As filed with the Securities and Exchange Commission on April 4, 2001
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-4
Registration Statement
under
the Securities Act of 1933
_______________
Marriott International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 7011 52-2055918
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
10400 Fernwood Road
Bethesda, MD 20817
(301) 380-3000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Joseph Ryan, Executive Vice President and General Counsel
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/923.30
Bethesda, MD 20817
(301) 380-3000
Copies to:
John F. Olson, Esq. Ward R. Cooper, Esq.
Stephanie Tsacoumis, Esq. W. David Mann, Esq.
Gibson, Dunn & Crutcher LLP Marriott International, Inc.
1050 Connecticut Avenue, N.W. 10400 Fernwood Road, Dept. 52/923.23
Washington, DC 20036 Bethesda, MD 20817
(202) 955-8500 (301) 380-7824
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) 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 this form is a post-effective amendment filed pursuant to Rule 462(b) 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. [_] ___________________
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of Each Class of Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Securities to be Registered Amount to be Registered Price Per Unit Offering Price (1) Registration Fee
------------------------------------------------------------------------------------------------------------------------------------
7% Series E Notes due 2008 $300,000,000 100% $300,000,000 $75,000
====================================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(b)(2).
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 of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted before the registration statement becomes effective.+
+This prospectus is not an offer to sell securities and is not soliciting an +
+offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 4, 2001
[LOGO]
$300,000,000
Marriott International, Inc.
OFFER TO EXCHANGE
ALL OUTSTANDING
7% Series E Notes due 2008
($300,000,000 aggregate principal amount outstanding)
for
7% Series E Notes due 2008
Registered Under the Securities Act of 1933
. The exchange offer expires at 5:00 p.m., New York City time, on
__________, 2001, unless extended.
. The exchange offer is not subject to any conditions other than that the
exchange offer will not violate any applicable law or interpretation of
the staff of the Securities and Exchange Commission and that there be no
pending or threatened proceeding that would reasonably be expected to
impair our ability to proceed with the exchange offer.
. All outstanding notes that are validly tendered and not validly
withdrawn will be exchanged.
. Tenders of outstanding notes may be withdrawn at any time before 5:00
p.m. on the date of expiration of the exchange offer.
. The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
. We will not receive any proceeds from the exchange offer.
. The terms of the new notes to be issued are substantially identical to
the outstanding notes, except for transfer restrictions and registration
rights relating to the outstanding notes.
Consider carefully the "Risk Factors" beginning on page 12.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the new notes to be distributed in the
exchange offer, or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is __________, 2001.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information............................. 2
Incorporation of Information We File With the SEC............... 2
Summary......................................................... 4
Risk Factors.................................................... 12
Forward-Looking Statements...................................... 17
Use of Proceeds................................................. 17
Ratio of Earnings to Fixed Charges.............................. 18
Capitalization.................................................. 19
The Exchange Offer.............................................. 20
Certain U.S. Federal Income Tax Considerations.................. 34
Selected Financial Data......................................... 35
Business........................................................ 36
Description of the New Notes.................................... 37
Plan of Distribution............................................ 54
Legal Matters................................................... 54
Independent Public Accountants.................................. 54
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can inspect and copy these reports, proxy
statements and other information at the public reference facilities of the SEC,
in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade
Center, Suite 1300, New York, New York 10048; and Suite 1400, Citicorp Center,
500 W. Madison Street, Chicago, Illinois 60661-2511. You can also obtain copies
of these materials from the public reference section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. The SEC
also maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC (http://www.sec.gov). You can inspect reports and other information
we file at the office of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
We hereby "incorporate by reference" the documents listed below, which
means that we are disclosing important information to you by referring you to
those documents. The information that we file later with the SEC will be deemed
to automatically update and supersede this information. Specifically, we
incorporate by reference:
. Annual Report on Form 10-K for the year ended December 29, 2000 (File
No. 1-13881);
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. Proxy Statement filed on March 23, 2001 (File No. 1-13881); and
. Any future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until the exchange offer
expires.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Marriott International, Inc.
Marriott Drive, Department 52/862
Washington, D.C. 20058
(301) 380-3000
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with other information.
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SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider before investing in the new notes to be issued in the
exchange offer. You should read the entire prospectus carefully, especially the
risks of investing in the new notes discussed under "Risk Factors'' starting on
page 12. As used in this prospectus, unless the context requires otherwise,
"we", "us", "Marriott" or the "Company" means Marriott International, Inc. and
its predecessors and consolidated subsidiaries.
The Exchange Offer
On January 16, 2001, we completed the private offering of "initial" notes,
comprised of $300 million of 7% Series E Notes due 2008. We entered into a
registration rights agreement with the initial purchasers in the private
offering in which we agreed, among other things, to deliver to you this
prospectus and to use reasonable efforts to complete the exchange offer no later
than August 14, 2001.
In the exchange offer, you are entitled to exchange your initial notes for
"new" notes -- registered notes with substantially identical terms as the
initial notes (except for transfer restrictions and registration rights relating
to the initial notes). If the exchange offer is not completed on or before
August 14, 2001, then the interest rate on the initial notes will be increased
by one-quarter of one percent per annum for each ninety-day period until the
exchange offer is consummated, up to maximum additional interest of one-half
percent per annum. You should read the discussion under the heading "Summary --
The New Notes" and "Description of the New Notes" for further information
regarding the new notes.
We believe that the new notes issued in the exchange offer may be resold by
you without compliance with the registration and prospectus delivery provisions
of the Securities Act, subject to the conditions discussed under the headings
"Summary -- Terms of Exchange Offer" and "The Exchange Offer." You should read
these sections for further information regarding the exchange offer and resale
of the new notes.
The Company
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 three business segments, Lodging, Senior Living Services and
Distribution Services, which represented 78 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 segment, we operate, develop and franchise lodging
facilities and vacation timesharing resorts under 17 separate brand names.
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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 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
Marriott Services, Inc., is a provider of food service and facilities management
in North America.
Terms of the Exchange Offer
The exchange offer relates to the exchange of up to $300 million aggregate
principal amount of initial notes for an equal aggregate principal amount of new
notes. The new notes will be obligations of Marriott International, Inc. and
will be governed by the same indenture that governs the initial notes. The form
and terms of the new notes are identical in all material respects to the form
and terms of the initial notes except that the new notes have been registered
under the Securities Act, and therefore are not entitled to the benefits of the
registration rights agreement that was executed as part of the offering of the
initial notes. The registration rights agreement provides for registration
rights with respect to the initial notes and for the payment of additional
interest on the initial notes if we fail to meet our registration obligations
under the agreement.
Initial Notes............$300,000,000 aggregate principal amount of 7% Series E
Notes due 2008, which were issued on January 16, 2001.
New Notes................Up to $300,000,000 aggregate principal amount of 7%
Series E Notes due 2008 that we are offering hereby.
The initial notes and the new notes are referred to
collectively as the notes.
The Exchange Offer.......We are offering to exchange $1,000 principal amount of
new notes for each $1,000 principal amount of initial
notes. Initial notes may only be exchanged in $1,000
principal amount increments. As of the date of this
prospectus, there are outstanding $300,000,000
aggregate principal amount of initial notes. To be
exchanged, the initial notes must be properly tendered
and accepted. All outstanding initial
5
notes that are properly tendered and not validly
withdrawn will be exchanged for new notes issued
on or promptly after the expiration date of the
exchange offer.
Resales.......................Based on an interpretation by the SEC set forth in
no-action letters issued to third parties, we
believe that you may resell or otherwise transfer
new notes issued in the exchange offer without
complying with the registration and prospectus
delivery requirements of the Securities Act,
provided that:
. you are not our "affiliate" within the meaning
of Rule 405 under the Securities Act;
. you are not a broker-dealer who acquired the
initial notes directly from us without
compliance with the registration and prospectus
delivery provisions of the Securities Act;
. you acquire the new notes in the ordinary
course of your business; and
. you are not participating in, do not intend to
participate in, and have no arrangement or
understanding with any person to participate in
the distribution of the new notes.
Any holder subject to any of the exceptions above,
and each broker-dealer that receives new notes for
its own account pursuant to the exchange offer in
exchange for initial notes that were acquired as a
result of market-making, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with the
resale of new notes.
Consequences of Failure
to Exchange...................If you do not exchange your initial notes for the
new notes pursuant to the exchange offer, you will
still be subject to the restrictions on transfer
of your initial notes and we will not have any
further obligation to those note holders to
provide for the registration of the initial notes
under the registration rights agreement. See "The
Exchange Offer - Consequences of Failure to
Exchange."
Expiration Date...............5:00 p.m., New York City time, __________, 2001,
unless we extend the exchange offer, in which case
the term
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"expiration date" means the latest date and time
to which the exchange offer is extended.
Interest on the New Notes
and the Initial Notes.........Each new note will bear interest from January 16,
2001. If your initial notes are accepted for
exchange, you will not receive accrued interest on
the initial notes, and will be deemed to have
waived the right to receive any interest on the
initial notes from and after January 16, 2001.
Conditions to the Exchange
Offer.........................The exchange offer is subject to the conditions
that the exchange offer not violate any applicable
law or interpretation of the staff of the SEC and
that there be no pending or threatened proceeding
that would reasonably be expected to impair our
ability to proceed with the exchange offer. See
"The Exchange Offer --Conditions." The exchange
offer is not conditioned upon any minimum
aggregate principal amount of initial notes being
tendered in the exchange.
Procedures for Tendering
Initial Notes.................If you wish to accept the exchange offer, you must
complete, sign and date the accompanying letter of
transmittal in accordance with its instructions
and deliver the letter of transmittal, together
with the initial notes and any other required
documentation, to the exchange agent at the
address set forth in the letter of transmittal
prior to 5:00 p.m., New York City time, on the
expiration date. If you hold initial notes through
DTC and wish to accept the exchange offer, you
must do so under DTC's Automated Tender Offer
Program, by which you will agree to be bound by
the letter of transmittal. Confirmation of such
book-entry transfer must be received by the
exchange agent prior to the expiration date.
Special Procedures for
Beneficial Owners.............If you are a beneficial owner whose initial notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and wish to tender in the exchange offer, you
should contact the person in whose name your
initial notes are registered promptly and instruct
the person to tender on your behalf. If you wish
to tender in the exchange offer on your own
behalf, you must, prior to completing and
executing the letter of transmittal and delivering
your initial notes, either make appropriate
arrangements to register ownership of the initial
notes in
7
your name or obtain a properly completed bond
power from the person in whose name your initial
notes are registered. The transfer of registered
ownership may take considerable time.
Guaranteed Delivery
Procedures....................If you wish to tender your initial notes in the
exchange offer and your initial notes are not
immediately available or you cannot deliver your
initial notes, the letter of transmittal and any
other required documents or you cannot comply with
the procedures for book-entry transfer prior to
the expiration date, you may tender your initial
notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights.............Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the expiration date
pursuant to the procedures described under "The
Exchange Offer -- Withdrawals of Tenders."
Acceptance of Initial Notes
and Delivery of New Notes.....Subject to certain conditions (summarized above in
" --Conditions to the Exchange Offer,") we will
accept for exchange any and all initial notes that
are properly tendered in the exchange offer prior
to the expiration date. The new notes issued
pursuant to the exchange offer will be delivered
promptly after the expiration date. See "The
Exchange Offer -- Terms of the Exchange Offer."
