Exhibit 3.2
Certificate of Designation,
Preferences and Rights of the
Marriott International, Inc.
Capped 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 Capped 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,
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the following terms shall have the meanings described:
"Business Day" means any day other than a Saturday, Sunday or a Legal
Holiday.
"Cap Amount" shall be 150% of the 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 Floor Price. After the
fifth anniversary of the Original Issue Date, the Cap Amount will be 175% of the
Floor Price.
"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 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.
"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 in Common Stock, or any reclassification, subdivision or
combination of, or similar transaction involving, Common Stock with respect to
which the specified date is the Ex-Date.
"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 Floor Price, the quotient obtained by dividing (i)
the 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 Cap Amount and greater than or equal to
the Floor Price, one share; and
(c) When the Common Stock Price as of the specified date is
greater than the Cap Amount, the quotient obtained by dividing
(i) the Cap Amount by (ii) the Common Stock Price as of the
specified date.
"Conversion Date" means the date specified in Section 7(b).
"Conversion Notice" means a notice given by the holder of Capped
Convertible Preferred Stock to the Corporation which specifies the number of
shares of Capped Convertible Preferred Stock to be converted.
"Conversion Ratio" means the product of (a) the quotient obtained by
dividing (i) $10,000 by (ii) the Floor Price, multiplied by the (b) Conversion
Amount Per Share.
"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
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such case as to particular shares of Capped Convertible Preferred Stock, such
shorter period during which such shares are outstanding.
"ESOP" means the employee stock ownership plan feature of the Plan 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 Convertible Preferred Stock" means the ESOP Convertible Preferred
Stock, no par value, of the Corporation.
"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 in
favor of the Marriott Asset Fund.
"Exchange" has the meaning described in Section 9(a) of the Certificate
of Designation, Preferences and Rights of the Marriott International, Inc. ESOP
Convertible Preferred Stock, as the same may be amended from time to time.
"Ex-Date" means (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).
"Extraordinary Cash Dividend" means, with respect to any security, a
cash dividend or cash distribution on such security (other than a dividend or
distribution in connection with a liquidation, dissolution or winding up of the
issuer of such security) (the "Specified Dividend"), in an amount determined
pursuant to the following sentence. If, upon the Trading Date prior to the date
of the declaration (the "Declaration Date") with respect to the Specified
Dividend, the aggregate per share amount of the Specified Dividend, together
with the aggregate per share amounts of all cash dividends and cash
distributions on such security with Ex-Dates occurring in the 360 consecutive
day period ending on the date prior to the Ex-Date with respect to the Specified
Dividend, exceeds 25% of the Common Stock Price on the Declaration Date with
respect to the Specified Dividend, such excess shall be deemed to be an
Extraordinary Cash Dividend.
"Floor Price" means the Common Stock Price on the Original Issue Date.
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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 its terms.
"NYSE" means the New York Stock Exchange.
"Original Issue Date" means the date of original issuance of the 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 Floor
Price, multiplied by (b) the product of (i) the Conversion Amount Per Share and
(ii) the Common Stock Price on the specified date.
"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 assumes or becomes a transferee or a successor by merger, spin-off or
split-up, of any 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.
"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(c).
"Redemption Price" means the sum of (a) the product of (i) the number
of whole and fractional shares of Capped Convertible Preferred Stock redeemed,
multiplied by (ii) the Per-Share Redemption Amount, plus (b) any accumulated and
unpaid dividends payable pursuant to Section 4(a).
"Regular Cash Dividend" means, with respect to any security, any cash
dividend or cash distribution with respect to such security other than an
Extraordinary Cash Dividend.
"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 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
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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 day
Business Day. Any day for which there is no reported sales 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 "Capped Convertible Preferred Stock" and
the number of shares constituting such series shall be 100,000. The Capped
Convertible Preferred Stock shall have no par value. As to dividends and upon
liquidation, dissolution or winding up, the Capped Convertible Preferred Stock
shall rank senior to the Common Stock, junior to the ESOP 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 Capped Convertible Preferred Stock shall be
issued or sold by the Corporation only to the Marriott Asset Fund.
