As filed with the Securities and Exchange Commission on July 31, 2001. Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- Marriott International, Inc. (Exact name of registrant as specified in its charter) -------------- Delaware 52-2055918 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10400 Fernwood Road Bethesda, Maryland 20817 (301) 380-3000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------- Ward R. Cooper, Esq. Marriott International, Inc. Dept. 52/923.30 10400 Fernwood Road Bethesda, Maryland 20817 (301) 380-7824 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------- With a copy to: Stephanie Tsacoumis, Esq. Gibson, Dunn & Crutcher LLP 1050 Connecticut Avenue, NW Washington, D.C. 20036 (202) 955-8277 -------------- Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] -------------- CALCULATION OF REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Proposed Proposed Title of Each Class Of Securities To Maximum Maximum Amount Of Be Registered Amount To Offering Price Aggregate Registration and Sold by the Registrant Be Registered Per Security(1) Offering Price(1) Fee(1) - ----------------------------------------------------------------------------------------------------------- Liquid Yield Option(TM) Notes due 2021................................ $470,000,000 $863.75 $405,962,500 $101,491 Class A common stock, par value $0.01 per share(2)........................ -- -- -- -- Preferred Share Purchase Rights and related Series A Junior Preferred Stock(3)............................ -- -- -- -- - ----------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (TM)Trademark of Merrill Lynch & Co., Inc. (1) Calculated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act, based on the average of the bid and asked prices of the LYONs on the PORTAL system on July 24, 2001 of $863.75 per $1,000 issue price of LYONs. (2) Also being registered are 6,358,395 shares of Class A common stock currently issuable upon conversion or redemption of the LYONs registered hereby and such indeterminate number of shares as may become issuable as a result of antidilution adjustments. (3) The Rights to purchase Series A Junior Preferred Stock will be attached to and will trade with shares of the Class A common stock. -------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. The + +selling securityholders may not sell these securities until the registration + +statement filed with the Securities and Exchange Commission is effective. + +This prospectus is not an offer to sell these securities and it is not + +soliciting an offer to buy these securities in any jurisdiction where the + +offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS Subject to Completion, dated July 31, 2001 $470,000,000 Marriott International, Inc. ----------- Liquid Yield Option(TM) Notes due 2021 (Zero Coupon -- Senior) and Class A Common Stock ----------- The Offering: We issued the LYONs in a private placement at an issue price of $860.95 per LYON (86.095% of the principal amount at maturity). Selling securityholders will use this prospectus to resell their LYONs and the shares of Class A common stock issuable upon conversion or redemption of their LYONs at fixed, varying or negotiated prices as described in the "Plan of Distribution" section beginning on page 34 of this prospectus. The LYONs are zero-coupon debt securities. On May 8, 2021, the maturity date of the LYONs, a holder will receive $1,000 per LYON. The issue price of each LYON represents a yield to maturity of 0.75% per year calculated from May 8, 2001. The LYONs rank equal in the right of payment to all existing and future unsecured and unsubordinated indebtedness of Marriott. Convertibility of the LYONs: Holders may convert their LYONs into 13.5285 shares of Marriott Class A common stock per LYON at any time on or before the maturity date. Upon conversion, we have the right to deliver, in lieu of shares of our common stock, cash in an amount described in this prospectus. The conversion rate may be adjusted for the reasons described in this prospectus, but will not be adjusted for accrued original issue discount. Marriott's common stock currently trades in the New York Stock Exchange under the symbol "MAR." The last reported sale price of the common stock on the New York Stock Exchange on July 30, 2001 was $47.92 per share. Contingent Interest: We will pay contingent interest to the holders of LYONs during any six-month period commencing after May 8, 2004 if the average market price of a LYON for a measurement period preceding the six-month period equals 120% or more of the sum of the issue price and accrued original issue discount for the LYON. The contingent interest payable per LYON in respect of any quarterly period will equal the greater of (1) regular cash dividends paid by us per share on our common stock during that quarterly period multiplied by the number of shares issuable upon conversion of a LYON at the then applicable conversion rate or (2) $0.06 multiplied by that number of shares. For United States federal income tax purposes, the LYONs will constitute contingent payment debt instruments. You should read the discussion of selected United States federal income tax consequences relevant to the LYONs beginning on page 28. Purchase of the LYONs by Marriott at the Option of the Holder: Holders may require Marriott to purchase all or a portion of their LYONs on May 8, 2002 at a price of $867.42 per LYON, on May 8, 2004, at a price of $880.50 per LYON, on May 8, 2011 at a price of $927.87 per LYON and on May 8, 2016 at a price of $963.26 per LYON. Marriott may choose to pay the purchase price in cash, common stock or a combination of cash and common stock. In addition, upon a change in control of Marriott occurring on or before May 8, 2004, holders may require Marriott to repurchase all or a portion of their LYONs. Redemption of the LYONs at the Option of Marriott: Marriott may redeem all or a portion of the LYONs at any time on or after May 8, 2004 at the prices set forth in "Description of LYONs--Redemption of LYONs at the Option of Marriott." The LYONs issued in the initial private placement are eligible for trading in the PORTAL system. LYONs sold using this prospectus, however, will no longer be eligible for trading in the PORTAL system. We do not intend to list the LYONs on any other national securities exchange or automated quotation system. ----------- Investing in the LYONs involves risks that are described in the "Risk Factors" section beginning on page 9 of this prospectus. ----------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representations to the contrary are a criminal offense. ----------- The date of this prospectus is , 2001. (TM) Trademark of Merrill Lynch & Co., Inc.
You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus or any document incorporated by reference is accurate only as of the date on the front cover of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date.
TABLE OF CONTENTS ---------------- Page ---- About this Prospectus...................................................... 1 Where You Can Find More Information........................................ 2 Forward-Looking Statements................................................. 3 Summary.................................................................... 4 Risk Factors............................................................... 9 Use of Proceeds............................................................ 12 Ratio of Earnings to Fixed Charges......................................... 12 Description of LYONs....................................................... 12 Description of Our Common and Preferred Stock.............................. 27 Certain United States Federal Income Tax Considerations.................... 28 Selling Securityholders.................................................... 33 Plan of Distribution....................................................... 34 Legal Matters.............................................................. 35 Independent Public Accountants............................................. 36
ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the "SEC") using a "shelf" registration or continuous offering process. Under this shelf prospectus, the selling securityholders may, from time to time, sell the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities the selling securityholders may offer. Each time a selling securityholder sells securities, the selling securityholder is required to provide you with this prospectus, and, in some cases, a prospectus supplement containing specific information about the selling securityholder and the terms of the securities being offered. That prospectus supplement may include a discussion of any risk factors or other special considerations applicable to those securities. Any prospectus supplement may also add, update or change information in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the information in the prospectus supplement. You should read both this prospectus and any prospectus supplement together with the additional information described under the heading "Where You Can Find More Information." The registration statement containing this prospectus, including the exhibits to the registration statement, provides additional information about us and the securities offered under this prospectus. The registration statement, including the exhibits, can be read at the SEC website or at the SEC offices mentioned under the heading "Where You Can Find More Information." 1
WHERE YOU CAN FIND MORE INFORMATION Marriott files annual, quarterly and current reports, proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). You may read and obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, DC 20549. Please call 1-800 SEC-0330 for further information on the operations of the public reference facilities and copying charges. The SEC also maintains a web site that contains reports, proxy statements and other information about issuers, like Marriott, who file electronically with the SEC. The address of that site is www.sec.gov. You can also inspect reports, proxy statements and other information about Marriott at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. We "incorporate by reference" information into this prospectus, which means that we disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus. These documents contain important information about Marriott and its finances. The following documents filed by us with the SEC (File No.1-13881) are incorporated in this prospectus by reference and made a part of this prospectus: . Annual Report on Form 10-K for the year ended December 29, 2000; . Quarterly Reports on Form 10-Q for the quarters ended March 23 and June 15, 2001; and . The description of Marriott's common stock and preferred stock purchase rights contained in our registration statement on Form 10 dated February 13, 1998. All documents filed by Marriott with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this prospectus and prior to the termination of this offering shall also be deemed to be incorporated by reference. You may request a copy of these filings at no cost, by writing or calling Marriott at the following address or telephone number: Corporate Secretary, Marriott International, Inc., Marriott Drive, Department 52/862, Washington, D.C. 20058, (301) 380-3000. Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in that information. 2
FORWARD-LOOKING STATEMENTS We have made forward-looking statements in this prospectus that are based on the beliefs and assumptions of our management and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations and statements preceded by, followed by or that include the words "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. Forward- looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You are cautioned not to put undue reliance on any forward-looking statements. In addition, except as required by applicable federal securities laws, we do not have any intention or obligation to update forward-looking statements. You should understand that the following important factors, in addition to those discussed elsewhere in this prospectus, could cause our results to differ materially from those expressed in forward-looking statements: . competition within each of our business segments; . the balance between supply of and demand for hotel rooms, timeshare units and senior living accommodations; . our continued ability to obtain new operating contracts and franchise agreements; . our ability to develop and maintain positive relations with current and potential hotel and retirement community owners; . the effect of international, national and regional economic conditions; . the availability of capital to allow us and potential hotel and retirement community owners to fund investments; . the effect that internet hotel reservation channels may have on the rates that we are able to charge for hotel rooms; and . other risks described from time to time in our filings with the SEC. 3
SUMMARY The following summary of material information appearing elsewhere in this prospectus is qualified in its entirety by the more detailed information included elsewhere or incorporated by reference in this prospectus. You should read the entire prospectus, as well as the information incorporated by reference, before making an investment decision. When used in this prospectus, the terms "Marriott," "we," "our" and "us" refer to Marriott International, Inc. and its consolidated subsidiaries, unless otherwise specified. Unless the context requires otherwise, all references to "common stock" are to Marriott's Class A common stock, par value $0.01 per share, and the associated rights issued under the Amended and Restated Rights Agreement, dated as of August 9, 1999. Marriott International, Inc. We are one of the world's leading hospitality companies. We are a worldwide operator and franchisor of hotels and senior living communities. We group our operations into six business segments, Full Service, Select Service, Extended Stay, Timeshare, Senior Living Services and Distribution Services, which represented 54 percent, 9 percent, 7 percent, 8 percent, 7 percent and 15 percent, respectively, of our total sales in the fiscal year ended December 29, 2000. Our principal executive offices are located at 10400 Fernwood Road, Bethesda, Maryland 20817, and our telephone number is (301) 380-3000. In our Lodging business, we operate, develop and franchise hotels under 14 separate brand names and we operate, develop and market Marriott timeshare properties under 3 separate brand names. Our Lodging business includes the Full Service, Select Service, Extended Stay, and Timeshare segments. In our Senior Living Services segment, we develop and presently operate 153 senior living communities offering independent living, assisted living and skilled nursing care for seniors in the United States. In our Distribution Services segment, we supply food and related products to external customers and to internal operations throughout the United States. Financial information by industry segment and geographic area as of December 29, 2000 and for the three fiscal years then ended, appears in the Business Segments note to our Consolidated Financial Statements, which are contained in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q and are incorporated by reference into this prospectus. We became a public company in March 1998, when we were "spun off" as a separate entity by the company formerly named "Marriott International, Inc." Our company--the "new" Marriott International--was formed to conduct the lodging, senior living and distribution services businesses formerly conducted by the "old" Marriott International. "Old" Marriott International, now called Sodexho, Inc., is a provider of food service and facilities management in North America. The Offering LYONs....................... Selling securityholders may sell up to $470,000,000 aggregate principal amount at maturity of LYONs due 2021. We will not pay interest on the LYONs prior to maturity unless contingent interest becomes payable. Each LYON was issued at a price of $860.95 per LYON and a principal amount at maturity of $1,000. Maturity of LYONs........... May 8, 2021 4
Yield to Maturity of 0.75% per year, computed on a semiannual bond LYONs....................... equivalent basis, calculated from May 8, 2001, excluding any contingent interest. Conversion Rights........... Holders may convert the LYONs at any time on or before the maturity date, unless the LYONs have been previously redeemed or purchased. For each LYON converted, we will deliver 13.5285 shares of our common stock. Also, in lieu of delivering shares of common stock upon conversion of any LYONs, we may elect to pay holders cash for their LYONs in an amount based on the average Sale Price of the common stock for the five consecutive trading days immediately following either: . the date of our notice of election to deliver cash, which we must give within two business days of receiving a conversion notice, unless we have earlier given notice of redemption; or . the conversion date, if we have previously given notice of redemption which specified that we intended to deliver cash upon conversion. The conversion rate may be adjusted for certain reasons, but will not be adjusted for accrued original issue discount. Upon conversion, the holder will not receive any cash payment representing accrued original issue discount; accrued original issue discount will be deemed paid by the shares of common stock received by the holder of LYONs on conversion. Ranking..................... The LYONs are unsecured and unsubordinated obligations and rank equal in right of payment to all our existing and future unsecured and unsubordinated indebtedness. However, the LYONs are effectively subordinated to all existing and future obligations of our subsidiaries. As of June 15, 2001, on a consolidated basis, we had approximately $2,354 million of total indebtedness outstanding. As of June 15, 2001, our subsidiaries had approximately $236 million of outstanding indebtedness to third parties. Original Issue Discount..... We issued our LYONs at a price significantly below the principal amount at maturity of the LYONs. This original issue discount accrues daily at a rate of 0.75% per year from May 8, 2001, calculated on a semiannual bond equivalent basis, using a 360-day year composed of twelve 30-day months. The accrual of imputed interest income, also referred to as tax original issue discount, as calculated for United States federal income tax purposes, will exceed the accrued original issue discount. Contingent Interest......... We will pay contingent interest to the holders of LYONs during any six-month period from May 9 to November 8 and from November 9 to May 8, commencing May 9, 2004, if the average market price of a LYON for the five trading days ending on the second trading day immediately preceding the relevant six-month period equals 120% or more of the sum of the issue price and accrued original issue discount for such LYON to the day immediately preceding the relevant six-month period. However, if 5
we declare a dividend for which the record date falls prior to the first day of a six-month period but the payment date falls within that six-month period, then the five trading day period for determining the average market price of a LYON will be the five trading days ending on the second trading day immediately preceding the record date. The amount of contingent interest payable per LYON in respect of any quarterly period will equal the greater of (1) regular cash dividends paid by us per share on our common stock during that quarterly period multiplied by the number of shares of common stock issuable upon conversion of a LYON or (2) $0.06 multiplied by that number of shares. Contingent interest, if any, will accrue and be payable to holders of LYONs as of the record date for the related common stock dividend or, if no cash dividend is paid by us during a quarter within the relevant six-month period, to holders of LYONs as of the fifteenth day preceding the last day of the relevant six-month period. These payments will be paid on the payment date of the related common stock dividend or, if no cash dividend is paid by us during a quarter within the relevant six-month period, on the last day of the relevant six-month period. The original issue discount will continue to accrue at the yield to maturity whether or not contingent interest is paid. Tax Original Issue The LYONs are debt instruments subject to the Discount.................... contingent payment debt regulations. You should be aware that, even if we do not pay any cash interest (including any contingent interest) on the LYONs, you will be required to include interest in your gross income for United States federal income tax purposes. This imputed interest, also referred to as tax original issue discount, accrues at a rate equal to 8.26% per year, computed on a semiannual bond equivalent basis, which represents the yield on our noncontingent, nonconvertible, fixed-rate debt with terms otherwise similar to the LYONs. The rate at which the tax original issue discount accrues for United States federal income tax purposes exceeds the stated yield of 0.75% for the accrued original issue discount. You will also recognize gain or loss on the sale, exchange, conversion or redemption of a LYON in an amount equal to the difference between the amount realized on the sale, exchange, conversion or redemption, including the fair market value of any common stock received upon conversion or otherwise, and your adjusted tax basis in the LYON. Any gain recognized by you on the sale, exchange, conversion or redemption of a LYON generally will be ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and after that, capital loss. See "Certain United States Federal Income Tax Considerations." 6
Sinking Fund................ None. Redemption of LYONs at the Option of Marriott......... We may redeem all or a portion of the LYONs for cash at any time on or after May 8, 2004, at the redemption prices set forth in this prospectus. See "Description of LYONs--Redemption of LYONs at the Option of Marriott." Purchase of LYONs by Marriott at the Option of the Holders................ You may require us to purchase all or a portion of your LYONs on the following dates at the following prices: . on May 8, 2002 at a price of $867.42 per LYON; . on May 8, 2004 at a price of $880.50 per LYON; . on May 8, 2011 at a price of $927.87 per LYON; . on May 8, 2016 at a price of $963.26 per LYON. We may choose to pay the purchase price in cash, shares of common stock or a combination of cash and shares of common stock. See "Description of LYONs--Purchase of LYONs by Marriott at the Option of the Holder." Change in Control........... Upon a change in control of Marriott occurring on or before May 8, 2004, you may require us to purchase all or a portion of your LYONs in cash at a price equal to the issue price of such LYONs plus accrued original issue discount to the date of purchase. Although not anticipated, we may not have sufficient cash to redeem the LYONs upon a change of control. See "Description of LYONs-- Change in Control Permits Purchase of LYONs by Marriott at the Option of the Holder." Optional Conversion to Semiannual Coupon Notes Upon Tax Event............. From and after the occurrence of a Tax Event, at the option of Marriott, interest instead of future original issue discount shall accrue on each LYON from the option exercise date at 0.75% per year on the restated principal amount and shall be payable semiannually on each interest payment date to holders of record at the close of business on each regular record date immediately preceding such interest payment date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will accrue from the most recent date to which interest has been paid or, if no interest has been paid, the option exercise date. If this occurs, the redemption price, purchase price and change in control purchase price shall be adjusted, and no future contingent interest will be paid on the LYONs. However, your conversion rights will not change. Use of Proceeds............. We will not receive any of the proceeds from the sale by any selling securityholder of the LYONs or the shares of common stock issuable upon conversion or redemption of the LYONs. See "Use of Proceeds." 7
DTC Eligibility............. The LYONs have been issued in book-entry form and are represented by one or more permanent global certificates deposited with a custodian for and registered in the name of a nominee of DTC in New York, New York. Beneficial interests in any of these securities are shown on, and transfers are effected only through, records maintained by DTC and its direct and indirect participants and any of these interests may not be exchanged for certificated securities, except in limited circumstances. See "Description of LYONs--Book- Entry System." Trading..................... We do not intend to list the LYONs on any national securities exchange or automated quotation system. The LYONs issued in the initial private placement are eligible for trading in the PORTAL system. LYONs sold using this prospectus, however, will no longer be eligible for trading in the PORTAL system. Our common stock is traded in the New York Stock Exchange under the symbol "MAR." Ratio of Earnings to Fixed Charges Our ratio of earnings to fixed charges is as follows. See "Ratio of Earnings to Fixed Charges." For the 24 Weeks Fiscal Year ended --------------------------------------------------- June 15, 2001 2000 1999 1998 1997 1996 ---------------- ---- ---- ---- ---- ---- 4.4x 4.4x 5.0x 7.1x 7.2x 5.8x 8
RISK FACTORS Prospective investors should carefully consider the following information as well as the other information contained in or incorporated into this prospectus before purchasing the LYONs. Risk Factors Relating to Marriott We may have conflicts of interest with Host Marriott Corporation and Crestline Capital Corporation We manage or franchise a large number of full service, luxury, limited service and extended stay hotels and senior living communities that are owned, controlled or leased by Host Marriott Corporation and its former subsidiary, Crestline Capital Corporation, we guarantee certain Host Marriott obligations and we also own through an unconsolidated joint venture with an affiliate of Host Marriott, two partnerships which own 120 Courtyard by Marriott hotels. We continue to manage the 120 hotels under long-term agreements. The joint venture is financed with equity contributed in equal shares by us and an affiliate of Host Marriott and approximately $200 million in mezzanine debt provided by us. Our total investment in the joint venture, including mezzanine debt, is approximately $300 million. We may have conflicts of interest with Host Marriott or Crestline because our Chairman and Chief Executive Officer, J.W. Marriott, Jr., and his brother, Richard E. Marriott, who is Chairman of Host Marriott, have significant stockholdings in, and are directors of, both Marriott International and Host Marriott. In addition, J.W. Marriott, Jr. and Richard E. Marriott have significant holdings in Crestline and John W. Marriott III, the son of J.W. Marriott, Jr. and a Marriott employee, is a director of Crestline. Circumstances may occur in which Host Marriott's or Crestline's interests could be in conflict with your interests as a holder of our securities, and Host Marriott or Crestline may pursue transactions that present risks to you as a holder of our securities. We cannot assure you that any such conflicts will be resolved in your favor. Our transactions with Host Marriott and Crestline are described in more detail in the notes to our Consolidated Financial Statements, which we filed with the SEC as part of our Annual Report on Form 10-K for the year ended December 29, 2000. See "Where You Can Find More Information." The availability and price of capital may affect our ability to grow Our ability to sell properties that we develop, and the ability of hotel developers to build or acquire new Marriott branded properties, both of which are important parts of our growth plans, are partially dependent on the availability and price of capital. We are monitoring the status of the capital markets and are evaluating the effect that changes in capital market conditions may have on our ability to execute our announced growth plans. We depend on arrangements with others to grow Our present growth strategy for development of additional facilities entails entering into and maintaining various arrangements with present and future property owners, including Host Marriott Corporation, Crestline Capital Corporation and New World Development Company Limited. We cannot assure you that any of our current strategic arrangements will continue, or that we will be able to enter into future collaborations. Contract terms for new units may be less favorable The terms of the operating contracts, distribution agreements, franchise agreements and leases for each of our lodging facilities and retirement communities are influenced by contract terms offered by our competitors at the time these agreements are entered into. We compete for hotel management, franchise and acquisition opportunities with other managers, franchisors and owners of hotel properties, some of which may have greater financial resources than we do. These competitors may be able to accept more risk than we can prudently manage. Competition may generally reduce the number of suitable management, franchise and investment opportunities offered to us, and increase the bargaining power of property owners seeking to engage a manager, become a franchisee or sell a hotel property. Accordingly, we cannot assure you that contracts entered into or renewed in the future will be on terms that are as favorable to us as those under our existing agreements. 9
We may fail to compete effectively and lose business The profitability of hotels, vacation timeshare resorts, senior living communities, corporate apartments, and distribution centers we operate is subject to general economic conditions, competition, the desirability of particular locations, the relationship between supply of and demand for hotel rooms, vacation timeshare resorts, senior living facilities, corporate apartments, distribution services, and other factors. We generally operate in markets that contain numerous competitors and our continued success will depend, in large part, upon our ability to compete in such areas as access, location, quality of accommodations, amenities, specialized services, cost containment and, to a lesser extent, the quality and scope of food and beverage services and facilities. Our operational and growth prospects are also dependent on the strength and desirability of our lodging brands, the ability of our franchisees to generate revenues and profits at properties they franchise from us and our ability to maintain positive relations with our employees. Changes in supply and demand, and other conditions, in our industries may adversely affect our revenues and profits. Our revenues and profitability may be adversely affected by (1) supply additions, (2) international, national and regional economic conditions, (3) changes in travel patterns, (4) taxes and government regulations which influence or determine wages, prices, interest rates, construction procedures and costs, and (5) the availability of capital to allow us and potential hotel and retirement community owners to fund investments. In particular, over- building in one or more sectors of the hotel industry and/or in one or more geographic regions could lead to excess supply compared to demand and a decrease in hotel occupancy and/or room rates. Our timeshare and senior living service businesses are also subject to the same or similar uncertainties and, accordingly, we cannot assure you that the present level of demand for timeshare intervals and senior living communities will continue, or that there will not be an increase in the supply of competitive units, which could reduce the prices at which we are able to sell or rent units. In addition, weaker hotel and senior living community performance could give rise to losses under loans, guarantees and minority equity investments that we have made in connection with hotels and senior living communities that we manage. Increasing use of internet reservation channels may decrease loyalty to our brands or otherwise adversely affect us Some of our hotel rooms are booked through internet travel intermediaries such as Travelocity, Expedia and Priceline. As this percentage increases, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us. Moreover, some of these internet travel intermediaries are attempting to commoditize hotel rooms by increasing the importance of price and general indicators of quality (such as "three-star downtown hotel") at the expense of brand identification. These agencies hope that consumers will eventually develop brand loyalties to their reservations system rather than to our lodging brands. If this happens our business and profitability may be significantly harmed. We are subject to restrictive debt covenants Our existing debt agreements contain covenants that limit our ability to, among other things, borrow additional money, pay dividends, sell assets or engage in mergers. If we do not comply with these covenants, or do not repay our debt on time, we would be in default under our debt agreements. Unless any such default is waived by our lenders, the debt could become immediately payable and this could have a material adverse impact on us. We depend on cash flow of our subsidiaries to make payments on our securities We are in part a holding company. Our subsidiaries conduct a significant percentage of our consolidated operations and own a significant percentage of our consolidated assets. Consequently, our cash flow and our ability to meet our debt service obligations depends in large part upon the cash flow of our subsidiaries and the payment of funds by the subsidiaries to us in the form of loans, dividends or otherwise. Our subsidiaries are not 10
obligated to make funds available to us for payment of our debt securities or preferred stock dividends or otherwise. In addition, their ability to make any payments will depend on their earnings, the terms of their indebtedness, business and tax considerations and legal restrictions. Our debt securities including the LYONs and any preferred stock we may issue effectively will rank junior to all liabilities of our subsidiaries. In the event of a bankruptcy, liquidation or dissolution of a subsidiary and following payment of its liabilities, the subsidiary may not have sufficient assets remaining to make payments to us as a shareholder or otherwise. The indenture under which the LYONs have been issued does not limit the amount of unsecured debt that our subsidiaries may incur. In addition, we and our subsidiaries may incur secured debt and enter into sale and leaseback transactions, subject to specified limitations. As of June 15, 2001, on a consolidated basis, we had approximately $2,354 million of total indebtedness outstanding. As of June 15, 2001, our subsidiaries had approximately $236 million of outstanding indebtedness to third parties. Forward-looking statements may prove inaccurate We have made forward-looking statements in this prospectus that are subject to risks and uncertainties. You should note that many factors, some of which are discussed elsewhere in this document, could affect future financial results and could cause those results to differ materially from those expressed in our forward-looking statements contained in this prospectus. See "Forward-Looking Statements." Risk Factors Relating to the LYONs An active trading market for LYONs may not develop which could reduce their value The LYONs comprise a new issue of securities for which there is currently no public market. If the LYONs are traded after their initial issuance, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the price of our common stock, our performance and other factors. The price at which you may be able to sell the LYONs, if at all, may be less than the price you pay for them, particularly if an active trading market does not develop. We may not have the ability to raise the funds necessary to finance the change in control purchase or the purchase at the option of the holder On May 8, 2002, 2004, 2011 and 2016 and upon the occurrence of specific kinds of change in control events occurring on or before May 8, 2004, holders of LYONs may require us to purchase their LYONs. Although we believe that we will be able to raise the necessary funds, it is possible that we would not have sufficient funds at that time to make the required purchase of LYONs. In such event, holders would not be able to sell their LYONs to Marriott for cash. In addition, some important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a change in control under the indenture. See "Description of LYONs-- Purchase of LYONs by Marriott at the Option of the Holder" and "--Change in Control Permits Purchase of LYONs by Marriott at the Option of the Holder." You should consider the United States federal income tax consequences of owning LYONs in the context of your own tax position The LYONs are characterized as our indebtedness for United States federal income tax purposes. Accordingly, you will be required to include, in your income, interest with respect to the LYONs. The LYONs constitute contingent payment debt instruments. As a result, you will be required to include amounts in income, as ordinary income, in advance of the receipt of the cash attributable to the LYONs. The amount of interest income required to be included by you for each year will be in excess of the yield to maturity of the LYONs. You will recognize gain or loss on the sale, purchase by us at your option, conversion or redemption of a LYON in an amount equal to the difference between the amount realized on the sale, purchase by us at your option, conversion or redemption, including the fair market value of any common stock received upon conversion or otherwise, and your adjusted tax basis in the LYON. Any gain recognized by you on the sale, purchase by us at your option, conversion or redemption of a LYON generally will be ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and after that, capital loss. A summary of the United States federal income tax consequences of ownership of the LYONs is described in this prospectus under the heading "Certain United States Federal Income Tax Considerations." 11
USE OF PROCEEDS We will not receive any of the proceeds from the sale of the LYONs or shares of common stock by the selling securityholders. RATIO OF EARNINGS TO FIXED CHARGES Our ratio of earnings to fixed charges for the periods indicated is as follows: For the 24 Weeks Fiscal Year ended June 15, --------------------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---------------- ---- ---- ---- ---- ---- 4.4x 4.4x 5.0x 7.1x 7.2x 5.8x In calculating the ratio of earnings to fixed charges, earnings represent net income plus taxes on this income, undistributed (income)/loss for less than 50% owned affiliates, fixed charges and distributed income of equity method investees, minus interest capitalized. Fixed charges represent interest (including amounts capitalized), the portion of rental expense deemed representative of interest and a share of interest expense of certain equity method investees. DESCRIPTION OF LYONs We issued the LYONs under an indenture, dated as of May 8, 2001, between us and The Bank of New York, as trustee. The following summary is not complete, and is subject to, and qualified by reference to, all of the provisions of the LYONs and the indenture. As used in this description, the words "we," "us," "our" or "Marriott" do not include any current or future subsidiary of Marriott. General The LYONs are limited to $470,000,000 aggregate principal amount at maturity. The LYONs will mature on May 8, 2021. The principal amount at maturity of each LYON is $1,000. The LYONs are payable at the office of the paying agent, which initially will be an office or agency of the trustee, or an office or agency maintained by us for this purpose, in the Borough of Manhattan, The City of New York. The LYONs were offered at a substantial discount from their principal amount at maturity. We will not make periodic payments of interest on the LYONs, other than contingent interest payments, if any, as described below. Each LYON was issued at an issue price of $860.95 per LYON. However, the LYONs will accrue original issue discount while they remain outstanding. Original issue discount is the difference between the issue price and the principal amount at maturity of a LYON. The calculation of the accrual of original issue discount will be on a semiannual bond equivalent basis using a 360-day year composed of twelve 30- day months. The issue date of the LYONs, and the commencement date for the accrual of original issue discount, was May 8, 2001. The LYONs are debt instruments subject to the contingent payment debt regulations. The LYONs were issued with original issue discount for United States federal income tax purposes. Even if we do not pay any cash interest (including any contingent interest) on the LYONs, holders will be required to include accrued tax original issue discount in their gross income for United States federal income tax purposes. The rate at which the tax original issue discount will accrue will exceed the stated yield of 0.75% for the accrued original issue discount described above. See "Certain United States Federal Income Tax Considerations." Maturity, conversion, or purchase by us at the option of a holder or redemption of a LYON will cause original issue discount and interest, if any, to cease to accrue on the LYON. We may not reissue a LYON that has matured or been converted, purchased by us at the option of a holder, redeemed or otherwise cancelled, except for registration of transfer, exchange or replacement of the LYON. 12
LYONs may be presented for conversion at the office of the conversion agent, and for exchange or registration of transfer at the office of the registrar, both the conversion agent and registrar will initially be the trustee. No service charge will be made for any registration of transfer or exchange of LYONs. However, we may require the holder to pay any tax, assessment or other governmental charge payable as a result of such transfer or exchange. Book-Entry System The LYONs have been issued in the form of global securities held in book- entry form. DTC or its nominee will be the sole registered holder of the LYONs for all purposes under the indenture. Owners of beneficial interests in the LYONs represented by the global securities hold their interests according to the procedures and practices of DTC. As a result, beneficial interests in any of these securities are shown on, and transfers may be effected only through, records maintained by DTC and its direct and indirect participants and any of these interests may not be exchanged for certificated securities, except in limited circumstances. Owners of beneficial interests must exercise any rights in respect of their interests, including any right to convert or require purchase of their interests in the LYONs, in accordance with the procedures and practices of DTC. Beneficial owners are not holders and are not be entitled to any rights provided to the holders of LYONs under the global securities or the indenture. Marriott and the trustee, and any of their respective agents, may treat DTC as the sole holder and registered owner of the global securities. Exchange of Global Securities LYONs represented by one or more global securities will be exchangeable for certificated securities with the same terms only if: . DTC is unwilling or unable to continue as depositary or if DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934 and a successor depositary is not appointed by us within 90 days; . we decide to discontinue use of the system of book-entry transfer through DTC (or any successor depositary); or . a default under the indenture occurs and is continuing. DTC has advised us as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC facilitates the settlement of transactions among its participants through electronic computerized book-entry changes in participants' accounts, eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers, banks, trust companies, clearing corporations and other organizations, some of whom and/or their representatives own DTC. Access to DTC's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Ranking of LYONs The LYONs are unsecured and unsubordinated obligations. The LYONs rank equal in right of payment to all of our existing and future unsecured and unsubordinated indebtedness. However, we are a holding company and the LYONs are effectively subordinated to all existing and future obligations of our subsidiaries. See "Risk Factors--We depend on cash flow of our subsidiaries to make payments on our securities." As of June 15, 2001, on a consolidated basis, we had approximately $2,354 million of total indebtedness outstanding. As of June 15, 2001, our subsidiaries had approximately $236 million of outstanding indebtedness to third parties. 13