Certain Federal Income Tax
Consequences..................With respect to the exchange of initial notes for
new notes:
. the exchange should not constitute a taxable
exchange for federal income tax purposes; and
. you should not recognize gain or loss upon
receipt of the new notes.
You must include interest on the new notes in
gross income to the same extent as interest on the
initial notes. See "Certain U.S. Federal Income
Tax Considerations."
Registration Rights
Agreement.....................In connection with the sale of the initial notes,
we entered into a registration rights agreement
with the initial purchasers of the initial notes
that grants the holders of the initial notes
registration rights. As a result of making this
exchange offer, we will have fulfilled most of our
8
obligations under the registration rights
agreement. If you do not tender your initial notes
in the exchange offer, you will not have any
further registration rights under the registration
rights agreement or otherwise unless you were not
eligible to participate in the exchange offer. See
"The Exchange Offer -- Registration Rights." If
you are eligible to participate in the exchange
offer and do not tender your initial notes, you
will continue to hold the untendered initial
notes, which will continue to be subject to
restrictions on transfer under the Securities Act.
Exchange Agent................The Chase Manhattan Bank is serving as our
exchange agent in connection with the exchange
offer.
Use of Proceeds...............We will not receive any cash proceeds from the
issuance of the new notes pursuant to the exchange
offer.
Terms of the New Notes
The form and terms of the new notes will be substantially the same as the
form and terms of the initial notes except that:
(1) the new notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
(2) the holders of the new notes, except in limited circumstances, will
not be entitled to further registration rights under the registration
rights agreement or to receive additional interest on the new notes in
the event that certain registration obligations are not complied with.
The new notes will evidence the same debt as the initial notes and will be
governed by the same indenture under which the initial notes were issued.
The New Notes
Issuer........................Marriott International, Inc.
Notes offered.................$300,000,000 aggregate principal amount of new 7%
Series E Notes due 2008.
Maturity......................January 15, 2008.
Interest payment dates........January 15 and July 15 of each year, beginning
July 15, 2001.
Ranking.......................The new notes will be unsecured senior obligations
and rank equally with all of our existing and
future unsecured
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senior indebtedness. The new notes effectively
will rank junior to all liabilities of our
subsidiaries. See "Description of the New Notes."
Sinking fund..................None.
Optional redemption...........None.
Certain covenants.............We will agree to certain restrictions on liens,
sale and leaseback transactions, mergers,
consolidations and transfers of substantially all
of our assets. These covenants are subject to
important exceptions and qualifications, which are
described under the heading "Description of the
New Notes."
Form and denomination.........$1,000 and integral multiples of $1,000.
Ratings.......................The initial notes have been rated BBB+ by Standard
& Poor's Ratings Service and Baa1 by Moody's
Investor Service, Inc. and we expect the new notes
to receive the same ratings. Security ratings are
not recommendations to buy, sell or hold the
notes. Ratings are subject to revision or
withdrawal at any time by the rating agencies.
Trustee.......................The Chase Manhattan Bank.
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SUMMARY CONSOLIDATED FINANCIAL DATA
(in millions, except ratios and per share data)
The following table presents certain summary financial data for the five
most recent fiscal years, which is from our consolidated financial statements.
Since the information in this table is only a summary and does not provide all
of the information contained in our financial statements, including the related
notes, you should read "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
contained in documents incorporated by reference in this prospectus. Per share
data and shareholders' equity have not been presented for periods prior to our
March 1998 spinoff because we were not a publicly held company during that time.
See "Business--Formation of `New' Marriott International--Spin-off in March
1998."
Fiscal Year(a)
-------------------------------------------------
2000 1999 1998 1997 1996
----- ---- ---- ---- ----
Income Statement Data:
Sales ................................ . $10,017 $ 8,739 $ 7,968 $ 7,236 $ 5,738
Operating Profit Before
Corporate............................. . 922 830 736 609 508
Expenses and Interest
Net Income ........................... . 479 400 390 324 270
Per Share Data:
Diluted Earnings per Share .......... . 1.89 1.51 1.46
Dividends Declared .................. . 0.235 0.215 0.195
Other Operating Data:
Ratio of Earnings to Fixed
Charges(b) .......................... . 4.4x 5.0x 7.1x 7.2x 5.8x
Balance Sheet Data (at end of
period):
Total Assets ......................... . $ 8,237 $ 7,324 $ 6,233 $ 5,161 $ 3,756
Long-Term and Convertible
Subordinated Debt ................... . 2,016 1,676 1,267 422 681
Shareholders' Equity ................. . 3,267 2,908 2,570
(a) Our fiscal year ends on the Friday nearest to December 31. Our 1996 fiscal
year was 53 weeks; all other fiscal years were 52 weeks.
(b) In calculating the ratio of earnings to fixed charges, earnings represent
net income plus taxes on such 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), that portion of rental expense
deemed representative of interest, and a share of interest expense of
certain equity method investees.
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RISK FACTORS
Before you invest in the new notes, you should be aware of various risks,
including those described below. You should carefully consider these risk
factors together with all other information included in this prospectus before
you decide to invest in the new notes.
Risks concerning the lodging business may impact our revenue and growth
The lodging business involves unique operating risks. Our largest business
is lodging. Our lodging properties are subject to operating risks that may
adversely impact our revenue. These risks include, among others:
. changes in general economic conditions, which can adversely affect the
level of business and pleasure travel, and therefore the demand for
lodging and related services;
. cyclical over-building in one or more sectors of the hotel industry
and/or in one or more geographic regions, which could lead to excess
supply compared to demand, and a decrease in hotel occupancy and/or
room rates;
. restrictive changes in zoning, land use, health, safety and
environmental laws, rules and regulations;
. our inability to obtain adequate property and liability insurance to
protect against losses or to obtain such insurance at reasonable
rates; and
. changes in travel patterns.
In addition, weaker hotel and senior living community performance could give
rise to losses that arise under loans, guarantees and minority equity
investments that we have made in connection with hotels and senior living
communities that we manage.
Competition in the lodging business may affect our ability to grow. 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. 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.
12
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 on 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" on page 2.
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. There can be no assurance
that any of our current strategic arrangements will continue, or that we will be
able to enter into future collaborations.
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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. 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.
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.
Changes in supply and demand in our industries may adversely affect us
The lodging industry may be adversely affected by (1) supply additions, (2)
international, national and regional economic conditions, (3) changes in travel
patterns, (4) taxes and government regulations which influence or determine
wages, prices, interest rates, construction procedures and costs, and (5) the
availability of capital to allow us and potential hotel and retirement community
owners to fund investments. Our timeshare and senior living service businesses
are also subject to the same or similar uncertainties and, accordingly, we
cannot assure you that the present level of demand for timeshare intervals and
senior living communities will continue, or that there will not be an increase
in the supply of competitive units, which could reduce the prices at which we
are able to sell or rent units.
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.
14
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 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 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 new notes will be issued does not limit the amount of unsecured
debt which our subsidiaries may incur. In addition, we and our subsidiaries may
incur secured debt and enter into sale and leaseback transactions, subject to
certain limitations. See "Description of the New Notes--Certain Covenants" on
page 45.
A liquid trading market for the new notes may not develop
The liquidity of any market for the new notes will depend upon the number
of holders of the new notes, our performance, the market for similar securities,
the interest of securities dealers in making a market in the new notes and other
factors. A liquid trading market may not develop. If an active market for the
new notes does not develop, the market price and liquidity of the new notes may
be adversely affected. There may not be a market where you can sell your new
notes and, if a market for the new notes starts, it may end at any time. While
the initial notes are eligible for trading in The Portal Market, we currently do
not intend to list the new notes on any securities exchange or to seek approval
for their quotation on the National Association of Securities Dealers Automated
Quotation or any other automated quotation system.
15
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" on page 17.
16
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are based on
the beliefs and assumptions of our management and on information currently
available to our management. Forward-looking statements include the information
concerning our possible or assumed future results of operations and statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these forward-
looking statements. You are cautioned not to put undue reliance on any forward-
looking statements. In addition, we do not have any intention or obligation to
update forward-looking statements after we distribute this prospectus.
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
Securities and Exchange Commission.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
17
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for the periods indicated is as
follows:
Fiscal Year
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
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 such 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), that portion of rental expense deemed
representative of interest, and a share of interest expense of certain equity
method investees.
18
CAPITALIZATION
(in millions)
The following table sets forth, as of December 29, 2000, (1) our historical
short-term borrowings, long-term debt and capitalization and (2) such amounts as
adjusted for the issuance of the initial notes.
This data should be read along with our consolidated financial statements
and the notes thereto appearing in the documents incorporated by reference in
this prospectus.
As of December 29, 2000
--------------------------
As
Historical Adjusted
---------- --------
(unaudited)
Indebtedness:
Short-term borrowings ................................................. $ 42 $ 42
------ ------
Long-term debt
Initial notes ....................................................... 0 299
Senior notes ........................................................ 1,001 1,001
Commercial paper .................................................... 827 530
Non-interest bearing endowment deposits ............................. 108 108
Other ............................................................... 80 80
------ ------
Total long-term debt ................................................ 2,016 2,018
------ ------
Total indebtedness ............................................... $2,058 $2,060
====== ======
Shareholders' equity:
ESOP preferred stock .................................................. $ -- $ --
Class A common stock, 255.6 million shares issued ..................... 3 3
Additional paid-in capital ............................................ 3,590 3,590
Retained earnings ..................................................... 851 851
Unearned ESOP shares .................................................. (679) (679)
Treasury stock, at cost ............................................... (454) (454)
Accumulated other comprehensive income ................................ (44) (44)
------ ------
Total stockholders' equity .......................................... $3,267 $3,267
====== ======
Total capitalization ................................................ $5,325 $5,327
====== ======
19
THE EXCHANGE OFFER
The following discussion summarizes the material terms of the exchange
offer, including those set forth in the letter of transmittal distributed with
this prospectus. This summary is qualified in its entirety by reference to the
full text of the documents underlying the exchange offer, including the
indenture governing the new notes, which is filed as Exhibit 4.1 to our Annual
Report on Form 10-K for the year ended January 1, 1999.
Registration Rights
We sold the initial notes to Merrill Lynch, Pierce, Fenner & Smith,
Incorporated, Banc of America Securities LLC, Banc One Capital Markets, Inc.,
Deutsche Bank Securities Inc., Lehman Brothers Inc., Salomon Smith Barney Inc.
and Scotia Capital (USA) Inc., as initial purchasers, on January 16, 2001 under
an offering memorandum dated January 10, 2001 covering $300 million aggregate
principal amount of the initial notes. The initial purchasers then subsequently
resold the initial notes to qualified institutional buyers under Rule 144A under
the Securities Act. As part of the offering of the initial notes, we entered
into a Registration Rights Agreement dated as of January 16, 2001.
Under the registration rights agreement, we agreed to:
. file with the SEC not later than April 16, 2001 an exchange offer
registration statement under the Securities Act covering the offering
of new notes;
. use our reasonable efforts to cause the registration statement to
become effective under the Securities Act not later than July 15, 2001
and to keep the registration statement effective until the closing of
the exchange offer;
. keep the exchange offer open at least 30 calendar days; and
. use our reasonable efforts to cause the exchange offer to be
consummated not later than August 14, 2001.