(b) In the event of any sale, transfer or other disposition
other than to the Marriott Asset Fund or the ESOP Loan Suspense Account pursuant
to an Exchange (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 Capped Convertible Preferred Stock pledged as security for any
loan or loans made to the ESOP) (hereafter a "transfer") of shares of Capped
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 Capped 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
Capped 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 Capped Convertible Preferred Stock are transferred, or the Plan in the
event shares of Capped 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 the "transferee") shall not have any of the powers,
preferences or relative, participating, optional or special rights ascribed to
the shares of Capped 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 Capped Convertible Preferred Stock shall have been so
converted. In the event of any 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 Capped Convertible Preferred Stock
shall have been converted as of the close of business on the Conversion Date.
(c) Shares of Capped Convertible Preferred Stock shall be
uncertificated shares within the meaning of Section 158 of the General
Corporation Law of the State of
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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 Capped 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 Common Stock into
which such shares of Capped 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 Capped 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 $112.50 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 Capped 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. In the event the Marriott Asset Fund shall forgive
interest due on the Purchase Money Note in an amount equal to any declared or
accrued but unpaid dividend required under this Section 4(a), such amount shall
not be treated as an accumulated and unpaid dividend payable pursuant to this
Section 4(a).
(b) For any Dividend Period which does not end on a Dividend
Payment Date, the dividend payable on each such share of the Capped 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 Capped Convertible Preferred
Stock shall be based on the aggregate number of whole and fractional shares of
Capped 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 Capped 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
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liquidation, dissolution or winding up of the Corporation. Holders of shares of
the Capped 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 Capped Convertible
Preferred Stock that may be in arrears. Any dividend payment made on shares of
the Capped Convertible Preferred Stock shall first be credited against the
earliest accumulated but unpaid dividend with respect to shares of the Capped
Convertible Preferred Stock.
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 Capped
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 Capped
Convertible Preferred Stock (collectively referred to as "Senior Preferred
Stock"), but before any payment shall be made to the holders of Common Stock or
any other class or series of stock ranking on liquidation junior to the Capped
Convertible Preferred Stock (such Common 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 Capped Convertible Preferred Stock the full amount to which they shall
be entitled, the holders of shares of Capped Convertible Preferred Stock and any
class or series of stock ranking on liquidation on a parity with the Capped
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, Capped Convertible Preferred
Stock and any other class or series of stock of the Corporation ranking on
liquidation on a parity with the Capped 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 shares of Capped Convertible
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Preferred Stock shall not be entitled to vote except as provided in Section 6(b)
below.
(b) Class Voting Rights. So long as the Capped Convertible
Preferred Stock is outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of at least a majority of all
outstanding shares of Capped Convertible Preferred Stock, voting separately as a
class, amend, alter or repeal any provision of the Certificate of Incorporation,
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except as provided herein, so as to (i) affect adversely the special rights,
preferences, qualifications, limitations or restrictions of the Capped
Convertible Preferred Stock or (ii) increase the number of authorized, or issue
additional, shares of Capped Convertible Preferred Stock; provided, however,
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that the creation, authorization or issue, or 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 Capped 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 Capped Convertible Preferred Stock or otherwise require the
affirmative vote or consent of the holders of the Capped Convertible Preferred
Stock.
(c) Class Voting Rights of ESOP Convertible Preferred Stock.
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The Corporation shall not amend, alter or repeal the preferences, special rights
or other powers of the Capped Convertible Preferred Stock of the Corporation,
except as provided herein, so as to (i) decrease the number of shares issuable
upon conversion of the Capped Convertible Preferred Stock as provided in Section
3 or Section 7, (ii) increase the number of shares of Capped Convertible
Preferred Stock subject to redemption, (iii) reduce the Per-Share Redemption
Amount for Capped Convertible Preferred Stock, or (iv) amend the requirements of
this Section 6(c), without the written consent or affirmative vote of the
holders of a majority of the then outstanding shares of ESOP Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a class.
7. Conversion.
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(a) Conversion Right. Outstanding shares of Capped Convertible
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Preferred Stock held in the ESOP Loan Suspense Account after an Exchange 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, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by multiplying (i) the number of shares of Capped Convertible Preferred Stock to
be converted by (ii) the Conversion Ratio as of the Conversion Date. Outstanding
shares of Capped Convertible Preferred Stock shall not be convertible by the
Marriott Asset Fund.
(b) Conversion Procedures.