Conversion Rights A holder may convert a LYON, in multiples of $1,000 principal amount at maturity, into common stock at any time before the close of business on May 8, 2021. However, a holder may convert a LYON only until the close of business on the second business day immediately preceding the redemption date if we call a LYON for redemption. A LYON for which a holder has delivered a purchase notice or a change in control purchase notice requiring us to purchase the LYON may be converted only if the notice is withdrawn in accordance with the indenture. The initial conversion rate is 13.5285 shares of common stock per LYON, subject to adjustment upon the occurrence of the events described below. A holder of a LYON otherwise entitled to a fractional share will receive cash in an amount equal to the value of such fractional share based on the Sale Price, as defined below, on the trading day immediately preceding the conversion date. On conversion of a LYON, a holder will not receive any cash payment of interest representing accrued original issue discount. Our delivery to the holder of the fixed number of shares of common stock into which the LYON is convertible, together with any cash payment for such holder's fractional shares, will be deemed: . to satisfy our obligation to pay the principal amount at maturity of the LYON; and . to satisfy our obligation to pay accrued original issue discount attributable to the period from the issue date through the conversion date. As a result, accrued original issue discount is deemed to be paid in full rather than cancelled, extinguished or forfeited. In lieu of delivery of shares of common stock upon notice of conversion of any LYONs (for all or any portion of the LYONs), we may elect to pay holders surrendering LYONs an amount in cash per note equal to the average Sale Price, as defined below, of the common stock for the five consecutive trading days immediately following (a) the date of our notice of our election to deliver cash as described below if we have not given notice of redemption, or (b) the conversion date, in the case of a conversion following a prior notice of redemption which specified that we intended to deliver cash upon all future conversions, in either case multiplied by the conversion rate in effect on that date. We will inform the holders through the trustee no later than two business days following the conversion date of our election to deliver shares of common stock or to pay cash in lieu of delivery of the shares, unless we have already informed holders of our election in connection with our optional redemption of the LYONs as described under "--Redemption of the LYONs at the Option of Marriott." If we elect to deliver all of this payment in shares of common stock, the shares will be delivered through the conversion agent no later than the fifth business day following the conversion date. If we elect to pay all or a portion of this payment in cash, the payment, including any delivery of common stock, will be made to holders surrendering LYONs no later than the tenth business day following the applicable conversion date. If an event of default, as described under "Events of Default" below (other than a default in a cash payment upon conversion of the LYONs), has occurred and is continuing, we may not pay cash upon conversion of any LYONs (other than cash for fractional shares). No contingent interest or, if we exercise our option to have interest instead of accrued original issue discount accrue on a LYON following a Tax Event, interest will be paid on any LYON that is converted, except as described below. If contingent interest or interest is payable to holders of LYONs during any particular six-month period, and the LYONs are converted after the applicable accrual or record date, such LYONs upon surrender must be accompanied by funds equal to the amount of contingent interest or interest payable on the principal amount of LYONs so converted, unless the LYONs have been called for redemption, in which case no such payment shall be required. 14
The conversion rate will not be adjusted for accrued original issue discount. A certificate for the number of full shares of common stock into which any LYON is converted, together with any cash payment for fractional shares, will be delivered through the conversion agent as soon as practicable following the conversion date. For a discussion of the tax treatment of a holder receiving shares of common stock upon conversion, see "Certain United States Federal Income Tax Considerations--Sale, Exchange, Conversion or Redemption." To convert a LYON into shares of common stock, a holder must: . complete and manually sign the conversion notice on the back of the LYON or complete and manually sign a facsimile of the conversion notice and deliver the conversion notice to the conversion agent; . surrender the LYON to the conversion agent; . if required by the conversion agent, furnish appropriate endorsements and transfer documents; and . if required, pay all transfer or similar taxes. The indenture provides that the date on which all of the requirements listed above have been satisfied is the conversion date. The conversion rate will be adjusted for: . dividends or distributions on our common stock payable in common stock or other capital stock of Marriott; . certain subdivisions, combinations or reclassifications of our common stock; . distributions to all holders of our common stock of particular rights entitling them to purchase, for a period expiring within 60 days, shares of common stock at less than the quoted price at the time; and . distributions to holders of our assets or debt securities or certain rights to purchase our securities (excluding cash dividends or other cash distributions from current or retained earnings but including some extraordinary dividends unless the annualized amount of the extraordinary dividends per share exceeds 10% of the Sale Price on the day preceding the date of declaration of the dividend or other distribution). In the event that we pay a dividend or make a distribution on shares of our common stock consisting of capital stock of, or similar equity interests in, a subsidiary or other business unit of ours, the conversion rate will be adjusted based on the market value of the securities so distributed relative to the market value of our common stock, in each case based on the average closing prices of those securities for the 10 trading days commencing on and including the fifth trading day after the date on which "ex-dividend trading" commences for the dividend or distribution on the principal United States securities exchange or market on which the securities are then listed or quoted. In the event we elect to make a distribution described in the third or fourth bullet of the second preceding paragraph which, in the case of the fourth bullet, has a per share value equal to more than 15% of the sale price of our shares of common stock on the day preceding the declaration date for the distribution, the Company will be required to give notice to the holders of LYONs at least 20 days prior to the ex-dividend date for such distribution. However, no adjustment need be made if holders may participate in the transaction on a basis that our Board of Directors determines to be fair and appropriate or in certain other cases. In cases where the fair market value of assets, debt securities or certain rights, warrants or options to purchase our securities, applicable to one share of common stock, distributed to shareholders: . equals or exceeds the average quoted price of the common stock, or . the average quoted price exceeds the fair market value of the assets, debt securities or rights, warrants or options so distributed by less than $1.00, 15
rather than being entitled to an adjustment in the conversion rate, the holder of a LYON will be entitled to receive upon conversion, in addition to the shares of common stock, the kind and amount of assets, debt securities or rights, warrants or options comprising the distribution that the holder would have received if the holder had converted the LYON immediately prior to the record date for determining the shareholders entitled to receive the distribution. The indenture permits us to increase the conversion rate from time to time. If we are party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of our assets, the right to convert a LYON into common stock may be changed into a right to convert it into the kind and amount of securities, cash or other assets of Marriott or another person which the holder would have received if the holder had converted the holder's LYONs immediately prior to the transaction. In the event of . a taxable distribution to holders of common shares which results in an adjustment of the conversion rate; or . an increase in the conversion rate at our discretion, the holders of the LYONs may, in some circumstances, be deemed to have received a distribution subject to federal income tax as a dividend. See "Certain United States Federal Income Tax Considerations--Constructive Dividends." If we exercise our option to have interest instead of original issue discount accrue on a LYON following a Tax Event, the holder will be entitled on conversion to receive the same number of shares of common stock the holder would have received if we had not exercised the option. If we exercise this option, LYONs surrendered for conversion by a holder during the period from the close of business on any regular record date to the opening of business on the next interest payment date, unless the LYONs have been called for redemption, must be accompanied by payment of an amount equal to the interest that the registered holder is to receive on the LYON. Except where LYONs are surrendered for conversion after a record date as described above, we will not pay interest on converted LYONs on any interest payment date subsequent to the date of conversion. See "--Optional Conversion to Semiannual Coupon Notes Upon Tax Event." Contingent Interest Subject to the accrual and record date provisions described below, we will pay contingent interest to the holders of LYONs during any six-month period from May 9 to November 8 and from November 9 to May 8, commencing May 9, 2004, if the average market price of a LYON for the five trading days ending on the second trading day immediately preceding the relevant six-month period equals 120% or more of the sum of the issue price and accrued original issue discount for the LYON to the day immediately preceding the relevant six-month period. See "--Redemption of LYONs at the Option of Marriott" for some of these values. However, if we declare a dividend for which the record date falls prior to the first day of a six-month period but the payment date falls within the six-month period, then the five trading day period for determining the average market price of a LYON will be the five trading days ending on the second trading day immediately preceding the record date. The amount of contingent interest payable per LYON in respect of any quarterly period will equal the greater of (1) regular cash dividends paid by us per share on our common stock during that quarterly period multiplied by the number of shares of common stock issuable upon conversion of a LYON or (2) $0.06 multiplied by that number of shares. Contingent interest, if any, will accrue and be payable to holders of LYONs as of the record date for the related common stock dividend or, if no cash dividend is paid by us during a quarter within the relevant six-month period, to holders of LYONs as of the fifteenth day preceding the last day of the relevant six-month period. These payments will be paid on the payment date of the related common stock dividend or, if no cash dividend is paid by us during a quarter within the relevant six-month period, on the last day of the relevant 16
six-month period. The original issue discount will continue to accrue at the yield to maturity whether or not contingent interest is paid. Regular cash dividends are quarterly or other periodic cash dividends on our common stock as declared by our board of directors as part of its cash dividend payment practices and that are not designated by them as extraordinary or special or other nonrecurring dividends. The market price of a LYON on any date of determination means the average of the secondary market bid quotations per LYON obtained by the bid solicitation agent for $10 million principal amount at maturity of LYONs at approximately 4:00 p.m., New York City time, on the determination date from three unaffiliated securities dealers we select, provided that if: . at least three bids are not obtained by the bid solicitation agent, or . in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the LYONs, then the market price of the LYONs will equal (a) the then applicable conversion rate of the LYONs multiplied by (b) the average Sale Price of our common stock on the five trading days ending on the determination date, appropriately adjusted. The bid solicitation agent will initially be The Bank of New York. We may change the bid solicitation agent, but the bid solicitation agent will not be our affiliate. The bid solicitation agent will solicit bids from securities dealers that are believed by us to be willing to bid for the LYONs. Upon determination that LYON holders will be entitled to receive contingent interest which may become payable during a relevant six-month period, on or prior to the start of the six-month period, we will issue a press release and publish the information on our web site on the World Wide Web (or successor media). Redemption of LYONs at the Option of Marriott No sinking fund is provided for the LYONs. Prior to May 8, 2004, the LYONs will not be redeemable at our option. Beginning on May 8, 2004, we may redeem the LYONs for cash as a whole at any time, or in part from time to time. We will give not less than 30 days nor more than 60 days notice of redemption by mail to holders of LYONs. The table below shows redemption prices of a LYON on May 8, 2004, at each succeeding May 8 prior to maturity and at maturity on May 8, 2021. These prices reflect the accrued original issue discount calculated to each of these dates. The redemption price of a LYON redeemed between these dates would include an additional amount reflecting the additional original issue discount accrued since the next preceding date in the table. (2) (1) Accrued LYON Original Redemption Redemption Date Issue Price Issue Discount Price (1) + (2) - --------------- ----------- -------------- --------------- May 8: 2004................................. $860.95 $19.55 $880.50 2005................................. 860.95 26.17 887.12 2006................................. 860.95 32.84 893.79 2007................................. 860.95 39.55 900.50 2008................................. 860.95 46.32 907.27 2009................................. 860.95 53.14 914.09 2010................................. 860.95 60.00 920.95 2011................................. 860.95 66.92 927.87 2012................................. 860.95 73.90 934.85 2013................................. 860.95 80.92 941.87 17
(2) (1) Accrued LYON Original Redemption Redemption Date Issue Price Issue Discount Price (1) + (2) - --------------- ----------- -------------- --------------- 2014................................. 860.95 88.00 948.95 2015................................. 860.95 95.13 956.08 2016................................. 860.95 102.31 963.26 2017................................. 860.95 109.55 970.50 2018................................. 860.95 116.84 977.79 2019................................. 860.95 124.19 985.14 2020................................. 860.95 131.59 992.54 At stated maturity................... $860.95 $139.05 $1,000.00 If converted to semiannual coupon LYONs following the occurrence of a Tax Event, the LYONs will be redeemable at the restated principal amount plus accrued and unpaid interest from the date of the conversion through the redemption date. However, in no event may the LYONs be redeemed prior to May 8, 2004. See "--Optional Conversion to Semiannual Coupon Note Upon Tax Event." If less than all of the outstanding LYONs are to be redeemed, the trustee shall select the LYONs to be redeemed in principal amounts at maturity of $1,000 or integral multiples of $1,000 by lot, pro rata or by any other method the trustee considers fair and appropriate. If a portion of a holder's LYONs is selected for partial redemption and the holder converts a portion of the LYONs, the converted portion shall be deemed to be the portion selected for redemption. Purchase of LYONs by Marriott at the Option of the Holder On May 8, 2002, 2004, 2011 and 2016, holders may require us to purchase any outstanding LYON for which a written purchase notice has been properly delivered by the holder and not withdrawn, subject to additional conditions. Holders may submit their LYONs for purchase to the paying agent at any time from the opening of business on the date that is 20 business days prior to the purchase date until the close of business on the purchase date. The purchase price of a LYON will be: . $867.42 per LYON on May 8, 2002; . $880.50 per LYON on May 8, 2004; . $927.87 per LYON on May 8, 2011; and . $963.26 per LYON on May 8, 2016. These purchase prices equal the issue price plus accrued original issue discount to the purchase dates. We may, at our option, elect to pay the purchase price in cash, shares of common stock, or any combination of cash and common stock. For a discussion of the tax treatment of a holder receiving cash, shares of common stock or any combination of cash and common stock, see "Certain United States Federal Income Tax Considerations--Sale, Exchange, Conversion or Redemption." If prior to a purchase date the LYONs have been converted to semiannual coupon LYONs following the occurrence of a Tax Event, the purchase price will be equal to the restated principal amount plus accrued and unpaid interest from the date of the conversion to the purchase date. See "--Optional Conversion to Semiannual Coupon Notes Upon Tax Event." We will be required to give notice on a date not less than 20 business days prior to each purchase date to all holders at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law, stating among other things: . whether we will pay the purchase price of LYONs in cash or common stock or any combination of cash and common stock, specifying the percentages of each; 18
. if we elect to pay in common stock the method of calculating the Market Price, as defined below, of the common stock; and . the procedures that holders must follow to require us to purchase their LYONs. The purchase notice given by each holder electing to require us to purchase LYONs shall be given to the paying agent no later than the close of business on the purchase date and must state: . the certificate numbers of the holder's LYONs to be delivered for purchase; . the portion of the principal amount at maturity of LYONs to be purchased, which must be $1,000 or an integral multiple of $1,000; . that the LYONs are to be purchased by us pursuant to the applicable provisions of the LYONs; and . in the event we elect, in accordance with the notice that we are required to give, to pay the purchase price in common stock, in whole or in part, but the purchase price is ultimately to be paid to the holder entirely in cash because any of the conditions to payment of the purchase price or portion of the purchase price in common stock is not satisfied prior to the close of business on the purchase date, as described below, whether the holder elects: (1) to withdraw the purchase notice as to some or all of the LYONs to which it relates, or (2) to receive cash in respect of the entire purchase price for all LYONs or portions of LYONs subject to the purchase notice. If the holder fails to indicate the holder's choice with respect to the election described in the final bullet point above, the holder shall be deemed to have elected to receive cash in respect of the entire purchase price for all LYONs subject to the purchase notice in these circumstances. Any purchase notice may be withdrawn by the holder by a written notice of withdrawal delivered to the paying agent prior to the close of business on the purchase date. The notice of withdrawal shall state: . the principal amount at maturity being withdrawn; . the certificate numbers of the LYONs being withdrawn; and . the principal amount at maturity, if any, of the LYONs that remains subject to the purchase notice. If we elect to pay the purchase price, in whole or in part, in shares of common stock, the number of shares of common stock to be delivered by us shall be equal to the portion of the purchase price to be paid in common stock divided by the Market Price, defined below, of a share of common stock. We will pay cash based on the Market Price for all fractional shares of common stock in the event we elect to deliver common stock in payment, in whole or in part, of the purchase price. See "Certain United States Federal Income Tax Considerations--Sale, Exchange, Conversion or Redemption." The "Market Price" means the average of the Sale Prices of the common stock for the five trading day period ending on the third business day prior to the applicable purchase date. If the third business day prior to the applicable purchase date is not a trading day, the five trading day period shall end on the last trading day prior to such third business day. We will appropriately adjust the Market Price to take into account the occurrence, during the period commencing on the first of the trading days during the five trading day period and ending on the purchase date, of certain events that would result in an adjustment of the conversion rate with respect to the common stock. The "Sale Price" of the common stock on any date means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal United States securities exchange on which the common stock is traded or, if the common stock is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated. 19
Because the Market Price of the common stock is determined prior to the applicable purchase date, holders of LYONs bear the market risk with respect to the value of the common stock to be received from the date the Market Price is determined to the purchase date. We may pay the purchase price or any portion of the purchase price in common stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation. Upon determination of the actual number of shares of common stock to be issued for each $1,000 principal amount at maturity of LYONs in accordance with the foregoing provisions, we will publish the information on our web site on the World Wide Web (or successor media). In addition to the above conditions, our right to purchase LYONs, in whole or in part, with common stock is subject to our satisfying various conditions, including: . the registration of the common stock under the Securities Act and the Exchange Act, if required; and . any necessary qualification or registration under applicable state securities law or the availability of an exemption from such qualification and registration. If these conditions are not satisfied with respect to a holder prior to the close of business on the purchase date, we will pay the purchase price of the LYONs to the holder entirely in cash. See "Certain United States Federal Income Tax Considerations--Sale, Exchange, Conversion or Redemption." We may not change the form or components or percentages of components of consideration to be paid for the LYONs once we have given the notice that we are required to give to holders of LYONs, except as described in the first sentence of this paragraph. In connection with any purchase offer, we will comply with and make filings in accordance with applicable securities laws. Payment of the purchase price for a LYON for which a purchase notice has been delivered and not validly withdrawn is conditioned upon delivery of the LYON, together with necessary endorsements, to the paying agent at any time after delivery of the purchase notice. Payment of the purchase price for the LYON will be made promptly following the later of the purchase date or the time of delivery of the LYON. If the paying agent holds money or securities sufficient to pay the purchase price of the LYON on the business day following the purchase date in accordance with the terms of the indenture, then, immediately after the purchase date, the LYON will cease to be outstanding and original issue discount and contingent interest, if any, on the LYON will cease to accrue, whether or not the LYON is delivered to the paying agent. Afterwards, all other rights of the holder shall terminate, other than the right to receive the purchase price upon delivery of the LYON. Our ability to purchase LYONs with cash may be limited by the terms of our then existing borrowing agreements. No LYONs may be purchased for cash at the option of holders if there has occurred and is continuing an event of default with respect to the LYONs, other than a default in the payment of the purchase price with respect to such LYONs. Change in Control Permits Purchase of LYONs by Marriott at the Option of the Holder In the event of any change in control, as defined below, occurring on or prior to May 8, 2004, each holder will have the right, at the holder's option, subject to the terms and conditions of the indenture, to require us to purchase for cash all or any portion of the holder's LYONs in integral multiples of $1,000 principal amount at maturity at a price for each $1,000 principal amount at maturity of the LYONs equal to the issue price of the LYON plus the accrued original issue discount to the date of purchase plus accrued contingent interest, if any. Although not anticipated, we may not have sufficient cash to redeem the LYONs upon a change of control. 20
We will be required to purchase the LYONs as of the date that is 35 business days after the occurrence of a change in control or such longer time as may be required for the SEC to review and clear any applicable schedules or filings (a "change in control purchase date"). If prior to a change in control purchase date the LYONs have been converted to semiannual coupon notes following the occurrence of a Tax Event, we will be required to purchase the LYONs at a cash price equal to the restated principal amount plus accrued and unpaid interest from the date of the conversion to the change in control purchase date. Within 15 business days after the occurrence of a change in control, we are obligated to mail to the trustee and to all holders of LYONs at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law, a notice regarding the change in control, which notice shall state, among other things: . the events causing a change in control; . the date of the change in control; . the last date on which the purchase right may be exercised; . the change in control purchase price; . the change in control purchase date; . the name and address of the paying agent and the conversion agent; . the conversion rate and any adjustments to the conversion rate; . that the LYONs with respect to which a holder has given a change in control purchase notice may be converted only if the holder withdraws that notice in accordance with the terms of the indenture; and . the procedures that holders must follow to exercise these rights. To exercise this right, the holder must deliver a written notice to the paying agent prior to the close of business on the change in control purchase date. The required purchase notice upon a change in control shall state: . the certificate numbers of the LYONs to be delivered by the holder; . the portion of the principal amount at maturity of LYONs to be purchased, which portion must be $1,000 or an integral multiple of $1,000; and . that we are to purchase the LYONs pursuant to the applicable provisions of the LYONs. Any change in control purchase notice may be withdrawn by the holder by a written notice of withdrawal delivered to the paying agent prior to the close of business on the change in control purchase date. The notice of withdrawal shall state: . the principal amount at maturity being withdrawn; . the certificate numbers of the LYONs being withdrawn; and . the principal amount at maturity, if any, of the LYONs that remain subject to a change in control purchase notice. Payment of the change in control purchase price for a LYON for which a change in control purchase notice has been delivered and not validly withdrawn is conditioned upon delivery of the LYON, together with necessary endorsements, to the paying agent at any time after the delivery of such change in control purchase notice. Payment of the change in control purchase price for the LYON will be made promptly following the later of the change in control purchase date or the time of delivery of the LYON. If the paying agent holds money sufficient to pay the change in control purchase price of the LYON on the business day following the change in control purchase date in accordance with the terms of the indenture, then, 21
immediately after the change in control purchase date, original issue discount on the LYON will cease to accrue, whether or not the LYON is delivered to the paying agent, and all other rights of the holder shall terminate, other than the right to receive the change in control purchase price upon delivery of the LYON. Under the indenture, a "change in control" of Marriott is deemed to have occurred when: . any person, including its affiliates and associates, other than us, our subsidiaries or our or their employee benefit plans, files a Schedule 13D or Schedule TO (or any successor schedule, form or report under the Exchange Act) disclosing that the person has become the beneficial owner of 50% or more of the voting power of our common stock or other capital stock into which the common stock is reclassified or changed, with certain exceptions; or . there shall be consummated any share exchange, consolidation or merger of Marriott under which the common stock would be converted into cash, securities or other property, in each case other than a share exchange, consolidation or merger of Marriott in which the holders of the common stock immediately prior to the share exchange, consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of all classes of capital stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger. The indenture does not permit our board of directors to waive our obligation to purchase LYONs at the option of holders in the event of a change in control. In connection with any purchase offer in the event of a change in control, we will comply with and make filings in accordance with applicable securities laws. The change in control purchase feature of the LYONs may in some circumstances make more difficult or discourage a takeover of Marriott. The change in control purchase feature, however, has not been included as the result of our knowledge of any specific effort: . to accumulate shares of common stock; . to obtain control of Marriott by means of a merger, tender offer, solicitation or otherwise; or . part of a plan by management to adopt a series of anti-takeover provisions. Instead, the change in control purchase feature is a standard term contained in other LYONs offerings that have been marketed by Merrill Lynch. The terms of the change in control purchase feature resulted from negotiations between Merrill Lynch and us. We could, in the future, enter into certain transactions, including some recapitalizations, that would not constitute a change in control with respect to the change in control purchase feature of the LYONs but that would increase the amount of our (or our subsidiaries') outstanding indebtedness. No LYONs may be purchased by Marriott at the option of holders upon a change in control if there has occurred and is continuing an event of default with respect to the LYONs, other than a default in the payment of the change in control purchase price with respect to the LYONs. Optional Conversion to Semiannual Coupon Notes Upon Tax Event From and after the date of the occurrence of a Tax Event, we will have the option to elect to have interest in lieu of future original issue discount accrue at 8.26% per year on a principal amount per LYON (the "restated principal amount") equal to the issue price plus original issue discount accrued to the date of the Tax Event or the date on which we exercise the option described herein, whichever is later (the "option exercise date"). This interest shall accrue from the option exercise date and will be payable semiannually on the interest payment dates of May 8 and November 8 of each year to holders of record at the close of business on April 23 22
or October 23 immediately preceding the interest payment date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Interest will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the option exercise date. In the event that we exercise our option to pay interest in lieu of accrued original issue discount, the redemption price, purchase price and change in control purchase price on the LYONs will be adjusted, and no future contingent interest payments will be made. However, there will be no change in the holder's conversion rights. A "Tax Event" means that Marriott shall have received an opinion from independent tax counsel experienced in such matters to the effect that as a result of: . any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority of or in the United States, or . any amendment to, or change in, an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority, in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation is issued or announced or which action is taken, there is more than an insubstantial risk that interest (including original issue discount and contingent interest, if any) payable on the LYONs either: . would not be deductible on a current accrual basis, or . would not be deductible under any other method, in either case in whole or in part, by Marriott (by reason of deferral, disallowance or otherwise) for United States federal income tax purposes. The Clinton Administration had previously proposed to change the tax law to defer the deduction of original issue discount on convertible debt instruments until the issuer pays the interest. Congress did not enact these proposed changes in the law. The Bush Administration has not made similar proposals. If a similar proposal were ever enacted and made applicable to the LYONs in a manner that would limit our ability to either . deduct the interest, including original issue discount and contingent interest, if any, payable on the LYONs on a current accrual basis, or . deduct the interest, including original issue discount and contingent interest, if any, payable on the LYONs under any other method for United States federal income tax purposes, the enactment would result in a Tax Event and the terms of the LYONs would be subject to modification at our option as described above. The modification of the terms of LYONs by us upon a Tax Event as described above could possibly alter the timing of income recognition by holders of the LYONs with respect to the semiannual payments of interest due on the LYONs after the option exercise date. See "Certain United States Federal Income Tax Considerations." Merger and Sales of Assets by Marriott The indenture provides that Marriott may not consolidate with or merge into any other person or convey, transfer or lease its properties and assets substantially as an entirety to another person, unless among other items, . the resulting, surviving or transferee person is organized and existing under the laws of the United States, any state thereof or the District of Columbia; . the person assumes all obligations of Marriott under the LYONs and the indenture; . Marriott or the successor person shall not immediately after the merger, consolidation or transfer be in default under the indenture. 23
Upon the assumption of the obligations of Marriott by such a person in these circumstances, subject to certain exceptions, Marriott will be discharged from all obligations under the LYONs and the indenture. Although these transactions are permitted under the indenture, some of the foregoing transactions occurring on or prior to May 8, 2004 could constitute a change in control of Marriott permitting each holder to require Marriott to purchase the LYONs of the holder as described above. Events of Default The following are events of default for the LYONs: . default in payment of the principal amount at maturity (or if the LYONs have been converted to semiannual coupon LYONs following a Tax Event, the restated principal amount), issue price, accrued original issue discount (or if the LYONs have been converted to semiannual coupon LYONs following a Tax Event, accrued and unpaid interest), redemption price, purchase price or change in control purchase price with respect to any LYON when it becomes due and payable; . default in payment of any contingent interest or of interest which becomes payable after the LYONs have been converted to semiannual coupon LYONs following the occurrence of a Tax Event, which default, in either case, continues for 30 days; . failure by Marriott to comply with any of its other agreements in the LYONs or the indenture upon receipt by Marriott of notice of the default by the trustee or by holders of not less than 25% in aggregate principal amount at maturity of the LYONs then outstanding and Marriott's failure to cure (or obtain a waiver of) the default within 60 days after receipt by Marriott of the notice; . (a) the failure of Marriott International, Inc. or any Restricted Subsidiary to make any payment by the end of any applicable grace period after maturity of indebtedness, which term as used in the indenture means obligations (other than nonrecourse obligations) of Marriott for borrowed money or evidenced by bonds, debentures, LYONs or similar instruments ("Indebtedness") in an aggregate principal amount in excess of $100 million and continuance of the failure, or (b) the acceleration of Indebtedness because of a default with respect to the Indebtedness without the Indebtedness having been discharged or the acceleration having been cured, waived, rescinded or annulled in case of (a) above, for a period of 10 days after written notice to Marriott by the trustee or to Marriott and the trustee by the holders of not less than 25% in aggregate principal amount at maturity of the LYONs then outstanding. However, if any failure or acceleration referred to in (a) or (b) above shall cease or be cured, waived, rescinded or annulled, then the event of default by reason thereof shall be deemed not to have occurred; or . certain events of bankruptcy or insolvency affecting Marriott. "Consolidated Net Assets" is the consolidated assets (less reserves and certain other permitted deductible items) after subtracting all current liabilities (other than the current portion of long-term debt and Capitalized Lease Obligations) as these amounts appear on our most recent consolidated balance sheet and computed in accordance with generally accepted accounting principles. "Restricted Subsidiary" means any Subsidiary: . organized and existing under the laws of the United States, and . the principal business of which is carried on within the United States of America, and . which either (1) owns or is a lessee under a capital lease of any real estate or depreciable asset which has a net book value in excess of 2% of Consolidated Net Assets, or (2) in which the investment of Marriott and all its Subsidiaries exceeds 5% of Consolidated Net Assets. The definition of a Restricted Subsidiary does not include any Subsidiaries principally engaged in our timeshare or senior living services businesses, or the major part of whose business consists of finance, banking, credit, leasing, insurance, financial services or other similar operations, or any combination of these activities. The definition also does not include any Subsidiary formed or acquired after the date of the Indenture for the 24
purpose of developing new assets or acquiring the business or assets of another person and which does not acquire all or any substantial part of our business or assets or those of any Restricted Subsidiary. A "Subsidiary" is a corporation in which we and/or one or more of our other subsidiaries owns at least 50% of the voting stock, which is a kind of stock that ordinarily permits its owners to vote for the election of directors. If an event of default shall have happened and be continuing, either the trustee or the holders of not less than 25% in aggregate principal amount at maturity of the LYONs then outstanding may declare the issue price of the LYONs plus the original issue discount on the LYONs accrued through the date of the declaration, and any accrued and unpaid interest (including contingent interest) through the date of the declaration, to be immediately due and payable. In the case of certain events of bankruptcy or insolvency, the issue price of the LYONs plus the original issue discount accrued on the LYONs through the occurrence of the event shall automatically become and be immediately due and payable. We will furnish to the trustee every year a written statement of certain of our officers certifying that to their knowledge we are in compliance with the indenture and the LYONs, or else specifying any default. Backup Withholding and Information Reporting Information reporting will apply to payments of interest or dividends, if any, made by us on, or the proceeds of the sale or other disposition of, the LYONs or shares of common stock with respect to certain noncorporate holders, and backup withholding at a rate of 31% may apply unless the recipient of the payment supplies a taxpayer identification number, certified under penalties of perjury, as well as certain other information or otherwise establishes an exemption from backup withholding. Any amount withheld under the backup withholding rules will be allowable as a credit against the holder's federal income tax, provided that the required information is provided to the Internal Revenue Service. Modification We and the trustee may enter into supplemental indentures that add, change or eliminate provisions of the indenture or modify the rights of the holders of the LYONs with the consent of the holders of at least a majority in principal amount at maturity of the LYONs then outstanding. However, without the consent of each holder, no supplemental indenture may: . alter the manner of calculation or rate of accrual of original issue discount or interest (including contingent interest) on any LYON or extend the time of payment; . make any LYON payable in money or securities other than that stated in the LYON; . change the stated maturity of any LYON; . reduce the principal amount at maturity, issue price, redemption price, purchase price, change in control purchase price or any amounts due with respect to any LYON; . reduce the amount of principal payable upon acceleration of maturity of the LYON, following a default; . change the place or currency of payment on the LYONs; . reduce the percentage of holders of LYONs whose consent is needed to modify or amend the indenture; . make any change that adversely affects the right of a holder to convert any LYON; . make any change that adversely affects the right to require us to purchase a LYON; . impair the right to institute suit for the enforcement of any payment with respect to, or conversion of, the LYONs; and . change the provisions in the indenture that relate to modifying or amending the indenture. 25