The registration statement will be deemed not to be effective for any
period during which the offering of new notes is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency or court.
The exchange offer gives you the opportunity, with limited exceptions, to
exchange your initial notes for a like principal amount of new notes, which will
be issued without a restrictive legend and which you may generally reoffer and
resell without restrictions or limitations under the Securities Act. The
exchange offer is subject to the general terms and conditions developed by the
staff of the SEC in the Morgan Stanley No-Action Letter (Morgan Stanley and Co.,
Inc. (available June 5, 1991)) and the Exxon Capital No-Action Letter (Exxon
Capital Holdings Corporation (available May 13, 1988)), as interpreted in the
SEC's letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters. However, you are not entitled to rely on the position of the staff in
the no-action letters referred to above and, in the absence of an exemption
20
therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the resale of the new
notes, if you:
. are our "affiliate" within the meaning of Rule 405 under the Securities
Act;
. do not acquire the new notes in the ordinary course of your business;
. tender in the exchange offer with the intention to participate, or for
the purpose of participating, in a distribution of the new notes; or
. are a broker-dealer that acquired such initial notes directly from us.
If you are a broker-dealer receiving new notes for your own account in
exchange for initial notes, where you acquired such initial notes as a result of
market-making activities or other trading activities, you must acknowledge that
you will deliver a prospectus in connection with any resale of such new notes.
See "Plan of Distribution." We have agreed to include in this prospectus
information necessary to allow such broker-dealers to exchange such initial
notes in the exchange offer and to satisfy the prospectus delivery requirements
for resales of new notes received by such broker-dealer in the exchange offer.
Shelf Registration
We may also be required to file a shelf registration statement to permit
certain holders of the initial notes who were not eligible to participate in the
exchange offer to resell the initial notes periodically without being limited by
the transfer restrictions.
We will only be required to file a shelf registration statement, if:
. after the date the initial notes are issued, there is a change in law or
applicable interpretations of the law by the staff of the SEC, and as a
result:
-- we determine that we are not permitted to complete the exchange offer
as contemplated by the registration rights agreement, or
-- any holder of the initial notes is not able to participate in the
exchange offer, or
-- any holder of the initial notes does not receive fully transferable
new notes, or
. the exchange offer registration statement is not declared effective on
or before July 15, 2001 or the exchange offer is not consummated on or
before August 14, 2001, but we may terminate such shelf registration
statement at any time, without penalty, if the exchange offer
registration statement is declared effective or the exchange offer is
consummated, or
. upon the request of any of the initial purchasers made within 90 days
after the consummation of the exchange offer with respect to initial
notes not eligible to be
21
exchanged in the exchange offer and held by it following the
consummation of the exchange offer, or
. we choose to do so.
The shelf registration statement will permit only certain holders to resell
their initial notes from time to time. In particular, such holders must
. provide certain information in connection with the registration statement
and
. agree in writing to be bound by all provisions of the registration rights
agreement (including certain indemnification obligations).
A holder who sells initial notes pursuant to the shelf registration statement
will be required to be named as a selling securityholder in the prospectus, and
to deliver a copy of the prospectus to purchasers. Such holder will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales, and will be bound by the provisions of the
registration rights agreement which are applicable to such a holder (including
certain indemnification obligations).
If a shelf registration statement is required, we will use our reasonable
efforts to:
. file the shelf registration statement with the SEC no later than (a) April
16, 2001 or (b) the 60th calendar day after such filing obligation arises,
whichever is later, and
. cause the shelf registration statement to be declared effective by the SEC
on or prior to the 60th calendar day after such filing is made, and
. keep the shelf registration statement effective for a period of two years
after January 16, 2001, the date the initial notes were first issued, or if
earlier until all of the initial notes covered by the shelf registration
statement are sold thereunder or are already freely tradeable.
Neither an exchange of initial notes for new notes nor the filing of a
registration statement with respect to the exchange offer or a shelf
registration statement should be a taxable event to the holders, and the holders
should not recognize any taxable gain or loss or any interest income as a result
of such an exchange or such a filing. We are obligated to pay additional
interest on the initial notes to the holders under certain circumstances
described below under "Additional Interest." We intend to take the position that
such payments should be treated for tax purposes as additional interest,
although the Internal Revenue Service could propose a different method of taxing
the payments.
Additional Interest
If a registration default occurs (this term is defined below in the third
paragraph under this sub-heading), then we will be required to pay additional
interest to each holder of the initial
22
notes. During the first 90-day period that a registration default occurs, we
will pay additional interest equal to 0.25% (which is also known as 25 basis
points) per annum. At the beginning of the second and any subsequent 90-day
period that a registration default is continuing, the amount of additional
interest will increase by an additional 0.25% until all registration defaults
have been cured, up to a maximum rate of additional interest equal to 0.5%
(which is also known as 50 basis points) per annum. In no event will the rate of
additional interest exceed 0.5% per annum. Such additional interest will accrue
only for those days that a registration default occurs and is continuing. All
accrued additional interest will be paid to the holders of the initial notes in
the same manner as interest payments on the initial notes, with payments being
made on the interest payment dates for the initial notes. Following the cure of
all registration defaults, no more additional interest will accrue.
You will not be entitled to receive any such additional interest if you were,
at any time while the exchange offer was pending, eligible to exchange, and did
not validly tender, your initial notes for new notes in the exchange offer.
A "registration default" includes if:
. we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing, or
. any of such registration statements is not declared effective by the SEC
on or prior to the date specified for such effectiveness, or
. we fail to complete the exchange offer on or prior to August 14, 2001,
or
. the shelf registration statement or the exchange offer registration
statement is declared effective but thereafter ceases to be effective or
usable in connection with resales of transfer restricted securities
during the periods specified in the registration rights agreement,
subject to certain exceptions for limited periods of time with respect
to the shelf registration statement.
Except as set forth above, this prospectus may not be used for any offer to
resell, resale or other transfer of new notes.
Except as set forth above, after consummation of the exchange offer,
holders of notes have no registration or exchange rights under the registration
rights agreement. See "-- Consequences of Failure to Exchange."
Expiration Date; Extensions; Amendments
The term "expiration date" means 5:00 p.m., New York City time, on
__________, 2001, unless we, in our sole discretion, extend the period of time
during which the exchange offer is open, in which case the term "expiration
date" means the latest date and time to which the exchange offer is extended.
To extend the exchange offer, we will notify the exchange agent of any extension
by oral or written notice, followed by a public announcement thereof no later
than
23
9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date.
We reserve the right, in our reasonable judgment:
. to delay accepting any initial notes, to extend the exchange offer or
to terminate the exchange offer if any of the conditions set forth
below under the heading "-- Conditions" have not been satisfied, by
giving oral or written notice of such delay, extension or termination
to the exchange agent; or
. to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by a public announcement thereof.
Terms of the Exchange Offer
Subject to terms and conditions set forth in this prospectus and in the
letter of transmittal, we will accept for exchange initial notes which are
properly tendered and not withdrawn prior to 5:00 p.m., New York City time on
the expiration date. We will issue $1,000 principal amount of new notes in
exchange for each $1,000 principal amount of outstanding initial notes accepted
in the exchange offer. Holders of the initial notes may tender some or all of
their initial notes pursuant to the exchange offer; however, initial notes may
be tendered only in integral multiples of $1,000. The new notes will evidence
the same debt as the initial notes and will be entitled to the benefits of the
indenture. Initial notes surrendered for new notes will be retired and cancelled
and cannot be reissued. The form and terms of the new notes are substantially
the same as the form and terms of the initial notes, except that:
. the new notes have been registered under the Securities Act and thus
will not bear legends restricting the transfer thereof, and
. holders of the new notes generally will not be entitled to rights
under the registration rights agreement or additional interest, which
rights generally will terminate upon consummation of the exchange
offer.
Holders of initial notes do not have any appraisal or dissenters' rights
under applicable law or the indenture as a result of the exchange offer. We
intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the SEC thereunder, including Rule 14e-l.
We will be deemed to have accepted validly tendered initial notes when, as
and if we have given oral or written notice thereof to the exchange agent. The
exchange agent will act as agent for the tendering note holders pursuant to the
exchange agent agreement for the purpose of receiving the new notes from us.
24
If any tendered initial notes are not accepted for exchange because of an
invalid tender, the occurrence of other events set forth in this prospectus or
otherwise, the certificates for any such unaccepted initial notes will be
returned, without expense, to the tendering holders as promptly as practicable
after the expiration date.
Holders who tender their initial notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
initial notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the exchange offer. See "-- Fees and Expenses."
Interest on New Notes
Registered holders of new notes on the relevant record date for the first
interest payment date following the consummation of the exchange offer will
receive interest accruing from the most recent date to which interest has been
paid on the initial notes. Holders of new notes will not receive any payment in
respect of accrued interest on initial notes otherwise payable on any interest
payment date, the record date for which occurs on or after the consummation of
the exchange offer. Interest on the new notes will be payable semi-annually on
July 15 and January 15 of each year, commencing July 15, 2001.
Procedures for Tendering Initial Notes
The tender to us of initial notes by you as set forth below and our
acceptance of the initial notes will constitute a binding agreement between us
and you upon the terms and subject to the conditions set forth in this
prospectus and in the accompanying letter of transmittal. Only holders of
initial notes may tender such initial notes in the exchange offer. To tender in
the exchange offer, you must complete, sign and date the letter of transmittal,
or a facsimile thereof, have the signatures thereon guaranteed if required by
the letter of transmittal, and mail or otherwise deliver such letter of
transmittal or such facsimile, together with the initial notes and any other
required documents, to the exchange agent so as to be received by the exchange
agent at the address set forth on the cover page of the letter of transmittal
prior to 5:00 p.m., New York City time, on the expiration date. Delivery of the
initial notes may be made by book-entry transfer of such initial notes into the
exchange agent's account at DTC in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the exchange
agent prior to the expiration date.
By executing the letter of transmittal, you will make to us the
representations set forth below in the third paragraph under the heading "--
Resale of New Notes."
The method of delivery of initial notes and the letter of transmittal and
all other required documents to the exchange agent is at your election and risk.
Instead of delivery by mail, we recommend that you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to assure
delivery to the exchange agent before the expiration date. No letter of
transmittal or initial notes should be sent to us. You may request that your
broker, dealer, commercial bank, trust company or nominee effect the above
transactions for you.
25
If you are a beneficial owner whose initial notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to tender, you should contact the registered holder promptly and
instruct such registered holder to tender on your behalf. If you are a
beneficial owner and you wish to tender the initial notes yourself, you must
either make appropriate arrangements to register ownership of the initial notes
in your name or follow the procedures described in the immediately following
paragraph. You must make these arrangements or follow these procedures before
completing and executing the letter of transmittal and delivering the initial
notes. The transfer of record ownership may take considerable time.
Signatures on the letter of transmittal or on a notice of withdrawal, as
the case may be, must be guaranteed by an "eligible institution" (as defined
below) unless the initial notes tendered:
. are signed by the registered holder, unless such holder has completed the
box entitled "Special Exchange Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or
. are tendered for the account of an eligible institution.
