<PAGE>
Filed Pursuant to Rule 424(b)(2) relating to
Registration Statement No. 333-45227
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 23, 1998
$1,010,000,000
[CENDANT CORPORATION LOGO]
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS TO 40 YEARS FROM DATE OF ISSUE
-----------------
Cendant Corporation (the "Company") may offer from time to time up to
$1,010,000,000 aggregate principal amount, or the equivalent thereof in
foreign currencies or currency units, of its Medium-Term Notes (the "Notes"),
subject to reduction as a result of the sale of other Debt Securities of the
Company. Each Note may be denominated or payable in U.S. dollars or in a
foreign currency, or currency unit specified in the applicable Pricing
Supplement (the "Specified Currency") or in amounts determined by reference
to an index as may be designated by the Company at the time of the offering
and set forth in a Pricing Supplement. The Notes will mature on any day from
9 months to 40 years from the date of issue, as selected by the initial
purchaser and agreed to by the Company. The specific interest rates and
maturities of Notes sold will be set forth in Pricing Supplements to this
Prospectus Supplement. Interest rates or interest rate formulas are subject
to change by the Company from time to time but no such change will affect any
Note theretofore issued or which the Company has agreed to sell. Unless
otherwise indicated in the applicable Pricing Supplement, each Note will bear
interest at a fixed rate (a "Fixed Rate Note") or at a floating rate (a
"Floating Rate Note") determined by reference to the Commercial Paper Rate,
the CD Rate, the Federal Funds Effective Rate, LIBOR, the Treasury Rate, the
Prime Rate or such other base rate or interest rate formula as may be
designated in any accompanying Pricing Supplement. Except as described herein
or in the applicable Pricing Supplement, interest on each Fixed Rate Note
will accrue from its issue date and will be payable February 15 and August 15
of each year and at maturity. Interest on each Floating Rate Note will be
payable on the dates indicated therein and in the applicable Pricing
Supplement. The Notes will not be subject to redemption or repayment prior to
their stated maturity unless otherwise specified in the applicable Pricing
Supplement. See "Description of Notes."
The Notes will be issued in the form of one or more fully registered
global notes (a "Global Note") unless otherwise indicated in the applicable
Pricing Supplement, in which case the Notes will be issued in fully
registered certificated form (a "Certificated Note"), in denominations of
$1,000 and integral multiples of $1,000 in excess thereof. Beneficial
interest in Global Notes will be shown on, and transfers thereof will be
effected only through, records maintained by The Depository Trust Company, as
depositary (the "Depositary") and its participants. See "Description of Notes
- -- Global Notes."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1)(2) COMPANY (2)(3)
-------------- --------------------- ----------------------------
<S> <C> <C> <C>
Per Note .. 100% .125%-.750% 99.875%-99.250%
Total(4) .. $1,010,000,000 $1,262,500-$7,575,000 $1,008,737,500-$1,002,425,000
</TABLE>
(1) Notes may be sold at discounts from their principal amounts, if
provided for in the applicable Pricing Supplements.
(2) The Company will pay a commission to an Agent acting in its capacity as
agent of from .125% to .750%, depending upon the Note maturity, of the
principal amount of any Note sold with a maturity of up to 30 years.
Commissions on agency sales of Notes with maturities of more than 30
years will be determined at the time of sale. The Company may also sell
Notes to an Agent acting in its capacity as principal at negotiated
discounts for resale to investors or other purchasers at varying prices
related to prevailing market prices at the time of resale, as
determined by such Agent. No commission will be payable on any sales
made directly by the Company. The Company has agreed to indemnify the
Agents against certain liabilities, including liabilities under the
Securities Act of 1933, and to reimburse the Agents for certain
expenses.
(3) Before deduction of estimated expenses of the offering of $1,052,000.
(4) Or the equivalent thereof in foreign currencies or currency units.
-----------------
The Notes are offered on a continuing basis by the Company through the
Agents, as set forth below, which have agreed to use best efforts to solicit
purchases of the Notes. The Company also may sell Notes to any Agent acting
as principal at negotiated discounts for resale to one or more investors or
other purchasers. The Company has the right to sell the Notes directly on its
own behalf and to appoint additional agents under the Distribution Agreement.
The Notes will not be listed on any securities exchange, and there can be no
assurance that the Notes offered by this Prospectus Supplement will be sold
or that there will be a secondary market for the Notes. The Company reserves
the right to withdraw, cancel or modify the offering contemplated hereby
without notice. The Company or the Agents may reject any offer to purchase
the Notes in whole or in part. See "Supplemental Plan of Distribution."
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
The date of this Prospectus Supplement is March 5, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF NOTES OFFERED ON A
FIXED PRICE BASIS, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH NOTES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING OF SUCH NOTES. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
<PAGE>
DESCRIPTION OF NOTES
The following description of the terms of the Medium-Term Notes offered
hereby (the "Notes") of Cendant Corporation (the "Company") supplements, and
to the extent inconsistent therewith replaces, insofar as such description
relates to the Notes, the description of the general terms and provisions of
the Debt Securities set forth in the Prospectus, to which description
reference is hereby made. The following description of the Notes will apply
unless otherwise specified in an applicable Pricing Supplement.
GENERAL
The Notes are to be issued under a Senior Indenture dated as of February
24, 1998 (as supplemented from time to time, the "Senior Indenture"), between
the Company and The Bank of Nova Scotia Trust Company of New York, as trustee
(the "Senior Trustee" or "Trustee"), as described more fully in the
Prospectus. The Notes offered hereby constitute a portion of a single series
of Senior Debt Securities for purposes of the Senior Indenture, unlimited in
aggregate principal amount. The aggregate principal amount in which the Notes
offered hereby may be issued is limited to $1,010,000,000 (or the equivalent
thereof in foreign currencies or currency units), less an amount equal to the
gross proceeds from the sales of other Debt Securities (other than the Notes)
pursuant to the Registration Statement of which the accompanying Prospectus
is a part. The statements herein concerning the Notes and the Senior
Indenture do not purport to be complete. They are qualified in their entirety
by reference to the provisions of the Senior Indenture, including the
definitions of certain terms used herein without definition. A copy of the
Senior Indenture has been filed with the Securities and Exchange Commission
as an exhibit to the Registration Statement of which the accompanying
Prospectus is a part.
The Notes will be unsecured obligations of the Company and will rank prior
to all subordinated indebtedness of the Company and on a parity with all
other unsecured indebtedness of the Company. As of September 30, 1997, after
giving pro forma effect to the Company's issuance on March 2, 1998 of
29,900,000 of FELINE PRIDES (Service Mark) and the application of the net
proceeds therefrom (the "FELINE PRIDES Offering"), the aggregate amount of
outstanding indebtedness to which the Notes will rank pari passu, was
$1,495,000,000. Although the Notes will not be subordinated in right of
payment to any other indebtedness of the Company, the right of the Company
and its creditors, including the holders of Notes, under general equitable
principles, to participate in any distributions of assets of any subsidiary
of the Company upon the Company's liquidation or reorganization or otherwise
is, unless there is a substantive consolidation of the Company with its
subsidiaries, likely to be subject to the prior claims of creditors of such
subsidiary, except to the extent that claims of the Company itself as a
creditor of such subsidiary may be recognized. As of September 30, 1997,
after giving pro forma effect to the FELINE PRIDES Offering and the
application of the net proceeds therefrom, the aggregate amount of
outstanding indebtedness of subsidiaries of the Company (excluding
indebtedness of the subsidiaries to the Company or other subsidiaries) was
$6,447,100,000.
The Senior Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities
may be issued in one or more series up to the aggregate principal amount
which may be authorized from time to time by the Company. The Company may,
from time to time, without the consent of the holders of the Notes (the
"Holders"), provide for the issuance of additional Notes or other Debt
Securities under the Senior Indenture. As used herein, "Holder" includes the
Depositary with respect to Global Notes.
The Notes will be offered on a continuing basis and will mature on any day
from 9 months to 40 years from the date of issue, as selected by the initial
purchaser and agreed to by the Company (the "Stated Maturity"), and may be
subject to redemption or repayment prior to Stated Maturity at the price or
prices specified in the applicable Pricing Supplement. "Maturity" means, when
used with respect to the Notes, the date on which the principal of such Note
or an installment of principal becomes due and payable as therein provided,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise. Unless otherwise specified in any applicable Pricing
Supplement, each Note will bear interest
- ------------
(Service Mark) Service Mark of Merrill Lynch & Co., Inc.
S-3
<PAGE>
at either (a) a fixed rate or (b) a floating rate determined by reference to
an interest rate formula or a Base Rate (as hereinafter defined), which may
be adjusted by adding or subtracting the Spread and/or multiplying by the
Spread Multiplier (as hereinafter defined).
Each Note will be issued initially as either a Global Note or a
Certificated Note and, if denominated in U.S. dollars, in denominations of
$1,000 and integral multiples of $1,000 in excess thereof or, if denominated
in any foreign currency or currency units, the dollar equivalent in such
foreign currency or currency units. For a description of the denominations of
Notes denominated or payable in a Specified Currency other than U.S. dollars
(a "Foreign Currency Note") see "Special Provisions Relating to Foreign
Currency Notes." Certificated Notes may be transferred or exchanged at the
offices of the Trustee, One Liberty Plaza, New York, New York. Global Notes
may be transferred or exchanged through a participating member of the
Depositary. See "Global Notes" below. No service charge will be made for any
registration of transfer or exchange of Certificated Notes, but the Company
may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The interest rates offered by the Company with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
the Notes purchased in any single transaction. Interest rates or interest
rate formulas are subject to change by the Company from time to time but no
such change will affect any Note theretofore issued or which the Company has
agreed to sell.
Unless otherwise indicated in the applicable Pricing Supplement, the
Interest Payment Dates for Fixed Rate Notes shall be as described below under
"Fixed Rate Notes." The Interest Payment Dates for Floating Rate Notes shall
be as indicated in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, each Regular Record Date for
a Fixed Rate Note or a Floating Rate Note will be the fifteenth day (whether
or not a Business Day) next preceding each Interest Payment Date.
The Notes are referred to in the accompanying Prospectus as the "Debt
Securities." For a description of the rights attaching to different series of
Debt Securities under the Senior or Subordinated Indenture, see "Description
of the Debt Securities" in the accompanying Prospectus.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal, premium, if any, and interest on Global Notes will
be made to the Depositary by wire transfer, either in same day funds or in
next day funds. See " -- Global Notes" below. In the case of Certificated
Notes, principal, premium, if any, and interest will be payable, the transfer
of the Notes will be registrable, and Notes will be exchangeable for Notes
bearing identical terms and provisions at the offices of the Trustee, One
Liberty Plaza, New York, New York; provided, however, that payment of
interest, other than interest at Maturity, may be made at the option of the
Company by check mailed to the address of the person in whose name the
applicable Note is registered at the close of business on the relevant
Regular Record Date (as hereinafter defined) as shown on the applicable
security register (which in the case of Global Notes will be a nominee of the
Depositary). Notwithstanding the foregoing, a holder of U.S. $10,000,000 or
more in aggregate principal amount of Notes of like tenor and term (or a
holder of the equivalent thereof in a Specified Currency other than U.S.
dollars) shall be entitled to receive interest payments (other than an
interest payment due at Maturity) by wire transfer of immediately available
funds to a designated account maintained in the United States, but only if
proper instructions have been received in writing by the Trustee on or prior
to the applicable Regular Record Date. Such instructions shall remain in
effect with respect to payments of interest made to such holder on subsequent
Interest Payment Dates unless revoked or changed by written instructions
received by the Trustee from such holder, provided that any such written
revocation or change which is received by the Trustee after a Regular Record
Date and before the related Interest Payment Date shall not be effective with
respect to the interest payable on such Interest Payment Date. Interest will
be payable on each date specified in the Note on which an installment of
interest is due and payable (an "Interest Payment Date") and at Maturity. If
the original issue date of a Note is between a Regular Record Date and the
related Interest
S-4
<PAGE>
Payment Date, the initial interest payment will be made on the Interest
Payment Date following the next succeeding Regular Record Date to the
registered Holder on such next succeeding Regular Record Date unless
otherwise specified in the applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement, interest
payments will be in the amount of interest accrued from and including the
next preceding Interest Payment Date in respect of which interest has been
paid or duly provided for (or from and including the date of issue, if no
interest has been paid with respect to such Note), to but excluding the
applicable Interest Payment Date (an "Interest Accrual Period"). In the case
of Certificated Notes, payment of principal, premium, if any, and interest
payable at Maturity on each Certificated Note will be paid in immediately
available funds against presentation of the Certificated Note at the offices
of the Trustee, One Liberty Plaza, New York, New York; provided that the
Certificated Notes are presented to the Trustee in time for the Trustee to
make such payments in such funds in accordance with its normal procedures.
Interest payable at Maturity will be payable to the person to whom the
principal of the Note shall be paid.
"Business Day" means any day, other than a Saturday or Sunday, that meets
each of the following applicable requirements: the day is (a) not a legal
holiday or a day on which banking institutions are authorized or required by
law or regulation to be closed in The City of New York, (b) if the Note is
denominated or payable in a Specified Currency other than U.S. dollars, (i)
not a day on which banking institutions are authorized or required by law or
regulation to close in the major financial center of the country issuing the
Specified Currency or, in the case of Notes denominated in or indexed to a
composite European currency, Brussels and (ii) a day on which banking
institutions in such financial center are carrying out transactions in such
Specified Currency and (c) with respect to LIBOR Notes (as defined below),
also a London Banking Day. "London Banking Day" means any day on which
dealings on deposits in U.S. dollars are transacted in the London interbank
market.
REDEMPTION AND REPAYMENT
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be redeemable prior to their Stated Maturity. If so specified in an
applicable Pricing Supplement with respect to a Note or Notes, such Note or
Notes will be redeemable on or after the date set forth in such Pricing
Supplement, either in whole or from time to time in part, at the option of
the Company, at the redemption price or prices (the "Redemption Price")
specified in the applicable Pricing Supplement, together with interest
accrued thereon to but excluding the date of redemption, on notice given not
more than 60 nor less than 30 days prior to the date of redemption. The
Redemption Price with respect to each Note subject to redemption prior to
Stated Maturity will be fixed at the time of sale and set forth in the
applicable Pricing Supplement and in the applicable Note.
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to repayment at the option of the Holders. If so
specified in an applicable Pricing Supplement with respect to a Note or
Notes, such Note or Notes will be subject to repayment at the option of the
Holders thereof in accordance with the terms of the Notes on their respective
optional repayment dates fixed at the time of sale and set forth in the
applicable Pricing Supplement and in the applicable Note. On any optional
repayment date with respect to a Note, such Note will be repayable in whole
or in part at the option of the Holder thereof at a price specified in the
applicable Pricing Supplement, together with interest thereon payable to the
optional repayment date, on notice given by such Holder to the Company not
more than 60 nor less than 30 days prior to the optional repayment date.
If a Note is represented by a Global Note, the Depositary's nominee will
be the Holder of such Note and therefore will be the entity through which the
beneficial owners of Global Notes may exercise a right to repayment. In order
to ensure that the Depositary's nominee will timely exercise a right to
repayment with respect to a particular Note, the beneficial owner of such
Note must instruct the broker or other direct or indirect participant through
which it holds an interest in such Note to notify the Depositary of its
desire to exercise a right to repayment. The Depositary would then notify the
Trustee. Different firms have different deadlines for accepting instructions
from their customers and, accordingly, each beneficial owner should consult
the broker or other direct or indirect participant through which it holds an
interest in a Global Note in order to ascertain the deadline by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary.
S-5
<PAGE>
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to any sinking fund.
FIXED RATE NOTES
Unless otherwise specified in an applicable Pricing Supplement, each Fixed
Rate Note will bear interest from the date of issue at the annual rate stated
on the face thereof, payable semiannually on February 15 and August 15 of
each year and at Maturity, subject to certain exceptions. Unless otherwise
specified in an applicable Pricing Supplement, interest on the Fixed Rate
Notes will be computed on the basis of a 360-day year of twelve 30-day
months. Interest on the Fixed Rate Notes will be payable generally to the
person in whose name the Note is registered at the close of business on the
Regular Record Date. However, interest payable at Maturity will be payable to
the person to whom principal shall be payable.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on
a day that is not a Business Day, the payment will be made on the next
Business Day as if it were made on the date such payment was due, and no
interest will accrue on the amount so payable for the period from and after
such Interest Payment Date or Maturity, as the case may be.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest at a floating rate determined
by reference to a Base Rate or an interest rate formula specified in the
applicable Pricing Supplement. Any Floating Rate Note may also have either or
both of the following: (i) a maximum numerical interest rate limitation, or
ceiling, on the rate of interest which may accrue during any interest period,
and (ii) a minimum numerical interest rate limitation, or floor, on the rate
of interest which may accrue during any interest period. Interest on the
Floating Rate Notes will be determined by reference to a "Base Rate," which
may be: (a) the CD Rate in which case such Note will be a "CD Rate Note," (b)
the Commercial Paper Rate in which case such Note will be a "Commercial Paper
Rate Note," (c) the Federal Funds Effective Rate in which case such Note will
be a "Federal Funds Effective Rate Note," (d) LIBOR in which case such Note
will be a "LIBOR Note," (e) the Treasury Rate in which case such Note will be
a "Treasury Rate Note," (f) the Prime Rate in which case such Note will be a
"Prime Rate Note" or (g) such other Base Rate or interest rate formula as is
set forth in such Pricing Supplement. The applicable Pricing Supplement will
specify the interest rate formula or the Base Rate and the Index Maturity,
the Spread and/or Spread Multiplier, if any, and the maximum or minimum
interest rate limitation, if any, applicable to each Floating Rate Note. In
addition, such Pricing Supplement may contain information concerning the
Calculation Agent, Calculation Dates, Initial Interest Rate, Interest
Determination Dates, Interest Payment Period, Interest Payment Dates,
Maturity, Regular Record Dates, Interest Reset Dates, Interest Reset Period,
and, if applicable, the Initial Redemption Dates, the Initial Redemption
Percentage, Annual Redemption Percentage Reduction and Optional Repayment
Date, with respect to such Floating Rate Note. The "Index Maturity" is the
period to maturity of an instrument or obligation with respect to which the
Base Rate is calculated. The "Spread" is the number of basis points above or
below the Base Rate applicable to such Floating Rate Note, and the "Spread
Multiplier" is the percentage of the Base Rate applicable to the interest
rate for such Floating Rate Note. The Spread, Spread Multiplier, Index
Maturity and other variable terms of the Floating Rate Notes are subject to
change by the Company from time to time, but no such change will affect any
Floating Rate Note theretofore issued or as to which an offer to purchase has
been accepted by the Company.
Unless otherwise specified in an applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semi-annually or annually (each an "Interest Reset Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
an applicable Pricing Supplement, the Interest Reset Date will be, in the
case of Floating Rate Notes which reset daily, each Business Day; in the case
of Floating Rate Notes (other than Treasury Rate Notes) which reset weekly,
the Wednesday of each week; in the case of Treasury Rate Notes which reset
weekly, the Tuesday of each week (except as provided below); in the case of
Floating Rate Notes which reset monthly, the third Wednesday of each month;
in the case of Floating Rate Notes which reset quarterly, the third
S-6
<PAGE>
Wednesday of each February, May, August and November; in the case of Floating
Rate Notes which reset semi-annually, the third Wednesday of each of the two
months of each year specified in the applicable Pricing Supplement; and in
the case of Floating Rate Notes which reset annually, the third Wednesday of
one month of each year, as specified in the applicable Pricing Supplement;
provided, however, that, unless otherwise specified in an applicable Pricing
Supplement, the interest rate in effect from the date of issue to the first
Interest Reset Date with respect to a Floating Rate Note will be the Initial
Interest Rate (as set forth in the applicable Pricing Supplement). If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that
is not a Business Day for such Floating Rate Note, the Interest Reset Date
for such Floating Rate Note shall be postponed to the next day that is a
Business Day for such Floating Rate Note, except that in the case of a LIBOR
Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day.
