EXHIBIT 10.3
XXXXx ALLOCATION AGREEMENT
This XXXXx Allocation Agreement (the "Agreement") is entered into this
27th day of March, 1998 between NEW MARRIOTT MI, INC., a Delaware corporation to
be renamed "Marriott International, Inc." ("New Marriott"), MARRIOTT
INTERNATIONAL, INC., a Delaware corporation to be renamed "Sodexho Marriott
Services, Inc." ("SMS"), and SODEXHO ALLIANCE, S.A., a societe anonyme organized
under the laws of France ("Sodexho").
RECITALS
WHEREAS, New Marriott and SMS have entered into a Distribution
Agreement dated as of September 30, 1997, as amended, which provides for, among
other things, (i) the distribution (the "Distribution") to the holders of SMS's
outstanding shares of common stock, par value $1.00 per share (the "SMS Common
Stock"), on a share-for-share basis, of all the outstanding shares of capital
stock of New Marriott, which as of the Distribution will be Common Stock, par
value $0.01 per share, of New Marriott ("New MAR Common Stock") and Class A
Common Stock, par share $0.01 per share, of New Marriott ("New MAR-A Common
Stock," and, collectively with the New MAR Common Stock, the "New Marriott
Common Stock"), (ii) the division between New Marriott and SMS of certain assets
and liabilities and (iii) certain other agreements governing the relationship
between New Marriott and SMS following the Distribution;
WHEREAS, SMS has issued and outstanding Liquid Yield Option(R) Notes
due 2011 ("Securities"), issued pursuant to an Indenture dated as of March 25,
1996, as amended by a First Supplemental Indenture dated as of April 2, 1996,
between SMS and The Bank of New York, as trustee (the "Indenture");
WHEREAS, the Distribution Agreement provides that SMS and New Marriott
shall enter into this Agreement on or prior to the date the Distribution is
effected (the "Distribution Date"), in order to provide for the adjustments and
assumption of obligations set forth herein; and
WHEREAS, Sodexho is entering into this Agreement in accordance with
the terms of the Agreement and Plan of Merger, dated as of September 30, 1997,
as amended, among the parties hereto and certain of their affiliates and the
transactions contemplated thereby, as a result of which, among other things,
Sodexho will (x) become a substantial stockholder of SMS on the Distribution
Date and (y) otherwise derive significant benefits.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants set forth herein, the parties hereby agree as follows:
Section 1. Capitalized Terms. Capitalized terms used herein, and not
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defined herein, shall have the meanings ascribed to such terms in the Indenture.
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Section 2. Execution of Second Supplemental Indenture. SMS and New
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Marriott agree to amend the terms of the Indenture by executing the Second
Supplemental Indenture in the form attached hereto as Exhibit A (the "Second
Supplemental Indenture") on or prior to the Distribution Date. (The "Indenture"
as referred to hereinafter shall mean the Indenture, as amended by the Second
Supplemental Indenture.) SMS agrees to deliver to the Trustee an Officer's
Certificate and an Opinion of Counsel, in form and substance satisfactory to the
Trustee, stating that the amendments contained in the Second Supplemental
Indenture are authorized or required pursuant to Sections 5.01, 9.01(2) and
9.01(4) of the Indenture. New Marriott and SMS agree to take all such other
action as may be reasonably necessary to cause the Trustee to execute the Second
Supplemental Indenture.
Section 3. SMS Allocable Payment Obligation. Pursuant to the Second
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Supplemental Indenture, (a) New Marriott will become the Successor Company to
SMS as contemplated by Article 5 of the Indenture, and (b) SMS will assume
responsibility for, and agree to pay, nine percent (9%) of the amount of each
payment required to be made by New Marriott, as the Successor Company, under the
terms of the Indenture or any Securities issued thereunder with respect to
Principal Amount, Issue Price, accrued Original Issue Discount, Redemption
Price, Purchase Price, Change
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in Control Purchase Price and interest (if any) with respect to the Securities
(the "SMS Allocable Payment Obligation"); provided that the SMS Allocable
Payment Obligation shall not include any amounts required to be paid by New
Marriott as interest pursuant to paragraph 1 of the Securities as a result of
New Marriott's failure to satisfy the Company Allocable Payment Obligation (as
defined below).
