AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1999
REGISTRATION NO.
333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CENDANT CORPORATION DELAWARE 06-0918165
CENDANT CAPITAL II DELAWARE 22-356523
(exact name of the (State or other (I.R.S. Employer
registrants as specified Jurisdiction of Identification No.)
in their respective charters) Incorporation or
Organization)
9 WEST 57TH STREET
NEW YORK, NY 10019
(212) 413-1800
FAX: (212) 265-1232
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
JAMES E. BUCKMAN, ESQ.
VICE CHAIRMAN
AND GENERAL COUNSEL
CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NY 10019
(212) 413-1800
FAX: (212) 413-1923
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPIES TO:
VINCENT J. PISANO, ESQ. ERIC J. BOCK, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP VICE PRESIDENT-LEGAL
919 THIRD AVENUE CENDANT CORPORATION
NEW YORK, NY 10022 9 WEST 57TH STREET
(212) 735-3000 NEW YORK, NY 10019
FAX: (212) 735-2000 (212) 413-1800
FAX: (212) 413-1922
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement
as determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, as
amended please check the following box and list the Securities Act
Registration Statement Number of the earlier Effective Registration
Statement for the same offering. [ ]
If this Form is a Post-Effective Amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, as amended, check the following
box and list the Securities Act Registration Statement Number of the
earlier Effective Registration Statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF SECURITIES AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
TO BE REGISTERED REGISTERED MAXIMUM MAXIMUM REGISTRATION
OFFERING PRICE AGGREGATE FEE
PER OFFERING PRICE(1)
SECURITY(1)
<S> <C> <C> <C> <C>
Debentures(2)
Common Stock, $.01 par value(3)
Additional Income PRIDES(4)
New Income PRIDES(4)
Additional Growth PRID S(5)
New Growth PRIDES(5)
Trust Preferred Securities of
Cendant Capital II(6)
Guarantees and Backup Under-
takings of Cendant Corporation
in connection with Preferred
Securities of Cendant Capital
II(7)
Total 100%(9) $ (3)(4) $343,338(8)
- ------------------------
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(o).
(2) Subject to note (8) below, there are being registered hereunder
an indeterminate principal amount of Debentures which will be
issued and sold by the Company to the Trust, which may later be
distributed to the holders of Trust Preferred Securities upon a
dissolution of the Trust and a distribution of the assets thereof.
(3) Subject to note (8) below, there are being registered hereunder
an indeterminate number of shares of Common Stock as shall be
issuable upon settlement of the Purchase Contracts that are
components of the additional Income PRIDES, new Income PRIDES,
additional Growth PRIDES and new Growth PRIDES registered
hereunder.
(4) Subject to note (8) below, there are being registered hereunder
an indeterminate number of additional Income PRIDES and new Income
PRIDES.
(5) Subject to note (8) below, there are being registered hereunder
an indeterminate number of additional Growth PRIDES and new Growth
PRIDES.
(6) Subject to note (8) below, there are being registered hereunder an
indeterminate amount of Trust Preferred Securities.
(7) Includes the rights of holders of the Trust Preferred Securities
under the Guarantees and back-up undertakings, consisting of
obligations by the Company to provide certain indemnities in
respect of, and pay and be responsible for certain expenses, costs,
liabilities, and debts of, Cendant Capital II, as set forth in the
Amended and Restated Declaration of Trust, the Indenture and the
Supplemental Indenture thereto and as further described in the
Registration Statement. No separate consideration will be received
for the Guarantees or any back-up undertakings.
(8) In no event will the aggregate initial offering price of all
securities issued pursuant to this Registration Statement exceed
$1,235,027,352. Any securities registered hereunder may be sold
separately or as units with other securities registered hereunder.
(9) The registration fee is based on the consideration to be paid for
the new FELINE PRIDES and the additional FELINE PRIDES. The
consideration per additional FELINE PRIDES, for purposes of
calculating the registration fee, is equal to the theoretical value
of the current FELINE PRIDES, which as of the close of business on
May 10, 1999, was $29.65. The consideration per new FELINE PRIDES
is equal to the market price of $31.25 of the current FELINE PRIDES
plus $17.57. The market price of a current FELINE PRIDES has been
estimated solely for the purpose of calculating registration fees
pursuant to Rule 457(c) based on the average high and low of the
registrants' Income PRIDES on May 10, 1999 as reported on the
composite tape of the NYSE.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
[FLAG]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS
[Number of] new FELINE PRIDES(SM)
4,000,000 additional FELINE PRIDES(SM)
Cendant Corporation
Trust Originated Preferred Securities (TOPrS(SM))
Cendant Capital II
(Liquidation Amount $50 per Trust Preferred Security)
fully and unconditionally guaranteed to
the extent provided in this prospectus by
Cendant Corporation
This is an offering of new FELINE PRIDES(SM), 4,000,000
additional FELINE PRIDES by Cendant Corporation and separately offered
and separately traded 6.45% trust originated preferred securities
of Cendant Capital II, a trust wholly owned by us. The new FELINE PRIDES
consist of units referred to as new Income PRIDES and new Growth PRIDES.
The additional FELINE PRIDES consist of units referred to as additional
Income PRIDES and additional Growth PRIDES. In addition to the separately
offered and separately traded trust preferred securities, the trust is
issuing [number] trust preferred securities that will initially be held as
components of the new Income PRIDES and additional Income PRIDES and will
not be offered or traded separately from the new Income PRIDES or
additional Income PRIDES, unless and until substitution is made as
described in this prospectus.
This offering is made under a stipulation of settlement agreement
we have entered, the material terms of which are described in this
prospectus. The additional FELINE PRIDES may be used to exercise rights
issued in connection with the settlement.
References made in this prospectus to FELINE PRIDES refer to new
FELINE PRIDES and additional FELINE PRIDES. References made in this
prospectus to Income PRIDES refer to new Income PRIDES and additional
Income PRIDES. References made in this prospectus to Growth PRIDES refer to
new Growth PRIDES and additional Growth PRIDES.
Investing in the securities involves risks. See "Risk Factors"
beginning on page 12.
We will apply for listing of the new Income PRIDES and the new
Growth PRIDES on the NYSE under the symbols and respectively, subject
to official notice of issuance and satisfaction of the NYSE minimum
distribution requirements. The additional FELINE PRIDES and the trust
preferred securities will not initially be listed on an exchange.
The new Income PRIDES and the new Growth PRIDES will be issued by
us only upon exercise of rights, described in this prospectus, that have
been issued in accordance with the settlement agreement. The offering price
of the additional FELINE PRIDES will be determined in accordance with a
formula described in this prospectus and will be included in a prospectus
supplement when it is determined.
The additional FELINE PRIDES may be sold directly by us, through
agents that we designate from time to time, or through underwriters or
dealers, although, as required by the settlement, they are being offered
initially to persons who received rights as part of the initial
distribution of rights and to other rights holders and will be offered to
others only if available. Any additional FELINE PRIDES purchased by holders
of rights must be immediately converted into new FELINE PRIDES. If any
agents or underwriters are involved in the sales of additional FELINE
PRIDES, the names of the agents or underwriters and any applicable fees,
commissions or discounts will be set forth in a prospectus supplement.
Neither the SEC, nor any state securities commission, has approved
or disapproved of these securities or passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this Prospectus is , 1999.
- -----------------
(SM) Service Mark of Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Page
----
THE OFFERING - Q&A.......................................................
RISK FACTORS.............................................................
THE COMPANY..............................................................
THE TRUST................................................................
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................................
ACCOUNTING TREATMENT.....................................................
USE OF PROCEEDS..........................................................
EXECUTION OF THE LITIGATION SETTLEMENT...................................
DESCRIPTION OF THE FELINE PRIDES.........................................
DESCRIPTION OF THE PURCHASE CONTRACTS....................................
PROVISIONS OF THE CONTRACT PURCHASE
AGREEMENT AND THE PLEDGE AGREEMENT.....................................
DESCRIPTION OF THE TRUST PREFERRED SECURITIES............................
DESCRIPTION OF THE GUARANTEE.............................................
DESCRIPTION OF THE DEBENTURES............................................
EFFECT OF OBLIGATIONS UNDER THE
DEBENTURES AND THE GUARANTEE...........................................
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................
PLAN OF DISTRIBUTION.....................................................
LEGAL OPINIONS...........................................................
EXPERTS..................................................................
FORWARD-LOOKING STATEMENTS...............................................
WHERE YOU CAN FIND MORE INFORMATION......................................
THE OFFERING - Q&A
What are FELINE PRIDES?
FELINE PRIDES consist of Income PRIDES and Growth PRIDES.
Income PRIDES contain two components:
(1) A purchase contract under which the investor agrees to purchase shares
of our common stock, $0.01 par value per share, on February 16, 2001.
The purchase contract also includes unsecured contract adjustment
payments of 1.05% of $50 per year paid quarterly.
(2) A trust preferred security under which the investor will be paid 6.45%
of $50 per year through and including February 15, 2001 and at the
reset rate after that date, but which will be pledged to us to secure
the investor obligations under the purchase contract. On February 16,
2001 the investor will have two options:
o Pay cash to settle the purchase contract for $50 and release the
pledged trust preferred securities, whose rate will have been reset at
that time, or
o Pay cash to settle the purchase contract by allowing the trust
preferred securities to be sold on its behalf in a remarketing process.
Growth PRIDES contain two components:
(1) A purchase contract under which the investor agrees to purchase shares
of our common stock, $0.01 par value per share, on February 16, 2001.
The purchase contract also includes unsecured contract adjustment
payments of 1.3% of $50 per year paid quarterly.
(2) A zero-coupon treasury security which is a 1/20th undivided beneficial
interest in a zero-coupon U.S. treasury security (CUSIP No. 912833 CD
0) with a principal amount at maturity equal to $1,000 and maturing on
February 15, 2001. The zero-coupon treasury security will be pledged to
us to secure the investor's obligations under the purchase contract.
What are current FELINE PRIDES?
The current FELINE PRIDES were issued under a prospectus and prospectus
supplement, dated February 23, 1998, and February 24, 1998, respectively.
The current FELINE PRIDES have been trading on the NYSE since February 25,
1998. Current FELINE PRIDES consist of current Income PRIDES, NYSE symbol
"CDPrI," and current Growth PRIDES, NYSE symbol "CDPrG."
What is the difference between current FELINE PRIDES, additional FELINE
PRIDES and new FELINE PRIDES?
The additional FELINE PRIDES have the same terms as the current FELINE
PRIDES. Holders of rights will be given priority in purchasing additional
PRIDES, which we have agreed will be sold by us no later than
1999. Since the additional FELINE PRIDES will be offered at
a price determined by a formula, which is expected to be below the market
price of the securities today, we expect that all of them will be purchased
by holders of rights and used to exercise the rights.
Each new FELINE PRIDES, which will be issued only upon the exercise of
rights, will have the same terms as each current FELINE PRIDES except with
respect to the settlement rate and anti-dilution provisions for each
purchase contract. The settlement rate for each purchase contract relating
to a new FELINE PRIDES will be shares of Cendant Common Stock, while the
settlement rate for the current FELINE PRIDES is between 1.0395 and 1.3514
shares of Cendant Common Stock, depending on the average of our closing
stock prices on each of the 20 consecutive trading days ending on the third
trading day preceding February 16, 2001. The anti-dilution provisions of
each purchase contract relating to a new FELINE PRIDES will be identical to
those attaching to the current FELINE PRIDES, except in the event that
prior to , 1999, we issue or agree to issue more than one million
shares of common stock or any other security conferring the right to our
common stock, other than for cash at fair value or as consideration for an
acquisition of a business or business assets, and that agreement causes a
decline in the market value for the common stock, in which case, the
settlement rate for the new FELINE PRIDES may be subject to greater
adjustment.
What are rights?
Under the settlement, we will issue up to rights. The stated value of
each right will be approximately $11.71. The rights will be distributed,
initially, to class members who held current FELINE PRIDES at the close of
business on April 15, 1998, in exchange for the release of any claims
arising from the purchase of FELINE PRIDES on or before April 15, 1998. The
rights will be listed on the NYSE and will trade on the NYSE until February
14, 2001. You may use the rights to exchange current FELINE PRIDES or
additional FELINE PRIDES for new FELINE PRIDES. If you exchange three
rights together with two current Income PRIDES or two additional Income
PRIDES, you will receive two new Income PRIDES. If you exchange three
rights together with two current Growth PRIDES or two additional Growth
PRIDES, you will receive two new Growth PRIDES.
How do I exercise rights?
In order to exercise rights, no later than February 14, 2001, you must
deliver the rights to , as rights agent, with the notice of exercise on the
reverse side filled in completely, together with the appropriate number of
current FELINE PRIDES or additional FELINE PRIDES being used to exercise
the rights. Since the FELINE PRIDES are book entry only, they must be
delivered to the Rights Agent by . The address of the Rights
Agent is . If the new FELINE PRIDES are to be issued to a person
other than the person in whose name the current FELINE PRIDES are held,
the person exercising rights must also submit to the rights agent payment
of any applicable transfer taxes.
We will issue two new Income PRIDES to any person who, prior to the close
of business on February 14, 2001, delivers to us three rights together with
two current Income PRIDES, or two additional Income PRIDES. We will issue
two new Growth PRIDES to any person who, prior to the close of business on
February 14, 2001, delivers to us three rights together with two current
Growth PRIDES, or two additional Growth PRIDES.
Am I entitled to exchange a current FELINE PRIDES or additional FELINE
PRIDES for a new FELINE PRIDES?
Any person holding three rights and two current FELINE PRIDES or two
additional FELINE PRIDES is entitled to exchange for two new FELINE PRIDES.
The rights will originally be issued only to persons who owned FELINE
PRIDES at the close of business on April 15, 1998 who do not exclude
themselves from the settlement and who file a timely proof of claim.
However, the rights will be freely tradeable on the NYSE until February 14,
2001, enabling any person to purchase them and execute the exchange.
What payments am I entitled to as a holder of Income PRIDES?
Holders of Income PRIDES will be entitled to receive total cash
distributions at a rate of 7.50% of $50 per year, payable quarterly in
arrears. These cash distributions will consist of cumulative cash
distributions on the related trust preferred securities or on the treasury
portfolio, as applicable, payable at the rate of 6.45% of $50 per year
through and including February 15, 2001, and contract adjustment payments
payable by us at the rate of 1.05% of $50 per year, subject, in the case of
both the distributions on the trust preferred securities and of the
contract adjustment payments, to our right to defer the payment of these
amounts.
What payments am I entitled to as a holder of Growth PRIDES?
Holders of Growth PRIDES will be entitled to receive quarterly cash
distributions of contract adjustment payments payable by us at the rate of
1.3% of $50 per year, subject to our rights of deferral. In addition,
original issue discount ("OID") will accrue on each related treasury
security.
What contract adjustment payments am I entitled to?
Contract adjustment payments will be fixed at a rate per year of 1.05% of
$50 per purchase contract in the case of Income PRIDES, and 1.3% of $50 per
purchase contract in the case of Growth PRIDES.
Do we have the option to defer current payments?
We have the right at any time, and from time to time, limited to a period
not extending beyond the maturity date of our debentures, due February 16,
2003 and initially bearing interest at 6.45% per year, to defer the
interest payments due on the debentures (each, an "extension period"). As a
consequence of the deferral, the corresponding quarterly distributions to
holders of trust preferred securities and Income PRIDES would be deferred.
During any period of deferral, these distributions would continue to
accrue, compounded quarterly, at the rate of 6.45% per year through and
including February 15, 2001, and at the reset rate thereafter. We also have
the right to defer the payment of contract adjustment payments on the
related purchase contracts until no later than February 16, 2001. However,
any deferred contract adjustment payments would continue to accrue at the
rate of 7.5% per year until paid, compounded quarterly.
What are the payment dates for the securities?
The current payments described above in respect of the Income PRIDES and
Growth PRIDES will be payable quarterly in arrears on February 16, May 16,
August 16 and November 16 of each year (each, a "payment date"), commencing
to holders of record on the business day preceding the payment
dates. With respect to contract adjustment payments, the payments will be
payable through and including the earlier of February 16, 2001 or the most
recent quarterly date on or before any early settlement of the related
purchase contracts. In the case of trust preferred securities that are
components of Income PRIDES, the payments will be payable through and
including the most recent quarterly date on or before the earlier of
February 16, 2001 and the date the liquidation amounts of the trust
preferred securities together with all accumulated and unpaid distributions
are paid in full. All of these payments are subject to the deferral
provisions described below.
What is the settlement rate?
The settlement rate is the number of newly issued shares of common stock
we are obligated to sell and you are obligated to buy upon settlement of a
purchase contract on February 16, 2001.
The settlement rate for each purchase contract related to additional
FELINE PRIDES, subject to adjustment under certain circumstances, will be
identical to the settlement rate for each purchase contract related to the
current FELINE PRIDES. The settlement rate will be as follows:
(a) If the applicable market value is equal to or greater than $48.10,
the settlement rate will be 1.0395 shares of our common stock per
purchase contract.
(b) If the applicable market value is less than $48.10 but greater than
$37, the settlement rate will be equal to $50 divided by the
applicable market value.
(c) If the applicable market value is less than or equal to $37, the
settlement rate, which is equal to $50 divided by $37, will be
1.3514 shares of our common stock per purchase contract.
Unlike the settlement rate for the additional FELINE PRIDES and current
FELINE PRIDES, which depends on the applicable market value, the settlement
rate of the new FELINE PRIDES is . At the settlement date of each
purchase contract relating to a new FELINE PRIDES, we will issue a holder of
new FELINE PRIDES shares of common stock per each purchase contract
relating to a new FELINE PRIDES, regardless of the market price of the shares.
What is remarketing?
The trust preferred securities of Income PRIDES holders who have failed
to notify First National Bank of Chicago, as agent of the holders of the
FELINE PRIDES in its capacity as the purchase contract agent, on or prior
to the fifth business day before February 16, 2001 of their intention to
pay cash to satisfy their obligations under the related purchase contracts
will be remarketed on the third business day immediately preceding February
16, 2001.
The remarketing agent will use its reasonable efforts to remarket those
trust preferred securities (bearing the reset rate) on that date for
settlement on February 16, 2001. The remarketing agent will use its best
efforts to obtain a price of approximately 100.5% of the aggregate stated
liquidation amount of those trust preferred securities, plus any related
accrued and unpaid distributions, including deferred distributions.
The portion of the proceeds from the remarketing equal to the total
stated liquidation amount of those trust preferred securities will be
automatically applied to satisfy in full those Income PRIDES holders'
obligations to purchase our common stock under the related purchase
contracts. The remarketing agent will deduct as a remarketing fee an amount
not exceeding 25 basis points (.25%) of the aggregate stated liquidation
amount of the remarketed trust preferred securities from any amount of
those proceeds in excess of the aggregate stated liquidation amount of the
remarketed trust preferred securities plus any accrued and unpaid
distributions, including any deferred distributions. The remarketing agent
will remit the remaining portion of the proceeds, if any, for the benefit
of that holder.
What happens if the remarketing agent does not sell the trust preferred
securities?
We will exercise our rights as a secured party to dispose of the trust
preferred securities in accordance with applicable law and to satisfy in
full, from the proceeds of that disposition, your obligation to purchase
common stock under the related purchase contracts if
o the remarketing agent cannot remarket the related trust preferred
securities, other than to us, of your Income PRIDES at a price not less
than 100% of the total stated liquidation amount of those trust preferred
securities plus accrued and unpaid distributions, including deferred
distributions, if any, or
o if the remarketing has not occurred because a condition precedent to the
remarketing has not been fulfilled.
If I am not a party to a purchase contract, may I still participate in a
remarketing of my trust preferred securities?
Holders of trust preferred securities that are not components of Income
PRIDES may elect, in the manner described below, to have their trust
preferred securities remarketed by the remarketing agent.
Besides participating in a remarketing, how else will my obligations under
the purchase contracts be satisfied?
o through the early delivery of cash to the purchase contract agent in the
manner described below ("early settlement")
o in the case of Income PRIDES, by settling the related purchase contracts
with separate cash on the third business day prior to February 16, 2001
with prior notification to the purchase contract agent
o upon the termination of purchase contracts.
What are the trust preferred securities?
The trust preferred securities represent undivided beneficial ownership
interests in the assets of the trust.
What distributions will I receive on the trust preferred securities?
Distributions on the trust preferred securities that are components of
Income PRIDES will constitute a portion of the distributions on the Income
PRIDES. Distributions will be payable initially at the annual rate of 6.45%
of the liquidation amount of $50 per trust preferred security to, but
excluding, February 16, 2001. If any trust preferred securities remain
outstanding on and after February 16, 2001, the distributions on these
trust preferred securities will be at the reset rate from February 16, 2001
to, but excluding, February 16, 2003.