The interest rate applicable to each Interest Accrual Period commencing on
an Interest Reset Date will be the rate determined by reference to the
Interest Determination Date. The Interest Determination Date with respect to
(a) a Commercial Paper Rate Note (the "Commercial Paper Interest
Determination Date"), (b) a Federal Funds Effective Rate Note (the "Federal
Funds Interest Determination Date"), (c) a CD Rate Note (the "CD Interest
Determination Date") or (d) a Prime Rate Note (the "Prime Interest
Determination Date") will be the second Business Day prior to the Interest
Reset Date for such Note. The Interest Determination Date pertaining to an
Interest Reset Date for a LIBOR Note (the "LIBOR Interest Determination
Date") will be the second London Banking Day prior to such Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date
for a Treasury Rate Note (the "Treasury Interest Determination Date") will be
the day of the week in which such Interest Reset Date falls on which Treasury
bills would normally be auctioned. Treasury bills are usually sold at auction
on Monday of each week, unless that day is a legal holiday, in which case the
auction is usually held on the following Tuesday, except that such auction
may be held on the preceding Friday. If, as the result of a legal holiday, an
auction is so held on the preceding Friday, such Friday will be the Treasury
Interest Determination Date pertaining to the Interest Reset Date occurring
in the next succeeding week. If an auction date shall fall on any Interest
Reset Date for a Treasury Rate Note, then such Interest Reset Date shall
instead be the first Business Day immediately following such auction date.
With respect to a Floating Rate Note, accrued interest is calculated by
multiplying the principal amount of a Note by an accrued interest factor. The
accrued interest factor is computed by adding the interest factors calculated
for each day from the date of issue, or from the last date for which interest
has been paid, as the case may be, to the date for which accrued interest is
being calculated. Unless otherwise specified in an applicable Pricing
Supplement, the interest factor for each such day is computed by dividing the
interest rate applicable to such date by 360, in the case of Commercial Paper
Rate Notes, CD Rate Notes, Federal Funds Effective Rate Notes, LIBOR Notes
and Prime Rate Notes, or by the actual number of days in the year, in the
case of Treasury Rate Notes.
All percentages resulting from any calculation with respect to Floating
Rate Notes will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all dollar amounts used in or
resulting from such calculation on Floating Rates Notes will be rounded to
the nearest cent with one half cent being rounded upward. The Calculation
Agent will, upon the request of the Holder of any Floating Rate Note, provide
the interest rate then in effect and the interest rate which will become
effective as a result of a determination made with respect to the most recent
Interest Determination Date with respect to such Note. The Calculation Agent
for the Floating Rate Notes will be specified in the applicable Pricing
Supplement. Unless otherwise specified in an applicable Pricing Supplement,
the Calculation Date, where applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after
such Interest Determination Date or if any such day is not a Business Day,
the next succeeding Business Day and (ii) the Business Day next preceding the
relevant Interest Payment Date or Maturity, as the case may be.
In addition to any specified maximum interest rate which may be applicable
to any Floating Rate Note, the interest rate on the Notes will in no event be
higher than the maximum rate permitted by New
S-7
<PAGE>
York law, as the same may be modified by United States law of general
application. Under current New York law, the maximum rate of interest on a
loan to a corporation is 25% per annum on a simple interest basis. The limit
may not apply to Floating Rate Notes in which $2,500,000 or more has been
invested.
Each Floating Rate Note will bear interest from the date of issue at the
rates determined as described below until the principal thereof is paid or
otherwise made available for payment. Except as provided below, and unless
otherwise indicated in an applicable Pricing Supplement, interest will be
payable, in the case of Floating Rate Notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third Wednesday of
February, May, August and November of each year, as specified in the
applicable Pricing Supplement; in the case of Floating Rate Notes which reset
quarterly, on the third Wednesday of February, May, August and November of
each year; in the case of Floating Rate Notes which reset semi-annually, on
the third Wednesday of the two months of each year specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, on the third Wednesday of the month specified in the
applicable Pricing Supplement and, in each case, at Maturity.
If any Interest Payment Date, other than an Interest Payment Date
occurring at Maturity, for any Floating Rate Note would fall on a day that is
not a Business Day with respect to such Note, such Interest Payment Date will
be the following day that is a Business Day with respect to such Note, except
that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding day that is a Business Day with respect to such LIBOR Note. If the
Maturity of any Floating Rate Note would fall on a day that is not a Business
Day, the payment of interest and principal (and premium, if any) may be made
on the next succeeding Business Day, and no interest on such payment will
accrue for the period from and after Maturity.
COMMERCIAL PAPER RATE NOTES
A Commercial Paper Rate Note will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any) specified in the Commercial Paper Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Commercial Paper Interest
Determination Date, the Money Market Yield (calculated as described below) on
that date of the rate for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement as such rate is published by
the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication of the
Board of Governors of the Federal Reserve System ("H.15(519)") under the
heading "Commercial Paper -- Nonfinancial." In the event that such rate is
not published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Commercial Paper Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield (as defined below) on
such Commercial Paper Interest Determination Date of the rate for commercial
paper having the Index Maturity designated in the applicable Pricing
Supplement as published by the Federal Reserve Bank of New York in its daily
statistical release, "Composite 3:30 P.M. Quotations for U.S. Government
Securities" ("Composite Quotations") under the heading "Commercial Paper." If
by 3:00 P.M., New York City time, on such Calculation Date such rate is not
yet published in either H.15(519) or Composite Quotations, then the
Commercial Paper Rate for such Commercial Paper Interest Determination Date
shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered rates as of 11:00 A.M., New York
City time, on such Commercial Paper Interest Determination Date, of three
leading dealers of commercial paper in New York City selected by the
Calculation Agent for commercial paper having the Index Maturity designated
in the applicable Pricing Supplement placed for an industrial issuer whose
bond rating is "AA," or the equivalent, from a nationally recognized
securities rating agency; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Commercial Paper Rate with respect to such Commercial Paper
Interest Determination Date will be the Commercial Paper Rate in effect on
such Commercial Paper Interest Determination Date.
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"Money Market Yield" shall be a yield (expressed as a percentage rounded,
if necessary, to the nearest one hundred-thousandth of a percent) calculated
in accordance with the following formula:
Money Market Yield = D X 360
------------ X 100
360 - (D X M)
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
CD RATE NOTES
A CD Rate Note will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in the CD Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any CD Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity
designated in the CD Rate Note as published in H.15(519) under the heading
"CDs (Secondary Market)" or, if not so published by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such CD Interest Determination
Date, the CD Rate will be the rate on such CD Interest Determination Date for
negotiable certificates of deposit of the Index Maturity designated in the
applicable Pricing Supplement as published in Composite Quotations under the
heading "Certificates of Deposit." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such CD Interest Determination Date, the CD
Rate will be calculated by the Calculation Agent and will be the arithmetic
mean of the secondary market offered rates as of 10:00 A.M., New York City
time, on such CD Interest Determination Date, of three leading nonbank
dealers in negotiable U.S. dollar certificates of deposit in New York City
selected by the Calculation Agent (after consultation with the Company) for
negotiable certificates of deposit of major United States money market banks
of the highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated
in the applicable Pricing Supplement in a denomination of $5,000,000;
provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
with respect to such CD Interest Determination Date will be the CD Rate in
effect on such CD Interest Determination Date.
FEDERAL FUNDS EFFECTIVE RATE NOTES
A Federal Funds Effective Rate Note will bear interest at the interest
rate (calculated with reference to the Federal Funds Effective Rate and the
Spread and/or Spread Multiplier, if any) specified in the Federal Funds
Effective Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Effective Rate" means, with respect to any Federal Funds Interest
Determination Date, the rate on that date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)" or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Federal Funds Interest Determination Date, the Federal
Funds Effective Rate will be the rate on such Federal Funds Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not yet published in either
H.15(519) or Composite Quotations by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Federal Funds Interest Determination
Date, then the Federal Funds Effective Rate for such Federal Funds Interest
Determination Date will be calculated by the Calculation Agent and will be
the arithmetic mean of the rates for the last transaction in overnight
Federal Funds arranged by three leading brokers of Federal Funds transactions
in New York City selected by the Calculation Agent as of 9:00 A.M., New York
City time, on such Federal Funds Interest Determination Date; provided,
however, that if the brokers selected as aforesaid by the Calculation Agent
are not quoting as mentioned in this sentence, the Federal Funds Effective
Rate with respect to such Federal Funds Interest Determination Date will be
the Federal Funds Effective Rate in effect on such Federal Funds Interest
Determination Date.
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LIBOR NOTES
A LIBOR Note will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified
in the LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR
will be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be,
as specified in the applicable Pricing Supplement, either (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
LIBOR Interest Determination Date, that appears on the Reuters Screen LIBO
Page as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. dollars
having the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following such
LIBOR Interest Determination Date, that appears on the Telerate Page 3750
as of 11:00 A.M., London time, on such LIBOR Interest Determination Date
("LIBOR Telerate"). "Reuters Screen LIBO Page" means the display
designated as page "LIBO" on the Reuters Monitor Money Rates Service (or
such other page as may replace page LIBO on that service for the purpose
of displaying London interbank offered rates of major banks). "Telerate
Page 3750" means the display designated as page "3750" on the Telerate
Service (or such other page as may replace the 3750 page on that service
or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank
offered rates for U.S. dollar deposits). If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR
will be determined as if LIBOR Telerate had been specified. If at least
two such offered rates appear on the Reuters Screen LIBO Page, the rate in
respect of such LIBOR Interest Determination Date will be the arithmetic
mean of such offered rates as determined by the Calculation Agent. If
fewer than two offered rates appear on the Reuters Screen LIBO Page, or if
no rate appears on the Telerate Page 3750, as applicable, LIBOR in
respect of such LIBOR Interest Determination Date will be determined as if
the parties had specified the rate described in (ii) below.
(ii) On any LIBOR Interest Determination Date on which fewer than two
offered rates appear on the Reuters Screen LIBO Page as specified in (i)
(a) above, or on which no rate appears on the Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars are offered by four
major banks in the London interbank market selected by the Calculation
Agent (the "Reference Banks") at approximately 11:00 A.M., London time, on
such LIBOR Interest Determination Date to prime banks in the London
interbank market, having the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day
immediately following such LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1,000,000 that
is representative for a single transaction in such market at such time.
The Calculation Agent will request the principal London office of each of
such Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, LIBOR in respect of such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR in respect of such LIBOR
Interest Determination Date will be the arithmetic mean of the rates
quoted by three major banks in New York City selected by the Calculation
Agent at approximately 11:00 A.M., New York City time, on such LIBOR
Interest Determination Date for loans in U.S. dollars to leading European
banks, having the Index Maturity designated in the applicable Pricing
Supplement, such loans commencing on the second London Banking Day
immediately following such LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1,000,000 that
is representative for a single transaction in such market at such time;
provided, however, that if the banks in New York City selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR with respect to such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
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TREASURY RATE NOTES
A Treasury Rate Note will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier,
if any) specified in the Treasury Rate Note and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the
rate for the most recent auction of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement as published in H.15(519) under the heading Pricing "U.S.
Government Securities -- Treasury Bills -auction average (investment)" or,
if not so published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Treasury Interest Determination Date, the auction average
rate (expressed as a bond equivalent, rounded, if necessary, to the nearest
one hundred-thousandth of a percent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) as otherwise announced by
the U.S. Department of the Treasury. In the event that the result of the
auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement is not otherwise reported as provided above by
3:00 P.M., New York City time, on such Calculation Date or, if no such
auction is held in a particular week, then the Treasury Rate shall be
calculated by the Calculation Agent and shall be a yield to Stated Maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Treasury Interest Determination Date, of three leading primary
U.S. securities dealers selected by the Calculation Agent for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate with respect to such Treasury
Interest Determination Date will be the Treasury Rate in effect on such
Treasury Interest Determination Date.
PRIME RATE NOTES
A Prime Rate Note will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in the Prime Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Prime Interest Determination Date, the rate
set forth on such date in H.15(519) under the heading "Bank Prime Loan." In
the event that such rate is not published prior to 9:00 A.M. New York City
time, on the Calculation Date pertaining to such Prime Interest Determination
Date, then the Prime Rate will be determined by the Calculation Agent and
will be the arithmetic mean of the rates of interest publicly announced by
each bank that appears on the Reuters Screen USPRIME1 Page (as defined below)
as such bank's prime rate or base lending rate as in effect for that Prime
Interest Determination Date. If fewer than four such rates but more than one
such rate appear on the Reuters Screen USPRIME1 Page for the Prime Interest
Determination Date, the Prime Rate will be determined by the Calculation
Agent and will be the arithmetic mean of the prime rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as of the
close of business on such Prime Interest Determination Date by four major
money center banks in New York City selected by the Calculation Agent. If
fewer than two such rates appear on the Reuters Screen USPRIME1 Page, the
Prime Rate will be determined by the Calculation Agent on the basis of the
rates furnished in New York City by the appropriate number of substitute
banks or trust companies organized and doing business under the laws of the
United States, or any State thereof, having total equity capital of at least
U.S. $500,000,000 and being subject to supervision or examination by federal
or state authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate will be the Prime Rate
in effect on such Prime Interest Determination Date. "Reuters Screen USPRIME1
Page" means the display designated as page "USPRIME1" on the Reuters Monitor
Money Rates Service (or such other page as may replace the USPRIME1 page on
that service for the purpose of displaying prime rates or base lending rates
of major United States banks).
S-11
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FOREIGN CURRENCY AND INDEX-LINKED NOTES
If any Note is not to be denominated in U.S. dollars, certain provisions
with respect thereto will be set forth in a foreign currency Pricing
Supplement which will indicate the Specified Currency in which the principal,
premium, if any, and interest with respect to such Note are to be paid, along
with any other terms relating to the Specified Currency. The Pricing
Supplement also will provide specific historic exchange rate information,
certain currency risks relating to the specific currencies selected, certain
investment considerations and certain additional tax considerations.
Amounts due on a Note in respect of principal, premium, if any, and
interest may be determined with reference to (a) a currency exchange rate or
rates, (b) a securities or commodities exchange index, (c) the value of a
particular security or commodity or (d) any other index or indices (any such
Note being herein referred to as an "Index-Linked Note"). The Pricing
Supplement relating to an Index-Linked Note will set forth the method by and
terms on which the amount of principal payable at Stated Maturity (or upon
redemption or repayment, if applicable) and interest, premium or the
amortized face amount, if any, will be determined, the tax consequences to
holders of Index-Linked Notes, a description of certain risks associated with
investments in Index-Linked Notes and other information relating to such
Index-Linked Notes.
An investment in Notes indexed, as to principal or interest or both, to
one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks
that are not associated with similar investments in a conventional fixed-rate
debt security. If the interest rate of such a Note is so indexed, it may
result in an interest rate that is less than that payable on a conventional
fixed-rate debt security issued at the same time, including the possibility
that no interest will be paid, and, if the principal amount of such a Note is
so indexed, the principal amount payable at Maturity may be less than the
original purchase price of such Note if allowed pursuant to the terms of such
Note, including the possibility that no principal will be paid. The secondary
market for such Notes will be affected by a number of factors independent of
the creditworthiness of the issuer and the value of the applicable currency,
commodity or interest rate index, including the volatility of the applicable
currency, commodity or interest rate index, the time remaining to the
maturity of such Notes, the amount outstanding of such Notes and market
interest rates. The value of the applicable currency, commodity or interest
rate index depends on a number of interrelated factors, including economic,
financial and political events, over which the Company has no control.
Additionally, if the formula used to determine the principal amount or
interest payable with respect to such Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index will be increased. The historical experience of the
relevant currencies, commodities or interest rate indices should not be taken
as an indication of future performance of such currencies, commodities or
interest rate indices during the term of any Note. The credit ratings
assigned to the Company's medium-term note program are a reflection of the
Company's credit status, and are not a reflection of the potential impact of
the factors discussed above, or any other factors, on the market value of the
Notes. Accordingly, prospective investors should consult their own financial
and legal advisors as to the risks entailed by an investment in such Notes
and the suitability of such Notes in light of their particular circumstances.
GLOBAL NOTES
The Notes may be issued in whole or in part in the form of one or more
fully registered Notes (each, a "Global Note") which will be deposited with,
or on behalf of, the Depositary and registered in the name of the
Depositary's nominee and in either temporary or permanent form. Except as set
forth below, a Global Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary
or any nominee to a successor of the Depositary or a nominee of such
successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with the Depositary for such Global Note or its
nominee ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests in such Global Note will be
shown on, and the transfer of ownership will be effected only through,
records maintained by the Depositary (with respect to participants' interest)
for such Global Note or by participants or persons that hold through
participants (with respect to beneficial owners' interests).
S-12
<PAGE>
The Depositary has advised the Company and the Agents that it is a
limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Depositary was created to hold
securities for its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's participants include securities
brokers and dealers (including the Agents), banks, trust companies, clearing
corporations and certain other organizations, some of which (and/or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants
may beneficially own securities held by the Depositary only through
participants.
Upon the issuance by the Company of Notes represented by a Global Note,
the Depositary will credit, on its book-entry registration and transfer
system, the respective principal amounts of the Notes represented by such
Global Note to the accounts of participants. The accounts to be credited
shall be designated by the Agents or by the Company, if such Notes are
offered and sold directly by the Company.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within
90 days, the Company will issue Notes in certificated form in exchange for
each Global Note. In addition, the Company may at any time determine not to
have Notes represented by one or more Global Notes, and, in such event, will
issue Notes in certificated form in exchange for the Global Note or Notes
representing such Notes. In any such instance, an owner of a beneficial
interest in a Global Note will be entitled to physical delivery in
certificated form of Notes equal in principal amount to such beneficial
interest and to have such Notes registered in its name. Notes so issued in
certificated form will be issued in denominations of $1,000 or any amount in
excess thereof which is an integral multiple of $1,000 and will be issued in
fully registered form only.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of, premium, if
any, and interest on the Notes will be made in U.S. dollars. The following
provisions shall apply to Foreign Currency Notes. Such provisions are in
addition to, and to the extent inconsistent therewith replace, the
description of general terms and provisions of the Notes set forth in the
attached Prospectus and elsewhere in this Prospectus Supplement.
Foreign Currency Notes are issuable in registered form only, without
coupons. The denominations for particular Foreign Currency Notes will be
specified in the applicable Pricing Supplement.
Unless otherwise provided in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds.
Unless otherwise indicated in the applicable Pricing Supplement, all
currency and currency unit amounts used and resulting from calculations
relating to currencies for a Foreign Currency Note will be rounded to the
nearest one-hundredth of a unit (with five one-thousandths of a unit being
rounded upwards).
CURRENCIES
Unless otherwise specified in the applicable Pricing Supplement,
purchasers are required to pay for Foreign Currency Notes in the Specified
Currency. At the present time there are limited facilities in the United
States for the conversion of U.S. dollars into foreign currencies or currency
units and vice versa, and banks generally do not offer non-U.S. dollar
checking or savings account facilities in the United States. However, if
requested on or prior to the third Business Day preceding the date of
delivery of the
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Notes, or by such other day as determined by the Agent which presented the
offer to purchase such Notes to the Company, such Agent is prepared to
arrange for the conversion of U.S. dollars into the Specified Currency set
forth in the applicable Pricing Supplement to enable the purchasers to pay
for the Notes. Each such conversion will be made by the applicable Agent on
such terms and subject to such conditions, limitations and charges as the
applicable Agent may from time to time establish in accordance with its
regular foreign exchange practices. All costs of exchange will be borne by
the purchasers of the Notes.
