
holders of Common Stock of the Corporation for their action or consideration.
Except as provided by Section 6(b) below, the holder of ESOP Convertible
Preferred Stock shall vote together with the holders of Common Stock as a single
class.
(b) Class Voting Rights. So long as the ESOP Convertible
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Preferred Stock is outstanding, the Corporation shall not, without the
affirmative vote of the holders of at least a majority of all outstanding shares
of ESOP Convertible Preferred Stock, voting separately as a class, amend, alter
or repeal any provision of the Certificate of Incorporation, except as provided
herein, so as to (i) affect adversely the special rights, preferences,
qualifications, limitations or restrictions of the ESOP Convertible Preferred
Stock, (ii) increase the number of authorized, or issue additional, shares of
ESOP Convertible Preferred Stock, (iii) decrease the number of shares
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of Common Stock issuable upon conversion of Capped Convertible Preferred Stock,
(iv) increase the number of shares of the Capped Convertible Preferred Stock
subject to redemption, (v) reduce the per-share redemption amount for the Capped
Convertible Preferred Stock, or (vi) adversely affect the requirements for a
vote by the holders of the ESOP Convertible Preferred Stock respecting
amendment, alteration or repeal of provisions relating to the Capped Convertible
Preferred Stock as provided in clauses (iii) through (vi) of this Section 6(b);
provided, however, that the creation, authorization or issue, or
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reclassification of any authorized stock of the Corporation into, or increase in
the authorized amount of, any class or series of stock of the Corporation
ranking senior to or on a parity with the ESOP Convertible Preferred Stock as to
dividends or upon liquidation, dissolution or winding up of the Corporation,
shall not be deemed to affect adversely the special rights, preferences,
qualifications, limitations or restrictions of the ESOP Convertible Preferred
Stock or otherwise require the affirmative vote or consent of the holders of the
ESOP Convertible Preferred Stock.
7. Conversion.
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(a) Conversion Right. Outstanding shares of ESOP
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Convertible Preferred Stock held in the ESOP Loan Suspense Account shall be
convertible, at the option of the Investment Manager, at any time and from time
to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by multiplying (i) the number of shares of ESOP Convertible
Preferred Stock to be converted on the Conversion Date by (ii) the Conversion
Ratio as of the Conversion Date.
(b) Conversion Procedures.
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(i) In order to convert shares of ESOP Convertible
Preferred Stock into shares of Common Stock pursuant to Section 7(a), the
Investment Manager shall deliver, or cause to be delivered, to the Corporation
at its principal executive offices or another place designated by the
Corporation in a written notice sent to the holder of ESOP Convertible Preferred
Stock, (A) a Conversion Notice, (B) a written instrument or instruments of
transfer for the shares of ESOP Convertible Preferred Stock being converted, in
form satisfactory to the Corporation, duly executed by the Investment Manager,
and (C) if required pursuant to Section 7(f), an amount sufficient to pay any
transfer or similar tax which is not payable by the Corporation (or evidence
reasonably satisfactory to the Corporation demonstrating that such taxes have
been paid). Any conversion pursuant to Section 7(a) shall be deemed to have been
effected at the close of business on the Business Day on which all of the items
specified in the immediately preceding sentence have been received by the
Corporation, and any conversion pursuant to Section 3 shall be deemed to have
been effected or on the effective date of any transfer described in Section 3
(in each case, the "Conversion Date").
(ii) Except as provided in Section 4(a), the
holder of a share of ESOP Convertible Preferred Stock at the close of business
on a Record Date shall be entitled to receive the dividend payable thereon on
the corresponding Dividend Payment Date notwithstanding the conversion thereof
during the Ex-Dividend Period or the Corporation's default in the payment of the
dividend due on such Dividend Payment Date; provided, however, that, with
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respect to each
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share of ESOP Convertible Preferred Stock surrendered for conversion during the
Ex-Dividend Period, the Corporation shall retain a number of shares of Common
Stock (or other securities or assets) otherwise required to be delivered upon
such conversion equal to (A) the dividend payable on such share of ESOP
Convertible Preferred Stock, divided by (B) the Common Stock Price as of the
Conversion Date. Except as provided for above, no payments or adjustments in
respect of dividends on shares of ESOP Convertible Preferred Stock surrendered
for conversion (whether or not in arrears) or on account of any dividend on the
shares of Common Stock issued upon conversion shall be made upon the conversion
of any shares of ESOP Convertible Preferred Stock.
(iii) The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver to the person specified in the Conversion
Notice a certificate or certificates evidencing the number of full shares of
Common Stock to which such person shall be entitled, together with a cash
payment in respect of any fractional shares of Common Stock otherwise issuable.