Section 4. Company Allocable Payment Obligation. Any payments by SMS
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in satisfaction of the SMS Allocable Payment Obligation shall be deemed to
relieve New Marriott of its obligations under the Indenture to the extent of
such payments by SMS. Subject to the SMS Allocable Payment Obligations, New
Marriott shall assume and retain all obligations with respect to payments under
the Indenture or with respect to any Securities issued thereunder, including,
without limitation, the obligation (i) to make payment of the SMS Allocable
Payment Obligation in the event SMS fails to make such payment as provided in
Section 3 and (ii) in any event, to pay an amount equal to ninety-one percent
(91%) of each payment required to be made under the terms of the Indenture with
respect to Principal Amount, Issue Price, accrued Original Issue Discount,
Redemption Price, Purchase Price, Change in Control Purchase Price and interest
(if any) with respect to the Securities (the "Company Allocable Payment
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Obligation").
Section 5. Direct Payment by New Marriott.
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(a) Upon a default by SMS in its payment obligations under the
Indenture, New Marriott shall have the right to pay all or any portion of the
SMS Allocable Payment Obligation directly to the Paying Agent or the Trustee for
the Securities.
(b) New Marriott shall also have the right, by giving written notice
to SMS at least 30 Business Days prior to the Purchase Date, to elect to pay all
or a portion of the SMS Allocable Payment Obligation for the purchase of
Securities directly to the Paying Agent or Trustee through the delivery of
Common Stock, as provided for in Section 3.08(b) of the Indenture. If New
Marriott makes such election, the amount due from SMS under the Indenture shall
be paid directly to New Marriott on the date such amount is due from SMS under
the Indenture.
(c) In the event that New Marriott is obligated to pay any amounts
payable by or on behalf of SMS pursuant to this Agreement or the Indenture, SMS
shall be required to pay to New Marriott upon demand any amounts paid by New
Marriott, together with interest on any such amounts at the Prime Rate (as
defined below), calculated from the date such payment was due from SMS
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under the Indenture to the date such payment is made by SMS to New Marriott.
"Prime Rate" means the "prime rate" as quoted from time to time in the "Money
Rates" section of The Wall Street Journal or, if the "prime rate" is no longer
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quoted there, the "prime", "base" or "reference rate" as announced from time to
time by Citibank, N.A.
Section 6. Issuance of SMS Stock Upon Conversion of Securities.
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(a) Following the record date for the Distribution (the "Distribution
Record Date"), upon conversion of Securities as provided in Article 11 of the
Indenture, Securityholders shall have the right to receive for each $1,000 face
amount of Securities: (1) 8.760 shares of SMS Common Stock, and (2) 8.760 shares
of New MAR Common Stock and 8.760 shares of New MAR-A Common Stock, in each case
subject to further adjustment in accordance with Article 11 of the Indenture.
The foregoing rights are being provided to the Securityholders pursuant to a
determination by the Board of Directors of SMS under Section 11.10 of the
Indenture that such rights enable the Securityholders to participate in the
Distribution on a basis that is fair and appropriate in light of the basis on
which holders of SMS Common Stock participate in the Distribution, and that, by
virtue of such rights being provided, no adjustment need
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be made pursuant to the Indenture, including Section 11.08 or 11.14 thereof, on
account of the Distribution.
(b) SMS currently anticipates effecting a one-for-four reverse stock
split (the "Reverse Stock Split") on or about the Distribution Date (the date on
which the Reverse Stock Split is effected, the "Effective Date"). If so
effected, pursuant to Section 11.06 and 11.06A of the Indenture, immediately
after the Effective Date, Securityholders shall have the right to receive, in
lieu of 8.760 shares of SMS Common Stock as set forth in Section 6(a) above,
2.190 shares of SMS Common Stock for each $1,000 face amount of Securities.