When will I receive distributions on the trust preferred securities?
Distributions will be payable quarterly in arrears on each February 16,
May 16, August 16 and November 16, commencing , to holders of
record on the business day preceding each date.
What is the reset rate?
The reset rate is the interest rate on the debentures, and therefore the
distribution rate on the trust preferred securities, following February 16,
2001. Merrill Lynch, Pierce, Fenner & Smith Incorporated in its capacity as
the reset agent will determine the reset rate that the trust preferred
securities should bear in order for a trust preferred security to have an
approximate market value of 100.5% of $50 on the third business day
immediately preceding February 16, 2001, except that we may limit the reset
rate to be no higher than the rate on the two-year benchmark treasury plus
200 basis points (2%).
When will the interest rate on the debentures be reset?
Unless a tax event redemption has occurred, the interest rate on the
debentures will be reset on the third business day immediately preceding
February 16, 2001. The debentures, and, thus, the trust securities, which
include the trust preferred securities and the common securities
representing undivided beneficial interests in the assets of the trust, are
redeemable at our option, in whole but not in part, upon the occurrence and
continuation of a tax event under the circumstances described to constitute
a tax event.
What are the debentures?
The debentures will be our senior unsecured obligations and will rank on
a parity with all of our senior unsecured obligations.
What are the federal income tax consequences related to the Income PRIDES,
Growth PRIDES and trust preferred securities?
The purchase of additional FELINE PRIDES and automatic exchange of those
additional FELINE PRIDES and rights for new FELINE PRIDES should be treated
as a purchase of new FELINE PRIDES in exchange for cash and rights.
Investors, if any, that purchase additional FELINE PRIDES and continue to
hold the additional FELINE PRIDES may be considered to have received
consideration to assume the obligations under the related purchase contract
and to have paid that amount, in addition to the purchase price, for the
related trust preferred securities or treasury securities, but those
investors should consult their tax advisors concerning the tax consequences
associated with the acquisition of the additional FELINE PRIDES. The
exchange of current FELINE PRIDES or additional FELINE PRIDES and rights
for new FELINE PRIDES (other than the required delivery of additional
FELINE PRIDES and rights immediately following the purchase of additional
FELINE PRIDES pursuant to this offering) should be treated as a taxable
exchange of both the rights and the purchase contracts related to those
current FELINE PRIDES or additional FELINE PRIDES.
If we do not exercise our right to defer interest on the debentures, a
beneficial owner of Income PRIDES and trust preferred securities will
include in gross income its proportionate share of the stated interest on
the debentures when that interest income is paid or accrued in accordance
with the beneficial owner's regular method of tax accounting. We intend to
report the contract adjustment payments as income to holders of FELINE
PRIDES, but holders should consult their tax advisors concerning the
possibility that the contract adjustment payments may be treated as loans,
purchase price adjustments, rebates or option premiums rather than being
includible in income on a current basis. A beneficial owner of Growth
PRIDES will be required to include in gross income any OID with respect to
the treasury securities as it accrues on a constant yield to maturity
basis. If a tax event redemption has occurred, a beneficial owner of Income
PRIDES will be required to include in gross income its allocable share of
OID on the treasury portfolio as it accrues on a constant yield to maturity
basis.
How do I buy additional PRIDES?
Any person who receives this prospectus may provide to at
, an indication of his or her interest in purchasing additional
FELINE PRIDES. Indications of interest do not constitute a commitment to
purchase any securities. No later than , 1999, we will instruct Merrill
Lynch, as calculation agent, to determine the offering price of the additional
PRIDES in accordance with the formula described in this prospectus. If this
formula were used with the closing price of the common stock as of ,
1999, the offering price for the additional Income PRIDES would be $ and
the offering price for the additional Growth PRIDES would be $ , while
the closing prices of the Income PRIDES and the Growth PRIDES on the New York
Stock Exchange on that date were $ and $ , respectively.
After the offering price is determined, we will issue a press release and
file a prospectus supplement and will contact those persons who have given
indications of interest. In filling orders, we will give priority to
persons as follows :
(1) Holders of rights who received them as part of the original distribution.
(2) Any other holder of rights.
(3) The public.
In order to purchase additional PRIDES, holders of rights must submit
their rights for exercise and their preferential allocation will be limited
to the number of Income PRIDES or Growth PRIDES necessary to exercise all
such rights. In addition, in making allocations, we may make adjustments so
as to satisfy the NYSE listing criteria for the listing of the new FELINE
PRIDES.
We will allow persons belonging to the first two groups to purchase up to
two additional FELINE PRIDES for each right held by that person. However,
the purchase of the additional FELINE PRIDES by persons belonging to the
first two groups is subject to their consenting to immediately exchanging
the additional FELINE PRIDES and rights for new FELINE PRIDES. Allocation
will be limited to the number of Income PRIDES or Growth PRIDES necessary
to exercise all these Rights. If we sell all the additional FELINE PRIDES
to one group, we will not sell any additional FELINE PRIDES to a group of a
lesser priority. If the first two groups oversubscribe we will issue the
additional FELINE PRIDES proportionately among the subscribers. In
addition, in making allocations, we may make adjustments so as to attempt
to satisfy the NYSE listing criteria for the listing of the new FELINE
PRIDES, including the requirement that there be at least 400 holders.
We will not sell any additional FELINE PRIDES to the public unless
members of the first two groups as a whole acquire at least $100,000,000
face amount of additional FELINE PRIDES.
We will not sell you any additional Growth PRIDES unless (1) you received
rights as part of the original distribution and you were a beneficial owner
of Growth PRIDES on April 15, 1998, or (2) we otherwise elect to issue
additional Growth PRIDES.
Explanatory Diagrams
The following diagrams demonstrate some of the key features of the
purchase contracts, the new Income PRIDES, the additional Income PRIDES,
the new Growth PRIDES, the additional Growth PRIDES, the 6.45% trust
preferred securities, the transformation of Income PRIDES into Growth
PRIDES and trust preferred securities and the transformation of rights and
current FELINE PRIDES or additional FELINE PRIDES into new FELINE PRIDES.
FELINE PRIDES purchase contract
o Income PRIDES and Growth PRIDES both include a purchase contract under
which the investor agrees to purchase shares of our common stock, $0.01
par value per share, on February 16, 2001. In addition, the purchase
contracts include unsecured contract adjustment payments shown in the
diagrams on the following pages.
[GRAPHIC OMITTED]
- --------------------
(1) For each of the percentage categories shown, the percentage of shares
to be delivered at maturity to an investor in additional Income PRIDES
or additional Growth PRIDES is determined by dividing the related
number of shares to be delivered, as indicated in the footnote for each
category, by an amount equal to $50 divided by $37.
(2) The number of shares to be delivered will be calculated by dividing $50
by $37.
(3) The number of shares to be delivered will be calculated by dividing $50
by the applicable market value.(6)
(4) The number of shares to be delivered will be calculated by dividing $50
by $48.10.
(5) The reported sales price of the common stock listed on the NYSE for
February 24, 1998.
(6) The applicable market value means the average of the closing price per
share of common stock on each of the twenty consecutive trading days
ending on the third trading day immediately preceding February 16,
2001.
[GRAPHIC OMITTED]
Income PRIDES
o Income PRIDES consist of two components as described below:
[GRAPHIC OMITTED]
o The investor owns the trust preferred security but will pledge it
to us to secure its obligations under the purchase contract.
Growth PRIDES
o Growth PRIDES consist of two components as described below:
[GRAPHIC OMITTED]
o The investor owns the zero-coupon treasury security but will pledge
it to us to secure its obligations under the purchase contract. A
"treasury security" is defined as a 1/20th undivided beneficial
interest in a zero- coupon U.S. treasury security (CUSIP No. 912833
CD 0) with a principal amount at maturity equal to $1,000 and
maturing on February 15, 2001.
Trust Preferred Securities
o Trust preferred securities have the terms described below:
[GRAPHIC OMITTED]
o The holder of trust preferred securities that are components of Income
PRIDES has an option on February 16, 2001 to either:
o Pay cash to settle the purchase contract for $50 and release
the pledged trust preferred securities whose rates have been
reset on February 16, 2001, or
o Pay cash to settle the purchase contracts by allowing the
trust preferred securities to be included in the remarketing
process.
o The holder of trust preferred securities that are separate and not
components of Income PRIDES has the option on February 16, 2001 to
either:
o Continue to hold the trust preferred securities whose rate
has been reset on February 16, 2001, or
o Deliver the trust preferred securities to the Chase
Manhattan Bank, in its capacity as our custodial agent, to
be included in the remarketing process.
Transforming Income PRIDES into Growth PRIDES and trust preferred securities
o To create a Growth PRIDES, the investor separates an Income
PRIDES into its components-the purchase contract and the
trust preferred security-and then combines the purchase
contract with a specific zero-coupon treasury security that
matures concurrently with the maturity of the purchase
contract.
o The investor owns the zero-coupon treasury security but will
pledge it to us to secure its obligations under the purchase
contract.
o The zero-coupon treasury security together with the purchase
contract constitute a Growth PRIDES. The trust preferred
securities, which are no longer a component of the Income
PRIDES, are tradeable as separate securities.
[GRAPHIC OMITTED]
o The investor can also transform Growth PRIDES and trust
preferred securities into Income PRIDES.
o The transformation of Income PRIDES into Growth PRIDES and
trust preferred securities, and the transformation of Growth
PRIDES and trust preferred securities into Income PRIDES,
require minimum amounts of securities.
o An investor who tenders three rights together with two
current Income PRIDES or two additional Income PRIDES will
receive in exchange two new Income PRIDES. An investor who
tenders three rights together with two current Growth PRIDES
or two additional Growth PRIDES will receive in exchange two
new Growth PRIDES.
[GRAPHIC OMITTED]
RISK FACTORS
Your investment in the FELINE PRIDES will involve risks. You should
carefully consider the following discussion of risks as well as other
information contained in this prospectus.
Discovery of accounting irregularities and related litigation and
government investigations
We were created in December 1997, through the merger of HFS
Incorporated into CUC International with CUC surviving and changing its
name to Cendant Corporation. On April 15, 1998, we announced that, in the
course of transferring responsibility for our accounting functions from the
personnel associated with CUC before the merger to the personnel associated
with HFS before the merger and preparing for the reporting of first quarter
1998 financial results, we discovered accounting irregularities in several
CUC business units. As a result, we and the audit committee of our board of
directors and their respective counsel, assisted by auditors, immediately
began the investigations, which resulted, in part, in our restating
previously reported financial results for 1997, 1996, 1995 and the first
six months of 1998.
As a result of these accounting irregularities, more than 70
lawsuits claiming to be class actions, two lawsuits claiming to be brought
derivatively on our behalf and several other lawsuits and arbitration
proceedings have been filed against us and other defendants. These lawsuits
assert, among other things, various claims under the federal securities
laws, including claims under sections 11, 12 and 15 of the Securities Act
of 1933 and sections 10(b), 14(a) and 20(a) of and Rules 10b-5 and 14a-9
under the Securities Exchange Act of 1934 and state statutory and common
laws, including claims that financial statements previously issued by us
allegedly were false and misleading and that we allegedly knew or should
have known that these statements allegedly caused the price of our
securities to be artificially inflated.
Although we expect to oppose any such contention, the plaintiffs
in one or more of these proceedings may contend that any damages in the
lawsuits should reflect, in whole or in part, the decline in market price
of our securities following: (1) the announcement of the accounting
irregularities April 15, 1998 after the NYSE closed; and (2) the press
release concerning the accounting irregularities that we issued on July 14,
1998. On April 15, 1998, the last sale price of our common stock on the
NYSE was $35.625. On April 16, 1998, the day following the announcement of
the accounting irregularities, the last sale price of our common stock on
the NYSE was $19.625. On July 13, 1998, the last sale price of our common
stock on the NYSE was $18.875. On July 14, 1998, the last sale price of our
common stock on the NYSE was $15.6875. On May 13, the last sale price
of our common stock on the NYSE was $18 1/16.
In addition, the SEC and the United States Attorney for the
District of New Jersey are conducting investigations relating to the
accounting issues. While our management has made all adjustments considered
necessary as a result of the findings of the investigations and the
restatement of our financial statements for 1997, 1996 and 1995, and the
first six months of 1998, we can provide no assurances that additional
adjustments will not be necessary as a result of these government
investigations.
Other than with respect to the portion of the FELINE PRIDES class
action litigation which has been settled subject to court approval, we do
not believe that it is feasible to predict or determine the final outcome
or resolution of these proceedings and investigations or to estimate the
amounts or potential range of loss with respect to the resolution of these
proceedings and investigations. In addition, the timing of the final
resolution of these proceedings and investigations is uncertain. The
possible outcomes or resolutions of these proceedings or investigations
could include judgments against us or settlements and could require
substantial payments by us.
We believe that adverse outcomes in such proceedings and
investigation or any other resolutions, including settlements, could have a
material impact on our financial condition, results of operations and cash
flows.
Investment in FELINE PRIDES requires holders to purchase common stock
resulting in the risk of decline in equity value
Although as a holder of FELINE PRIDES you will be the beneficial
owner of the related trust preferred securities, treasury portfolio or
treasury securities, you have an obligation under the purchase contract to
buy our common stock. We cannot assure you that the market value of the
common stock you will receive on February 16, 2001 will be equal to or
greater than the $50 stated amount per FELINE PRIDES held by you.
Prior to February 16, 2001, unless you pay cash to satisfy your
obligation under the purchase contract or the purchase contracts are
terminated due to our bankruptcy, insolvency or reorganization, the
proceeds derived from the remarketing of the trust preferred securities or
the principal of the related treasury securities, or the appropriate
applicable ownership interest of the treasury portfolio, when paid at
maturity, as the case may be, will automatically be used to purchase a
specified number of shares of our common stock on your behalf. As a holder
of additional FELINE PRIDES, if the applicable market value of the common
stock is less than $ , the aggregate market value of the common stock
issued to you under each purchase contract on February 16, 2001 will be
less than the price you paid for the additional FELINE PRIDES and the
market value per share of that common stock will be less than the effective
price per share paid by you for such common stock on that date, in which
case you will suffer an economic loss as of February 16, 2001. Accordingly,
you assume the risk that the market value of the common stock may decline,
and that decline could be substantial.
Limitations on opportunity for equity appreciation
Your opportunity for equity appreciation afforded by investing in
the additional FELINE PRIDES is less than your opportunity for equity
appreciation if you directly invested in the common stock. This opportunity
is less because the market value of the common stock to be received by you
under the purchase contract on February 16, 2001, assuming that the market
value is the same as the applicable market value of such common stock, will
only exceed the price you paid if the applicable market value of the common
stock exceeds $ , which represents an appreciation of approximately % over
$ . Moreover, in such event, you would receive on February 16, 2001 only
approximately %, the percentage equal to $ divided by $ , of the shares of
common stock that you would have received if you had made a direct
investment in the common stock on that date. Therefore you would receive on
February 16, 2001 only approximately % of the appreciation in the value of
the common stock in excess of $ .
Factors affecting trading prices
The trading prices of Income PRIDES and Growth PRIDES in the
secondary market will be directly affected by the trading prices of the
common stock, the general level of interest rates and our credit quality.
It is impossible to predict whether the price of our common stock or
interest rates will rise or fall. Trading prices of the common stock will
be influenced by our operating results and prospects and by economic,
financial and other factors, including the remaining class action
litigation against us. In addition, general market conditions can affect
the trust preferred securities markets generally, therefore affecting the
price of our common stock, including the level of, and fluctuations in, the
trading prices of stocks generally and sales of substantial amounts of
common stock by us in the market after the offering of the FELINE PRIDES or
the perception that those sales could occur. Fluctuations in interest rates
may give rise to arbitrage opportunities based upon changes in the relative
value of the common stock underlying the purchase contracts and of the
other components of the FELINE PRIDES. The arbitrage could, in turn, affect
the trading prices of the Income PRIDES, Growth PRIDES, trust preferred
securities and common stock.
Limited rights including limited voting rights
If you hold trust preferred securities you will not be entitled to
vote to appoint, remove or replace or to increase or decrease the number of
trustees of the trust, and generally will have no voting rights except in
limited circumstances. If you hold FELINE PRIDES you will not be entitled
to any rights with respect to the common stock, including, without
limitation, voting rights and rights to receive any dividends or other
distributions on the common stock. You will only be entitled to rights as a
holder of the common stock if we deliver shares of common stock for FELINE
PRIDES on February 16, 2001 or as a result of early settlement and only if
the applicable record date, if any, for the exercise of these rights occurs
after that date. For example, if an amendment is proposed to our articles
of incorporation or by-laws and the record date for determining the
stockholders of record entitled to vote on that amendment occurs prior to
the delivery, you will not be entitled to vote on that amendment.
Dilution of the common stock may affect the settlement rate and the FELINE
PRIDES trading prices
The number of shares of common stock you are entitled to receive
upon the settlement of your purchase contract and the trading prices of
Income PRIDES and Growth PRIDES may be adversely affected due to dilution
of our common stock resulting from the issuance of additional common stock
or other equity interests.
The number of shares of common stock that you are entitled to
receive on February 16, 2001 or as a result of early settlement of a
purchase contract is subject to adjustment for certain events arising from
stock splits and combinations, stock dividends and other actions by us that
modify our capital structure. We will not adjust the number of shares of
common stock that you are to receive on February 16, 2001, or as a result
of early settlement of a purchase contract, for other events, including
most offerings of common stock for cash by us or in connection with
acquisitions. We are not restricted from issuing additional common stock
during the term of the purchase contracts and have no obligation to
consider your interests for any reason; except, that, in case of an
agreement to issue more than one million shares of common stock or any
other security conferring that the right to receive our common stock, other
than for cash at fair value or as consideration for an acquisition of a
business or business assets, and that agreement causes a decline in the
market value for the common stock. In that event, the settlement rate of
the new FELINE PRIDES may be adjusted, as described elsewhere in this
prospectus.
If we issue additional shares of common stock, the price of the
common stock may be materially and adversely affected and, because of the
relationship of the number of shares to be received on February 16, 2001 to
the price of the common stock, these events may adversely affect the
trading price of Income PRIDES or Growth PRIDES.
Possible illiquidity of the secondary market
We are unable to predict how the new FELINE PRIDES and the
additional FELINE PRIDES will trade in the secondary market or whether this
market will be liquid or illiquid.
We will apply to list the new Income PRIDES and the new Growth
PRIDES on the NYSE, subject to official notice of issuance and satisfaction
of the NYSE minimum distribution requirements. The NYSE will not list the
new FELINE PRIDES unless there are 400 holders of new FELINE PRIDES. The
new FELINE PRIDES are issued in the framework of a class action settlement.
We cannot predict how many persons will choose to participate in the
settlement and exercise the exchange rights provided in the settlement. The
exchange rights may be exercised until February 14, 2001. In addition, we
can neither predict at which point in time the holders of rights will
choose to exercise their exchange rights. The liquidity of the new Income
PRIDES and new Growth PRIDES depends on the number of people who elect to
execute their exchange rights and on the point in time in which they do so.
Additionally, we will not list additional FELINE PRIDES for trading unless
we issue them to the general public. We can, therefore, provide no
assurance as to the liquidity of any market that may develop for the new
FELINE PRIDES and the additional FELINE PRIDES, your ability to sell these
securities and whether a trading market if it develops will continue.
Moreover, if you were to substitute treasury securities for trust
preferred securities, or trust preferred securities for treasury
securities, thereby converting your Income PRIDES to Growth PRIDES or your
Growth PRIDES to Income PRIDES, the liquidity of Income Prides and Growth
PRIDES could be adversely affected. The liquidity of the additional FELINE
PRIDES could also be adversely affected if you were to exchange the rights
together with the additional FELINE PRIDES for new FELINE PRIDES. We can
provide no assurance that the new FELINE PRIDES or the additional FELINE
PRIDES will meet the minimum distribution requirements for listing on the
NYSE. We cannot provide assurance that the NYSE will not delist or suspend
the new FELINE PRIDES or additional FELINE PRIDES. The NYSE may delist or
suspend the new FELINE PRIDES or the additional FELINE PRIDES (if the
additional FELINE PRIDES have been listed) should you elect to (1) create
new Growth PRIDES or Income PRIDES by substituting collateral, or (2)
replace additional Income PRIDES or additional Growth PRIDES together with
rights for new Income PRIDES or new Growth PRIDES. This could cause the
number of Income PRIDES or Growth PRIDES to fall below the requirement for
listing securities that at least 1,000,000 additional Income PRIDES,
additional Growth PRIDES, new Income PRIDES and new Growth PRIDES be
outstanding at any time.