The person or persons entitled to receive the shares of Common Stock deliverable
upon conversion of such shares of ESOP Convertible Preferred Stock shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the relevant Conversion Date, unless the stock transfer books of
the Corporation shall be closed on such Conversion Date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such stock
transfer books are open, but such conversion shall be based upon the Conversion
Ratio in effect on such Conversion Date.
(c) Fractional Shares. No fractional shares or scrip representing
-----------------
fractional shares of Common Stock shall be issued upon conversion of any shares
of ESOP Convertible Preferred Stock. If more than one share of ESOP Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
record holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of ESOP Convertible Preferred Stock which are converted. In lieu of any
fractional share of Common Stock that would otherwise be issuable upon
conversion of any shares of ESOP Convertible Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional share in an amount
equal to the same fraction of the Conversion Price of the Common Stock as of the
Conversion Date, calculated to the nearer cent, with one-half cent rounded
upward.
(d) Reservation and Authorization of Shares. The Corporation shall
---------------------------------------
at all times when the ESOP Convertible Preferred Stock shall be outstanding,
reserve and keep available out of its authorized but unissued stock, for the
purpose of effecting the conversion of the ESOP Convertible Preferred Stock,
such number of its duly authorized shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of ESOP
Convertible Preferred Stock.
(e) Converted Shares. After the Conversion Date with respect to
----------------
any shares of ESOP Convertible Preferred Stock, such shares shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
but not limited to the rights, if any, to receive
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notices or distributions and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock (and cash in lieu of fractional shares) in exchange
therefor. Any shares of ESOP Convertible Preferred Stock converted pursuant to
Section 3 or Section 7 shall be retired and canceled after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions set forth herein.
(f) Payment of Taxes. The Corporation shall pay any and all issue
----------------
and other taxes that may be payable in respect of any issuance or delivery of
shares of Common Stock upon conversion of shares of ESOP Convertible Preferred
Stock pursuant to this Section 7. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a name other than that
in which the shares of ESOP Convertible Preferred Stock so converted were
registered, and no such issuance or delivery shall be made unless and until the
person or entity requesting such issuance has paid to the Corporation the amount
of any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid. To the extent required by law, the Corporation may, upon
any conversion of shares of ESOP Convertible Preferred Stock, retain any shares
of Common Stock (or other securities or assets) otherwise required to be
delivered upon such conversion to the extent necessary to provide for the
payment of taxes required to be withheld or deducted by the Corporation, and
paid to any taxing authority having jurisdiction, from amounts otherwise due to
the holder; provided, however, that the Corporation shall apply such shares or
other securities or assets (or cash received upon disposition thereof), or make
other provision, to discharge such taxes.
(g) Adjustment of Terms of Conversion. Upon the occurrence of any
---------------------------------
event that affects the Common Stock and that the Board of Directors determines
would violate the general principle that each share of ESOP Convertible
Preferred Stock shall be convertible into a number of shares of Common Stock
(and cash for fractional shares) having a Common Stock Price on the Conversion
Date equal to the product of (i) 0.00001 multiplied by (ii) the ESOP Convertible
Preferred Stock Value as of the Conversion Date, or upon the determination by
the Board of Directors that such event may occur, the Board of Directors shall
modify the Conversion Price or the Conversion Ratio, or take any other action,
as it determines in its sole discretion to be necessary or desirable in order to
implement such general principle, provided, however, that any such action by the
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Board of Directors pursuant to this Section 7(g) shall be supported by a written
opinion of an investment banking firm of recognized national standing selected
by the Corporation that such action is fair and reasonable to the ESOP from a
financial standpoint. Any adjustment to the Conversion Ratio or other action
taken pursuant to this Section 7(g) shall, to the extent determined by the Board
of Directors to be applicable, also apply in determining the Redemption Price
for any shares of ESOP Convertible Preferred Stock which are redeemed on or
after the effective date of such adjustment or other action.
(h) Certificate as to Adjustments. Upon the occurrence of an
-----------------------------
adjustment or readjustment of the Conversion Price or Conversion Ratio or other
provision pursuant to this
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Section 7, which adjustment or readjustment affects a conversion pursuant to
Section 3 or 7, the Corporation at its expense shall, prior to the Conversion
Date, compute such adjustment or readjustment in accordance with the terms
hereof and furnish to the Investment Manager a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
8. Redemption.
----------
(a) Shares Released from the ESOP Loan Suspense Account. The
---------------------------------------------------
ESOP may, at the option of the Investment Manager, redeem any or all shares or
fractions of a share of ESOP Convertible Preferred Stock when and as they are
released from the ESOP Loan Suspense Account as provided in Treasury Regulation
section 54.4975-11(c). The amount paid by the Corporation for shares so redeemed
(the "Redemption Price") shall be equal to the product of (i) the number of
whole and fractional shares to be redeemed, multiplied by (ii) the product of
(A) 0.00001 multiplied by (B) the ESOP Convertible Preferred Stock Value as of
the Redemption Date.