The Foreign Currency Notes provide that, in the event of an official
redenomination of a foreign currency or currency unit, the obligations of the
Company with respect to payments on Notes denominated or payable in such
foreign currency or currency unit shall, in all cases, be deemed immediately
following such redenomination to provide for payment of that amount of
redenominated currency representing the amount of such obligations
immediately before such redenomination. In no event, however, shall any
adjustment be made to any amount payable under the Notes as a result of any
change in the value of such foreign currency or currency unit relative to any
other currency due solely to fluctuations in exchange rates. See "Foreign
Currency Risks -- Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
The principal of, premium, if any, and interest on Foreign Currency Notes
are payable by the Company in the Specified Currency. However, the agent
appointed by the Company (the "Exchange Rate Agent") will convert all
payments of principal of, premium, if any, and interest on Foreign Currency
Notes to U.S. dollars. Unless otherwise specified in the applicable Pricing
Supplement, the Holder of a Foreign Currency Note may elect to receive such
payments in the Specified Currency as described below.
Unless the Holder has elected otherwise or unless otherwise specified in
the applicable Pricing Supplement, payment in respect of a Foreign Currency
Note shall be made in U.S. dollars based upon the exchange rate as determined
by the Exchange Rate Agent based on the quotation for such non-U.S. dollar
currency or composite currency appearing at approximately 11:00 a.m., New
York City time, on the second Business Day preceding the applicable date of
payment, on the bank composite or multi-contributor pages of the Telerate
Monitor Foreign Exchange Service (or, if such service is not then available
to the Exchange Rate Agent, the Reuters Monitor Foreign Exchange Service or,
if neither is available, on a comparable display or in a comparable manner as
the Company and the Exchange Rate Agent shall agree), for the first three
banks (or two, if three are not available), in chronological order, appearing
on a list of banks agreed to by the Company and the Exchange Rate Agent prior
to such second Business Day, which are offering quotes. The Exchange Rate
Agent shall then select from among the selected quotations in a manner
specified in the applicable Pricing Supplement. If fewer than two bids are
available, then such conversion will be based on the Market Exchange Rate (as
defined below) as of the second Business Day preceding the applicable payment
date. "Market Exchange Rate" means the noon U.S. dollar buying rate in The
City of New York for cable transfers of the relevant currency as certified
for customs purposes by the Federal Reserve Bank of New York. If no Market
Exchange Rate as of the second Business Day preceding the applicable payment
date is available, payments will be made in the Specified Currency, unless
such Specified Currency is unavailable due to the imposition of exchange
controls or to other circumstances beyond the Company's control, in which
case payment will be made as described below under "Payment Currency." All
currency exchange costs will be borne by the Holders of such Notes by
deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of Foreign Currency Notes may elect to receive payment of the principal of,
premium, if any, and interest on the Notes in the Specified Currency by
transmitting a written request for such payment to the principal office of
the Trustee, One Liberty Plaza, New York, New York, on or prior to the
Regular Record Date or at least fifteen days prior to Maturity, as the case
may be. Such request may be in writing (mailed or hand delivered) or by
cable, telex or other form of facsimile transmission. A Holder of a Foreign
Currency Note may elect to receive payment in the Specified Currency for all
principal, premium, if any, and interest payments and need not file a
separate election for each payment. Such election will remain in effect until
revoked by written notice to the Trustee, One Liberty Plaza, New York, New
York, but written notice of any such revocation must be received by the
Trustee on or prior to the Regular Record Date or at least
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<PAGE>
fifteen days prior to Maturity, as the case may be. Holders of Foreign
Currency Notes whose Foreign Currency Notes are to be held in the name of a
broker or nominee should contact such broker or nominee to determine whether
and how an election to receive payments in the Specified Currency may be
made.
Interest on Foreign Currency Notes paid in U.S. dollars will be paid in
the manner specified in the attached Prospectus and this Prospectus
Supplement for interest on Notes denominated in U.S. dollars. Interest on
Foreign Currency Notes paid in the Specified Currency will be paid by a check
drawn on an account maintained at a bank outside the United States, unless
other arrangements have been made. The principal and premium, if any, of
Foreign Currency Notes, together with interest accrued and unpaid thereon,
due at Maturity will be paid in immediately available funds against
presentation of such Foreign Currency Notes at the offices of the Trustee,
One Liberty Plaza, New York, New York.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a Foreign Currency
Note is required to be made in a Specified Currency and such currency is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control, or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions of or within the international banking community, then all
payments due on that due date in respect of such Foreign Currency Note shall
be made in U.S. dollars. The amount so payable on any date in such Specified
Currency shall be converted into U.S. dollars at the Market Exchange Rate, on
the date of such payment. In the event such Market Exchange Rate is not then
available, the Company will be entitled to make payments in U.S. dollars (i)
if such Specified Currency is not a composite currency, on the basis of the
most recently available Market Exchange Rate for such Specified Currency or
(ii) if such Specified Currency is a composite currency, in an amount
determined by the Exchange Rate Agent to be the sum of the results obtained
by multiplying the number of units of each component currency of such
composite currency, as of the most recent date on which such composite
currency was used, by the Market Exchange Rate for such component currency on
the second Business Day prior to such payment date (or if such Market
Exchange Rate is not then available, by the most recently available Market
Exchange Rate for such component currency).
It is presently anticipated that, on January 1, 1999, the European Union
will commence a new stage of economic and monetary union for those member
states that satisfy the convergence criteria set forth in the Treaty on
European Union. Part of this stage is the introduction of a single currency
(the "Euro"), which will be legal tender in such member states in
substitution for the national currencies of the member states that adopt the
Euro. It is anticipated that the Council of European Union and the member
states will adopt regulations providing specific rules for the introduction
of the Euro. Investors in Foreign Currency Notes should recognize that, if
the Euro is adopted, it will replace the national currencies of those member
states. The Company cannot predict when or if the Euro will be adopted or
what effect the adoption of the Euro might have on any Foreign Currency Note
denominated in the currency of any member state.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a
Component shall be divided or multiplied in the same proportion. If two or
more component currencies are consolidated into a single currency, the
amounts of those currencies as Components shall be replaced by an amount in
such single currency equal to the sum of the amounts of the consolidated
component currencies expressed in such single currency. If any component
currency is divided into two or more currencies, the amount of that currency
as a Component shall be replaced by amounts of such two or more currencies,
each of which shall have a value on the date of division equal to the amount
of the former component currency divided by the number of currencies into
which that currency was divided.
All determinations referred to above made by the Exchange Rate Agent shall
be subject to approval by the Company.
FOREIGN CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO AND THE ATTACHED
PROSPECTUS DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY
NOTES AS THEY EXIST AT THE DATE OF THIS
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PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS
AS TO THE RISKS ENTAILED BY AN INVESTMENT IN SUCH NOTES. SUCH NOTES ARE NOT
AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT
TO FOREIGN CURRENCY TRANSACTIONS.
Governing Law and Judgments
The Notes will be governed by and construed in accordance with the laws of
the State of New York. Courts in the United States have not customarily
rendered judgments for money damages denominated or payable in any currency
other than the U.S. dollar. New York statutory law provides, however, that a
court shall render a judgment or decree in the foreign currency of the
underlying obligation and that the judgment or decree shall be converted into
U.S. dollars at the rate of exchange prevailing on the date of the entry of
the judgment or decree.
Exchange Rates and Exchange Controls
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a security denominated and
payable in U.S. dollars. Such risks include, without limitation, the
possibility of significant market changes in rates of exchange between the
U.S. dollar and the various foreign currencies, the possibility of
significant changes in rates of exchange between the U.S. dollar and the
various foreign currencies resulting from official redenomination with
respect to a Specified Currency and the possibility of the imposition or
modification of foreign exchange controls by either the United States or
foreign governments. Such risks generally depend on factors over which the
Company has no control, such as economic and political events and on the
supply of and demand for the relevant currencies. In recent years rates of
exchange between the U.S. dollar and certain foreign currencies have been
volatile and such volatility may be expected in the future. Fluctuations in
any particular exchange rate that have occurred in the past are not
necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Foreign Currency Note. Depreciation of the Specified
Currency of a Foreign Currency Note against the U.S. dollar would result in a
decrease in the effective yield of such Foreign Currency Note below its
coupon rate, and in certain circumstances could result in a loss to the
investor, on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the
availability of a Specified Currency at an Interest Payment Date or at
Maturity of a Foreign Currency Note. There can be no assurance that exchange
controls will not restrict or prohibit payments of principal (and premium, if
any) or interest in any Specified Currency other than U.S. dollars. Even if
there are no actual exchange controls, it is possible that on an Interest
Payment Date or at Maturity of a particular Foreign Currency Note, the
Specified Currency for such Foreign Currency Note would not be available to
the Company due to circumstances beyond the control of the Company. In any
such event, the Company will make required payments in U.S. dollars on the
basis described herein.
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated or payable in a Specified Currency other than U.S. dollars will
not be sold in or to residents of the country issuing the Specified Currency.
The information set forth in this Prospectus Supplement and the applicable
Pricing Supplement is directed to prospective purchasers who are United
States residents, and the Company disclaims any responsibility to advise
prospective purchasers who are residents of countries other than the United
States with respect to any matters that may affect the purchase, holding or
receipt of payments of principal (and premium, if any) or interest on the
Notes. Such persons should consult their own counsel with regard to such
matters.
Pricing Supplements relating to Foreign Currency Notes will indicate the
Specified Currency in which the principal, premium, if any, and interest with
respect to such Note are to be paid, along with other terms relating to the
Specified Currency. The Pricing Supplement also will provide specific
historic exchange rate information, certain currency risks relating to the
specific currencies selected, certain investment considerations and certain
additional tax considerations. The information therein concerning exchange
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rates is furnished as a matter of information only and should not be regarded
as indicative of the range of or trends in fluctuations in currency exchange
rates that may occur in the future.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income
tax consequences of the ownership of Notes. It deals only with Notes held as
capital assets and not with special classes of Holders, such as dealers in
securities or currencies, life insurance companies, persons holding Notes as
a hedge or hedged against currency risks, as a position in a straddle for tax
purposes, as part of a "synthetic security" or other integrated instrument
compared of a Note and one or more other investments, certain United States
expatriates and United States persons whose functional currency is not the
U.S. dollar. In addition, this summary does not address the federal income tax
consequences of owning Indexed Notes. Such consequences will be addressed in
the applicable Pricing Supplement. The discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code") and regulations, rulings and
judicial decisions thereunder as of the date hereof. Such authorities may be
repealed, revoked or modified so as to produce federal income tax consequences
different from those discussed below.
The following discussion of the United States federal income tax
consequences is based on the classification of the Notes as debt of the
Company, which determination would be made at the time of the issuances of
the Notes. If, as a result of the particular features of a particular issue
of Notes, an adverse change in the financial condition of the issuer, or
otherwise, the status of the Notes as debt for United States federal income
tax purposes were to be challenged, payments on the Notes could be
characterized as dividends and subject to United States federal withholding
tax. The remaining discussion assumes that the Notes will be classified as
debt.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN THEIR
PARTICULAR SITUATIONS, AS WELL AS ANY CONSEQUENCES UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
UNITED STATES HOLDERS
For purposes of this discussion, a "United States Holder" means (i) a
citizen or resident of the United States, (ii) a partnership or corporation
created or organized in or under the law of the United States or of any State
of the United States, (iii) an estate the income of which is subject to
United States federal income tax regardless of its source, (iv) any trust if
(A) a court within the United States is able to exercise primary supervision
over the administration of the trust and (B) one or more United States
persons have the authority to control all substantive decisions of the trust
and (v) any other person that is subject to United States federal income tax
on interest income derived from a Note as a result of such income being
effectively connected with the conduct by such person of a trade or business
within the United States. The term also includes certain former citizens of
the United States whose income and gain on the Notes will be subject to U.S.
income tax.
Payments of Interest
Interest on a Note, whether payable in the Specified Currency or U.S.
dollars, that constitutes "qualified stated interest" (as defined below under
"Original Issue Discount") will be taxable to a United States Holder as
ordinary interest income at the time it is received or accrued, depending on
the Holder's method of accounting for tax purposes. In the case of a United
States Holder of a Foreign Currency Note using a cash method of accounting,
the amount of such interest income for United States federal income tax
purposes ("taxable interest") will be determined in the Specified Currency
and translated into U.S. dollars using the spot exchange rate on the date of
receipt, regardless of whether the interest is in fact paid in or converted
to U.S. dollars. In the case of a United States Holder of a Foreign Currency
Note using an accrual method of accounting, the amount of taxable interest
will depend on whether the Holder has made a valid election to use a "spot
accrual convention" pursuant to regulations under the Code. If the Holder has
made such an election, the amount of taxable interest will be measured in the
Specified Currency and translated into U.S. dollars using the spot exchange
rate in effect on the last day of the accrual period (or last day of a
partial accrual period ending on the last day of the Holder's taxable year);
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or where interest is paid within five business days of such last day, the
exchange rate in effect on the date of receipt may be used. If the Holder has
not made such an election, the amount of taxable interest will be measured in
the Specified Currency and translated into U.S. dollars using the average
exchange rate in effect during the accrual period. A United States Holder of
a Foreign Currency Note on the accrual method will also recognize ordinary
income or loss for federal income tax purposes ("exchange gain or loss") upon
actual or constructive receipt of accrued interest income and upon the sale,
retirement or other disposition of a Note. Such exchange gain or loss, if
any, will be measured by subtracting the amount of taxable interest accrued
in the manner described above with respect to any accrual period from the
U.S. dollar value of the interest income received attributable to that
accrual period. The U.S. dollar value of the interest payment received will
be determined by translating the units of Specified Currency received into
dollars using the spot exchange rate in effect on the date of receipt of the
interest income or disposition of the Note.
Original Issue Discount
General. A Note will generally be treated as having been issued at an
original issue discount (a "Discount Note") if the excess of its "stated
redemption price at maturity" over its issue price (defined as the first
price at which a substantial amount of the Notes are sold for money other
than to bond houses, brokers, or similar persons or organizations acting in
the capacity of underwriters, placement agents or wholesalers) equals or
exceeds 1/4 of 1 percent of such Note's stated redemption price at maturity
multiplied by the number of complete years to its Stated Maturity (or in the
case of installment obligations, the weighted average maturity). "Stated
redemption price at maturity" is the total of all payments provided by the
Note that are not payments of "qualified stated interest." Generally,
"qualified stated interest" is stated interest that is unconditionally
payable in cash or property (other than debt instruments of the issuer) at
least annually in an amount equal to the product of the outstanding principal
amount of the Note and, with respect to a Fixed Rate Note, a single fixed
rate of interest (adjusted to account appropriately for any differing lengths
of intervals between payments). Qualified stated interest also includes
stated interest on certain variable rate debt instruments that satisfy
certain requirements of the Treasury regulations applicable to original issue
discount obligations (the "OID Regulations") if the interest is
unconditionally payable in cash or property (other than debt instruments of
the issuer) at least annually. A Floating Rate Note may or may not qualify as
a variable rate debt instrument under the OID Regulations depending on its
interest rate formula and other terms as set forth in the applicable Pricing
Supplement.
In certain cases, Notes that bear stated interest and are issued at par
may be deemed to have original issue discount for federal income tax
purposes, with the result that the inclusion of interest in the Holder's
income may vary from the actual cash payments of interest on such Notes,
generally accelerating income for cash or accrual method taxpayers. Notice
will be given in the applicable Pricing Supplement when the Company
determines that a particular Note will be a Discount Note. Unless an
applicable Pricing Supplement so indicates, Floating Rate Notes will not be
Discount Notes.
United States Holders of Discount Notes having a Stated Maturity of more
than one year from their date of issue will have to include original issue
discount in income before the receipt of cash attributable to such income.
The amount of original issue discount includible in income by a United States
Holder of a Discount Note is the sum of the daily portions of original issue
discount with respect to the Discount Note for each day during the taxable
year or portion of the taxable year in which it holds such Note ("accrued
original issue discount"). The daily portion is determined by allocating to
each day in any "accrual period" a pro rata portion of the original discount
allocable to that accrual period. The amount of original issue discount
allocable to an accrual period is the excess of (a) the product of the
Discount Note's adjusted issue price at the beginning of such accrual period
and its yield to maturity (determined on the basis of compounding at the
close of each accrual period and adjusted for the length of such period) over
(b) the sum of the qualified stated interest payments, if any, payable (or
treated as payable) on the Discount Note during the accrual period. Under the
OID Regulations, the "accrual period" may be of any length and may vary in
length over the term of the Note, provided that each accrual period is no
longer than one year and each scheduled payment of principal or interest
occurs either on the final day or on the first day of an accrual period. The
"adjusted issue price" of the Discount Note at the start of any accrual
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period is the sum of the issue price of such Note plus the accrued original
issue discount for each prior accrual period minus any prior payments on the
Note that were not payments of qualified stated interest. The amount of
original issue discount includible in income is adjusted for any United
States Holder which acquires a Discount Note at a premium over its adjusted
issue price (an "acquisition premium"), but at an amount less than or equal
to the sum of all amounts payable on the instrument after the acquisition
date (other than payments of qualified stated interest). It should be noted
that the OID Regulations require certain modifications to be made to the
method for determining OID in the case of variable rate instruments.
Under the foregoing rules, United States Holders of Discount Notes will
have to include in income increasingly greater amounts of original issue
discount in successive accrual periods and in advance of any payment of cash
related thereto.
At the time the Company issues a Note, it will make a determination based
on the OID Regulations and other authorities whether such Note bears original
issue discount. The Company is required to report the amount of original issue
discount accrued on Notes held of record by persons other than corporations and
other exempt Holders.
Optional Redemption of Discount Notes. Under the OID Regulations, if
either the Company or the Holder has an option to redeem, or cause the
redemption of, a Discount Note prior to its Stated Maturity, such option will
be presumed to be exercised if, by utilizing any date on which such Note may
be redeemed as its maturity date and the amount payable on such date in
accordance with the terms of the Note as its stated redemption price at
maturity, the yield on such Note would be (i) in the case of an option of the
Company, lower than its yield to maturity computed without assuming the
option to be so exercised or (ii) in the case of an option of the Holder,
higher than its yield to maturity computed without assuming the option to be
so exercised. If such option is not in fact exercised when presumed to be
exercised, the Note would be treated solely for original issue discount
purposes as if it were redeemed, and a new Note were issued, on the presumed
exercise date for an amount equal to the adjusted issue price of the original
Note on such date. Notice will be given in an applicable Pricing Supplement
when the Company determines that a particular Note will be deemed to have a
maturity date for federal income tax purposes prior to its Stated Maturity.
Short Term Discount Notes. Under the OID Regulations, a Note that matures
one year or less from the date of its issuance ("short-term Discount Note")
will be treated as having been issued at a discount ("short-term discount")
equal to the excess of the total principal and interest payments on the Note
over its issue price (or its tax basis if the United States Holder so
elects). In general, an individual or other cash basis United States Holder
of a short-term Discount Note is not required to accrue short-term discount
for United States federal income tax purposes unless it elects to do so.
Accrual basis United States Holders and certain other United States Holders,
including banks and dealers in securities, are required to accrue the
short-term discount on short-term Discount Notes on a straight-line basis
unless an election is made to accrue the short-term discount under the
constant-yield method (based on daily compounding). In the case of a United
States Holder not required and not electing to include the short-term
discount in income currently, any gain realized on the sale or retirement of
the short-term Discount Note will be ordinary income to the extent of the
short-term discount accrued on a straight-line basis (unless an election is
made to accrue the short-term discount under the constant-yield method)
through the date of sale or retirement. United States Holders who are not
required and do not elect to accrue the short-term discount on short-term
Discount Notes will be required to defer deductions for interest on
borrowings allocable to short-term Discount Notes in an amount not exceeding
the deferred income until the deferred income is realized.