If signatures on a letter of transmittal or a notice of withdrawal are required
to be guaranteed, the guarantee must be by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule l7A(d)-15 under the Securities Exchange Act of 1934
(an "eligible institution").
If the letter of transmittal is signed by a person other than the
registered holder of any initial notes listed therein, those initial notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such initial
notes, with the signature guaranteed by an eligible institution.
If the letter of transmittal or any initial notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
those persons should also indicate when signing, and unless waived by us,
evidence satisfactory to us of their authority to so act must be submitted with
the letter of transmittal.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance of tendered initial
notes and withdrawal of tendered initial notes, and our determination will be
final and binding. We reserve the absolute right to reject any and all initial
notes not properly tendered or any initial notes our acceptance of which would,
in the opinion of our counsel, be unlawful. We also reserve the right to waive
any defects, irregularities or conditions of tender as to particular initial
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in tenders
of initial
26
notes must be cured within the amount of time we determine. Although we intend
to notify you of defects or irregularities in your tender of initial notes, none
of us, the exchange agent or any other person shall incur any liability for
failure to give such notification. Tenders of initial notes will not be deemed
to have been made until those defects or irregularities have been cured or
waived. Any initial notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holders, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
Book-Entry Delivery Procedures
Promptly after the date of this prospectus, the exchange agent will
establish accounts with respect to the initial notes at DTC for purposes of the
exchange offer. Any financial institution that is a participant in DTC's systems
may make book-entry delivery of the initial notes by causing DTC to transfer
those initial notes into the exchange agent's account at DTC in accordance with
DTC's procedures for such transfer. To be timely, book-entry delivery of initial
notes requires receipt of a confirmation of a book-entry transfer ("Book-Entry
Confirmation") prior to the expiration date. In addition, although delivery of
initial notes may be effected through book-entry transfer into the exchange
agent's account at DTC, the letter of transmittal or a manually signed facsimile
thereof, together with any required signature guarantees and any other required
documents, or an "agent's message" (as defined below) in connection with a book-
entry transfer, must, in any case, be delivered or transmitted to and received
by the exchange agent at its address set forth on the cover page of the letter
of transmittal prior to the expiration date to receive new notes for tendered
initial notes, or the guaranteed delivery procedure described below must be
complied with. Tender will not be deemed made until such documents are received
by the exchange agent. Delivery of documents to DTC does not constitute delivery
to the exchange agent.
Tender of Initial Notes Held Through Depository Trust Company
The exchange agent and DTC have confirmed that the exchange offer is
eligible for DTC's Automated Tender Offer Program. Accordingly, participants in
DTC's Automated Tender Offer Program may, instead of physically completing and
signing the applicable letter of transmittal and delivering it to the exchange
agent, electronically transmit their acceptance of the exchange offer by causing
DTC to transfer initial notes to the exchange agent in accordance with DTC's
Automated Tender Offer Program procedures for transfer. DTC will then send an
agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the Book-Entry Confirmation, which states
that DTC has received an express acknowledgment from a participant in DTC's
Automated Tender Offer Program that is tendering initial notes that are the
subject of such Book-Entry Confirmation, that such participant has received and
agrees to be bound by the terms of the applicable letter of transmittal or, in
the case of an agent's message relating to guaranteed delivery, that such
participant has received and agrees to be bound by the applicable notice of
guaranteed delivery, and that we may enforce such agreement against such
participant.
27
Guaranteed Delivery Procedures
If you wish to tender your initial notes and:
. your initial notes are not immediately available,
. you cannot deliver your initial notes, the letter of transmittal or
any other required documents to the exchange agent or
. you cannot complete the procedures for book-entry transfer, prior to
the expiration date,
you may still effect a tender if:
. the tender is made through an eligible institution;
. prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice
of guaranteed delivery by facsimile transmission, mail or hand
delivery setting forth the name and address of the holder, the
certificate number(s) of such initial notes (if such initial notes
are not held through DTC) and the principal amount of initial notes
tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the letter of transmittal or facsimile
thereof, together with the certificate(s) representing the initial
notes or a Book-Entry Confirmation transfer of such initial notes
into the exchange agent's account at DTC and all other documents
required by the letter of transmittal, will be deposited by the
eligible institution with the exchange agent; and
. such properly completed and executed letter of transmittal or
facsimile thereof, as well as the certificate(s) representing all
tendered initial notes in proper form for transfer or Book-Entry
Confirmation transfer of such initial notes into the exchange
agent's account at DTC and all other documents required by the
letter of transmittal, are received by the exchange agent within
three New York Stock Exchange trading days after the expiration
date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to you so that you may tender your initial notes according to the
guaranteed delivery procedures set forth above.
Withdrawals of Tenders
Except as otherwise provided herein, you may withdraw your tender of
initial notes at any time prior to 5:00 p.m., New York City time, on the
expiration date.
28
To withdraw a tender of initial notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at the address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must:
. specify the name of the person having deposited the initial notes to
be withdrawn,
. identify the initial notes to be withdrawn including the certificate
number(s) and the principal amount of such initial notes, or, in the
case of initial notes transferred by book-entry transfer, the name and
number of the account at DTC to be credited,
. be signed by the holder in the same manner as the original signature
on the letter of transmittal by which such initial notes were
tendered, including any required signature guarantees, or be
accompanied by documents of transfer sufficient to have the trustee
under the indenture register the transfer of such initial notes into
the name of the person withdrawing the tender, and
. specify the name in which any such initial notes are to be registered,
if different from that of the person who deposited the initial notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices, and our determination shall be final
and binding on all parties. Any initial notes so withdrawn will be deemed not to
have been validly tendered for purposes of the exchange offer and no new notes
will be issued with respect thereto unless the initial notes so withdrawn are
validly retendered. Any initial notes that have been tendered but are not
accepted for exchange will be returned to their holder without cost to such
holder as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn initial notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering Initial Notes" at any time prior to the expiration
date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange any initial notes, and may terminate or amend
the exchange offer as provided in this prospectus before the acceptance of such
initial notes, if:
. the exchange offer or the making of any exchange by a holder, violates
any applicable law or interpretation of the staff of the SEC; or
. any action or proceeding shall have been instituted or threatened in
any court or by any governmental agency which in our judgment would
reasonably be expected to impair our ability to proceed with the
exchange offer.
If we determine in our reasonable judgment that any of the foregoing
conditions are not satisfied, we may:
29
. refuse to accept any initial notes and return all tendered initial
notes to the tendering holders,
. extend the exchange offer and retain all initial notes tendered prior
to the expiration of the exchange offer, subject, however, to the
rights of holders to withdraw such initial notes (see "-- Withdrawals
of Tenders"), or
. waive such unsatisfied conditions with respect to the exchange offer
and accept all properly tendered initial notes which have not been
withdrawn.
Exchange Agent
The Chase Manhattan Bank will act as exchange agent for the exchange offer
with respect to the initial notes.
Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal for the initial notes and
requests for copies of the notice of guaranteed delivery should be directed to
the exchange agent, addressed as follows:
By registered or certified mail or overnight courier:
The Chase Manhattan Bank
Attn: Marvin Kierstead
One Liberty Place
Suite 5210
Philadelphia, PA 19103
By facsimile (for eligible institutions only): (215) 972-8372
Confirm by telephone: (215) 988-1317
IF YOU DELIVER TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE IT WILL NOT BE A
VALID DELIVERY
Fees and Expenses
We will bear the expenses of soliciting initial notes for exchange. The
principal solicitation is being made by mail by the exchange agent. Additional
solicitation may be made by telephone, facsimile or in person by our officers
and regular employees and our affiliates and by persons so engaged by the
exchange agent.
We will pay the exchange agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith and pay other registration expenses, including fees and
expenses of the trustee under the indenture, filing fees, blue sky fees and
printing and distribution expenses.
30
We will pay all transfer taxes, if any, applicable to the exchange of the
initial notes pursuant to the exchange offer. If, however, certificates
representing the new notes or the initial notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the initial notes
tendered, or if tendered initial notes are registered in the name of any person
other than the person signing the letter of transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the initial notes pursuant to
the exchange offer, then the amount of any such transfer taxes, whether imposed
on the registered holder or any other person, will be payable by the tendering
holder.
Accounting Treatment
The new notes will be recorded at the same carrying value as the initial
notes, which is the aggregate principal amount of the initial notes, as
reflected in our accounting records on the date of exchange. Accordingly, no
gain or loss for accounting purposes will be recognized in connection with the
exchange offer. The expenses of the initial notes offering and the exchange
offer will be amortized over the term of the new notes.
Resale of New Notes
We are making the exchange offer in reliance on the position of the
Securities and Exchange Commission staff's Exxon Capital no-action letter,
Morgan Stanley no-action letter, Shearman & Sterling no-action letter and other
interpretive letters addressed to third parties in other transactions; however,
we have not sought our own interpretive letter addressing these matters and we
cannot assure you that the staff of the SEC would make a similar determination
with respect to the exchange offer as it has in such interpretive letters to
third parties. Based on these interpretations by the staff, and subject to the
two immediately following sentences, we believe that unless you are a broker-
dealer, you may offer for resale, resell or otherwise transfer new notes issued
to you pursuant to this exchange offer in exchange for initial notes without
further compliance with the registration and prospectus delivery requirements of
the Securities Act, provided that you acquire such new notes in the ordinary
course of your business and you are not participating, and have no arrangement
or understanding with any person to participate, in a distribution within the
meaning of the Securities Act of such new notes. Notwithstanding the above, you
may be subject to separate restrictions if you:
. are our "affiliate" within the meaning of Rule 405 under the Securities
Act,
. do not acquire such new notes in the ordinary course of your business,
. intend to participate in the exchange offer for the purpose of distributing
new notes, or
. are a broker-dealer who purchased such initial notes directly from us.
If you fall into any of the categories above, you:
31
. will not be able to rely on the interpretations of the SEC staff set forth
in the above-mentioned interpretive letters,
. will not be permitted or entitled to tender your initial notes in the
exchange offer, and
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or other transfer of your
initial notes unless the sale is made pursuant to an exemption from these
requirements.
In addition, as described below, if you are a broker-dealer holding initial
notes acquired for your own account (a "Participating Broker-Dealer"), then you
may be deemed a statutory "underwriter" within the meaning of the Securities Act
and must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of your new notes.
As a condition to your participation in the exchange offer, each holder of
initial notes, including, without limitation, any holder who is a Participating
Broker-Dealer, must furnish, upon our request, prior to the consummation of the
exchange offer, a written representation to us contained in the letter of
transmittal to the effect that:
. you are not our affiliate,
. any new notes to be received by you are being acquired in the ordinary
course of your business, and
. you are not engaged in, do not intend to engage in, and have no arrangement
or understanding with any person to participate in, a distribution within
the meaning of the Securities Act of such new notes.
If you are a broker-dealer receiving new notes for your own account in the
exchange offer, you must acknowledge that you acquired the initial notes for
your own account as a result of market-making activities or other trading
activities, and not directly from us, and must agree that you will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such new notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the SEC staff in the interpretive
letters referred to above, we believe that if you are a Participating Broker-
Dealer, you may fulfill your prospectus delivery requirements with respect to
the new notes received upon exchange of your initial notes with a prospectus
meeting the requirements of the Securities Act, which may be this prospectus
(which was prepared for the exchange offer) so long as it contains a description
of the plan of distribution with respect to the resale of such new notes.