Without the consent of any holder of LYONs, we and the trustee may enter into supplemental indentures for any of the following purposes: . to evidence a successor to us and the assumption by that successor of our obligations under the indenture and the LYONs; . to add to our covenants for the benefit of the holders of the LYONs or to surrender any right or power conferred upon us; . to secure our obligations in respect of the LYONs; . to make any changes or modifications to the indenture necessary in connection with the registration of the LYONs under the Securities Act and the qualification of the LYONs under the Trust Indenture Act as contemplated by the indenture; and . to cure any ambiguity or inconsistency in the indenture. No supplemental indenture entered into pursuant to the second, third, fourth or fifth bullet of the preceding paragraph may be entered into without the consent of the holders of a majority in principal amount at maturity of the LYONs, however, if the supplemental indenture may materially and adversely affect the interests of the holders of the LYONs. The holders of a majority in principal amount at maturity of the outstanding LYONs may, on behalf of the holders of all LYONs waive any existing default under the indenture and its consequences, except a default in the payment of the principal amount at maturity, issue price, accrued and unpaid interest, accrued and unpaid contingent interest, accrued original issue discount, redemption price, purchase price or change in control purchase price or obligation to deliver shares of common stock upon conversion with respect to any LYON or in respect of any provision which under the indenture cannot be modified or amended without the consent of the holder of each outstanding LYON affected. Discharge of the Indenture Marriott may satisfy and discharge its obligations under the indenture by delivering to the trustee for cancellation all outstanding LYONs or by depositing with the trustee, the paying agent or the conversion agent, if applicable, after the LYONs have become due and payable, whether at stated maturity, or any redemption date, or any purchase date, or a change in control purchase date, or upon conversion or otherwise, cash or shares of common stock (as applicable under the terms of the indenture) sufficient to pay all of the outstanding LYONs and paying all other sums payable under the indenture by Marriott. Calculations in Respect of LYONs We will be responsible for making all calculations called for under the LYONs. These calculations include, but are not limited to, determination of the market prices of the LYONs and of our common stock and amounts of contingent interest payments, if any, payable on the LYONs. We will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders of LYONs. We will provide a schedule of our calculations to the trustee, and the trustee is entitled to rely upon the accuracy of our calculations without independent verification. Limitations of Claims in Bankruptcy If a bankruptcy proceeding is commenced in respect of Marriott, the claim of the holder of a LYON is, under Title 11 of the United States Code, limited to the issue price of the LYON plus that portion of the original issue discount that has accrued from the date of issue to the commencement of the proceeding. In addition, the holders of the LYONs will be effectively subordinated to the indebtedness and other obligations of Marriott's subsidiaries. 26
Information Concerning the Trustee The Bank of New York is the trustee, registrar, paying agent and conversion agent under the indenture. As trustee, the Bank of New York has no obligation to exercise any of its rights or powers under the indenture at the direction of any of the holders of LYONs unless such holders have offered to the trustee security or indemnity satisfactory to it against the liabilities which the trustee may incur. The Bank of New York is one of a number of lenders under our $2,000,000,000 in revolving credit facilities with Citibank, N.A. as administrative agent, and various other lenders. We may maintain deposit accounts and conduct other banking transactions with the trustee in the normal course of business. Governing Law The indenture and the LYONs are governed by, and construed in accordance with, the law of the State of New York. DESCRIPTION OF OUR COMMON AND PREFERRED STOCK Common Stock Our common stock (Class A Common Stock, $0.01 par value per share) is traded on the New York Stock Exchange, Chicago Stock Exchange, Pacific Stock Exchange and Philadelphia Stock Exchange under the symbol "MAR" Each holder of our common stock is entitled to ten votes for each share registered in his or her name on our books on all matters submitted to a vote of stockholders. Our common stock does not have cumulative voting rights. As a result, subject to the voting rights of holders of any outstanding preferred stock, if any, in an election of directors the holders of a majority of shares of our common stock will be able to elect 100 percent of the directors to be elected. Rights Agreement and Series A Junior Preferred Stock Each share of our common stock, including those that may be issued upon conversion of the LYONs, carries with it one preferred share purchase right. This type of arrangement is sometimes referred to as a "poison pill." If the rights become exercisable, each right entitles the registered holder to purchase one one-thousandth of a share of our Series A Junior Preferred Stock (subject to adjustment as a result of certain events) at a fixed price. Until a right is exercised, the holder of the right has no right to vote or receive dividends or any other rights as a shareholder as a result of holding the right. The rights trade automatically with shares of our common stock, and may only be exercised in connection with certain attempts to take over our company. The rights are designed to protect the interests of our company and our shareholders against coercive takeover tactics. The rights are also designed to encourage potential acquirors to negotiate with our board of directors before attempting a takeover and to increase the ability of our board to negotiate terms of any proposed takeover that benefit our shareholders. The rights may, but are not intended to, deter takeover proposals that may be in the interests of our shareholders. If issued, our Series A Junior Preferred Stock would generally not be available to the person or persons who acquired our common stock in certain takeover attempts. Our Series A Junior Preferred Stock would have significant preferential dividend, voting and liquidation rights over our common stock. 27
For more information on our common stock, the rights and our Series A Junior Preferred Stock, see our Form 10 Registration Statement dated February 13, 1998 and the Amended and Restated Rights Agreement, dated as of August 9, 1999, between us and The Bank of New York, as Rights Agent, both of which we have filed with the SEC. See "Where You Can Find More Information." CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS General This is a summary of certain United States federal income tax consequences relevant to holders of LYONs. This summary is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change (including retroactive changes in effective dates) or possible differing interpretations. The discussion below deals only with LYONs held as capital assets and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated investment companies, dealers in securities or currencies, tax-exempt entities, persons holding LYONs in a tax- deferred or tax-advantaged account, or persons holding LYONs as a hedge against currency risks, as a position in a "straddle" or as part of a "hedging" or "conversion" transaction for tax purposes. Persons considering the purchase of the LYONs should consult their own tax advisors concerning the application of the United States federal income tax laws to their particular situations as well as any consequences of the purchase, ownership and disposition of the LYONs arising under the laws of any other taxing jurisdiction. We do not address all of the tax consequences that may be relevant to a U.S. Holder (as defined below). In particular, we do not address: . the United States federal income tax consequences to shareholders in, or partners or beneficiaries of, an entity that is a holder of LYONs; . the United States federal estate, gift or alternative minimum tax consequences of the purchase, ownership or disposition of LYONs; . persons who hold the LYONs whose functional currency is not the United States dollar; . any state, local or foreign tax consequences of the purchase, ownership or disposition of LYONs; or . any federal, state, local or foreign tax consequences of owning or disposing of the common stock. Accordingly, you should consult your own tax advisor regarding the tax consequences of purchasing, owning and disposing of the LYONs and the common stock in light of your own circumstances. A U.S. Holder is a beneficial owner of the LYONs who or which is: . a citizen or individual resident of the United States, as defined in Section 7701(b) of the Internal Revenue Code of 1986, as amended (which we refer to as the Code); . a corporation, including any entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any state of the United States or the District of Columbia; . an estate if its income is subject to United States federal income taxation regardless of its source; or . a trust if (1) a United States court can exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of its substantial decisions. However, certain trusts in existence on August 20, 1996, and treated as a U.S. Holder prior to that date, may also be treated as U.S. Holders. A Non-U.S. Holder is a holder of LYONs other than a U.S. Holder. No statutory, administrative or judicial authority directly addresses the treatment of the LYONs or instruments similar to the LYONs for United States federal income tax purposes. No rulings have been sought or are expected to be sought from the Internal Revenue Service (which we refer to as the IRS) with respect to any of the United States federal income tax consequences discussed below, and we cannot assure you that the IRS will not take contrary positions. As a result, we cannot assure you that the IRS will agree with the tax characterizations and the tax consequences described below. 28
We urge prospective investors to consult their own tax advisors with respect to the tax consequences to them of the purchase, ownership and disposition of the LYONs and the common stock in light of their own particular circumstances, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in United States federal or other tax laws. Classification of the LYONs It is the opinion of special tax counsel to Marriott, Sidley Austin Brown &Wood LLP, that the LYONs will be treated as indebtedness for United States federal income tax purposes and that the LYONs will be subject to the special regulations governing contingent payment debt instruments (which we refer to as the CPDI regulations). Accrual of Interest on the LYONs Under the indenture, we and each holder of the LYONs agree, for United States federal income tax purposes, to treat the LYONs as debt instruments that are subject to the CPDI regulations. Under these regulations, U.S. Holders of the LYONs will be required to accrue interest income on the LYONs, in the amounts described below, regardless of whether the U.S. Holder uses the cash or accrual method of tax accounting. Accordingly, U.S. Holders will be required to include interest in taxable income in each year in excess of the accruals on the LYONs for non-tax purposes and in excess of any contingent interest payments actually received in that year. The CPDI regulations provide that a U.S. Holder must accrue an amount of ordinary interest income, as original issue discount for United States federal income tax purposes, for each accrual period prior to and including the maturity date of the LYONs that equals: (1) the product of (a) the adjusted issue price (as defined below) of the LYONs as of the beginning of the accrual period; and (b) the comparable yield to maturity (as defined below) of the LYONs, adjusted for the length of the accrual period; (2) divided by the number of days in the accrual period; and (3) multiplied by the number of days during the accrual period that the U.S. Holder held the LYONs. A LYON's issue price is the first price at which a substantial amount of the LYONs is sold to the public, excluding sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. The adjusted issue price of a LYON is its issue price increased by any interest income previously accrued, determined without regard to any adjustments to interest accruals described below, and decreased by the projected amount of any payments previously made with respect to the LYONs. Sidley Austin Brown &Wood LLP, special tax counsel to us, has advised us that the term "comparable yield" means the annual yield we would pay, as of the initial issue date, on a fixed-rate nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the LYONs. Based in part on that advice, we intend to take the position that the comparable yield for the LYONs is 8.26% compounded semiannually. The specific yield, however, is not entirely clear. If the comparable yield were successfully challenged by the IRS, the redetermined yield could be materially greater or less than the comparable yield provided by us. Moreover, the projected payment schedule could differ materially from the projected payment schedule we provided. The CPDI regulations require that we provide to U.S. Holders, solely for United States federal income tax purposes, a schedule of the projected amounts of payments, which we refer to as projected payments, on the LYONs. This schedule must produce the comparable yield. The projected payment schedule includes estimates for certain payments of contingent interest and an estimate for a payment at maturity taking into account the conversion feature. 29
The comparable yield and the schedule of projected payments are set forth in the indenture. U.S. Holders may also obtain the projected payment schedule by submitting a written request for this information to: Marriott International, Inc., Marriott Drive, Washington, D.C. 20058. For United States federal income tax purposes, a U.S. Holder must use the comparable yield and the schedule of projected payments in determining its interest accruals, and the adjustments thereto described below, in respect of the LYONs, unless such U.S. Holder timely discloses and justifies the use of other estimates to the IRS. A U.S. Holder that determines its own comparable yield or schedule of projected payments must also establish that our comparable yield or schedule of projected payments is unreasonable. The comparable yield and the schedule of projected payments are not determined for any purpose other than for the determination of a U.S. Holder's interest accruals and adjustments thereof in respect of the LYONs for United States federal income tax purposes and do not constitute a projection or representation regarding the actual amounts payable on the LYONs. Amounts treated as interest under the CPDI regulations are treated as original issue discount for all purposes of the Code. Adjustments to Interest Accruals on the LYONs If, during any taxable year, a U.S. Holder receives actual payments with respect to the LYONs for that taxable year that in the aggregate exceed the total amount of projected payments for that taxable year, the U.S. Holder will incur a "net positive adjustment" under the CPDI regulations equal to the amount of the excess. The U.S. Holder will treat a "net positive adjustment" as additional interest income for the taxable year. For this purpose, the payments in a taxable year include the fair market value of property received in that year. If a U.S. Holder receives in a taxable year actual payments with respect to the LYONs for that taxable year that in the aggregate were less than the amount of projected payments for that taxable year, the U.S. Holder will incur a "net negative adjustment" under the CPDI regulations equal to the amount of such deficit. This adjustment will (a) reduce the U.S. Holder's interest income on the LYONs for that taxable year, and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of the U.S. Holder's interest income on the LYONs during prior taxable years, reduced to the extent such interest was offset by prior net negative adjustments. If a U.S. Holder purchases LYONs at a discount or premium to the adjusted issue price, the discount will be treated as a positive adjustment and the premium will be treated as a negative adjustment. The U.S. Holder must reasonably allocate the adjustment over the remaining term of the LYONs by reference to the accruals of original issue discount at the comparable yield or to the projected payments. It may be reasonable to allocate the adjustment over the remaining term of the LYONs pro rata with the accruals of original issue discount at the comparable yield. You should consult your tax advisors regarding these allocations. Sale, Exchange, Conversion or Redemption Generally, the sale or exchange of a LYON, or the redemption of a LYON for cash, will result in taxable gain or loss to a U.S. Holder. As described above, our calculation of the comparable yield and the schedule of projected payments for the LYONs includes the receipt of stock upon conversion as a contingent payment with respect to the LYONs. Accordingly, we intend to treat the receipt of our common stock by a U.S. Holder upon the conversion of a LYON, or upon the redemption of a LYON where we elect to pay in common stock, as a contingent payment under the CPDI regulations. As described above, holders are generally bound by our determination of the comparable yield and the schedule of projected payments. Under this treatment, a conversion or such a redemption will also result in taxable gain or loss to the U.S. Holder. The amount of gain or loss on a taxable sale, exchange, conversion or redemption will be equal to the difference between (a) the amount of cash plus the fair market value of any other property received by the U.S. Holder, including the fair market value of any of our common stock received, and (b) the U.S. Holder's adjusted tax basis in the LYON. 30
A U.S. Holder's adjusted tax basis in a LYON will generally be equal to the U.S. Holder's original purchase price for the LYON, increased by any interest income previously accrued by the U.S. Holder (determined without regard to any adjustments to interest accruals described above), and decreased by the amount of any projected payments previously made on the LYONs to the U.S. Holder. Gain recognized upon a sale, exchange, conversion or redemption of a LYON will generally be treated as ordinary interest income; any loss will be ordinary loss to the extent of interest previously included in income, and thereafter, capital loss (which will be long-term if the LYON is held for more than one year). The deductibility of net capital losses by individuals and corporations is subject to limitations. A U.S. Holder's tax basis in our common stock received upon a conversion of a LYON or upon a holder's exercise of a put right that we elect to pay in common stock will equal the then current fair market value of such common stock. The U.S. Holder's holding period for the common stock received will commence on the day immediately following the date of conversion or redemption. Constructive Dividends If at any time we make a distribution of property to our stockholders that would be taxable to the stockholders as a dividend for federal income tax purposes and, in accordance with the anti-dilution provisions of the LYONs, the conversion rate of the LYONs is increased, the increase may be deemed to be the payment of a taxable dividend to holders of the LYONs. For example, an increase in the conversion rate in the event of distributions of our evidences of indebtedness or our assets or an increase in the event of an extraordinary cash dividend will generally result in deemed dividend treatment to holders of the LYONs, but generally an increase in the event of stock dividends or the distribution of rights to subscribe for common stock will not. Treatment of Non-U.S. Holders Payments of contingent interest made to Non-U.S. Holders will not be exempt from United States federal income or withholding tax and, as a result, Non-U.S. Holders will be subject to withholding on such payments of contingent interest at a rate of 30%, subject to reduction by an applicable treaty or upon the receipt of a Form W-8ECI from a Non-U.S. Holder claiming that the payments are effectively connected with the conduct of a United States trade or business. A Non-U.S. Holder that is subject to the withholding tax should consult its tax advisors as to whether it can obtain a refund for a portion of the withholding tax, either on the grounds that some portion of the contingent interest represents a return of principal under the CPDI regulations, or on some other grounds. All other payments on the LYONs made to a Non-U.S. Holder, including a payment in common stock pursuant to a conversion, and any gain realized on a sale or exchange of the LYONs (other than gain attributable to accrued contingent interest payments), will be exempt from United States income or withholding tax, provided that:(1) the Non-U.S. Holder does not own, actually or constructively, 10 percent or more of the total combined voting power of all classes of our stock entitled to vote, is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership; (2) the statement requirement set forth in section 871(h) or section 881(c) of the Code has been fulfilled with respect to the beneficial owner, as discussed below; (3) the payments and gain are not effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States and (4) our common stock continues to be actively traded within the meaning of section 871(h)(4)(C)(v)(I) of the Code (which, for these purposes and subject to certain exceptions, includes trading on the NYSE). The statement requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a LYONs certifies on IRS Form W-8BEN, under penalties of perjury, that it is not a United States person and provides its name and address. 31
If a Non-U.S. Holder of the LYONs is engaged in a trade or business in the United States, and if interest on the LYONS is effectively connected with the conduct of such trade or business, the Non-U.S. Holder, although exempt from the withholding tax discussed in the preceding paragraphs, will generally be subject to regular U.S. federal income tax on interest and on any gain realized on the sale or exchange of the LYONs in the same manner as if it were a U.S. Holder. In lieu of the certificate described in the preceding paragraph, such a Non-U.S. Holder will be required to provide to the withholding agent a properly executed IRS Form W-8ECI (or successor form) in order to claim an exemption from withholding tax. In addition, if such a Non-U.S. Holder is a foreign corporation, such Holder may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. Backup Withholding Tax and Information Reporting Payments of principal, premium, if any, and interest (including original issue discount and a payment in common stock pursuant to a conversion of the LYONs) on, and the proceeds of disposition or retirement of, the LYONs may be subject to information reporting and United States federal backup withholding tax at the rate of 31% (which rate is scheduled to be reduced periodically through 2006) if the U.S. Holder thereof fails to supply an accurate taxpayer identification number or otherwise fails to comply with applicable United States information reporting or certification requirements. Any amounts so withheld will be allowed as a credit against such U.S. Holder's United States federal income tax liability. Tax Event The modification of the terms of the LYONs by us upon a Tax Event as described in "Description of LYONs--Optional Conversion to Semiannual Coupon Notes Upon Tax Event," could possibly alter the timing of income recognition by the holders with respect to the semiannual payments of interest due after the option exercise date. 32
SELLING SECURITYHOLDERS The LYONs were originally issued by us and sold by Merrill Lynch, Pierce, Fenner & Smith Incorporated in a transaction exempt from the registration requirements of the Securities Act to persons reasonably believed by Merrill Lynch to be "qualified institutional buyers" (as defined by Rule 144A under the Securities Act). The selling securityholders (which term includes their transferees, pledgees, donees or successors) may from time to time offer and sell under this prospectus any and all of the LYONs and the shares of common stock issuable upon conversion or redemption of the LYONs. Set forth below are the names of each selling securityholder, the principal amount of LYONs that may be offered by each selling securityholder under this prospectus and the number of shares of common stock into which the LYONs are convertible. Unless set forth below, none of the selling securityholders has had a material relationship with us or any of our predecessors or affiliates within the past three years. The following table sets forth certain information received by us on or prior to July 30, 2001. However, any or all of the LYONs or common stock listed below may be offered for sale under this prospectus by the selling securityholders from time to time. Accordingly, we cannot estimate the amounts of LYONs or common stock that will be held by the selling securityholders upon consummation of any sales. Aggregate Number of Principal Amount Shares of of LYONs at Percentage of Common Stock Percentage of Maturity that LYONs that May be Common Stock Name May be Sold Outstanding Sold(1) Outstanding(2) - ------------------------ ---------------- ------------- ------------ -------------- Bank Austria Cayman Is- land, Ltd. ............ $ 3,000,000 * 40,585 * Black Diamond Offshore Ltd. .................. $ 852,000 * 11,526 * Double Black Diamond Offshore LDC........... $ 3,938,000 * 53,275 * GLG Market Neutral Fund................... $ 500,000 * 6,764 * Nomura Securities Inter- national Inc. ......... $ 35,000,000 7.45% 473,497 * R/2/ Investments, LDC... $ 44,000,000 9.36% 595,254 * RGC Latitude Master Fund................... $ 2,000,000 * 27,057 * All other holders (3)(4)................. $380,710,000 81.10% 5,150,435 2.06% Total................... $470,000,000 100.00% 6,358,395 2.53% - -------- * Less than 1%. 1. Assumes conversion of all of the holder's LYONs at a conversion rate of 13.5285 shares of common stock per $1,000 principal amount at maturity of the LYONs, rounded down to the nearest whole number of shares. However, this conversion rate will be subject to adjustment as described under "Description of LYONs--Conversion Rights." As a result, the amount of common stock issuable upon conversion of the LYONs may increase or decrease in the future. 2. Calculated based on Rule 13d-3(d)(i) of the Exchange Act using 245,167,385 shares of common stock outstanding as of July 27, 2001. In calculating this amount for each holder, we treated as outstanding the number of shares of common stock issuable upon conversion of all of that holder's LYONs but did not assume conversion of any other holder's LYONs. 3. Information about other selling securityholders will be set forth in prospectus supplements or in other documents that we file from time to time with the SEC that are incorporated by reference in this prospectus (see "Where You Can Find More Information" above), if required. 4. Assumes that any other holders of LYONs, or any future transferees, pledgees, donees or successors of or from any such other holders of LYONs, do not beneficially own any common stock other than the common stock issuable upon conversion of the LYONs at the initial conversion rate. 33
The preceding table has been prepared based upon information furnished to us by the selling securityholders named in the table. From time to time, additional information concerning ownership of the LYONs and common stock may rest with certain holders of these securities not named in the preceding table, with whom we believe we have no affiliation. Information about the selling securityholders may change from over time. Any changed information will be set forth in prospectus supplements or in other documents that we file from time to time with the SEC that are incorporated by reference in this prospectus (see "Where You Can Find More Information" above). PLAN OF DISTRIBUTION We are registering the LYONs and shares of common stock covered by this prospectus to permit holders to conduct public secondary trading of these securities from time to time after the date of this prospectus. We have agreed, among other things, to bear all expenses, other than underwriting discounts and selling commissions, in connection with the registration and sale of the LYONs and the shares of common stock covered by this prospectus. We will not receive any of the proceeds from the offering of LYONs or the shares of common stock by the selling securityholders. We have been advised by the selling securityholders that the selling securityholders may sell all or a portion of the LYONs and shares of common stock beneficially owned by them and offered hereby from time to time: . directly; or . through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, commissions or concessions from the selling securityholders or from the purchasers of the LYONs and common stock for whom they may act as agent. The LYONs and the common stock may be sold from time to time in one or more transactions at: . fixed prices, which may be changed; . prevailing market prices at the time of sale; . varying prices determined at the time of sale; or . negotiated prices. These prices will be determined by the holders of the securities or by agreement between these holders and underwriters or dealers who may receive fees or commissions in connection with the sale. The aggregate proceeds to the selling securityholders from the sale of the LYONs or shares of common stock offered by them hereby will be the purchase price of the LYONs or shares of common stock less discounts and commissions, if any. The sales described in the preceding paragraph may be effected in transactions: . on any national securities exchange or quotation service on which the LYONs and common stock may be listed or quoted at the time of sale, including the New York Stock Exchange in the case of the common stock; . in the over-the-counter market; . in transactions other than on such exchanges or services or in the over- the-counter market; or . through the writing of options. These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade. In connection with sales of the LYONs and the shares of common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the LYONs and the shares of common stock in the course of hedging their positions. 34
The selling securityholders may also sell the LYONs and shares of common stock short and deliver LYONs and the shares of common stock to close out short positions, or loan or pledge LYONs and the shares of common stock to broker- dealers that in turn may sell the LYONs and the shares of common stock. To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker- dealer or agent regarding the sale of the LYONs and the shares of common stock by the selling securityholders. Selling securityholders may ultimately not sell all, and conceivably may not sell any, of the LYONs and the shares of common stock offered by them pursuant to this prospectus. In addition, we cannot assure you that a selling securityholder will not transfer, devise or gift the LYONs and the shares of common stock by other means not described in this prospectus. In addition, any securities covered by this prospectus which qualify for sale under Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than under this prospectus. The outstanding shares of common stock are listed for trading on the New York Stock Exchange. The selling securityholders and any broker and any broker-dealers, agents or underwriters that participate with the selling securityholders in the distribution of the LYONs or the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act. In this case, any commissions received by these broker-dealers, agents or underwriters and any profit on the resale of the LYONs or the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. In addition, any profits realized by the selling securityholders may be deemed to be underwriting commissions. The LYONs were issued and sold in transactions exempt from the registration requirements of the Securities Act to persons reasonably believed by Merrill Lynch to be "qualified institutional buyers," as defined in Rule 144A under the Securities Act. We have agreed to indemnify Merrill Lynch and each selling securityholder, and each selling securityholder has agreed to indemnify us, Merrill Lynch and each other selling securityholder against specified liabilities arising under the Securities Act. The selling securityholders and any other person participating in such distribution will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the LYONs and the underlying shares of common stock by the selling securityholders and any such other person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the LYONs and the underlying shares of common stock to engage in market-making activities with respect to the particular LYONs and the underlying shares of common stock being distributed for a period of up to five business days prior to the commencement of the distribution. This may affect the marketability of the LYONs and the underlying shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the LYONs and the underlying shares of common stock. We will use our reasonable efforts to keep the registration statement of which this prospectus is a part effective until the earlier of (1) the second anniversary of the date of effectiveness of the registration statement of which this prospectus is a part and (2) the sale, under the registration statement of which this prospectus is a part, of all the securities registered under the registration statement. Our obligation to keep the registration statement to which this prospectus relates effective is subject to specified, permitted exceptions. In these cases, we may prohibit offers and sales of LYONs and shares of common stock under the registration statement to which this prospectus relates. LEGAL MATTERS Certain legal matters regarding the LYONs are being passed upon for Marriott by its Law Department. Certain federal income tax matters are being passed on for Marriott by Sidley Austin Brown &Wood, New York, New York, special tax counsel to Marriott. 35
INDEPENDENT PUBLIC ACCOUNTANTS The audited financial statements incorporated by reference in this prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving such reports. 36
$470,000,000 [LOGO OF MARRIOTT INTERNATIONAL, INC.] Marriott International, Inc. ---------------- Liquid Yield Option(TM) Notes due 2021 (Zero Coupon -- Senior) and Class A Common Stock (TM)Trademark of Merrill Lynch & Co., Inc.
PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following is a statement of the expenses payable by us in connection with the registration of the offering of the securities. All expenses other than the SEC registration fee are estimates. All expenses will be borne by us, except the selling securityholders will pay any applicable broker's commissions and expenses. Securities and Exchange Commission registration fee................ $101,491 -------- Printing expenses.................................................. 20,000 Legal fees and expenses............................................ 15,000 Accounting fees and expenses....................................... 10,000 Miscellaneous expenses............................................. 5,000 Trustee fees and expenses.......................................... 10,000 -------- Total.......................................................... $161,491 ======== Item 15. Indemnification of Directors and Officers Article Eleventh and Article Sixteenth of the Company's Amended and Restated Certificate of Incorporation (the "Certificate") and Section 7.7 of the Company's Restated Bylaws limit the personal liability of directors to the Company or its shareholders for monetary damages for breach of fiduciary duty. These provisions of the Company Certificate and Bylaws are collectively referred to herein as the "Director Liability and Indemnification Provisions." The Director Liability and Indemnification Provisions define and clarify the rights of individuals, including Company directors and officers, to indemnification by the Company in the event of personal liability or expenses incurred by them as a result of litigation against them. These provisions are consistent with Section 102(b)(7) of the Delaware General Corporation Law, which is designed, among other things, to encourage qualified individuals to serve as directors of Delaware corporations by permitting Delaware corporations to include in their certificates of incorporation a provision limiting or eliminating directors' liability for monetary damages and with other existing Delaware General Corporation Law provisions permitting indemnification of certain individuals, including directors and officers. The limitations of liability in the Director Liability and Indemnification Provisions may not affect claims arising under the federal securities laws. In performing their duties, directors of a Delaware corporation are obligated as fiduciaries to exercise their business judgment and act in what they reasonably determine in good faith, after appropriate consideration, to be the best interests of the corporation and its shareholders. Decisions made on that basis are protected by the so-called "business judgment rule." The business judgment rule is designed to protect directors from personal liability to the corporation or its shareholders when business decisions are subsequently challenged. However, the expense of defending lawsuits, the frequency with which unwarranted litigation is brought against directors and the inevitable uncertainties with respect to the outcome of applying the business judgment rule to particular facts and circumstances mean that, as a practical matter, directors and officers of a corporation rely on indemnity from, and insurance procured by, the corporation they serve, as a financial backstop in the event of such expenses or unforeseen liability. The Delaware legislature has recognized that adequate insurance and indemnity provisions are often a condition of an individual's willingness to serve as director of a Delaware corporation. The Delaware General Corporation law has for some time specifically permitted corporations to provide indemnity and procure insurance for its directors and officers. This description of the Director Liability and Indemnification Provisions is intended as a summary only and is qualified in its entirety by reference to the Company Certificate and the Company Bylaws, each of which has been filed with the SEC. II-1
Item 16. Exhibits The following exhibits are filed herewith or incorporated by reference: EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.1 Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit No. 3 to our Form 10-Q for the fiscal quarter ended June 18, 1999) 4.1 Amended and Restated Rights Agreement dated as of August 9, 1999 between the Company and The Bank of New York, as Rights Agent (incorporated by reference to Exhibit No. 4.1 to our Form 10-Q for the fiscal quarter ended September 10, 1999) 4.2 Indenture, dated as of May 8, 2001, between the Company and The Bank of New York 4.3 Form of Liquid Yield Option Note(TM) due 2021 (Zero Coupon--Senior) (included in Exhibit 4.2) 4.4 Registration Rights Agreement, dated as of May 8, 2001, between the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated 5.1 Opinion of the Company's Law Department as to the legality of the securities to be registered 8.1 Opinion of Sidley Austin Brown &Wood as to tax matters 12.1 Computation of Ratios of Earnings to Fixed Charges (incorporated by reference to Exhibit 12 to our Form 10-Q for the fiscal quarter ended June 15, 2001, and to Exhibit 12 to our Form 10-K for the fiscal year ended December 29, 2000) 23.1 Consent of the Company's Law Department (included in Exhibit 5.1) 23.2 Consent of Sidley Austin Brown &Wood (included in Exhibit 8.1) 23.3 Consent of Arthur Andersen LLP 24.1 Power of Attorney (included on the signature page of this Registration Statement) 25.1 Form of T-1 Statement of Eligibility of the Trustee under the Indenture Item 17. Undertakings The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts of events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price present no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. Provided, however, the paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. II-2
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) That, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (5) To file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act of 1939; (6) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective; (7) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (8) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 15 of this registration statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Montgomery, State of Maryland, on July 31, 2001. Marriott International, Inc. /s/ J. W. Marriott, Jr. By: _________________________________ J.W. Marriott, Jr. Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Joseph Ryan as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any or all further amendments (including post-effective amendments) to this Registration Statement (and any additional Registration Statement related hereto permitted by Rule 462(b) promulgated under the Securities Act of 1933 (and all further amendments, including post-effective amendments, thereto)), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in- fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ J.W. Marriott, Jr. Chairman of the Board, July 31, 2001 ______________________________________ Chief Executive Officer J.W. Marriott, Jr. and Director (Principal Executive Officer) /s/ Arne M. Sorenson Executive Vice President July 31, 2001 ______________________________________ and Chief Financial Arne M. Sorenson Officer (Principal Financial Officer) /s/ Linda A. Bartlett Vice President and July 31, 2001 ______________________________________ Controller (Principal Linda A. Bartlett Accounting Officer) /s/ Gilbert M. Grosvenor Director July 31, 2001 ______________________________________ Gilbert M. Grosvenor II-4
Signature Title Date --------- ----- ---- /s/ Richard E. Marriott Director July 31, 2001 ______________________________________ Richard E. Marriott /s/ Floretta Dukes McKenzie Director July 31, 2001 ______________________________________ Floretta Dukes McKenzie /s/ Harry J. Pearce Director July 31, 2001 ______________________________________ Harry J. Pearce /s/ William J. Shaw President, Chief Operating July 31, 2001 ______________________________________ Officer and Director William J. Shaw /s/ Lawrence M. Small Director July 31, 2001 ______________________________________ Lawrence M. Small II-5
EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 3.1 Third Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit No. 3 to our Form 10-Q for the fiscal quarter ended June 18, 1999) 4.1 Amended and Restated Rights Agreement dated as of August 9, 1999 between the Company and The Bank of New York, as Rights Agent (incorporated by reference to Exhibit No. 4.1 to our Form 10-Q for the fiscal quarter ended September 10, 1999) 4.2 Indenture, dated as of May 8, 2001, between the Company and The Bank of New York 4.3 Form of Liquid Yield Option Note(TM) due 2021 (Zero Coupon--Senior) (included in Exhibit 4.2) 4.4 Registration Rights Agreement, dated as of May 8, 2001, between the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated 5.1 Opinion of the Company's Law Department as to the legality of the securities to be registered 8.1 Opinion of Sidley Austin Brown &Wood as to tax matters 12.1 Computation of Ratios of Earnings to Fixed Charges (incorporated by reference to Exhibit 12 to our Form 10-Q for the fiscal quarter ended June 15, 2001, and to Exhibit 12 to our Form 10-K for the fiscal year ended December 29, 2001) 23.1 Consent of the Company's Law Department (included in Exhibit 5.1) 23.2 Consent of Sidley Austin Brown &Wood (included in Exhibit 8.1) 23.3 Consent of Arthur Andersen LLP 24.1 Power of Attorney (included on the signature page of this Registration Statement) 25.1 Form of T-1 Statement of Eligibility of the Trustee under the Indenture II-6
EXHIBIT 4.2 EXECUTION COPY MARRIOTT INTERNATIONAL, INC. Liquid Yield Option (TM) Notes due 2021 (Zero Coupon-Senior) ____________________________________________________________ INDENTURE Dated as of May 8, 2001 ____________________________________________________________ THE BANK OF NEW YORK TRUSTEE ____________________________________________________________ (TM) Trademark of Merrill Lynch & Co., Inc.