Foreign Currency Notes. The amount of original issue discount for any
accrual period on a Discount Note that is a Foreign Currency Note will depend
on whether the Holder has made a valid election to use a "spot accrual
convention" pursuant to regulations under the Code. If the Holder has made
such an election, original issue discount will be determined in the Specified
Currency and translated into U.S. dollars using the spot exchange rate in
effect on the last day of the accrual period (or last day of a partial
accrual period ending on the last day of the Holder's taxable year); or where
interest is paid within five
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business days of such last day, the exchange rate in effect on the date of
receipt may be used. If the Holder has not made such an election, original
issue discount will be determined in the Specified Currency and translated
into U.S. dollars using the average exchange rate in effect during the
accrual period. A United States Holder of a Discount Note that is a Foreign
Currency Note will also recognize ordinary income or loss ("exchange gain or
loss") upon actual or constructive receipt of an amount attributable to
original issue discount (whether in connection with a payment of interest or
the sale or retirement of a Discount Note). Such exchange gain or loss, if
any, will be measured by subtracting the amount of original issue discount
with respect to the accrual period from the U.S. dollar value of the amount
received attributable to that accrual period. The U.S. dollar value of the
amount received will be determined by translating the units of Specified
Currency received into dollars using the spot exchange rate in effect on the
date of receipt of payment or sale or retirement of the Note.
Notes Issued at a Premium. A United States Holder that purchases a Note
for an amount in excess of the sum of all amounts payable on the Note after
the purchase date other than qualified stated interest will be considered to
have purchased the Note at a "premium" and will not be required to include
any original issue discount in income. A United States Holder may generally
elect to amortize the premium over the remaining term of the Note on a
constant-yield method. The amount amortized in any year will be treated as a
reduction of the United States Holder's interest income from the Note in such
year. Any such election shall apply to all debt instruments (other than debt
instruments the interest on which is excludable from gross income) held by
the United States Holder at the beginning of the first taxable year to which
the election applies and to any such debt instruments thereafter acquired by
the United States Holder, and is irrevocable without the consent of the
Internal Revenue Service (the "IRS"). Bond premium on a Note held by a United
States Holder that does not make such election will decrease the gain or
increase the loss otherwise recognized on a taxable disposition of the Note.
If a Note is callable by the Company before its Stated Maturity, the earlier
call date will be considered as the Maturity if it results in a smaller
amortizable bond premium attributable to the period of earlier call date. If
a Note is not then called on the earlier call date, any unamortized bond
premium must then be amortized to a succeeding call date or to Maturity.
Certain of the Notes may be callable prior to Stated Maturity. Holders
therefore should consult with their tax advisors to determine whether this
rule will apply to their individual situation.
Bond premium on a Foreign Currency Note will be computed in the applicable
Specified Currency. With respect to a United States Holder that elects to
amortize the premium, the amortizable bond premium will reduce interest
income measured in units of the Specified Currency. At the close of any
period in which a portion of the bond premium is amortized, exchange gain or
loss (which is generally ordinary income or loss) will be realized with
respect to such portion based on the difference between spot rates at the
close of such period and spot rates at the time of acquisition of the Foreign
Currency Note. With respect to a United States Holder that does not elect to
amortize bond premium, the amount of the bond premium will constitute a
capital loss when the Note matures, which may be offset or eliminated by
exchange gain.
Market Discount. If a United States Holder purchases a Note for an amount
that is less than its "revised issue price" (defined as the sum of the issue
price of the Note and the aggregate amount of the original issue discount, if
any, includible in the gross income of all previous Holders of the Note,
determined without regard to any adjustment for a previous holder's
acquisition premium), the amount of the difference will be treated as "market
discount," unless such difference is less than a de minimis amount. The
market discount provisions of the Code generally require a Holder of a Note
acquired at a market discount to treat as ordinary interest income any gain
recognized on the disposition of such Note to the extent of the "accrued
market discount" on such Note at the time of disposition. If a Holder of a
Note makes a gift of such Note, any accrued market discount will be included
in income as if such Holder had sold the Note for a price equal to its fair
market value. In addition, if a Holder of a Note acquired at a market
discount receives a partial principal payment prior to Maturity, that payment
may be treated as ordinary income to the extent of the accrued market
discount on the Note at the time the payment is received and the accrued
market discount on the Note will be reduced by the amount of ordinary income
so recognized. These rules will not apply to the extent the Holder has,
pursuant to an election, included
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the accrued market discount in income as it accrued. Once made, the election
will apply to all market discount obligations acquired on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS. The adjusted basis of a Note will be
increased by any accrued market discount that is included in a Holder's
income pursuant to the election.
The amount of market discount that accrues while a Holder holds a Note
will be equal to the amount which bears the same ratio to the market discount
on the Note as the number of days on which the Holder holds the Note bears to
the number of days from the date the Holder acquires the Note through its
Stated Maturity. Alternatively, a Holder of a Note may elect to accrue market
discount on the basis of a constant-yield method, rather than the
ratable-accrual method described in the preceding sentence.
The market discount rules also provide that any Holder of a Note acquired
at a market discount may be required to defer the deduction of a portion of
the interest on any indebtedness incurred or maintained to purchase or carry
the Note until the Note is disposed of in a taxable transaction. This rule
will not apply if the Holder elects to include accrued market discount in
income currently.
Accrued market discount on Foreign Currency Notes will generally be
determined by translating the market discount determined in the Specified
Currency into U.S. dollars at the spot rate on the date the Foreign Currency
Note is retired or otherwise disposed of. If the United States Holder has
elected to accrue market discount currently, then the amount which accrues is
determined in the Specified Currency and then translated into U.S. dollars on
the basis of the average exchange rate in effect during the accrual period. A
United States Holder will recognize exchange gain or loss with respect to
market discount which is accrued currently upon the sale, retirement or other
disposition of the Foreign Currency Note measured in the same manner as
exchange gain or loss arising upon receipt of accrued interest on a Foreign
Currency Note, as described above.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
Under the OID Regulations, a United States Holder may elect to treat all
interest on any Note as original issue discount and calculate the amount
includible in gross income under the constant-yield method described above.
For the purpose of this election, interest includes stated interest,
short-term discount, original issue discount, de minimis original issue
discount, market discount, de minimis market discount and unstated interest,
as adjusted by any amortizable bond premium or acquisition premium. If a
United States Holder makes this election for a Note with market discount or
amortizable bond premium, the election is treated as an election under the
market discount or amortizable bond premium provisions as described above, as
the case may be, and the electing United States Holder will be required to
include market discount in income currently or amortize bond premium. The
election is to be made for the taxable year in which the United States Holder
acquired the Note, and may not be revoked without the consent of the IRS.
United States Holders should consult with their own tax advisors about this
election.
PURCHASE, SALE AND RETIREMENT OF NOTES
A United States Holder's tax basis in a Note will be its U.S. dollar cost
(which, in the case of a Foreign Currency Note, will be the U.S. dollar value
of the purchase price on the date of purchase), increased by the amount of
any original issue discount, short-term discount or market discount included
in the United States Holder's income with respect to the Note and reduced by
the amount of any payments on a Note that are not qualified stated interest
payments and by the amount of any amortizable bond premium applied to reduce
interest on the Note. A United States Holder will generally recognize gain or
loss upon the sale or retirement of a Note equal to the difference between
the amount realized upon the sale or retirement and the tax basis in the
Note. The amount realized will equal the proceeds of the sale excluding the
amount attributable to accrued but unpaid interest, which is treated as the
receipt of an interest payment. The amount realized on a sale or retirement
for an amount in Specified Currency will be the U.S. dollar value of such
amount on the date of sale or retirement (excluding any amount attributable
to accrued but unpaid interest). Except (i) to the extent described above
with respect to short-term Discount Notes and Foreign Currency Notes, and
(ii) to the extent attributable to market discount or currency gain
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or loss (as described in the following paragraph), gain or loss recognized by
a United States Holder on the sale or retirement of a Note will generally be
capital gain or capital loss and such gain or loss will be long-term capital
gain or loss if the Note was held for more than one year. Long-term capital
gains of individuals are eligible for reduced rates of taxation, with
additional rate reductions applicable to gains from capital assets held for
more than 18 months. Still further reduced rates of taxation on long-term
capital gains of individuals may apply in certain cases commencing in the
year 2001.
Gain or loss recognized by a United States Holder on the sale or
retirement of a Foreign Currency Note that is attributable to changes in
exchange rates will be treated as ordinary income or loss and will be limited
to the amount of overall gain or loss realized on the disposition of the
Note. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between the U.S. dollar value of the principal amount of the
Note expressed in units of the Specified Currency, determined at the spot
exchange rate on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the amount paid for the Note expressed in
units of the Specified Currency, determined at the spot exchange rate as of
the date the Holder acquired the Note.
EXCHANGE OF THE SPECIFIED CURRENCY
A United States Holder who purchases a Note with previously owned
Specified Currency will recognize exchange gain or loss at the time of
purchase attributable to the difference at the time of purchase, if any,
between such Holder's tax basis in such currency and the fair market value of
the Note in U.S. dollars on the date of purchase. Such gain or loss will be
ordinary income or loss.
Specified Currency received as interest on (or original issue discount
with respect to) a Foreign Currency Note or on the sale or retirement of a
Note will have a tax basis equal to its U.S. dollar value determined with
reference to the spot exchange rate at the time such interest is received or
at the time of such sale or retirement. Foreign currencies and currency units
which are purchased will generally have a tax basis equal to their U.S.
dollar cost. Any gain or loss realized on a sale or other disposition of a
foreign currency or currency unit (including its use to purchase the Foreign
Currency Notes or upon exchange for U.S. dollars) will be ordinary income or
loss.
UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law and subject
to the discussion of backup withholding below:
(a) payments of principal, premium, if any, and interest (including
original issue discount) on the Notes to any Holder who is not a United
States Holder (a "United States Alien Holder") will not be subject to
United States federal income tax or withholding of federal income tax,
provided that in the case of interest or original issue discount, (i) such
interest or original issue discount is not effectively connected with a
trade or business conducted by the United States Alien Holder in the
United States, (ii) the United States Alien Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (iii) the United States
Alien Holder is not a controlled foreign corporation that is related to
the Company through stock ownership, (iv) the United States Alien Holder
is not a bank that acquired the Notes pursuant to a loan agreement made in
the ordinary course of its trade or business, and (v) either (A) the
beneficial owner of the Note certifies to the Company or its agent, under
penalties of perjury, that such owner is not a United States Holder and
provides its name and address, or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in
the ordinary course of its trade or business (a "financial institution")
and holds the Note, certifies to the Company or its agent under penalties
of perjury that such statement has been received from the beneficial owner
by it or by a financial institution and furnishes the payor with a copy
thereof;
(b) a United States Alien Holder will not be subject to United States
federal income tax or withholding of federal income tax on gain realized
on the sale, exchange or redemption of a Note
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unless (i) such gain is effectively connected with a trade or business
conducted by the United States Alien Holder in the United States or (ii)
in the case of a United States Alien Holder who is an individual and holds
a Note as a capital asset, such Holder is present in the United States for
183 days or more in the taxable year of sale and certain other
requirements are met; and
(c) a Note held by an individual who at the time of death is not a citizen
or resident, as defined for United States federal estate tax purposes, of
the United States will not be subject to United States federal estate tax
as a result of such individual's death if the individual does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and the income on the
Note, if received at the time of the individual's death, would not have
been effectively connected with a U.S. trade or business of the individual.
Under recently finalized U.S. Treasury regulations, which generally are
effective for payments made after December 31, 1998, subject to certain
transitional rules, the certification described in (a)(v) above may also be
provided by a qualified intermediary on behalf of one or more beneficial
owners (or other intermediaries), provided that such intermediary has entered
into a withholding agreement with the IRS and certain other requirements are
satisfied. In the case of Notes held by a foreign partnership, the
regulations require that (x) the certification described in clause (a)(v)
above be provided by partners rather than by the foreign partnership and (y)
the partnership provide certain information, including a taxpayer
identification number. A look-through rule applies in the case of tiered
partnerships.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders
In general, information reporting requirements will apply to payments of
principal and interest on a Note and the proceeds of the sale of a Note
before Maturity within the United States to, and to the accrual of original
issue discount on a Note with respect to, non-corporate United States
Holders. A 31% "backup withholding" tax will apply to such payments and to
payments with respect to original issue discount if the United States Holder
fails to provide an accurate taxpayer identification number or to report all
interest and dividends required to be shown on its federal income tax
returns. The amount of original issue discount required to be reported by the
Company may not be equal to the amount of original issue discount required to
be reported as taxable income by a United States Holder of Discount Notes.
United States Alien Holders
Payment of principal, premium, if any, and interest made within the United
States by the Company or any of its Paying Agents are generally subject to
information reporting and possibly "backup withholding" at a rate of 31%.
Information reporting and backup withholding will not, however, apply to
payments made to a United States Alien Holder on a Note if the certification
described in clause (a) (v) above under "United States Alien Holders" is
received, provided in each case the payor does not have actual knowledge that
the Holder is a United States person.
Payment of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not generally be
subject to information reporting or backup withholding. If, however, the
broker is a United States person, a controlled foreign corporation for United
States tax purposes or a foreign person 50% or more of whose gross income is
from a United States trade or business, such payments will not be subject to
backup withholding but will be subject to information reporting, unless (a)
such broker has documentary evidence in its records that the beneficial owner
is not a U.S. person and certain other conditions are met or (b) the
beneficial owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a credit against such holder's U.S. federal income tax liability (any
resulting overpayment being refundable) provided the required information is
furnished to the IRS.
S-23
<PAGE>
Recently finalized U.S. Treasury regulations, which generally are
effective for payments made after December 31, 1998, subject to certain
transitional rules, generally do not alter the treatment of United States
Alien Holders described above. The regulations do alter certification
procedures in certain cases by setting forth presumptions under which a
United States Alien Holder is subject to information reporting and backup
withholding at the rate of 31% unless the Company receives certification from
the holder of non-U.S. status. Depending on the circumstances, this
certification must be provided (i) directly by the United States Alien
Holder, (ii) in the case of a United States Alien Holder that is treated as a
partnership or other fiscally transparent entity, by the partners,
shareholders, or other beneficiaries of such entity, or (iii) certain
qualified financial institutions or other qualified entities on behalf of the
United States Alien Holder. Prospective investors should consult their tax
advisors concerning the effect, if any, of such new Treasury regulations on
an investment in the Notes.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are offered on a continuing basis by the Company through Bear,
Stearns & Co. Inc., Chase Securities Inc., Lehman Brothers Inc. and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
(collectively, the "Agents") who have agreed to use their best efforts to
solicit purchases of the Notes, and may be sold to the Agents for resale to
investors and other purchasers at varying prices related to prevailing market
prices at the time of resale, to be determined by the Agents. The Company
reserves the right to sell Notes directly on its own behalf in those
jurisdictions where it is authorized to do so. The Company will have the sole
right to accept offers to purchase Notes and may reject any proposed purchase
of Notes in whole or in part. The Agents will have the right to reject any
proposed purchase of Notes through them in whole or in part. Payment of the
purchase price of Notes will be required to be made in immediately available
funds in The City of New York. The Company will pay the Agents a commission
ranging from .125% to .750% of the principal amount of Notes with maturities
of up to 30 years sold through the Agents, depending upon the Stated
Maturity, and may also sell Notes to the Agents as principals at negotiated
discounts. Commissions on agency sales of Notes with maturities of more than
30 years will be determined at the time of sale. No commission will be
payable on any sales made directly to the public by the Company.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing
Supplement, such discount allowed to any dealer may include all or a portion
of the discount to be received by such Agent from the Company. Unless
otherwise indicated in the applicable Pricing Supplement, any Note sold to an
Agent as principal will be purchased by such Agent at a price equal to 100%
of the principal amount thereof less a percentage equal to the commission
applicable to any agency sale of a Note of identical maturity, and may be
resold by the Agent to investors and other purchasers from time to time in
one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale or
may be resold to certain dealers as described above. After the initial public
offering of Notes to be resold to investors and other purchasers, the public
offering price (in the case of a fixed-price public offering), concession and
discount may be changed.
In connection with the offering made hereby, the Agents may purchase and
sell the Notes in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the Agents in connection with the offering. Stabilizing
transactions, in the case of the offering of Notes purchased by one or more
Agents as principal on a fixed price basis, consist of certain bids or
purchases for the purpose of preventing or retarding a decline in the market
price of the Notes, and short positions created by the Agents involve the
sale by the Agents of a greater principal amount of Notes than they are
required to purchase from the Company. The Agents may also impose a penalty
bid, whereby selling concessions allowed to broker-dealers in respect of the
Notes sold in the offering may be reclaimed by the Agents if such Notes are
repurchased by the Agents in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of
the Notes, which may be higher than the price that might otherwise prevail in
the open market; and these activities, if commenced, may be discontinued at
any time. These transactions may be effected in the over-the-counter market
or otherwise.
S-24
<PAGE>
The Agents and any dealers to whom Notes are sold may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"). The Company has agreed to indemnify the Agents
against certain liabilities, including liabilities under the Securities Act,
and will reimburse the Agents for certain expenses.
The Notes are a new issue of securities with no established trading
market. The Agents have informed the Company that they intend to make a
market in the Notes, but are under no obligation to do so and such market
making may be terminated at any time. Therefore, no assurance can be given as
to the existence of a trading market in the Notes in the future.
One or more of the Agents or their affiliates may be customers of, extend
credit to, engage in transactions with or perform services for the Company
and its affiliates in the ordinary course of business.
S-25
<PAGE>
PROSPECTUS
$4,000,000,000
CENDANT CORPORATION
DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK,
STOCK PURCHASE CONTRACTS, STOCK PURCHASE UNITS AND WARRANTS
CENDANT CAPITAL I
CENDANT CAPITAL II
CENDANT CAPITAL III
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED
BY CENDANT CORPORATION
------------------
Cendant Corporation (the "Company"), directly or through such agents,
dealers or underwriters as may be designated from time to time, may offer,
issue and sell, together or separately, its (i) debt securities (the "Debt
Securities"), which may be senior debt securities (the "Senior Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities"), (ii) shares of its preferred stock, par value $0.01 per share
(the "Preferred Stock"), (iii) shares of its common stock, par value $0.01
per share (the "Common Stock"), (iv) Stock Purchase Contracts ("Stock
Purchase Contracts") to purchase shares of Common Stock, (v) Stock Purchase
Units, each representing ownership of a Stock Purchase Contract and Preferred
Securities (as defined herein) or debt obligations of third parties,
including U.S. Treasury securities, securing the holder's obligation to
purchase Common Stock under the Stock Purchase Contracts ("Stock Purchase
Units") and (vi) warrants to purchase Debt Securities, Preferred Stock,
Common Stock or other securities or rights ("Warrants").
Cendant Capital I, Cendant Capital II and Cendant Capital III (each, a
"Cendant Trust"), statutory business trusts formed under the laws of the
State of Delaware, may offer, from time to time, preferred securities,
representing preferred undivided beneficial interests in the assets of the
respective Cendant Trusts ("Preferred Securities"). The payment of periodic
cash distributions ("Distributions") with respect to Preferred Securities out
of moneys held by each of the Cendant Trusts, and payments on liquidation,
redemption or otherwise with respect to such Preferred Securities, will be
guaranteed by the Company to the extent described herein (each, a "Trust
Guarantee"). See "Description of Preferred Securities" and "Description of
Trust Guarantees." The Company's obligations under the Trust Guarantees will
rank junior and subordinate in right of payment to all other liabilities of
the Company and pari passu with its obligations under the senior most
preferred or preference stock of the Company. See "Description of Trust
Guarantees--Status of the Trust Guarantees." Debt Securities may be issued
and sold by the Company in one or more series to a Cendant Trust or a trustee
of such Cendant Trust in connection with the investment of the proceeds from
the offering of Preferred Securities and Common Securities (as defined
herein) of such Cendant Trust. The Debt Securities purchased by a Cendant
Trust may be subsequently distributed pro rata to holders of Preferred
Securities and Common Securities in connection with the dissolution of such
Cendant Trust. The Debt Securities, Preferred Stock, Common Stock, Stock
Purchase Contracts, Stock Purchase Units, Warrants and Preferred Securities
are herein collectively referred to as the "Securities," with an aggregate
public offering price of up to $4,000,000,000 (or its equivalent in foreign
currencies or foreign currency units based on the applicable exchange rate at
the time of offering) in amounts, at prices and on terms to be determined at
the time of sale.