Accordingly, this prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer during the period referred to
below in connection with resales of new notes received in exchange for initial
notes where the initial notes were acquired by the Participating Broker-Dealer
for its own account as a result of market-making or other trading activities.
32
Consequences of Failure to Exchange
Any initial notes tendered and exchanged in the exchange offer will reduce
the aggregate principal amount of initial notes outstanding. Following the
consummation of the exchange offer, holders who did not tender their initial
notes generally will not have any further registration rights under the
registration rights agreement, and such initial notes will continue to be
subject to restrictions on transfer. Accordingly, the liquidity of the market
for such initial notes could be adversely affected. The initial notes are
currently eligible for sale pursuant to Rule 144A through The Portal Market.
Because we anticipate that most holders will elect to exchange initial notes for
new notes pursuant to the exchange offer due to the absence of restrictions on
the resale of new notes (except for applicable restrictions on any holder of new
notes who is our affiliate or is a broker-dealer that acquired the initial notes
directly from us) under the Securities Act, we anticipate that the liquidity of
the market for any initial notes remaining after the consummation of the
exchange offer may be substantially limited.
As a result of the making of this exchange offer, we will have fulfilled
most of our obligations under the registration rights agreement, and holders who
do not tender their initial notes, except for certain instances involving the
initial purchasers or holders of initial notes who are not eligible to
participate in the exchange offer, will not have any further registration rights
under the registration rights agreement or otherwise or rights to receive
additional interest for failure to register. Accordingly, any holder that does
not exchange its initial notes for new notes will continue to hold the
untendered initial notes and will be entitled to all the rights and subject to
all the limitations applicable under the indenture, except to the extent that
such rights or limitations, by their terms, terminate or cease to have further
effectiveness as a result of the exchange offer.
The initial notes that are not exchanged for new notes pursuant to the
exchange offer will remain restricted securities within the meaning of the
Securities Act. Accordingly, such initial notes may be resold only:
. to us or any of our subsidiaries,
. inside the United States to a "qualified institutional buyer" in compliance
with Rule 144A under the Securities Act,
. inside the United States to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), or an
"accredited investor" that, prior to such transfer, furnishes or has
furnished on its behalf by a U.S. broker-dealer to the trustee under the
indenture a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the new notes, the form of
which letter can be obtained from the trustee,
. outside the United States in compliance with Rule 904 under the Securities
Act,
. pursuant to the exemption from registration provided by Rule 144 under the
Securities Act, if available, or
33
. pursuant to an effective registration statement under the Securities Act.
Each accredited investor that is not a qualified institutional buyer and
that is an original purchaser of any of the initial notes from the initial
purchasers will be required to sign a letter confirming that such person is an
accredited investor under the Securities Act and that such person acknowledges
the transfer restrictions summarized above.
Other
Participation in the exchange offer is voluntary and you should carefully
consider whether to accept the offer to exchange your initial notes. You are
urged to consult your financial and tax advisors in making your decision on what
action to take with respect to the exchange offer. We may in the future seek to
acquire untendered initial notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. We have no
present plans to acquire any initial notes that are not tendered in the exchange
offer or to file a registration statement to permit resales of any untendered
initial notes.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
considerations relating to the exchange of the initial notes for the new notes.
This discussion is based upon the Internal Revenue Code of 1986 as amended (the
"Code"), existing and proposed Treasury Regulations, and judicial decisions and
administrative interpretations thereunder, as of the date hereof, all of which
are subject to change, possibly with retroactive effect, or are subject to
different interpretations. We have not obtained, nor do we intend to obtain, a
ruling from the Internal Revenue Service (the "IRS") as to any U.S. federal
income tax consequences discussed below and there can be no assurances that the
IRS will not take contrary positions. This discussion does not address all
aspects of U.S. federal income tax that may be relevant to particular holders of
the initial notes and new notes. This discussion deals only with holders of
notes who hold the notes as capital assets and exchange initial notes for new
notes. This discussion does not address the tax consequences arising under the
laws of any foreign, state or local jurisdiction. Prospective investors are
urged to consult their tax advisors regarding the U.S. federal tax consequences
of acquiring, holding and disposing of the notes, as well as any tax
consequences that may arise under the laws of any foreign, state, local or other
taxing jurisdiction.
In the opinion of our outside counsel, Gibson, Dunn & Crutcher LLP, neither
participation in this exchange offer nor the filing of a shelf registration
statement should result in a taxable exchange to the holders of the initial
notes. Consequently, holders of the initial notes will not recognize taxable
gain or loss as a result of exchanging initial notes for new notes pursuant to
this exchange offer. The holding period of the new notes will be the same as
the holding period of the initial notes and the tax basis of the new notes will
be the same as the basis in the initial notes immediately before the exchange.
34
SELECTED FINANCIAL DATA
(in millions, except per share data)
The following table presents certain selected financial data for the
five most recent fiscal years, which is from our consolidated financial
statements. Since the information in this table is only a summary and does not
provide all of the information contained in our financial statements, including
the related notes, you should read "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our Consolidated Financial
Statements in our Annual Report on Form 10-K for the year ended December 29,
2000, which has been filed with the SEC and incorporated into this prospectus by
reference. Per share data has not been presented for periods prior to 1998
because we were not a publicly held company during that time.
Fiscal Year
-----------------------------------------------
2000 1999 1998 1997 1996(a)
---- ---- ---- ---- -------
Systemwide Sales...................................... $19,781 $17,684 $16,024 $13,196 $9,899
Income Statement Data:
Sales................................................. $10,017 $ 8,739 $ 7,968 $ 7,236 $5,738
Operating Profit Before Corporate Expenses and
Interest............................................. 922 830 736 609 508
Net Income............................................ 479 400 390 324 270
Per Share Data:
Diluted Earnings per Share........................... 1.89 1.51 1.46
Cash Dividends Declared.............................. .235 .215 .195
Balance Sheet Data (at end of period):
Total Assets.......................................... $ 8,237 $ 7,324 $ 6,233 $ 5,161 $3,756
Long-Term and Convertible Subordinated Debt........... 2,016 1,676 1,267 422 681
Shareholders' Equity.................................. 3,267 2,908 2,570
(a) 1996 fiscal year was 53 weeks; all other fiscal years were 52 weeks.
35
BUSINESS
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 three business segments, Lodging, Senior Living Services and
Distribution Services, which represented 78 percent, 7 percent and 15 percent,
respectively, of our total sales in the fiscal year ended December 29, 2000.
Lodging. We operate or franchise 2,099 lodging properties worldwide, with
approximately 390,469 rooms, as of December 29, 2000. In addition, we provide
approximately 6,959 furnished corporate housing units. We believe that our
portfolio of lodging brands - from luxury to economy to extended stay to
corporate housing - is the broadest of any company in the world, and that we are
the leader in the quality tier of the vacation timesharing business. Consistent
with our focus on management and franchising, we own very few of our lodging
properties. Our lodging brands include:
Upscale Full-Service Lodging Extended-Stay Lodging
. Marriott Hotels, Resorts and Suites . Residence Inn
. Marriott Conference Centers . TownePlace Suites
. J.W. Marriott Hotels . Marriott Executive Apartments
. Renaissance Hotels, Resorts and Suites
Vacation Timesharing
Luxury Lodging . Marriott Vacation Club International
. Bvlgari Hotels and Resorts/1/ . Horizons by Marriott Vacation Club
. Ritz-Carlton . The Ritz-Carlton Club
Moderate-Priced and Economy Lodging Corporate Apartments
. Courtyard . ExecuStay by Marriott
. Fairfield Inn
. SpringHill Suites
. Ramada International Hotels, Resorts and
Suites (Europe, Middle East and
Asia/Pacific)
/1/ As part of our ongoing strategy to expand our reach through partnerships
with preeminent, world-class companies, in early 2001, we announced our plans to
launch a joint venture with Bulgari SpA to introduce a distinctive new luxury
hotel brand - Bvlgari Hotels and Resorts
Senior Living Services. Our Senior Living Services segment develops and
operates senior living communities offering independent living, assisted living
and skilled nursing care for seniors. We operated 153 of these facilities as of
December 29, 2000, most of which were owned by third parties. Our three
principal senior living community brands are:
. Brighton Gardens by Marriott (quality-tier assisted living)
. Village Oaks (moderate-priced assisted living)
36
. Marriott MapleRidge (high levels of service for the more frail senior
population)
Distribution Services. Operating under the name Marriott Distribution
Services, we supply food and related products to our domestic hotels and senior
living communities and to external domestic customers through our high-volume
distribution centers. Marriott Distribution Services is one of the largest
limited-line food service distributors in the United States.
Formation of "New" Marriott International--Spin-off in March 1998. We
became a public company in March 1998, when we were "spun off" as a separate
entity by the company formerly named "Marriott International, Inc." We refer to
the "former" Marriott International as "Old Marriott." Our company--the "new"
Marriott International--was formed to conduct the lodging, senior living and
distribution services businesses formerly conducted by Old Marriott. Old
Marriott, now called Sodexho Marriott Services, Inc., is a provider of food
service and facilities management in North America.
Other Companies with the "Marriott" Name. In addition to us and Sodexho
Marriott Services, there is one other public company with "Marriott" in its
name: Host Marriott Corporation (a lodging real estate investment trust, most of
whose properties we manage). Sodexho Marriott Services and Host Marriott each
have their own separate management, businesses and employees. Each company's
board of directors is comprised of different persons, except that J.W.
Marriott, Jr., our Chairman and Chief Executive Officer, his brother, Richard E.
Marriott, Chairman of Host Marriott, and William J. Shaw, our President and
Chief Operating Officer and one of our directors, are each directors of more
than one Marriott company. Members of the Marriott family continue to own stock
in us, in Sodexho Marriott Services, and in Host Marriott.
DESCRIPTION OF THE NEW NOTES
We are offering, in exchange for the initial notes, a total of $300
million aggregate principal amount of 7% Series E new notes.
The initial notes were issued under a document called the "indenture".
The indenture is a contract between us and The Chase Manhattan Bank, which acts
as trustee. The new notes will be governed by the same indenture that governs
the initial notes. The trustee has two main roles. First, the trustee can
enforce your rights against us if we default. There are some limitations on the
extent to which the trustee acts on your behalf, described below on page 50
under "Remedies If an Event of Default Occurs". Second, the trustee performs
administrative duties for us, such as sending you interest payments,
transferring your new notes to a new buyer if you sell and sending you notices.
The indenture and its associated documents contain the full legal text
of the matters described in this section. The indenture and the new notes are
governed by New York law. We filed a copy of the indenture with the SEC as
Exhibit 4.1 to our Annual Report on Form 10-K for the year ended January 1,
1999. The indenture is subject to and governed by the Trust Indenture Act of
1939.
37
Because this section is a summary, it does not describe every aspect of
the new notes. This summary is subject to, and qualified in its entirety by
reference to, all the provisions of the indenture, including definitions of
certain terms used in the indenture and those terms made part of the indenture
by reference to the Trust Indenture Act. For example, in this section we use
capitalized words to signify defined terms that have been given special meanings
in the indenture. We describe the meaning for only the more important terms. We
also include references in parentheses to certain sections of the indenture.