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(i) In order to convert shares of Capped Convertible
Preferred Stock into shares of Common Stock after an Exchange, the Investment
Manager shall deliver, or cause to be delivered, to the Corporation or another
place designated by the Corporation in a written notice sent to the ESOP, (A) a
Conversion Notice, (B) a written instrument or instruments of transfer for the
shares of Capped 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,
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and any conversion pursuant to Section 3 shall be deemed to have been effected
the 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 Capped 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 respect to each
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share of Capped 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 Capped
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 Capped 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 Capped 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 Capped 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
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fractional shares of Common Stock shall be issued upon conversion of any shares
of Capped Convertible Preferred Stock. If more than one share of Capped
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 Capped 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 Capped 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
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all times when the Capped Convertible Preferred Stock shall be outstanding,
reserve and keep
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available out of its authorized but unissued stock, for the purpose of effecting
the conversion of the Capped 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 Capped Convertible
Preferred Stock.
(e) Converted Shares. After the Conversion Date with respect to any
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shares of Capped 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, dividends or other
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 Capped 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
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other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of Capped 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 Capped 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 Capped 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
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event that affects the Common Stock and that the Board of Directors determines
would violate the general principle that each share of Capped Convertible
Preferred Stock shall be convertible into a number of shares of Common Stock
(and cash for fractional shares) equal to the product of (i) the quotient
obtained by dividing $10,000 by the Floor Price, multiplied by (ii) the
Conversion Amount Per Share 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 Ratio, the Conversion Amount Per Share or the Cap
Amount, or take any other action pursuant to this Section 7(g), 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 Board of
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Directors pursuant to this Section 7(g) shall be supported by a written opinion
of
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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 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 Capped Convertible
Preferred Stock which are redeemed on or after the effective date of such
adjustment or other action.
8. Redemption.
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(a) Shares Held by the Marriott Asset Fund. If the shares of
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Capped Convertible Preferred Stock are held by the Marriott Asset Fund, on each
of the due dates for quarterly interest payments on the Purchase Money Note
(each such date, a Redemption Date), the Corporation shall redeem a number of
shares of Capped Convertible Preferred Stock equal to the least of (i) the
number of shares of Capped Convertible Preferred Stock held by the Marriott
Asset Fund as of the Redemption Date, (ii) 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 such Redemption Date, over the
Floor Price, and the denominator of which is the Floor Price, multiplied by (y)
$1,000,000,000, over (ii) the cumulative dollar amount, as of the day
immediately prior to such Redemption Date, of the Redemption Price paid with
respect to all prior redemptions of shares of Capped Convertible Preferred Stock
held by the Marriott Asset Fund pursuant to this Section 8(a) (determined
without regard to any portion of the Redemption Price attributable to
accumulated and unpaid dividends payable pursuant to Section 4(a)), by (B) the
Per-Share Redemption Amount for shares of Capped Convertible Preferred Stock as
of such Redemption Date, or (iii) the quotient obtained by dividing (A) the
excess, if any, as of such Redemption Date of (i) the outstanding principal
balance and any interest that has become due and payable but is unpaid on the
Purchase Money Note, over (ii) the outstanding principal balance and any
interest that has become due and payable but is unpaid on the ESOP Note, by (B)
the Per-Share Redemption Amount.
(b) Shares Released from the ESOP Loan Suspense Account. If
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shares of Capped Convertible Preferred Stock are held by the ESOP after an
Exchange, the ESOP may, at the option of the Investment Manager, redeem any or
all shares or fractions of a share of Capped 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).
(c) Notice of Redemption. In the event of a redemption pursuant
--------------------
to Section 8(a), the Corporation shall give notice (a "Redemption Notice") to
the Marriott Asset Fund and the ESOP. In the event of a redemption pursuant to
Section 8(b), the ESOP shall give a Redemption Notice to the Corporation. Each
Redemption Notice shall specify (i) the Redemption Date, (ii) the number of
shares of Capped Convertible Preferred Stock to be redeemed or the aggregate
Redemption Price for all shares of Capped Convertible Preferred Stock to be
redeemed as of the applicable Redemption Date, and (iii) the place or places for
payment of the Redemption Price and method for surrender of the shares to be
redeemed. A Redemption Notice with respect to a redemption pursuant to Section
8(a) may be given on or
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before the Redemption Date. A Redemption Notice with respect to a redemption
pursuant to Section 8(b) must be given before the Redemption Date.