CROSS REFERENCE TABLE* TIA Section Indenture Section 310(a)(1)............................................ 7.10 (a)(2)............................................ 7.10 (a)(3)............................................ N.A. (a)(4)............................................ N.A. (b)............................................... 7.08; 7.10 (c)............................................... N.A. 311(a)............................................... 7.11 (b)............................................... 7.11 (c)............................................... N.A. 312(a)............................................... 2.05 (b)............................................... 13.03 (c)............................................... 13.03 313(a)............................................... 7.06 (b)(1)............................................ N.A. (b)(2)............................................ 7.06 (c)............................................... 13.02 (d)............................................... 7.06 314(a)............................................... 4.02; 4.03; 13.02 (b)............................................... N.A. (c)(1)............................................ 13.04 (c)(2)............................................ 13.04 (c)(3)............................................ N.A. (d)............................................... N.A. (e)............................................... 13.05 (f)............................................... N.A. 315(a)............................................... 7.01 (b)............................................... 7.05; 13.02 (c)............................................... 7.01 (d)............................................... 7.01 (e)............................................... 6.11 316(a) (last sentence)............................... 2.08 (a)(1)(A)......................................... 6.05 (a)(1)(B)......................................... 6.04 (a)(2)............................................ N.A. (b)............................................... 6.07 317(a)(1)............................................ 6.08 (a)(2)............................................ 6.09 (b)............................................... 2.04 318(a)............................................... 13.01 N.A. means Not Applicable. _____________________________ * Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture.
TABLE OF CONTENTS* Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions.............................................................. 1 SECTION 1.02 Other Definitions........................................................ 6 SECTION 1.03 Incorporation by Reference of Trust Indenture Act........................ 8 SECTION 1.04 Rules of Construction.................................................... 8 SECTION 1.05 Acts of Holders.......................................................... 8 ARTICLE 2 THE SECURITIES SECTION 2.01 Form and Dating.......................................................... 9 SECTION 2.02 Execution and Authentication............................................. 11 SECTION 2.03 Registrar, Paying Agent, Conversion Agent and Bid Solicitation Agent.................................................................... 12 SECTION 2.04 Paying Agent to Hold Money and Securities in Trust....................... 12 SECTION 2.05 Securityholder Lists..................................................... 12 SECTION 2.06 Transfer and Exchange.................................................... 13 SECTION 2.07 Replacement Securities................................................... 14 SECTION 2.08 Outstanding Securities; Determinations of Holders' Action................ 15 SECTION 2.09 Temporary Securities..................................................... 15 SECTION 2.10 Cancellation............................................................. 16 SECTION 2.11 Persons Deemed Owners.................................................... 16 SECTION 2.12 Global Securities........................................................ 16 SECTION 2.13 CUSIP Numbers............................................................ 21 ARTICLE 3 REDEMPTION AND PURCHASES SECTION 3.01 Right to Redeem; Notices to Trustee...................................... 21 SECTION 3.02 Selection of Securities to Be Redeemed................................... 22 SECTION 3.03 Notice of Redemption..................................................... 22 SECTION 3.04 Effect of Notice of Redemption........................................... 23 SECTION 3.05 Deposit of Redemption Price.............................................. 23 SECTION 3.06 Securities Redeemed in Part.............................................. 23 SECTION 3.07 Conversion Arrangement on Call for Redemption............................ 24 SECTION 3.08 Purchase of Securities at Option of the Holder........................... 25 SECTION 3.09 Purchase of Securities at Option of the Holder upon Change in Control.................................................................. 31 _____________________________________ * Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. i
SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase Notice........... 34 SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase Price............ 35 SECTION 3.12 Securities Purchased in Part............................................. 35 SECTION 3.13 Covenant to Comply with Securities Laws upon Purchase of Securities...... 36 SECTION 3.14 Repayment to the Company................................................. 36 SECTION 3.15 Notices from Trustee to Beneficial Owners................................ 36 ARTICLE 4 COVENANTS SECTION 4.01 Payment of Securities.................................................... 36 SECTION 4.02 SEC and Other Reports.................................................... 37 SECTION 4.03 Compliance Certificate................................................... 37 SECTION 4.04 Further Instruments and Acts............................................. 37 SECTION 4.05 Maintenance of Office or Agency.......................................... 37 SECTION 4.06 Delivery of Certain Information.......................................... 38 SECTION 4.07 Calculation of Original Issue Discount................................... 38 ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 When Company May Merge or Transfer Assets................................. 39 SECTION 5.02 Successor Company Substituted............................................. 39 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 Events of Default........................................................ 40 SECTION 6.02 Acceleration............................................................. 41 SECTION 6.03 Other Remedies........................................................... 42 SECTION 6.04 Waiver of Past Defaults.................................................. 42 SECTION 6.05 Control by Majority...................................................... 42 SECTION 6.06 Limitation on Suits...................................................... 42 SECTION 6.07 Rights of Holders to Receive Payment..................................... 43 SECTION 6.08 Collection Suit by Trustee............................................... 43 SECTION 6.09 Trustee May File Proofs of Claim......................................... 43 SECTION 6.10 Priorities............................................................... 44 SECTION 6.11 Undertaking for Costs.................................................... 44 SECTION 6.12 Notice of Defaults....................................................... 45 SECTION 6.13 Waiver of Stay, Extension or Usury Laws.................................. 45 ARTICLE 7 TRUSTEE SECTION 7.01 Duties of Trustee........................................................ 45 SECTION 7.02 Rights of Trustee........................................................ 46 SECTION 7.03 Individual Rights of Trustee............................................. 48 SECTION 7.04 Trustee's Disclaimer..................................................... 48 ii
SECTION 7.05 Notice of Defaults....................................................... 48 SECTION 7.06 Reports by Trustee to Holders............................................ 48 SECTION 7.07 Compensation and Indemnity............................................... 49 SECTION 7.08 Replacement of Trustee................................................... 49 SECTION 7.09 Successor Trustee by Merger.............................................. 50 SECTION 7.10 Eligibility; Disqualification............................................ 50 SECTION 7.11 Preferential Collection of Claims Against Company........................ 50 ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.01 Discharge of Liability on Securities...................................... 50 SECTION 8.02 Repayment to the Company.................................................. 51 ARTICLE 9 AMENDMENTS SECTION 9.01 Without Consent of Holders............................................... 51 SECTION 9.02 With Consent of Holders.................................................. 52 SECTION 9.03 Compliance with Trust Indenture Act...................................... 53 SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions................... 53 SECTION 9.05 Notation on or Exchange of Securities.................................... 53 SECTION 9.06 Trustee to Sign Supplemental Indentures.................................. 53 SECTION 9.07 Effect of Supplemental Indentures........................................ 53 ARTICLE 10 SPECIAL TAX EVENT CONVERSION SECTION 10.01 Optional Conversion to Semiannual Coupon Notes upon Tax Event............ 54 ARTICLE 11 CONVERSION SECTION 11.01 Conversion Privilege..................................................... 54 SECTION 11.02 Conversion Procedure..................................................... 56 SECTION 11.03 Fractional Shares........................................................ 58 SECTION 11.04 Taxes on Conversion...................................................... 58 SECTION 11.05 Company to Provide Stock................................................. 58 SECTION 11.06 Adjustment for Change in Capital Stock................................... 58 SECTION 11.07 Adjustment for Rights Issue.............................................. 59 SECTION 11.08 Adjustment for Other Distributions....................................... 60 SECTION 11.09 When Adjustment May Be Deferred.......................................... 63 SECTION 11.10 When No Adjustment Required.............................................. 63 SECTION 11.11 Notice of Adjustment..................................................... 63 SECTION 11.12 Voluntary Increase....................................................... 64 SECTION 11.13 Notice of Certain Transactions........................................... 64 SECTION 11.14 Reorganization of Company; Special Distributions......................... 64 SECTION 11.15 Company Determination Final.............................................. 65 iii
SECTION 11.16 Trustee's Adjustment Disclaimer.......................................... 65 SECTION 11.17 Simultaneous Adjustments................................................. 65 SECTION 11.18 Successive Adjustments................................................... 65 SECTION 11.19 Rights Issued in Respect of Common Stock Issued upon Conversion.......... 65 ARTICLE 12 SECTION 12.01 Interest Payments........................................................ 66 SECTION 12.02 Defaulted Interest....................................................... 66 SECTION 12.03 Interest Rights Preserved................................................ 67 ARTICLE 13 MISCELLANEOUS SECTION 13.01 Trust Indenture Act Controls............................................. 67 SECTION 13.02 Notices.................................................................. 67 SECTION 13.01 Trust Indenture Act Controls............................................. 67 SECTION 13.03 Communication by Holders with Other Holders.............................. 68 SECTION 13.04 Certificate and Opinion as to Conditions Precedent....................... 68 SECTION 13.05 Statements Required in Certificate or Opinion............................ 69 SECTION 13.06 Separability Clause...................................................... 69 SECTION 13.07 Rules by Trustee, Paying Agent, Conversion Agent, Bid Solicitation Agent and Registrar......................................... 69 SECTION 13.08 Calculations............................................................. 69 SECTION 13.09 Legal Holidays........................................................... 69 SECTION 13.10 GOVERNING LAW............................................................ 70 SECTION 13.11 No Recourse Against Others............................................... 70 SECTION 13.12 Successors............................................................... 70 SECTION 13.13 Multiple Originals....................................................... 70 EXHIBITS - -------- Exhibit A-1 Form of Face of Global Security Exhibit A-2 Form of Certificated Security Exhibit B-1 Transfer Certificate Exhibit B-2 Form of Letter to be Delivered by Accredited Investors ANNEX Projected Payment Schedule - ----- iv
INDENTURE dated as of May 8, 2001 between MARRIOTT INTERNATIONAL, INC., a corporation incorporated under the laws of the State of Delaware (the "Company"), and THE BANK OF NEW YORK, a New York banking corporation (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's Liquid Yield Option(TM) Notes due 2021 (Zero Coupon - Senior) ("Securities"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01 Definitions. ----------- "144A Global Security" means a permanent Global Security in the form -------------------- of the Security attached hereto as Exhibit A-1, and that is deposited with and registered in the name of the Depositary, representing Securities sold in reliance on Rule 144A under the Securities Act. "Affiliate" of any specified person means any other person directly or --------- indirectly controlling or controlled by or under direct or indirect common control with such specified person. For purposes of this definition, "control" when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Procedures" means, with respect to any transfer or --------------------- transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Bankruptcy Law" means Title 11, United States Code, or any similar -------------- Federal or state law for the relief of debtors. "Board of Directors" means either the board of directors of the ------------------ Company or any duly authorized committee of such board. "Business Day" means each day of the year other than a Saturday or a ------------ Sunday or other day on which banking institutions in The City of New York are required or authorized to close. "Capitalized Lease Obligations" of any person means the obligations of ----------------------------- such person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP.
"Capital Stock" for any corporation means any and all shares, ------------- interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation. "Certificated Securities" means Securities that are in the form of the ----------------------- Securities attached hereto as Exhibit A-2. "Common Stock" shall mean the shares of Class A Common Stock, par ------------ value $0.01, of the Company as it exists on the date of this Indenture (together with the associated stock purchase rights under the Amended and Restated Rights Agreement described in Section 11.19) or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed. "Company" means the party named as the "Company" in the first ------- paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "Company Request" or "Company Order" means a written request or order --------------- ------------- signed in the name of the Company by any two Officers. "Consolidated Net Assets" means the total amount of assets of the ----------------------- Company and its Subsidiaries (less applicable depreciation, amortization and other valuation reserves), after deducting therefrom all current liabilities of the Company and its Subsidiaries (other than intercompany liabilities and the current portion of long-term Debt and Capitalized Lease Obligations), all as set forth on the latest consolidated balance sheet of the Company prepared in accordance with GAAP. "Corporate Trust Office" means the principal office of the Trustee at ---------------------- which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Administration, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company). "Custodian" means any receiver, trustee, assignee, liquidator, --------- custodian or similar official under any Bankruptcy Law. "Debt" means with respect to the Company at any date, without ---- duplication, obligations (other than nonrecourse obligations) for borrowed money or evidenced by bonds, debentures, notes or similar instruments. "Default" means any event which is, or after notice or passage of time ------- or both would be, an Event of Default. "GAAP" means generally accepted accounting principles in the United ---- States as in effect on the date hereof. 2
"Global Securities" means Securities that are in the form of the ----------------- Securities attached hereto as Exhibit A-1, and to the extent that such Securities are required to bear the Legend required by Section 2.06, such Securities will be in the form of a 144A Global Security. "Holder" or "Securityholder" means a person in whose name a Security ------ -------------- is registered on the Registrar's books. "Indenture" means this Indenture, as amended or supplemented from time --------- to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof. "Institutional Accredited Investor Security" means a Security in the ------------------------------------------ form of the Security attached hereto as Exhibit A-2, representing Securities sold to Institutional Accredited Investors. "Issue Date" of any Security means the date on which the Security was ---------- originally issued or deemed issued as set forth on the face of the Security. "Issue Price" of any Security means, in connection with the original ----------- issuance of such Security, the initial issue price at which the Security is sold as set forth on the face of the Security. "Officer" means either the Chairman or Vice Chairman of the Board, the ------- President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or Assistant Secretary of the Company. "Officers' Certificate" means a written certificate containing the --------------------- information specified in Sections 13.04 and 13.05, (i) signed in the name of the Company by either its Chairman of the Board, Vice Chairman of the Board, President, any Vice President, Treasurer, any Assistant Treasurer, Controller, or any Assistant Controller, and (ii) attested to by its Secretary or any Assistant Secretary, and delivered to the Trustee. An Officers' Certificate given pursuant to Section 4.03 shall be signed by the principal executive, financial or accounting Officer of the Company. "Opinion of Counsel" means a written opinion containing the ------------------ information specified in Sections 13.04 and 13.05, from legal counsel. The counsel may be an employee of, or counsel to, the Company or other counsel designated by the Company and reasonably acceptable to the Trustee. "Original Issue Discount" of any Security means the difference between ----------------------- the Issue Price and the Principal Amount at Maturity of the Security as set forth on the face of the Security. "person" or "Person" means any individual, corporation, limited ------ ------ liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. 3
"Principal Amount at Maturity" of a Security means the principal ---------------------------- amount at maturity as set forth on the face of the Security. "Principal Property" means (i) a parcel of improved or unimproved real ------------------ estate or other physical facility or depreciable asset of the Company or a Subsidiary, the net book value of which on the date of determination exceeds 2% of Consolidated Net Assets and (ii) any group of parcels of real estate, other physical facilities, and/or depreciable assets of the Company and/or its Subsidiaries, the net book value of which, when sold in one or a series of related Sale and Lease-Back Transactions or securing Debt issued in respect of such Principal Properties, on the date of determination exceeds 2% of the Consolidated Net Assets. For purposes of the foregoing, "related Sale and Lease-Back Transactions" refers to any two or more such contemporaneous transactions, which are on substantially similar terms with substantially the same parties. "Redemption Date" or "redemption date" means the date specified for --------------- --------------- redemption of the Securities in accordance with the terms of the Securities and this Indenture. "Redemption Price" or "redemption price" shall have the meaning set ---------------- ---------------- forth in paragraph 6 of the Securities. "Regular Cash Dividends" means quarterly or other periodic cash ---------------------- dividends on the Company's Common Stock as declared by the Company's Board of Directors as part of its cash dividend payment practices and that are not designated by them as extraordinary or special or other nonrecurring dividends. "Responsible Officer" means, when used with respect to the Trustee, ------------------- any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who, in each case, shall have direct responsibility for the administration of this Indenture. "Restricted Security" means a Security required to bear the ------------------- restrictive Legend set forth in the form of Security set forth in Exhibits A-1 and A-2 of this Indenture. "Restricted Subsidiary" means any Subsidiary organized and existing --------------------- under the laws of the United States of America and the principal business of which is carried on within the United States of America (x) which owns or is a lessee pursuant to a capital lease of any property of the type described in clause (i) of the definition of Principal Property or (y) in which the investment of the Company and all its Subsidiaries exceeds 5% of Consolidated Net Assets as of the date of such determination other than, in the case of either clause (x) or (y), (i) Subsidiaries of which the principal business is the Company's timeshare or senior living services businesses, (ii) each Subsidiary the major part of whose business consists of finance, banking, credit, leasing, insurance, financial services or other similar operations, or any combination thereof and, (iii) each Subsidiary formed or acquired after the date hereof for the purpose of developing new 4
assets or acquiring the business or assets of another person and which does not acquire all or any substantial part of the business or assets of the Company or any Restricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act (or any successor --------- provision), as it may be amended from time to time. "Sale Price" of Capital Stock on any date means the closing per share ---------- sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated. In the absence of such quotation, the Company shall be entitled to determine the Sale Price on the basis of such quotations as it considers appropriate. "SEC" means the Securities and Exchange Commission. --- "Securities" means any of the Company's Liquid Yield OptionTM Notes ---------- due 2021 (Zero Coupon-Senior), as amended or supplemented from time to time, issued under this Indenture. "Securityholder" or "Holder" means a person in whose name a Security -------------- ------ is registered on the Registrar's books. "Significant Subsidiary" shall have the meaning set forth in Rule 1-02 ---------------------- of Regulation S-X under the Securities Act of 1933, as amended. "Special Record Date" means, for the payment of any Defaulted ------------------- Interest, the date fixed by the Trustee pursuant to Section 12.02. "Stated Maturity" means, when used with respect to any Security, or --------------- any installment of semiannual or contingent interest thereon, the date specified in such Security as the fixed date on which an amount equal to the Principal Amount at Maturity of such Security or such installment of semiannual or contingent interest is due and payable. "Subsidiary" means (i) a corporation, a majority of whose Capital ---------- Stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly owned by the Company, by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company, (ii) a partnership in which the Company or a Subsidiary of the Company holds a majority interest in the equity capital or profits of such partnership, or (iii) any other person (other than a corporation or partnership) in which the Company, a Subsidiary of the Company or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of a majority of the directors or other governing body of such person. 5
"Tax Event" means that the Company shall have received an opinion from --------- independent tax counsel experienced in such matters to the effect that, on or after May 3, 2001, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority, in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation is issued or announced or which action is taken, on or after May 3, 2001, there is more than an insubstantial risk that interest (including Original Issue Discount and contingent interest, if any) payable on the Securities either (i) would not be deductible on a current accrual basis or (ii) would not be deductible under any other method, in either case in whole or in part, by the Company (by reason of deferral, disallowance, or otherwise) for United States federal income tax purposes. "TIA" means the Trust Indenture Act of 1939 as in effect on the date --- of this Indenture; provided, however, that in the event the TIA is amended after -------- ------- such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "trading day" means a day during which trading in securities generally ----------- occurs on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Common Stock is then traded. "Trustee" means the party named as the "Trustee" in the first ------- paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. SECTION 1.02 Other Definitions. ------------------------------------- Defined in Term Section ---- ------- "Act".................................... 1.05(a) "Agent Members".......................... 2.12(e) "Amended and Restated Rights Agreement".. 11.19 "Associate".............................. 3.09(a) "Average Sale Price"..................... 11.01 "beneficial owner"....................... 3.09(a) "Bid Solicitation Agent"................. 2.03 "cash"................................... 3.08(b) "Change in Control"...................... 3.09(a) "Change in Control Purchase Date"........ 3.09(a) "Change in Control Purchase Notice"...... 3.09(c) 6
"Change in Control Purchase Price"............... 3.09(a) "Company Notice"................................. 3.08(e) "Company Notice Date"............................ 3.08(c) "Contingent Interest Period"..................... Exhibit A-1 "Conversion Agent"............................... 2.03 "Conversion Date"................................ 11.02 "Conversion Rate"................................ 11.01 "Defaulted Interest"............................. 12.02 "Depositary"..................................... 2.01(a) "DTC"............................................ 2.01(a) "Event of Default"............................... 6.01 "Exchange Act"................................... 3.08(d) "Ex-Dividend Date"............................... 11.08(b) "Ex-Dividend Time"............................... 11.01 "Extraordinary Cash Dividend".................... 11.08(a) "Five-Day Period"................................ Exhibit A-1 "Institutional Accredited Investors"............. 2.01(b) "Interest Payment Date".......................... 10.01 "Legal Holiday".................................. 13.08 "Legend"......................................... 2.06(f) "LYON Market Price".............................. Exhibit A-1 "Market Price"................................... 3.08(d) "Measurement Period"............................. 11.08(a) "noncontingent bond method"...................... 4.07 "Notice of Default".............................. 6.01 "Option Exercise Date"........................... 10.01 "Option Exercise Date"........................... 10.01 "Paying Agent"................................... 2.03 "Legend"......................................... 2.06(f) "Purchase Date".................................. 3.08(a) "Purchase Notice"................................ 3.08(a) "Purchase Price"................................. 3.08(a) "QIB"............................................ 2.01(a) "Quarterly Period"............................... Exhibit A-1 "Registrar"...................................... 2.03 "Regular Record Date"............................ 10.01 "Relevant Cash Dividends......................... 11.08(a) "Restated Principal Amount"...................... 10.01 "Rights"......................................... 11.19 "Rights Agreement"............................... 11.19 "Rule 144A Information".......................... 4.06 "Securities Act"................................. 3.08(d) "Series A Junior Preferred Stock"................ 11.19 "Successor Company".............................. 5.01 "Tax Event Date"................................. 10.01 "Time of Determination".......................... 11.01 7
SECTION 1.03 Incorporation by Reference of Trust Indenture Act. ---------------------------------------------------------------- Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04 Rules of Construction. Unless the context otherwise ------------------------------------ requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles as in effect from time to time; (c) "or" is not exclusive; (d) "including" means including, without limitation; and (e) words in the singular include the plural, and words in the plural include the singular. SECTION 1.05 Acts of Holders. (a) Any request, demand, ------------------------------ authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by their agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. 8
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the register maintained by the Registrar. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a resolution of the Board of Directors, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement -------- or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. ARTICLE 2 THE SECURITIES SECTION 2.01 Form and Dating. The Securities and the Trustee's ------------------------------ certificate of authentication shall be substantially in the form of Exhibits A-1 and A-2, which are a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage (provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company). The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. 9
(a) 144A Global Securities. Securities offered and sold within the ---------------------- United States to qualified institutional buyers as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued, initially in the form of a 144A Global Security, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for the Depositary and registered in the name of The Depository Trust Company ("DTC") or the nominee thereof (such depositary, or any successor thereto, and any such nominee being hereinafter referred to as the "Depositary"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate Principal Amount at Maturity of the 144A Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary as hereinafter provided. (b) Institutional Accredited Investor Securities. Except as provided -------------------------------------------- in this Section 2.01, or in Sections 2.06 or 2.12, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of Certificated Securities. Securities offered and sold within the United States to institutional accredited investors as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act ("Institutional Accredited Investors") shall be issued, initially in the form of an Institutional Accredited Investor Security, duly executed by the Company and authenticated by the Trustee as hereinafter provided. (c) Global Securities in General. Each Global Security shall ---------------------------- represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate Principal Amount at Maturity of outstanding Securities from time to time endorsed thereon and that the aggregate Principal Amount at Maturity of outstanding Securities represented thereby may from time to time be increased or decreased, as appropriate, to reflect exchanges, redemptions and conversions. Any adjustment of the aggregate Principal Amount at Maturity of a Global Security to reflect the amount of any increase or decrease in the aggregate Principal Amount at Maturity of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary. (d) Book-Entry Provisions. This Section 2.01(d) shall apply only to --------------------- Global Securities deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(d), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary, (b) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions and (c) shall bear legends substantially to the following effect: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS 10
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS, IN WHOLE BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (e) Certificated Securities. Securities not issued as interests in ----------------------- the Global Securities will be issued in certificated form substantially in the form of Exhibit A-2 attached hereto. SECTION 2.02 Execution and Authentication. The Securities shall be ------------------------------------------ executed on behalf of the Company by any Officer. The signature of the Officer on the Securities may be manual or by facsimile. Securities bearing the manual or facsimile signatures of an individual who was at the time of the execution of the Securities the proper Officer of the Company shall bind the Company, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of such Securities or did not hold such office at the date of authentication of such Securities. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized Officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee shall authenticate and deliver Securities for original issue in an aggregate Principal Amount at Maturity of up to $410,000,000 ($470,000,000 aggregate Principal Amount at Maturity if the over-allotment option is exercised in full within 30 days from the Issue Date) upon a Company Order without any further action by the Company. The aggregate Principal Amount at Maturity of Securities outstanding at any time may not exceed the amount set forth in the foregoing sentence, except as provided in Section 2.07. The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of Principal Amount at Maturity and any integral multiple thereof. 11
SECTION 2.03 Registrar, Paying Agent, Conversion Agent and Bid ---------------------------------------------------------------- Solicitation Agent. The Company shall maintain an office or agency where - ------------------ Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for purchase or payment ("Paying Agent") and an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Company shall also appoint a bid solicitation agent (the "Bid Solicitation Agent") to act pursuant to paragraph 5 of the Securities. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent, including any named pursuant to Section 4.05. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 4.05. The Company shall enter into an appropriate agency agreement with any Registrar or co-registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent (other than the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co- registrar. None of the Company or any Subsidiary or any Affiliate of either of them may act as Bid Solicitation Agent. The Company initially appoints the Trustee as Registrar, Conversion Agent, Paying Agent and Bid Solicitation Agent (provided, however, that the --------- -------- Trustee shall have the right to delegate the responsibilities of Bid Solicitation Agent to such other person, as the Trustee deems fit and proper) in connection with the Securities. SECTION 2.04 Paying Agent to Hold Money and Securities in Trust. ----------------------------------------------------------------- Except as otherwise provided herein, not later than 10:00 a.m., New York City time, on each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) or Common Stock sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money and Common Stock held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and Common Stock so held in trust. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money and Common Stock held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money and Common Stock held by it to the Trustee and to account for any funds and Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money or Common Stock. SECTION 2.05 Securityholder Lists. The Trustee shall preserve in ----------------------------------- as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall cause to be 12
furnished to the Trustee at least semiannually on May 1 and November 1 a listing of Securityholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06 Transfer and Exchange. Subject to Section 2.12 hereof, ------------------------------------ (a) upon surrender for registration of transfer of any Security, together with a written instrument of transfer satisfactory to the Registrar, duly executed by the Securityholder or duly authorized in writing by such Securityholder's attorney, at the office or agency of the Company designated Registrar or co-registrar pursuant to Section 2.03, the Company shall execute, and the Trustee, at the written direction of the Company, shall authenticate and deliver in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations, of a like aggregate Principal Amount at Maturity. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the registration of transfer or exchange of the Securities from the Securityholder requesting such registration of transfer or exchange. At the option of the Holder, Certificated Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate Principal Amount at Maturity, upon surrender of the Securities to be exchanged, together with a written instrument of transfer satisfactory to the Registrar, duly executed by the Securityholder or duly authorized in writing by such Securityholder's attorney, at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee, upon receipt of a Company Order, shall authenticate and deliver, the Securities, which the Holder making the exchange is entitled to receive. The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be purchased in part, the portion thereof not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. (b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.12 and this Section 2.06(b). Transfers of a Global Security shall be limited to transfers of such Global Security, in whole or in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (c) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities. 13
(d) Any Registrar appointed pursuant to Section 2.03 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon registration of transfer or exchange of Securities. (e) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made. (f) If Securities are issued upon the registration of transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legends set forth on the form of Security attached hereto as Exhibits A-1 and A-2 setting forth such restrictions (collectively, the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company and the Registrar such satisfactory evidence, which shall include an Opinion of Counsel, as may be reasonably required by the Company and the Registrar, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 under the Securities Act or that such Securities are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon (i) provision of such satisfactory evidence, or (ii) notification by the Company to the Trustee and Registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, upon receipt of a Company Order, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face of a Security and the Security is subsequently held by an Affiliate of the Company, the Legend shall be reinstated by the Company. SECTION 2.07 Replacement Securities. If (a) any mutilated Security ------------------------------------- is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and the Trustee, upon receipt of a Company Order, shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and Principal Amount at Maturity, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Security, pay or purchase such Security, as the case may be. Upon the issuance of any new Securities under this Section, the Company may require the Holder thereof to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of 14
the Company, whether or not the mutilated, destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.08 Outstanding Securities; Determinations of Holders' ----------------------------------------------------------------- Action. Securities outstanding at any time are all the Securities authenticated - ------ by the Trustee except for those cancelled by it, those delivered to it for cancellation, those mutilated, destroyed, lost or stolen, those paid pursuant to Section 2.07 and those described in this Section 2.08 as not outstanding. A Security does not cease to be outstanding because the Company or an Affili ate thereof holds the Security; provided, however, that in determining whether the -------- ------- Holders of the requisite Principal Amount at Maturity of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles 6 and 9). If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a protected purchaser. If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following the Purchase Date or a Change in Control Purchase Date, or on Stated Maturity, money or securities, if permitted hereunder, sufficient to pay Securities payable on that date, then immediately after such Redemption Date, Purchase Date, Change in Control Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and Original Issue Discount and interest (including contingent interest), if any, on such Securities shall cease to accrue; provided -------- that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made. If a Security is converted in accordance with Article 11, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding and Original Issue Discount and interest (including contingent interest), if any, shall cease to accrue on such Security. SECTION 2.09 Temporary Securities. Pending the preparation of ------------------------------------ definitive Securities, the Company may execute, and upon receipt of a Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially 15
of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.03, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee, upon receipt of a Company Order, shall authenticate and deliver in exchange therefor a like Principal Amount at Maturity of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.10 Cancellation. All Securities surrendered for payment, --------------------------- purchase by the Company pursuant to Article 3, conversion, redemption or registration of transfer or exchange shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 11. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee's customary procedure. SECTION 2.11 Persons Deemed Owners. Prior to due presentment of a ----------------------------------- Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of the Security or the payment of any Redemption Price, Purchase Price or Change in Control Purchase Price in respect thereof, and interest (including contingent interest, if any) thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 2.12 Global Securities. (a) Notwithstanding any other ------------------------------- provisions of this Indenture or the Securities, (A) transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.06 and Section 2.12(a)(i) below, (B) transfer of a beneficial interest in a Global Security for a Certificated Security shall comply with Section 2.06 and Section 2.12(a)(ii) below, and (C) transfers of a Certificated Security shall comply with Section 2.06 and Section 2.12(a)(iii) and (iv) below. (i) Transfer of Global Security. A Global Security may not be --------------------------- transferred, in whole or in part, to any Person other than the Depositary or a nominee or any 16
successor thereof, and no such transfer to any such other Person may be registered; provided that this clause (i) shall not prohibit any -------- transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Nothing in this Section 2.12(a)(i) shall prohibit or render ineffective any transfer of a beneficial interest in a Global Security effected in accordance with the other provisions of this Section 2.12(a). (ii) Restrictions on Transfer of a Beneficial Interest in a Global ------------------------------------------------------------- Security for a Certificated Security. A beneficial interest in a ------------------------------------ Global Security may not be exchanged for a Certificated Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a transfer of a beneficial interest in a Global Security in accordance with Applicable Procedures for a Certificated Security in the form satisfactory to the Trustee, together with: (a) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B-1, and, if requested by the Company or the Registrar, certification in the form set forth in Exhibit B-2, that such beneficial interest in the Global Security is being transferred to an Institutional Accredited Investor in accordance with subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act; (b) written instructions to the Trustee to make, or direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect a decrease in the aggregate Principal Amount at Maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such decrease; and (c) if the Company or Registrar so requests, an Opinion of Counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the Legend. the Trustee shall cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate Principal Amount at Maturity of Securities represented by the Global Security to be decreased by the aggregate Principal Amount at Maturity of the Certificated Security to be issued, shall authenticate and deliver such Certificated Security and shall debit or cause to be debited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the Principal Amount at Maturity of the Certificated Security so issued. (iii) Transfer and Exchange of Certificated Securities. When ------------------------------------------------ Certificated Securities are presented to the Registrar with a request: 17