Whenever we refer to particular sections or defined terms of the indenture in
this prospectus, such sections or defined terms are automatically incorporated
here.
General
The new notes will be our general unsecured and senior obligations and
will be limited to $300,000,000 aggregate principal amount. The new notes will
mature on January 15, 2008. The new notes will rank equally with all of our
other unsecured senior indebtedness. The new notes will effectively rank junior
to all liabilities of our subsidiaries. The new notes will be issued solely in
exchange for an equal principal amount of initial notes pursuant to the Exchange
Offer. The form and terms of the new notes will be identical in all material
respects to the form and terms of the initial notes, except that:
. the new notes will have been registered under the Securities Act and
will not bear legends restricting their transfer; and
. the holders of the new notes, except for limited instances, will not
be entitled to further registration rights under the registration
rights agreement or to receive additional interest on the new notes in
the event that certain registration obligations are not complied with.
The new notes are subject to full defeasance and covenant defeasance.
Defeasance may be accomplished in the manner described below under the heading
"--Defeasance."
Marriott International, Inc. is a legal entity separate and distinct from
its subsidiaries. Our subsidiaries are not obligated to make required payments
on the new notes. Accordingly, Marriott International, Inc.'s rights and the
rights of holders of the new notes to participate in any distribution of the
assets or income from any subsidiary is necessarily subject to the prior claims
of creditors of the subsidiary. The indenture under which the new notes will be
issued does not limit the amount of unsecured debt which our subsidiaries may
incur. In addition, Marriott International, Inc. and its subsidiaries may incur
secured debt and enter into sale and leaseback transactions, subject to the
limitations described below under the heading "--Certain Covenants."
Payments by Us on the New Notes
We will pay interest on the notes at a rate of 7% per annum. We will pay
interest on the notes on January 15 and July 15 of each year, with the first
payment being made on July 15, 2001. Each new note will bear interest from
January 16, 2001. If your new notes are accepted
38
for exchange, you will not receive accrued interest on the initial notes, and
will be deemed to have waived the right to receive any interest on the initial
notes from and after January 16, 2001.
We will pay interest only to those holders who are registered holders on the
close of business on the preceding December 31 or June 30, as the case may be.
These dates are the "regular record dates." In addition to the interest, we
will repay the principal on the notes on January 15, 2008. Periodically, we may
buy the new notes. However, we are not obligated to repay, and may not repay at
our option, any portion of the principal of the new notes prior to their
maturity.
The new notes will not be redeemable prior to maturity. The new notes will
not be entitled to the benefit of any sinking fund or other mandatory redemption
provisions.
Legal Ownership
"Street Name" and Other Indirect Holders
Investors who hold new notes in accounts at banks or brokers will generally
not be recognized by us as legal holders of the new notes. This is called
holding in "street name." Instead, we would recognize only the bank or broker,
or the financial institution the bank or broker uses to hold its new notes, as a
holder of new notes. These intermediary banks, brokers and other financial
institutions pass along principal, interest and other payments on the new notes,
either because they agree to do so in their customer agreements or because they
are legally required to. If you hold new notes in "street name," you should
check with your own institution to find out:
. How it handles payments and notices.
. Whether it imposes fees or charges.
. How it would handle voting if ever required.
. Whether and how you can instruct it to send you the new notes registered
in your own name so you can be a direct holder as described below.
. How it would pursue rights under the new notes if there were a default
or other event triggering the need for holders to act to protect their
interests.
Direct Holders
Our obligations, as well as the obligations of the trustee and those of any
third parties employed by us or the trustee, run only to those persons who are
registered as holders of the new notes. We do not have obligations to you if
you hold in "street name" or other indirect means, either because you choose
to hold the new notes in that manner or because the new notes are issued in the
form of global securities as described below. For example, once we make payment
to the registered holder, we have no further responsibility for the payment even
if that holder is legally required to pass the payment along to you as a
"street name" customer but does not do so.
39
Global Security
All new notes will initially be issued only as a registered new note in
global form without interest coupons, known as a "global security".
What is a Global Security? A global security is a special type of
indirectly held security as described above under " 'Street Name' and Other
Indirect Holders." The financial institution that acts as the sole direct
holder of the global security is called the "depositary". Our Depositary will
be the Depository Trust Company, New York, New York, or "DTC." Any holder
wishing to own an interest in a global security must do so indirectly by virtue
of an account with a broker, bank or other financial institution that in turn
has an account with the depositary. See "--Book-Entry System".
Special Investor Considerations for Global Securities. As an indirect
holder, an investor's rights relating to a global security will be governed by
the account rules of the investor's financial institution and of the depositary,
as well as general laws relating to securities transfers. We will not recognize
this type of investor as a holder of new notes and instead will deal only with
the depositary that holds the global security.
An investor holding interests in a global security should be aware that:
. The investor cannot get the new notes registered in his or her own name.
. The investor cannot receive physical certificates for his or her
interest in the new notes.
. The investor will be a "street name" holder and must look to his or her
own bank or broker for payments on the new notes and protection of his
or her legal rights relating to the new notes. See " 'Street Name' and
Other Indirect Holders".
. The investor may not be able to sell interests in the new notes to some
insurance companies and other institutions that are required by law to
own their securities in the form of physical certificates.
. The depositary's policies will govern payments, transfers, exchange and
other matters relating to the investor's interest in the global
security. We and the trustee have no responsibility for any aspect of
the depositary's actions or for its records of ownership interests in
the global security. We and the trustee also do not supervise the
depositary in any way.
. Payment for purchases and sales in the market for corporate bonds and
notes is generally made in next-day funds. In contrast, it is the policy
of the Depositary to require that interests in a global security be
purchased or sold within its system using same-day funds. This
difference could have some effect on how global security interests
trade, but we do not know what that effect will be.
40
Special Situations When Global Security Will Be Terminated. In a few
special situations described below, a global security will terminate and
interests in it will be exchanged for physical certificates representing new
notes. After that exchange, the choice of whether to hold the notes directly or
in "street name" will be up to each investor. Investors must consult their own
bank or brokers to find out how to have their interests in new notes transferred
to their own name, so that they will be direct holders. The rights of "street
name" "investors and direct holders in the new notes have been previously
described in the subsections entitled "Street Name' and Other Indirect Holders"
on page 39 ad "Direct Holders" on page 39.
The special situations for termination of a global security are:
. When the depositary notifies us that it is unwilling, unable or no
longer qualified to continue as depositary.
. When an Event of Default on the new notes has occurred and has not
been cured. We discuss defaults below under "Events of Default" on
page 49.
When a global security terminates, the depositary (and not we or the
trustee) is responsible for deciding the names of the institutions that will be
the initial direct holders.
--------------------------------------------------------------------------------
In the remainder of this description "you" means direct holders and not
"street name" or other indirect holders of notes. Indirect holders should read
the previous subsection on page 39 entitled 'Street Name' and Other Indirect
Holders".
--------------------------------------------------------------------------------
Overview of Remainder of this Description
The remainder of this description summarizes:
. Additional mechanics relevant to the new notes under normal
circumstances, such as how you transfer ownership and where we make
payments;
. Your rights under several special situations, such as if we merge with
another company, or if we want to change a term of the new notes;
. Promises we make to you about how we will run our business, or
business actions we promise not to take (known as "restrictive
covenants"); and
. Your rights if we default or experience other financial difficulties.
Additional Mechanics
Form, Exchange and Transfer
The new notes will be issued:
41
. only in fully registered form
. without interest coupons
. in a minimum denomination of $1,000 and integral multiples of $1,000.
You may have your new notes broken into more new notes of smaller
denominations (subject to minimum denomination requirements) or combined into
fewer new notes of larger denominations, as long as the total principal amount
is not changed. (Section 305) This is called an "exchange."
You may exchange or transfer new notes at the office of the trustee. The
trustee acts as our agent for registering new notes in the names of holders and
transferring new notes. We may change this appointment to another entity or
perform it ourselves. The entity performing the role of maintaining the list of
registered holders is called the "security registrar." It will also perform
transfers. (Section 305)
You will not be required to pay a service charge to transfer or exchange
new notes, but you may be required to pay for any tax or other governmental
charge associated with the exchange or transfer. The transfer or exchange will
only be made if the security registrar is satisfied with your proof of
ownership.
We may cancel the designation of any particular transfer agent. We may also
approve a change in the office through which any transfer agent acts. (Section
1002)
Payment and Paying Agents
We will pay interest to you if you are a direct holder listed in the
trustee's records at the close of business on a particular day in advance of
each due date for interest, even if you no longer own the new note on the
interest due date. That particular day, usually about two weeks in advance of
the interest due date, is called the "regular record date." (Section 307)
Holders buying and selling new notes must work out between them how to
compensate for the fact that we will pay all the interest for an interest period
to the one who is the registered holder on the regular record date. The most
common manner is to adjust the sales price of the new notes to pro-rate interest
fairly between buyer and seller. This pro-rated interest amount is called
"accrued interest".
We will pay interest, principal and any other money due on the new notes at
the corporate trust office of the trustee in Dallas, Texas. That office is
currently located at 1201 Main Street, 18th Floor, Dallas, Texas 75202. You may
elect to have your payments picked up at or wired from that office. We may also
choose to pay interest by mailing checks.
--------------------------------------------------------------------------------
"Street name" and other indirect holders should consult their banks or
brokers for information on how they will receive payments.
--------------------------------------------------------------------------------
42
We may also arrange for additional payment offices, and may cancel or
change these offices, including our use of the trustee's corporate trust office.
These offices are called "paying agents." We may also choose to act as our own
paying agent. We must notify the trustee of changes in the paying agents.
(Section 1002)
Notices
We and the trustee will send notices regarding the new notes only to direct
holders, using their addresses as listed in the trustee's records. (Sections 101
and 106)
Regardless of who acts as paying agent, all money paid by us to a paying
agent that remains unclaimed at the end of two years after the amount is due to
direct holders will be repaid to us. After that two-year period, you may look
only to us for payment and not to the trustee, any other paying agent or anyone
else. (Section 1003)
Special Situations
Mergers and Similar Events
Under the indenture, we are generally permitted to consolidate or merge
with another company or entity. We are also permitted to sell substantially all
of our assets to another entity. However, we may not take any of these actions
unless all the following conditions are met:
. Where we merge out of existence or sell substantially all of our
assets, the other entity may not be organized under a foreign
country's laws (that is, it must be a corporation, partnership or
trust organized under the laws of a State or the District of Columbia
or under federal law) and it must agree to be legally responsible for
the new notes.
. The merger, sale of assets or other transaction must not cause a
default on the new notes, and we must not already be in default
(unless the merger or other transaction would cure the default). For
purposes of this no-default test, a default would include an Event of
Default that has occurred and not been cured, as described later on
page 49 under "What is An Event of Default." A default for this
purpose would also include any event that would be an Event of Default
if the requirements for giving us default notice or our default having
to exist for a specific period of time were disregarded.
. It is possible that the merger, sale of assets or other transaction
would cause some of our property to become subject to a mortgage or
other legal mechanism giving lenders preferential rights in that
property over other lenders or over our general creditors if we fail
to pay them back. We have promised to limit these preferential rights
on our property, called "Liens," as discussed later on page 45 under
"Certain Covenants--Restrictions on Liens". If a merger or other
transaction would create any Liens on our property, we must comply
with that covenant. We would do this either by deciding that the Liens
were permitted, or by following the requirements of
43
the covenant to grant an equivalent or higher-ranking Lien on the same
property to you and the other direct holders of the new notes.