(c) SMS agrees to issue and deliver shares of SMS Common Stock upon
the conversion of Securities on the dates and in the manner set forth in Article
11A of the Indenture.
Section 7. Notice to Securityholders. SMS has delivered a notice
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to Securityholders (and, if the Reverse Stock Split is to be effected, filed
such notice with the Trustee and the Conversion Agent), reasonably satisfactory
in form and substance to New Marriott, at least 15 days prior to the
Distribution Record Date that describes the basis on which Securityholders will
participate in the Distribution and the matters set forth in this Agreement and
the Second Supplemental
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Indenture, and, if the Reverse Stock Split is to be effected, that states the
Effective Date.
Section 8. Redemption of Securities.
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(a) New Marriott Initiated Redemption. New Marriott may exercise its
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right to redeem any Securities in accordance with Article 3 of the Indenture,
without obtaining the prior consent of SMS. In the event New Marriott calls for
a redemption of any Securities, (x) New Marriott will provide to SMS a copy of
the notice given to the Trustee in accordance with Section 3.01 of the Indenture
and (y) New Marriott must deposit with the Paying Agent the entire Redemption
Price for the Securities to be redeemed (including, without limitation, the
portion attributable to the SMS Allocable Payment Obligation) on the date and in
the manner set forth in the Indenture. The portion of such Redemption Price
constituting the SMS Allocable Payment Obligation shall be paid by SMS to New
Marriott on the applicable Redemption Date in the same manner that New Marriott
is obligated to deposit with the Paying Agent the Redemption Price.
(b) No SMS Initiated Redemptions. SMS shall have no right to initiate
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a redemption of any Securities.
Section 9. Special Tax Event Conversion. New Marriott shall have
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the sole power to elect, pursuant to Article 12 of the Indenture, to make cash
interest payments, and SMS agrees to make cash interest payments on the SMS
Allocable
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Payment Obligation in the event New Marriott makes such election.
Section 10. Sodexho Obligations.
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(a) Sodexho Guarantee. Sodexho hereby unconditionally guarantees to
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New Marriott prompt and timely payment and performance of all of the obligations
of SMS under this Agreement and the Indenture, other than the obligation to
deliver SMS Common Stock upon conversion of the Securities pursuant to Section
11A of the Indenture and Section 6 hereof. The obligations of Sodexho under
this Section 10 shall be unconditional, absolute and irrevocable. Sodexho will
pay, on demand by New Marriott, any amounts not timely paid by SMS under this
Agreement and the Indenture.
(b) Direct Obligations of Sodexho. To the extent that SMS is not
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permitted or obligated to make any payment hereunder or under the Indenture for
any reason whatsoever, Sodexho agrees to make such payment directly to New
Marriott or the Trustee, as the case may be, and shall indemnify New Marriott
for any losses, costs or expenses incurred by New Marriott as a result of SMS
not being permitted or obligated to make any such payments.
(c) Obligations Unconditional. Sodexho agrees that its obligations
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hereunder shall be unconditional, irrespective of the validity, legality or
enforceability of the underlying
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obligations of SMS, the failure of New Marriott to assert any claim or demand or
to exercise any right or remedy against SMS or any other person under the
provisions hereof or of the Indenture or any other agreement or otherwise, the
absence of any action to enforce the underlying obligations of SMS or any other
circumstance that might otherwise constitute a legal or equitable discharge or
defense of a guarantor (including any rescission, waiver, amendment, extension,
renewal or modification of any of the terms or provisions hereof or any of the
agreements under which the underlying obligations of SMS arise or any other
instrument or agreement). Sodexho hereby waives diligence, presentment, demand,
any right to require a proceeding first against any other person, protest or
notice with respect to the underlying obligations of SMS and all demands
whatsoever and also waives notice of protest for nonpayment or nonperformance.
Sodexho covenants that its obligations in this Section 10 will not be discharged
except by complete performance of the obligations contained herein. These
obligations will not be affected by, and will remain in full force and effect
notwithstanding, any bankruptcy, insolvency, liquidation or reorganization of
SMS. No delay or omission by New Marriott to exercise any right under this
Section 10 shall impair any such right, nor shall it be construed to be a waiver
thereof. No amendment, modification, termination or waiver of any provision
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of these obligations, or consent to any departure by Sodexho therefrom, shall in
any event be effective without the written concurrence of New Marriott. No
waiver of any single breach or default under these obligations shall be deemed a
waiver of any other breach or default.