(d) Redemption Procedures. On the Redemption Date, the holder
---------------------
of shares of Capped Convertible Preferred Stock shall surrender, or cause to be
surrendered, the shares to the Corporation and shall thereupon be entitled to
receive payment of the applicable Redemption Price. 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 or set aside for, or paid to, the holder of the redeemed
shares, then, notwithstanding that the redeemed shares of Capped 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 Capped Convertible Preferred
Stock shall terminate, except the right of the holders of such shares to receive
the Redemption Price, 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 shares of Capped 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.
(e) No Sinking Fund. The shares of Capped Convertible Preferred
---------------
Stock shall not be subject to the operation of any retirement or sinking fund.
(f) Redeemed Shares. After the Redemption Date with respect to
---------------
any shares of Capped 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, dividends or other
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 Capped 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.
(g) Payment of Redemption Price. The Corporation, at its
---------------------------
option, may make payment of the Redemption Price for shares of Capped
Convertible Preferred Stock held by the Marriott Asset Fund before an Exchange
(i) in cash, (ii) by forgiveness of principal and/or interest on the Purchase
Money Note, or (iii) in any combination of cash and forgiveness of principal
and/or interest on the Purchase Money Note. The Corporation, at its option, may
make payment of the Redemption Price for shares of Capped Convertible Preferred
Stock held by the ESOP after an Exchange (x) in cash, (y) in shares of Common
Stock, or (z) 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
for shares of Capped Convertible Preferred Stock held by the ESOP after an
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Exchange, shares of Common Stock shall be valued at the Common Stock Price as of
the Redemption Date.
9. Adjustment of Floor Price. The Floor Price shall be subject to
-------------------------
adjustment from time to time as follows:
(a) If the Corporation shall fix a Determination Date with
respect to the payment or making of a dividend or other distribution on shares
of Common Stock exclusively in shares of Common Stock, the Floor Price in effect
as of the opening of business on the day following the Determination Date shall
be decreased by multiplying such Floor Price by a fraction (i) the numerator of
which shall be one and (ii) the denominator of which shall be the sum of one and
the number of shares, or fraction thereof, constituting such dividend or other
distribution to be paid or made in respect of each share of Common Stock.
(b) If the Corporation shall fix a Determination Date with
respect to the making of a dividend or other distribution on shares of Common
Stock consisting exclusively of rights or warrants entitling the holders thereof
to subscribe for or purchase, during a period not exceeding 45 days from the
date of such dividend or other distribution, shares of Common Stock at a price
per share less than the Common Stock Price on the Ex-Date for such dividend or
distribution, the Floor Price in effect as of the opening of business on the day
following the Determination Date shall be decreased by multiplying such Floor
Price by a fraction (i) the numerator of which shall be the sum of one plus a
fraction, the numerator of which is equal to the product of (A) the number of
shares of Common Stock that may be subscribed for or purchased pursuant to the
rights or warrants paid as a dividend on, or distributed in respect of, each
share of Common Stock and (B) the per share subscription or purchase price of
such rights or warrants, and the denominator of which is equal to the Common
Stock Price on the Ex-Date, and (ii) the denominator of which shall be the sum
of one plus the number of shares of Common Stock that may be subscribed for or
purchased pursuant to the rights or warrants paid as a dividend on, or
distributed in respect of, each share of Common Stock.
(c) If outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock or combined into a smaller
number of shares of Common Stock, the Floor Price in effect at the opening of
business on the Determination Date shall be proportionately decreased or
increased, respectively.
(d) If the Corporation shall fix a Determination Date with
respect to the making of a dividend or other distribution on shares of Common
Stock (other than a dividend or distribution referred to in Section 9(a) or
9(b), or in connection with a liquidation, dissolution or winding up of the
Corporation) consisting of evidences of its indebtedness, shares of any class of
capital stock or other assets (including securities and Extraordinary Cash
Dividends, but excluding Regular Cash Dividends) (any of the foregoing, other
than any such excluded dividend or distribution, being hereinafter referred to
as "Assets"), then, in each such case, the Floor Price in effect as of the
opening of business on the day following the Determination Date shall be
decreased by multiplying such Floor Price by a fraction (i) the numerator of
which shall be the Common Stock Price on the Determination Date less the fair
market value on the Determination
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Date of the portion of the Assets so distributed applicable to one share of
Common Stock and (ii) the denominator of which is the Common Stock Price on the
Determination Date.