Pledged securities encumbered
Your rights to the trust preferred securities, treasury portfolio
or treasury securities (together, the "pledged securities"), as applicable,
will be subordinated to our security interest. Although you will be the
beneficial owners of the applicable pledged securities, those pledged
securities will be pledged with Chase Manhattan Bank, in its capacity as
our collateral agent, to secure your obligations under the related purchase
contracts. Additionally, notwithstanding the automatic termination of the
purchase contracts, if we become the subject of a case under the Bankruptcy
Code, the delivery of the pledged securities to you may be delayed by the
imposition of the automatic stay of section 362 of the Bankruptcy Code.
Possible dissolution of the trust due to an investment company event
The dissolution of the trust due to an investment company event may
affect the Income PRIDES' market prices.
If an investment company event occurs, we will dissolve the trust,
except in the limited circumstances described below, and distribute the
debentures to you in a total principal amount equal to the aggregate stated
liquidation amount of any trust preferred securities that you may hold. We
will only dissolve and distribute the debentures to you if we are unable to
avoid the investment company event within a 90-day period by taking some
ministerial action or pursuing some other reasonable measure that will have
no adverse effect on the trust, us or you, and will involve no material
cost to us. In addition, we will have the right to dissolve the trust at
any time.
There can be no assurance as to the impact on the market prices for
Income PRIDES if we dissolve the trust and distribute the debentures to you
in exchange for your trust preferred securities. Because Income PRIDES will
consist of debentures and related purchase contracts, if we dissolve the
trust as a result of an investment company event or otherwise, you are also
making an investment decision with regard to the debentures if you purchase
Income PRIDES and should carefully review all the information regarding the
debentures contained in this prospectus.
Tax event redemption
The occurrence of a tax event redemption, described below, may
affect the market prices of Income PRIDES, due to the substitution of the
treasury portfolio for the redeemed trust preferred securities as
collateral for your obligations under the related purchase contract.
We have the option to redeem the debentures and, thus, the trust
securities, on not less than 30 days or more than 60 days prior written
notice, in whole but not in part, at any time before February 16, 2001 if a
tax event occurs and continues under the circumstances described below. If
a tax event occurs, we will redeem the debentures at a redemption price per
trust security equal to the redemption amount plus accrued and unpaid
interest, including deferred interest, if any. If we redeem all of the
debentures, the trust must redeem all of the trust securities and pay the
redemption price in cash to the holders of the trust securities.
If the tax event redemption occurs before February 16, 2001, the
redemption price payable to you due to liquidation of any interest you may
have in the trust as a holder of Income PRIDES will be distributed to the
collateral agent, who in turn will apply an amount equal to the redemption
amount of the redemption price to purchase the treasury portfolio on your
behalf.
We will substitute the treasury portfolio for the trust preferred
securities and pledge the treasury portfolio with the collateral agent to
secure your obligations to purchase our common stock under the purchase
contracts related to the Income PRIDES. If you do not hold trust preferred
securities in the form of Income PRIDES you will receive redemption
payments directly. There can be no assurance as to the impact on the market
prices for the Income PRIDES if we substitute the treasury portfolio as
collateral in replacement of any trust preferred securities so redeemed. A
tax event redemption will be a taxable event to the beneficial owners of
the trust preferred securities.
Right to defer current payments
If we chose to exercise our right to defer payments on the
purchase contracts and on the trust preferred securities, you may also be
adversely affected by (1) the United States federal income tax
consequences, (2) the impact on your receipt of distributions on the trust
preferred securities and (3) the effect on the market prices of trust
preferred securities associated with the deferral of distributions on the
trust preferred securities.
We have the option to defer the payment of contract adjustment
payments on the purchase contracts until February 16, 2001. Any deferred
contract adjustment payments will bear additional contract adjustment
payments at the rate of 7.5% per year, compounding on each succeeding
payment date, until we pay them to you. If the purchase contracts are
settled early or terminated due to our bankruptcy, insolvency or
reorganization, the right to receive contract adjustment payments and
deferred contract adjustment payments, if any, will also terminate.
If we defer the payment of contract adjustment payments on the
purchase contracts until February 16, 2001, you will receive a number of
shares of common stock equal to the total amount of deferred contract
adjustment payments payable to you, divided by the applicable market value.
We will also have the right under the indenture to defer payments
of interest on the debentures by extending the interest payment period at
any time, and from time to time, on the debentures. As a consequence of
that extension, quarterly distributions on the trust preferred securities,
held either as a component of the Income PRIDES or held separately, would
be deferred. Any such deferrals would continue to accrue at a rate of 6.45%
per year through and including February 15, 2001, and at the reset rate
afterwards, compounded quarterly. Our right to extend the interest payment
period for the debentures will be limited and may not extend beyond
February 16, 2003.
During any extension period, we will not declare or pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or
make a liquidation payment with respect to, any of our capital stock except
in the following five situations:
o to purchase or acquire our own capital stock in order to
satisfy any obligations that we may have under any employee
benefit plans or to satisfy any obligations that we may have
under any contract or security outstanding on the date of
that event requiring us to purchase our own capital stock;
o as a result of any reclassification of our capital stock or
the exchange or conversion of one class or series of our
capital stock for another class or series of our capital
stock;
o to purchase fractional interests in shares of our capital
stock under the conversion or exchange provisions of our
capital stock or the conversion or exchange of that
security;
o to pay dividends or distributions in our capital stock, or
rights to acquire our capital stock, or to repurchase or
redeem our capital stock solely from the issuance or
exchange of capital stock; or
o to redeem or repurchase any rights outstanding under a
shareholder rights plan or to declare a dividend of rights
in the future.
During any extension period, we also will not make any guarantee
payments with respect to the above, other than payments of distributions
and specific redemptions out of monies held by the trust and payments on
liquidation of the trust (the "guarantee") or payments of the obligations
of the trust with respect to the common securities (the "common securities
guarantee"). Before the termination of any extension period, we may further
extend the interest payment period. However, we may not extend the
extension period beyond February 16, 2003. Upon the termination of any
extension period and the payment of all amounts then due, we may commence a
new extension period, subject to the above requirements.
We do not currently intend to defer payments of stated interest on
the debentures and we currently believe that the likelihood of our doing so
is remote. Therefore, the debentures should not be considered to have been
issued with OID for United States federal income tax purposes as a result
of our right to defer payments of stated interest on the debentures unless
and until we actually exercise that deferral right. There can be no
assurance that the IRS will agree with our position.
Should we exercise our right to defer payments of interest by
extending the interest payment period, a U.S. holder of trust preferred
securities held either as a component of the Income PRIDES or held
separately would be required to include its proportionate share of the
stated interest on the debentures in gross income, as OID, on a daily
economic accrual basis, regardless of that U.S. holder's method of tax
accounting. As a result, a U.S. holder of trust preferred securities would
recognize income for United States federal income tax purposes in advance
of the receipt of cash attributable to that income, and would not receive
cash from the trust related to that income if that holder disposed of the
trust preferred securities prior to the record date for the date on which
distributions of such amounts were made.
In addition, as a result of our right to defer interest payments,
the market price of the trust preferred securities, which represent
undivided beneficial ownership interests in the assets of the trust, might
be more volatile than the market price of other securities that are not
subject to the deferral. Should we exercise that right in the future, the
market price of the trust preferred securities likely would be adversely
affected. If you were to dispose of your trust preferred securities during
an extension period, therefore, you might not receive the same return on
your investment as if you had continued to hold your trust preferred
securities.
United States federal income tax consequences
No statutory, judicial or administrative authority directly
addresses the treatment of the FELINE PRIDES or instruments similar to the
FELINE PRIDES for United States federal income tax purposes, or of the
exchange of rights and current FELINE PRIDES or additional FELINE PRIDES
for new FELINE PRIDES. As a result, some United States federal income tax
consequences of the purchase, ownership and disposition of FELINE PRIDES
are not entirely clear.
Purchase contract agreement not qualified under Trust Indenture Act;
limited obligations of purchase contract agent
You, as a holder of FELINE PRIDES, will not have the benefits of
the protection of the Trust Indenture Act of 1939.
The purchase contract agreement between us and the purchase
contract agent will not be qualified as an indenture under the Trust
Indenture Act and the purchase contract agent will not be required to
qualify as a trustee under the Trust Indenture Act, although the trust
preferred securities constituting a part of the Income PRIDES will be
issued pursuant to the declaration, which will be qualified under the Trust
Indenture Act. Accordingly, if you hold FELINE PRIDES you will not have the
benefit of the protections of the Trust Indenture Act. The protections
generally afforded the holder of a security issued under an indenture that
has been qualified under the Trust Indenture Act include:
o disqualification of the indenture trustee for conflicting interests.
o provisions preventing a trustee that is also a creditor of the
issuer from improving its own credit position at the expense of the
security holders immediately prior to or after a default under the
indenture.
o the requirement that the indenture trustee deliver reports at least
annually with respect to specific matters concerning the indenture
trustee and the securities.
Rights under the guarantee
Except as described below, you as a holder of trust preferred
securities, will not be able to exercise directly any other rights with
respect to the debentures.
The guarantee will be qualified as an indenture under the Trust
Indenture Act. The Wilmington Trust Company will act as indenture trustee
under the guarantee in its capacity as the guarantee trustee for the
purposes of compliance with the provisions of the Trust Indenture Act. The
guarantee trustee will hold the guarantee for your benefit if you hold any
of the trust preferred securities.
If you hold any of the trust preferred securities, the guarantee
will guarantee you, generally on a senior unsecured basis, the payment of
the following:
o any accrued and unpaid distributions that are required to be
paid on the trust preferred securities, to the extent the
trust has funds available for this purpose.
o the redemption price, including all accumulated and unpaid
distributions to the date of redemption, of trust preferred
securities that we may have redeemed upon the occurrence of
a tax event redemption, to the extent the trust has funds
available for this purpose.
o upon a voluntary or involuntary dissolution of the trust,
other than in connection with the distribution of debentures
to you, the lesser of (a) the total of the liquidation
amount and all accrued and unpaid distributions on the trust
preferred securities to the date of payment to the extent
the trust has funds available for this purpose or (b) the
amount of assets of the trust remaining available for
distribution to holders of the trust preferred securities in
liquidation of the trust.
The holders of a majority in liquidation amount of the trust
preferred securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
guarantee trustee or to direct the exercise of any trust or power conferred
upon the guarantee trustee under the guarantee. Notwithstanding the above,
but only under limited circumstances, holders of the trust preferred
securities may institute a legal proceeding directly against us to enforce
their rights under the guarantee without first instituting a legal
proceeding against the trust, the guarantee trustee or any other person or
entity.
If we were to default on our obligation to pay amounts payable on
the debentures or otherwise, the trust would lack funds for the payment of
distributions or amounts payable on redemption of the trust preferred
securities or otherwise, and, in that event, holders of the trust preferred
securities would not be able to rely upon the guarantee for payment of
these amounts. Instead, they would rely on the enforcement
o by the institutional trustee of its rights as registered
holder of the debentures against us pursuant to the terms of
the indenture and the debentures or
o by that holder of the institutional trustee's or that
holder's own rights against us to enforce payments on the
debentures.
The declaration provides that each holder of trust preferred
securities, by its acceptance, agrees to the provisions of the guarantee
and the indenture.
Enforcement of specific rights by holders of trust preferred securities
Except as described below, you, as holder of trust preferred
securities, will not be able to exercise directly any other rights with
respect to the debentures.
If a declaration event of default were to occur and were
continuing, holders of trust preferred securities would rely on the
enforcement by the institutional trustee of its rights as registered holder
of the debentures against us. In addition, the holders of a majority in
liquidation amount of the trust preferred securities would have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the institutional trustee or to direct the exercise of
any trust or power conferred upon the institutional trustee under the
declaration, including the right to direct the institutional trustee to
exercise the remedies available to it as the holder of the debentures.
The indenture provides that the debt trustee must give holders of
debentures notice of all defaults or events of default within 30 days after
occurrence. However, except in the cases of a default or an event of
default in payment on the debentures, the debt trustee will be protected in
withholding the notice if its responsible officers in good faith determine
that withholding of the notice is in the interest of such holders.
If the institutional trustee were to fail to enforce its rights
under the debentures in respect of an indenture event of default after a
holder of record of trust preferred securities had made a written request,
such holder of record of trust preferred securities may, to the extent
permitted by applicable law, institute a legal proceeding against us to
enforce the institutional trustee's rights under the debentures. In
addition, if we were to fail to pay interest or principal on the debentures
on the date that interest or principal is otherwise payable, and this
failure to pay were continuing, holders of trust preferred securities may
directly institute a proceeding for enforcement of payment of the principal
of or interest on the debentures having a principal amount equal to the
aggregate stated liquidation amount of your trust preferred securities (a
"direct action") after the respective due date specified in the debentures.
In connection with a direct action, we would have the right under the
indenture to set off any payment made to that holder by us.
Limited rights of acceleration
The institutional trustee, as holder of the debentures, may
accelerate payment of the principal and accrued and unpaid interest on the
debentures only upon the occurrence and continuation of a declaration event
of default or an indenture event of default. A declaration event of default
or indenture event of default are generally limited to payment defaults,
breaches of specific covenants and specific events of bankruptcy,
insolvency and reorganization relating to us and specific events of
dissolution of the trust. Accordingly, there is no right to acceleration
upon default of our payment obligations under the guarantee.
Trading price of the trust preferred securities
The trust preferred securities may trade at a price that does not
fully reflect the value of accrued but unpaid interest with respect to the
underlying debentures. If you are an accrual basis taxpayer and dispose of
your trust preferred securities between record dates for payments of
distributions you will be required to include accrued but unpaid interest
on the debentures through the date of disposition in income as ordinary
interest income, i.e., interest or, possibly, OID, and to add that amount
to your adjusted tax basis in your proportionate share of the underlying
debentures deemed disposed of. The same situation would arise to the
extent, if any, that there is OID on the debentures underlying the trust
preferred securities following any payment extension. To the extent the
selling price is less than your adjusted tax basis, you will recognize a
loss.
THE COMPANY
Overview
We are one of the foremost consumer and business services companies
in the world. We were created through the merger of HFS into CUC in
December 1997 with the resultant corporation being renamed Cendant
Corporation. We provide the fee-based services formerly provided by each of
CUC and HFS, including travel services, real estate services and
membership-based consumer services, to our customers throughout the world.
We operate in four principal divisions: travel related services,
real estate related services, alliance marketing related services and other
consumer and business services. Our businesses provide a wide range of
complementary consumer and business services, which together represent nine
business segments.
o The travel related services businesses facilitate vacation
timeshare exchanges, manage corporate and government vehicle
fleets and franchise car rental and hotel businesses.
o The real estate related services businesses franchise real
estate brokerage businesses, provide home buyers with
mortgages and assist in employee relocation.
o The alliance marketing related services businesses provide
an array of value driven products and services.
o Our other consumer and business services include our tax
preparation services franchise, information technology
services, car parks and vehicle emergency support and rescue
services in the United Kingdom, credit information services,
financial products and other consumer-related services.
As a franchisor of hotels, residential real estate brokerage
offices, car rental operations and tax preparation services, we license the
owners and operators of independent businesses to use our brand names. We
do not own or operate hotels, real estate brokerage offices, car rental
operations or tax preparation offices, except for certain company-owned
Jackson Hewitt offices which we intend to franchise. Instead, we provide
our franchisee customers with services designed to increase their revenue
and profitability.
Matters Relating to the Accounting Irregularities and Accounting Policy Change
Accounting Irregularities
On April 15, 1998, we announced that in the course of transferring
responsibility for our accounting functions from Cendant personnel
associated with CUC prior to the merger to Cendant personnel associated
with HFS before the merger and preparing for the reporting of first quarter
1998 financial results, we discovered accounting irregularities in certain
CUC business units. As a result, we, together with our counsel and assisted
by auditors, immediately began an intensive investigation. In addition, our
audit committee engaged Willkie Farr & Gallagher as special legal counsel
and Willkie Farr engaged Arthur Andersen LLP to perform an independent
investigation into these accounting irregularities.
On July 14, 1998, we announced that the accounting irregularities
were greater than those initially discovered in April and that the
irregularities affected the accounting records of the majority of the CUC
business units. On August 13, 1998, we announced that our investigation was
complete. On August 27, 1998, we announced that our audit committee had
submitted its report to the board of directors on the audit committee
investigation into the accounting irregularities and its conclusions
regarding responsibility for those actions. A copy of the audit committee's
report has been filed as an exhibit to our report on Form 8-K dated August
28, 1998.
As a result of the findings of the investigations, we restated our
previously reported financial results for 1997, 1996 and 1995 and the six
months ended June 30, 1998 and 1997. The 1997 restated amounts also
included certain adjustments related to the former HFS businesses which are
substantially comprised of $47.8 million in reductions to merger-related
costs and other unusual charges ("Unusual Charges") and a $14.5 million
decrease in pre-tax income excluding Unusual Charges, which on a net basis
increased 1997 net income from continuing operations. The 1997 annual and
six months results have also been restated for a change in accounting,
effective January 1, 1997, related to revenue and expense recognition for
memberships with a full refund offer.
Class Action Litigation and Government Investigation
Since our April 15, 1998 announcement of the discovery of
accounting irregularities in the former CUC business units, and prior to
the date of this prospectus, 70 lawsuits claiming to be class actions, two
lawsuits claiming to be brought derivatively on our behalf and several other
lawsuits and arbitration proceedings have been filed in various courts
against us and, among others, our predecessor, HFS, and several current and
former officers and directors of Cendant and HFS, asserting various claims
under the federal securities laws and several state statutory and common
laws.
In addition, the SEC and the United States Attorney for the
District of New Jersey are conducting investigations relating to the
accounting irregularities. The SEC staff has advised us that its inquiry
should not be construed as an indication by the SEC or its staff that any
violations of law have occurred. While we have made all adjustments
considered necessary as a result of the findings of the investigations and
the restatement of our financial statements for 1997, 1996 and 1995 and the
first six months of 1998, we can provide no assurances that additional
adjustments will not be required as a result of these government
investigations.
Other than with respect to the portion of the FELINE PRIDES
litigation which has been settled subject to court approval, we do not
believe that it is feasible to predict or determine the final outcome or
resolution of these proceedings and investigations or to estimate the
amounts or potential range of loss with respect to the resolution of these
proceedings and investigations. In addition, the timing of the final
resolution of these proceedings and investigations is uncertain. The
possible outcomes or resolutions of these proceedings and investigations
could include judgments against us or settlements and could require
substantial payments by us. Our management believes that adverse outcomes
in such proceedings and investigations or any other resolutions, including
settlements, could have a material impact on our financial condition,
results of operations and cash flows.
FELINE PRIDES Litigation and Litigation Settlement
On February 1998, we, together with Cendant Capital I, a Delaware
Business Trust wholly owned by us, sold an aggregate of 29,900,000 current
FELINE PRIDES. We sold the current FELINE PRIDES through a public offering
pursuant to a registration statement on Form S-3, and a prospectus and
prospectus supplement each dated February 24, 1998. The current FELINE
PRIDES began trading on the NYSE on or about February 25, 1998.
Following our announcement of potential accounting irregularities
on April 15, 1998, eight suits were commenced against us, our present and
former officers, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Chase Securities, Inc. and Ernst & Young, LLP, by persons who
had acquired or purchased our current FELINE PRIDES. A lead plaintiff was
selected to represent all persons who purchased or acquired current FELINE
PRIDES during the period of February 24, 1998 through and including April
15, 1998 and who purchased or acquired current FELINE PRIDES in the open
market during the period of April 16, 1998 through and including July 15,
1998. Kirby McInerney & Squire, LLP, is plaintiffs' lead counsel. An
amended and consolidated class action complaint was filed in the
consolidated action, which is entitled In Re Cendant Corporation PRIDES
Litigation and is pending in the United States District Court for the
District of New Jersey. The complaint asserts claims arising under sections
11, 12(a)(2) and 15 of the Securities Act of 1933, and sections 10(b) and
20(a) of the Securities Exchange Act of 1934. The complaint alleges that
the registration statement, prospectus and prospectus supplement for the
current FELINE PRIDES offering contained materially false and misleading
statements due to the accounting irregularities discussed above and that we
made other misstatements and omissions of material fact on and after April
15, 1998.
On March 17, 1999, we entered into a stipulation of settlement in
the consolidated action. The court granted the settlement its preliminary
approval, pending a fairness hearing to be held on May 18, 1999. Under the
settlement agreement, in return for the release of all claims arising from
any purchase of current FELINE PRIDES on or before April 15, 1998, we are
obligated to issue up to 29,161,474 rights with an aggregate theoretical
value of $341,500,000. Each class member who does not opt out and submits a
timely and valid proof of claim will be entitled to one right for each
current FELINE PRIDES that was held at the close of business on April 15,
1998. Under the settlement agreement, until February 14, 2001, we will
issue two new FELINE PRIDES, the value of each of which will exceed the
value of a current FELINE PRIDES by $17.57, to every person who delivers to
us three rights and two current FELINE PRIDES. The settlement does not
resolve claims based upon purchase of current FELINE PRIDES between April
16 and July 15, 1998.