Section 11. New Marriott Indemnity. In connection with SMS's
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assumption or retention of certain obligations regarding the Securities, New
Marriott agrees to indemnify SMS for losses, costs or expenses resulting from a
determination that interest paid by SMS with respect to such obligations
(including for this purpose any extension, renewal or refinancing of such
obligations) is not deductible for federal income tax purposes.
Section 12. Repayment to SMS. If New Marriott receives any money
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or securities from the Trustee pursuant to Section 3.14 or Section 8.02 of the
Indenture, New Marriott shall pay to SMS any such money or securities that are
attributable to the SMS Allocable Payment Obligation. Such payment to SMS shall
occur on the next Business Day after New Marriott receives such money or
securities from the Trustee. If New Marriott fails to make payment on such
date, the amount ultimately returned to Sodexho shall include interest from the
date such payment was to be made to SMS to the date of payment at the Prime
Rate.
Section 13. Certain Representations. Each party hereto represents
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to the other parties hereto that this Agreement
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is enforceable against such party in accordance with its terms.
Section 14. Compliance with Indenture.
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(a) New Marriott agrees to comply with all of its obligations under
the Indenture, and not to take any action that would cause any Event of Default
under the Indenture.
(b) SMS agrees to comply with all of its obligations under the
Indenture, and not to take any action that would cause an Event of Default under
the Indenture.
Section 15. Remedies. New Marriott and SMS acknowledge and agree
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that money damages would be inadequate relief from any breach of threatened
breach of their obligations hereunder, and that either party shall be entitled
to injunctive or other equitable relief for any breach or threatened breach
thereof.
Section 16. Severability. The invalidity or partial invalidity or
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unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions.
Section 17. Choice of Law. THIS AGREEMENT SHALL BE CONSTRUED UNDER
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AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
Section 18. Entire Agreement. This Agreement and the Indenture
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constitute the entire agreement and understanding
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between the parties with respect to its subject matter, are intended as a
complete and exclusive statement of the terms of their agreement with respect to
the Securities and supersede any prior or contemporaneous agreement or
understanding related to the subject matter hereof. To the extent that there is
any conflict between the terms of the Indenture and the terms of this Agreement,
the terms of the Indenture shall control.
Section 19. Amendments. This Agreement may not be amended,
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supplemented or modified in any respect except by written agreement between the
parties, duly signed by their respective authorized representatives.
Section 20. Counterparts. This Agreement may be executed in one or
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more counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one and the same instrument.
Section 21. Waiver. Either party may specifically waive any breach
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of this Agreement by the other party, but no such waiver shall be deemed
effective unless in writing, sighed by the waiving party, and specifically
designating the breach waived. No waiver shall constitute a continuing waiver
of similar or other breaches.
Section 22. Notices. Any notice required or permitted hereunder
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shall be delivered in the manner set forth in sections 13.02 and 13.02A of the
Indenture.
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Section 23. Headings. The descriptive headings of the several
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Sections of this Agreement are for convenience only an do not constitute a part
of the Agreement or affect its meaning or interpretation.
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IN WITNESS WHEREOF, the duly authorized representatives of the parties
have executed this XXXXx Allocation Agreement as of the date first written
above.
NEW MARRIOTT MI, INC. (To Be Renamed
"Marriott International, Inc.")
By: /s/ Xxxxxxx X. Xxxxxx
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Title: Vice President and Treasurer
MARRIOTT INTERNATIONAL, INC. (To Be
Renamed "Sodexho Marriott Services,
Inc.")
By: /s/ Xxxxxxxx X. Xxxxx
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Title: Vice President
SODEXHO ALLIANCE, S.A.
By: /s/ Xxxxxxx Xxxxxx
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Title: Senior Vice President and Chief
Financial Officer
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