(x) to register the transfer of such Certificated Securities; or (y) to exchange such Certificated Securities for an equal Principal Amount at Maturity of Certificated Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Securities surrendered for -------- ------- registration of transfer or exchange: (a) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (b) so long as such Securities are Restricted Securities, such Securities are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Certificated Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Certificated Securities are being transferred to the Company, a certification to that effect; or (C) if such Certificated Securities are being transferred pursuant to an exemption from registration, (i) a certification to that effect (in the form set forth in Exhibit B-1 and B-2, if applicable) and (ii) if the Company or Registrar so requests, an Opinion of Counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the Legend. (iv) Restrictions on Transfer of a Certificated Security for a --------------------------------------------------------- Beneficial Interest in a Global Security. A Certificated Security may ---------------------------------------- not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Certificated Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (a) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B-1, that such Certificated Security is being transferred to a QIB in accordance with Rule 144A; and 18
(b) written instructions directing the Trustee to make, or to direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate Principal Amount at Maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Certificated Security and cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate Principal Amount at Maturity of Securities represented by the Global Security to be increased by the aggregate Principal Amount at Maturity of the Certificated Security to be exchanged, and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the Principal Amount at Maturity of the Certificated Security so cancelled. If no Global Securities are then outstanding, the Company shall execute, and the Trustee, upon receipt of a Company Order, shall authenticate, a new Global Security in the appropriate Principal Amount at Maturity. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Security. (b) Subject to the succeeding paragraph, every Security shall be subject to the restrictions on transfer provided in the Legend including the delivery of an Opinion of Counsel, if so provided. Whenever any Restricted Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Security must be accompanied by a certificate in substantially the form set forth in Exhibit B-1, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate. (c) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or, if earlier, upon the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision). Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.12 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144 or any successor provision, by an Opinion of Counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Company, addressed to the Company and the Registrar and in form acceptable to the Company, to the effect that the transfer of such Security has been made in compliance with 19
Rule 144 or such successor provision), be exchanged for a new Security, of like tenor and aggregate Principal Amount at Maturity, which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. The Trustee and the Registrar shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned Opinion of Counsel or registration statement. (d) As used in the preceding two paragraphs of this Section 2.12, the term "transfer" encompasses any sale, pledge, transfer, hypothecation or other disposition of any Security. (e) The provisions of clauses (1), (2), (3) and (4) below shall apply only to Global Securities: (1) Notwithstanding any other provisions of this Indenture or the Securities, except as provided in Section 2.12(a)(ii), a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof; provided that a -------- Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (i) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days; (ii) the Company decides to discontinue use of the system of book-entry transfer through the Depositary or (iii) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clause (i) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (iii) above may be exchanged in whole or from time to time in part as directed by the Depositary. (2) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate Principal Amount at Maturity equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the Principal Amount at Maturity thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the 20
Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof. (3) Subject to the provisions of clause (5) below, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members (as defined below) and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities. (4) In the event of the occurrence of any of the events specified in clause (1) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons. (5) Neither any members of, or participants in, the Depositary (collectively, the "Agent Members") nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security. SECTION 2.13 CUSIP Numbers. The Company in issuing the Securities may --------------------------- use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the - -------- correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3 REDEMPTION AND PURCHASES SECTION 3.01 Right to Redeem; Notices to Trustee. The Company, at its ------------------------------------------------- option, may redeem the Securities in accordance with the provisions of paragraphs 6 and 8 of the Securities. If the Company elects to redeem Securities pursuant to paragraph 6 of the Securities, 21
it shall notify the Trustee in writing of the Redemption Date, the Principal Amount at Maturity of Securities to be redeemed, the Redemption Price and the amount of contingent interest, if any, payable on the Redemption Date. The Company shall give the notice to the Trustee provided for in this Section 3.01 by a Company Order, at least 40 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). SECTION 3.02 Selection of Securities to Be Redeemed. If less than all ---------------------------------------------------- the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by any other method the Trustee considers fair and appropriate (so long as such method is not prohibited by the rules of any stock exchange on which the Securities are then listed). The Trustee shall make the selection at least 30 days but not more than 60 days before the Redemption Date from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the Principal Amount at Maturity of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in Principal Amounts at Maturity of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. SECTION 3.03 Notice of Redemption. At least 30 days but not more than ---------------------------------- 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and, to the extent known at the time of such notice, the amount of contingent interest, if any, payable on the Redemption Date; (3) the Conversion Rate; (4) the name and address of the Paying Agent and Conversion Agent; (5) that Securities called for redemption may be converted at any time before the close of business on the second Business Day immediately preceding the Redemption Date; 22
(6) that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 9 of the Securities; (7) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and contingent interest, if any; (8) if fewer than all the outstanding Securities are to be redeemed, the certificate number and Principal Amounts at Maturity of the particular Securities to be redeemed; (9) that, unless the Company defaults in making payment of such Redemption Price and contingent interest, if any, Original Issue Discount and interest (including contingent interest), if any, on Securities called for redemption will cease to accrue on and after the Redemption Date; (10) the CUSIP number of the Securities; and (11) any other information the Company wants to present. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense; provided that the -------- Company makes such request at least three Business Days prior to the date such notice of redemption must be mailed. SECTION 3.04 Effect of Notice of Redemption. Once notice of ------------------------------ redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price (together with accrued contingent interest, if any) stated in the notice, except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price (together with accrued contingent interest, if any) stated in the notice. SECTION 3.05 Deposit of Redemption Price. Prior to 10:00 a.m. (New --------------------------- York City time), on the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of, and any accrued and unpaid contingent interest with respect to, all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money, not required for that purpose because of conversion of Securities pursuant to Article 11. If such money is then held by the Company in trust and is not required for such purpose, it shall be discharged from such trust. SECTION 3.06 Securities Redeemed in Part. Upon surrender of a ------------------------------------------ Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in Principal Amount at Maturity to the unredeemed portion of the Security surrendered. 23
SECTION 3.07 Conversion Arrangement on Call for Redemption. In ------------------------------------------------------------ connection with any redemption of Securities, the Company may arrange, in lieu of redemption, for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment banks or other purchasers to purchase such Securities by paying to the Trustee in trust for the Securityholders, on or prior to 10:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with the Trustee by the Company for the redemption of such Securities, is not less than the Redemption Price of such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Price of, and any accrued and unpaid contingent interest with respect to, such Securities shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, any Securities not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 11) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date, subject to payment of the above amount as aforesaid. The Trustee shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Company for the redemption of Securities. Without the Trustee's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. 24
SECTION 3.08 Purchase of Securities at Option of the Holder. ------------------------------------------------------------- (a) General. Holders may require the Company to purchase any ------- outstanding Security for which a written purchase notice has been properly delivered by the Holder and not withdrawn, subject to certain additional conditions. Holders may submit their Securities for purchase to the Paying Agent at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on such Purchase Date. The Securities shall be purchased by the Company pursuant to paragraph 7 of the Securities as of May 8, 2002, May 8, 2004, May 8, 2011 and May 8, 2016 (each, a "Purchase Date"), at the purchase price of $867.42 per $1,000 of Principal Amount at Maturity as of May 8, 2002, of $880.50 per $1,000 of Principal Amount at Maturity as of May 8, 2004, of $927.87 per $1,000 of Principal Amount at Maturity as of May 8, 2011 and of $963.26 per $1,000 of Principal Amount at Maturity as of May 8, 2016 (each, a "Purchase Price", as applicable), at the option of the Holder thereof, upon: (i) delivery to the Paying Agent, by the Holder of a written notice of purchase (a "Purchase Notice") no later than the close of business on the Purchase Date stating: (A) the certificate numbers of the Holder's Securities which will be delivered for purchase, (B) the portion of the Principal Amount at Maturity of the Securities which the Holder will deliver to be purchased, which portion must be a Principal Amount at Maturity of $1,000 or an integral multiple thereof, (C) that such Securities shall be purchased pursuant to the terms and conditions specified in paragraph 7 of the Securities and in this Indenture, and (D) in the event the Company elects, pursuant to Section 3.08(b), to pay the Purchase Price to be paid as of such Purchase Date, in whole or in part, in shares of Common Stock but such portion of the Purchase Price shall ultimately be payable to such Holder entirely in cash because any of the conditions to payment of the Purchase Price in Common Stock is not satisfied prior to the close of business on such Purchase Date, as set forth in Section 3.08(d), whether such Holder elects (i) to withdraw such Purchase Notice as to some or all of the Securities to which such Purchase Notice relates (stating the Principal Amount at Maturity and certificate numbers of the Securities as to which such withdrawal shall relate), or (ii) to receive cash in respect of the entire Purchase Price for all Securities (or portions thereof) to which such Purchase Notice relates; and (ii) delivery of such Security to the Paying Agent at any time after delivery of the Purchase Notice to the Paying Agent (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that -------- ------- 25
such Purchase Price shall be so paid pursuant to this Section 3.08 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice, as determined by the Company. If a Holder, in such Holder's Purchase Notice and in any written notice of withdrawal delivered by such Holder pursuant to the terms of Section 3.10, fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 3.08(a)(i), such Holder shall be deemed to have elected to receive cash in respect of the Purchase Price for all Securities subject to such Purchase Notice in the circumstances set forth in such clause (D). The Company shall purchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the consideration to be received by the Holder (together with accrued and unpaid contingent interest, if any) promptly following the later of the Purchase Date and the time of delivery of the Security. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price. The ------------------------------------------------------------ Securities to be purchased pursuant to Section 3.08(a) may be paid for, at the election of the Company, in U.S. legal tender ("cash") or Common Stock, or in any combination of cash and Common Stock, subject to the conditions set forth in Sections 3.08(c) and (d). The Company shall designate, in the Company Notice delivered pursuant to Section 3.08(e), whether the Company will purchase the Securities for cash or Common Stock, or, if a combination thereof, the percentages of the Purchase Price of Securities in respect of which it will pay in cash or Common Stock; provided that the Company will pay cash for fractional -------- interests in Common Stock. For purposes of determining the existence of potential fractional interests, all Securities subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Securities are purchased pursuant to this Section 3.08 shall receive the same percentage of cash or Common Stock in payment of the Purchase Price for such Securities, except (i) as provided in Section 3.08(d) with regard to the payment of cash in lieu of fractional shares of Common Stock and (ii) in the event that the Company is unable to purchase the Securities of a Holder or Holders for Common Stock because any necessary qualifications or registrations of the Common Stock under applicable state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for cash. The Company may not change its election with respect to the consideration (or 26
components or percentages of components thereof) to be paid once the Company has given its Company Notice to Securityholders, except pursuant to this Section 3.08(b) or pursuant to Section 3.08(d) in the event of a failure to satisfy, prior to the close of business on the Purchase Date, any condition to the payment of the Purchase Price, in whole or in part, in Common Stock. At least three Business Days before the Company Notice Date, the Company shall deliver an Officers' Certificate to the Trustee specifying: (i) the manner of payment selected by the Company, (ii) the information required by Section 3.08(e), (iii) if the Company elects to pay the Purchase Price, or a specified percentage thereof, in Common Stock, that the conditions to such manner of payment set forth in Section 3.08(d) have been or will be complied with, and (iv) whether the Company desires the Trustee to give the Company Notice required by Section 3.08(e). (c) Purchase with Cash. On each Purchase Date, at the option of the ------------------ Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) has been given, or a specified percentage thereof, may be paid by the Company with cash equal to the aggregate Purchase Price of such Securities. If the Company elects to purchase Securities with cash, the Company Notice, as provided in Section 3.08(e), shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to such Purchase Date (the "Company Notice Date"). (d) Payment by Issuance of Common Stock. On each Purchase Date, at ----------------------------------- the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a) has been given, or a specified percentage thereof, may be paid by the Company by the issuance of a number of shares of Common Stock equal to the quotient obtained by dividing (i) the amount of cash to which the Securityholders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Securities in cash by (ii) the Market Price of a share of Common Stock, subject to the next succeeding paragraph. The Company will not issue a fractional share of Common Stock in payment of the Purchase Price. Instead the Company will pay cash for the current market value of the fractional share. The current market value of a fraction of a share shall be determined by multiplying the Market Price by such fraction and rounding the product to the nearest whole cent. It is understood that if a Holder elects to have more than one Security purchased, the number of shares of Common Stock shall be based on the aggregate amount of Securities to be purchased. If the Company elects to purchase the Securities by the issuance of shares of Common Stock, the Company Notice, as provided in Section 3.08(e), shall be sent to the Holders (and to beneficial owners as required by applicable law) not later than the Company Notice Date. 27
The Company's right to exercise its election to purchase the Securities pursuant to Section 3.08 through the issuance of shares of Common Stock shall be conditioned upon: (i) the Company's not having given its Company Notice of an election to pay entirely in cash and its giving of timely Company Notice of election to purchase all or a specified percentage of the Securities with Common Stock as provided herein; (ii) the shares of Common Stock having been admitted for listing or admitted for listing subject to notice of issuance on the principal United States securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a national or regional securities exchange, as quoted on the National Association of Securities Dealers Automated Quotation System; (iii) the registration of the shares of Common Stock to be issued in respect of the payment of the Purchase Price under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case, if required; (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture and (B) the shares of Common Stock to be issued by the Company in payment of the Purchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Purchase Price in respect of the Securities, will be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights, and, in the case of such Officers' Certificate, stating that conditions (i), (ii), (iii) and (iv) above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that conditions (ii), (iii) and (iv) above have been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 Principal Amount at Maturity of Securities and the Sale Price of a share of Common Stock on each trading day during the period for which the Market Price is calculated. The Company may pay the Purchase Price (or any portion thereof) in Common Stock only if the information necessary to calculate the Market Price is published in The Wall Street Journal or another daily newspaper of national circulation or in any other comparable medium should such newspapers no longer be in wide circulation. If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the Purchase Date and the Company has elected to purchase the Securities pursuant to this Section 3.08 through the issuance of shares of Common Stock, the Company shall pay the entire Purchase Price of the Securities of such Holder or Holders in cash. 28
The "Market Price" of the Common Stock means the average of the Sale Prices of the Common Stock for the five trading day period ending on the third Business Day prior to the applicable Purchase Date (or if such Business Day is not a trading day, then on the last trading day prior to such Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of such trading days during such five trading day period and ending on such Purchase Date, of any event described in Section 11.06, 11.07 or 11.08; subject, however, to the conditions set forth in Sections 11.09 and 11.10. (e) Notice of Election. The Company's notice of election to ------------------ purchase with cash or Common Stock or any combination thereof shall be sent to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 13.02 at the time specified in Section 3.08(c) or (d), as applicable (the "Company Notice"). Such Company Notice shall state the manner of payment elected and shall contain the following information: In the event the Company has elected to pay the Purchase Price (or a specified percentage thereof) with Common Stock, the Company Notice shall: (1) state that each Holder will receive Common Stock with a Market Price determined as of a specified date prior to the Purchase Date equal to such specified percentage of the Purchase Price of the Securities held by such Holder (except any cash amount to be paid in lieu of fractional shares); (2) set forth the method of calculating the Market Price of the Common Stock; and (3) state that because the Market Price of Common Stock will be determined prior to the Purchase Date, Holders will bear the market risk with respect to the value of the Common Stock to be received from the date such Market Price is determined to the Purchase Date. In any case, each Company Notice shall include a form of Purchase Notice to be completed by a Securityholder and shall state: (i) the Purchase Price, the Conversion Rate and, to the extent known at the time of such notice, the amount of contingent interest, if any, that will be accrued and payable with respect to the Securities as of the Purchase Date; (ii) the name and address of the Paying Agent and the Conversion Agent; (iii) that Securities as to which a Purchase Notice has been given may be converted pursuant to Article 11 hereof only if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (iv) that Securities must be surrendered to the Paying Agent to collect payment of the Purchase Price and contingent interest, if any; (v) that the Purchase Price for any Security as to which a Purchase Notice has been given and not withdrawn, together with any accrued contingent interest 29
payable with respect thereto, will be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in clause (iv) above; (vi) the procedures the Holder must follow to exercise rights under Section 3.08 and a brief description of those rights; (vii) briefly, the conversion rights of the Securities; (viii) the procedures for withdrawing a Purchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 3.08(a)(1)(D) or Section 3.10); (ix) that, unless the Company defaults in making payment of such Purchase Price and contingent interest, if any, Original Issue Discount and interest (including contingent interest), if any, on Securities surrendered for purchase will cease to accrue on and after the Purchase Date; and (x) the CUSIP number of the Securities. At the Company's request, the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that, in -------- ------- all cases, the text of such Company Notice shall be prepared by the Company. Upon determination of the actual number of shares of Common Stock to be issued for each $1,000 Principal Amount at Maturity of Securities, the Company will publish such information on its website on the World Wide Web (or its successor media). (f) Covenants of the Company. All shares of Common Stock delivered ------------------------ upon purchase of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. (g) Procedure upon Purchase. The Company shall deposit cash (in ----------------------- respect of a cash purchase under Section 3.08(c) or for fractional interests or contingent interest, as applicable) or shares of Common Stock, or a combination thereof, as applicable, at the time and in the manner as provided in Section 3.11, sufficient to pay the aggregate Purchase Price of, and any accrued and unpaid contingent interest with respect to, all Securities to be purchased pursuant to this Section 3.08. As soon as practicable after the later of the Purchase Date or the date such Securities are surrendered to the Paying Agent or at the office or agency referred to, the Company shall deliver to each Holder entitled to receive Common Stock through the Paying Agent, a certificate for the number of full shares of Common Stock issuable in payment of the Purchase Price and cash in lieu of any fractional interests. The person in whose name the certificate for Common Stock is registered shall be treated as a holder of record of shares of Common Stock on the Business Day following the Purchase Date. Subject to Section 3.08(d), no payment or adjustment will be made for dividends on the Common Stock the record date for which occurred on or prior to the Purchase Date. 30
(h) Taxes. If a Holder of a Security is paid in Common Stock, the ----- Company shall pay any documentary, stamp or similar issue or transfer tax due on such issue of shares of Common Stock. However, the Holder shall pay any such tax which is due because the Holder requests the shares of Common Stock to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. SECTION 3.09 Purchase of Securities at Option of the Holder upon ---------------------------------------------------------------- Change in Control. (a) If on or prior to May 8, 2004 there shall have occurred a - ----------------- Change in Control, all or a portion of the Securities of any Holder shall be purchased by the Company, at the option of such Holder, at a purchase price specified in paragraph 7 of the Securities (the "Change in Control Purchase Price"), as of the date that is 35 Business Days after the occurrence of such Change in Control or such longer time as may be required for the SEC to review and clear any applicable schedules or filings (the "Change in Control Purchase Date"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.09(c). A "Change in Control" shall be deemed to have occurred at such time as either of the following events shall occur: (i) There shall be consummated any share exchange, consolidation or merger of the Company pursuant to which the Common Stock would be converted into cash, securities or other property, in each case other than a share exchange, consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the share exchange, consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of all classes of Capital Stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger; or (ii) There is a report filed on Schedule 13D or TO (or any successor schedule, form or report) pursuant to the Exchange Act, disclosing that any person, other than the Company, including its Affiliates or Associates (for the purposes of this Section 3.09 only, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the aggregate voting power of the Common Stock or other capital stock into which the Common Stock is reclassified or changed; provided, -------- however, that a person shall not be deemed beneficial owner of, or to ------- own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules 31
and regulations under the Exchange Act, and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act. Notwithstanding the foregoing provisions of this Section 3.09, a Change in Control shall not be deemed to have occurred by virtue of the Company, any Subsidiary, any employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary, or any person holding Common Stock for or pursuant to the terms of any such employee benefit plan, filing or becoming obligated to file a report under or in response to Schedule 13D or Schedule TO (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of shares of Common Stock, whether in excess of 50% or otherwise. "Associate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof. (b) Within 15 Business Days after the occurrence of a Change in Control, the Company shall mail a written notice of Change in Control by first- class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). In addition, the Company shall cause a copy of such notice of Change in Control to be published in The Wall Street Journal or another daily newspaper of national circulation or in any other comparable medium should such newspapers no longer be in wide circulation. The notice shall include a form of Change in Control Purchase Notice to be completed by the Securityholder and shall state: (1) briefly, the events causing a Change in Control and the date of such Change in Control; (2) the date by which the Change in Control Purchase Notice pursuant to this Section 3.09 must be given; (3) the Change in Control Purchase Date; (4) the Change in Control Purchase Price and, to the extent known at the time of such notice, the amount of contingent interest, if any, that will be accrued and payable with respect to the Securities as of the change in Control Purchase Date; (5) the name and address of the Paying Agent and the Conversion Agent; (6) the Conversion Rate and any adjustments thereto; (7) that Securities as to which a Change in Control Purchase Notice has been given by a Holder may be converted pursuant to Article 11 hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (8) that Securities must be surrendered to the Paying Agent to collect payment of the Change in Control Purchase Price and contingent interest, if any; 32
(9) that the Change in Control Purchase Price for any Security as to which a Change in Control Purchase Notice has been duly given and not withdrawn, together with any accrued contingent interest payable with respect thereto, will be paid promptly following the later of the Change in Control Purchase Date and the time of surrender of such Security as described in clause (8) above; (10) briefly, the procedures the Holder must follow to exercise rights under this Section 3.09; (11) briefly, the conversion rights of the Securities; (12) the procedures for withdrawing a Change in Control Purchase Notice; (13) that, unless the Company defaults in making payment of such Change in Control Purchase Price and contingent interest, if any, Original Issue Discount and interest (including contingent interest), if any, on Securities surrendered for purchase will cease to accrue on and after the Change in Control Purchase Date; and (14) the CUSIP number of the Securities. (c) A Holder may exercise its rights specified in Section 3.09(a) hereof upon delivery of a written notice of purchase (a "Change in Control Purchase Notice") to the Paying Agent at any time prior to the close of business on the Change in Control Purchase Date, stating: (1) the certificate number of the Security which the Holder will deliver to be purchased; (2) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; and (3) that such Security shall be purchased pursuant to the terms and conditions specified in paragraph 7 of the Securities. The delivery of such Security to the Paying Agent at any time after the delivery to the Paying Agent of the Change in Control Purchase Notice (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that such Change in Control Purchase -------- ------- Price shall be so paid pursuant to this Section 3.09 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 3.09, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. 33
Any purchase by the Company contemplated pursuant to the provisions of this Section 3.09 shall be consummated by the delivery of the consideration to be received by the Holder (together with accrued and unpaid contingent interest, if any) promptly following the later of the Change in Control Purchase Date and the time of delivery of the Security to the Paying Agent in accordance with this Section 3.09. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Purchase Notice contemplated by this Section 3.09(c) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business on the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10. The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof. The Company shall not be required to comply with this Section 3.09 if a third party mails a written notice of Change in Control in the manner, at the times and otherwise in compliance with this Section 3.09 and repurchases all Securities for which a Change in Control Purchase Notice shall be delivered and not withdrawn. SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase -------------------------------------------------------------------- Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in - ------ Control Purchase Notice specified in Section 3.08(a) or Section 3.09(c), as applicable, the Holder of the Security in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid contingent interest, with respect to such Security. Such Purchase Price or Change in Control Purchase Price and contingent interest, if any, shall be paid to such Holder, subject to receipts of funds and/or securities by the Paying Agent, promptly following the later of (x) the Purchase Date or the Change in Control Purchase Date, as the case may be, with respect to such Security (provided the conditions in Section 3.08(a) or Section 3.09(c), as applicable, have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.08(a) or Section 3.09(c), as applicable. Securities in respect of which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted pursuant to Article 11 hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice, as the case may be, unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs. A Purchase Notice or Change in Control Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Purchase Notice or Change in Control Purchase Notice, as the case may be, at any time prior to the close of business on the Purchase Date or the Change in Control Purchase Date, as the case may be, specifying: 34
(1) the certificate number of the Security in respect of which such notice of withdrawal is being submitted, (2) the Principal Amount at Maturity of the Security with respect to which such notice of withdrawal is being submitted, and (3) the Principal Amount at Maturity, if any, of such Security which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company. A written notice of withdrawal of a Purchase Notice may be in the form set forth in the preceding paragraph or may be in the form of (i) a conditional withdrawal contained in a Purchase Notice pursuant to the terms of Section 3.08(a)(1)(D) or (ii) a conditional withdrawal containing the information set forth in Section 3.08(a)(1)(D) and the preceding paragraph and contained in a written notice of withdrawal delivered to the Paying Agent as set forth in the preceding paragraph. There shall be no purchase of any Securities pursuant to Section 3.08 (other than through the issuance of Common Stock in payment of the Purchase Price, including cash in lieu of fractional shares) or 3.09 if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Securities, of the required Purchase Notice or Change in Control Purchase Notice, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid contingent interest with respect to such Securities). The Paying Agent will promptly return to the respective Holders thereof any Securities (x) with respect to which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid contingent interest with respect to such Securities) in which case, upon such return, the Purchase Notice or Change in Control Purchase Notice with respect thereto shall be deemed to have been withdrawn. SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase -------------------------------------------------------------------- Price. Prior to 10:00 a.m. (New York City time) on the Business Day following - ----- the Purchase Date or the Change in Control Purchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.04) an amount of money (in immediately available funds if deposited on such Business Day) or Common Stock, if permitted hereunder, sufficient to pay the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and any accrued and unpaid contingent interest with respect to, all the Securities or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be. SECTION 3.12 Securities Purchased in Part. Any Security which is to ----------------------------------------- be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in 35
form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute, and the Trustee, upon receipt of a Company Order, shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate Principal Amount at Maturity equal to, and in exchange for, the portion of the Principal Amount at Maturity of the Security so surrendered which is not purchased. SECTION 3.13 Covenant to Comply with Securities Laws upon Purchase of --------------------------------------------------------------------- Securities. In connection with any offer to purchase or purchase of Securities - ---------- under Section 3.08 or 3.09 hereof, the Company shall comply with and make filings in accordance with applicable securities laws. SECTION 3.14 Repayment to the Company. The Trustee and the Paying ------------------------ Agent shall return to the Company any cash or shares of Common Stock that remain unclaimed as provided in paragraph 14 of the Securities, together with interest or dividends, if any, thereon (subject to the provisions of Section 7.01(f)), held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, or contingent interest, if any; provided, however, -------- ------- that to the extent that the aggregate amount of cash or shares of Common Stock deposited by the Company pursuant to Section 3.11 exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and the accrued and unpaid contingent interest with respect to, the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change in Control Purchase Date, as the case may be, then promptly after the Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon (subject to the provisions of Section 7.01(f)). SECTION 3.15 Notices from Trustee to Beneficial Owners. ------------------------------------------------------ Notwithstanding anything in this Indenture to the contrary, the Trustee shall mail any notices to beneficial owners only to the extent that addresses for such mailing are provided to the Trustee in writing by the Company no less than 10 days before the deadline for such mailing. ARTICLE 4 COVENANTS SECTION 4.01 Payment of Securities. The Company shall promptly make ---------------------------------- all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Principal Amount, Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, contingent interest and interest, if any, shall be considered paid on the applicable date due if on such date the Trustee or the Paying Agent holds, in accordance with this Indenture, cash or securities, if expressly permitted hereunder, sufficient to pay all such amounts then due. The Company shall, to the extent permitted by law, pay interest on overdue amounts at the per annum rate of interest set forth in paragraph 1 of the Securities, compounded semi-annually, which interest on overdue amounts (to the extent payment of such interest shall 36
be legally enforceable) shall accrue from the date such overdue amounts were originally due and payable. SECTION 4.02 SEC and Other Reports. The Company shall file with the ---------------------------------- Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual and quarterly reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act (or any such successor provisions thereto). In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act (or any such successor provisions thereto), it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements, and the Trustee shall make any such reports available to Securityholders upon request. In such event, such reports shall be provided at the times the Company would have been required to provide reports had it continued to have been subject to such reporting requirements. The Company also shall comply with the other provisions of TIA Section 314(a), to the extent such provisions are applicable. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.03 Compliance Certificate. (a) The Company shall deliver ----------------------------------- to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 28, 2001) an Officers' Certificate, stating whether or not, to the knowledge of the signer, the Company has complied with all conditions and covenants on its part contained in this Indenture and, if the signer has obtained knowledge of any default by the company in the performance, observance or fulfillment of any such condition or covenant, specifying each such default and the nature thereof. For the purpose of this Section 4.03, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. (b) The Company shall file with the Trustee written notice of the occurrence of any Default or Event of Default within five Business Days of its becoming aware of such Default or Event of Default. SECTION 4.04 Further Instruments and Acts. Upon request of the ----------------------------------------- Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 4.05 Maintenance of Office or Agency. The Company will -------------------------------------------- maintain in the Borough of Manhattan, The City of New York, in such location as may be required by the rules of any securities exchange or quotation system on which the Securities may from time to time be listed, an office or agency where Securities may be presented or 37
surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The office of the Trustee in The City of New York, at which at any particular time its corporate trust business shall be principally administered, which office on the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, shall be such office or agency for all of the aforesaid purposes unless the Company shall maintain some other office or agency for such purposes and shall give prompt written notice to the Trustee of the location, and any change of location, of such other office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.02. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner - -------- ------- relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. SECTION 4.06 Delivery of Certain Information. At any time when the --------------------------------------------- Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder or any beneficial holder of Securities or shares of Common Stock issued upon conversion thereof, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or any beneficial holder of Securities or holder of shares of Common Stock issued upon conversion of Securities, or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.07 Calculation of Original Issue Discount. The Company ---------------------------------------------------- agrees, and each Holder and any beneficial holder of a Security by its purchase thereof shall be deemed to agree, to treat, for United States federal income tax purposes, the Securities as Debt instruments that are subject to Section 1.1275- 4(b) of the Treasury Regulations. For United States federal income tax purposes, the Company shall accrue interest with respect to outstanding Securities as original issue discount according to the "noncontingent bond method," set forth in section 1.1275-4(b) of the Treasury Regulations, using a comparable yield of 8.26 percent compounded semiannually, and the projected payment schedule set forth in the Annex to this Indenture. The Company agrees, and each Holder and any beneficial owner of a Security by its purchase thereof shall be deemed to agree, to treat the payment and receipt of Common Stock upon a conversion of a Security, or upon a redemption of a Security where the Company elects to pay in Common Stock, as a contingent payment under Treasury Regulation section 1.1275- 4(b). The Company shall file with the Trustee promptly following the end of each calendar year (i) a written notice specifying the amount of original issue discount for United States federal income tax purposes (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from 38
time to time, including the amount of any adjustment made under the noncontingent bond method to account for the amount of any difference between the amount of an actual payment and the amount of a projected payment. The Company acknowledges and agrees, and each Holder and any beneficial holder of a Security by its purchase thereof shall be deemed to acknowledge and agree, that (i) the comparable yield and the schedule of projected payments are determined on the basis of an assumption of linear growth of the stock price and a constant dividend yield and are not determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the Securities for United States federal income tax purposes and (ii) the comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on the Securities. ARTICLE 5 SUCCESSOR CORPORATION SECTION 5.01 When Company May Merge or Transfer Assets. So long as ------------------------------------------------------- any Securities shall be outstanding, the Company shall not consolidate with or merge into any other corporation or other person or convey, transfer or lease its properties and assets substantially as an entirety to any person (such successor corporation or person, as the case may be, shall in this Article 5 be referred to as the "Successor Company"), unless (1) the Successor Company shall be organized and existing under the laws of the United States of America or any State or the District of Columbia, and shall expressly assume by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and premium, if any, and interest, if any, on all the Securities and the performance of every covenant of this Indenture and in the Securities on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing; (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 5.02 Successor Company Substituted. Upon any consolidation ------------------------------------------- with or merger into any other corporation or other person, or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 5.01, the Successor Company or person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Successor Company or person had been named as the Company 39