In addition, we are obligated under the settlement to advance or
pay, as incurred, the reasonable costs of:
o assembling the list of class members;
o printing, mailing and publishing the notices;
o reimbursing brokers or nominees for costs in identifying
and/or forwarding notices to class members or their
nominees;
o all listing, SEC registration and filing fees, and other
costs associated with issuance of the rights and the new
FELINE PRIDES;
o the settlement administrator, which costs will not exceed
$160,000; and
o other similar cash costs associated with the implementation
of the settlement. We are also obligated to pay the
reasonable expenses of the law firm of Squadron, Ellenoff,
Plesent & Sheinfeld, LLP, retained to assist lead
plaintiffs' counsel in drafting appropriate portions of the
stipulation. Additionally, we will be solely responsible for
the costs identified in this section if the settlement is
ultimately not consummated.
Based on the settlement agreement, we recorded an after tax charge
of approximately $228 million, or $0.26 per diluted share, which is $351
million pre-tax, in the fourth quarter of 1998 associated with the
agreement in principle to settle the FELINE PRIDES securities class action.
We recorded an increase in additional paid-in capital of $350 million
offset by a decrease in retained earnings of $228 million resulting in a
net increase in stockholders' equity of $122 million as a result of the
prospective issuance of the common stock. As a result, the settlement
should not reduce net book value. In addition, the settlement is not
expected to reduce 1999 earnings per share unless our common stock price
materially appreciates.
THE TRUST
The trust is a statutory business trust formed under Delaware law
according to (1) a declaration of trust, executed by the sponsor and some
of the trustees and (2) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on February 6, 1998. This
declaration of trust will be amended and restated in its entirety
substantially in the form filed as an exhibit to the registration statement
of which this prospectus forms a part. The declaration will be qualified as
an indenture under the Trust Indenture Act.
Although upon issuance of the trust preferred securities, a holder
of Income PRIDES will be the beneficial owner of the related trust
preferred securities, those trust preferred securities will be pledged with
the collateral agent to secure the obligations of the holders under the
related purchase contracts. We will directly or indirectly acquire common
securities in an aggregate liquidation amount equal to 3% of the total
capital of the trust.
The trust exists for the exclusive purposes of
(1) issuing the trust securities representing undivided
beneficial ownership interests in the assets of the trust,
(2) investing the proceeds of the trust securities in the
debentures and
(3) engaging in only those activities necessary, appropriate,
convenient or incidental to the purposes specified in (1)
and (2) above. The trust has a term of approximately six
years, but may dissolve earlier as provided in the
declaration.
The number of the trustees is initially three. Two of the trustees
(the "regular trustees") are persons who are our employees or officers or
who are affiliated with us. Under the declaration, the third trustee will
be a financial institution that is unaffiliated with us. This trustee will
serve as institutional trustee under the declaration and as indenture
trustee for the purposes of compliance with the provisions of the Trust
Indenture Act (the "institutional trustee"). Initially, Wilmington Trust
Company, a Delaware banking corporation, will be the institutional trustee
until removed or replaced by the holder of the common securities. For
purposes of compliance with the provisions of the Trust Indenture Act,
Wilmington Trust Company will also act as the guarantee trustee and as
trustee resident in the State of Delaware (the "Delaware trustee") for
purposes of the Delaware Business Trust Act (the "Trust Act").
The institutional trustee will hold title to the debentures for the
benefit of the holders of the trust securities and the institutional
trustee will have the power to exercise all rights, powers and privileges
under the indenture as the holder of the debentures. In addition, the
institutional trustee will maintain exclusive control of a segregated
noninterest bearing bank account (the "property account") to hold all
payments made in respect of the debentures for the benefit of the holders
of the trust securities. The institutional trustee will make payments of
distributions and payments on liquidation, redemption and otherwise to the
holders of the trust securities out of funds from the property account. The
guarantee trustee will hold the guarantee for the benefit of the holders of
the trust preferred securities.
We, as the direct or indirect holder of all the common securities,
will have the right to appoint, remove or replace any trustee and to
increase or decrease the number of trustees. However, the number of
trustees shall be at least two, at least one of which shall be a regular
trustee. We will pay all fees and expenses related to the trust and the
offering of the trust securities.
The rights of the holders of the trust preferred securities,
including economic rights, rights to information and voting rights, are
provided in the declaration, the Trust Act and the Trust Indenture Act.
The office of the Delaware trustee currently is Wilmington Trust
Company, Wilmington, Delaware. The principal place of business of the trust
shall be c/o Cendant Corporation, 9 West 57th Street, New York, NY 10019
and its telephone number shall be (212) 413-1800.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed and traded on the NYSE under the symbol
"CD". The following table provides, for the calendar quarters indicated,
the high and low closing sales prices per share on the NYSE for the periods
shown below as reported on the NYSE Composite Tape. On December 17, 1997,
CUC merged with HFS, with CUC surviving and changing its name to "Cendant
Corporation." All the common stock prices prior to the first quarter of
1998 are for CUC.
<TABLE>
<CAPTION>
Market Price (1)
----------------
Period High Low
- ------ ---- ---
1997:
<S> <C> <C>
First Quarter................................................. $26 7/8 $22 1/2
Second Quarter................................................ 26 3/4 20
Third Quarter................................................. 31 3/4 23 11/16
Fourth Quarter................................................ 34 3/8 26 15/16
1998:
First Quarter................................................. $41 $32 7/16
Second Quarter................................................ $41 3/8 18 9/16
Third Quarter................................................. 22 7/16 10 7/16
Fourth Quarter................................................ 20 5/8 7 1/2
1999:
First Quarter ................................................ 22 9/16 14 7/8
Second Quarter through May 13................................. 22 3/4 15 1/2
</TABLE>
We have never paid a cash dividend on our common stock. We do not
anticipate paying cash dividends on our capital stock in the foreseeable
future and intend to retain all earnings to finance the operations and
expansion of our business and the repurchase of common stock and debt
reduction. The payment of cash dividends in the future will depend on our
earnings, financial condition and capital needs and on other factors deemed
relevant by our board of directors at that time.
ACCOUNTING TREATMENT
The financial statements of the trust will be reflected in our
consolidated financial statements, with the trust preferred securities
shown on our balance sheet under the caption "Mandatorily redeemable
preferred securities issued by subsidiary." The financial statement
footnotes to our consolidated financial statements will reflect that the
sole asset of the trust will be the debentures. Distributions on the trust
preferred securities will be reflected as a charge to our consolidated
income, identified as minority interest, whether paid or accrued.
The present value of the FELINE PRIDES contract adjustment payments
are initially charged to equity, with an offsetting credit to liabilities.
Subsequent contract adjustment payments are allocated between this
liability account and interest expense based on a constant rate calculation
over the life of the transaction.
The issuance of the additional FELINE PRIDES for cash will result in
an increase in mandatorily redeemable preferred securities issued by
subsidiary in an amount equal to the current market value of the trust
preferred securities at such time. To the extent cash proceeds received are
less than the current market value of the trust preferred securities at
the time of issuance, a charge to paid-in capital will be recorded for the
difference.
The FELINE PRIDES purchase contracts are forward transactions in our
common stock. Upon settlement of a purchase contract, we will receive $50
on that purchase contract and will issue the requisite number of shares of
common stock. The $50 we receive will be credited to shareholders' equity
allocated between the common stock and paid-in capital accounts.
Before the issuance of shares of common stock upon settlement of the
purchase contracts, the FELINE PRIDES will be reflected in our earnings per
share calculations using the treasury stock method. Under this method, the
number of shares of common stock used in calculating earnings per share is
deemed to be increased by the excess, if any, of the number of shares
issuable upon settlement of the purchase contracts over the number of
shares that could be purchased by us in the market, at the average market
price during the period, using the proceeds receivable upon settlement.
Consequently, we anticipate that there will be no dilutive effect on our
earnings per share except during periods when the average market price of
common stock is above $48.10, with respect to both the current FELINE
PRIDES and additional FELINE PRIDES and $ , with respect to the new
FELINE PRIDES.
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the additional
Growth PRIDES will be used to purchase the underlying treasury securities
to be transferred to holders of the additional Growth PRIDES, and we will
receive no proceeds from the sale of the additional Growth PRIDES. All or
substantially all of the proceeds from the sale of the additional Income
PRIDES and from the common securities will be invested by the trust in our
debentures. We currently anticipate using substantially all of the net
proceeds from the sale of the debentures, estimated to be approximately $
million, after deducting expenses, for general corporate purposes which
may include repaying outstanding indebtedness, repurchasing our common
stock and other purposes.
There will not be any proceeds to us from the exchange of the
current or additional Growth PRIDES and rights for new Growth PRIDES. There
will not be any proceeds to us from the exchange of the current or
additional Income PRIDES and rights for new Income PRIDES. Our issuance of
the debentures and the purchase contracts relating to the new FELINE PRIDES
will not result in the receipt of any cash proceeds but will be done to
settle the claims against us discussed in this prospectus.
EXECUTION OF THE LITIGATION SETTLEMENT
Execution of the Exchange
We will issue two new Income PRIDES to each person who delivers
three rights along with two current Income PRIDES or two additional Income
PRIDES, and we will issue two new Growth PRIDES to each person who delivers
three rights along with two current Growth PRIDES or two additional Growth
PRIDES.
New FELINE PRIDES will not be issued to any person with respect to
rights submitted after February 14, 2001. We will not be required to issue
new FELINE PRIDES to you if the rights agent receives your rights
certificates, current FELINE PRIDES certificates or additional FELINE
PRIDES certificates after that date, regardless of when you sent them.
After you have exercised your right, you may not revoke that
exercise.
With respect to an exchange of current Income PRIDES for new Income
PRIDES, Chase Manhattan Bank, the collateral agent for the current FELINE
PRIDES, will release the trust preferred securities relating to the current
Income PRIDES pledged to it to Cendant Capital I, a Delaware Business
Trust, which issued the trust preferred securities relating to the current
Income PRIDES. The regular trustees of Cendant Capital I will cancel the
trust preferred securities and the indenture trustee under the indenture
will cancel the equivalent principal amount of debentures. In addition, the
purchase contract agent relating to the current FELINE PRIDES will cancel
the related purchase contracts. The new trust will issue a trust preferred
security for each new Income PRIDES. If the rights are exchanged together
with additional Income PRIDES, the new Income PRIDES will not be issued a
new trust preferred security, as it will already include a trust preferred
security issued by Cendant Capital II.
With respect to exchanges of current Growth PRIDES for new Growth
PRIDES, the collateral agent for the current Growth PRIDES will release the
related treasury securities pledged to it, and will transfer them to the
collateral agent for the new Growth PRIDES, with whom such treasury
securities will be pledged to secure the holder's obligation under the
purchase contract relating to the new Growth PRIDES. In addition, the
purchase contract agent for the current Growth PRIDES will cancel the
purchase contracts relating to such exchanged Growth PRIDES. With respect
to exchanges of additional Growth PRIDES for new Growth PRIDES, the new
collateral agent will transfer the treasury securities pledged to it under
the purchase contracts relating to the additional Growth PRIDES from the
collateral account relating to the additional Growth PRIDES to the
collateral account relating to the new Growth PRIDES. In addition, the
purchase contract agent for the additional Growth PRIDES will cancel the
purchase contracts relating to the exchanged additional Growth PRIDES.
You may exercise your rights by delivering to the rights agent on or
prior to February 14, 2001:
o a properly completed and duly executed rights certificate
representing an adequate number of rights;
o any required signature guarantees; and
o FELINE PRIDES certificates representing the requisite amount
of current FELINE PRIDES or additional FELINE PRIDES.
You should deliver your rights certificate and the FELINE PRIDES
certificates to the rights agent. We have appointed as rights
agent for this offering. The rights agent's address for packages sent by mail,
courier or overnight delivery is:
The rights agent telephone number is and its facsimile
number is .
If the new FELINE PRIDES are to be issued to a person other than the
person in whose name the current FELINE PRIDES are held, the person
exercising the rights must also submit to the rights agent payment of any
transfer taxes.
If you do not specify the number of rights being exercised on your
rights certificate, or the number of current FELINE PRIDES or additional
FELINE PRIDES tendered is not sufficient consideration for all of the new
FELINE PRIDES that you indicated you wished to purchase, you will be deemed
to have exercised the maximum number of rights that could be exercised for
the amount of current FELINE PRIDES that the rights agent receives from
you.
Signatures on the rights certificate must be guaranteed by an
eligible guarantor institution, as defined in Rule 17Ad-15 of the Exchange
Act, subject to the standards and procedures adopted by the rights agent.
Eligible guarantor institutions include banks, brokers, dealers, credit
unions, national securities exchanges and savings associations.
Signatures on the rights certificate do not need to be guaranteed if:
(1) the rights certificate provides that the new FELINE PRIDES are to be
delivered directly to you, the record owner of those rights, or
(2) the rights certificate is submitted for the account of a member firm
of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the
United States.
Distinguishing Characteristics of the new FELINE PRIDES
The new FELINE PRIDES will have the same terms as those of the
current FELINE PRIDES and additional FELINE PRIDES, except that:
o the settlement rate of the related purchase contract will be
modified so that it is equal to ; and
o the purchase contracts relating to the new FELINE PRIDES
will benefit from more favorable anti-dilution protection as
discussed below.
The new FELINE PRIDES will be listed, subject to the NYSE 400
holders minimum distribution requirement, which is not expected to be
satisfied when the rights are first distributed.
Each purchase contract underlying a new FELINE PRIDES, unless
earlier terminated, or earlier settled at your option, will obligate you to
purchase, and us to sell, on February 16, 2001, for the stated amount of
the new FELINE PRIDES, which equals $50, a number of newly issued shares of
our common stock equal to the settlement rate. The settlement rate of the
related purchase contract entitles you to purchase and obligates us to sell
a number of newly issued shares of our common stock greater than that of
the purchase contract related to a current FELINE PRIDES or an additional
FELINE PRIDES.
The anti-dilution provisions of purchase contracts relating to the
new FELINE PRIDES will be identical to those attaching to the purchase
contracts relating to the current FELINE PRIDES and the additional FELINE
PRIDES; provided, however, in case we issue, or undertake or agree to
issue, in one or a series of related transactions, an aggregate of more
than one million shares of common stock or any other security conferring
such right, other than for cash at fair value or as consideration for an
acquisition of a business or business assets, and that agreement causes a
decline in the market value for the common stock, the settlement rate for
purchase contracts relating to new FELINE PRIDES may be subject to further
adjustment as described in "Description of the purchase contracts
- -Anti-Dilution Adjustments."
Issuance of Additional FELINE PRIDES and Special FELINE PRIDES
We have incorporated other features into the settlement to assist
holders of rights in obtaining current FELINE PRIDES and additional FELINE
PRIDES to exercise their rights. First, on a date which is no earlier than
, 1999 and is no later than , 1999, we will sell to interested
rights holders up to 4,000,000 additional FELINE PRIDES that can be used to
exercise rights at an offering price per additional FELINE PRIDES equal to
100% of its theoretical value, as described below. Second, we will file a
shelf registration statement covering 15,000,000 FELINE PRIDES (the
"special FELINE PRIDES") with the same terms as the current FELINE PRIDES
and the additional FELINE PRIDES and which may be used to exercise rights,
if issued. We have no obligation to sell any special FELINE PRIDES except
that, within 30 days of the expiration of the rights, we must offer holders
of unexpired rights the opportunity to purchase special FELINE PRIDES for
cash at a price of 105% of their theoretical value.
The price of an additional FELINE PRIDES will equal 100% of its
theoretical value. The additional FELINE PRIDES will be priced not less
than fifteen nor more than sixty days after the distribution date of the
rights. The price will be determined by Merrill Lynch in its capacity as
the calculation agent. As promptly as practicable upon receipt of the
pricing confirmation, we will file with the SEC and distribute a prospectus
supplement containing definitive pricing information and announce the price
to the public.
We will sell the additional FELINE PRIDES according to the following
priority:
(1) holders of rights who received them as part of the original
distribution, to the extent required to exercise their
rights;
(2) any other holders of rights, to the extent required to
exercise their rights;
(3) the public.
The purchase of the additional FELINE PRIDES by persons belonging to
the first two groups is subject to their consent to use the additional
FELINE PRIDES to exchange the rights and is limited to the number of
additional FELINE PRIDES each person requires to exercise its rights. If we
sell all the additional FELINE PRIDES to one of the groups, we will not
sell any additional FELINE PRIDES to a group of a lesser priority. If the
first two groups oversubscribe we will distribute the additional FELINE
PRIDES proportionately among the subscribers. We will not sell any
additional FELINE PRIDES to the public unless members of the first two
groups acquire as a whole at least $100,000,000 face amount of additional
FELINE PRIDES.
In addition to the restrictions stated above, we will not sell any
additional Growth PRIDES unless (1) the sale is to a rights holder who
received those rights as part of the original distribution and was a
beneficial owner of Growth PRIDES on April 15, 1998, or (2) we elect to
issue additional Growth PRIDES.
We will require holders of rights belonging to one of the first two
groups to place orders to purchase additional FELINE PRIDES with the rights
agent not later than the close of business on the first full business day
after the price is first publicly announced. Settlement will occur on the
fifth business day after the announcement date. On the settlement date,
holders of rights will be required to submit funds for the additional
FELINE PRIDES being acquired together with the certificates for the rights.
On the settlement date, we will issue the additional FELINE PRIDES
and will immediately exchange the additional FELINE PRIDES and rights for
new FELINE PRIDES. If we issue the additional FELINE PRIDES to the general
public, we will use reasonable efforts to list the additional FELINE PRIDES
on the NYSE, subject to satisfaction of the minimum distribution
requirements.
Payment for the additional FELINE PRIDES by members of the first two
groups must be made by submitting with their rights, in the manner
described above and by:
(1) bank draft drawn upon a United States bank or a postal,
telegraphic or express money order payable to
, in its capacity as the rights agent, or
(2) wire transfer of funds to the account maintained by the
rights agent for this purpose at .
Payment will be deemed to have been received by the rights agent
only upon receipt by the rights agent of any bank draft drawn upon U.S.
bank, any postal, telegraphic or express money order or any wire transfer.
We may, at our discretion from time to time, issue special FELINE
PRIDES. Except as set forth below, we will have no obligation to issue any
special FELINE PRIDES. If we issue special FELINE PRIDES, they will have
terms that are substantially identical to the current FELINE PRIDES and
additional FELINE PRIDES. We will not offer, issue, or sell special FELINE
PRIDES unless holders of unexpired rights are given priority to purchase
the special FELINE PRIDES on the same terms and conditions as such special
FELINE PRIDES are to be offered to any third party.
No later than thirty days prior to February 16, 2001, which is the
purchase contract settlement date, we will distribute to all record holders
of the rights a preliminary prospectus with respect to the 15 million
special FELINE PRIDES, which will consist of special Income PRIDES and/or
special Growth PRIDES or any combination of them, at our option. We will
inform those persons that they are entitled to purchase special FELINE
PRIDES for cash at a price no greater than 105% of their theoretical value,
including accrued interest. However, purchasers of special FELINE PRIDES
must undertake to exercise all of the rights held by them with respect to
which special FELINE PRIDES are issued, as described below. Not later than
five business days prior to February 14, 2001, we will file with the SEC
and distribute a pricing prospectus and announce the price to the public.
Until the close of business day on February 14, 2001, persons who
hold rights may submit rights and the cash necessary to purchase the number
of special FELINE PRIDES required to exercise all their rights. Not later
than the fifth business day after February 14, 2001, we will issue the
special FELINE PRIDES, which will be immediately exchanged with the
applicable rights for new FELINE PRIDES, the purchase contracts relating to
which will be settled.
Do not send the certificates to us. You are responsible for choosing
the payment and delivery method for your certificates, and you bear the
risks associated with that delivery. If you choose to deliver your
certificates and payment by mail, we recommend that you use registered
mail, properly insured, with return receipt requested. We also recommend
that you allow a sufficient number of days to ensure delivery to the rights
agent and clearance of payment prior to February 14, 2001.
DESCRIPTION OF THE FELINE PRIDES
The summaries of the provisions of documents described below are not
necessarily complete, and in each instance reference is made to the copies
of those documents, including the definitions of terms, which are on file
with the commission. Wherever particular sections of, or terms defined in,
those documents are referred to in this prospectus, those sections or
defined terms are incorporated by reference.