(Section 801)
Modification and Waiver
There are three types of changes we can make to the indenture and the new
notes.
Changes Requiring Your Approval. First, there are changes that we cannot
make to the indenture or your new notes without your specific approval. We
cannot do the following without your specific approval:
. change the stated maturity of the principal or interest on a new note;
. reduce any amounts due on a new note;
. reduce the amount of principal payable upon acceleration of the
Maturity of a new note following a default;
. change the place or currency of payment on a new note;
. impair your right to sue for payment;
. reduce the percentage of holders of new notes whose consent is needed
to modify or amend the indenture;
. reduce the percentage of holders of new notes whose consent is needed
to waive compliance with certain provisions of the indenture or to
waive certain defaults; and
. modify any other aspect of the provisions dealing with modification
and waiver of the indenture. (Section 902).
Changes Requiring a Majority or 50% Vote. Second, there are change that we
cannot make to the indenture or the new notes without a vote in favor by holders
of notes owning not less than 50% of the principal amount of the particular
series affected. Most changes fall into this category, except for clarifying
changes and certain other changes that would not adversely affect holders of the
new notes. A majority vote would be required for us to obtain a waiver of all or
part of the covenants described below, or a waiver of a past default. However,
we cannot obtain a waiver of a payment default or any other aspect of the
indenture or the new notes listed in the first category described above on this
page 44 under "Changes Requiring Your Approval" unless we obtain your individual
consent to the waiver. (Section 513)
Changes Not Requiring Approval. The third type of change does not require
any vote by holders of the new notes. This type is limited to clarifications and
certain other changes that would not adversely affect holders of the new notes.
(Section 901)
44
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a new note.
The new notes will not be considered outstanding, and therefore not
eligible to vote, if we have deposited or set aside in trust for you money for
their payment or redemption. New notes will also not be eligible to vote if they
have been fully defeased as described below on page 48 under "Full Defeasance."
(Section 101)
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding new notes that are entitled to
vote or take other action under the indenture. In certain limited circumstances,
the trustee will be entitled to set a record date for action by holders. If we
or the trustee set a record date for a vote or other action to be taken by
holders, that vote or action may be taken only by persons who are holders of
outstanding new notes on the record date and must be taken within 180 days
following the record date or another shorter period that we may specify (or as
the trustee may specify, if it set the record date). We may shorten or lengthen
(but not beyond 180 days) this period from time to time. (Section 104)
--------------------------------------------------------------------------------
"Street name" and other indirect holders should consult their banks or
brokers for information on how approval may be granted or denied if we seek to
change the indenture or the new notes or request a waiver.
--------------------------------------------------------------------------------
No Protection in the Event of a Change of Control
The new notes will not contain any provisions which may afford holders of the
new notes protection in the event of a change in control of our company or in
the event of a highly leveraged transaction (whether or not such transaction
results in a change in control) which could adversely affect Holders of the new
notes.
Certain Covenants
The indenture does not contain provisions that would afford protection to
you in the event of a highly leveraged transaction involving the Company.
Restrictions on Liens. Some of our property may be subject to a mortgage or
other legal mechanism that gives our lenders preferential rights in that
property over other lenders (including you and any other holders of the our debt
securities) or over our general creditors if we fail to pay them back. These
preferential rights are called "Liens". We promise that we will not place a Lien
on any of our Principal Properties, or on any shares of stock or debt of any of
our Restricted Subsidiaries, to secure new debt unless we grant an equivalent or
higher-ranking Lien on the same property to you and any other holders of the new
notes. (Section 1008)
However, we do not need to comply with this restriction if the amount of
all debt that would be secured by Liens on Principal Properties (including the
new debt and all "Attributable Debt", as described under "Restriction on Sales
and Leasebacks" below, that results from a sale
45
and leaseback transaction involving Principal Properties) is less than the
greater of $400 million or 10% of our Consolidated Net Assets.
This Restriction on Liens also does not apply to certain types of Liens,
and we can disregard these Liens when we calculate the limits imposed by this
restriction. We may disregard a Lien on any Principal Property or on any shares
of stock or debt of any Restricted Subsidiary if:
. the Lien existed on the date of the indenture, or
. the Lien existed at the time the property was acquired or at the time
an entity became a Restricted Subsidiary, or
. the Lien secures Debt that is no greater than the Acquisition Cost or
the Cost of Construction on a Principal Property or Restricted
Subsidiary (if the Lien is created no later than 24 months after such
acquisition or completion of construction), or
. the Lien is in favor of us or any Subsidiary, or
. the Lien is granted in order to assure our performance of any tender
or bid on any project (and other similar Liens).
Subject to certain limitations, we may also disregard any Lien that
extends, renews or replaces any of these types of Liens.
We and our subsidiaries are permitted to have as much unsecured debt as we
may choose and except as provided in this Restriction on Liens, the indenture
does not contain provisions that would afford protection to you in the event of
a highly leveraged transaction involving our company.
Restrictions on Sales and Leasebacks. We promise that neither we nor any of
our Restricted Subsidiaries will enter into any sale and leaseback transaction
involving a Principal Property, unless we comply with this covenant. A "sale and
leaseback transaction" generally is an arrangement between us or a Restricted
Subsidiary and any lessor (other than the Company or a Subsidiary) where we or
the Restricted Subsidiary lease a Principal Property for a period in excess of
three years, if such property was or will be sold by us or such Restricted
Subsidiary to that lender or investor.
We can comply with this promise in either of two different ways. First, we
will be in compliance if we or a Restricted Subsidiary could grant a Lien on the
Principal Property in an amount equal to the Attributable Debt for the sale and
leaseback transaction without being required to grant an equivalent or higher-
ranking Lien to you and the other holders of the new notes under the Restriction
on Liens described above. Second, we can comply if we retire an amount of Debt
ranking on a parity with, or senior to, the new notes, within 240 days of the
transaction, equal to at least the net proceeds of the sale of the Principal
Property that we lease in the transaction or the fair value of that property,
whichever is greater. (Section 1009)
46
Certain Definitions Relating to our Covenants. Following are the meanings
of the terms that are important in understanding the covenants previously
described. (Section 101)
"Attributable Debt" means the total present value of the minimum rental
payments called for during the term of the lease (discounted at the rate that
the lessee could borrow over a similar term at the time of the transaction).
"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 such amounts appear on our most recent consolidated
balance sheet and computed in accordance with generally accepted accounting
principles.
"Debt" means notes, bonds, debentures or other similar evidences of
indebtedness for borrowed money or any guarantee thereof.
A "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 pursuant to 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 the Company 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 company's 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 thereof. The definition also does not include any Subsidiary
formed or acquired after the date of the indenture for the purpose of developing
new assets or acquiring the business or assets of another person and which does
not acquire all or any substantial part of 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.
A "Principal Property" is any parcel or groups of parcels of real estate or
one or more physical facilities or depreciable assets, the net book value of
which exceeds 2% of the Consolidated Net Assets.
47
Defeasance
Full Defeasance. If there is a change in federal tax law, as described
below, we can legally release ourselves from any payment or other obligations on
the new notes (called "full defeasance") if we put in place the following other
arrangements for you to be repaid:
. We must deposit in trust for your benefit and the benefit of all other
direct holders of the new notes a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
new notes on their various due dates.
. There must be a change in current federal tax law or an IRS ruling
that lets us make the above deposit without causing you to be taxed on
the new notes any differently than if we did not make the deposit and
just repaid the new notes ourselves. (Under current federal tax law,
the deposit and our legal release from the new notes would be treated
as though we took back your new notes and gave you your share of the
cash and notes or bonds deposited in trust. In that event, you could
be required to recognize gain or loss on the new notes you give back
to us.)
. We must deliver to the trustee a legal opinion of our counsel
confirming the tax law change or ruling described above.
If we ever did accomplish full defeasance, as described above, you would
have to rely solely on the trust deposit for repayment on the new notes. You
could not look to us for repayment in the unlikely event of any shortfall.
Conversely, the trust deposit would most likely be protected from claims of our
lenders and other creditors if we ever become bankrupt or insolvent.
Covenant Defeasance. Under current federal tax law, we can make the same
type of deposit described above and be released from some of the covenants in
the new notes. This is called "covenant defeasance." In that event, you would
lose the protection of those covenants but would gain the protection of having
money and securities set aside in trust to repay the new notes. In order to
achieve covenant defeasance, we must, among other things, do the following:
. We must deposit in trust for your benefit and the benefit of all other
direct holders of the new notes a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate
enough cash to make interest, principal and any other payments on the
new notes on their various due dates.
. We must deliver to the trustee a legal opinion of our counsel
confirming that under current federal income tax law we may make the
above deposit without causing you to be taxed on the new notes any
differently than if we did not make the deposit and just repaid such
new notes ourselves.
If we accomplish covenant defeasance, the following provisions of the
indenture with respect to the new notes would no longer apply:
48
. Our promises regarding conduct of our business previously described on
pages 45-47 under "Certain Covenants."
. The condition regarding the treatment of Liens when we merge or engage
in similar transactions, as previously described on page 43 under
"Mergers and Similar Events."
. The Events of Default relating to breach of covenants and acceleration
of the maturity of other debt, described later on page 49 under "What
Is an Event of Default?"
If we accomplish covenant defeasance, you can still look to us for
repayment of the new notes if there were a shortfall in the trust deposit. In
fact, if one of the remaining Events of Default occurred (such as our
bankruptcy) and the new notes become immediately due and payable, there may be
such a shortfall. Depending on the event causing the default, you may not be
able to obtain payment of the shortfall. (Sections 1303 and 1304)
Default and Related Matters
Events of Default
You will have special rights if an Event of Default occurs and is not
cured, as described later in this subsection.
What Is An Event of Default? The term "Event of Default" means any of the
following:
. We do not pay the principal or any premium on a new note on its due
date.
. We do not pay interest on a new note within 30 days of its due date.
. We remain in breach of a covenant described on pages 45-47 or any
other term of the indenture for 60 days after we receive a notice of
default stating we are in breach. The notice must be sent by either
the trustee or holders of 25% of the principal amount of new notes.
. We or any Restricted Subsidiary default on other debt (excluding any
non-recourse debt) which totals over $100 million (or 4% of our
Consolidated Net Assets, whichever amount is greater) and the lenders
of such debt shall have taken affirmative action to enforce the
payment of such debt, and this repayment obligation remains
accelerated for 10 days after we receive a notice of default as
described in the previous paragraph.
. We file for bankruptcy or certain other events in bankruptcy,
insolvency or reorganization occur. (Section 501)
49
A payment default or other default under one series of new notes may, but
will not necessarily, cause a default to occur under any other series of new
notes issued under the indenture.