herein, and thereafter, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 Events of Default. An "Event of Default" occurs if: ------------------------------- ---------------- (1) the Company defaults in the payment of any contingent interest or of interest which becomes payable after the Securities have been converted to semiannual coupon notes following the occurrence of a Tax Event, which default, in either case, continues for a period of 30 days; (2) the Company defaults in the payment of the Principal Amount at Maturity (or if the Securities have been converted to semiannual coupon notes following the occurrence of a Tax Event, the Restated Principal Amount), Issue Price, accrued Original Issue Discount (or if the Securities have been converted to semiannual coupon notes following the occurrence of a Tax Event, accrued and unpaid interest), Redemption Price, Purchase Price or Change in Control Purchase Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise, whether or not such payment shall be prohibited by this Indenture; (3) the Company fails to comply with any of its agreements in the Securities or this Indenture and such failure continues for 60 days after receipt by the Company of a Notice of Default; (4) (a) the Company or any Restricted Subsidiary fails to make any payment by the end of the applicable grace period after maturity of Debt in an aggregate principal amount in excess of $100 million and such failure continues or (b) Debt is accelerated because of a default with respect to such Debt without such Debt having been discharged or such acceleration having been cured, waived, rescinded or annulled, in the case of (a) above, for a period of 10 days after written notice specifying such default or defaults to the Company by the Trustee or to the Company and the Trustee by the Holders of not less than 25% in aggregate Principal Amount at Maturity of the Securities then outstanding; provided, however, that if any such --------- ------- failure or acceleration referred to in (a) or (b) above shall cease or be cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; (5) the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it; 40
(C) consents to the appointment of a Custodian of it or for any substantial part of its property; (D) makes a general assignment for the benefit of its creditors; (E) files a petition in bankruptcy or answer or consent seeking reorganization or relief; or (F) consents to the filing of such petition or the appointment of or taking possession by a Custodian; (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case or proceeding, or adjudicates the Company insolvent or bankrupt; (B) appoints a Custodian of the Company or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company; and the order or decree remains unstayed and in effect for 60 days. A Default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default within the time specified in clause (3) above after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after it becomes aware of the occurrence thereof, written notice of any event which with the giving of notice and the lapse of time or both would become an Event of Default under clause (3) or clause (4), its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02 Acceleration. If an Event of Default (other than an Event ------------------------- of Default specified in Section 6.01(4) or (5)) occurs and is continuing, unless the Principal Amount of all the Securities shall have already become due and payable, either the Trustee by notice to the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Issue Price and accrued Original Issue Discount to the date of declaration, and any accrued and unpaid interest (including contingent interest) to the date of such declaration, on all the Securities to be immediately due and payable, whereupon such Issue Price and accrued Original Issue Discount, and such accrued and unpaid interest (including contingent interest), if any, shall be due and payable immediately; provided -------- that, if an Event of Default specified in Section 6.01(4) or (5) occurs and is continuing, the Issue Price and accrued Original Issue Discount on all the 41
Securities to the date of the occurrence of such Event of Default shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Issue Price and accrued Original Issue Discount that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.07 have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03 Other Remedies. If an Event of Default occurs and is ---------------------------- continuing, the Trustee may pursue any available remedy to collect the payment of the Issue Price and accrued Original Issue Discount (or if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount, plus accrued interest) on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04 Waiver of Past Defaults. The Holders of a majority in ------------------------------------- aggregate Principal Amount of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder), may waive an existing Default and its consequences except (a) an Event of Default described in Section 6.01(1) or 6.01(2), (b) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected or (c) a Default under Article 11. When a Default is waived, it is deemed cured and shall cease to exist, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05 Control by Majority. The Holders of a majority in --------------------------------- aggregate Principal Amount of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability unless the Trustee shall have been provided with reasonable security or indemnity against such liability satisfactory to the Trustee. SECTION 6.06 Limitation on Suits. A Securityholder may not pursue --------------------------------- any remedy with respect to this Indenture or the Securities unless: 42
(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee security or indemnity against any loss, liability or expense, which security or indemnity shall be reasonably satisfactory to the Trustee; (4) the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security or indemnity; and (5) the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder. SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding -------------------------------------------------- any other provision of this Indenture, the right of any Holder to receive payment of the Principal Amount, Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, contingent interest or interest, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities or any Redemption Date, and to convert the Securities in accordance with Article 11 or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of each such Holder. SECTION 6.08 Collection Suit by Trustee. If an Event of Default ---------------------------------------- described in Section 6.01(1) or 6.01(2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.07. SECTION 6.09 Trustee May File Proofs of Claim. In case of the ---------------------------------------------- pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal Amount, Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, contingent interest or interest, if any, in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of the Principal Amount, Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price, Change 43
in Control Purchase Price, contingent interest or interest, if any, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 Priorities. If the Trustee collects any money pursuant ------------------------ to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities for the Principal Amount, Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, contingent interest or interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and THIRD: the balance, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit initiated by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate Principal Amount of the Securities at the time outstanding. 44
SECTION 6.12 Notice of Defaults. The Trustee shall, within 90 days -------------------------------- after the occurrence of any Default, mail to all Holders of Securities, as the names and addresses of such Holders appear on the books of registry of the Company, notice of all Defaults of which the Trustee shall be aware, unless such Defaults shall have been cured or waived before the giving of such notice; provided that, except in the case of a Default described in Section 6.01(1) or - -------- 6.01(2), the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or Trust Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of Securities. SECTION 6.13 Waiver of Stay, Extension or Usury Laws. The Company ----------------------------------------------------- covenants (to the extent it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law, wherever enacted, now or at any time hereafter in force, that would prohibit or forgive the Company from paying all or any portion of the Principal Amount, Issue Price, accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price or contingent interest, if any, in respect of the Securities, or interest on any such amounts, as contemplated herein, or that may affect the covenants or the performance of this Indenture or the Securities; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 TRUSTEE SECTION 7.01 Duties of Trustee. (a) If an Event of Default has ------------------------------- occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. 45
This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01. (e) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company. SECTION 7.02 Rights of Trustee. Subject to its duties and ------------------------------- responsibilities under the provisions of Section 7.01, and, except as expressly excluded from this Indenture pursuant to said Section 7.01, under the TIA, (a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate; 46
(c) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (d) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith which it believes to be authorized or within its rights or powers conferred under this Indenture; (e) the Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby; (g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a resolution of the Board of Directors; (h) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; (i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture; (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; and (k) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any 47
person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. SECTION 7.03 Individual Rights of Trustee. The Trustee in its ------------------------------------------ individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent, Bid Solicitation Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04 Trustee's Disclaimer. The Trustee makes no ---------------------------------- representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for any statement in the registration statement for the Securities under the Securities Act or in the Indenture or the Securities (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. SECTION 7.05 Notice of Defaults. If a Default occurs and if it is -------------------------------- known to the Trustee, the Trustee shall give to each Securityholder notice of the Default within 90 days after it occurs unless such Default shall have been cured or waived before the giving of such notice. Except in the case of a Default described in Section 6.01(1) or (2), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Securityholders. The second sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee shall not be deemed to have knowledge of a Default unless a Responsible Officer of the Trustee has received written notice of such Default. SECTION 7.06 Reports by Trustee to Holders. Within 60 days after ------------------------------------------- each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company agrees to promptly notify the Trustee whenever the Securities become listed on any securities exchange and of any delisting thereof. 48
SECTION 7.07 Compensation and Indemnity. The Company agrees: ----------------------------------------- (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee or any predecessor, Trustee and their agents for, and to hold them harmless against, any loss, damage, claim, liability, cost or expense (including attorney's fees and expenses and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the acceptance, exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, contingent interest or interest, if any, as the case may be, on particular Securities. The Company's payment obligations pursuant to this Section 7.07 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(5) or (6), the expenses including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08 Replacement of Trustee. The Trustee may resign by so ------------------------------------- notifying the Company; provided, however, no such resignation shall be effective -------- ------- until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. 49
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.09 Successor Trustee by Merger. If the Trustee ------------------------------------------ consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. SECTION 7.10 Eligibility; Disqualification. The Trustee shall at -------------------------------------------- all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. Nothing herein contained shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of TIA Section 310(b). SECTION 7.11 Preferential Collection of Claims Against Company. ---------------------------------------------------------------- The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 DISCHARGE OF INDENTURE SECTION 8.01 Discharge of Liability on Securities. When (i) the --------------------------------------------------- Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable and the Company deposits with the Trustee cash or, if expressly permitted by the terms 50
of the Securities or the Indenture, Common Stock sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.07, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Company. SECTION 8.02 Repayment to the Company. The Trustee and the Paying -------------------------------------- Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Securityholders with respect to such money or securities for that period commencing after the return thereof. ARTICLE 9 AMENDMENTS SECTION 9.01 Without Consent of Holders. The Company and the ----------------------------------------- Trustee may amend this Indenture or the Securities without the consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; provided, however, that such amendment does not materially adversely ----------------- affect the rights of any Securityholder. (2) to comply with Article 5 or Section 11.14; (3) to secure the Company's obligations under the Securities and this Indenture; (4) to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred upon the Company; or (5) to make any change to comply with the TIA, or any amendment thereto, or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, or as necessary in connection with the registration of the Securities under the Securities Act. Notwithstanding the foregoing, no amendment contemplated pursuant to clause (1), (3), (4) or (5) of the preceding paragraph may be made without the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of Securities at the time outstanding if such amendment may materially and adversely affect the interests of the Holders. 51
SECTION 9.02 With Consent of Holders. With the written consent of ---------------------------------------- the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, the Company and the Trustee may amend this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment to this Indenture or the Securities may not: (1) make any change to the provisions of this Indenture that relate to modifying or amending this Indenture; (2) make any Security payable in money or securities other than that stated in the Security or as set forth in Article 11 hereof; (3) make any change in the manner of calculation or rate of accrual in connection with Original Issue Discount, make any change in the manner of calculation of, or that adversely affects the right to receive, contingent interest, reduce the rate of interest referred to in paragraph 1 of the Securities, reduce the rate of interest referred to in Section 10.01 upon the occurrence of a Tax Event, or extend the time for payment of Original Issue Discount, contingent interest or interest, if any, on any Security; (4) reduce the Principal Amount at Maturity, Restated Principal Amount or the Issue Price of or change the Stated Maturity of any Security; (5) reduce the Redemption Price, Purchase Price, Change in Control Purchase Price or any amounts due with respect to any Security; (6) reduce the amount of principal payable upon acceleration of maturity of the Security, following a default; (7) change the place or currency of payment on any Security; (8) reduce the percentage of holders of Securities whose consent is needed to modify or amend the indenture; (9) make any change in Section 6.04, Section 6.07 or this Section 9.02, except to increase any percentage set forth therein; (10) make any change that adversely affects the right to convert any Security; (11) make any change that adversely affects the right to require the Company to purchase the Securities in accordance with the terms thereof and this Indenture; or (12) impair the right to institute suit for the enforcement of any payment with respect to, or conversion of, the Securities. 52
It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.02 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. SECTION 9.03 Compliance with Trust Indenture Act. Every -------------------------------------------------- supplemental indenture executed pursuant to this Article shall comply with the TIA. SECTION 9.04 Revocation and Effect of Consents, Waivers and Actions. --------------------------------------------------------------------- Until an amendment, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Securityholder. SECTION 9.05 Notation on or Exchange of Securities. Securities ---------------------------------------------------- authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities. SECTION 9.06 Trustee to Sign Supplemental Indentures. The Trustee ------------------------------------------------------ shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall be entitled to receive, and (subject to the provisions of Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07 Effect of Supplemental Indentures. Upon the execution ------------------------------------------------ of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 53
ARTICLE 10 SPECIAL TAX EVENT CONVERSION SECTION 10.01 Optional Conversion to Semiannual Coupon Notes upon Tax --------------------------------------------------------------------- Event. From and after (i) the date (the "Tax Event Date") of the occurrence of - ----- a Tax Event, at the option of the Company, interest in lieu of future Original Issue Discount shall accrue at the rate of 0.75% per annum on a Restated Principal Amount, per $1,000 original Principal Amount at Maturity (the "Restated Principal Amount") equal to the Issue Price plus Original Issue Discount accrued through the Tax Event Date or the date on which the Company exercises the option provided for in this Section 10.01, whichever is later (the "Option Exercise Date") and shall be payable semiannually on May 8 and November 8 of each year (each an "Interest Payment Date") to Holders of record at the close of business on the April 23 or October 23 (each a "Regular Record Date") immediately preceding such Interest Payment Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from the Option Exercise Date. Within 15 days of the occurrence of a Tax Event, the Company shall deliver a written notice of such Tax Event by facsimile and first-class mail to the Trustee and within 15 days of its exercise of such option the Company shall deliver a written notice of the Option Exercise Date by facsimile and first-class mail to the Trustee and by first class mail to the Holders of the Securities. From and after the Option Exercise Date, (i) the Company shall be obligated to pay at Stated Maturity, in lieu of the Principal Amount at Maturity of a Security, the Restated Principal Amount thereof, (ii) "Issue Price and accrued Original Issue Discount," "Issue Price plus Original Issue Discount" or similar words, as used herein, shall mean Restated Principal Amount plus accrued and unpaid interest with respect to any Security and (iii) contingent interest shall cease to accrue on the Securities. Securities authenticated and delivered after the Option Exercise Date may, and shall if required by the Trustee, bear a notation in a form approved by the Trustee as to the conversion of the Securities to semiannual coupon notes. ARTICLE 11 CONVERSION SECTION 11.01 Conversion Privilege. A Holder of a Security may ----------------------------------- convert such Security into Common Stock at any time during the period stated in paragraph 9 of the Securities. The number of shares of Common Stock issuable upon conversion of a Security per $1,000 of Principal Amount at Maturity thereof (the "Conversion Rate") shall be that set forth in paragraph 9 of the Securities, subject to adjustment as herein set forth. The Holders' right to convert Securities into shares of Common Stock is subject to the Company's right to elect instead to pay such Holder the amount of cash set forth in the next succeeding sentence, in lieu of delivering such shares of Common Stock; provided, however, that if an Event of Default (other than a default in a cash payment upon conversion of the Securities) shall have occurred and be continuing, the Company shall deliver shares of Common Stock (and cash in lieu of fractional shares of Common Stock) in accordance with this Article 11, whether or not the Company has delivered a notice pursuant to Section 3.04 to the 54
effect that the Securities would be paid in cash. The amount of cash to be paid pursuant to Section 11.02 for each $1,000 of Principal Amount at Maturity of a Security upon conversion shall be equal to the Average Sale Price of the Common Stock for the five consecutive trading days immediately following (i) the date of the Company's notice of its election to deliver cash upon conversion, if the Company shall not have given a notice of redemption pursuant to Section 3.04, or (ii) the Conversion Date, in the case of a conversion following such a notice of redemption specifying an intent to deliver cash upon all future conversions, in either case multiplied by the Conversion Rate in effect on such Conversion Date. The Company shall not pay cash in lieu of delivering shares of Common Stock upon the conversion of any Security pursuant to the terms of this Article 11 (other than cash in lieu of fractional shares pursuant to Section 11.03) if there has occurred (prior to, on or after, as the case may be, the Conversion Date or the date on which the Company delivers its notice of whether such Security shall be converted into shares of Common Stock or cash pursuant to Section 11.02) and is continuing an Event of Default (other than a default in a cash payment upon conversion of such Securities). A Holder may convert a portion of the Principal Amount at Maturity of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. "Average Sale Price" means the average of the Sale Prices of the Common Stock for the shorter of: (i) 30 consecutive trading days ending on the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated, or (ii) the period (x) commencing on the date next succeeding the first public announcement of (a) the issuance of rights, warrants or options or (b) the distribution, in each case, in respect of which the Average Sale Price is being calculated and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not trading days), or (iii) the period, if any, (x) commencing on the date next succeeding the Ex-Dividend Time with respect to the next preceding (a) issuance of rights, warrants or options or (b) distribution, in each case, for which an adjustment is required by the provisions of Section 11.06(4), 11.07 or 11.08 and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not trading days). In the event that the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 11.06(1), (2), (3) or (5) applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the 55
definition in the preceding sentence, "Average Sale Price" shall be calculated for such period in a manner determined by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Sale Price of the Common Stock during such period. "Time of Determination" means the time and date of the earlier of (i) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case, to which Section 11.07 or 11.08 applies and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on the New York Stock Exchange or such other principal national or regional exchange or market on which the Common Stock is then listed or quoted. SECTION 11.02 Conversion Procedure. To convert a Security, a Holder ----------------------------------- must satisfy the requirements in paragraph 9 of the Securities. The date on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date"). The Conversion Agent shall notify the Company of the Conversion Date within one Business Day of the Conversion Date. Within two Business days following the Conversion Date, the Company shall deliver to the applicable Holder, through the Conversion Agent, written notice of whether such Security shall be converted into shares of Common Stock or paid in cash, unless the Company shall have delivered such notice previously pursuant to Section 3.04. If the Company shall have notified the Holder that all of such Security shall be converted into shares of common stock, the Company shall deliver to the Holder, through the Conversion Agent, no later than the fifth Business Day following the Conversion Date, a certificate for the number of full shares of Common Stock issuable upon the conversion and cash in lieu of any fractional share determined pursuant to Section 11.03. Except as provided in the last sentence in the second paragraph of Section 11.01, if the Company shall have notified the Holder that all or a portion of such Security shall be paid in cash, the Company shall deliver to the Holder surrendering such Security the amount of cash payable with respect to such Security no later than the tenth Business Day following such Conversion Date, together with a certificate for the number of full shares of Common Stock issuable upon the conversion and cash in lieu of any fractional share determined pursuant to Section 11.03. Except as provided in the last sentence in the second paragraph of Section 11.03, the Company may not change its election with respect to the consideration to be delivered upon conversion of a Security once the Company has notified the Holder in accordance with this paragraph. If shares of Common Stock are delivered as consideration, then the Person in whose name the certificate representing such shares is registered shall be treated as a stockholder of record on and after the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such conversion shall be at the Conversion Rate in effect on the date that such Security shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. 56
No payment or adjustment will be made for accrued interest or dividends on, or other distributions with respect to, any Common Stock except as provided in this Article 11. On conversion of a Security, that portion of accrued Original Issue Discount (and original issue discount, as computed for United States federal income tax purposes pursuant to Section 1.275-4(b) of the Treasury Regulations) attributable to the period from the Issue Date to, but excluding, the Conversion Date and (except as provided below) that portion of accrued cash interest attributable to the period from the last Interest Payment Date (or, if no Interest Payment Date has occurred, from the Issue Date) to, but excluding, the Conversion Date (or, if the Company has exercised the option provided for in Section 10.01, that portion of accrued interest attributable to the period from the later of (x) the date of such exercise and (y) the most recent Interest Payment Date following the date of such exercise to, but excluding, the Conversion Date) with respect to the converted Security shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) and/or cash, if any, in exchange for the Security being converted pursuant to the provisions hereof; and such cash, if any, and/or the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as delivered pro rata, to the extent thereof, first in exchange for Original Issue Discount (and original issue discount, as computed for United States federal income tax purposes pursuant to Section 1.275-4(b) of the Treasury Regulations) and cash interest (or interest, if the Company has exercised its option provided for in Section 10.01) accrued to, but excluding, the Conversion Date, and the balance, if any, of such cash and/or the fair market value of such Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as delivered in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof. Notwithstanding the foregoing, accrued but unpaid cash interest will be payable upon conversion of Securities made concurrently with or after acceleration of Securities following an Event of Default. If the Holder converts more than one Security at the same time, the number of shares of Common Stock issuable or cash paid upon the conversion shall be based on the total Principal Amount at Maturity of the Securities converted. Securities surrendered for conversion by a Holder during the period from the close of business on any Regular Record Date to the opening of business on the next Interest Payment Date, except for Securities to be redeemed on a date within this period or on the next Interest Payment Date, must be accompanied by payment of an amount equal to the interest that the Holder is to receive on the Securities surrendered for conversion. Except where Securities surrendered for exchange must be accompanied by payment as described above, the Company will not pay interest on any Interest Payment Date subsequent to the Conversion Date. If the last day on which a Security may be converted is a Legal Holiday, the Security may be surrendered on the next succeeding day that is not a Legal Holiday. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in Principal Amount at Maturity to the unconverted portion of the Security surrendered. 57
SECTION 11.03 Fractional Shares. The Company will not issue a -------------------------------- fractional share of Common Stock upon conversion of a Security. Instead, the Company will deliver cash for the current market value of the fractional share. The current market value of a fractional share shall be determined, to the nearest 1/1,000th of a share, by multiplying the Sale Price of the Common Stock, on the last trading day prior to the Conversion Date, of a full share by the fractional amount and rounding the product to the nearest whole cent. SECTION 11.04 Taxes on Conversion. If a Holder converts a Security, ---------------------------------- the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. SECTION 11.05 Company to Provide Stock. The Company shall, prior to --------------------------------------- issuance of any Securities under this Article 11, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of the Securities. All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. SECTION 11.06 Adjustment for Change in Capital Stock. If, after the ----------------------------------------------------- Issue Date of the Securities, the Company: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock or other Capital Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; (3) combines its outstanding shares of Common Stock into a smaller number of shares; (4) pays a dividend or makes a distribution on its Common Stock in shares of its Capital Stock (other than Common Stock or rights, warrants or options for its Capital Stock); or 58
(5) issues by reclassification of its Common Stock any shares of its Capital Stock (other than rights, warrants or options for its Capital Stock), then the conversion privilege and the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Security thereafter converted may receive the number of shares of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Security immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder of a Security upon conversion of such Security may receive shares of two or more classes of Capital Stock of the Company, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article 11 with respect to the Common Stock, on terms comparable to those applicable to Common Stock in this Article 11. SECTION 11.07 Adjustment for Rights Issue. If after the Issue Date ------------------------------------------ of the Securities, the Company distributes any rights, warrants or options to all holders of its Common Stock entitling them, for a period expiring within 60 days after the record date for such distribution, to purchase shares of Common Stock at a price per share less than the Sale Price of the Common Stock as of the Time of Determination, the Conversion Rate shall be adjusted in accordance with the formula: R' = R x (O + N) -------------- (O + (N x P)/M) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. O = the number of shares of Common Stock outstanding on the record date for the distribution to which this Section 11.07 is being applied. N = the number of additional shares of Common Stock offered pursuant to the distribution. P = the offering price per share of the additional shares. M = the Average Sale Price, minus, in the case of (i) a distribution to which Section 11.06(4) applies or (ii) a distribution to which Section 11.08 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 11.07 applies and (y) the Ex-Dividend Time shall 59
occur on or after the date of the Time of Determination for the distribution to which this Section 11.07 applies, the fair market value (on the record date for the distribution to which this Section 11.07 applies) of the (1) Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 11.06(4) distribution and (2) assets of the Company or Debt securities or any rights, warrants or options to purchase securities of the Company distributed in respect of each share of Common Stock in such Section 11.08 distribution. The Board of Directors shall determine fair market values for the purposes of this Section 11.07. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 11.07 applies. If all of the shares of Common Stock subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options. No adjustment shall be made under this Section 11.07 if the application of the formula stated above in this Section 11.07 would result in a value of R' that is equal to or less than the value of R. SECTION 11.08 Adjustment for Other Distributions. ------------------------------------------------- (a) If, after the Issue Date of the Securities, the Company distributes to all holders of its Common Stock any of its assets excluding distributions of Capital Stock or equity interests referred to in Section 11.08(b), or evidences of indebtedness of the Company or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 11.06 and distributions of rights, warrants or options referred to in Section 11.07 and (y) cash dividends or other cash distributions that are paid out of consolidated current net earnings or earnings retained in the business as shown on the books of the Company unless such cash dividends or other cash distributions are Extraordinary Cash Dividends) the Conversion Rate shall be adjusted, subject to the provisions of Section 11.08(c), in accordance with the formula: R' = R x M ----- M-F where: R' = the adjusted Conversion Rate. 60
R = the current Conversion Rate. M = the Average Sale Price, minus, in the case of a distribution to which Section 11.06(4) applies, for which (i) the record date shall occur on or before the record date for the distribution to which this Section 11.08(a) applies and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 11.08(a) applies, the fair market value (on the record date for the distribution to which this Section 11.08(a) applies) of any Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 11.06(4) distribution. F = the fair market value (on the record date for the distribution to which this Section 11.08(a) applies) of the assets, securities, rights, warrants or options to be distributed in respect of each share of Common Stock in the distribution to which this Section 11.08(a) is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently). The Board of Directors shall determine fair market values for the purposes of this Section 11.08(a). The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 11.08(a) applies. For purposes of this Section 11.08(a), the term "Extraordinary Cash Dividend" shall mean any cash dividend with respect to the Common Stock the amount of which, together with the aggregate amount of cash dividends on the Common Stock to be aggregated with such cash dividend in accordance with the provisions of this paragraph, equals or exceeds the threshold percentage set forth in item (i) below. For purposes of item (i) below, the "Measurement Period" with respect to a cash dividend on the Common Stock shall mean the 365 consecutive day period ending on the date prior to the Ex-Dividend Time with respect to such cash dividend, and the "Relevant Cash Dividends" with respect to a cash dividend on the Common Stock shall mean the cash dividends on the Common Stock with Ex-Dividend Times occurring in the Measurement Period. (i) If, upon the date prior to the Ex-Dividend Time with respect to a cash dividend on the Common Stock, the aggregate amount of such cash dividend together with the amounts of all Relevant Cash Dividends equals or exceeds on a per share basis 10% of the Sale Price of the Common Stock on the last trading day preceding the date of declaration by the Board of Directors of the cash dividend with respect to which this provision is being applied, then such cash dividend together with all Relevant Cash Dividends, shall be deemed to be an Extraordinary Cash Dividend and for purposes of applying the formula set forth above in this Section 11.08(a), the value of "F" shall be equal to (y) the aggregate amount of such cash dividend together with the amount of all Relevant Cash Dividends, minus (z) the aggregate amount of all Relevant Cash Dividends for 61
which a prior adjustment in the Conversion Rate was previously made under this Section 11.08(a). In making the determinations required by item (i) above, the amount of cash dividends paid on a per share basis and the amount of any Relevant Cash Dividends specified in item (i) above, shall be appropriately adjusted to reflect the occurrence during such period of any event described in Section 11.06. (b) If, after the Issue Date of the Securities, the Company pays a dividend or makes a distribution to all holders of its Common Stock consisting of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Company, the Conversion Rate shall be adjusted in accordance with the formula: R' = R x (1 + F/M) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the average of the Post-Distribution Prices of the Common Stock for the 10 trading days commencing on and including the fifth trading day after the date on which "ex-dividend trading" commences for such dividend or distribution on the principal United States exchange or market which such securities are then listed or quoted (the "Ex-Dividend Date"). F = the fair market value of the securities distributed in respect of each share of Common Stock for which this Section 11.08(b) shall mean the number of securities distributed in respect of each share of Common Stock multiplied by the average of the Post-Distribution Prices of those securities distributed for the 10 trading days commencing on and including the fifth trading day after the Ex-Dividend Date. "Post-Distribution Price" of Capital Stock or any similar equity interest on any date means the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "when issued" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated; provided that if on any date such units have not traded on a "when issued" basis, the Post-Distribution Price shall be the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "regular way" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital 62
Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated. In the absence of such quotation, the Company shall be entitled to determine the Post-Distribution Price on the basis of such quotations, which reflect the post-distribution value of the Capital Stock or equity interests as it considers appropriate. (c) In the event that, with respect to any distribution to which Section 11.08(a) would otherwise apply, the difference "M-F" as defined in the formula set forth in Section 11.08(a) is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by Section 11.08(a) shall not be made and in lieu thereof the provisions of Section 11.14 shall apply to such distribution. SECTION 11.09 When Adjustment May Be Deferred. No adjustment in the ---------------------------------------------- Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 11 shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be (with one-half of a cent and 5/10,000ths of a share being rounded upwards). SECTION 11.10 When No Adjustment Required. No adjustment need be made ------------------------------------------ for a transaction referred to in Section 11.06, 11.07, 11.08, 11.14 or 11.19 if Securityholders are 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 Common Stock participate in the transaction. Such participation by Securityholders may include participation upon conversion provided that an adjustment shall be made at such time as the Securityholders are no longer entitled to participate. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent the Securities become convertible pursuant to this Article 11 into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. SECTION 11.11 Notice of Adjustment. Whenever the Conversion Rate is ----------------------------------- adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. 63
SECTION 11.12 Voluntary Increase. The Company from time to time may --------------------------------- increase the Conversion Rate by any amount for any period of time. Whenever the Conversion Rate is increased, the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 11.06, 11.07 or 11.08. SECTION 11.13 Notice of Certain Transactions. If: --------------------------------------------- (1) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 11.06, 11.07 or 11.08 (unless no adjustment is to occur pursuant to Section 11.10); or (2) the Company takes any action that would require a supplemental indenture pursuant to Section 11.14; or (3) there is a liquidation or dissolution of the Company; then the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. SECTION 11.14 Reorganization of Company; Special Distributions. If --------------------------------------------------------------- the Company is a party to a transaction subject to Section 5.01 (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of Common Stock immediately prior to such transaction do not receive securities, cash or other assets of the Company or any other person) or a merger or binding share exchange which reclassifies or changes the outstanding Common Stock, the person obligated to deliver securities, cash or other assets upon conversion of Securities shall enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Securities is an Affiliate of the successor Company, that issuer shall join in the supplemental indenture. The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Security immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder (i) was not a constituent person or an Affiliate of a constituent person to such transaction; (ii) made no election with respect thereto; and (iii) was treated alike with the plurality of non- electing Holders. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article 11. The successor Company shall mail to Securityholders a notice briefly describing the supplemental indenture. 64
