EXHIBIT 10.9
XXXXX ALLOCATION AGREEMENT
This XXXXx Allocation Agreement (the "Agreement") is entered into this
__ day of ________, 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, 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 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,
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:
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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.
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
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agree to pay, ___% [to be determined in good faith by the Board of Directors of
SMS shortly before the Distribution] 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 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
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the event SMS fails to make such payment as provided in Section 3 and (ii) in
any event, to pay an amount equal to ___ percent (___%) 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 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.
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(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 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 quoted there,
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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
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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 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.
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Section 7. Notice to Securityholders. SMS has delivered a notice to
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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 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
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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 the
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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 Payment Obligation in the event New Marriott makes such election.
Section 10. Sodexho Obligations.
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(a) Sodexho Guarantee. Sodexho hereby guarantees to New Marriott
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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. 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
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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 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.
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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 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 or
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securities from the Trustee pursuant to
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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 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
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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 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.
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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.
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:
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Title:
MARRIOTT INTERNATIONAL, INC. (To Be
Renamed "Sodexho Marriott Services,
Inc.")
By:
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Title:
SODEXHO ALLIANCE, S.A.
By:
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Title:
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