(b) Notice of Redemption. In the event of a redemption
--------------------
pursuant to Section 8(a), the Investment Manager shall give notice (a
"Redemption Notice") to the Corporation. Each Redemption Notice shall specify
(i) the Redemption Date, (ii) the number of shares of ESOP Convertible Preferred
Stock to be redeemed or the aggregate Redemption Price for all shares of ESOP
Convertible Preferred Stock to be redeemed as of the applicable Redemption Date,
(iii) the place or places for payment of the Redemption Price and method for
surrender of the shares to be redeemed, (iv) that payment will be made upon
surrender of shares of ESOP Convertible Preferred Stock, and (v) that the right
of holders to convert shares of ESOP Convertible Preferred Stock shall terminate
at the close of business on the Redemption Date (unless the Corporation defaults
in the payment of the Redemption Price). The Redemption Notice must be given
before the Redemption Date to which such notice is applicable.
(c) Redemption Procedures. On the Redemption Date, the
---------------------
holder of shares of ESOP Convertible Preferred Stock shall surrender, or cause
to be surrendered, such shares to the Corporation and shall thereupon be
entitled to receive payment of the applicable Redemption Price for each such
share. If a Redemption Notice shall have been given, as aforesaid, and if, on
the Redemption Date, assets necessary for the redemption shall be legally
available therefor and shall have been irrevocably deposited, set aside for or
paid to the Plan, then, notwithstanding that the redeemed shares of ESOP
Convertible Preferred Stock shall not have been surrendered, (i) such shares
shall no longer be deemed outstanding, (ii) the holders thereof shall cease to
be stockholders of the Corporation to the extent of their interest in such
shares, and (iii) all rights whatsoever with respect to such shares of ESOP
Convertible Preferred Stock shall terminate, except the right of the holders of
such shares to receive the Redemption Price for each such share, without
interest or any sum of money in lieu of interest thereon, upon surrender of
their shares in the manner designated in the applicable Redemption Notice.
Redemptions of ESOP Convertible Preferred Stock shall be effected as of the
close of business on the Redemption Date before effecting any conversion for
which the Conversion Date corresponds with the Redemption Date.
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(d) No Sinking Fund. The shares of ESOP Convertible
---------------
Preferred Stock shall not be subject to the operation of any retirement or
sinking fund.
(e) Redeemed Shares. After the Redemption Date with respect
---------------
to any shares of ESOP Convertible Preferred Stock, such shares shall no longer
be deemed to be outstanding and all rights with respect to such shares,
including but not limited to the rights, if any, to receive notices or
distributions and to vote, shall immediately cease and terminate on the
Redemption Date, except only the right of the holders thereof to receive the
Redemption Price therefor. Any shares of ESOP Convertible Preferred Stock
redeemed pursuant to this Section 8 shall be retired and canceled after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions set forth
herein.
(f) Payment of Redemption Price. The Corporation, at its
---------------------------
option, may make payment of the Redemption Price (i) in cash, (ii) in shares of
Common Stock, or (iii) in any combination of cash and shares of Common Stock.
For purposes of determining the number of shares of Common Stock to be delivered
by the Corporation in satisfaction, in whole or in part, of any Redemption
Price, shares of Common Stock shall be valued at the Common Stock Price as of
the Redemption Date.
9. Exchange.
--------
(a) Exchange Right. The Investment Manager may, at any time,
--------------
require the Corporation to effect an exchange of all but not less than all of
the outstanding shares of ESOP Convertible Preferred Stock held in the ESOP Loan
Suspense Account on the Exchange Date in exchange for the Exchange Consideration
(an "Exchange").
(b) Exchange Requirements and Procedures. In order to cause
------------------------------------
the Corporation to effect an Exchange, (i) the Investment Manager shall deliver
or cause to be delivered to the Corporation a written notice (an "Exchange
Notice") requesting an Exchange and specifying the Business Day that shall be
the effective date of the exchange (the "Exchange Date"), which shall not be
less than sixty- one (61) days nor more than ninety (90) days after the date the
Exchange Notice is given, (ii) the ESOP shall satisfy the Exchange Obligations
by the Exchange Date, and (iii) the Investment Manager shall deliver, or cause
to be delivered, to the Corporation a written instrument or instruments of
surrendering to the Corporation all shares of ESOP Convertible Preferred Stock
outstanding at the Exchange Date, in form satisfactory to the Corporation. An
Exchange shall be effected as of the close of business on the Exchange Date,
after effecting any Conversion or Redemption for which the Conversion Date or
Redemption Date, as applicable, corresponds with the Exchange Date. Upon
satisfaction of all applicable requirements and procedures for an Exchange, the
Corporation shall transfer, or cause the Marriott Asset Fund to transfer, the
Exchange Consideration to the ESOP.