If this Section applies, neither Section 11.06 nor 11.07 applies. If the Company makes a distribution to all holders of its Common Stock of any of its assets, or Debt securities or any rights, warrants or options to purchase securities of the Company that, but for the provisions of Section 11.08(c), would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 11.08, then, from and after the record date for determining the holders of Common Stock entitled to receive the distribution, a Holder of a Security that converts such Security in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of Common Stock into which the Security is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Security immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution. SECTION 11.15 Company Determination Final. Any determination that the ------------------------------------------ Company or the Board of Directors must make pursuant to Section 11.03, 11.06, 11.07, 11.08, 11.09, 11.10, 11.14 or 11.17 is conclusive. SECTION 11.16 Trustee's Adjustment Disclaimer. The Trustee has no ---------------------------------------------- duty to determine when an adjustment under this Article 11 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 11.14 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article 11. Each Conversion Agent shall have the same protection under this Section 11.16 as the Trustee. SECTION 11.17 Simultaneous Adjustments. In the event that this --------------------------------------- Article 11 requires adjustments to the Conversion Rate under more than one of Sections 11.06(4), 11.07 or 11.08, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 11.06, second, the provisions of Section 11.08 and, third, the provisions of Section 11.07. SECTION 11.18 Successive Adjustments. After an adjustment to the ------------------------------------- Conversion Rate under this Article 11, any subsequent event requiring an adjustment under this Article 11 shall cause an adjustment to the Conversion Rate as so adjusted. SECTION 11.19 Rights Issued in Respect of Common Stock Issued upon ------------------------------------------------------------------- Conversion. Each share of Common Stock issued upon conversion of Securities - ---------- pursuant to this Article 11 shall be entitled to receive such number of shares of Series A Junior Preferred Stock of the Company that is specified in the Company's Amended and Restated Shareholder Rights Agreement, dated as of August 9, 1999, in relation to each share of Common Stock. Each share of Common Stock issued upon conversion of the Securities pursuant to this Article 11 shall be further entitled to such number of shares of Common Stock or preferred stock purchase rights, as the case may be (together with the right to receive shares of Series A Junior Preferred Stock, the "Rights"), if any, that all shares of Common Stock are entitled to receive and the certificates representing the Common Stock issued upon such conversion shall bear such legends, if any, in 65
each case as may be provided by the terms of any shareholder rights agreement adopted by the Company, as the same may be amended from time to time (in each case, a "Rights Agreement"). Provided that such Rights Agreement requires that each share of Common Stock issued upon conversion of Securities at any time prior to the distribution of separate certificates representing the Rights be entitled to receive such Rights, then, notwithstanding anything else to the contrary in this Article 11, there shall not be any adjustment to the conversion privilege or Conversion Rate as a result of the issuance of Rights, the distribution of separate certificates representing the Rights, the exercise or redemption of such Rights in accordance with any such Rights Agreement, or the termination or invalidation of such Rights. ARTICLE 12 PAYMENT OF INTEREST SECTION 12.01 Interest Payments. Semiannual or contingent interest on -------------------------------- any Security that is payable, and is punctually paid or duly provided for, on any applicable payment date shall be paid to the person in whose name that Security is registered at the close of business on the Regular Record Date or accrual date, as the case may be, for such interest at the office or agency of the Company maintained for such purpose. Each installment of semiannual or contingent interest on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States. In the case of a permanent Global Security, semiannual or contingent interest payable on any applicable payment date will be paid to the Depositary, with respect to that portion of such permanent Global Security held for its account by Cede & Co. for the purpose of permitting such party to credit the interest received by it in respect of such permanent Global Security to the accounts of the beneficial owners thereof. SECTION 12.02 Defaulted Interest. Except as otherwise specified with --------------------------------- respect to the Securities, any semiannual or contingent interest on any Security that is payable, but is not punctually paid or duly provided for, within 30 days following any applicable payment date (herein called "Defaulted Interest", which term shall include any accrued and unpaid interest that has accrued on such defaulted amount in accordance with paragraph 1 of the Securities), shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date or accrual date, as the case may be, by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Securities are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the 66
persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities at his address as it appears on the list of Securityholders maintained pursuant to Section 2.05 not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Securities are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. SECTION 12.03 Interest Rights Preserved. Subject to the foregoing ---------------------------------------- provisions of this Article 12 and Section 2.06, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to semiannual and contingent interest accrued and unpaid, and to accrue, which were carried by such other Security. ARTICLE 13 MISCELLANEOUS SECTION 13.01 Trust Indenture Act Controls. If any provision of this ------------------------------------------- Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02 Notices. Any request, demand, authorization, notice, ---------------------- waiver, consent or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers: if to the Company: Marriott International, Inc. 10400 Fernwood Road Bethesda, MD 20817 67
Telephone No. (301) 380-3000 Facsimile No. (301) 380-5067 Attention: Treasury Department 52/924.11 with a copy to: Assistant General Counsel Corporate Finance Department 52/923.23 Facsimile No. (301) 380-6727 if to the Trustee: The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Telephone No. 212-815-5084 Facsimile No. 212-815-5915 Attention: Corporate Trust Administration The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Securityholder shall be mailed to the Securityholder, by first-class mail, postage prepaid, at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent, Bid Solicitation Agent or co-registrar. SECTION 13.03 Communication by Holders with Other Holders. ---------------------------------------------------------- Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent, the Bid Solicitation Agent and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04 Certificate and Opinion as to Conditions Precedent. ----------------------------------------------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: 68
(1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture -------- relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 13.05 Statements Required in Certificate or Opinion. Each ------------------------------------------------------------ Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such person, such covenant or condition has been complied with. SECTION 13.06 Separability Clause. In case any provision in this ---------------------------------- Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.07 Rules by Trustee, Paying Agent, Conversion Agent, Bid -------------------------------------------------------------------- Solicitation Agent and Registrar. The Trustee may make reasonable rules for - -------------------------------- action by or a meeting of Securityholders. The Registrar, Conversion Agent, the Bid Solicitation Agent and the Paying Agent may make reasonable rules for their functions. SECTION 13.08 Calculations. The calculation of the Purchase Price, --------------------------- Change in Control Purchase Price, Conversion Rate, Market Price, Sale Price of the Common Stock and each other calculation to be made hereunder shall be the obligation of the Company. All calculations made by the Company as contemplated pursuant to this Section 13.08 shall be final and binding on the Company and the Holders absent manifest error. The Trustee, Paying Agent, Conversion Agent and Bid Solicitation Agent shall not be obligated to recalculate, recompute or confirm any such calculations. SECTION 13.09 Legal Holidays. A "Legal Holiday" is any day other than ----------------------------- a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no Original Issue Discount or interest, if any, shall accrue for the intervening period. 69
SECTION 13.10 GOVERNING LAW. THIS INDENTURE AND THE SECURITIES WILL ---------------------------- BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK . SECTION 13.11 No Recourse Against Others. A director, officer, ----------------------------------------- employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.12 Successors. All agreements of the Company in this ------------------------- Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 13.13 Multiple Originals. The parties may sign any number of --------------------------------- copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 70
IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. MARRIOTT INTERNATIONAL, INC. By: _______________________ Name: Title: THE BANK OF NEW YORK, as Trustee By: ___________________________ Name: Title:
EXHIBIT A-1 MARRIOTT INTERNATIONAL, INC. Liquid Yield Option(TM) Note due 2021 (Zero Coupon-Senior) FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS SECURITY IS ISSUED WITH AN INDETERMINATE AMOUNT OF ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE DATE IS MAY 8, 2001, AND THE YIELD TO MATURITY FOR PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 8.26% PER ANNUM. THE HOLDER OF THIS SECURITY MAY OBTAIN THE PROJECTED PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: MARRIOTT INTERNATIONAL, INC., 10400 FERNWOOD ROAD, BETHESDA, MD 20817, ATTENTION: TREASURY DEPARTMENT 52/924.11 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ISSUANCE OF THE LYONS UPON THE EXERCISE OF THE OVER-ALLOTMENT OPTION, AND THE LAST DATE ON WHICH MARRIOTT INTERNATIONAL, INC. (THE "COMPANY" OR THE "ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. [THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE.] A-1-2
MARRIOTT INTERNATIONAL, INC. Liquid Yield Option(TM) Note due 2021 (Zero Coupon-Senior) No. R CUSIP: 571903 AA Issue Date: May 8, 2001 Original Issue Discount: $139.05 Issue Price: $860.95 (for each $1,000 Principal (for each $1,000 Principal Amount at Maturity) Amount at Maturity) MARRIOTT INTERNATIONAL, INC., a corporation incorporated under the laws of the State of Delaware, promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of ________________($ ) on May 8, 2021. This Security shall not bear interest except as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. Dated: _____________ MARRIOTT INTERNATIONAL, INC. By: ___________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture (as defined on the other side of this Security). By: ___________________________ Authorized Signatory Dated: ________________________ A-1-3
FORM OF REVERSE SIDE OF LYON Liquid Yield Option(TM) Note due 2021 (Zero Coupon-Senior) 1. Interest. This Security shall not bear interest, except as specified in this paragraph or in paragraph 5 or 11 hereof. If the Principal Amount at Maturity hereof or any portion of such Principal Amount at Maturity is not paid when due (whether upon acceleration pursuant to Section 6.02 of the Indenture, upon the date set for payment of the Redemption Price pursuant to paragraph 6 hereof, upon the date set for payment of the Purchase Price or Change in Control Purchase Price pursuant to paragraph 7 hereof or upon the Stated Maturity of this Security) or if interest (including contingent interest, if any) due hereon or any portion of such interest is not paid when due in accordance with paragraph 5 or 11 hereof, then in each such case the overdue amount shall, to the extent permitted by law, bear interest at the rate of 0.75% per annum, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount. Original Issue Discount (the difference between the Issue Price and the Principal Amount at Maturity of the Security), in the period during which a Security remains outstanding, shall accrue at 0.75% per annum, on a semiannual bond equivalent basis using a 360-day year composed of twelve 30-day months, from the Issue Date of this Security. 2. Method of Payment. Subject to the terms and conditions of the Indenture, the Company will make payments in respect of Principal Amount at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price and interest, if any, to Holders who surrender Securities to a Paying Agent to collect such payments in respect of the Securities. The Company will pay any cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may make such cash payments by check payable in such money. 3. Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. The Company may appoint and change any Paying Agent, Conversion Agent, Registrar or co-registrar or Bid Solicitation Agent without notice, other than notice to the Trustee except that the Company will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Registrar or A-1-4
co-registrar. None of the Company, any of its Subsidiaries or any of their Affiliates shall act as Bid Solicitation Agent. 4. Indenture. The Company issued the Securities under an Indenture dated as of May 8, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured and unsubordinated obligations of the Company limited to $410,000,000 aggregate Principal Amount at Maturity ($470,000,000 aggregate Principal Amount at Maturity if the over-allotment option is exercised in full within 30 days from the Issue Date), subject to Section 2.07 of the Indenture. The Indenture does not limit other indebtedness of the Company, secured or unsecured. 5. Contingent Interest. Subject to the accrual and record date provisions specified in this paragraph 5, the Company shall pay contingent interest to the Holders during any six-month period (a "Contingent Interest Period") from May 9 to November 8 and from November 9 to May 8, commencing May 9, 2004, if the average LYON Market Price for the Five-Day Period with respect to such Contingent Interest Period equals 120% or more of the sum of the Issue Price of a Security and Original Issue Discount accrued thereon to the day immediately preceding the first day of the relevant Contingent Interest Period. The amount of contingent interest payable per $1,000 Principal Amount at Maturity hereof in respect of any Quarterly Period within a Contingent Interest Period shall equal the greater of (i) Regular Cash Dividends paid by the Company per share of Common Stock during that Quarterly Period multiplied by the number of shares of Common Stock into which $1,000 Principal Amount at Maturity hereof is convertible pursuant to paragraph 9 hereof as of the accrual date for such contingent interest or (ii) $.06 multiplied by such number of shares. Contingent interest, if any, will accrue and be payable to Holders as of the record date for the related Regular Cash Dividend or, if no Regular Cash Dividend is paid by the Company during a Quarterly Period, to Holders as of the 15/th/ day preceding the last day of the relevant Contingent Interest Period. Such payments shall be paid on the payment date of the related Regular Cash Dividend or, if no Regular Cash Dividend is paid by the Company during any Quarterly Period, on the last day of the relevant Contingent Interest Period. Original Issue Discount will continue to accrue at .75% per annum whether or not contingent interest is paid. "Five-Day Period" means, with respect to any Contingent Interest Period, the five trading days ending on the second trading day immediately preceding the first day of such Contingent Interest Period; provided, however, if the Company shall have declared a Regular Cash Dividend on its Common Stock that is payable during such Contingent Interest Period but for which the A-1-5
record date for determining stockholders entitled thereto precedes the first day of such Contingent Interest Period, then "Five-Day Period" shall mean, with respect to such Contingent Interest Period, the five trading days ending on the second trading day immediately preceding such record date. "Regular Cash Dividends" means quarterly or other periodic cash dividends on the Company's Common Stock as declared by the Company's Board of Directors as part of its cash dividend payment practices and that are not designated by them as extraordinary or special or other nonrecurring dividends. "LYON Market Price" means, as of any date of determination, the average of the secondary market bid quotations per $1,000 Principal Amount at Maturity obtained by the Bid Solicitation Agent for $10 million Principal Amount at Maturity of Securities at approximately 4:00 p.m., New York City time, on such determination date from three recognized securities dealers in The City of New York (none of which shall be an Affiliate of the Company) selected by the Company; provided, however, if (a) at least three such bids are not obtained by the Bid Solicitation Agent or (b) in the Company's reasonable judgment, the bid quotations are not indicative of the secondary market value of the Securities as of such determination date, then the LYON Market Price for such determination date shall equal (i) the Conversion Rate in effect as of such determination date multiplied by (ii) the average Sale Price of the Common Stock for the five trading days ending on such determination date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such trading days during such five trading day period and ending on such determination date, of any event described in Section 11.06, 11.07 or 11.08 (subject to the conditions set forth in Sections 11.09 and 11.10) of the Indenture. The term "Quarterly Period" shall mean, with respect to any Contingent Interest Period, any quarterly period within such Contingent Interest Period extending from May 8 to August 7, August 8 to November 7, November 8 to February 7, or from February 8 to May 7. Upon determination that Holders will be entitled to receive contingent interest which may become payable during a Contingent Interest Period, on or prior to the first day of such Contingent Interest Period, the Company shall issue a press release and publish such information on its web site on the World Wide Web or successor media. 6. Redemption at the Option of the Company. No sinking fund is provided for the Securities. The Securities are redeemable for cash as a whole at any time, or in part from time to time, at the option of the Company at the Redemption Prices set forth below, provided that -------- the Securities are not redeemable at the option of the Company prior to May 8, 2004. The table below shows Redemption Prices of a Security per $1,000 Principal Amount at Maturity on the dates shown below and at Stated Maturity, which prices reflect accrued Original Issue Discount calculated to each such date. The Redemption Price of a Security redeemed between such dates shall include an additional amount reflecting the additional Original Issue Discount accrued since the next preceding date in the table. A-1-6
(1) (2) (3) LYON Accrued Original Redemption Price Redemption Date Issue Price Issue Discount (1) + (2) - --------------- ----------- -------------- --------- May 8, 2004.......................... $860.95 $ 19.55 $ 880.50 May 8, 2005.......................... $860.95 $ 26.17 $ 887.12 May 8, 2006.......................... $860.95 $ 32.84 $ 893.79 May 8, 2007.......................... $860.95 $ 39.55 $ 900.50 May 8, 2008.......................... $860.95 $ 46.32 $ 907.27 May 8, 2009.......................... $860.95 $ 53.14 $ 914.09 May 8, 2010.......................... $860.95 $ 60.00 $ 920.95 May 8, 2011.......................... $860.95 $ 66.92 $ 927.87 May 8, 2012.......................... $860.95 $ 73.90 $ 934.85 May 8, 2013.......................... $860.95 $ 80.92 $ 941.87 May 8, 2014.......................... $860.95 $ 88.00 $ 948.95 May 8, 2015.......................... $860.95 $ 95.13 $ 956.08 May 8, 2016.......................... $860.95 $102.31 $ 963.26 May 8, 2017.......................... $860.95 $109.55 $ 970.50 May 8, 2018.......................... $860.95 $116.84 $ 977.79 May 8, 2019.......................... $860.95 $124.19 $ 985.14 May 8, 2020.......................... $860.95 $131.59 $ 992.54 At Stated Maturity................... $860.95 $139.05 $1,000.00 If this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Redemption Price will be equal to the Restated Principal Amount, plus accrued and unpaid interest from the date of such conversion through the Redemption Date; but in no event will this Security be redeemable before May 8, 2004. In addition to the Redemption Price payable with respect to all Securities or portions thereof to be redeemed as of a Redemption Date, the Holders of such Securities (or portions thereof) shall be entitled to receive accrued and unpaid contingent interest, if any, with respect thereto, which contingent interest shall be paid in cash on the Redemption Date. 7. Purchase by the Company at the Option of the Holder. Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, the Securities held by such Holder on the following Purchase Dates and at the following Purchase Prices per $1,000 Principal Amount at Maturity, upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on such Purchase Date and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture. Purchase Date Purchase Price ------------- -------------- A-1-7
May 8, 2002 $867.42 May 8, 2004 $880.50 May 8, 2011 $927.87 May 8, 2016 $963.26 The Purchase Price (equal to the Issue Price plus accrued Original Issue Discount to the Purchase Date) may be paid, at the option of the Company, in cash, in shares of Common Stock or in any combination thereof. If prior to a Purchase Date this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Purchase Price will be equal to the Restated Principal Amount, plus accrued and unpaid interest from the date of conversion to the Purchase Date. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or a portion of the Securities held by such Holder as of a date no later than 35 Business Days after the occurrence of a Change in Control of the Company occurring on or prior to May 8, 2004 for a Change in Control Purchase Price equal to the Issue Price plus accrued Original Issue Discount to the Change in Control Purchase Date, which Change in Control Purchase Price shall be paid in cash. If prior to a Change in Control Purchase Date this Security has been converted to a semiannual coupon note following the occurrence of a Tax Event, the Change in Control Purchase Price shall be equal to the Restated Principal Amount, plus accrued and unpaid interest from the date of conversion to the Change in Control Purchase Date. A third party may make the offer and purchase of the Securities in lieu of the Company in accordance with the Indenture. In addition to the Purchase Price or Change in Control Purchase Price, as the case may be, payable with respect to all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, the Holders of such Securities (or portions thereof) shall be entitled to receive accrued and unpaid contingent interest, if any, with respect thereto, which contingent interest shall be paid in cash promptly following the later of the Purchase Date or the Change in Control Purchase Date, as the case may be and the time of delivery of such Securities to the Paying Agent pursuant to the Indenture. Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or securities if permitted under the Indenture) sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, together with any accrued and unpaid contingent interest, of all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, A-1-8
as the case may be, Original Issue Discount and interest (including contingent interest), if any, shall cease to accrue on such Securities (or portions thereof) immediately after such Purchase Date or Change in Control Purchase Date, as the case may be, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Change in Control Purchase Price, as the case may be, and accrued and unpaid contingent interest, if any, upon surrender of such Security). 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of, and accrued and unpaid contingent interest, if any, with respect to, all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, immediately after such Redemption Date, Original Issue Discount and interest (including contingent interest), if any, shall cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of Principal Amount at Maturity may be redeemed in part but only in integral multiples of $1,000 of Principal Amount at Maturity. 9. Conversion. Subject to the next two succeeding sentences, a Holder of a Security may convert it into Common Stock of the Company at any time before the close of business on May 8, 2021. If the Security is called for redemption, the Holder may convert it only until the close of business on the second business day immediately preceding the Redemption Date. A Security in respect of which a Holder has delivered a Purchase Notice or Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. The initial Conversion Rate is 13.5285 shares of Common Stock per $1,000 Principal Amount at Maturity, subject to adjustment upon occurrence of certain events described in the Indenture. The Company will deliver cash in lieu of any fractional share of Common Stock. In the event the Company exercises its option pursuant to Section 10.01 of the Indenture to have interest in lieu of Original Issue Discount accrue on the Security following a Tax Event, the Holder will be entitled on conversion to receive the same number of shares of Common Stock such Holder would have received if the Company had not exercised such option. If the Company exercises such option, Securities surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (except Securities with respect to which the Company has mailed a notice of redemption) must be accompanied by payment of an amount equal to the interest thereon that the registered Holder is to receive. Except where Securities surrendered for conversion must be accompanied by payment as described above, no interest on converted Securities will be payable by the Company on any Interest Payment Date subsequent to the date of conversion. A-1-9
Securities surrendered for conversion during the period from the close of business on any date on which contingent interest accrues to the opening of business on the date on which such contingent interest is payable (except Securities with respect to which the Company has mailed a notice of redemption) must be accompanied by payment of an amount equal to the contingent interest with respect thereto that the registered Holder is to receive. Except where Securities surrendered for conversion must be accompanied by payment as described above, no contingent interest on converted Securities will accrue after the date of conversion. To convert a Security, a Holder must (1) complete and manually sign the conversion notice below (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) surrender the Security to the Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (4) pay any transfer or similar tax, if required. A Holder may convert a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Common Stock except as provided in the Indenture. On conversion of a Security, that portion of accrued original issue discount, as computed for United States federal income tax purposes pursuant to Section 1.1275-4(b) of the Treasury Regulations, (or interest if the Company has exercised its option provided for in paragraph 11 hereof) attributable to the period from the Issue Date (or, if the Company has exercised the option referred to in paragraph 11 hereof, the later of (x) the date of such exercise and (y) the date on which interest was last paid) through the Conversion Date and (except as provided below) accrued contingent interest with respect to the converted Security shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through the delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the terms hereof; and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for original issue discount, as computed for United States federal income tax purposes pursuant to Section 1.1275-4(b) of the Treasury Regulations, (or interest, if the Company has exercised its option provided for in paragraph 11 hereof) accrued through the Conversion Date and accrued contingent interest, and the balance, if any, of such fair market value of such Common Stock (and any such cash payment) shall be treated as issued in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof. The Conversion Rate will be adjusted for dividends or distributions on Common Stock payable in Common Stock or other Capital Stock; subdivisions, combinations or certain reclassifications of Common Stock; distributions to all holders of Common Stock of certain rights to purchase Common Stock for a period expiring within 60 days at less than the Sale Price at the Time of Determination; and distributions to such holders of assets or Debt securities of the Company or certain rights to purchase securities of the Company (excluding certain cash dividends or distributions). However, no adjustment need be made if Securityholders may participate in the transaction or in certain other cases. The Company from time to time may voluntarily increase the Conversion Rate. A-1-10
In the event that the Company declares a dividend or distribution described in Section 11.07 of the Indenture, or a dividend or a distribution described in Section 11.08 of the Indenture where the fair market value of such dividend or distribution per share of Common Stock, as determined in the Indenture, exceeds 15% of the Sale Price of the Common Stock on the day preceding the date of declaration for such dividend or distribution, the Company shall give notice to the Holders, which shall not be less than 20 days prior to the Ex-Dividend Date for such dividend or distribution. If the Company is a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of its assets, or upon certain distributions described in the Indenture, the right to convert a Security into Common Stock may be changed into a right to convert it into the kind and amount of securities, cash or other assets of the Company or another person which the Holder would have received if the Holder had converted its Securities immediately prior to the transaction. 10. Conversion Arrangement on Call for Redemption. Any Securities called for redemption, unless surrendered for conversion before the close of business on the Redemption Date, may be deemed to be purchased from the Holders of such Securities at an amount not less than the Redemption Price, by one or more investment banks or other purchasers who may agree with the Company to purchase such Securities from the Holders, to convert them into Common Stock of the Company and to make payment for such Securities to the Trustee in trust for such Holders. 11. Tax Event (a) From and after (i) the date (the "Tax Event Date") of the occurrence of a Tax Event and (ii) the date the Company exercises the option provided for in this paragraph 11, whichever is later (the "Option Exercise Date"), at the option of the Company, interest in lieu of future Original Issue Discount shall accrue at the rate of .75% per annum on a principal amount per Security (the "Restated Principal Amount") equal to the Issue Price plus Original Issue Discount accrued through the Option Exercise Date and shall be payable semiannually on May 8 and November 8 of each year (each an "Interest Payment Date") to Holders of record at the close of business on the April 23 or October 23 (each a "Regular Record Date") immediately preceding such Interest Payment Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Option Exercise Date. (b) Interest on any Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Security is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose. Each installment of interest on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States. (c) From and after the Option Exercise Date, contingent interest provided for in paragraph 5 hereof shall cease to accrue on this Security. A-1-11
12. Defaulted Interest. Except as otherwise specified with respect to the Securities, any Defaulted Interest on any Security shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date or accrual date, as the case may be, by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company as provided for in Section 12.02 of the Indenture. 13. Denominations; Transfer; Exchange. The Securities are in fully registered form, without coupons, in denominations of $1,000 of Principal Amount at Maturity and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. 13. Persons Deemed Owners. The registered Holder of this Security may be treated as the owner of this Security for all purposes. 14. Unclaimed Money or Securities. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property laws. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 15. Amendment; Waiver. Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding and (ii) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, to comply with Article 5 or Section 11.14 of the Indenture, to secure the Company's obligations under this Security, to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred, to comply with any requirement A-1-12
of the SEC in connection with the qualification of the Indenture under the TIA or as necessary in connection with the registration of the Securities under the Securities Act. 16. Defaults and Remedies. Under the Indenture, Events of Default include (i) default in the payment of contingent interest or of interest when the same becomes due and payable or of interest which becomes due or payable upon exercise by the Company of its option provided for in paragraph 11 hereof, which default in either case continues for 30 days; (ii) default in payment of the Principal Amount at Maturity (or, if the Securities have been converted to semiannual coupon notes following a Tax Event, the Restated Principal Amount), Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price or Change in Control Purchase Price, as the case may be, in respect of the Securities when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise, whether or not such payment shall be prohibited by the Indenture; (iii) failure by the Company to comply with other agreements in the Indenture (other than those referred to in clause (i) above) or the Securities, subject to notice and lapse of time; (iv)(a) failure by the Company or any Restricted Subsidiary to make any payment by the end of the applicable grace period after maturity of Debt in an aggregate principal amount in excess of $100 million and continuance of such failure or (b) the acceleration of Debt because of a default with respect to such Debt without such Debt having been discharged or such acceleration having been cured, waived, rescinded or annulled, in the case of (a) above, for a period of 10 days after written notice to the Company by the Trustee or to the Company and the Trustee by the Holders of not less than 25% in aggregate Principal Amount at Maturity of the Securities then outstanding; provided, however, that if any such --------- ------- failure or acceleration referred to in (a) or (b) above shall cease or be cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; and (v) certain events of bankruptcy or insolvency. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding, may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency are Events of Default, which will result in the Securities becoming due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of amounts specified in clause (i) or (ii) above) if it determines that withholding notice is in their interests. 17. Trustee Dealings with the Company. Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may A-1-13
otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 18. Authentication. This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 19. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. GOVERNING LAW. THE INDENTURE AND THIS SECURITY WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. ---------------------- A-1-14
The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture. Requests may be made to: Corporate Secretary Marriott International, Inc. Marriott Drive Washington, D.C. 20058 Telephone No. (301) 380-3000 Attention: Department 52/862 ASSIGNMENT FORM CONVERSION NOTICE To assign this Security, fill in the To convert this Security into Common form below: Stock of the Company, check the box: I or we assign and transfer this [_] Security to ____________________________________ To convert only part of this Security, ____________________________________ state the Principal Amount at Maturity to be converted (which must be $1,000 or (Insert assignee's soc. sec. or tax an integral multiple of $1,000): ID no.) ____________________________________ $__________________________ ____________________________________ ____________________________________ If you want the stock certificate made (Print or type assignee's name, out in another person's name, fill in address and zip code) the form below: ________________________________________ and irrevocably appoint ________________________________________ (Insert other person's soc. sec. or _____________________ agent to tax ID no.) transfer this Security on the books of the Company. The agent may ________________________________________ substitute another to act for him. ________________________________________ ________________________________________ ________________________________________ (Print or type other person's name, address and zip code) ________________________________________________________________________________ Date: _____________________ Your Signature:___________________________________ ________________________________________________________________________________ (Sign exactly as your name appears on the other side of this Security)
EXHIBIT A-2 [FORM OF CERTIFICATED SECURITY] FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS SECURITY IS ISSUED WITH AN INDETERMINATE AMOUNT OF ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE DATE IS MAY 8, 2001, AND THE YIELD TO MATURITY FOR PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 8.26% PER ANNUM. THE HOLDER OF THIS SECURITY MAY OBTAIN THE PROJECTED PAYMENT SCHEDULE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: MARRIOTT INTERNATIONAL, INC., 10400 FERNWOOD ROAD, BETHESDA, MD 20817, ATTENTION: TREASURY DEPARTMENT 52/924.11 [INCLUDE IF SECURITY IS A CERTIFICATED SECURITY TO BE HELD BY AN INSTITUTIONAL ACCREDITED INVESTOR--IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOLLOWING RESTRICTIONS.] THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ISSUANCE OF THE LYONS UPON THE EXERCISE OF THE OVER-ALLOTMENT OPTION, AND THE LAST DATE ON WHICH THE MARRIOTT INTERNATIONAL, INC. (THE "COMPANY" OR THE "ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHTS PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. [THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE.] A-2-2
MARRIOTT INTERNATIONAL, INC. Liquid Yield Option(TM) Note due 2021 (Zero Coupon-Senior) No. R CUSIP: 571903 AA Issue Date: May 8, 2001 Original Issue Discount: $139.05 Issue Price: $860.95 (for each $1,000 Principal (for each $1,000 Principal Amount at Maturity) Amount at Maturity) MARRIOTT INTERNATIONAL, INC., a corporation incorporated under the laws of the State of Delaware, promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of ________________($ ) on May 8, 2021. This Security shall not bear interest except as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. Dated: _____________ MARRIOTT INTERNATIONAL, INC. By: ---------------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture (as defined on the other side of this Security). By: ___________________________ Authorized Signatory Dated: ________________________ A-2-3
EXHIBIT B-1 Transfer Certificate In connection with any transfer of any of the Securities within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act") (or any successor provision), the undersigned registered owner of this Security hereby certifies with respect to $__________ Principal Amount at Maturity of the above-captioned securities presented or surrendered on the date hereof (the "Surrendered Securities") for registration of transfer, or for exchange or conversion where the securities issuable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a "transfer"), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Securities for the reason checked below: [_] A transfer of the Surrendered Securities is made to the Company or any subsidiaries; or [_] The transfer of the Surrendered Securities complies with Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act"); or [_] The transfer of the Surrendered Securities is to an institutional accredited investor, as described in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act; or [_] The transfer of the Surrendered Securities is pursuant to an effective registration statement under the Securities Act, or [_] The transfer of the Surrendered Securities is pursuant to an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act; or [_] The transfer of the Surrendered Securities is pursuant to another available exemption from the registration requirement of the Securities Act. and unless the box below is checked, the undersigned confirms that, to the undersigned's knowledge, such Securities are not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act (an "Affiliate"). [_] The transferee is an Affiliate of the Company. DATE:_____________________ ___________________________________________ Signature(s) (If the registered owner is a corporation, partnership or fiduciary, the title of the Person signing on behalf of such registered owner must be stated.)
EXHIBIT B-2 Form of Letter to be Delivered by Accredited Investors Marriott International, Inc. 10400 Fernwood Road Bethesda, MD 20817 Attention: Treasurer Department 52/924.11 The Bank of New York 101 Barclay Street, Floor 21 West New York, New York 10286 Attention: Corporate Trust Administration Dear Sirs: We are delivering this letter in connection with the proposed transfer of $________ Principal Amount at Maturity of the Liquid Yield Option(TM) Notes due 2021 ("LYONs") of Marriott International, Inc. (the "Company"), which are convertible into shares of the Company's Class A Common Stock, par value $.01 per share (the "Common Stock"). We hereby confirm that: (i) we are an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional Accredited Investor"); (ii) the purchase of LYONs by us is for our own account or for the account of one or more other Institutional Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring LYONs as fiduciary for the account of one or more institutions for which we exercise sole investment discretion; (iii) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing LYONs; and (iv) we are not acquiring LYONs with a view to distribution thereof or with any present intention of offering or selling LYONs or the Common Stock issuable upon
conversion thereof, except as permitted below; provided that the disposition of our property and property of any accounts for which we are acting as fiduciary shall remain at all times within our control. We understand that the LYONs were originally offered and sold in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the LYONs and the shares of Common Stock (the "Securities") issuable upon conversion thereof have not been registered under the Securities Act, and we agree, on our own behalf and on behalf of each account for which we acquire any LYONs, that if in the future we decide to resell or otherwise transfer such Securities prior to the date (the "Resale Restriction Termination Date") which is two years after the later of the original issuance of the LYONs and the last date on which the Company or an affiliate of the Company was the owner of the Security, such Securities may be resold or otherwise transferred only (i) to The Company or any subsidiary thereof, or (ii) for as long as the LYONs are eligible for resale pursuant to Rule 144A, to a person it reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) that purchases for its own account or for the account of a qualified institutional buyer to which notice is given that the transfer is being made in reliance on Rule 144A, or (iii) to an Institutional Accredited Investor that is acquiring the Security for its own account, or for the account of such Institutional Accredited Investor for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, or (iv) pursuant to another available exemption from registration under the Securities Act (if applicable), or (v) pursuant to a registration statement which has been declared effective under the Securities Act and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction and in accordance with the legends set forth on the Securities. We further agree to provide any person purchasing any of the Securities other than pursuant to clause (v) above from us a notice advising such purchaser that resales of such securities are restricted as stated herein. We understand that the trustee or the transfer agent, as the case may be, for the Securities will not be required to accept for registration of transfer any Securities pursuant to (iii) or (iv) above except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that any Securities will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of this paragraph other than certificates representing Securities transferred pursuant to clause (v) above. We acknowledge that the Company, others and you will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. __________________________________ (Name of Purchaser) By:_______________________________ Name: Title: Address:
ANNEX A Projected Payment Schedule* Quarterly Period Ending Projected Payment per LYON ----------------------- -------------------------- June 1, 2001 -- September 1, 2001 -- December 1, 2001 -- March 1, 2002 -- June 1, 2002 -- September 1, 2002 -- December 1, 2002 -- March 1, 2003 -- June 1, 2003 -- September 1, 2003 -- December 1, 2003 -- March 1, 2004 -- June 1, 2004 -- September 1, 2004 -- December 1, 2004 -- March 1, 2005 -- June 1, 2005 -- September 1, 2005 -- December 1, 2005 -- March 1, 2006 -- June 1, 2006 -- September 1, 2006 -- December 1, 2006 -- March 1, 2007 -- June 1, 2007 1.4053 September 1, 2007 1.4374 December 1, 2007 1.4702 March 1, 2008 1.5038 June 1, 2008 1.5381 September 1, 2008 1.5732 December 1, 2008 1.6091 _______________________ * The comparable yield and the schedule of projected payments are determined on the basis of an assumption of linear growth of the stock price and a constant dividend yield and are not determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the Securities for United States federal income tax purposes. The comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on Securities.