The form in which the Securities are to be issued, their specific
designation, aggregate principal amount or aggregate initial offering price,
maturity, if any, rate and times of payment of interest or dividends, if any,
redemption, conversion, and sinking fund terms, if any, voting or other
rights, if any, exercise price and detachability, if any, and other specific
terms will be set forth in a Prospectus Supplement (the "Prospectus
Supplement"), together with the terms of offering of such Securities. Any
such Prospectus Supplement will also contain information, as applicable,
about certain material United States Federal income tax considerations
relating to the particular Securities offered thereby.
The Declaration of Trust for each of such Trusts also provides that to the
full extent permitted by law, the Company shall indemnify any Company
Indemnified Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of any such Trust) by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys' fees),
judgments, fines and amounts paid in
<PAGE>
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of any such Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. Each of the Declaration of Trusts also provides that to the full
extent permitted by law, the Company shall indemnify any Company Indemnified
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of any
such trust to procure a judgment in its favor by reason of the fact that such
person is or was a Company Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such
person acted in good faith and in a manner such person reasonably believed to
be in or not opposed to the best interests of any such trust and except that
no such indemnification shall be made in respect of any claim, issue or
matter as to which such Company Indemnified Person shall have been adjudged
to be liable to any such trust unless and only to the extent that the Court
of Chancery of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such Court of
Chancery or such other court shall deem proper. The Declaration of Trust for
each such Trust further provides that expenses (including attorneys' fees)
incurred by a Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred to in the
immediately preceding two sentences shall be paid by the Company in advance
of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such Company Indemnified Person to repay
such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Company as authorized in any such
Declaration.
The Declaration of Trust for each Trust also provides that the Company
shall indemnify each Fiduciary Indemnified Person against any loss, liability
or expense incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of the trust or
trusts under any such Trust, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties thereunder.
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "CD". Any Prospectus Supplement will also contain information,
where applicable, as to any other listing on a securities exchange of the
Securities covered by such Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. The
Company reserves the sole right to accept, and together with its agents, from
time to time, to reject in whole or in part any proposed purchase of
Securities to be made directly or through agents. If any agents or
underwriters are involved in the sale of any Securities, the names of such
agents or underwriters and any applicable fees, commissions or discounts will
be set forth in the applicable Prospectus Supplement. See "Plan of
Distribution."
This Prospectus may not be used to consummate any sale of Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is February 23, 1998
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE
OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER, DEALER OR AGENT INVOLVED IN THE OFFERING
DESCRIBED HEREIN. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE SPECIFICALLY
OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all the amendments and exhibits thereto, the
"Registration Statement") filed by the Company and the Cendant Trusts with
the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Securities. This Prospectus does not contain all of the information set
forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, although it does
include a summary of the material terms of the Indenture and the Declaration
of Trust (each as defined herein). Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company, the Cendant Trusts and the Securities. Any statements
contained herein concerning the provisions of any document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission
or incorporated by reference herein are not necessarily complete, and, in
each instance, reference is made to the copy of such document so filed for a
more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center, 13th Floor,
New York, New York 10048. The Commission also maintains a website that
contains reports, proxy and information statements and other information. The
website address is http.//www.sec.gov. In addition, such material can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
No separate financial statements of the Cendant Trusts have been included
or incorporated by reference herein. The Company does not consider that such
financial statements would be material to holders of the Preferred Securities
because (i) all of the voting securities of the Cendant Trusts will be owned,
directly or indirectly, by the Company, a reporting company under the
Exchange Act, (ii) the Cendant Trusts have and will have no independent
operations but exist for the sole purpose of issuing securities representing
undivided beneficial interests in their assets and investing the proceeds
thereof in Subordinated Debt Securities issued by the Company, and (iii) the
Company's obligations described herein and in any accompanying Prospectus
Supplement, under the Declaration (as defined herein)(including the
obligation to pay expenses of the Cendant Trusts), the Subordinated Indenture
and any supplemental indentures thereto, the Subordinated Debt Securities
issued to the Cendant Trust and the Trust Guarantees taken together,
constitute a full and unconditional guarantee by the Company of payments due
on the Preferred Securities. See "Description of Preferred Securities of the
Cendant Trusts" and "Description of Trust Guarantees."
The Cendant Trusts are not currently subject to the information reporting
requirements of the Exchange Act. The Cendant Trusts will become subject to
such requirements upon the effectiveness of the Registration Statement,
although they intend to seek and expect to receive exemptions therefrom.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
(i) Annual Report on Form 10-K for the fiscal year ended January 31, 1997
(the "1997 Form 10-K"); (ii) Quarterly Reports on Form 10-Q for the fiscal
quarters ended April 30, 1997, July 31, 1997 and October 31, 1997 (the "1997
Form 10-Qs"); (iii) Current Reports on Form 8-K dated January 22, 1997,
February 4, 1997, February 13, 1997, February 26, 1997, March 17, 1997, May
29, 1997, August 15, 1997, October 31, 1997, November 4, 1997, December 18,
1997, January 14, 1998, January 22, 1998, January 27, 1998, January 29, 1998,
February 4, 1998, February 6, 1998 and February 16, 1998; and (iv)
description of the common stock of the Company which is contained in the
Registration Statements on Form 8-A of the Company dated July 27, 1984 and
August 15, 1989.
The financial statements filed as part of the Current Report on Form 8-K
dated January 29, 1998 are now the historical financial statements of the
Company (the "Historical Financial Statements"). The Historical Financial
Statements supercede the financial statements appearing in the 1997 Form 10-K
and the 1997 Form 10-Qs.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities shall be deemed to
be incorporated herein by reference and to be a part hereof from the date of
filing of such documents. Any statement contained in this Prospectus or in a
document incorporated or deemed to be incorporated herein by reference shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated herein by reference or
in any Prospectus Supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have
been or may be incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to James E.
Buckman, Esq., Senior Executive Vice President and General Counsel, Cendant
Corporation, 6 Sylvan Way, Parsippany, New Jersey 07054, (973) 428-9700.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE SECURITIES
OFFERED HEREBY, INCLUDING STABILIZING TRANSACTIONS, THE PURCHASE OF
SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS.
3
<PAGE>
THE COMPANY
The Company is one of the foremost consumer and business services
companies in the world. The Company was created through the merger (the
"Merger") of CUC International Inc. ("CUC") and HFS Incorporated ("HFS") in
December 1997 and provides all of the services formerly provided by each of
CUC and HFS, including technology-driven, membership-based consumer services,
travel services and real estate services.
Membership Services. The Company's membership-based consumer services
provide more than 66.5 million members with access to a variety of goods and
services worldwide. These memberships include such components as shopping,
travel, auto, dining, home improvement, lifestyle, vacation exchange, credit
card and checking account enhancement packages, financial products and
discount programs. The Company also administers insurance package programs
which are generally combined with discount shopping and travel for credit
union members, distributes welcoming packages which provide new homeowners
with discounts for local merchants, and provides travelers with value-added
tax refunds. The Company believes that it is the leading provider of
membership-based consumer services of these types in the United States. The
Company's membership activities are conducted principally through its
Comp-U-Card division and certain of the Company's wholly-owned subsidiaries,
FISI*Madison Financial Corporation, Benefit Consultants, Inc., Entertainment
Publications, Inc. and SafeCard Services, Inc.
Travel Services. The Company also provides services to consumers through
intermediaries in the travel and real estate industries. In the travel
industry, the Company, through certain of its subsidiaries, franchises hotels
primarily in the mid-priced and economy markets. It is the world's largest
hotel franchisor, operating the Days Inn(Registered Trademark),
Ramada(Registered Trademark) (in the United States), Howard
Johnson(Registered Trademark), Super 8(Registered Trademark),
Travelodge(Registered Trademark) (in North America), Villager
Lodge(Registered Trademark), Knights Inn(Registered Trademark) and Wingate
Inn(Registered Trademark) franchise systems. Additionally, the Company owns
the Avis worldwide vehicle rental system, which is operated through its
franchisees and is the second-largest car rental system in the world (based
on total revenues and volume of rental transactions). The Company currently
owns approximately 27.5% of the capital stock of the world's largest Avis
franchisee, Avis Rent A Car, Inc. The Company also owns Resort Condominiums
International, Inc., a leading timeshare exchange organization. The Company
also operates the second largest provider in North America of comprehensive
vehicle management services and is the market leader in the United Kingdom
among the four nationwide providers of fuel card services and the six
nationwide providers of vehicle management services.
Real Estate Services. In the residential real estate industry, the
Company, through certain of its subsidiaries, franchises real estate
brokerage offices under the Century 21(Registered Trademark), Coldwell
Banker(Registered Trademark) and Electronic Realty Associates(Registered
Trademark) (ERA(Registered Trademark)) real estate brokerage franchise
systems and is the world's largest real estate brokerage franchisor.
Additionally, the Company, through Cendant Mobility Services Corporation, is
the largest provider of corporate relocation services in the United States,
offering relocation clients a variety of services in connection with the
transfer of a client's employees. Through Cendant Mortgage Corporation, the
Company originates, sells and services residential mortgage loans in the
United States, marketing such services to consumers through relationships
with corporations, affinity groups, financial institutions, real estate
brokerage firms and other mortgage banks.
As a franchisor of hotels, residential real estate brokerage offices and
car rental operations, the Company licenses the owners and operators of
independent businesses to use the Company's brand names. The Company does not
own or operate hotels or real estate brokerage offices. Instead, the Company
provides its franchisee customers with services designed to increase their
revenue and profitability.
Other. The Company also offers consumer software in various multimedia
forms. During 1996, the Company acquired Davidson & Associates, Inc., Sierra
On-Line, Inc. and Knowledge Adventure, Inc. These companies develop, publish,
manufacture and distribute educational, entertainment and personal
productivity interactive multimedia products for home and school use.
The Company from time to time explores and conducts discussions with
regard to acquisitions and other strategic corporate transactions in its
industries and in other businesses. Historically, the Company
4
<PAGE>
has been involved in numerous transactions of various magnitudes, for
consideration which included cash or securities (including Common Stock) or
combinations thereof. The Company will evaluate and pursue appropriate
acquisition and combination opportunities as they arise. No assurance can be
given with respect to the timing, likelihood or financial or business effect
of any possible transaction. In the past, acquisitions by the Company have
involved both relatively small acquisitions and acquisitions which have been
significant.
As part of its regular on-going evaluation of acquisition opportunities,
the Company is currently engaged in a number of separate and unrelated
preliminary discussions concerning possible acquisitions. The Company is in
the early stages of such discussions and has not entered into any agreement
in principle with respect to any of these possible acquisitions. The purchase
price for the possible acquisitions may be paid in cash, through the issuance
of Common Stock (which would increase the number of shares of Common Stock
outstanding) Preferred Stock, Debt Securities or other securities of the
Company, borrowings, or a combination thereof. Prior to consummating any such
possible acquisitions, the Company, among other things, will have to initiate
and satisfactorily complete its due diligence investigation; negotiate the
financial and other terms (including price) and conditions of such
acquisitions; obtain appropriate Board of Directors, regulatory and other
necessary consents and approvals; and secure financing. The Company cannot
predict whether any such acquisitions will be consummated or, if consummated,
will result in a financial or other benefit to the Company.
The Company's principal executive offices are located at 6 Sylvan Way,
Parsippany, New Jersey 07054 (telephone number: (973) 428-9700).
THE CENDANT TRUSTS
Each of the Cendant Trusts is a statutory business trust formed under
Delaware law pursuant to (i) a declaration of trust (each a "Declaration")
executed by the Company as sponsor for such trust (the "Sponsor"), and the
Cendant Trustees (as defined herein) of such trust and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
February 5, 1998. Each Cendant Trust exists for the exclusive purposes of (i)
issuing and selling the Preferred Securities and common securities
representing common undivided beneficial interests in the assets of such
Cendant Trust (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities"), (ii) using the gross proceeds from the
sale of the Trust Securities to acquire the Debt Securities and (iii)
engaging in only those other activities necessary, appropriate, convenient or
incidental thereto. All of the Common Securities will be directly or
indirectly owned by the Company. The Common Securities will rank pari passu,
and payments will be made thereon pro rata, with the Preferred Securities,
except that, if an event of default under the Declaration has occurred and is
continuing, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Preferred
Securities. The Company will directly or indirectly acquire Common Securities
in an aggregate liquidation amount equal to at least 3% of the total capital
of each Cendant Trust.
Unless otherwise specified in the applicable Prospectus Supplement, each
Cendant Trust has a term of up to 55 years but may terminate earlier, as
provided in the Declaration. Each Cendant Trust's business and affairs will
be conducted by the trustees (the "Cendant Trustees") appointed by the
Company as the direct or indirect holder of all of the Common Securities. The
holder of the Common Securities will be entitled to appoint, remove or
replace any of, or increase or reduce the number of, the Cendant Trustees of
each Cendant Trust. The duties and obligations of the Cendant Trustees shall
be governed by the Declaration of such Cendant Trust. A majority of the
Cendant Trustees (the "Regular Trustees") of each Cendant Trust will be
persons who are employees or officers of or who are affiliated with the
Company. One Cendant Trustee of each Cendant Trust will be a financial
institution (the "Institutional Trustee") that is not affiliated with the
Company and has a minimum amount of combined capital and surplus of not less
than $50,000,000, which shall act as property trustee and as indenture
trustee for the purposes of compliance with the provisions of Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), pursuant to the terms
set forth in the applicable Prospectus Supplement. In addition, unless the
Institutional Trustee maintains a principal place of business in the State of
Delaware and otherwise meets
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the requirements of applicable law, one Cendant Trustee of each Cendant Trust
will be an entity having a principal place of business in, or a natural
person resident of, the State of Delaware (the "Delaware Trustee"). The
Company will pay all fees and expenses related to the Cendant Trust and the
offering of the Trust Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the
Institutional Trustee and Delaware Trustee for each Cendant Trust shall be
Wilmington Trust Company, and its address in the State of Delaware is Rodney
Square, North, 1100 North Market Street, Wilmington, Delaware 19890. The
principal place of business of each Cendant Trust shall be c/o Cendant
Corporation, 6 Sylvan Way, Parsippany, New Jersey 07054, telephone (973)
428-9700.
RECENT DEVELOPMENTS
1997 FINANCIAL RESULTS. On February 4, 1998, the Company announced its
financial results for the year ended December 31, 1997. The Company reported
diluted earnings per share of $1.00 for 1997, a 49% increase compared to $.67
earnings per share reported for 1996, excluding one-time charges recognized
in both 1997 and 1996. The Company had revenues of $5.3 billion for 1997
compared with $3.9 billion for 1996, an increase of 36%, and net income of
$872.2 million for 1997, excluding one-time charges, compared with $542.3
million of 1996, excluding one-time charges, an increase of 61%. On a pro
forma basis, which assumes that the financial results include all of the
Company's 1996 acquisitions, accounted for under the purchase method, as if
they had occurred as of January 1, 1996, earnings per share for the year
ended December 31, 1997, excluding one-time charges, was $1.00 representing a
43% increase over pro forma $.70 per share for the year ended December 31,
1996.
When giving effect to one-time charges, the Company reported $.06 diluted
earnings per share for the year ended December 31, 1997 and net income of
$55.4 million for 1997 compared to $423.6 million for 1996. In 1997, one-time
charges totaled $1.1 billion ($816.8 million after-tax, or $.94 per share)
for merger related costs and unusual charges coincident with the Merger, as
well as the merger of HFS and PHH Corporation which was consummated in April
1997. In 1996, one-time charges totaled $179.9 million ($118.7 million
after-tax, or $.15 per share) related to three CUC mergers.
Proposed Acquisition of American Bankers. On January 27, 1998, the Company
made a proposal to acquire American Bankers Insurance Group Inc. ("American
Bankers") for $58 per share in cash and stock, for an aggregate purchase
price of approximately $2.7 billion on a fully diluted basis. On January 28,
1998, the Company commenced a tender offer to purchase approximately 23.5
million of American Bankers' common shares at a price of $58 per share in
cash, which together with shares the Company owns will equal approximately
51% of the fully diluted shares of American Bankers. The Company proposes to
exchange, on a tax free basis, shares of its common stock with a fixed value
of $58 per share for the balance of American Bankers' common stock. The
tender offer is subject to customary conditions and there can be no assurance
that the Company will be successful in its proposal to acquire American
Bankers.
In connection with the Company's proposal to acquire American Bankers, the
Company entered into a commitment letter, dated January 23, 1998, with The
Chase Manhattan Bank and Chase Securities Inc. to provide a $1.5 billion
364-Day revolving credit facility (the "New Facility") which will mature 364
days after the execution of the definitive documentation relating thereto.
The New Facility will bear interest, at the option of the Company, at rates
based on competitive bids of lenders participating in such facilities at a
prime rate or at LIBOR plus an applicable variable margin based on the
Company's senior unsecured long-term debt rating.
Harpur Acquisition. On January 20, 1998, the Company completed the
acquisition of Harpur Group, Ltd., a leading fuel card and vehicle management
company in the United Kingdom, from H-G Holdings, Inc. for approximately $186
million in cash plus future contingent payments of up to $20 million over the
next two years.
Jackson Hewitt Acquisition. On January 7, 1998, the Company completed the
acquisition of Jackson Hewitt Inc. ("Jackson Hewitt"), for approximately $480
million in cash, or $68 per share of common stock of Jackson Hewitt. Jackson
Hewitt is the second largest tax preparation service system in the United
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States with locations in 41 states. Jackson Hewitt franchises a system of
approximately 2,050 offices that specialize in computerized preparation of
federal and state individual income tax returns.
Interval Divestiture. On December 17, 1997, in connection with the merger
with HFS, the Company completed the divestiture of its timeshare exchange
subsidiary, Interval International Inc., as contemplated by the consent
decree with the Federal Trade Commission.
Providian Acquisition. On December 10, 1997, the Company announced that it
had entered into a definitive agreement to acquire Providian Auto and Home
Insurance Company ("Providian") and its subsidiaries from an Aegon N.V.
subsidiary for approximately $219 million in cash. Providian sells automobile
insurance to consumers through direct response marketing in 45 states and the
District of Columbia. The closing of this transaction is subject to customary
conditions, including regulatory approval and is anticipated to occur in the
spring of 1998.
Hebdo Mag Acquisition. On October 3, 1997, the Company completed the
acquisition of all of the outstanding capital stock of Hebdo Mag
International Inc. ("Hebdo Mag") in exchange for the issuance of shares of
preferred stock of Getting to Know You of Canada Ltd., an indirect
wholly-owned subsidiary of the Company, exchangeable for shares of Common
Stock (the "Hebdo Acquisition Shares") and the assumption of certain options
of Hebdo Mag exchanged for options to acquire shares of Common Stock, such
Hebdo Acquisition Shares or options having an aggregate value of
approximately $440 million. Based in Paris, France, Hebdo Mag is an
international publisher of over 150 titles and distributor of classified
advertising information with operations in twelve countries, including
Canada, France, Sweden, Hungary, the United States, Italy, Russia and
Holland. The Hebdo Mag Acquisition was accounted for in accordance with the
pooling-of-interests method of accounting.
USE OF PROCEEDS
Unless otherwise set forth in a Prospectus Supplement, the net proceeds
from the offering of the Securities will be used for general corporate
purposes, which may include acquisitions, repayment of other debt, working
capital and capital expenditures. When a particular series of Securities is
offered, the Prospectus Supplement relating thereto will set forth the
Company's intended use for the net proceeds received from the sale of such
Securities. Pending application for specific purposes, the net proceeds may
be invested in short-term marketable securities.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited consolidated ratio of
earnings to fixed charges of the Company for the periods indicated.
HISTORICAL
----------------------------------------------------------
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994 1993 1992
------------------ ------ ------ ------ ------ ------
Ratio of Earnings to
Fixed Charges (1) . 3.48x 3.06x 2.70x 2.94x 2.68x 1.99x
- ------------
(1) The ratio of earnings to fixed charges is computed by dividing income
before income taxes and extraordinary items plus fixed charges, less
capitalized interest by fixed charges. Fixed charges consist of
interest expense on all indebtedness (including amortization of
deferred financing costs) and the portion of operating lease rental
expense that is representative of the interest factor (deemed to be
one-third of operating lease rentals).