Each FELINE PRIDES will be issued under the purchase contract
agreement between us and the purchase contract agent. The FELINE
PRIDES, including new FELINE PRIDES and additional
FELINE PRIDES offered initially will consist of (A) units referred
to as Income PRIDES, including new Income PRIDES and new Growth
PRIDES, and (B) units referred to as Growth PRIDES, including
new Growth PRIDES and additional Growth PRIDES.
Each Income PRIDES will initially consist of a unit comprised of
(a) a purchase contract under which
(1) you will purchase from us on February 16,
2001, a number of newly issued shares of our
common stock equal to the settlement rate
described below
(2) we will pay you contract adjustment payments
at the rate of 1.05% of $50 per year paid
quarterly, subject to our right to defer these
payments, and
(b) beneficial ownership of a 6.45% trust originated
preferred security, having a stated liquidation
amount per trust preferred security equal to $50,
representing an undivided beneficial ownership
interest in the assets of the trust, which will
consist solely of the debentures,
(1) in the case of a distribution of the
debentures upon the dissolution of the trust
as a result of an investment company event, as
described below, or otherwise, debentures
having a principal amount equal to $50, or
(2) upon the occurrence of a tax event redemption
prior to February 16, 2001, the appropriate
applicable ownership interest in the treasury
portfolio. "Applicable ownership interest"
means, with respect to an Income PRIDES and
the U.S. treasury securities in the treasury
portfolio, (A) a 1/20, or 5%, undivided
beneficial ownership interest in a $1,000
principal or interest amount of a principal or
interest strip in a U.S. treasury security
which matures on or prior to February 15, 2001
and (B) for each scheduled interest payment
date on the debentures that occurs after the
tax event redemption date, a .080625%
undivided beneficial ownership interest in a
$1,000 face amount of the U.S. treasury
security which is a principal or interest
strip maturing on that date.
Each Growth PRIDES will initially consist of a unit comprised of
(a) a purchase contract under which
(1) the holder will purchase from us on February
16, 2001, for an amount in cash equal to $50,
a number of newly issued shares of our common
stock, equal to the settlement rate described
below, and
(2) we will pay the holder contract adjustment
payments at the rate of 1.3% of $50 per year
paid quarterly, subject to our right to defer
these payments, and
(b) a 1/20 undivided beneficial interest in a treasury
security.
The new FELINE PRIDES are generally identical to the current FELINE
PRIDES in all aspects, excluding the settlement rate and the anti-dilution
protections. The trust preferred securities contained in the new Income
PRIDES and additional Income PRIDES and the separately traded trust
preferred securities offered in this prospectus are issued by Cendant
Capital II trust, while the trust preferred securities contained in the
current Income PRIDES are issued by Cendant Capital I trust. New Income
PRIDES holders and additional Income PRIDES holders may, therefore,
exercise voting rights only as they apply to Cendant Capital II.
The purchase price of each FELINE PRIDES will generally be allocated
between the related purchase contract and the related trust preferred
security or interest in a treasury security in proportion to their
respective fair market values at the time of purchase. We will take the
position that
(1) in the case of a new FELINE PRIDES, the entire purchase
price of that new FELINE PRIDES will be allocated to the
related trust preferred security or interest in a treasury
security, and that no amount will be allocated to the
related purchase contract and
(2) in the case of an additional FELINE PRIDES, the entire
purchase price of that additional FELINE PRIDES plus an
amount equal to the negative value of the related purchase
contract will be allocated to the related trust preferred
security or interest in a treasury security, and no amount
will be allocated to the related purchase contract.
This position generally will be binding on each beneficial owner of
each Income PRIDES, but not on the IRS. As long as FELINE PRIDES are in the
form of Income PRIDES or Growth PRIDES, the related trust preferred
securities or the appropriate applicable ownership interest of the treasury
portfolio or treasury securities, as applicable, will be pledged to the
collateral agent to secure your obligation to purchase our common stock
under the related purchase contracts.
Substitution of pledged securities
Each holder of an Income PRIDES, unless a tax event redemption has
occurred, will have the right, at any time on or prior to the fifth
business day immediately preceding February 16, 2001, to substitute for the
related trust preferred securities held by the collateral agent treasury
securities in an aggregate principal amount equal to the aggregate stated
liquidation amount of those trust preferred securities.
The treasury securities will be pledged with the collateral agent
to secure the holder's obligation to purchase our common stock under the
related purchase contracts. Because treasury securities are issued in
integral multiples of $1,000, holders of Income PRIDES may make the
substitution only in integral multiples of 20 Income PRIDES. However, if a
tax event redemption has occurred prior to February 16, 2001, and the
treasury portfolio has become a component of the Income PRIDES, you may
make those substitutions only in integral multiples of 160,000 Income
PRIDES by obtaining the release of the treasury portfolio, rather than the
trust preferred securities, at any time on or prior to the second business
day immediately preceding February 16, 2001.
FELINE PRIDES with respect to which treasury securities have been
substituted for the related trust preferred securities or the appropriate
applicable ownership interest of the treasury portfolio, as the case may
be, as collateral to secure that holder's obligation under the related
purchase contracts will be referred to as Growth PRIDES.
To create 20 Growth PRIDES, unless a tax event redemption has
occurred, you must
(a) deposit with the collateral agent a treasury security having
a principal amount at maturity of $1,000 and
(b) transfer 20 Income PRIDES to the purchase contract agent
accompanied by a notice stating that you have deposited a
treasury security with the collateral agent and are
requesting that the purchase contract agent instruct the
collateral agent to release to you the 20 trust preferred
securities relating to the 20 Income PRIDES.
If contract adjustment payments are at a higher rate for Growth
PRIDES than for Income PRIDES, you will also be required to deliver cash in
an amount equal to the excess of the contract adjustment payments that
would have accrued since the last payment date through the date of
substitution on the Growth PRIDES being created by you, over the contract
adjustment payments that have accrued over the same period on the related
Income PRIDES.
Upon that deposit and the receipt of an instruction from the
purchase contract agent, the collateral agent will effect the release of
the related 20 trust preferred securities from the pledge under the pledge
agreement free and clear of our security interest to the purchase contract
agent, which will
(a) cancel the 20 Income PRIDES,
(b) transfer to you the 20 related trust preferred securities, and
(c) deliver to you 20 Growth PRIDES.
The treasury security will be substituted for the trust preferred
securities and will be pledged with the collateral agent to secure your
obligation to purchase our common stock under the related purchase
contracts. The related trust preferred securities released to you will
trade separately from the resulting Growth PRIDES. Contract adjustment
payments will be payable by us on those Growth PRIDES on each payment date
from the later of and the last payment date on
which contract adjustment payments were paid. In addition, OID for
United States federal income tax purposes will accrue on the related
treasury securities. Distributions on any trust preferred securities, up to
but not including February 16, 2001, including after a substitution of
collateral resulting in the creation of Growth PRIDES, will continue to be
payable quarterly by the trust at the rate of 6.45% of $50 per year,
subject to our deferral rights.
Each holder of a Growth PRIDES, unless a tax event redemption has
occurred, will have the right, at any time on or prior to the fifth
business day immediately preceding February 16, 2001, to substitute for the
related treasury securities held by the collateral agent trust preferred
securities in an aggregate principal amount equal to the aggregate stated
liquidation amount of those treasury securities, thereby creating Income
PRIDES.
The trust preferred securities will be pledged with the collateral
agent to secure the holder's obligation to purchase our common stock under
the related purchase contract. Because treasury securities are issued in
integral multiples of $1,000, you may make those substitutions only in
integral multiples of 20 Growth PRIDES. However, if a tax event redemption
has occurred and the treasury portfolio has become a component of the
Income PRIDES, you may make that substitution only in integral multiples of
160,000 Growth PRIDES, at any time, on or prior to the second business day
immediately preceding February 16, 2001.
To create 20 Income PRIDES, unless a tax event redemption has
occurred, you must
(a) deposit with the collateral agent 20 trust preferred
securities and
(b) transfer 20 Growth PRIDES certificates to the purchase
contract agent accompanied by a notice stating that you had
deposited 20 trust preferred securities with the collateral
agent and are requesting that the purchase contract agent
instruct the collateral agent to release to you the treasury
security relating to those Growth PRIDES.
Upon the deposit and receipt of an instruction from the purchase
contract agent, the collateral agent will effect the release of the related
treasury security from the pledge under the pledge agreement free and clear
of our security interest to the purchase contract agent, which will
(a) cancel the 20 Growth PRIDES,
(b) transfer to you the related treasury security and
(c) deliver to you 20 Income PRIDES.
The substituted trust preferred securities will be pledged with
the collateral agent to secure your obligation to purchase our common stock
under the related purchase contacts. Cumulative cash distribution, payable
quarterly at a rate of 7.5% of $50 per year on those Income PRIDES, subject
to our deferral rights, will be payable by us on those Income PRIDES on
each payment date from the later of and the last payment date on which
those cumulative cash distributions, if any, were paid.
Holders who elect to substitute pledged securities, creating or
recreating Growth PRIDES or Income PRIDES, shall be responsible for any
fees or expenses payable in connection with substitution.
Recreating Income PRIDES or Growth PRIDES
On or prior to the fifth business day immediately preceding February
16, 2001, a holder of Growth PRIDES or Income PRIDES may, unless a tax
event redemption has occurred, recreate Income PRIDES or Growth PRIDES by
(a) depositing with the collateral agent 20 trust preferred
securities or a treasury security and
(b) transferring 20 Growth PRIDES or Income PRIDES, as
applicable, to the purchase contract agent accompanied by a
notice stating that the Growth PRIDES or Income PRIDES
holder has deposited 20 trust preferred securities or a
treasury security with the collateral agent and requesting
that the purchase contract agent instruct the collateral
agent to release to that holder the related treasury
security or trust preferred securities, as applicable.
Upon the deposit and receipt of instructions from the purchase
contract agent, the collateral agent will effect the release of the related
treasury security or trust preferred securities, as applicable, from the
pledge of the pledge agreement free and clear of our security interest to
the purchase contract agent, which will
(a) cancel the 20 Growth PRIDES or Income PRIDES, as applicable,
(b) transfer to you the treasury security or trust preferred
securities, as applicable, and
(c) deliver to you 20 Income PRIDES or 20 Growth PRIDES, as
applicable.
If, however, a tax event redemption has occurred prior to February
16, 2001 and the treasury portfolio has become a component of the Income
PRIDES, holders of Growth PRIDES or Income PRIDES, as applicable, may make
those substitutions (by using, in the case of the Growth PRIDES, the
appropriate applicable ownership interest of the treasury portfolio rather
than the trust preferred securities) at any time on or prior to the second
business day immediately preceding February 16, 2001, but only in integral
multiples of 160,000 Growth PRIDES or Income PRIDES, as applicable.
If contract adjustment payments are at a higher rate for Growth
PRIDES than for Income PRIDES, holders of Income PRIDES wishing to recreate
Growth PRIDES will also be required to deliver cash in an amount equal to
the excess of the contract adjustment payments that would have accrued
since the last payment date through the date of substitution on the Growth
PRIDES being recreated by those holders, over the contract adjustment
payments that have accrued over the same time period on the related Income
PRIDES.
The substituted trust preferred securities, the appropriate
applicable ownership interest of the treasury portfolio or a treasury
security will be pledged with the collateral agent to secure your
obligation to purchase our common stock under the related purchase
contracts.
Current Payments
Holders of Income PRIDES are entitled to receive aggregate cash
distributions at a rate of 7.5% of $50 per year from and after
through and including February 15, 2001, payable quarterly in arrears. The
quarterly payments on the Income PRIDES will consist of
(1) cumulative cash distributions on the related trust preferred
securities or the treasury portfolio, as applicable, payable
at the rate of 6.45% of $50 per year and
(2) contract adjustment payments payable by us at the rate of
1.05% of $50 per year,
subject, in the case of distributions on the trust preferred
securities and the contract adjustment payments, to our right of deferral.
Each holder of Growth PRIDES will be entitled to receive quarterly
contract adjustment payments payable by the us at the rate of 1.3% of $50
per year, subject to our rights of deferral. In addition, OID will accrue
on the related treasury securities.
The ability of the trust to make the quarterly distributions on the
trust preferred securities is solely dependent upon the receipt of
corresponding interest payments from us on the debentures. We have the
right at any time, and from time to time, limited to a period not extending
beyond February 16, 2003, to defer the interest payments on the debentures.
As a consequence of that deferral, unless a tax event redemption has
occurred, quarterly distributions to holders of Income PRIDES or any trust
preferred securities outstanding after February 16, 2001 or after a
substitution of collateral resulting in the creation of Growth PRIDES would
be deferred. However, despite the deferral, the distributions would
continue to accumulate quarterly and would accrue interest compounded
quarterly at the rate of 6.45% per year through and including February 15,
2001, and at the reset rate afterwards.
We also have the right to defer the payment of contract adjustment
payments on the related purchase contracts until February 16, 2001.
However, deferred contract adjustment payments will bear additional
contract adjustment payments at the rate of 7.5% per year. The deferred
installments of contract adjustment payments, together with the additional
contract adjustment payments, shall be referred to as the "deferred
contract adjustment payments."
If a tax event redemption has occurred and the treasury portfolio
has become a component of the Income PRIDES, quarterly distributions on the
treasury portfolio, as a portion of the cumulative quarterly distributions
to the holders of Income PRIDES, will not be deferred.
Our obligations with respect to the debentures will be senior and
unsecured and will rank on a parity in right of payment with all our other
senior unsecured obligations. Our obligations with respect to the contract
adjustment payments will be subordinated and junior in right of payment to
our senior indebtedness.
Valuation
The theoretical value of the new FELINE PRIDES equals the
theoretical value of the current FELINE PRIDES plus $17.57 as of ,
1999. The theoretical value of the additional FELINE PRIDES equals 100% of
the theoretical value of the current FELINE PRIDES as of , 1999.
Theoretical value is the value of a FELINE PRIDES calculated in accordance
with the formula set forth , which is a generally accepted method
for valuing similar securities. The theoretical values are only as of the
date rights are issued. We, Merrill Lynch or any other party to the settlement
cannot and are not assuring or guaranteeing the values and market prices for
the new FELINE PRIDES and the additional FELINE PRIDES.
The calculation agent will conduct the valuation process pursuant to
the following steps. These steps are illustrated in the table entitled
"Hypothetical Valuation across a Range of Stock Prices" below.
First, the calculation agent will determine the theoretical value of
the current FELINE PRIDES marked "f". The additional FELINE PRIDES are
designed to have a theoretical value equal to 100% of the theoretical value
of the current FELINE PRIDES. The current FELINE PRIDES will be valued as a
sum of their component parts:
o Fixed Income Component:
o Present Value of 7.50% coupons discounted at our
debt rate
o Present Value of $50 stated value discounted at term
LIBOR
o Options Component:
o Short 1.3514 puts struck at $37.00 per share
o Long 1.0395 calls struck at $48.10 per share
Both options are valued assuming a discount rate of term LIBOR and
using a trailing 100-day volatility schedule as determined by Bloomberg LP.
Second, the calculation agent will determine the theoretical value
of the new FELINE PRIDES:
o The new FELINE PRIDES are designed to have a value equal to
the theoretical value of current FELINE PRIDES plus $17.57
Third, the calculation agent will determine the settlement rate that
generates the theoretical value of the new FELINE PRIDES:
o The new FELINE PRIDES have the same coupons and maturity as
the current FELINE PRIDES and the additional FELINE PRIDES.
o The equity value of the new FELINE PRIDES is equal to the
theoretical value of the new FELINE PRIDES minus the present
value of the coupons.
o The settlement rate will be the equity value of the new
FELINE PRIDES divided by the closing common stock price on
the determination date.
<TABLE>
<CAPTION>
Hypothetical Valuation across a Range of Stock Prices
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock Price as of
Determination Date $5.00 $10.00 $15.00 $17.4375 $20.00 $25.00 $30.00 $35.00 $40.00
PV Coupons(1) $6.99 $6.99 $6.99 $6.99 $6.99 $6.99 $6.99 $6.99 $6.99
PV Principal (2) $45.06 $45.06 $45.06 $45.06 $45.06 $45.06 $45.06 $45.06 $45.06
Put Value (2)(3) ($38.36) ($32.19) ($26.94) ($24.72) ($22.61) ($19.08) ($16.19) ($13.82) ($11.87)
Call Value(2)(3) $0.02 $0.27 $1.00 $1.57 $2.30 $4.15 $6.48 $9.22 $12.32
Current &
additional
FELINE PRIDES
Value $13.71 $20.13 $26.11 $28.90 $31,74 $37.12 $42.34 $47,45 $52.50
Value of 1.5
rights
assumed as of
determination
date $17.57 $17.57 $17.57 $17.57 $17.57 $17.57 $17.57 $17.57 $17.57
new FELINE
PRIDES Value $31.28 $37.70 $43.68 $46.47 $49.31 $54.69 $59.91 $65.02 $70.07
new FELINE
PRIDES Equity
Value $24.29 $30.71 $36.69 $39.48 $42.32 $47.70 $52.92 $58.03 $63.08
Settlement Rate 4.8580 3.0710 2.4460 2.2641 2.1160 1.9080 1.7640 1.6580 1.5770
</TABLE>
The figures are provided by way of example only. The actual values
will be determined by the calculation agent as of the close of business on
the determination date. The theoretical values are only as of the date that
the rights are issued:
(1) discounted at two-year Eurodollar LIBOR of 5.47% + 1.5%
credit spread determined as of March 15, 1999;
(2) discounted at two-year Eurodollar LIBOR of 5.47% determined
as of March 15, 1999; and
(3) historical volatility over the previous 100 trading days of
60.0% used in valuing options determined as of March 15,
1999.
The prices we have set for the additional FELINE PRIDES and new
FELINE PRIDES are not necessarily an indication of our actual value or of
the value of the FELINE PRIDES or common stock. We cannot assure you that
the market price of the FELINE PRIDES will not decline during this
offering. We also cannot assure you that we will be able to sell new FELINE
PRIDES or additional FELINE PRIDES at a price equal to or greater to the
prices determined here.
Voting and other rights
Holders of trust preferred securities, in that capacity, will not
be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of regular trustees and will generally have no voting
rights except in limited circumstances. Holders of purchase contracts
relating to the Income PRIDES or Growth PRIDES, in that capacity, will have
no voting or other rights in respect of our common stock.
Listing of the securities
We will apply to list the new Income PRIDES and the new Growth
PRIDES on the NYSE under the symbols and , respectively, subject
to official notice of issuance and minimum distribution requirements. The
additional FELINE PRIDES will not initially be listed on any exchange.
NYSE symbol of common stock
The common stock is listed on the NYSE under the symbol "CD." The
current FELINE PRIDES are listed under the symbols "CDPrI" and "CDPrG."
Miscellaneous
We or our affiliates may from time to time purchase any of the
securities offered in this prospectus which are then outstanding by tender,
in the open market or by private agreement.
DESCRIPTION OF THE PURCHASE CONTRACTS
General
Each purchase contract underlying a FELINE PRIDES, unless earlier
terminated, or earlier settled at your option, will obligate you to
purchase, and us to sell, on February 16, 2001, for an amount in cash equal
to $50, a number of newly issued shares of our common stock equal to the
settlement rate.
The settlement rate, which is the number of newly issued shares of
our common stock issuable upon settlement of a purchase contract on
February 16, 2001, will be calculated for additional FELINE PRIDES, subject
to adjustment under certain circumstances, as follows:
(a) if the applicable market value is equal to or greater than
the threshold appreciation price of $48.10, which is 30%
above $37, the last reported sale price of the common stock
on February 24, 1998, the settlement rate, which is equal to
$50 divided by $48.10, will be 1.0395; accordingly, if,
between the date of this prospectus and the period during
which the applicable market value is measured, the market
price for the common stock increases to an amount that is
higher than $48.10, the aggregate market value of the shares
of common stock issued upon settlement of each purchase
contract, assuming that this market value is the same as the
applicable market value of the common stock, will be higher
than $50, and if the market price equals $48.10, the
aggregate market value of those shares, assuming that this
market value is the same as the applicable market value of
the common stock, will equal $50;
(b) if the applicable market value is less than $48.10 but
greater than $37, the settlement rate will be equal to $50
divided by the applicable market value; accordingly, if the
market price for the common stock increases between the date
of this prospectus and the period during which the
applicable market value is measured but that market price is
less than $48.10, the aggregate market value of the shares
of common stock issued upon settlement of each purchase
contract, assuming that this market value is the same as the
applicable market value of the common stock, will equal $50;
and
(c) if the applicable market value is less than or equal to $37,
the settlement rate, which is equal to $50 divided by $37,
will be 1.3514; accordingly, if the market price for the
common stock decreases between the date of this prospectus
and the period during which the applicable market value is
measured, the aggregate market value of the shares of common
stock issued upon settlement of each purchase contract,
assuming that the market value is the same as the applicable
market value of the common stock, will be less than $50, and
if the market price stays the same, the aggregate market
value of those shares, assuming that this market value is
the same as the applicable market value of the common stock,
will equal $50.