March 1, 2009 1.6458 June 1, 2009 1.6834 September 1, 2009 1.7218 December 1, 2009 1.7611 March 1, 2010 1.8013 June 1, 2010 1.8424 September 1, 2010 1.8845 December 1, 2010 1.9275 March 1, 2011 1.9715 June 1, 2011 2.0165 September 1, 2011 2.0625 December 1, 2011 2.1096 March 1, 2012 2.1577 June 1, 2012 2.2070 September 1, 2012 2.2574 December 1, 2012 2.3089 March 1, 2013 2.3616 June 1, 2013 2.4155 September 1, 2013 2.4706 December 1, 2013 2.5270 March 1, 2014 2.5847 June 1, 2014 2.6437 September 1, 2014 2.7040 December 1, 2014 2.7657 March 1, 2015 2.8289 June 1, 2015 2.8934 September 1, 2015 2.9595 December 1, 2015 3.0270 March 1, 2016 3.0961 June 1, 2016 3.1668 September 1, 2016 3.2391 December 1, 2016 3.3130 March 1, 2017 3.3886 June 1, 2017 3.4659 September 1, 2017 3.5450 December 1, 2017 3.6260 March 1, 2018 3.7087 June 1, 2018 3.7934 September 1, 2018 3.8799 December 1, 2018 3.9685 March 1, 2019 4.0591 June 1, 2019 4.1517 September 1, 2019 4.2465 December 1, 2019 4.3434 March 1, 2020 4.4425 June 1, 2020 4.5439
September 1, 2020 4.6476 December 1, 2020 4.7537 March 1, 2021 4.8622 May 8, 2021 3,958.2000
Exhibit 4.4 EXECUTION COPY REGISTRATION RIGHTS AGREEMENT Dated as of May 8, 2001 by and between MARRIOTT INTERNATIONAL, INC. and MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Liquid Yield Option(TM) Notes due 2021 (Zero Coupon -- Senior) REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of May 8, 2001 by and between Marriott International, Inc., a Delaware corporation (the "Company"), and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation (the "Initial Purchaser"), pursuant to the Purchase Agreement, dated May 3, 2001 (the "Purchase Agreement"), between the Company and the Initial Purchaser. In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. The Company agrees with the Initial Purchaser, (i) for its benefit as Initial Purchaser and (ii) for the benefit of the beneficial owners (including the Initial Purchaser) from time to time of the LYONs (as defined herein) and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of the LYONs (each of the foregoing a "Holder" and together the "Holders"), as follows: Section 1. Definitions. Capitalized terms used herein without ----------- definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" means, with respect to any specified person, an --------- "affiliate," as defined in Rule 144, of such person. "Amendment Effectiveness Deadline Date" has the meaning specified in ------------------------------------- Section 2(d) hereof. "Applicable Conversion Price" means, as of any date of determination, --------------------------- the Applicable Principal Amount per $1,000 principal amount at maturity of LYONs as of such date of determination divided by the Conversion Rate in effect as of such date of determination or, if no LYONs are then outstanding, the Conversion Rate that would be in effect were LYONs then outstanding. "Applicable Principal Amount" means, as of any date of determination, --------------------------- with respect to each $1,000 principal amount at maturity of LYONs the sum of the initial issue price of such LYONs ($860.95) plus accrued original issue discount with respect to such LYON through such date of determination or, if no LYONs are then outstanding, such sum calculated as if such LYONs were then outstanding. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and ------------ Friday that is not a day on which banking institutions in the City of New York are authorized or obligated by law or executive order to close. "Common Stock" means the shares of Common Stock, $0.01 par value, of ------------ the Company and any other shares of common stock as may constitute "Common Stock" for purposes of the Indenture, including the Underlying Common Stock. "Conversion Rate" has the meaning assigned to that term in the --------------- Indenture. "Damages Accrual Period" has the meaning specified in Section 2(e) ---------------------- hereof. 2
"Damages Payment Date" means each November 8 and May 8 in the case of -------------------- LYONs and the Underlying Common Stock. "Deferral Notice" has the meaning specified in Section 3(i) hereof. --------------- "Deferral Period" has the meaning specified in Section 3(i) hereof. --------------- "Effectiveness Deadline Date" has the meaning specified in Section --------------------------- 2(a) hereof. "Effectiveness Period" means the period beginning on the date of -------------------- effectiveness of the Initial Shelf Registration Statement and ending on the earlier of (i) the second anniversary of such date of effectiveness and (ii)) the sale pursuant to the shelf registration statement of all of the Registrable Securities "Event" has the meaning specified in Section 2(e) hereof. ----- "Event Termination Date" has the meaning specified in Section 2(e) ---------------------- hereof. "Event Date" has the meaning specified in Section 2(e) hereof. ---------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ and the rules and regulations of the SEC promulgated thereunder. "Filing Deadline Date" has the meaning specified in Section 2(a) -------------------- hereof. "Holder" has the meaning specified in the second paragraph of this ------ Agreement. "Indenture" means the Indenture dated as of the date hereof between --------- the Company and The Bank of New York, as trustee, pursuant to which the LYONs are being issued. "Initial Purchaser" means Merrill Lynch & Co., Merrill Lynch, Pierce, ----------------- Fenner & Smith Incorporated. "Initial Shelf Registration Statement" has the meaning specified in ------------------------------------ Section 2(a) hereof. "Issue Date" means May 8, 2001. ---------- "Liquidated Damages Amount" has the meaning specified in Section 2(e) ------------------------- hereof. "Losses" has the meaning specified in Section 6 hereof. ------ "LYONs" means the Liquid Yield Option(TM) Notes due 2021 of the ----- Company to be purchased pursuant to the Purchase Agreement. "Material Event" has the meaning specified in Section 3(i) hereof. -------------- "Notice and Questionnaire" means a written notice delivered to the ------------------------ Company containing substantially the information called for by the Selling Securityholder Notice and 3
Questionnaire attached as Appendix A to the Offering Memorandum of the Company dated May 3, 2001 relating to the LYONs. "Notice Holder" means, on any date, any Holder that has delivered a ------------- Notice and Questionnaire to the Company on or prior to such date. "Prospectus" means the prospectus included in any Registration ---------- Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus. "Purchase Agreement" has the meaning specified in the first paragraph ------------------ of this Agreement. "Record Holder" means, with respect to any Damages Payment Date ------------- relating to any LYON or Underlying Common Stock as to which any Liquidated Damages Amount has accrued, the registered holder of such LYON or Underlying Common Stock, as the case may be, 15 days prior to the next succeeding Damages Payment Date. "Registrable Securities" means the LYONs and the Underlying Common ---------------------- Stock, until such securities have been converted or exchanged, and, at all times subsequent to any such conversion or exchange, any securities into or for which such securities have been converted or exchanged, and any security issued with respect thereto upon any stock dividend, split or similar event until, in the case of any such security, the earliest of (i) its effective registration under the Securities Act and resale in accordance with the Registration Statement covering it, (ii) expiration of the holding period that would be applicable thereto under Rule 144(k) were it not held by an Affiliate of the Company or (iii) its sale to the public pursuant to Rule 144, or (iv) it ceases to be outstanding. "Registration Expenses" has the meaning specified in Section 5 hereof. --------------------- "Registration Statement" means any registration statement of the ---------------------- Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement. "Restricted Securities" has the meaning assigned to that term in Rule --------------------- 144. "Rule 144" means Rule 144 under the Securities Act, as such Rule may -------- be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. "Rule 144A" means Rule 144A under the Securities Act, as such Rule may --------- be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. 4
"SEC" means the U.S. Securities and Exchange Commission and any --- successor agency. "Securities Act" means the Securities Act of 1933, as amended, and the -------------- rules and regulations promulgated by the SEC thereunder. "Shelf Registration Statement" has the meaning specified in Section ---------------------------- 2(a) hereof. "Subsequent Shelf Registration Statement" has the meaning specified in --------------------------------------- Section 2(b) hereof. "TIA" means the Trust Indenture Act of 1939, as amended. --- "Trustee" means The Bank of New York, the Trustee under the Indenture. ------- "Underlying Common Stock" means the Common Stock into which the LYONs ----------------------- are convertible or issued upon any such conversion. Section 2. Shelf Registration. (a) The Company shall prepare and ------------------ file or cause to be prepared and filed with the SEC, as soon as practicable but in any event within 90 days after the Issue Date (the "Filing Deadline Date"), a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf Registration Statement") registering the resale from time to time by Holders thereof of all of the Registrable Securities (the "Initial Shelf Registration Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution ele cted by the Holders and set forth in the Initial Shelf Registration Statement. The Company shall use reasonable efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable but in any event within 180 days after the Issue Date (the "Effectiveness Deadline Date"), and to keep the Initial Shelf Registration Statement (or any Subsequent Shelf Registration Statement) continuously effective under the Securities Act until the expiration of the Effectiveness Period; provided, however, that no -------- ------- Holder shall be entitled to have the Registrable Securities held by it covered by such Shelf Registration Statement unless such Holder shall have provided a Notice and Questionnaire in accordance with Section 2(d) and is in compliance with Section 4. None of the Company's security holders (other than the Holders of Registrable Securities) shall have the right to include any of the Company's securities in the Shelf Registration Statement. (b) If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because all Registrable Securities registered thereunder shall have been resold pursuant thereto or shall have otherwise ceased to be Registrable Securities), the Company shall use all reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty (30) days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are 5
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, the Company shall use all reasonable efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is practicable after such filing and to keep such Registration Statement (or subsequent Shelf Registration Statement) continuously effective until the end of the Effectiveness Period. (c) The Company shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement, if required by the Securities Act or, to the extent to which the Company does not reasonably object, as reasonably requested by the Initial Purchaser or by the Trustee on behalf of the registered Holders. (d) Each Holder of Registrable Securities agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(d) and Section 3(i). Each Holder of Registrable Securities wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least twenty (20) Business Days prior to any intended distribution of Registrable Securities under the Shelf Registration Statement. From and after the date the Initial Shelf Registration Statement is declared effective, the Company shall, as promptly as is practicable after the date a Notice and Questionnaire is delivered, (i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling security holder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with applicable law (subject to the Company's rights under Section 3(i)) and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable (the "Amendment Effectiveness Deadline Date"); (ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided that if -------- such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(i), provided, that the -------- Company may satisfy its requirements to file a post-effective amendment as promptly as practicable under clause (i) above if the Company includes in an annual or periodic report on Form 10-K or Form 10-Q the pertinent information from any Questionnaire received at least ten (10) business days prior to the filing of such report, and such information is thereby incorporated by reference in the shelf registration statement, provided further, that if under applicable -------- ------- law the Company has more than one option as to the type or manner of making any such filing, it will make the required filing or filings in the manner or of a type that is reasonably expected to result in the earliest availability of the Prospectus for effecting resales of Registrable Securities. Notwithstanding anything contained herein to the contrary, the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling security holder in any 6
Registration Statement or related Prospectus; provided, however, that any Holder that becomes a Notice Holder pursuant to the provisions of Section 2(d) of this Agreement (whether or not such Holder was a Notice Holder at the time the Registration Statement was declared effective) shall be named as a selling security holder in the Registration Statement or related Prospectus in accordance with the requirements of this Section 2(d). (e) The parties hereto agree that the Holders of Registrable Securities will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if (i) the Initial Shelf Registration Statement has not been filed on or prior to the Filing Deadline Date, (ii) the Initial Shelf Registration Statement has not been declared effective under the Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company has failed to perform its obligations set forth in Section 2(d) hereof within the time period required therein, (iv) the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(i) hereof or (v) the number of Deferral Periods in any period exceeds the number permitted in respect of such period pursuant to Section 3(i) (each of the events of a type described in any of the foregoing clauses (i) through (v) are individually referred to herein as an "Event," and the Filing Deadline Date in the case of clause (i), the Effectiveness Deadline Date in the case of clause (ii), the date by which the Company is required to perform its obligations set forth in Section 2(d) in the case of clause (iii) (including the filing of any post-effective amendment prior to the Amendment Effectiveness Deadline Date), the date on which the aggregate duration of Deferral Periods in any period exceeds the number of days permitted by Section 3(i) hereof in the case of clause (iv), and the date of the commencement of a Deferral Period that causes the limit on the number of Deferral Periods in any period under Section 3(i) hereof to be exceeded in the case of clause (v), being referred to herein as an "Event Date"). Events shall be deemed to continue until the "Event Termination Date," which shall be the following dates with respect to the respective types of Events: the date the Initial Shelf Registration Statement is filed in the case of an Event of the type described in clause (i), the date the Initial Shelf Registration Statement is declared effective under the Securities Act in the case of an Event of the type described in clause (ii), the date the Company performs its obligations set forth in Section 2(d) in the case of an Event of the type described in clause (iii) (including, without limitation, the date the relevant post-effective amendment to the Shelf Registration Statement is declared effective under the Securities Act), termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods in a period set forth in Section 3(i) to be exceeded in the case of the commencement of an Event of the type described in clause (iv), and termination of the Deferral Period the commencement of which caused the number of Deferral Periods in a period permitted by Section 3(i) to be exceeded in the case of an Event of the type described in clause (v). Accordingly, commencing on (and including) any Event Date and ending on (but excluding) the next date on which there are no Events that have occurred and are continuing (a "Damages Accrual Period"), the Company agrees to pay, as liquidated damages and not as a penalty, an amount (the "Liquidated Damages Amount"), payable on the Damages Payment Dates to Record Holders of then outstanding LYONs that are Registrable Securities and of then outstanding shares of Underlying Common Stock issued upon conversion of LYONs that are Registrable Securities, as the case may be, accruing, for each portion of such Damages Accrual Period beginning on and including a Damages Payment Date (or, in respect of the first time that the Liquidation Damages Amount is to be paid to Holders on a Damages Payment Date as a 7
result of the occurrence of any particular Event, from the Event Date) and ending on but excluding the first to occur of (A) the date of the end of the Damages Accrual Period or (B) the Next Damages Payment Date, at a rate per annum equal to one-quarter of one percent (0.25%) for the first 90-day period from the Event Date, and thereafter at a rate per annum equal to one-half of one percent (0.5%) of the aggregate Applicable Principal Amount of such LYONs and the aggregate Applicable Conversion Price of such shares of Underlying Common Stock, as the case may be, in each case determined as of the Business Day immediately preceding the next Damages Payment Date; provided, that any Liquidated Damages Amount accrued with respect to any LYON or portion thereof called for redemption on a redemption date or converted into Underlying Common Stock on a conversion date prior to the Damages Payment Date, shall, in any such event, be paid instead to the Holder who submitted such LYON or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion). Notwithstanding the foregoing, no Liquidated Damages Amounts shall accrue as to any Registrable Security from and after the earlier of (x) the date such security is no longer a Registrable Security and (y) expiration of the Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with respect to any period shall not exceed the rate provided for in this paragraph notwithstanding the occurrence of multiple concurrent Events. Following the cure of all Events requiring the payment by the Company of Liquidated Damages Amounts to the Holders of Registrable Securities pursuant to this Section, the accrual of Liquidated Damages Amounts will cease (without in any way limiting the effect of any subsequent Event requiring the payment of Liquidated Damages Amount by the Company). The Trustee shall be entitled, on behalf of Holders of LYONs or Underlying Common Stock, to seek any available remedy for the enforcement of this Agreement, including for the payment of any Liquidated Damages Amount. Nothing shall preclude a Notice Holder or Holder of Registrable Securities from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement. All of the Company's obligations set forth in this Section 2(e) that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all such obligations with respect to such security have been satisfied in full (notwithstanding termination of this Agreement pursuant to Section 8(k)). The parties hereto agree that the liquidated damages provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of the Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof. Section 3. Registration Procedures. In connection with the ----------------------- registration obligations of the Company under Section 2 hereof, the Company shall: (a) Before filing any Registration Statement or Prospectus or any amendments or supplements thereto with the SEC, furnish to the Initial Purchaser copies of all such documents proposed to be filed and use reasonable efforts to reflect in each such document when so filed with the SEC such comments as the Initial Purchaser reasonably 8
shall propose within three (3) Business Days of the delivery of such copies to the Initial Purchaser. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable period specified in Section 2(a); cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use all reasonable efforts to comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by such Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or such Prospectus as so supplemented. (c) As promptly as practicable give notice to the Notice Holders and the Initial Purchaser (i) when any Prospectus, Prospectus supplement, Registration Statement or post-effective amendment to a Registration Statement has been filed with the SEC and, with respect to a Registration Statement or any post-effective amendment, when the same has been declared effective, (ii) of any request, following the effectiveness of the Initial Shelf Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to any Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) of the occurrence of (but not the nature of or details concerning) a Material Event (provided, however, that no notice by the Company shall be required pursuant to this clause (v) in the event that the Company either promptly files a Prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which, in either case, contains the requisite information with respect to such Material Event that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading) and (vi) of the determination by the Company that a post-effective amendment to a Registration Statement will be filed with the SEC, which notice may, at the discretion of the Company (or as required pursuant to Section 3(i)), state that it constitutes a Deferral Notice, in which event the provisions of Section 3(i) shall apply. (d) Use all reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale, in either case at the earliest possible moment. 9
(e) If reasonably requested by the Initial Purchaser or any Notice Holder, promptly as reasonably practicable incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information as the Initial Purchaser or such Notice Holder shall, on the basis of an opinion of nationally-recognized counsel experienced in such matters, determine to be required to be included therein by applicable law and make any required filings of such Prospectus supplement or such post- effective amendment; provided, that the Company shall not be required to take any actions under this Section 3(e) that are not, in the reasonable opinion of counsel for the Company, in compliance with applicable law. (f) Promptly as reasonably practicable furnish to each Notice Holder and the Initial Purchaser, upon their request and without charge, at least one (1) conformed copy of the Registration Statement and any amendment thereto, including financial statements but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Company by such Notice Holder or the Initial Purchaser, as the case may be). (g) During the Effectiveness Period, deliver to each Notice Holder in connection with any sale of Registrable Securities pursuant to a Registration Statement, without charge, as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Company hereby consents (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by each Notice Holder in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein. (h) Prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use all reasonable efforts to register or qualify or cooperate with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder reasonably requests in writing (which request may be included in the Notice and Questionnaire); prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use all reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period in connection with such Notice Holder's offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the relevant Registration Statement and the related Prospectus; provided, that the Company will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Agreement or (ii) take any action that would subject it to general service of process in suits or to taxation in any such jurisdiction where it is not then so subject. 10
(i) Upon (A) the issuance by the SEC of a stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of proceedings with respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any fact (a "Material Event") as a result of which any Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of any pending corporate development that, in the discretion of the Company, makes it appropriate to suspend the availability of the Shelf Registration Statement and the related Prospectus, (i) in the case of clause (B) above, subject to the next sentence, as promptly as practicable prepare and file a post- effective amendment to such Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Registration Statement and Prospectus so that such Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post- effective amendment to a Registration Statement, subject to the next sentence, use all reasonable efforts to cause it to be declared effective as promptly as is reasonably practicable, and (ii) give notice to the Notice Holders that the availability of the Shelf Registration Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Registration Statement until such Notice Holder's receipt of copies of the supplemented or amended Prospectus provided for in clause (i) above, or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Company will use all reasonable efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y) in the case of clause (B) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as reasonably practicable thereafter and (z) in the case of clause (C) above, as soon as, in the discretion of the Company, such suspension is no longer appropriate. The period during which the availability of the Registration Statement and any Prospectus is suspended (the "Deferral Period") shall, without the Company incurring any obligation to pay liquidated damages pursuant to Section 2(e), not exceed forty-five (45) days in any three (3) month period or ninety (90) days in any twelve (12) month period. (j) If reasonably requested in writing in connection with a disposition of Registrable Securities pursuant to a Registration Statement, make reasonably available 11
for inspection during normal business hours by a representative for the Notice Holders of such Registrable Securities and any broker-dealers, attorneys and accountants retained by such Notice Holders, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the appropriate executive officers, directors and designated employees of the Company and its subsidiaries to make reasonably available for inspection during normal business hours all relevant information reasonably requested by such representative for the Notice Holders or any such broker-dealers, attorneys or accountants in connection with such disposition, in each case as is customary for similar "due diligence" examinations; provided, however, that such persons shall first agree in writing with the Company that any information that is reasonably and in good faith designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of any Registration Statement or the use of any Prospectus referred to in this Agreement), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person or (iv) such information becomes available to any such person from a source other than the Company and such source is not bound by a confidentiality agreement; and provided further, that the foregoing inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of all the Notice Holders and the other parties entitled thereto by the counsel referred to in Section 5. (k) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12- month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (l) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold pursuant to a Registration Statement, and cause such Registrable Securities to be in such denominations as are permitted by the Indenture and registered in such names as such Notice Holder may request in writing at least two Business Days prior to any sale of such Registrable Securities. (m) Provide a CUSIP number for all Registrable Securities covered by each Registration Statement not later than the effective date of such Registration Statement and provide the Trustee for the LYONs and the transfer agent for the Common Stock with printed certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company. 12
(n) Make a reasonable effort to provide such information as is required for any filings required to be made with the National Association of Securities Dealers, Inc. (o) Upon (i) the filing of the Initial Shelf Registration Statement and (ii) the effectiveness of the Initial Shelf Registration Statement, announce the same, in each case by release to Reuters Economic Services and Bloomberg Business News. (p) Enter into such customary agreements and take all such other reasonable necessary actions in connection therewith (including those reasonably requested by the holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate disposition of such Registrable Securities. (q) Cause the Indenture to be qualified under the TIA not later than the effective date of any Registration Statement; and in connection therewith, cooperate with the Trustee to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use all reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner. Section 4. Holder's Obligations. Each Holder agrees, by acquisition of -------------------- the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as may be required to be disclosed in the Registration Statement under applicable law. Section 5. Registration Expenses. The Company shall bear all fees --------------------- and expenses incurred in connection with the performance by the Company of its obligations under Sections 2 and 3 of this Agreement whether or not any of the Registration Statements are declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with federal and state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of the counsel specified in the next sentence in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as the Notice Holders of a majority of the Registrable Securities being sold pursuant to a Registration Statement may designate), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company), (iii) duplication expenses relating to copies of any Registration Statement or Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of counsel for the Company in connection with the Shelf Registration Statement, and (v) reasonable fees and 13
disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which similar securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company. Section 6. Indemnification; Contribution. (a) The Company agrees to ----------------------------- indemnify and hold harmless the Initial Purchaser, each holder of Registrable Securities and the respective Affiliates thereof, including the respective officers, directors, employees, agents and representatives of the Initial Purchaser, each holder of Registrable Securities and the respective Affiliates thereof, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, provided that (subject to Section 6(d) below) any such settlement is effected with the prior written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of legal counsel), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity shall not apply to any loss, liability, - -------- ------- claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser, such holder of Registrable Securities (which also acknowledges the indemnity provisions herein) or the respective Affiliates thereof, expressly for use in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto). 14
(b) In connection with any Shelf Registration in which a holder, including, without limitation, the Initial Purchaser, of Registrable Securities is participating, in furnishing information relating to such holder of Registrable Securities to the Company in writing expressly for use in such Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto, the holders of such Registrable Securities agree, severally and not jointly, to indemnify and hold harmless the Initial Purchaser, the Company and the respective Affiliates thereof, including the respective officers, directors, employees, agents and representatives of the Initial Purchaser, the Company, and the respective Affiliates thereof, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such holder of Registrable Securities (which also acknowledges the indemnity provisions herein) and each person, if any, who controls any such holder of Registrable Securities expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). The Initial Purchaser agrees to indemnify and hold harmless the Company, the holders of Registrable Securities, and the respective Affiliates thereof, including the respective officers, directors, employees, agents and representatives of the Company, the holders of Registrable Securities and respective Affiliates thereof, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by the Initial Purchaser expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with - -------- ------- the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 hereof (whether or not the indemnified parties are actual or 15
potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) If the indemnification provided for in this Section 6 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and the holders of the Registrable Securities or the Initial Purchaser on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the holder of the Registrable Securities or the Initial Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(e) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 6(e). The aggregate amount of losses, liabilities, claims, damages, and expenses incurred by an indemnified party and referred to above in this Section 6(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 6, neither the holder of any Registrable Securities nor the Initial Purchaser, shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by such holder of Registrable Securities or underwritten by the Initial Purchaser, as the case may be, and distributed to the public were offered to the public exceeds the amount of any damages 16
that such holder of Registrable Securities or the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6(e), each person, if any, who controls the Initial Purchaser or any holder of Registrable Securities within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchaser or such holder, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. Section 7. Information Requirements. The Company covenants that, if ------------------------ at any time before the end of the Effectiveness Period the Company is not subject to the reporting requirements of the Exchange Act, it will cooperate with any Holder of Registrable Securities and take such further reasonable action as any Holder of Registrable Securities may reasonably request in writing (including, without limitation, making such reasonable representations as any such Holder may reasonably request), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act and customarily taken in connection with sales pursuant to such exemptions. Upon the written request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such filing requirements, unless such a statement has been included in the Company's most recent report required to be filed and filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities (other than Common Stock) under any section of the Exchange Act. Section 8. Miscellaneous. (a) No Conflicting Agreements. The ------------- ------------------------- Company is not, as of the date hereof, a party to, nor shall it, on or after the date of this Agreement, enter into, any agreement with respect to its securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement. The Company represents and warrants that the rights granted to the Holders of Registrable Securities hereunder do not in any way conflict with the rights granted to the holders of the Company's securities under any other agreements. (b) Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority of the then outstanding Underlying Common Stock constituting Registrable Securities (with Holders of LYONs deemed to be the Holders, for purposes of this Section, of the number of outstanding shares of Underlying Common Stock into which such LYONs are or would be convertible or exchangeable as of the date on which such consent is requested). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration 17
Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 8(b), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder. (c) Notices. All notices and other communications provided for or ------- permitted hereunder shall be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by first-class mail, to the parties as follows: (w) if to a Holder of Registrable Securities that is not a Notice Holder, at the address for such Holder then appearing on the books of the Registrar (as defined in the Indenture); (x) if to a Notice Holder, at the most current address given by such Holder to the Company in a Notice and Questionnaire or any amendment thereto; (y) if to the Company, to: Marriott International, Inc. 10400 Fernwood Road Bethesda, Maryland 20817 Attention: Treasurer Department 52/924.11 Telecopy No.: 301-380-5067 with a copy to: Assistant General Counsel Corporate Finance Department 52/923.23 Telecopy No.: 301-380-6726 and (z) if to the Initial Purchaser, to: Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center 18
North Tower 250 Vesey Street New York, New York 10080 Attention: Syndicate Department Telecopy No.: (212) 449-1000 or to such other address as such person may have furnished to the other persons identified in this Section 8(c) in writing in accordance herewith. (d) Approval of Holders. Whenever the consent or approval of Holders ------------------- of a specified percentage of Registrable Securities is required hereunder, the Registrable Securities held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) (other than the Initial Purchaser or subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be such affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (e) Successors and Assigns. Any person who purchases any Registrable ---------------------- Securities from the Initial Purchaser shall be deemed, for purposes of this Agreement, to be an assignee of the Initial Purchaser. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties and shall inure to the benefit of and be binding upon each Holder of any Registrable Securities. (f) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ------------- IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (i) Severability. If any term, provision, covenant or restriction of ------------ this Agreement is held to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (j) Entire Agreement. This Agreement is intended by the parties as a ---------------- final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained 19
herein and the registration rights granted by the Company with respect to the Registrable Securities. Except as provided in the Purchase Agreement, there are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and undertakings among the parties with respect to such registration rights. (k) Termination. This Agreement and the obligations of the parties ----------- hereunder shall terminate upon the expiration of the Effectiveness Period, except for any liabilities or obligations under Sections 4, 5 or 6 hereof and the obligations to make payments of and provide for liquidated damages under Section 2(e) hereof to the extent such damages accrue prior to the end of the Effectiveness Period, each of which shall remain in effect in accordance with its terms. [Remainder of this page intentionally left blank] 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. MARRIOTT INTERNATIONAL, INC. By:_____________________________ Name: Title: Confirmed and accepted as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:_____________________________ Name: Title: 21
Exhibit 5.1 [LOGO OF MARRIOTT] Marriott International, Inc. Marriott Drive Corporate Headquarters Washington, D.C. 20058 - -------------------------------------------------------------------------------- Joseph Ryan Executive Vice President and General Counsel 301/380-7553 301/380-6727 Fax Internet: joe.ryan@marriott.com July 31, 2001 Marriott International, Inc. 10400 Fernwood Road Bethesda, Maryland 20817 Ladies and Gentlemen: We have acted as counsel for Marriott International, Inc., a Delaware corporation (the "Company"), in connection with (1) the issuance and sale by the Company of $470,000,000 aggregate principal amount at maturity of Liquid Yield Option(TM) Notes due 2021 (the "LYONs") in May, 2000 in transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the "Act"), the shares of the Company's $1.00 par value common stock issuable upon conversion of the LYONs (the "Shares"), and preferred stock purchase rights attached to the Shares (the "Rights"), each as described in a Registration Statement on Form S-3 (the "Registration Statement") with respect to the offer and sale by the several holders of the LYONs (the "Selling Holders") to be filed with the Securities and Exchange Commission under the Act; and (2) the filing of the Registration Statement. As the basis for the opinions expressed below, we have examined, among other things, such federal and state laws and such documents, certificates, telegrams, and corporate and other records, and made such inquiries as to questions of fact of officers of the Company, as we have deemed necessary or appropriate for the purposes of giving the opinions expressed below. The opinions set forth herein are subject to the following assumptions and qualifications: (a) at the time any of the LYONs are offered or sold, (1) the Registration Statement will be effective or the LYONs will be sold in a transaction exempt from the requirements of the Act, and (2) all applicable "Blue Sky" and state securities laws will have been complied with; (b) the Indenture between the Company and The Bank of New York, as Trustee, dated as of May 8, 2001, as now or hereafter supplemented, under which the LYONs were issued (the "Indenture"), shall have been qualified under the Trust Indenture Act of 1939, as amended; and (c) The LYONs shall have been duly executed, authenticated, and delivered against payment therefor.
Marriott International, Inc. Page 2 Based on and subject to the foregoing, it is our opinion that: (1) the LYONs are legally issued, fully paid, non-assessable, legal, valid and binding obligations of the Company; (2) the Shares, when issued in accordance with the terms of the Indenture, will be legally issued, fully paid and non-assessable; and (3) the Rights, when issued in accordance with the terms of the Amended and Restated Rights Agreement, dated as of August 9, 1999 between the Company and The Bank of New York, as Rights Agent, will be legally issued. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to the name of the undersigned in the Prospectus being a part of the Registration Statement. Very truly yours, MARRIOTT INTERNATIONAL, INC. LAW DEPARTMENT By: /s/ Joseph Ryan -------------------------------------------- Joseph Ryan Executive Vice President and General Counsel
Exhibit 8.1 [SIDLEY AUSTIN BROWN & WOOD LLP LETTERHEAD APPEARS HERE] July 30, 2001 Marriott International, Inc. 10400 Fernwood Road Bethesda, Maryland 20817 Re: Marriott International, Inc. Liquid Yield Option Notes due 2021/1/ ------------------------------------- Ladies and Gentlemen: We have acted as special tax counsel for Marriott International, Inc. (the "Company") in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, of the Registration Statement on Form S-3 filed with the Commission on July 31, 2001 (the "Registration Statement"), of which the prospectus forms a part (the "Prospectus"). The Registration Statement relates to the Liquid Yield Option Notes due 2021 (the "LYONs") in an aggregate principal amount of $470,000,000 offered by the Company. The LYONs are described in the Prospectus. The LYONs were issued under an Indenture, dated as of May 8, 2001 (the"Indenture"), between the Company and The Bank of New York, as trustee. In preparing this opinion, we have examined and relied on such documents as we have deemed appropriate, including, inter alia, the Prospectus, the Indenture, and the originals or copies, certified or otherwise identified to our satisfaction, of all such corporate records of the Company and such other instruments, certificates and other documents of public officials and such other persons, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinion expressed below. - -------------------- /1/ "Liquid Yield Option Notes" and "LYONs" are trademarks of Merrill Lynch & Co., Inc.
Based upon the foregoing, the Company's representation that, as of the issue date of the LYONs, the likelihood of a contingent interest payment being made on the LYONs during the term of the LYONs is not remote, the Company's representation that, as of the issue date of the LYONs, the likelihood of a contingent interest payment not being made on the LYONs during the term of the LYONs is not remote, and certain estimates made by the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated regarding the present value of contingent payments, we are of the opinion that: 1. the LYONs will be classified as indebtedness of the Company for United States federal income tax purposes; 2. the LYONs will be subject to the rules applicable to contingent payment debt instruments that are contained in Treasury Regulations section 1.1275-4(b); and 3. the term comparable yield means the annual yield the Company would pay, as of the initial issue date, on a fixed-rate nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the LYONs. We are also of the opinion that the statements contained in the Prospectus under the captions "Summary - The Offering - Tax Original Issue Discount" and "Certain United States Federal Income Tax Considerations," to the extent they constitute matters of law or legal conclusions with respect thereto, accurately describe the treatment of the LYONs under federal income tax laws, regulations and rulings now in effect. We express no opinions other than those expressed herein. We hereby consent to the use of this letter as an exhibit to the Registration Statement and to the use of our name under the heading "Legal Matters" in the Prospectus. Very truly yours, Sidley Austin Brown & Wood LLP 2
Exhibit 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in Marriott International, Inc.'s registration statement on Form S-3 of our report dated January 30, 2001 included in Marriott International, Inc.'s Form 10-K for the year ended December 29, 2000 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Vienna, Virginia July 30, 2001
Exhibit 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) Marriott International, Inc. (Exact name of obligor as specified in its charter) Delaware 52-2055918 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 10400 Fernwood Road Bethesda, Maryland 20817 (Address of principal executive offices) (Zip code) ------------- Liquid Yield Option(TM) Notes due 2021 (Title of the indenture securities) ================================================================================
1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the 2 Rector Street, New York, State of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -2-
SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 27th day of July, 2001. THE BANK OF NEW YORK By: /s/ THOMAS E. TABOR ----------------------- Name: THOMAS E. TABOR Title: VICE PRESIDENT
EXHIBIT 7 --------- - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2001, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS In Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin.......................................... $ 2,811,275 Interest-bearing balances........................... 3,133,222 Securities: Held-to-maturity securities......................... 147,185 Available-for-sale securities....................... 5,403,923 Federal funds sold and Securities purchased under agreements to resell.......................... 3,378,526 Loans and lease financing receivables: Loans and leases held for sale...................... 74,702 Loans and leases, net of unearned income............................................ 37,471,621 LESS: Allowance for loan and lease losses...................................... 599,061 Loans and leases, net of unearned income and allowance.............................. 36,872,560 Trading Assets......................................... 11,757,036 Premises and fixed assets (including capitalized leases)................................. 768,795 Other real estate owned................................ 1,078 Investments in unconsolidated subsidiaries and associated companies............................ 193,126 Customers' liability to this bank on acceptances outstanding............................. 592,118 Intangible assets...................................... Goodwill............................................ 1,300,295 Other intangible assets............................. 122,143 Other assets........................................... 3,676,375 ============
Total assets........................................... $70,232,359 ============ LIABILITIES Deposits: In domestic offices................................. $25,962,242 Noninterest-bearing................................. 10,586,346 Interest-bearing.................................... 15,395,896 In foreign offices, Edge and Agreement subsidiaries, and IBFs............................ 24,862,377 Noninterest-bearing................................. 373,085 Interest-bearing.................................... 24,489,292 Federal funds purchased and securities sold under agreements to repurchase...................... 1,446,874 Trading liabilities.................................... 2,373,361 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)............... 1,381,512 Bank's liability on acceptances executed and outstanding......................................... 592,804 Subordinated notes and debentures...................... 1,646,000 Other liabilities...................................... 5,373,065 ------------ Total liabilities...................................... $63,658,235 ============ EQUITY CAPITAL Common stock........................................... 1,135,284 Surplus................................................ 1,008,773 Retained earnings...................................... 4,426,033 Accumulated other comprehensive income................. 4,034 Other equity capital components........................ 0 Total equity capital................................... 6,574,124 ------------ Total liabilities and equity capital................... $70,232,359 ============ I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro, Senior Vice President and Comptroller We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Thomas A. Renyi ] Gerald L. Hassell ] Directors Alan R. Griffith ]