10. Consolidations, Mergers, etc. In the event the Corporation
----------------------------
shall enter into or engage in any consolidation, merger, share exchange, spin-
off, split-up or similar transaction, pursuant to which (a) the outstanding
shares of Common Stock are to be exchanged, changed,
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reclassified or converted into shares of capital stock of any successor or
resulting or other company, or (b) shares of capital stock of a company other
than the Corporation will be distributed to holders of Common Stock, the Board
of Directors shall be entitled, but will not be required, to modify the
Certificate of Incorporation in any respect, or make other provisions, as it
determines in its sole discretion, and, anything in Section 6(b) to the contrary
notwithstanding, without the consent of, or any vote by, the holders of the ESOP
Convertible Preferred Stock, such that, effective upon consummation of such
transaction, (x) some or all of the then-outstanding shares of ESOP Convertible
Preferred Stock shall be converted into or exchanged for shares of convertible
preferred stock of such successor, resulting or other company having in respect
to such company the same powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
that the shares of ESOP Convertible Preferred Stock had in respect of the
Corporation immediately prior to such transaction, provided that after such
transaction the shares of convertible preferred stock of such surviving,
resulting or other company so received in such transaction, and the shares into
which such convertible preferred stock shall be convertible, in each case shall
be Qualifying Employer Securities with respect to the holder of such convertible
preferred stock, and (y) appropriate adjustment shall be made to the terms and
conditions of any shares of ESOP Convertible Preferred Stock which are not
converted into or exchanged for shares of convertible preferred stock of a
successor, resulting or other company as provided in clause (x) of this Section
10 to reflect the effect of such transaction provided, however, that the Board
-------- -------
of Directors shall obtain a written opinion of an investment banking firm of
recognized national standing selected by the Corporation or the Board of
Directors, that such transaction, and any actions taken by the Board of
Directors pursuant to this Section 10, will be fair and reasonable to the ESOP
from a financial standpoint.
11. Fractional Shares of ESOP Convertible Preferred Stock. ESOP
-----------------------------------------------------
Convertible Preferred Stock may be held in fractions of a share but no such
fraction shall be less than one ten millionth (1/10,000,000) of a share.
Fractional shares may be converted, redeemed or exchanged as provided herein,
and shall entitle the holder to participate in distributions and to have the
benefit of all other rights of a holder of ESOP Convertible Preferred Stock.
12. Notices. All notices to be given or delivered to the
-------
Corporation pursuant to this Certificate shall be given in writing and shall be
deemed to have been given only upon receipt thereof by the Corporation at its
principal executive offices as designated in its most recent filing pursuant to
the Securities and Exchange Act of 1934 as amended, (or such other address as
the Corporation shall specify in writing by notice to the holders of record of
shares of the ESOP Convertible Preferred Stock), addressed to the General
Counsel, and sent by certified mail, return receipt requested, by hand delivery,
by facsimile transmission or by such other means as the Corporation and the
holder of record of ESOP Convertible Preferred Stock may agree in writing. All
notices to be given or delivered by the Corporation to the holder of record of
shares of ESOP Convertible Preferred Stock shall be sent by hand delivery or by
first class mail, postage prepaid, to such holders at their last addresses as
they appear on the stock transfer books of the Corporation, or to any such
holder by facsimile transmission to a number given by such holder to the
Corporation. All notices to be given or delivered to the ESOP pursuant to this
Certificate of Designation shall be given in writing and shall be sent by hand
delivery or by certified mail,
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return receipt requested, to the Investment Manager at Two International Place,
Floor 34, Boston, MA 02110, Attn: Kelly Q. Driscoll/Marianne Sullivan (or such
other address as the Investment Manager shall specify in writing by notice sent
to the Corporation), addressed to the Investment Manager, or by facsimile
transmission to (617) 664-2376 (or such other number for facsimile transmission
as the Investment Manager shall specify in writing by notice sent to the
Corporation).
[Signatures begin on the following page]
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IN WITNESS WHEREOF, the undersigned, does make, file and record this
Certificate of Designation and does hereby certify that the facts herein stated
are true, and accordingly hereto sets his hand this 13th day of June, 2000.
/s/ W. David Mann
-----------------
W. David Mann