The applicable market value means the average of the closing prices
per share of common stock on each of the twenty consecutive trading days
ending on the third trading day immediately preceding February 16, 2001.
The closing price of the common stock on any date of determination
means the closing sale price or, if no closing price is reported, the last
reported sale price of the common stock on the NYSE on that date. If the
common stock is not listed for trading on the NYSE on any of those dates,
the closing price of the common stock on any date of determination means
the closing sales price as reported in the composite transactions for the
principal U.S. securities exchange on which the common stock is so listed,
or if the common stock is not so listed on a U.S. national or regional
securities exchange, as reported by the Nasdaq stock market, or, if the
common stock is not so reported, the last quoted bid price for the common
stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization or, if that bid price is not available, the
market value of the common stock on that date as determined by a nationally
recognized independent investment banking firm retained by us for this
purpose.
A trading day is a day on which the common stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the common stock.
Each purchase contract underlying a new FELINE PRIDES, unless
earlier terminated, or earlier settled at your option, will obligate you to
purchase, and us to sell, on February 16, 2001, for $50 cash, a number of
newly issued shares of our common stock equal to the settlement rate.
Unlike the settlement rate of the additional FELINE PRIDES and
current FELINE PRIDES, which varies depending on the applicable market
value, the settlement rate of the new FELINE PRIDES is fixed at . At
the settlement date, we will issue a holder of new FELINE PRIDES
shares of common stock per each new FELINE PRIDES, regardless of the market
price of our common stock.
The new FELINE PRIDES settlement rate entitles a holder of new
FELINE PRIDES to purchase, and obligates us to sell, a number of newly
issued shares of common stock greater than the number issued to a holder of
current FELINE PRIDES or additional FELINE PRIDES. The difference in value
between the amount of common stock we will issue a holder of current FELINE
PRIDES or additional FELINE PRIDES and the amount of common stock we will
issue a holder of new FELINE PRIDES will equal $17.57 per new FELINE
PRIDES, subject to adjustment for expenses. We selected the fixed
settlement rate of because, given an initial stock price of
$17.4375, this rate will return $11.71 of value per right. One and a half
rights are required to generate the additional value of $17.57 for each new
FELINE PRIDES.
The following table demonstrates the net additional shares per
right to be delivered to a holder of new FELINE PRIDES, as compared to
current FELINE PRIDES and additional FELINE PRIDES, upon settlement of the
related purchase contracts. The table displays that the value of the right
varies positively with the price of our common stock. Because the new
FELINE PRIDES settlement rate is fixed, the higher the price of our stock,
the more value the holder of new FELINE PRIDES will receive for its fixed
amount of common stock. The values in the table are theoretical values and
may not represent the price that may actually be realized in the market.
The actual values will be determined at the close of the determination
date, which will take place two days prior to the distribution of the
rights.
Net Additional Shares from Right:
Stock Conversion Ratios
A B C D E
Stock Current New Net Shares Value per
Price & Addi- PRIDES Per Right Right
tional (C-B)x2/3 (AxD)
PRIDES
- -------- --------- --------- ---------- --------
5 1.3514 0.6085 3.04
10 1.3514 0.6085 6.08
15 1.3514 0.6085 9.13
17.4375 1.3514 0.6085 10.61
20 1.3514 0.6085 12.17
30 1.3514 0.6085 18.25
35 1.3514 0.6085 21.30
37 1.3514 0.6085 22.51
39 1.2821 0.6547 25.53
41 1.2195 0.6964 28.55
43 1.1628 0.7342 31.57
45 1.1111 0.7687 34.59
47 1.0638 0.8002 37.61
50 1.0395 0.8164 40.82
No fractional shares of common stock will be issued by us pursuant
to the purchase contracts. In place of fractional shares otherwise
issuable, calculated on an aggregate basis, in respect of the purchase
contracts you are settling, you will be entitled to receive an amount of
cash equal to the fractional share times the applicable market value.
On the business day immediately preceding February 16, 2001, unless
(1) you have settled the related purchase contracts prior
to February 16, 2001 through the early delivery of
cash to the purchase contract agent, in the manner
described under "-Early Settlement,"
(2) in the case of Income PRIDES, you have settled the
related purchase contracts with separate cash on the
business day immediately preceding February 16, 2001,
having given prior notice in the manner described
under "--Notice to Settle with Cash",
(3) you have had the trust preferred securities related
to your purchase contracts remarketed in the manner
described in this prospectus, or
(4) an event described under "--Termination" below has
occurred, then
In the case of Income PRIDES, unless a tax event redemption has
occurred, we will exercise our rights as a secured party to dispose of the
trust preferred securities in accordance with applicable law. In the case
of Growth PRIDES or Income PRIDES, if a tax event redemption has occurred,
the principal amount of the related treasury securities or the appropriate
applicable ownership interest of the treasury portfolio, as applicable,
when paid at maturity, will automatically be applied to satisfy in full
your obligation to purchase common stock under the related purchase
contracts. The common stock will then be issued and delivered to you or
your designee, upon presentation and surrender of the certificate
evidencing the FELINE PRIDES and payment by you of any transfer or similar
taxes payable in connection with the issuance of the common stock to any
person other than you. Where a holder of either Income PRIDES or Growth
PRIDES effects the early settlement of the related purchase contracts
through the delivery of cash or, in the case of Income PRIDES, settles the
related purchase contracts with cash on the business day immediately
preceding February 16, 2001, the related trust preferred securities or
treasury securities, as the case may be, will be released to the holder as
described in this prospectus. The funds received by the collateral agent on
the business day immediately preceding February 16, 2001, upon cash
settlement of a purchase contract, will be promptly invested in overnight
permitted investments and paid to us on February 16, 2001. Any funds
received by the collateral agent in respect of the interest earned from the
overnight investment in permitted investments will be distributed to the
purchase contract agent for payment to the holders.
Prior to the date on which shares of common stock are issued in
settlement of purchase contracts, the common stock underlying the related
purchase contracts will not be deemed to be outstanding for any purpose and
the holders of those purchase contracts will not have any voting rights,
rights to dividends or other distributions, rights or privileges of a
stockholder of Cendant by virtue of holding the purchase contracts.
As a holder of an Income PRIDES or Growth PRIDES, you will, by
acceptance and under the terms of the purchase contract agreement and the
related purchase contracts, be deemed to have
(a) irrevocably agreed to be bound by the terms of the related
purchase contracts and the pledge agreement for so long as
you remain a holder of that FELINE PRIDES, and
(b) duly appointed the purchase contract agent as your
attorney-in-fact to enter into and perform the related
purchase contracts on behalf of and in your name.
In addition, as a beneficial owner of Income PRIDES or Growth
PRIDES, you, by acceptance of the interest, will be deemed to have agreed
to treat for United States federal, state and local income and franchise
tax purposes,
(a) yourself as the owner of the related trust preferred
securities, the appropriate applicable ownership interest of
the treasury portfolio or the treasury securities, as the
case may be, and
(b) the debentures as indebtedness that we have issued.
Remarketing
Under the remarketing agreement and subject to the terms of the
remarketing underwriting agreement between the remarketing agent, the
purchase contract agent, us and the trust, the trust preferred securities
of Income PRIDES holders' who have failed to notify the purchase contract
agent, on or prior to the fifth business day immediately preceding February
16, 2001 of their intention to settle the related purchase contracts with
separate cash on the business day immediately preceding February 16, 2001,
will be remarketed on the third business day immediately preceding the
February 16, 2001.
The remarketing agent will use its reasonable efforts to remarket
those trust preferred securities on that date at a price of approximately
100.5% of the aggregate stated liquidation amount of those trust preferred
securities, plus accrued and unpaid distributions, including any deferred
distributions. The portion of the proceeds from that remarketing equal to
the aggregate stated liquidation amount of those trust preferred securities
will automatically be applied to satisfy in full those Income PRIDES
holders' obligations to purchase common stock under the related purchase
contracts. In addition, after deducting as the remarketing fee an amount
not exceeding 25 basis points (.25%) of the aggregate stated liquidation
amount of the remarketed trust preferred securities, from any amount of
those proceeds in excess of the aggregate stated liquidation amount of the
remarketed trust preferred securities plus any accrued and unpaid
distributions, including any deferred distributions, the remarketing agent
will remit the remaining portion of the proceeds, if any, for the benefit
of that holder. Income PRIDES holders whose trust preferred securities are
so remarketed will not otherwise be responsible for the payment of any
remarketing fee.
If, despite using its reasonable efforts, the remarketing agent
cannot remarket the related trust preferred securities of those holders of
Income PRIDES at a price not less than 100% of the aggregate stated
liquidation amount of those trust preferred securities plus accrued and
unpaid distributions, including any deferred distributions, and thus
resulting in a failed remarketing, we will exercise our rights as a secured
party to dispose of the trust preferred securities in accordance with the
applicable law and satisfy in full, from the proceeds of that disposition,
that holder's obligation to purchase common stock under the related
purchase contracts. However, if we exercise those rights as a secured
creditor, any accrued and unpaid distributions, including any deferred
distributions, on those trust preferred securities will be paid in cash by
us to the holders of record of those trust preferred securities. We will
cause a notice of the failed remarketing to be published on the second
business day immediately preceding February 16, 2001 by publication in a
daily newspaper in the English language of general circulation in the city
of New York, which is expected to be The Wall Street Journal. In addition,
we will request, not later than ten nor more than 15 calendar days prior to
the remarketing date, that the depository notify its participants holding
trust preferred securities, Income PRIDES and Growth PRIDES of the
remarketing and of the procedures that must be followed if a trust
preferred security holder wishes to exercise its right to put its trust
preferred security to us as described in this prospectus. We will endeavor
to ensure that a registration statement with regard to the full amount of
the trust preferred securities to be remarketed shall be effective in a
form that will enable the remarketing agent to rely on it in connection
with the remarketing process. It is currently anticipated that Merrill
Lynch, Pierce, Fenner & Smith Incorporated will be the remarketing agent.
Early Settlement
A holder of Income PRIDES may settle the related purchase contracts
on or prior to the fifth business day immediately preceding February 16,
2001 by presenting and surrendering the FELINE PRIDES certificate
evidencing those Income PRIDES at the offices of the purchase contract
agent. The holder should also present the form of election to settle early
on the reverse side of that certificate completed and executed as
indicated, accompanied by payment payable to us in immediately available
funds of an amount equal to $50 times the number of purchase contracts
being settled. However, if a tax event redemption has occurred prior to
February 16, 2001 and the treasury portfolio has become a component of the
Income PRIDES, holders of those Income PRIDES may settle early only in
integral multiples of 160,000 Income PRIDES, and the related appropriate
applicable ownership interest of the treasury portfolio, at any time on or
prior to the second business day immediately preceding February 16, 2001.
A holder of Growth PRIDES may settle the related purchase contracts
on or prior to the second business day immediately preceding February 16,
2001 by presenting and surrendering the FELINE PRIDES certificate
evidencing the Growth PRIDES at the offices of the purchase contract agent
with the form of election to settle early on the reverse side of that
certificate completed and executed as indicated, accompanied by payment in
immediately available funds of an amount equal to $50 times the number of
purchase contracts being settled.
So long as the FELINE PRIDES are evidenced by one or more global
security certificates deposited with the depositary, procedures for early
settlement will also be governed by standing arrangements between the
depositary and the purchase contract agent.
Upon early settlement of the purchase contracts related to any
Income PRIDES or Growth PRIDES:
(a) as a holder of an additional FELINE PRIDES, you will receive
newly issued shares of common stock per Income PRIDES or
Growth PRIDES, regardless of the market price of the common
stock on the date of the early settlement. As a holder of a
new FELINE PRIDES, you will receive shares of common stock
per new FELINE PRIDES. The number of newly issued shares of
common stock in both cases will be subject to adjustment
under the circumstances described in "--Anti-Dilution
Adjustments" below;
(b) the trust preferred securities, the appropriate applicable
ownership interest of the treasury portfolio or the treasury
securities, related to the Income PRIDES or Growth PRIDES,
as applicable, will then be transferred to you free and
clear of our security interest;
(c) your right to receive any deferred contract adjustment
payments on the purchase contracts being settled will be
forfeited;
(d) your right to receive future contract adjustment payments
will terminate; and
(e) no adjustment will be made to or for you on account of any
deferred contract adjustment payments or any amounts accrued
in respect of contract adjustment payments.
If the purchase contract agent receives a FELINE PRIDES
certificate, accompanied by the completed election to settle early form and
the requisite amount of immediately available funds, from you by 5:00 p.m.,
New York City time, on a business day, that day will be considered the
settlement date. If the purchase contract agent receives those documents
after 5:00 p.m., New York City time, on a business day or at any time on a
day that is not a business day, unless you are an Income PRIDES holder and
a tax event redemption has occurred, the next business day will be
considered the settlement date.
Upon early settlement of purchase contracts in the manner described
above, presentation and surrender of the FELINE PRIDES certificate
evidencing the related Income PRIDES or Growth PRIDES and payment of any
transfer or similar taxes payable by the holder in connection with the
issuance of the related common stock to any person other than the holder of
the Income PRIDES or Growth PRIDES, we will cause the shares of common
stock being purchased to be issued, and the related trust preferred
securities, the appropriate applicable ownership interest of the treasury
portfolio or the treasury securities, as the case may be, securing those
purchase contracts to be released from the pledge under the pledge
agreement and transferred, within three business days following the
settlement date, to you or your designee.
Notice to Settle with Cash
If you want to settle the purchase contract underlying a FELINE
PRIDES with separate cash on the business day immediately preceding
February 16, 2001, you must notify the purchase contract agent by
presenting and surrendering the FELINE PRIDES certificate evidencing those
FELINE PRIDES. You must present the certificates at the offices of the
purchase contract agent with the form of "Notice to Settle by Separate
Cash" on the reverse side of the certificate completed and executed as
indicated. You must present the documents on or prior to 5:00 p.m., New
York City time, on the second business day immediately preceding February
16, 2001 if you are a Growth PRIDES holder or if you are an Income PRIDES
holder and a tax event redemption has occurred. If you are an Income PRIDES
holder, you must present the document on the fifth business day immediately
preceding February 16, 2001.
If you have given notice of your intention to settle the related
purchase contract with separate cash but failed to deliver the cash on the
business day immediately preceding February 16, 2001, then we will exercise
our right as a secured party to dispose of, in accordance with the
applicable law, the related trust preferred securities, the applicable
ownership interest of the treasury portfolio or the treasury securities, as
the case may be, to satisfy in full from the proceeds of that disposition
your obligation to purchase common stock under the related purchase
contract.
Contract Adjustment Payments
Contract adjustment payments will be fixed at a rate per year of
1.05% of $50 per purchase contract in the case of Income PRIDES, and at a
rate per year of 1.3% of $50 per purchase contract in the case of Growth
PRIDES. Contract adjustment payments that are not paid when due, after
giving effect to any permitted deferrals, will continue to accrue at the
rate per year of 7.5% compounded quarterly, until paid. Contract adjustment
payments payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. Contract adjustment payments will accrue from
and will be payable quarterly in arrears on February 16, May 16,
August 16 and November 16 of each year, commencing .
Contract adjustment payments will be payable to the holders of
purchase contracts as they appear on the books and records of the purchase
contract agent on the relevant record dates.
As long as the Income PRIDES or Growth PRIDES remain in book-entry
only form, the record dates will be one business day prior to the relevant
payment dates. Those distributions will be paid through the purchase
contract agent who will hold amounts received in respect of the contract
adjustment payments for your benefit relating to those Income PRIDES or
Growth PRIDES. Subject to any applicable laws and regulations, each of
those payments will be made as described under "--Book-Entry System." If
the Income PRIDES or Growth PRIDES do not continue to remain in book-entry
only form, we shall have the right to select relevant record dates, which
shall be more than one business day but less than 60 business days prior to
the relevant payment dates.
If any date on which contract adjustment payments are to be made
on the purchase contracts related to the Income PRIDES or Growth PRIDES is
not a business day, then payment of the contract adjustment payments
payable on that date will be made on the next succeeding day which is a
business day, and no interest or payment will be paid in respect of the
delay. However, if that business day is in the next succeeding calendar
year, that payment shall be made on the immediately preceding business day,
in each case with the same force and effect as if made on that payment
date. A "business day" shall mean any day other than Saturday, Sunday or
any day on which banking institutions in New York City in the State of New
York are permitted or required by any applicable law to close.
Our obligations with respect to contract adjustment payments will
be subordinated and junior in right of payment to our obligations under any
senior indebtedness.
Option to Defer Contract Adjustment Payments
We may, at our option and upon prior written notice to the holders
of the FELINE PRIDES and the purchase contract agent, defer the payment of
contract adjustment payments on the purchase contracts until no later than
February 16, 2001. However, deferred contract adjustment payments, if any,
will bear additional contract adjustment payments at the rate of 7.5% per
year, compounding on each succeeding payment date, until paid. If the
purchase contracts are terminated upon the occurrence of specific events of
our bankruptcy, insolvency or reorganization, the right to receive contract
adjustment payments and deferred contract adjustment payments, if any, will
also terminate.
If we elect to defer the payment of contract adjustment payments on
the purchase contracts until February 16, 2001, you will receive on
February 16, 2001, in respect of the deferred contract adjustment payments,
instead of a cash payment, a number of shares of our common stock equal to
(x) the aggregate amount of deferred contract adjustment payments payable
to you divided by (y) the applicable market value.
If we exercise our option to defer the payment of contract
adjustment payments, until the deferred contract adjustment payments have
been paid, we shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation
payment with respect to, any of our capital stock or make guarantee
payments with respect to the above-mentioned, other than
o purchases or acquisitions of our capital stock in connection
with the satisfaction of our obligations under any employee
or agent benefit plans or under any contract or security
outstanding on the date of that event requiring us to
purchase our capital stock,
o as a result of a reclassification of our capital stock or
the exchange or conversion of one class or series of our
capital stock for another class or series of our capital
stock,
o the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of our capital stock or the security being
converted or exchanged,
o dividends or distributions in our capital stock (or rights
to acquire capital stock) or repurchases or redemptions of
capital stock solely from the issuance or exchange of
capital stock or
o redemptions or repurchases of any rights outstanding under a
shareholder rights plan.
Anti-Dilution Adjustments
The formula for determining the settlement rate will be subject to
adjustment, without duplication, upon the occurrence of events, including:
(a) the payment of dividends and distributions of our common
stock on our common stock;
(b) the issuance to all holders of our common stock of rights,
warrants or options entitling them, for a period of up to 45
days, to subscribe for or purchase our common stock at less
than the current market price;
(c) subdivisions, splits and combinations of our common stock;
(d) distributions to all holders of our common stock of our
evidences of indebtedness, shares of capital stock,
securities, cash or property, excluding any dividend or
distribution covered by clause (a) or (b) above and any
dividend or distribution paid exclusively in cash;
(e) distributions consisting exclusively of cash to all holders
of our common stock in an aggregate amount that, together
with
o all-cash distributions made within the preceding 12
months and
o any cash and the fair market value, as of the
expiration of the tender or exchange offer referred
to below, of consideration payable in respect of any
tender or exchange offer by us or a subsidiary of
ours for the common stock concluded within the
preceding 12 months, exceeds 15% of our aggregate
market capitalization; the aggregate market
capitalization being the product of the current
market price of the common stock multiplied by the
number of shares of common stock then outstanding on
the date of that distribution; and
(f) the successful completion of a tender or exchange offer made
by us or any subsidiary of ours for our common stock which
involves an aggregate consideration that, together with
o any cash and the fair market value of consideration
payable in respect of any tender or exchange offer by
us or a subsidiary of ours for the common stock
concluded within the preceding 12 months and
o the aggregate amount of any all-cash distributions to
all holders of our common stock made within the
preceding 12 months, exceeds 15% of our aggregate
market capitalization on the expiration of the tender
or exchange offer.
The "current market price" per share of common stock on any day
means the average of the daily closing prices for the five consecutive
trading days selected by us commencing not more than 30 trading days
before, and ending not later than, the earlier of the day in question and
the day before the "ex date" with respect to the issuance or distribution
requiring that computation. For purposes of this paragraph, the term "ex
date," when used with respect to any issuance or distribution, shall mean
the first date on which the common stock trades regular way on that
exchange or in that market without the right to receive the issuance or
distribution.