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DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities may be offered from time to time by the Company as
Senior Debt Securities and/or as Subordinated Debt Securities. The Senior
Debt Securities will be issued under an Indenture, as it may be supplemented
from time to time (the "Senior Indenture"), between the Company and The Bank
of Nova Scotia Trust Company of New York, as trustee (the "Senior Trustee").
The Subordinated Debt Securities will be issued under an Indenture, as it may
be supplemented from time to time (the "Subordinated Indenture"), between the
Company and The Bank of Nova Scotia Trust Company of New York, as trustee
(the "Subordinated Trustee"). The term "Trustee", as used herein, refers to
either the Senior Trustee or the Subordinated Trustee, as appropriate. The
forms of the Senior Indenture and the Subordinated Indenture (being sometimes
referred to herein collectively as the "Indentures" and individually as an
"Indenture") have been filed as exhibits to the Registration Statement. The
terms of the Indentures are also governed by certain provisions of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of certain material provisions of the Debt Securities does not
purport to be complete and is qualified in its entirety by reference to the
Indentures. All capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Indentures. For a summary of
certain definitions used in this section, see "Certain Definitions" below.
GENERAL
The Indentures will provide for the issuance of Debt Securities in series
up to the aggregate amount from time to time authorized by the Company for
each series. A Prospectus Supplement will set forth the following terms (to
the extent such terms are applicable to such Debt Securities) of and
information relating to the Debt Securities in respect of which this
Prospectus is delivered: (1) the designation of such Debt Securities; (2)
classification as Senior or Subordinated Debt Securities; (3) the aggregate
principal amount of such Debt Securities; (4) the percentage of their
principal amount at which such Debt Securities will be issued; (5) the date
or dates on which such Debt Securities will mature; (6) the rate or rates, if
any, per annum, at which such Debt Securities will bear interest, or the
method of determination of such rate or rates; (7) the times and places at
which such interest, if any, will be payable; (8) provisions for sinking,
purchase or other analogous fund, if any; (9) the date or dates, if any,
after which such Debt Securities may be redeemed at the option of the Company
or of the holder and the redemption price or prices; (10) the date or the
dates, if any, after which such Debt Securities may be converted or exchanged
at the option of the holder into or for shares of Common Stock or Preferred
Stock of the Company and the terms for any such conversion or exchange; and
(11) any other specific terms of the Debt Securities. Principal, premium, if
any, and interest, if any, will be payable and the Debt Securities offered
hereby will be transferable, at the corporate trust office of the Trustee's
agent in the borough of Manhattan, City of New York, provided that payment of
interest, if any, may be made at the option of the Company by check mailed to
the address of the person entitled thereto as it appears in the Security
Register. (Section 301 of each Indenture)
If a Prospectus Supplement specifies that a series of Debt Securities is
denominated in a currency or currency unit other than United States dollars,
such Prospectus Supplement shall also specify the denomination in which such
Debt Securities will be issued and the coin or currency in which the
principal, premium, if any, and interest, if any, on such Debt Securities
will be payable, which may be United States dollars based upon the exchange
rate for such other currency or currency unit existing on or about the time a
payment is due. Special United States federal income tax considerations
applicable to any Debt Securities so denominated are also described in the
applicable Prospectus Supplement.
The Debt Securities may be issued in registered or bearer form and, unless
otherwise specified in a Prospectus Supplement, in denominations of $1,000
and integral multiples thereof. Debt Securities may be issued in book-entry
form, without certificates. Any such issue will be described in the
Prospectus Supplement relating to such Debt Securities. No service charge
will be made for any transfer or exchange of the Debt Securities, but the
Company or the Trustee may require payment of a sum sufficient to cover any
tax or other government charge payable in connection therewith.
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Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be sold at a substantial discount from their stated
principal amount. United States Federal income tax consequences and other
considerations applicable thereto will be described in the Prospectus
Supplement relating to such Debt Securities.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indentures will provide that the Company shall not consolidate with or
merge into any other corporation or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, unless: (1) the
corporation formed by such consolidation or into which the Company is merged
or the Person which acquires by conveyance or transfer, or which leases, the
properties and assets of the Company substantially as an entirety (A) shall
be a corporation, partnership, limited liability company or trust organized
and validly existing under the laws of the United States of America, any
state thereof or the District of Columbia and (B) shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the Company's obligation for the due and
punctual payment of the principal of (and premium, if any, on) and interest
on all the Debt Securities and the performance and observance of every
covenant of the Indentures on the part of the Company to be performed or
observed; (2) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and (3) the
Company or such Person shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and such supplemental indenture comply
with this "Merger, Consolidation and Sale of Assets" section and that all
conditions precedent herein provided for relating to such transaction have
been complied with. This paragraph shall apply only to a merger or
consolidation in which the Company is not the surviving corporation and to
conveyances, leases and transfers by the Company as transferor or lessor.
(Section 801 of each Indenture)
The Indentures will further provide that upon any consolidation by the
Company with or merger by the Company into any other corporation or any
conveyance, transfer or lease of the properties and assets of the Company
substantially as an entirety to any Person in accordance with the preceding
paragraph, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indentures with the same effect as if such
successor Person had been named as the Company therein, and in the event of
any such conveyance or transfer, the Company (which term shall for this
purpose mean Cendant Corporation or any successor Person which shall
theretofore become such in the manner described in the preceding paragraph),
except in the case of a lease, shall be discharged of all obligations and
covenants under the Indentures and the Debt Securities and the coupons and
may be dissolved and liquidated. (Section 802 of each Indenture)
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indentures with
respect to Debt Securities of any series:
(1) default in the payment of any interest on any Debt Securities of that
series or any related coupon, when such interest or coupon becomes due and
payable, and continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any, on)
any Debt Securities of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment when and as due
pursuant to the terms of the Debt Securities of that series and Article
Twelve of the Indentures; or
(4) default in the performance, or breach, of any covenant or warranty of
the Company in the Indentures (other than a default in the performance, or
breach, of a covenant or warranty which is specifically dealt with
elsewhere under this "Events of Default" section), and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail,
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to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of all Outstanding Debt
Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" thereunder; or
(5) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under the Federal
Bankruptcy Code or any other applicable federal or state law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days; or
(6) the institution by the Company of proceedings to be adjudicated
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Code or any other applicable federal or state law, or
the consent by it to the filing of any such petition or to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due; or
(7) (A) there shall have occurred one or more defaults by the Company in
the payment of the principal of (or premium, if any, on) Debt aggregating
$50 million or more, when the same becomes due and payable at the stated
maturity thereof, and such default or defaults shall have continued after
any applicable grace period and shall not have been cured or waived, or
(B) Debt of the Company aggregating $50 million or more shall have been
accelerated or otherwise declared due and payable, or required to be
prepaid or repurchased (other than by regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(8) any other Event of Default provided with respect to Debt Securities
of that series.
If an Event of Default described in clause (1), (2), (3), (4), (7) or (8)
above with respect to Debt Securities of any series at the time Outstanding
occurs and is continuing, then in every such case the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Debt Securities
of that series may declare the principal amount (or, if the Debt Securities
of that series are Original Issue Discount Securities or Indexed Securities,
such portion of the principal amount as may be specified in the terms of that
series) of all of the Debt Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if
given by Holders), and upon any such declaration such principal amount (or
specified portion thereof) shall become immediately due and payable. If an
Event of Default described in clause (5) or (6) above occurs and is
continuing, then the principal amount of all the Debt Securities shall become
and be immediately due and payable without any declaration or other act on
the part of the Trustee or any Holder, subject, however, to all rights,
powers and limitations provided for by the Federal Bankruptcy Code or any
other applicable Federal or State Law.
At any time after a declaration of acceleration with respect to Debt
Securities of any series (or of all series, as the case may be) has been made
and before a judgment or decree for payment of the money due has been
obtained by the Trustee as provided in Article Five of the Indentures, the
Holders of a majority in principal amount of the Outstanding Debt Securities
of that series (or of all series, as the case may be), by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay in the Currency in which the Debt Securities of such series are
payable (except as otherwise specified pursuant to Section 301 of the
Indentures for the Debt Securities of such series and except, if
applicable, as provided in certain provisions of Section 312 of the
Indentures):
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(A) all overdue interest on all Outstanding Debt Securities of that
series (or of all series, as the case may be) and any related coupons;
(B) all unpaid principal of (and premium, if any, on) any Outstanding
Debt Securities of that series (or of all series, as the case may be)
which has become due otherwise than by such declaration of
acceleration, and interest on such unpaid principal at the rate or
rates prescribed therefor in such Debt Securities;
(C) to the extent that payment of such interest is lawful, interest
on overdue interest at the rate or rates prescribed therefor in such
Debt Securities; and
(D) all sums paid or advanced by the Trustee thereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Debt Securities of that series
(or of all series, as the case may be), other than the non-payment of
amounts of principal of (or premium, if any, on) or interest on Debt
Securities of that series (or of all series, as the case may be) which
have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513 of the Indentures.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Debt Securities because of an Event of Default
specified in clause (7) of the first paragraph of this section shall have
occurred and be continuing, such declaration of acceleration shall be
automatically annulled if the Debt that is the subject of such Event of
Default has been discharged or the holders thereof have rescinded their
declaration of acceleration in respect of such Debt, and written notice of
such discharge or rescission, as the case may be, shall have been given to
the Trustee by the Company and countersigned by the holders of such Debt or a
trustee, fiduciary or agent for such holders, within 30 days after such
declaration of acceleration in respect of the Debt Securities, and no other
Event of Default has occurred during such 30-day period which has not been
cured or waived during such period. (Section 502 of each Indenture)
Subject to Section 502 of each Indenture, the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
may on behalf of the Holders of all the Debt Securities of such series waive
any past default described in clause (1), (2), (3), (4), (7), or (8) of the
first paragraph of this section (or, in the case of a default described in
clause (5) or (6) of the first paragraph of this section, the Holders of not
less than a majority in principal amount of all Outstanding Debt Securities
may waive any such past default), and its consequences, except a default (i)
in respect of the payment of the principal of (or premium, if any, on) or
interest on any Debt Security or any related coupon, or (ii) in respect of a
covenant or provision which under the Indentures cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security
of such series affected. (Section 513 of each Indenture)
Upon any such waiver, any such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of the Indentures; but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.
(Section 513 of each Indenture)
No Holder of any Debt Security of any series or any related coupons shall
have any right to institute any proceeding, judicial or otherwise, with
respect to the Indentures, or for the appointment of a receiver or trustee,
or for any other remedy thereunder, unless (i) such Holder has previously
given written notice to the Trustee of a continuing Event of Default with
respect to the Debt Securities of that series; (ii) the Holders of not less
than 25% in principal amount of the Outstanding Debt Securities of that
series in the case of any Event of Default under clause (1), (2), (3), (4),
(7) or (8) of the first paragraph of this section, or, in the case of any
Event of Default described in clause (5) or (6) of the first paragraph of
this section, the Holders of not less than 25% in principal amount of all
Outstanding Debt Securities, shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own name
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as Trustee under each of the Indentures; (iii) such Holder or Holders have
offered to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request; (iv) the Trustee
for 60 days after its receipt of such notice, request and offer of indemnity
has failed to institute any such proceeding; and (v) no direction
inconsistent with such written request has been given to the Trustee during
such 60-day period by the Holders of a majority or more in principal amount
of the Outstanding Debt Securities of that series in the case of any Event of
Default described in clause (1), (2), (3), (4), (7) or (8) of the first
paragraph of this section, or, in the case of any Event of Default described
in clause (5) or (6) of the first paragraph of this section, by the Holders
of a majority or more in principal amount of all Outstanding Debt Securities.
(Section 507 of each Indenture)
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under either Indenture in good
faith. Subject to the provisions of the Indentures relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee under the Indentures is not under any obligation to exercise any of
its rights or powers under the Indentures at the request or direction of any
of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity. Subject to certain provisions concerning
the rights of the Trustee, with respect to the Debt Securities of any series,
the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of such series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee
under the Indentures.
Within 90 days after the occurrence of any Default with respect to Debt
Securities of any series, the Trustee shall transmit in the manner and to the
extent provided in TIA Section 313(c), notice of such Default known to the
Trustee, unless such Default shall have been cured or waived; provided,
however, that, except in the case of a Default in the payment of the
principal of (or premium, if any, on) or interest on any Debt Securities of
such series, or in the payment of any sinking fund installment with respect
to Debt Securities of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders of Debt Securities of such series
and any related coupons; and provided further that, in the case of any
Default of the character specified in clause (7) of the first paragraph of
this section with respect to Debt Securities of such series, no such notice
to Holders shall be given until at least 30 days after the occurrence
thereof.
The Company is required to deliver to the Trustee, within 120 days after
the end of each fiscal year, a brief certificate of the Company's compliance
with all of the conditions and covenants under the Indentures.
DEFEASANCE OR COVENANT DEFEASANCE OF THE INDENTURES
The Indentures will provide that the Company may, at its option and at any
time, terminate the obligations of the Company with respect to the
Outstanding Debt Securities of any series ("defeasance"). Such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Debt Securities and any related
coupons, except for the following which shall survive until otherwise
terminated or discharged under the Indentures: (A) the rights of Holders of
such Outstanding Debt Securities and any related coupons (i) to receive,
solely from the trust fund described in the Indentures, payments in respect
of the principal of (and premium, if any, on) and interest on such Debt
Securities and any related coupons when such payments are due, and (ii) to
receive shares of common stock or other Securities from the Company upon
conversion of any convertible Debt Securities issued thereunder, (B) the
Company's obligations to issue temporary Debt Securities, register the
transfer or exchange of any Debt Securities, replace mutilated, destroyed,
lost or stolen Debt Securities, maintain an office or agency for payments in
respect of the Debt Securities and, if the Company acts as its own Paying
Agent, hold in trust, money to be paid to such Persons entitled to payment,
and with respect to Additional Amounts, if any, on such Debt Securities as
contemplated in the Indentures, (C) the rights, powers, trusts, duties and
immunities of the Trustee under the Indentures and (D) the defeasance
provisions of the Indentures. With respect to Subordinated Debt Securities,
money
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and securities held in trust pursuant to the Defeasance and Covenant
Defeasance provisions described herein, shall not be subject to the
subordination provisions of the Subordinated Indenture. In addition, the
Company may, at its option and at any time, elect to terminate the
obligations of the Company with respect to certain covenants that are set
forth in the Indentures, some of which are described in the "Certain
Covenants" section above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the
Debt Securities ("covenant defeasance"). (Section 1403 of each Indenture)
In order to exercise either defeasance or covenant defeasance:
(1) the Company shall irrevocably have deposited or caused to be deposited
with the Trustee, in trust, for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of such Debt Securities and any related coupons, (A) money in an
amount (in such Currency in which such Debt Securities and any related
coupons are then specified as payable at Stated Maturity), or (B) Government
Obligations applicable to such Debt Securities (determined on the basis of
the Currency in which such Debt Securities are then specified as payable at
Stated Maturity) which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment of principal (including
any premium) and interest, if any, under such Debt Securities and any related
coupons, money in an amount or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public accountants to
pay and discharge (i) the principal of (and premium, if any, on) and interest
on the Outstanding Debt Securities and any related coupons on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and premium,
if any) or installment or interest and (ii) any mandatory sinking fund
payments or analogous payments applicable to the Outstanding Debt Securities
and any related coupons on the day on which such payments are due and payable
in accordance with the terms of the Indentures and of such Debt Securities
and any related coupons; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such Government
Obligations to said payments with respect to such Debt Securities and any
related coupons. Before such a deposit, the Company may give to the Trustee,
in accordance with certain redemption provisions in the Indentures, a notice
of its election to redeem all or any portion of such Outstanding Debt
Securities at a future date in accordance with the terms of the Debt
Securities of such series and the redemption provisions of the Indentures,
which notice shall be irrevocable. Such irrevocable redemption notice, if
given, shall be given effect in applying the foregoing; and
(2) no Default or Event of Default with respect to the Debt Securities and
any related coupons shall have occurred and be continuing on the date of such
deposit or, insofar as the Event of Default described in clauses (5) and (6)
of the Events of Default section above are concerned, at any time during the
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period); (3) such defeasance or covenant defeasance shall
not result in a breach or violation of, or constitute a default under, the
Indentures or any other material agreement or instrument to which the Company
is a party or by which it is bound; (4) in the case of a defeasance, the
Company shall have delivered to the Trustee an Opinion of Counsel stating
that (x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (y) since the Issue Date, there has been
a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the Holders
of the Outstanding Debt Securities and any related coupons will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance had not occurred; (5) in the case of a covenant defeasance, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the Outstanding Debt Securities and any related
coupons will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; (6) notwithstanding any other provisions of the defeasance and
covenant defeasance provisions of the Indentures, such defeasance or covenant
defeasance shall be effected in compliance with any additional or substitute
terms, conditions or
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limitations in connection therewith pursuant to Section 301 of the
Indentures; and (7) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent under the Indentures to either defeasance or covenant
defeasance, as the case may be, have been complied with. (Section 1404 of
each Indenture)
SATISFACTION AND DISCHARGE
The Indentures shall upon Company Request cease to be of further effect
with respect to any series of Debt Securities (except as to any surviving
rights of registration of transfer or exchange of Debt Securities of such
series herein expressly provided for and the obligation of the Company to pay
any Additional Amounts as contemplated by Section 1005 of each Indenture) and
the Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of such Indenture as to such series
when (1) either (A) all Debt Securities of such series theretofore
authenticated and delivered and all coupons, if any, appertaining thereto
(other than (i) coupons appertaining to Bearer Securities surrendered for
exchange for Registered Securities and maturing after such exchange, whose
surrender is not required or has been waived as provided in Section 305 of
the Indentures, (ii) Debt Securities and coupons of such series which have
been destroyed, lost or stolen and which have been replaced or paid as
provided in Section 306 of the Indentures, (iii) coupons appertaining to Debt
Securities called for redemption and maturing after the relevant Redemption
Date, whose surrender has been waived as provided in Section 1106 of the
Indentures, and (iv) Debt Securities and coupons of such series for whose
payment money has theretofore been deposited in trust with the Trustee or any
Paying Agent or segregated and held in trust by the Company and thereafter
repaid to the Company, as provided in Section 1003 of the Indentures) have
been delivered to the Trustee for cancellation; or (B) all Debt Securities of
such series and, in the case of (i) or (ii) below, any coupons appertaining
thereto not theretofore delivered to the Trustee for cancellation (i) have
become due and payable, or (ii) will become due and payable at their Stated
Maturity within one year, or (iii) if redeemable at the option of the
Company, are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company, in
the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to
be deposited with the Trustee as trust funds in trust for the purpose an
amount, in the Currency in which the Debt Securities of such series are
payable, sufficient to pay and discharge the entire indebtedness on such Debt
Securities not theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest to the date of such deposit (in
the case of Debt Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be; (2) the Company has
paid or caused to be paid all other sums payable hereunder by the Company;
and (3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of the Indentures as
to such series have been complied with. (Section 401 of each Indenture)
AMENDMENTS AND WAIVERS
The Indentures will provide that at any time and from time to time, the
Company and the Trustee may, without the consent of any holder of Debt
Securities, enter into one or more indentures supplemental thereto for
certain specified purposes, including, among other things, (i) to cure
ambiguities, defects or inconsistencies, or to make any other provisions with
respect to questions or matters arising under the Indentures (provided that
such action shall not adversely affect the interests of the Holders in any
material respect), (ii) to effect or maintain the qualification of the
Indentures under the Trust Indenture Act, or (iii) to evidence the succession
of another person to the Company and the assumption by any such successor of
the obligations of the Company in accordance with the Indentures and the Debt
Securities. (Section 901 of each Indenture). Other amendments and
modifications of the Indentures or the Debt Securities may be made by the
Company and the Trustee with the consent of the holders of not less than a
majority of the aggregate principal amount of all of the then Outstanding
Debt Securities of any Series; provided, however, that no such modification
or amendment may, without the consent of the holder of each Outstanding Debt
Security affected thereby, (1) change the Stated Maturity of the principal
of, or any installment of interest on, any Debt Security or reduce the
principal amount thereof
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or the rate of interest thereon or any premium payable upon the redemption
thereof, or change any obligation of the Company to pay Additional Amounts
contemplated by Section 1005 of each Indenture (except as contemplated and
permitted by certain provisions of the Indentures), or reduce the amount of
the principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 502 of the Indentures of the amount thereof provable in bankruptcy
pursuant to Section 504 of the Indentures, or adversely affect any right of
repayment at the option of any Holder of any Debt Security, or change any
Place of Payment where, or the Currency in which, any Debt Security or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption or repayment at the option of the
Holder, on or after the Redemption Date or Repayment Date, as the case may
be), or adversely affect any right to convert or manage any Debt Securities
as may be provided pursuant to Section 301 of the Indentures, or (2) reduce
the percent in principal amount of the Outstanding Debt Securities of any
series, the consent of whose Holders is required for any such supplemental
indenture, for any waiver of compliance with certain provisions of the
Indentures or certain defaults thereunder and their consequences provided for
in the Indentures, or reduce the requirements for quorum or voting.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by and construed
in accordance with the laws of the State of New York. The Indentures are
subject to the provisions of the Trust Indenture Act that are required to be
a part thereof and shall, to the extent applicable, be governed by such
provisions.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indentures.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Capital Stock" means any and all shares, interests, participations,
rights or equivalents (however designated) of corporate stock of the Company
or any Principal Subsidiary.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Debt" means notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Fair Market Value" means the fair market value of the item in question as
determined by the Board of Directors acting in good faith and in exercise of
its fiduciary duties.