Remedies If an Event of Default Occurs. If an Event of Default has occurred
and has not been cured, the trustee or the holders of 25% in principal amount of
the new notes may declare the entire principal amount of all the new notes to be
due and immediately payable. This is called a declaration of acceleration of
maturity. If an Event of Default occurs because of certain events in bankruptcy,
insolvency or reorganization, the principal amount of all the new notes will be
automatically accelerated, without any action by the trustee or any Holder. A
declaration of acceleration of maturity may be cancelled by the holders of at
least a majority in principal amount of the new notes. (Section 502)
Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the indenture at the request of
any holders unless the holders offer the trustee reasonable protection from
expenses and liability (called an "indemnity"). (Section 603) If reasonable
indemnity is provided, the holders of a majority in principal amount of the
outstanding new notes may direct the time, method and place of conducting any
lawsuit or other formal legal action seeking any remedy available to the
trustee. These majority holders may also direct the trustee in performing any
other action under the indenture. (Section 512)
Before you bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to the new notes, the following must occur:
. You must give the trustee written notice that an Event of Default has
occurred and remains uncured.
. The holders of 25% in principal amount of all outstanding new notes
must make a written request that the trustee take action because of
the default, and must offer reasonable indemnity to the trustee
against the cost and other liabilities of taking that action.
. The trustee must have not taken action for 60 days after receipt of
the above notice and offer of indemnity. (Section 507)
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your new notes on or after its due date. (Section 508)
--------------------------------------------------------------------------------
"Street name" and other indirect holders should consult their banks or
brokers for information on how to give notice or direction to or make a request
of the trustee and to make or cancel a declaration of acceleration.
--------------------------------------------------------------------------------
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 new notes, or else specifying any default. (Section 1004)
50
Regarding the Trustee
The Chase Manhattan Bank is the trustee, security registrar and paying
agent under the indenture. We have certain existing banking relationships with
The Chase Manhattan Bank, including that one of its affiliates is a lender under
our revolving credit facility.
If an Event of Default (or an event that would be an Event of Default if
the requirements for giving us default notice or our default having to exist for
a specific period of time were disregarded) occurs, the trustee may be
considered to have a conflicting interest with respect to the new notes for
purposes of the Trust Indenture Act of 1939. In that case, the trustee may be
required to resign as trustee under the indenture and we would be required to
appoint a successor trustee.
Book-Entry System
The global security will be deposited with, or on behalf of, DTC and
registered in the name of DTC or its nominee. Ownership of beneficial interests
in the global security will be limited to DTC participants and to persons that
may hold interests through institutions that have accounts with DTC, known as
participants. Beneficial interests in such global security will be shown on, and
transfers of those ownership interests will be effected only through, records
maintained by DTC and its participants for such global security.
DTC holds the securities of its participants and facilitates the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in the accounts of its
participants. The electronic book entry system eliminates the need for physical
transfer and delivery of certificates. DTC's participants include:
. securities brokers and dealers;
. banks;
. trust companies;
. clearing corporations; and
. certain other organizations, some of which, and/or their
representatives, own DTC.
Banks, brokers, dealers, trust companies and others that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly, also have access to DTC's book-entry system.
The conveyance of notices and other communications by DTC to its
participants and by its participants to owners of beneficial interests in the
new notes represented by a global security will be governed by arrangements
among them, subject to any statutory or regulatory requirements in effect.
51
Principal and interest payments on any new notes represented by a global
security will be made to DTC or its nominee, as the case may be, as the sole
registered owner and the sole holder of the new notes represented by such global
security for all purposes under the indenture. Accordingly, we, the trustee and
any paying agent will have no responsibility or liability for:
. any aspect of DTC's records relating to, or payments made on account
of, beneficial ownership interests in any new notes represented by a
global security;
. any other aspect of the relationship between DTC and its participants
or the relationship between such participants and the owners of
beneficial interests in a global security held through such
participants; or
. the maintenance, supervision or review of any of DTC's records
relating to such beneficial ownership interests.
DTC has advised us that upon receipt of any payment of principal of or
interest on a note represented by a global security, DTC will immediately
credit, on its book-entry registration and transfer system, the accounts of
participants with payments in amounts proportionate to their respective
beneficial interests in the principal amount of such global note as shown on
DTC's records. Payments by participants to owners of beneficial interests in a
global security will be governed by standing instructions and customary
practices, as is the case with securities held for customer accounts registered
in "street name," and will be the sole responsibility of those participants.
A global security can only be transferred:
. as a whole by DTC to one of its nominees;
. as a whole by a nominee of DTC to DTC or another nominee of DTC; or
. as a whole by DTC or a nominee of DTC to a successor of DTC or a
nominee of such successor.
Except as described above under "--Special Situations When a Global
Security Will Be Terminated" and "--Exchanges Between Global Notes", (1) owners
of beneficial interests in a global security will not be entitled to receive
physical delivery of new notes in definitive form and will not be considered the
holders of the new notes for any purpose under the indenture and (2) no new
notes represented by a global security will be exchangeable. Accordingly, each
person owning a beneficial interest in a global security must rely on the
procedures of DTC, and if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the indenture or such global security. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of the securities in definitive form. Such laws may impair the ability
to transfer beneficial interests in a global security.
52
We understand that under existing industry practices, if we request holders
to take any action, or if an owner of a beneficial interest in a global security
desires to take any action which a holder is entitled to take under the
indenture, then (1) DTC would authorize the participants holding the relevant
beneficial interests to take such action and (2) such participants would
authorize the beneficial owners owning through such participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
DTC has provided the following information to us. DTC is:
. a limited-purpose trust company organized under the laws of the State
of New York;
. a "banking organization" within the meaning of the New York Banking
Law;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
. a "clearing agency" registered under the Exchange Act.
53
PLAN OF DISTRIBUTION
This prospectus, as it may be amended or supplemented from time to time,
may be used by Participating Broker-Dealers in connection with resales of new
notes received in exchange for initial notes where such initial notes were
acquired as a result of market-making activities or other trading activities.
Each Participating Broker-Dealer that receives new notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such new notes.
We will not receive any proceeds from any sale of new notes by broker-
dealers. New notes received by broker-dealers for their own account pursuant to
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such new notes. Any Participating Broker-Dealer that acquired
initial notes as a result of market making activities or other trading
activities and who resells new notes that were received by it pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such new notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of new notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the new notes will be passed upon for us by our Law
Department. Certain federal income tax matters will be passed upon for us by
Gibson, Dunn & Crutcher LLP, Washington, D.C. Attorneys in our Law Department
own shares of our common stock, and hold stock options, deferred stock and
restricted stock awards under our 1998 Comprehensive Stock and Cash Incentive
Plan and may receive additional awards under such plan in the future.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving such reports.
54
$300,000,000
Exchange Offer
LOGO
Marriott International, Inc.
$300,000,000 7% Series E Notes due 2008
PROSPECTUS
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. 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 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
3.1 Third Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3 to our Form 10-Q
for fiscal quarter ended June 18, 1999)
3.2 Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.3 to our Form 10-K for the fiscal year ended
January 1, 1999)
3.3 Amended and Restated Rights Agreement dated as of August 9, 1999
with the Bank of New York, as rights Agent (incorporated by
reference to Exhibit No. 4.1 to our Form 10-Q for fiscal quarter
ended September 10, 1999)
3.4 Certificate of Designation, Preferences and Rights of the Marriott
International, Inc. ESOP Convertible Preferred Stock (incorporated
by reference to Exhibit No. 3.1 to our Form 10-Q for fiscal quarter
ended June 16, 2000)
3.5 Certificate of Designation, Preferences and Rights of the Marriott
International, Inc. Capped Convertible Preferred Stock
(incorporated by reference to Exhibit No. 3.2 to our Form 10-Q for
fiscal quarter ended June 16, 2000)
4.1 Indenture between the Company and The Chase Manhattan Bank, as
trustee, dated as of November 16, 1998 (incorporated by reference
to Exhibit 4.1 to our Form 10-K for the fiscal year ended January
1, 1999)
4.2 Registration Rights Agreement among the Company and Merrill Lynch,
Pierce, Fenner & Smith, Incorporated, Banc of America Securities
LLC, Banc One Capital Markets, Inc., Deutsche Bank Securities Inc.,
Lehman Brothers Inc., Salomon Smith Barney Inc. and Scotia Capital
(USA) Inc., dated as of January 16, 2001
4.3 Form of 7% Series E Note due 2008.
5.1 Opinion of Marriott International, Inc.'s Law Department regarding
the legal validity of the securities being registered for issuance
8.1 Opinion of Gibson, Dunn & Crutcher LLP regarding certain federal
income tax matters
12 Statement re Computation of Ratios (incorporated by reference to
Exhibit 12 to our Form 10-K for the fiscal year ended December 29,
2000)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Marriott International, Inc.'s Law Department (included
in its opinion filed as Exhibit 5.1 hereto)
23.3 Consent of Gibson, Dunn & Crutcher LLP (included in its opinion
filed as Exhibit 8.1 hereto)
24.1 Powers of Attorney (included on the signature page hereto)
25.1 Statement of eligibility of trustee under the indenture, on Form T-
1
99.1 Form of Letter of Transmittal
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(b) Financial Statement Schedules
Schedules are omitted because of the absence of conditions under which they
are required under the pertinent portion of the instructions for Form S-4.
(c) Opinion Materially Relating to the Transaction
None.
Item 22. Undertakings.
(1) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the 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.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act of 1933 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, suite 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 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 of 1933 and will be governed by the
final adjudication of such issue.
(3) The undersigned registrant hereby undertakes that (1) for the 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 on 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
shall be deemed to be part of this registration statement as of the time it was
declared effective and (2) 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 the time
shall be deemed to be the initial bona fide offering thereof.
(4) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
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(5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 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 April 4,
2001.
MARRIOTT INTERNATIONAL, INC.
By: /s/ J.W. Marriott, Jr.
----------------------
J.W. Marriott, Jr.
Chairman of the Board and
Chief Executive Officer
POWERS OF ATTORNEY
Each person whose signature appears below constitutes and appoints each of
J.W. Marriott, Jr. and Arne M. Sorenson, acting singly, 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 connection therewith, 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 date indicated.
Signature Title Date
/s/ J.W. Marriott, Jr. Chairman of the Board and April 4, 2001
------------------------- Chief Executive Officer
J.W. Marriott, Jr. (Principal Executive Officer)
/s/ Arne M. Sorenson Executive Vice President and April 4, 2001
------------------------- Chief Financial Officer
Arne M. Sorenson (Principal Financial Officer)
/s/ Linda A. Bartlett Vice President - Finance and April 4, 2001
------------------------- Controller
Linda A. Bartlett (Principal Accounting Officer)
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/s/ William J. Shaw President, Chief Operating April 4, 2001
------------------------------ Officer and Director
William J. Shaw
/s/ Richard E. Marriott Director April 4, 2001
------------------------------
Richard E. Marriott
/s/ Henry Cheng Kar-Shun Director April 4, 2001
------------------------------
Henry Cheng Kar-Shun
/s/ Gilbert M. Grosvenor Director April 4, 2001
------------------------------
Gilbert M. Grosvenor
/s/ Floretta Dukes McKenzie Director April 4, 2001
------------------------------
Floretta Dukes McKenzie
/s/ Harry J. Pearce Director April 4, 2001
------------------------------
Harry J. Pearce
/s/ W. Mitt Romney Director April 4, 2001
------------------------------
W. Mitt Romney
/s/ Roger W. Sant Director April 4, 2001
------------------------------
Roger W. Sant
/s/ Lawrence M. Small Director April 4, 2001
------------------------------
Lawrence M. Small
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