The new FELINE PRIDES will benefit from additional anti-dilution
provisions, providing that if after the distribution date of the rights and
prior to the date which is 70 days after the distribution date:
(a) we issue, undertake, or agree to issue in one or a series of
related transactions an aggregate of more than one million
shares of our common stock or securities which are or may be
convertible into, exchangeable for, or which confer or may
confer a right to acquire more than one million shares of
our common stock, subject to adjustment for mergers,
consolidations, stock splits, recapitalizations, or similar
transactions, other than for cash at fair value, as
determined in good faith by our board of directors or as
consideration for an acquisition of a business or of assets
to be used in its business; and
(b) following the announcement of our intention to issue those
shares or other securities, which includes a description of
the material terms of that issuance, the calculation average
of the closing prices of our common stock on the NYSE for
the ten consecutive trading days following the announcement
is less than the closing price of the stock on the NYSE on
the trading day immediately prior to the announcement, then
the settlement rate shall be adjusted further, but using the
calculation average as the market value of our common stock
for purposes of that calculation.
We will deem these agreements, undertakings or issuances as a
material corporate event in determining the timing of any announcements.
In the case of reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions in accordance to which our common
stock is converted into the right to receive securities, cash or property,
each purchase contract then outstanding would, without the consent of the
holders of the related Income PRIDES or Growth PRIDES, become a contract to
purchase only the kind and amount of securities, cash and property
receivable upon consummation of the transaction by a holder of the number
of shares of common stock which would have been received by the holder of
the related Income PRIDES or Growth PRIDES immediately prior to the date of
consummation of that transaction if that holder had then settled that
purchase contract.
If at any time (1) we make a distribution of property to our
stockholders which would be taxable to those stockholders as a dividend for
United States federal income tax purposes, which includes generally
distributions of our evidences of indebtedness or assets, but generally not
stock dividends or rights to subscribe to capital stock; and, (2) according
to the settlement rate adjustment provisions of the purchase contract
agreement, the settlement rate is increased, that increase may give rise to
a taxable dividend to holders of FELINE PRIDES.
In addition, we may make increases to the settlement rate as our
board of directors deems advisable to avoid or diminish any income tax to
holders of our capital stock resulting from any dividend, distribution of
capital stock, distribution of rights to acquire capital stock or from any
event treated similarly for income tax purposes or for any other reasons.
Adjustments to the settlement rate will be calculated to the
nearest 1/10,000th of a share. No adjustment in the settlement rate shall
be required unless that adjustment would require an increase or decrease of
at least one percent in the settlement rate. However, any adjustments which
by reason of the above are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
We will be required, within ten business days following the
adjustment of the settlement rate, to provide written notice to the
purchase contract agent of the occurrence of that event and a statement
specifying in reasonable detail the method by which the adjustment to the
settlement rate was determined and the revised settlement rate.
Each adjustment to the settlement rate will result in a
corresponding adjustment to the number of shares of common stock issuable
upon early settlement of a purchase contract.
Termination of Purchase Contracts
The purchase contracts, our related rights and obligations and
those of the holders of the FELINE PRIDES, including the right to receive
accrued contract adjustment payments or deferred contract adjustment
payments and the right and obligation to purchase common stock, will
automatically terminate upon the occurrence of particular events of our
bankruptcy, insolvency or reorganization.
Upon termination, the collateral agent will release the related
trust preferred securities or the appropriate applicable ownership interest
of the treasury portfolio and the treasury securities held by it to the
purchase contract agent for distribution to the holders. The release will
be subject in the case of the treasury portfolio to the purchase contract
agent's disposition of the subject securities for cash and the payment of
the cash to the holders to the extent that the holders would otherwise have
been entitled to receive less than $1,000 of any security. Upon
termination, however, the release and distribution may be subject to a
delay. If we become the subject of a case under the Bankruptcy Code, a
delay may occur as a result of the automatic stay under the Bankruptcy Code
and continue until the automatic stay has been lifted. We expect the delay
to be limited.
Pledged Securities and Pledge Agreement
The trust preferred securities related to the Income PRIDES, or the
treasury portfolio if a tax event redemption has occurred prior to February
16, 2001 and the treasury securities related to the Growth PRIDES
(collectively, the "pledged securities") will be pledged to the collateral
agent, for our benefit. According to the pledge agreement, the pledged
securities will secure the obligations of holders of FELINE PRIDES to
purchase our common stock under the related purchase contracts. Your rights
to the related pledged securities will be subject to our security interest
created by the pledge agreement. You will not be permitted to withdraw the
pledged securities related to the Income PRIDES or Growth PRIDES from the
pledge arrangement except
(1) to substitute treasury securities for the related trust
preferred securities or the appropriate applicable ownership
interest of the treasury portfolio,
(2) to substitute trust preferred securities or the appropriate
applicable ownership interest of the treasury portfolio for
the related treasury securities, or
(3) upon the termination or early settlement of the related
purchase contracts.
Subject to the security interest and the terms of the purchase
contract agreement and the pledge agreement, (1) each holder of Income
PRIDES, unless a tax event redemption has occurred, will be entitled
through the purchase contract agent and the collateral agent to all of the
proportional rights and preferences of the related trust preferred
securities, including distribution, voting, redemption, repayment and
liquidation rights, and (2) each holder of Growth PRIDES or Income PRIDES,
if a tax event redemption has occurred, will retain beneficial ownership of
the related treasury securities or the appropriate applicable ownership
interest of the treasury portfolio, pledged in respect of the related
purchase contracts. We will have no interest in the pledged securities
other than our security interest.
Except as described in "Description of the purchase contracts --
General," the collateral agent will, upon receipt of distributions on the
pledged securities, distribute those payments to the purchase contract
agent, which will in turn distribute them, together with contract
adjustment payments received from us, to the persons in whose names the
related Income PRIDES or Growth PRIDES are registered at the close of
business on the record date immediately preceding the date of the
distribution.
Book Entry-System
The Depository Trust Company will act as securities depositary for
the FELINE PRIDES. The FELINE PRIDES will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
"depositary's nominee"). One or more fully-registered global security
certificates, representing the total aggregate number of FELINE PRIDES,
will be issued and deposited with the depositary and will bear a legend
regarding the restrictions on exchanges and registration of transfer
referred to below.
The laws of some jurisdictions require that some purchasers of
securities take physical delivery of securities in definitive form. Those
laws may impair the ability to transfer beneficial interests in the FELINE
PRIDES so long as the FELINE PRIDES are represented by global security
certificates.
The depositary is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the
provisions of section 17A of the Exchange Act.
The depositary holds securities that its participants deposit with
the depositary. The depositary also facilitates the settlement among
participants of securities transactions, including transfers and pledges,
in deposited securities through electronic computerized book-entry changes
in participants' accounts, thus eliminating the need for physical movement
of securities certificates. Direct participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations. The depositary is owned by a number of its direct
participants and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. ("participants"). Access
to the depositary system is also available to others, including securities
brokers and dealers, banks and trust companies that clear transactions
through or maintain a direct or indirect custodial relationship with a
direct participant either directly or indirectly ("indirect participants").
The rules applicable to the depositary and its participants are on file
with the commission.
No FELINE PRIDES represented by global security certificates may be
exchanged in whole or in part for FELINE PRIDES registered, and no transfer
of global security certificates in whole or in part may be registered, in
the name of any person other than the depositary or any nominee of the
depositary, unless, however, the depositary has notified us that it is
unwilling or unable to continue as depositary for the global security
certificates, has ceased to be qualified to act as required by the purchase
contract agreement or there is a continuing default by us in respect of our
obligations under one or more purchase contracts. All FELINE PRIDES
represented by one or more global security certificates or any portion of
them will be registered in those names as the depositary may direct.
As long as the depositary or its nominee is the registered owner of
the global security certificates, the depositary or that nominee will be
considered the sole owner and holder of the global security certificates
and all FELINE PRIDES represented by those certificates for all purposes
under the FELINE PRIDES and the purchase contract agreement. Except in the
limited circumstances referred to above, owners of beneficial interests in
global security certificates will not be entitled to have the global
security certificates or the FELINE PRIDES represented by those
certificates registered in their names, will not receive or be entitled to
receive physical delivery of FELINE PRIDES certificates in exchange and
will not be considered to be owners or holders of the global security
certificates or any FELINE PRIDES represented by those certificates for any
purpose under the FELINE PRIDES or the purchase contract agreement. All
payments on the FELINE PRIDES represented by the global security
certificates and all related transfers and deliveries of trust preferred
securities, treasury portfolio, treasury securities and common stock will
be made to the depositary or its nominee as their holder.
Ownership of beneficial interests in the global security
certificates will be limited to participants or persons that may hold
beneficial interests through institutions that have accounts with the
depositary or its nominee. Ownership of beneficial interests in global
security certificates will be shown only on, and the transfer of those
ownership interests will be effected only through, records maintained by
the depositary or its nominee with respect to participants' interests or by
the participant with respect to interests of persons held by the
participants on their behalf.
Procedures for settlement of purchase contracts on February 16,
2001 or upon early settlement will be governed by arrangements among the
depositary, participants and persons that may hold beneficial interests
through participants designed to permit the settlement without the physical
movement of certificates. Payments, transfers, deliveries, exchanges and
other matters relating to beneficial interests in global security
certificates may be subject to various policies and procedures adopted by
the depositary from time to time.
Neither we or any of our agents, nor the purchase contract agent
or any of its agents will have any responsibility or liability for any
aspect of the depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in global security
certificates, or for maintaining, supervising or reviewing any of the
depositary's records or any participant's records relating to those
beneficial ownership interests.
The information in this section concerning the depositary and its
book-entry system has been obtained from sources that we and the trust
believe to be reliable, but neither we nor the trust take responsibility
for its accuracy.
PROVISIONS OF THE CONTRACT PURCHASE
AGREEMENT AND THE PLEDGE AGREEMENT
Overview
Distributions on the FELINE PRIDES will be payable, purchase
contracts and documents related to it will be settled and transfers of the
FELINE PRIDES will be registrable at the office of the purchase contract
agent in the Borough of Manhattan, The City of New York. In addition, in
the event that the FELINE PRIDES do not remain in book-entry form, payment
of distributions on the FELINE PRIDES may be made, at our option, by check
mailed to the address of the person entitled to it as shown on the security
register.
Shares of our common stock will be delivered on February 16, 2001
or earlier upon early settlement or, if the purchase contracts have
terminated, the related pledged securities will be delivered potentially
after a delay as a result of the imposition of the automatic stay under the
Bankruptcy Code, in either case upon presentation and surrender of the
FELINE PRIDES certificate at the office of the purchase contract agent. We
expect any delay to be limited.
If you fail to present and surrender the FELINE PRIDES certificate
evidencing the Income PRIDES or Growth PRIDES to the purchase contract
agent on February 16, 2001, the shares of common stock issuable in
settlement of the related purchase contract and in payment of any deferred
contract adjustment payments will be registered in the name of the purchase
contract agent. The shares of common stock, together with any related
distributions, shall be held by the purchase contract agent as agent for
your benefit, until the FELINE PRIDES certificate is presented and
surrendered or you provide satisfactory evidence that the certificate has
been destroyed, lost or stolen, together with any indemnity that may be
required by the purchase contract agent and us.
If the purchase contracts have terminated prior to February 16,
2001, the related pledged securities have been transferred to the purchase
contract agent for distribution to you and you fail to present and
surrender the FELINE PRIDES certificate evidencing your Income PRIDES or
Growth PRIDES to the purchase contract agent, the related pledged
securities delivered to the purchase contract agent and related payments
shall be held by the purchase contract agent as agent for your benefit,
until the FELINE PRIDES certificate is presented or you provide the
evidence and indemnity described above.
The purchase contract agent will have no obligation to invest or to
pay interest on any amounts held by the purchase contract agent pending
distribution.
No service charge will be made for any registration of transfer or
exchange of the FELINE PRIDES, except for any related tax or other
governmental charge that may be imposed.
Modification
The purchase contract agreement and the pledge agreement will
contain provisions permitting us and the purchase contract agent or
collateral agent with the consent of the holders of not less than a
majority of the purchase contracts at the time outstanding, to modify the
terms of the purchase contracts, the purchase contract agreement and the
pledge agreement. If any particular series of FELINE PRIDES are materially
and adversely affected, the consent of the majority of that series' holders
of contract purchase FELINE PRIDES will be required. However, we, the
purchase contract agent or collateral agent may not, without the consent of
the holder of each outstanding purchase contract,
(a) change any payment date,
(b) change the amount or type of pledged securities related to
the purchase contract, impair the right of the holder of any
pledged securities to receive distributions on the pledged
securities except for the rights of holders of Income PRIDES
to substitute treasury securities for the related trust
preferred securities or treasury portfolio or the rights of
holders of Growth PRIDES to substitute trust preferred
securities or treasury portfolio for the related treasury
securities or otherwise adversely affect the holder's rights
in or to those pledged securities,
(c) change the place or currency of payment or reduce any
contract adjustment payments or any deferred contract
adjustment payments,
(d) impair the right to institute suit for the enforcement of
the purchase contract,
(e) reduce the amount of common stock purchasable under the
purchase contract, increase the price to purchase common
stock on settlement of the purchase contract, change the
purchase contract settlement date or otherwise adversely
affect the holder's rights under the purchase contract or
(f) reduce the above-stated percentage of outstanding purchase
contracts the consent of whose holders is required for the
modification or amendment of the provisions of the purchase
contracts, the purchase contract agreement or the pledge
agreement. However, if any amendment or proposal referred to
above would adversely affect only the Income PRIDES or the
Growth PRIDES, then only the affected class of holder will
be entitled to vote on that amendment or proposal and that
amendment or proposal shall not be effective except with the
consent of the holders of not less than a majority of that
class.
No Consent to Assumption
You, by your acceptance of the Income PRIDES or Growth PRIDES,
will, under the terms of the purchase contract agreement and the Income
PRIDES or Growth PRIDES, be deemed expressly to have withheld any consent
to the assumption, i.e., affirmance, of the related purchase contracts by
us or our trustee if we become the subject of a case under the Bankruptcy
Code.
Consolidation, Merger, Sale or Conveyance
We will covenant in the purchase contract agreement that we will
not merge or consolidate with any entity or sell, assign, transfer, lease
or convey all or substantially all of our properties and assets to any
person, firm or corporation unless we are the continuing corporation or the
successor corporation is a corporation organized under the laws of the
United States of America or one of its states and that corporation
expressly assumes our obligations under the purchase contracts, the
debentures, the purchase contract agreement and the pledge agreement, and
we or the successor corporation is not, immediately after such merger,
consolidation, sale, assignment, transfer, lease or conveyance, in default
in the performance of any of these obligations.
Title
We, the purchase contract agent and the collateral agent may treat
the registered owner of any FELINE PRIDES as its absolute owner for the
purpose of making payment and settling the related purchase contracts and
for all other purposes.
Replacement of FELINE PRIDES Certificates
In the case that physical certificates have been issued, we will
replace any mutilated FELINE PRIDES certificate at the expense of the
holder upon surrender of that certificate to the purchase contract agent.
We will replace any FELINE PRIDES certificates that become destroyed, lost
or stolen at the expense of the holder upon delivery to us and the purchase
contract agent of satisfactory evidence of its destruction, loss or theft.
In the case of a destroyed, lost or stolen FELINE PRIDES certificate, an
indemnity satisfactory to the purchase contract agent and us may be
required at the expense of the holder of the FELINE PRIDES evidenced by
that certificate before a replacement will be issued.
Notwithstanding the above, we will not be obligated to issue any
Income PRIDES or Growth PRIDES on or after February 16, 2001, after early
settlement or after the purchase contracts have terminated. The purchase
contract agreement will provide that, in place of the delivery of a
replacement FELINE PRIDES certificate following February 16, 2001, the
purchase contract agent, upon delivery of the evidence and indemnity
described above, will deliver the common stock issuable pursuant to the
purchase contracts included in the Income PRIDES or Growth PRIDES evidenced
by that certificate. If the purchase contracts have terminated prior to
February 16, 2001, the purchase contract agent will transfer the principal
amount of the pledged securities included in the Income PRIDES or Growth
PRIDES evidenced by that certificate.
Governing Law
The purchase contract agreement, the pledge agreement and the
purchase contracts will be governed by, and construed in accordance with,
the laws of the State of New York.
Information Concerning the Purchase Contract Agent
The First National Bank of Chicago will be the purchase contract
agent. The purchase contract agent will act as your agent from time to
time. The purchase contract agreement will not obligate the purchase
contract agent to exercise any discretionary actions in connection with a
default under the terms of the Income PRIDES and Growth PRIDES or the
purchase contract agreement.
The purchase contract will contain provisions limiting the
liability of the purchase contract agent. The purchase contract agreement
will contain provisions under which the purchase contract agent may resign
or be replaced. That resignation or replacement would be effective upon the
appointment of a successor.
Information Concerning the Collateral Agent
The Chase Manhattan Bank will be the collateral agent. The
collateral agent will act solely as our agent and will not assume any
obligation or relationship of agency or trust for or with you except for
the obligations owed by a pledgee of property to the owner under the pledge
agreement and applicable law.
The pledge agreement will contain provisions limiting the liability
of the collateral agent. The pledge agreement will contain provisions under
which the collateral agent may resign or be replaced. That resignation or
replacement would be effective upon the appointment of a successor.
maintains commercial banking relationships with us.
Miscellaneous
The purchase contract agreement will provide that we will pay all
fees and expenses related to
(1) the offering of the FELINE PRIDES,
(2) the retention of the collateral agent and
(3) the enforcement by the purchase contract agent of the rights
of the holders of the FELINE PRIDES.
Should you elect to substitute the related pledged securities,
creating Growth PRIDES or Income PRIDES or recreating Income PRIDES or
Growth PRIDES, you shall be responsible for any fees or expenses payable in
connection with that substitution, as well as any commissions, fees or
other expenses incurred in acquiring the pledged securities to be
substituted, and we shall not be responsible for any of those fees or
expenses.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The trust preferred securities will be issued according to the
terms of the declaration. The declaration will be qualified as an indenture
under the Trust Indenture Act. The institutional trustee, Wilmington Trust
Company, an independent trustee, will act as indenture trustee for the
trust preferred securities under the declaration for purposes of compliance
with the provisions of the Trust Indenture Act. The terms of the trust
preferred securities will include those stated in the declaration and those
made part of the declaration by the Trust Indenture Act. The following
summary of provisions of the trust preferred securities and the declaration
is not necessarily complete, and reference is made to the copy of the
declaration, including the definitions, which is filed as an exhibit to the
registration statement relating to this prospectus, the Trust Act and the
Trust Indenture Act. Whenever particular defined terms are referred to in
this prospectus, those defined terms are incorporated in this prospectus by
reference.
Overview
The declaration authorizes the regular trustees to issue on behalf
of the trust the trust securities, which represent undivided beneficial
ownership interests in the assets of the trust. We will own directly or
indirectly all of the common securities. The common securities rank on a
parity, and related payments will be made on a proportionate basis, with
the trust preferred securities. However, upon the occurrence and during the
continuance of an indenture event of default, the rights of the holders of
the common securities to receive payment of periodic distributions and
payments upon liquidation, redemption and otherwise will be subordinated to
the rights of the holders of the trust preferred securities. The
declaration does not permit the issuance by the trust of any securities
other than the trust securities or the incurrence of any indebtedness by
the trust.
Under the declaration, the institutional trustee will own the
debentures purchased by the trust for the benefit of the holders of the
trust securities. The payment of distributions out of money held by the
trust, and payments upon redemption of the trust preferred securities or
liquidation of the trust, are guaranteed by us to the extent described
under "description of the guarantee." The guarantee, when taken together
with our obligations under the debentures and the indenture and our
obligations under the declaration, including the obligations to pay costs,
expenses, debts and liabilities of the trust other than with respect to the
trust preferred securities, provides a full and unconditional guarantee of
amounts due on the trust preferred securities. Wilmington Trust Company,
the guarantee trustee, will hold the guarantee for the benefit of the
holders of the trust preferred securities. The guarantee does not cover
payment of distributions when the trust does not have sufficient available
funds to pay those distributions. In that case, except in the limited
circumstances in which the holder may take direct action, the remedy of a
holder of trust preferred securities is to vote to direct the institutional
trustee to enforce the institutional trustee's rights under the debentures.
Distributions
Distributions on the trust preferred securities will be fixed
initially at a rate per year of 6.45% of the stated liquidation amount of
$50 per trust preferred security. Distributions applicable on the trust
preferred securities that remain outstanding on and after February 16, 2001
will be reset on the third business day immediately preceding February 16,
2001. Distributions in arrears for more than one quarter will bear interest
at the rate of 6.45% per year through and including February 15, 2001 and
at the reset rate afterwards, compounded quarterly. The term "distribution"
as used here includes any interest payable unless otherwise stated. The
amount of distributions payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months.