"Holder" means a Person in whose name a Debt Security is registered in the
Security Register.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Debt Securities.
"Issue Date" means the date of first issuance of the Debt Securities under
either Indenture.
"Maturity", when used with respect to any Debt Securities, means the date
on which the principal of such Debt Security or an installment of principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, notice of redemption, notice of
option to elect repayment or otherwise.
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"Officers' Certificate" means a certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, including an employee of the Company, and who shall
be acceptable to the Trustee.
"Original Issue Discount Security" means any Debt Security which provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502 of the Indentures.
"Outstanding", when used with respect to Debt Securities, means, as of the
date of determination, all Debt Securities theretofore authenticated and
delivered under the Indentures, except:
(i) Debt Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Debt Securities, or portions thereof, for whose payment, money in
the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Debt Securities;
(iii) Debt Securities, except to the extent provided in the "Defeasance
or Covenant Defeasance of the Indentures" section, with respect to which
the Company has effected defeasance and/or covenant defeasance as provided
in the Indenture; and
(iv) Mutilated, destroyed, lost or stolen Debt Securities which have
become or are about to become due and payable which have been paid
pursuant to Section 306 of the Indentures or in exchange for or in lieu of
which other Debt Securities have been authenticated and delivered pursuant
to the Indenture, other than any such Debt Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it
that such Debt Securities are held by a bona fide purchaser in whose hands
the Debt Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Debt Securities have given any request,
demand, authorization, direction, notice, consent or waiver under the
Indentures, and for the purpose of making the calculations required by TIA
Section 313, Debt Securities owned by the Company or any other obligor upon
the Debt Securities or any Affiliate of the Company or such other obligor
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in making such calculation
or in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Debt Securities which the Trustee knows to be
so owned shall be so disregarded. Debt Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Debt Securities and that the pledgee is not the Company
or any other obligor upon the Debt Securities or any Affiliate of the Company
or such other obligor.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (and premium, if
any, on) or interest on any Debt Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer,
the cashier, any assistant cashier, any trust officer or assistant trust
officer, the controller or any assistant controller or any other officer of
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the Trustee customarily performing functions similar to those performed by
any of the above-designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Rolling Period" shall mean with respect to any fiscal quarter, such
fiscal quarter and the three immediately preceding fiscal quarters considered
as a single accounting period.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305 of the Indenture.
"Stated Maturity", when used with respect to any Debt Security or any
installment of principal thereof or interest thereon, means the date
specified in such Debt Security as the fixed date on which the principal of
such Debt Security or such installment of principal or interest is due and
payable.
"Subsidiary" means any corporation of which at the time of determination
the Company, directly and/or indirectly through one or more Subsidiaries,
owns more than 50% of the Voting Stock.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force at the date as of which the Indentures were executed, except that any
supplemental indenture executed pursuant to the Indentures shall conform to
the requirements of the Trust Indenture Act as in effect on the date of
execution thereof.
"Trustee" means The Bank of Nova Scotia Trust Company of New York until a
successor Trustee shall have become such pursuant to the applicable
provisions of the Indentures, and thereafter "Trustee" shall mean such
successor Trustee.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Voting Stock" means stock of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board
of directors, managers or trustees of a corporation (irrespective of whether
or not at the time stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).
GENERAL DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject to, and qualified in its entirety by reference
to, the more complete descriptions thereof set forth in the Company's Amended
and Restated Certificate of Incorporation (the "Certificate"), and Amended
and Restated By-laws (the "By-laws") which documents are exhibits to this
Registration Statement.
The Company is authorized to issue up to 2,000,000,000 shares of Common
Stock, par value $.01 per share, and up to 10,000,000 shares of Preferred
Stock, par value $1.00 per share. As of January 15, 1998, there were
839,992,974 shares of Common Stock and no shares of Preferred Stock
outstanding.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The following summary contains a description of certain general terms of
the Company's Preferred Stock. The particular terms of any series of
Preferred Stock that may be offered will be described in the applicable
Prospectus Supplement. If so indicated in a Prospectus Supplement, the terms
of any such series may differ from the terms set forth below. The summary of
terms of the Preferred Stock does not purport to be complete and is subject
to and qualified in its entirety by reference to the provisions of the
Certificate and the Certificate of Designation (the "Certificate of
Designation") relating to a particular series of offered Preferred Stock
which is or will be in the form filed or incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part at
or prior to the time of the issuance of such series of Preferred Stock.
The Board of Directors of the Company has the power, without further
action by the shareholders, to issue Preferred Stock in one or more series,
with such designations of series, dividend rates, redemption
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provisions, special or relative rights in the event of liquidation,
dissolution, distribution or winding up of the Company, sinking fund
provisions, conversion or exchange provisions, voting rights thereof and
other preferences, privileges, powers, rights, qualifications, limitations
and restrictions, as shall be set forth as and when established by the Board
of Directors of the Company. The shares of any series of Preferred Stock will
be, when issued, fully paid and non-assessable and holders thereof will have
no preemptive rights in connection therewith.
RANK
Unless otherwise specified in the Prospectus Supplement relating to a
particular series of Preferred Stock, each series of Preferred Stock will
rank on parity as to dividends and liquidation rights in all respects with
each other series of Preferred Stock.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of
funds legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to such series
of Preferred Stock. Different series of the Preferred Stock may be entitled
to dividends at different rates or based upon different methods of
determination. Such rates may be fixed or variable or both. Each such
dividend will be payable to the holders of record as they appear on the stock
books of the Company on such record dates as will be fixed by the Board of
Directors of the Company or a duly authorized committee thereof. Dividends on
any series of the Preferred Stock may be cumulative or noncumulative, as
provided in the Prospectus Supplement relating thereto.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will
be entitled to receive out of assets of the Company available for
distribution to stockholders, before any distribution of assets is made to
holders of Common Stock or any other class of stock ranking junior to such
series of the Preferred Stock upon liquidation, liquidating distributions in
the amount set forth in the Prospectus Supplement relating to such series of
Preferred Stock plus an amount equal to accrued and unpaid dividends for the
then current dividend period and, if such series of the Preferred Stock is
cumulative, for all dividend periods prior thereto, all as set forth in the
Prospectus Supplement with respect to such series of Preferred Stock.
REDEMPTION
The terms, if any, on which shares of a series of Preferred Stock may be
subject to optional or mandatory redemption, in whole or in part, will be set
forth in the Prospectus Supplement relating to such series.
CONVERSION AND EXCHANGE
The terms, if any, on which shares of a series of Preferred Stock are
convertible into another series of Preferred Stock or Common Stock or
exchangeable for another series of Preferred Stock or Common Stock will be
set forth in the Prospectus Supplement relating thereto. Such terms may
include provisions for conversion, either mandatory, at the option of the
holder, or at the option of the Company, in which case the number of shares
of another series of Preferred Stock or Common Stock to be received by the
holders of such series of Preferred Stock would be calculated as of a time
and in the manner stated in such Prospectus Supplement.
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursement agent for each
series of Preferred Stock will be designate in the applicable Prospectus
Supplement. The registrar for shares of each series of Preferred Stock will
send notices to shareholders of any meetings at which holders of the
Preferred Stock have the right to elect directors of the Company or to vote
on any other matter.
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VOTING RIGHTS
The holders of Preferred Stock of a series offered hereby will not be
entitled to vote except as indicated in the Prospectus Supplement relating to
such series of Preferred Stock or as required by applicable law.
DESCRIPTION OF COMMON STOCK
GENERAL
Subject to the rights of the holders of any shares of the Company's
Preferred Stock which may at the time be outstanding, holders of Common Stock
are entitled to such dividends as the Board of Directors may declare out of
funds legally available therefor. The holders of Common Stock will possess
exclusive voting rights in the Company, except to the extent the Board of
Directors specifies voting power with respect to any Preferred Stock issued.
Except as hereinafter described, holders of Common Stock are entitled to one
vote for each share of Common Stock, but will not have any right to cumulate
votes in the election of directors. In the event of liquidation, dissolution
or winding up of the Company, the holders of Common Stock are entitled to
receive, after payment of all of the Company's debts and liabilities and of
all sums to which holders of any Preferred Stock may be entitled, the
distribution of any remaining assets of the Company. Holders of the Common
Stock will not be entitled to preemptive rights with respect to any shares
which may be issued. Any shares of Common Stock sold hereunder will be fully
paid and non-assessable upon issuance against full payment of the purchase
price therefor. The Common Stock is listed on the New York Stock Exchange
under the symbol "CD."
CERTAIN PROVISIONS
The provisions of the Company's Certificate and By-Laws which are
summarized below may be deemed to have an anti-takeover effect and may delay,
defer or prevent a tender offer or takeover attempt that a stockholder might
consider in such stockholder's best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.
CLASSIFIED BOARD
The Board of Directors is divided into three classes that are elected for
staggered three-year terms. A director may be removed by the stockholders
without cause only by the affirmative vote of the holders, voting as a single
class, of 80% or more of the total number of votes entitled to be cast by all
holders of the voting stock, which shall include all capital stock of the
Company which by its terms may vote on all matters submitted to stockholders
of the Company generally. The size of the Board of Directors was set by
resolution at 30 and pursuant to the By-Laws (i) until the third anniversary
of the consummation of the merger of HFS and CUC (the "Effective Time"), an
affirmative vote of 80% of the entire Board of Directors will be required in
order to change the number of directors, and (ii) a quorum, at any meeting of
the Board of Directors, shall consist of a majority of the entire Board of
Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Pursuant to the Certificate, the Board of Director's authority to
designate committees shall be subject to the provisions of the By-Laws.
Pursuant to the By-Laws, the Board of Directors shall have the following
committees: (i) an Executive Committee consisting of four CUC Directors (as
defined below) and four HFS Directors (as defined below) and whose Chairman
shall be the Chairman of the Board; (ii) a Compensation Committee consisting
of two CUC Directors and two HFS Directors and whose Chairman shall be an HFS
Director; and (iii) an Audit Committee consisting of two CUC Directors and
two HFS Directors and whose Chairman shall be a CUC Director. The Board of
Directors may designate one or more directors as alternate members of any
committee to fill any vacancy on a committee and to fill a vacant
chairmanship of a committee occurring as a result of a member or chairman
leaving the committee, whether through death, resignation, removal or
otherwise. Until the third anniversary of the Effective Time, the affirmative
vote of 80% of the entire Board of Directors will be required in order to
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remove a director from a committee, change the chairmanship of a committee,
designate an alternate member to any committee, designate any additional
committee, or amend, modify or repeal or adopt any provision inconsistent
with the provisions described herein.
The term "HFS Director" means (A) any person serving as a Director of HFS
on May 27, 1997 (or any person appointed by the Board of Directors of HFS
after May 27, 1997 to fill a vacancy on the HFS Board of Directors created
other than due to an increase in the size of the Board of Directors of HFS)
who continues as a Director of the Company at the Effective Time and (B) any
person who becomes a Director of the Company and who was designated as such
by the remaining HFS Directors prior to his or her election; and the term
"CUC Director" means (A) any person serving as a Director of the Company on
May 27, 1997 (or any person appointed by the Board of Directors of the
Company after May 27, 1997 but prior to the Effective Time to fill a vacancy
on the Board of Directors created other than due to an increase in the size
of the Board of Directors) who continues as a Director of the Company at the
Effective Time, (B) any of the four persons designated by the CUC Directors
to become a Director of the Company at the Effective Time and (C) any person
who becomes Director of the Company and who was designated as such by the
remaining CUC Directors prior to his or her election.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Pursuant to the By-Laws, until the third anniversary of the Effective
Time, the Board of Directors will delegate to the Executive Committee the
full and exclusive power and authority to nominate directors for election to
the Board of Directors at the next stockholders' meetings at which directors
are to be elected, elect directors to fill vacancies on the Board of
Directors between stockholders' meetings and fill vacancies on any committee
of the Board of Directors to the extent an alternate member has not been
previously designated. Such nominations and elections of directors and
members of committees shall be undertaken by the Executive Committee such
that (i) the number of HFS Directors and CUC Directors on the Board of
Directors or any committee of the Board of Directors shall be equal and (ii)
the remaining HFS Directors (if the number of HFS Directors is less than the
number of CUC Directors) or the remaining CUC Directors (if the number of CUC
Directors is less than the number of HFS Directors) shall designate the
person to be nominated or elected. Any resolution regarding such election or
nomination as described above in a manner that (a) is consistent with the two
preceding sentences will require the approval by only three members of the
Executive Committee (or only two members if there are then two vacancies on
the Executive Committee) or (b) is inconsistent with the two preceding
sentences will require approval by at least seven members of the Executive
Committee. Until the third anniversary of the Effective Time, the affirmative
vote of at least 80% of the entire Board of Directors shall be required in
order for the Board of Directors to amend, modify or repeal, or adopt any
provision inconsistent with, the provisions of the By-Laws described herein.
OFFICERS
Pursuant to the By-Laws, Walter A. Forbes shall be the Chairman of the
Board from and after the Effective Time and until January 1, 2000, at which
time Henry R. Silverman will be the Chairman of the Board. If, for any reason
Mr. Forbes ceases to serve as Chairman of the Board prior to January 1, 2000
and at such time Mr. Silverman is President and Chief Executive Officer, Mr.
Silverman shall become Chairman of the Board. Mr. Silverman will be President
and Chief Executive Officer from and after the Effective Time and until
January 1, 2000, at which time Mr. Forbes will be President and Chief
Executive Officer. If, for any reason Mr. Silverman ceases to serve as
President and Chief Executive Officer prior to January 1, 2000 and at such
time Mr. Forbes is Chairman of the Board, Mr. Forbes shall become President
and Chief Executive Officer. Until January 1, 2002, the affirmative vote of
80% of the entire Board of Directors shall be required in order for the Board
to (i) amend, modify, repeal or adopt any provision inconsistent with the
provisions described herein, (ii) remove Mr. Forbes or Mr. Silverman from the
positions specifically provided for in their employment agreements with the
Company and HFS, respectively, (iii) modify either of the respective roles,
duties or authority of Messrs. Forbes and Silverman.
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SPECIAL MEETINGS OF STOCKHOLDERS
A special meeting of stockholders may be called only by the Chairman of
the Board of Directors, the President or the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors.
QUORUM AT STOCKHOLDER MEETINGS
The holders of one-third of the shares entitled to vote at any meeting of
the stockholders, present in person or by proxy, shall constitute a quorum at
all stockholder meetings.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Stockholder action by written consent in lieu of a meeting is prohibited
under the Certificate. As a result, stockholder action can be taken only at
an annual or special meeting of stockholders. This prevents the holders of a
majority of the outstanding voting stock of the Company from using the
written consent procedure to take stockholder action without giving all the
stockholders of the Company entitled to vote on a proposed action the
opportunity to participate in determining the proposed action.
ADVANCE NOTICE OF STOCKHOLDER--PROPOSED BUSINESS AT ANNUAL MEETINGS
The By-Laws provide that for business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth
day following the date on which such notice of the date of the annual meeting
was mailed or such public disclosure was made. A stockholder's notice to the
Secretary must set forth as to each matter the stockholder proposes to bring
before the annual meeting; (i) a brief description of the business desired to
be brought before the annual meeting, (ii) the name and address, as they
appear on the Company's books, of the stockholder proposing such business,
(iii) the class and number of shares of the Company which are beneficially
owned by the stockholder, and (iv) any material interest of the stockholder
in such business.
In addition, the By-Laws provide that for a stockholder to properly
nominate a director at a meeting of stockholders, the stockholder must have
given timely notice thereof in writing to the Secretary of the Company. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Company (i) in the case of an annual
meeting, at least 90 days prior to the date of the last annual meeting of the
Company stockholders and (ii) with respect to a special meeting of
stockholders, the close of business on the 10th day following the date on
which notice of such meeting is first given to stockholders. Such
stockholder's notice to the Secretary must set forth: (i) the name and
address of the stockholder who intends to make the nomination and of the
person or persons to be nominated, (ii) a representation that the stockholder
is holder of record of Common Stock and intends to appear in person or by
proxy at the meeting to nominate each such nominee, (iii) a description of
all arrangements between such stockholder and each nominee, (iv) such other
information with respect to each nominee as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the Commission, and
(v) the consent of each nominee to serve as director of the Company if so
elected.
AMENDMENT OF GOVERNING DOCUMENTS
In addition to the provisions of the Certificate which require a
super-majority of stockholders to approve certain amendments to the
Certificate and the By-Laws, the By-Laws require the affirmative vote of 80%
of the entire Board of Directors in order for the Board of Directors to adopt
certain amendments to the By-Laws as described under "--Board of Directors,"
"--Committees of the Board of Directors," "Newly Created Directorships and
Vacancies" and "--Officers."
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FAIR PRICE PROVISIONS
Under the Delaware General Corporation Law and the Certificate, an
agreement of merger, sale, lease or exchange of all or substantially all of
the Company's assets must be approved by the Board of Directors and adopted
by the holders of a majority of the outstanding shares of stock entitled to
vote thereon. However, the Certificate includes what generally is referred to
as a "fair price provision," which requires the affirmative vote of the
holders of at least 80% of the outstanding shares of capital stock entitled
to vote generally in the election of the Company's directors, voting together
as a single class, to approve certain business combination transactions
(including certain mergers, recapitalization and the issuance or transfer of
securities of the Company or a subsidiary having an aggregate fair market
value of $10 million or more) involving the Company or a subsidiary and an
owner or any affiliate of an owner of 5% or more of the outstanding shares of
capital stock entitled to vote, unless either (i) such business combination
is approved by a majority of disinterested directors, or (ii) the
shareholders receive a "fair price" for their securities and certain other
procedural requirements are met. The Certificate provides that this provision
may not be repealed or amended in any respect except by the affirmative vote
of the holders of not less than 80% of the outstanding shares of capital
stock entitled to vote generally in the election of directors.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Debt Securities, Preferred
Stock, Common Stock or any combination thereof, and such Warrants may be
issued independently or together with any such Securities and may be attached
to or separate from such Securities. Each series of Warrants will be issued
under a separate warrant agreement (each a "Warrant Agreement") to be entered
into between the Company and a warrant agent ("Warrant Agent"). The Warrant
Agent will act solely as an agent of the Company in connection with the
Warrants of each such series and will not assume any obligation or
relationship of agency for or with holders or beneficial owners of Warrants.