(e) If the Floor Price is adjusted pursuant to Section 9(a),
9(b) or 9(d), as a result of the Corporation fixing a Determination Date, and
the dividend or distribution with respect to which such Determination Date was
fixed is not paid or made, or is only paid or made in part, the Floor Price in
effect as of the opening of business on the day following the date on which such
dividend or distribution was to have been paid or made shall be adjusted to
equal either (i) if such dividend or distribution is not paid or made, the Floor
Price that would then be in effect if such Determination Date had not been
fixed, or (ii) if such dividend or distribution is only paid or made in part,
the Floor Price that would then be in effect if the adjustment made as of the
opening of business on the day following the Determination Date had been made on
the basis of a dividend or distribution in the amount actually paid or made. If
the Floor Price is adjusted pursuant to Section 9(b) as a result of the
Corporation fixing a Determination Date for a dividend or distribution
consisting of rights or warrants, and any of such rights or warrants expire
unexercised, the Floor Price in effect as of the opening of business on the day
following the date of expiration of such rights or warrants shall be adjusted to
equal the Floor Price that would then be in effect if the adjustment made as of
the opening of business on the day following the Determination Date with respect
to such dividend or distribution had been made assuming that the number of
shares of Common Stock that could be subscribed for or purchased pursuant to the
rights or warrants paid as a dividend on, or distributed in respect of, each
share of Common Stock had been multiplied by a fraction, the numerator of which
is equal to the total number of such rights or warrants that were actually
exercised and the denominator of which is equal to the total number of such
rights or warrants that were paid as a dividend or distributed.
(f) No adjustment in the Floor Price pursuant to this Section
9 shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Floor Price; provided, however, that any adjustments which
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by reason of this subparagraph (f) are not required to be made shall be carried
forward and taken into account in determining whether any subsequent adjustment
shall be required.
(g) No adjustment need be made for a transaction referred to
in Section 9(a), 9(b) or 9(d) if the holder of the Capped Convertible Preferred
Stock is to participate in the transaction on a basis and with notice that the
Board of Directors determines to be fair and appropriate in light of the basis
and notice on which holders of the Common Stock participate in the transaction;
provided, however, that any such action of the Board of Directors pursuant to
- -------- -------
this Section 9(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.
(h) When the Floor Price is adjusted as provided in this
Certificate of Designation:
(i) the Corporation shall compute the adjustment and
shall prepare a certificate signed by the Treasurer or an Assistant Treasurer of
the Corporation setting forth the
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adjusted Floor Price and showing in reasonable detail the facts upon which such
adjustment is based; and
(ii) a notice stating that the Floor Price has been
adjusted and setting forth the adjusted Floor Price shall as soon as practicable
after the Corporation has calculated such adjustment be mailed by the
Corporation to the record holder of shares of Capped Convertible Preferred
Stock.
(i) In any case in which this Section 9 provides that an
adjustment shall become effective as of the opening of business on the day
following the Determination Date with respect to a dividend or distribution or
on the day on which a subdivision or combination becomes effective, the
Corporation may defer until such dividend, distribution, subdivision or
combination is effected (i) issuing to the holder of any share of Capped
Convertible Preferred Stock converted after such day and before such dividend,
distribution, subdivision or combination is effected any additional shares of
Common Stock issuable upon such conversion by reason of the adjustment required
by such event over and above the shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of any fractional share of Common Stock
pursuant to Section 7(c).
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, 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 Capped Convertible Preferred Stock such that,
effective upon consummation of such transaction, (x) some or all of the
then-outstanding shares of Capped 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 Capped
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 Capped 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
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a written opinion of an investment banking firm of recognized national standing
selected by the Board
-15-
of Directors or the Corporation, 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. Shares Held for Exchange. Any shares of Capped Convertible
------------------------
Preferred Stock that are withdrawn by the Corporation from the Marriott Asset
Fund as provided in the constituent documents for the Marriott Asset Fund shall
be held by the Corporation as treasury stock and shall be reserved and kept
available for purposes of effecting the exchange right of the ESOP as described
in the Certificate of Designation, Preferences and Rights of Marriott
International, Inc. ESOP Convertible Preferred Stock, as the same may be amended
from time to time.
12. Fractional Shares of Capped Convertible Preferred Stock. Capped
-------------------------------------------------------
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 or redeemed and shall entitle the holder to
participate in distributions and to have the benefit of all other rights of
holders of Capped Convertible Preferred Stock.
13. 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 Capped 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 Capped 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 Capped 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 Investment Manager or
the ESOP pursuant to this Certificate of Designation shall be given in writing
and shall be sent by hand delivery or by certified mail, 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