The following sets forth certain general terms and provisions of the Warrants
offered hereby. Further terms of the Warrants and the applicable Warrant
Agreement will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any
Warrants in respect of which this Prospectus is being delivered, including
the following: (i) the title of such Warrants; (ii) the aggregate number of
such Warrants; (iii) the price or prices at which such Warrants will be
issued; (iv) the currency or currencies, including composite currencies, in
which the price of such Warrants may be payable; (v) the designation and
terms of the Securities (other than Preferred Securities and Common
Securities) purchasable upon exercise of such Warrants; (vi) the price at
which and the currency or currencies, including composite currencies, in
which the Securities (other than Preferred Securities and Common Securities)
purchasable upon exercise of such Warrants may be purchased; (vii) the date
on which the right to exercise such Warrants shall commence and the date on
which such right shall expire; (viii) whether such Warrants will be issued in
registered form or bearer form; (ix) if applicable, the minimum or maximum
amount of such Warrants which may be exercised at any one time; (x) if
applicable, the designation and terms of the Securities (other than Preferred
Securities and Common Securities) with which such Warrants are issued and the
number of such Warrants issued with each such Security; (xi) if applicable,
the date on and after which such Warrants and the related Securities (other
than Preferred Securities and Common Securities) will be separately
transferable; (xii) information with respect to book-entry procedures, if
any; (xiii) if applicable, a discussion of certain United States Federal
income tax considerations; and (xiv) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
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DESCRIPTION OF PREFERRED SECURITIES OF THE CENDANT TRUSTS
GENERAL
Each Cendant Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Cendant Trust authorizes the
Regular Trustees of such Cendant Trust to issue on behalf of such Cendant
Trust one series of Preferred Securities. Each Declaration will be qualified
as an indenture under the Trust Indenture Act. The Institutional Trustee, an
independent trustee, will act as indenture trustee for the Preferred
Securities for purposes of compliance with the provisions of the Trust
Indenture Act. The Preferred Securities will have such terms, including
distributions, redemption, voting, liquidation rights and such other
preferred, deferred or other special rights or such restrictions as shall be
established by the Regular Trustees in accordance with the applicable
Declaration or as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act. Reference is made to any Prospectus
Supplement relating to the Preferred Securities of a Cendant Trust for
specific terms of the Preferred Securities, including, to the extent
applicable, (i) the distinctive designation of such Preferred Securities,
(ii) the number of Preferred Securities issued by such Cendant Trust, (iii)
the annual distribution rate (or method of determining such rate) for
Preferred Securities issued by such Cendant Trust and the date or dates upon
which such distributions shall be payable (provided, however, that
distributions on such Preferred Securities shall, subject to any deferral
provisions, and any provisions for payment of defaulted distributions, be
payable on a quarterly basis to holders of such Preferred Securities as of a
record date in each quarter during which such Preferred Securities are
outstanding), (iv) any right of such Cendant Trust to defer quarterly
distributions on the Preferred Securities as a result of an interest deferral
right exercised by the Company on the Subordinated Debt Securities held by
such Cendant Trust; (v) whether distributions on Preferred Securities shall
be cumulative, and, in the case of Preferred Securities having such
cumulative distribution rights, the date or dates or method of determining
the date or dates from which distributions on Preferred Securities shall be
cumulative, (vi) the amount or amounts which shall be paid out of the assets
of such Cendant Trust to the holders of Preferred Securities upon voluntary
or involuntary dissolution, winding-up or termination of such Cendant Trust,
(vii) the obligation or option, if any, of such Cendant Trust to purchase or
redeem Preferred Securities and the price or prices at which, the period or
periods within which and the terms and conditions upon which Preferred
Securities shall be purchased or redeemed, in whole or in part, pursuant to
such obligation or option with such redemption price to be specified in the
applicable Prospectus Supplement, (viii) the voting rights, if any, of
Preferred Securities in addition to those required by law, including the
number of votes per Preferred Security and any requirement for the approval
by the holders of Preferred Securities as a condition to specified action or
amendments to the Declaration, (ix) the terms and conditions, if any, upon
which Subordinated Debt Securities held by such Cendant Trust may be
distributed to holders of Preferred Securities, and (x) any other relevant
rights, preferences, privileges, limitations or restrictions of Preferred
Securities consistent with the Declaration or with applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company to the
extent set forth below under "Description of Trust Guarantees." The Trust
Guarantee issued to each Cendant Trust, when taken together with the
Company's back-up undertakings, consisting of its obligations under each
Declaration (including the obligation to pay expenses of each Cendant Trust),
the applicable Indenture and any applicable supplemental indentures thereto
and the Subordinated Debt Securities issued to any Cendant Trust will provide
a full and unconditional guarantee by the Company of amounts due on the
Preferred Securities issued by each Cendant Trust. The payment terms of the
Preferred Securities will be the same as the Subordinated Debt Securities
issued to the applicable Cendant Trust by the Company.
Each Declaration authorizes the Regular Trustees to issue on behalf of the
applicable Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be established by the Regular Trustees in accordance with the
Declaration or as shall otherwise be set forth therein. The terms of the
Common Securities issued by each Cendant Trust will be substantially
identical to the terms of the Preferred Securities issued by such Cendant
Trust, and the Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities except that, if an event
of default under such Declaration has occurred and is
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continuing, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Preferred
Securities. The Common Securities will also carry the right to vote and to
appoint, remove or replace any of the Cendant Trustees of such Cendant Trust.
All of the Common Securities of each Cendant Trust will be directly or
indirectly owned by the Company.
The financial statements of any Cendant Trust that issues Preferred
Securities will be reflected in the Company's consolidated financial
statements with the Preferred Securities shown as Company-obligated
mandatorily-redeemable preferred securities of a subsidiary trust under
minority interest in consolidated subsidiaries. In a footnote to the
Company's audited financial statements there will be included statements that
the applicable Cendant Trust is wholly-owned by the Company and that the sole
asset of such Cendant Trust is the Subordinated Debt Securities (indicating
the principal amount, interest rate and maturity date thereof).
DESCRIPTION OF TRUST GUARANTEES
Set forth below is a summary of information concerning the Trust
Guarantees that will be executed and delivered by the Company for the benefit
of the holders, from time to time, of Preferred Securities. Each Trust
Guarantee will be qualified as an indenture under the Trust Indenture Act.
Unless otherwise specified in the applicable Prospectus Supplement,
Wilmington Trust Company will act as independent indenture trustee for Trust
Indenture Act purposes under each Trust Guarantee (the "Preferred Securities
Guarantee Trustee"). The terms of each Trust Guarantee will be those set
forth in such Trust Guarantee and those made part of such Trust Guarantee by
the Trust Indenture Act. The following summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
provisions of the form of Trust Guarantee, a copy of which has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part,
and the Trust Indenture Act. Each Trust Guarantee will be held by the
Preferred Securities Guarantee Trustee for the benefit of the holders of the
Preferred Securities of the applicable Cendant Trust.
GENERAL
Unless otherwise specified in the applicable Prospectus Supplement,
pursuant to each Trust Guarantee, the Company will agree, to the extent set
forth therein, to pay in full to the holders of the Preferred Securities, the
Guarantee Payments (as defined below) (except to the extent paid by such
Cendant Trust), as and when due, regardless of any defense, right of set-off
or counterclaim which such Cendant Trust may have or assert. The following
payments or distributions with respect to the Preferred Securities (the
"Guarantee Payments"), to the extent not paid by such Cendant Trust, will be
subject to the Trust Guarantee (without duplication): (i) any accrued and
unpaid distributions that are required to be paid on such Preferred
Securities, to the extent such Cendant Trust shall have funds available
therefor, (ii) the redemption price, including all accrued and unpaid
distributions to the date of redemption (the "Redemption Price"), to the
extent such Cendant Trust has funds available therefor, with respect to any
Preferred Securities called for redemption by such Cendant Trust and (iii)
upon a voluntary or involuntary dissolution, winding-up or termination of
such Cendant Trust (other than in connection with such distribution of Debt
Securities to the holders of Preferred Securities or the redemption of all of
the Preferred Securities upon maturity or redemption of the Subordinated Debt
Securities) the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on such Preferred Securities to the date of
payment, to the extent such Cendant Trust has funds available therefor or (b)
the amount of assets of such Cendant Trust remaining for distribution to
holders of such Preferred Securities in liquidation of such Cendant Trust.
The Company's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Company to the holders of
Preferred Securities or by causing the applicable Cendant Trust to pay such
amounts to such holders.
Each Trust Guarantee will not apply to any payment of distributions except
to the extent the applicable Cendant Trust shall have funds available
therefor. If the Company does not make interest or principal payments on the
Subordinated Debt Securities purchased by such Cendant Trust, such Cendant
Trust will not pay distributions on the Preferred Securities issued by such
Cendant Trust and will not have funds available therefore.
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The Company has also agreed to guarantee the obligations of each Cendant
Trust with respect to the Common Securities (the "Common Guarantee") issued
by such Cendant Trust to the same extent as the Trust Guarantee, except that,
if an Event of Default under the Subordinated Indenture has occurred and is
continuing, holders of Preferred Securities under the Trust Guarantee shall
have priority over holders of the Common Securities under the Common
Guarantee with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise specified in the applicable Prospectus Supplement, in
each Trust Guarantee, the Company will covenant that, so long as any
Preferred Securities issued by the applicable Cendant Trust remain
outstanding, if there shall have occurred any event of default under such
Trust Guarantee or under the Declaration of such Cendant Trust, then (a) the
Company will not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or
acquisitions of capital stock of the Company in connection with the
satisfaction by the Company of its obligations under any employee or agent
benefit plans or the satisfaction by the Company of its obligations pursuant
to any contract or security outstanding on the date of such event requiring
the Company to purchase capital stock of the Company, (ii) as a result of a
reclassification of the Company's capital stock (other than into cash or
other property) or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged, (iv) dividends or
distributions in capital stock of the Company (or rights to acquire capital
stock) or repurchases or redemptions of capital stock solely from the
issuance or exchange of capital stock or (v) redemptions or repurchases of
any rights outstanding under a shareholder rights plan); (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company which
rank junior to the Subordinated Debt Securities issued to the applicable
Cendant Trust and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than pursuant to a Trust Guarantee).
MODIFICATION OF THE TRUST GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent of such holders
will be required), each Trust Guarantee may be amended only with the prior
approval of the holders of not less than a majority in liquidation amount of
the outstanding Preferred Securities of such Cendant Trust. The manner of
obtaining any such approval of holders of such Preferred Securities will be
set forth in accompanying Prospectus Supplement. All guarantees and
agreements contained in a Trust Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Preferred Securities of the applicable Cendant
Trust then outstanding.
EVENTS OF DEFAULT
An event of default under a Trust Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
to which such Trust Guarantee relates have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Preferred Securities Guarantee Trustee in respect of such Trust Guarantee or
to direct the exercise of any trust or power conferred upon the Preferred
Securities Guarantee Trustee under such Trust Guarantee.
If the Preferred Securities Guarantee Trustee fails to enforce such Trust
Guarantee, any record holder of Preferred Securities to which such Trust
Guarantee relates may institute a legal proceeding directly against the
Company to enforce the Preferred Securities Guarantee Trustee's rights under
such Trust Guarantee without first instituting a legal proceeding against the
applicable Cendant Trust, the Preferred Securities Guarantee Trustee or any
other person or entity. Notwithstanding the foregoing, if the Company has
failed to make a Guarantee Payment under a Trust Guarantee, a record holder
of
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Preferred Securities to which such Trust Guarantee relates may directly
institute a proceeding against the Company for enforcement of such Trust
Guarantee for such payment to the record holder of the Preferred Securities
to which such Trust Guarantee relates of the principal of or interest on the
applicable Debt Securities on or after the respective due dates specified in
the Debt Securities, and the amount of the payment will be based on the
holder's pro rata share of the amount due and owing on all of the Preferred
Securities to which such Trust Guarantee relates. The Company has waived any
right or remedy to require that any action be brought first against the
applicable Cendant Trust or any other person or entity before proceeding
directly against the Company. The record holder in the case of the issuance
of one or more global Preferred Securities certificates will be The
Depository Trust Company acting at the direction of the beneficial owners of
the Preferred Securities.
The Company will be required to provide annually to the Preferred
Securities Guarantee Trustee a statement as to the performance by the Company
of certain of its obligations under each outstanding Trust Guarantee and as
to any default in such performance.
INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE
The Preferred Securities Guarantee Trustee, prior to the occurrence of a
default to a Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in such Trust Guarantee and, after default with
respect to such Trust Guarantee, shall exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the Preferred Securities Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by a Trust
Guarantee at the request of any holder of Preferred Securities to which such
Trust Guarantee relates unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
TERMINATION
Each Trust Guarantee will terminate as to the Preferred Securities issued
by the applicable Cendant Trust upon full payment of the Redemption Price of
all Preferred Securities of such Cendant Trust, upon distribution of the Debt
Securities held by such Cendant Trust to the holders of all of the Preferred
Securities of such Cendant Trust or upon full payment of the amounts payable
in accordance with the Declaration of such Cendant Trust upon liquidation of
such Cendant Trust. Each Trust Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of
Preferred Securities issued by the applicable Cendant Trust must restore
payment of any sums paid under such Preferred Securities or such Trust
Guarantee.
STATUS OF THE TRUST GUARANTEES
The Trust Guarantees will constitute senior unsecured obligations of the
Company and will rank on a parity with all of the Company's other senior
unsecured obligations.
Each Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under such Trust Guarantee
without instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Trust Guarantees will be governed by and construed in accordance with
the law of the State of New York.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, including contracts
obligating holders to purchase from the Company, and the Company to sell to
the holders, a specified number of shares of Common Stock or Preferred Stock
at a future date or dates. The consideration per share of Common Stock or
Preferred Stock may be fixed at the time the Stock Purchase Contracts are
issued or may be determined by reference to a specific formula set forth in
the Stock Purchase Contracts. The Stock Purchase Contracts may be issued
separately or as a part of units ("Stock Purchase Units") consisting of a
Stock Purchase Contract and Debt Securities, Preferred Securities or debt
obligations of third parties, including U.S. Treasury securities, securing
the holders' obligations to purchase the Common Stock or Preferred Stock
under the Stock Purchase Contracts. The Stock Purchase Contracts may require
the Company to make periodic payments to the holders of the Stock Purchase
Units or vice versa, and such payments may be unsecured or prefunded on some
basis. The Stock Purchase Contracts may require holders to secure their
obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not necessarily be complete, and reference will be made to
the Stock Purchase Contracts, and, if applicable, collateral arrangements and
depositary arrangements, relating to such Stock Purchase Contracts or Stock
Purchase Units.
PLAN OF DISTRIBUTION
The Company may sell the Securities and the Cendant Trusts may sell
Preferred Securities being offered hereby in any of, or any combination of,
the following ways: (i) directly to purchasers; (ii) through agents; (iii)
through underwriters; and/or (iv) through dealers.
Offers to purchase Securities may be solicited directly by the Company
and/or a Cendant Trust or by agents designated by the Company and/or a
Cendant Trust from time to time. Any such agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act, involved in the
offer or sale of Securities, will be named, and any commissions payable by
the Company and/or a Cendant Trust to such agent will be set forth, in the
Prospectus Supplement. Unless otherwise indicated in a Prospectus Supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment (ordinarily five business days or less).
If an underwriter or underwriters are utilized in the offer or sale of
Securities, the Company and/or the applicable Cendant Trust will execute an
underwriting agreement with such underwriters at the time of sale of such
Securities to such underwriters and the names of such underwriters and the
principal terms of the Company's and/or the applicable Cendant Trust's
agreement with such underwriters will be set forth in the appropriate
Prospectus Supplement.
If a dealer is utilized in the offer or sale of Securities, the Company
and/or the applicable Cendant Trust will sell such Securities to such dealer,
as principal. Such dealer may then resell such Securities to the public at
varying prices to be determined by such dealer at the time of resale. The
name of such dealer and the principal terms of the Company's and/or the
applicable Cendant Trust's agreement with such dealer will be set forth in
the appropriate Prospectus Supplement.
Agents, underwriters, and dealers may be entitled under agreements with
the Company and/or a Cendant Trust to indemnification by the Company and/or a
Cendant Trust against certain liabilities, including liabilities under the
Securities Act. Agents, dealers and underwriters may also be customers of,
engage in transactions with, or perform services for the Company in the
ordinary course of their business.
Underwriters, agents or their controlling persons may engage in
transactions with and perform services for the Company in the ordinary course
of business.
The place and time of delivery for Securities will be set forth in the
accompanying Prospectus Supplement for such Securities.
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LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Cendant Trusts by Skadden,
Arps, Slate, Meagher & Flom LLP. The validity of the Securities offered
hereby by the Company will be passed on for the Company by Eric J. Bock,
Esq., Vice President--Legal of the Company. Mr. Bock holds shares of Common
Stock and options to acquire shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company and its consolidated
subsidiaries, except PHH Corporation ("PHH"), as of December 31, 1996 and
January 31, 1996 and for the years ended December 31, 1996, January 31, 1996
and 1995 and CUC International Inc. ("CUC") as of January 31, 1997 and 1996
and for each of the three years in the period ended January 31, 1997
incorporated in this Prospectus by reference from the Company Form 8-K dated
January 29, 1998, have been audited by Deloitte & Touche LLP, as stated in
their report which is incorporated herein by reference. The financial
statements of PHH (consolidated with those of the Company) have been audited
by KPMG Peat Marwick LLP, independent auditors of PHH Corporation, as stated
in their report incorporated herein by reference. Their report contains an
explanatory paragraph that states that PHH adopted the provisions of
Statement of Financial Standards No. 122 "Accounting for Mortgage Service
Rights" in the year ended January 31, 1996. The consolidated financial
statements of CUC (consolidated with those of the Company) have been audited
by Ernst & Young LLP, as set forth in their report included in the Current
Report on Form 8-K, dated January 29, 1998 incorporated herein by reference,
which, as to the years ended January 31, 1996 and 1995, is based in part on
the reports of Deloitte & Touche LLP, independent auditors of Sierra On-Line,
Inc., KPMG Peat Marwick LLP, independent auditors of Davidson & Associates,
Inc., and Price Waterhouse LLP, independent accountants of Ideon Group, Inc.
Such supplemental consolidated financial statements of the Company and its
consolidated subsidiaries are incorporated by reference herein in reliance
upon the respective reports of such firms given upon their authority as
experts in accounting and auditing. All of the foregoing firms are
independent auditors.
The consolidated financial statements of Avis Rent A Car, Inc.
incorporated in this Prospectus by reference from the Current Report on Form
8-K, dated February 6, 1998, filed by Cendant Corporation have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report,
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENTS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, NOR
ANY SALE MADE HEREUNDER AND THEREUNDER, SHALL UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
Description of Notes ................................................ S-3
Special Provisions Relating to Foreign Currency Notes ............... S-13
Certain Federal Income Tax Considerations .......................... S-17
Supplemental Plan of Distribution ................................... S-24
PROSPECTUS
Available Information ............................................... 2
Incorporation of Certain Documents by Reference...................... 3
The Company ......................................................... 4
Use of Proceeds ..................................................... 7
Consolidated Ratio of Earnings to Fixed Charges...................... 7
Description of the Debt Securities .................................. 8
General Description of Capital Stock ................................ 17
Description of Warrants ............................................. 22
Description of Preferred Securities of the Cendant Trusts ........... 23
Description of Trust Guarantees ..................................... 24
Description of Stock Purchase Contracts and Stock Purchase Units .... 27
Plan of Distribution ................................................ 27
Legal Opinions ...................................................... 28
Experts ............................................................. 28
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$1,010,000,000
[CENDANT CORPORATION LOGO]
MEDIUM-TERM NOTES
---------------
PROSPECTUS SUPPLEMENT
---------------
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MARCH 5, 1998
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