Distributions on the trust preferred securities will be cumulative
and will accrue from and will be payable quarterly in arrears on
February 16, May 16, August 16, and November 16 of each year, commencing
, when, as and if funds are available for payment. Distributions
will be made by the institutional trustee, except as otherwise described
below.
We have the right under the indenture to defer payments of interest
on the debentures by extending the interest payment period. If we exercise
the right, quarterly distributions on the trust preferred securities would
be deferred during the interest payment period. However, those
distributions would continue to accrue with interest at the rate of 6.45%
per year through and including February 15, 2001, and at the reset rate
afterwards. The right to extend the interest payment period for the
debentures is limited to a period, in the aggregate, not extending beyond
February 16, 2003. If we exercise this right, then
(a) we shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of our capital
stock, other than
o purchases or acquisitions of our capital stock in
connection with the satisfaction of our obligations
under any employee or agent benefit plans or under
any contract or security outstanding on the date of
that event requiring us to purchase our capital
stock,
o as a result of a reclassification of our capital
stock or the exchange or conversion of one class or
series of our capital stock for another class or
series of our capital stock,
o the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of our capital stock or the security being
converted or exchanged,
o dividends or distributions in our capital stock (or
rights to acquire capital stock) or repurchases or
redemptions of capital stock solely from the issuance
or exchange of capital stock or
o redemptions or repurchases of any rights outstanding
under a shareholder rights plan.
(b) We shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt
securities issued by us that rank junior to those
debentures, and
(c) We shall not make any guarantee payments with respect to the
above other than according to the guarantee or the common
securities guarantee.
Prior to the termination of any extension period, we may further
extend the interest payment period. However, the extension period, together
with all previous and further extensions, may not extend beyond February
16, 2003. Upon the termination of any extension period and the payment of
all amounts then due, we may select a new extension period, subject to the
above requirements. If distributions are deferred, the deferred
distributions and accrued interest shall be paid to holders of record of
the trust preferred securities as they appear on the books and records of
the trust on the record date next following the termination of that
extension period.
The trust must pay distributions on the trust preferred securities
on the dates payable to the extent that it has funds available in the
property account for the payment of those distributions. The trust's funds
available for distribution to you as a holder of the trust preferred
securities will be limited to payments received from us on the debentures.
We guarantee the payment of distributions out of moneys held by the trust
to the extent specified under "Description of the guarantee."
Distributions on the trust preferred securities will be payable to
holders, including the collateral agent, as they appear on the books and
records of the trust on the relevant record dates. As long as the trust
preferred securities remain in book-entry only form, the record dates will
be one business day prior to the relevant payment dates. Distributions will
be paid through the institutional trustee, who will hold amounts received
in respect of the debentures in the property account for your benefit.
Subject to any applicable laws and regulations and the provisions of the
declaration, each payment will be made as described under "--Book-Entry
Only Issuance -- The Depository Trust Company" below. With respect to trust
preferred securities not in book-entry form, the regular trustees shall
have the right to select relevant record dates, which shall be more than
one business day but less than 60 business days prior to the relevant
payment dates.
If any date on which distributions on the trust preferred
securities are to be made is not a business day, payment of the
distributions payable on that date will be made on the next succeeding day
that is a business day, without any interest or other payment in respect of
any delay, but if that business day is in the next succeeding calendar
year, the payment shall be made on the immediately preceding business day,
in each case with the same force and effect as if made on that record date.
Market Rate Reset
The applicable quarterly distribution rate on the trust preferred
securities and the interest rate on the related debentures that remain
outstanding on and after February 16, 2001 will be reset on the third
business day immediately preceding February 16, 2001 to the reset rate.
The reset rate will be equal to the sum of the reset spread and the
rate on the two-year benchmark treasury in effect on the third business day
immediately preceding February 16, 2001 and will be determined by the reset
agent as the rate the trust preferred securities should bear for a trust
preferred security to have an approximate market value on the third
business day immediately preceding February 16, 2001 of 100.5% of $50.
However, we may limit the reset rate to be no higher than the rate on the
two-year benchmark treasury on February 16, 2001 plus 200 basis points
(2%). The market value of the trust preferred securities may be less than
100.5% if the reset spread is limited to a maximum of 2%.
The "two-year benchmark treasury" shall mean direct obligations of
the United States, which may be obligations traded on a when-issued basis
only, having a maturity comparable to the remaining term to maturity of the
trust preferred securities, as agreed upon by us and the reset agent. The
rate for the two-year benchmark treasury will be the bid side rate
displayed at 10:00 A.M., New York City time, on the third business day
immediately preceding February 16, 2001 in the Telerate system. If the
Telerate system is (a) no longer available on the third business day
immediately preceding February 16, 2001 or (b) in the opinion of the reset
agent, after consultation with us, no longer an appropriate system from
which to obtain that rate, another nationally recognized quotation system
as, in the opinion of the reset agent, after consultation with the us, is
appropriate. If that rate is not so displayed, the rate for the two-year
benchmark treasury shall be, as calculated by the reset agent, the yield to
maturity for the two-year benchmark treasury, expressed as a bond
equivalent on the basis of a year of 365 or 366 days, and applied on a
daily basis. It shall be computed by taking the arithmetic mean of the
secondary market bid rates, as of 10:30 A.M., New York City time, on the
third business day immediately preceding February 16, 2001, of three
leading United States government securities dealers selected by the reset
agent, after consultation with us. These dealers may include the reset
agent or its affiliate.
We currently anticipate that Merrill Lynch, Pierce, Fenner & Smith
Incorporated will be the investment banking firm acting as the reset agent.
On the tenth business day immediately preceding February 16, 2001,
the two-year benchmark treasury to be used to determine the reset rate on
February 16, 2001 will be selected. On that date, the reset agent will
establish the reset spread to be added to the rate on the two-year
benchmark treasury in effect on the third business day immediately
preceding February 16, 2001, and we will announce the reset spread and the
Two-year benchmark treasury. We will cause a notice of the reset spread and
the two-year benchmark treasury to be published on the business day
following the reset announcement date by publication in a daily newspaper
in the English language of general circulation in The City of New York,
which is expected to be The Wall Street Journal. We will request, not later
than ten nor more than 15 calendar days prior to the reset announcement
date, that the depositary notify its participants holding trust preferred
securities, Income PRIDES or Growth PRIDES of the reset announcement date
and of the procedures that must be followed if any owner of FELINE PRIDES
wants to settle the related purchase contract with cash on the business day
immediately preceding February 16, 2001.
Optional Remarketing
Under the remarketing agreement and subject to the terms of the
remarketing underwriting agreement, on or prior to the fifth business day
immediately preceding February 16, 2001, but no earlier than the payment
date immediately preceding February 16, 2001, holders of trust preferred
securities which are not components of Income PRIDES may elect to have
their trust preferred securities remarketed by delivering their trust
preferred securities along with a notice of such election to the custodial
agent. The custodial agent will hold these trust preferred securities in an
account separate from the collateral account in which the pledged
securities will be held. Holders of trust preferred securities electing to
have their trust preferred securities remarketed will also have the right
to withdraw that election on or prior to the fifth business day immediately
preceding February 16, 2001.
On the fourth business day immediately preceding February 16,
2001, the custodial agent will deliver these separate trust preferred
securities to the remarketing agent for remarketing. The remarketing agent
will use its reasonable efforts to remarket these trust preferred
securities on that date at a price of approximately 100.5% of the aggregate
stated liquidation amount of these trust preferred securities, plus accrued
and related unpaid distributions, including any deferred distributions. The
portion of the proceeds from that remarketing equal to the aggregate stated
liquidation amount of these trust preferred securities will automatically
be remitted by the remarketing agent to the custodial agent for the benefit
of the holders of these trust preferred securities. In addition, after
deducting as the remarketing fee an amount not exceeding 25 basis points
(.25%) of the aggregate stated liquidation amount of the remarketed
securities from any amount of those proceeds in excess of the aggregate
stated liquidation amount of the remarketed trust preferred securities plus
any accrued and unpaid distributions, including any deferred distributions,
the remarketing agent will remit to the custodial agent any remaining
portion of the proceeds for the benefit of that holder.
If, despite using its reasonable efforts, the remarketing agent
cannot remarket the related trust preferred securities of these holders at
a price not less than 100% of the aggregate stated liquidation amount of
the trust preferred securities plus accrued and unpaid distributions,
including any deferred distributions and thus, resulting in a failed
remarketing. The custodial agent will promptly return these trust preferred
securities to the custodial agent to release to these holders. We will
cause a notice of the failed remarketing to be published on the second
business day immediately preceding February 16, 2001 by publication in a
daily newspaper in the English language of general circulation in the city
of New York, which is expected to be The Wall Street Journal. In addition,
we will request, not later than ten nor more than 15 calendar days prior to
the remarketing date, that the depository notify its participants holding
trust preferred securities, Income PRIDES and Growth PRIDES of the
remarketing and of the procedures that must be followed if a trust
preferred security holder wishes to exercise its right to put its trust
preferred security to us. We will endeavor to ensure that a registration
statement with regard to the full amount of the trust preferred securities
to be remarketed shall be effective in a form as will enable the
remarketing agent to rely on it in connection with the remarketing process.
We currently anticipate that Merrill Lynch, Pierce, Fenner & Smith
Incorporated will be the remarketing agent.
Optional Redemption
The debentures are redeemable at our option, in whole but not in
part, on not less than 30 days nor more than 60 days notice, upon the
occurrence and continuation of a tax event under the circumstances
described under "Description of the debentures -- tax event redemption." If
we redeem the debentures upon the occurrence and continuation of a tax
event, the proceeds from that repayment shall simultaneously be applied on
a proportionate basis to redeem trust preferred securities having an
aggregate stated liquidation amount equal to the aggregate principal amount
of the debentures so redeemed at a redemption price, per trust preferred
security, equal to the redemption amount plus accrued and unpaid interest
to the date of that redemption. Those proceeds will be payable in cash to
the holders of the trust preferred securities. If a tax event redemption
occurs prior to February 16, 2001, the redemption price payable to the
collateral agent, in liquidation of the Income PRIDES holders' interests in
the trust, will be simultaneously applied by the collateral agent to
purchase the treasury portfolio on behalf of the holders' of the Income
PRIDES. The treasury portfolio will be pledged with the collateral agent to
secure the obligation of Income PRIDES holders' to purchase common stock
under the related purchase contracts.
If a failed remarketing has occurred, holders of trust securities
and holders of debentures following the distribution of the debentures upon
a dissolution of the trust, after February 16, 2001, will have the right,
o in the case of trust securities, to require the trust to put
to us the related debentures, or
o in the case of the debentures, to put the debentures
directly to us on March 2, 2001, upon at least three
business days' prior notice, at a price per debenture equal
to $50, plus accrued and unpaid interest, including any
deferred interest.
Upon our repurchase of those debentures from the trust
o the proceeds from the repurchase shall simultaneously be
applied, in the case of the trust securities, to redeem the
trust securities of the holder in an aggregate stated
liquidation amount equal to the aggregate principal amount
of the debentures so repurchased and
o any accrued and unpaid distributions, including any deferred
distributions, with respect to those trust securities will
be paid to such holder in cash.
Redemption Procedures
If the trust gives a notice of redemption, which will be
irrevocable, in respect of all of the trust preferred securities, then, by
12:00 noon, New York City time, on the redemption date, the trust will
irrevocably deposit with the depositary, the purchase contract agent or the
collateral agent, as applicable, funds sufficient to pay the redemption
price, but only if we have paid to the institutional trustee sufficient
amount of cash in connection with the related redemption or maturity of the
debentures. The trust will give the depositary, the purchase contract agent
or the collateral agent irrevocable instructions and authority to pay the
redemption price to the holders of the trust preferred securities called
for redemption.
If notice of redemption has been given and funds deposited as
required, then, immediately prior to the close of business on the date of
the deposit, distributions will cease to accrue and all rights of holders
of those trust preferred securities called for redemption will cease,
except for the right of the holders of those trust preferred securities to
receive the redemption price without interest on the redemption price.
If any date fixed for redemption of trust preferred securities is
not a business day, then payment of the redemption price payable on that
date will be made on the next succeeding day that is a business day,
without any interest or other payment in respect of any delay, except that
if the business day falls in the next calendar year, the payment will be
made on the immediately preceding business day.
Distribution of the Debentures
"Investment company event" means that the regular trustees have
received an opinion from independent counsel experienced in practice under
the 1940 Act that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or
regulatory authority, which change in 1940 Act law becomes effective on or
after the date of this prospectus, there is more than an insubstantial risk
that the trust is or will be considered an "investment company" that is
required to be registered under the Investment Company Act of 1940 (the
"1940 Act").
If, at any time, an investment company event shall occur and be
continuing, the trust shall be dissolved. As a result, debentures with an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on,
the trust securities would be distributed to the holders of the trust
securities in liquidation of the holders' interests in the trust on a
proportionate basis within 90 days following the occurrence of the
investment company event. However, the dissolution and distribution shall
be conditioned on us being unable to avoid the investment company event
within a 90-day period either by taking some ministerial action or by
pursuing some other similar reasonable measure that will have no adverse
effect on the trust, us or the holders of the trust securities and will
involve no material cost. If an investment company event occurs, debentures
distributed to the collateral agent in liquidation of holders' interests in
the trust would be pledged, in place of the trust preferred securities, to
secure Income PRIDES holders' obligations to purchase common stock under
the purchase contracts.
We will have the right at any time to dissolve the trust and, after
satisfaction of liabilities of creditors of the trust as provided by
applicable law, to cause the debentures to be distributed to the holders of
the trust securities. As of the date of any distribution of debentures upon
dissolution of the trust,
o the trust preferred securities will no longer be deemed to
be outstanding,
o the depositary or its nominee, as the record holder of the
trust preferred securities, will receive a registered global
certificate or certificates representing the debentures to
be delivered upon the distribution, and
o any certificates representing trust preferred securities not
held by the depositary or its nominee will be deemed to
represent debentures having an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid
distributions on, those trust preferred securities until the
certificates are presented to us or our agent for transfer
or reissuance.
Debentures distributed to the collateral agent in liquidation of
the interest of the holders of the trust preferred securities in the trust
would be substituted for the trust preferred securities and pledged to
secure Income PRIDES holders' obligations to purchase our common stock
under the purchase contracts.
We cannot predict the market prices for either the trust preferred
securities or the debentures that may be distributed in exchange for the
trust preferred securities if a dissolution of the trust were to occur.
Accordingly, the trust preferred securities or the debentures that an
investor may receive if a dissolution of the trust were to occur may trade
at a discount to the price that the investor paid to purchase the trust
preferred securities forming a part of the Income PRIDES offered here.
Liquidation Distribution Upon Dissolution
In case of a voluntary or involuntary dissolution of the trust,
unless a tax event redemption has occurred, the then holders of the trust
preferred securities will be entitled to receive out of the assets of the
trust, after satisfaction of liabilities to creditors, debentures in an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on,
the trust preferred securities on a proportionate basis in exchange for
those trust preferred securities.
The holders of the common securities will be entitled to receive
distributions upon any such dissolution proportionately with the holders of
the trust preferred securities. However, if a declaration event of default
has occurred and is continuing, the trust preferred securities shall have a
preference over the common securities with regard to those distributions.
Under the declaration, the trust shall dissolve
(1) on March 2, 2005, the expiration of the term of the trust,
(2) upon our bankruptcy or the bankruptcy of the holder of the
common securities,
(3) upon our filing of a certificate of dissolution or its
equivalent or the revocation of our charter and the
expiration of 90 days after the date of revocation without
its reinstatement,
(4) after the receipt by the institutional trustee of written
direction from us to dissolve the trust or the filing of a
certificate of dissolution or its equivalent with respect to
the trust,
(5) upon the distribution of debentures,
(6) upon the occurrence and continuation of a tax event
redemption or
(7) upon the entry of a decree of a judicial dissolution of the
holder of the common securities, us or the trust.
Declaration Events of Default
An event of default under the indenture constitutes an event of
default under the declaration with respect to the trust securities.
However, under the declaration, the holder of the common securities will be
deemed to have waived any declaration event of default with respect to the
common securities until all declaration events of default with respect to
the trust preferred securities have been cured, waived or otherwise
eliminated. Until any declaration events of default with respect to the
trust preferred securities have been so cured, waived or otherwise
eliminated, the institutional trustee will be deemed to be acting solely on
behalf of the holders of the trust preferred securities. Only the holders
of the trust preferred securities will have the right to direct the
institutional trustee with respect to particular matters under the
declaration and, therefore, the indenture. If a declaration event of
default with respect to the trust preferred securities is waived by holders
of trust preferred securities, the waiver will also constitute the waiver
of the declaration event of default with respect to the common securities
without any further act, vote or consent of the holders of the common
securities.
If the institutional trustee fails to enforce its rights under the
debentures in respect of an indenture event of default after a holder of
record of trust preferred securities has made a written request, that
holder of record of trust preferred securities may, to the fullest extent
permitted by applicable law, institute a legal proceeding against us to
enforce the institutional trustee's rights under the debentures without
first proceeding against the institutional trustee or any other person or
entity. Notwithstanding the above, if a declaration event of default has
occurred and is continuing and that event is attributable to our failure to
pay interest or principal on the debentures on the date that interest or
principal is otherwise payable, after giving effect to any right of
deferral, then you, as a holder of trust preferred securities, may directly
institute a proceeding after the respective due date specified in the
debentures for enforcement of payment (a "direct action") to you directly
of the principal of or interest on the debentures having a principal amount
equal to the aggregate liquidation amount of your trust preferred
securities. In connection with the direct action, we shall have the right
under the indenture to set off any payment made to you. The holders of
trust preferred securities will not be able to exercise directly any other
remedy available to the holders of the debentures.
Upon the occurrence of a declaration event of default, the
institutional trustee, as the sole holder of the debentures, will have the
right under the indenture to declare the principal of and interest on the
debentures to be immediately due and payable. We and the trust are each
required to file annually with the institutional trustee an officer's
certificate as to our compliance with all conditions and covenants under
the declaration.
Voting rights
Except as described here, under the Trust Act and the Trust
Indenture Act and under "Description of the Guarantee -- Modification of
the Guarantee; Assignment," and as otherwise required by law and the
declaration, the holders of the trust preferred securities will have no
voting rights.
Subject to the requirement of the institutional trustee obtaining a
tax opinion in specific circumstances provided below, the holders of a
majority in aggregate stated liquidation amount of the trust preferred
securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the institutional
trustee, or direct the exercise of any trust or power conferred upon the
institutional trustee under the declaration, including the right to direct
the institutional trustee, as holder of the debentures, to
(1) exercise the remedies available under the indenture with
respect to the debentures,
(2) waive any past indenture event of default that is waivable
under the indenture,
(3) exercise any right to rescind or annul a declaration that
the principal of all the debentures shall be due and payable
or
(4) consent to any amendment, modification or termination of the
indenture or the debentures where that consent shall be
required. However, where a consent or action under the
indenture would require the consent or act of holders of
more than a majority in principal amount of the affected
debentures (a "super-majority"), only the holders of at
least the super-majority in aggregate stated liquidation
amount of the trust preferred securities may direct the
institutional trustee to give the consent or take the
action.
The institutional trustee shall notify all holders of the trust
preferred securities of any notice of default received from the debt
trustee with respect to the debentures. The notice shall state that the
indenture event of default also constitutes a declaration event of default.
Except with respect to directing the time, method and place of conducting a
proceeding for a remedy, the institutional trustee shall not take any of
the actions described in clauses (1), (2) or (3) above unless the
institutional trustee has obtained an opinion of tax counsel experienced in
those matters that, as a result of the action, the trust will not fail to
be classified as a grantor trust for United States federal income tax
purposes.
If the consent of the institutional trustee, as the holder of the
debentures, is required under the indenture with respect to any amendment,
modification or termination of the indenture or the debentures, the
institutional trustee shall request the direction of the holders of the
trust preferred securities and the common securities with respect to that
amendment, modification or termination. The indenture trustee shall vote
with respect to that amendment, modification or termination as directed by
a majority in stated liquidation amount of the trust preferred securities
and the common securities voting together as a single class. However, where
a consent under the indenture would require the consent of a
super-majority, the institutional trustee may only give that consent at the
direction of the holders of at least the proportion in stated liquidation
amount of the trust preferred securities and the common securities which
the relevant super-majority represents of the aggregate principal amount of
the debentures outstanding. The institutional trustee shall not take any
action in accordance with the directions of the holders of the trust
preferred securities and the common securities unless the institutional
trustee has obtained an opinion of tax counsel experienced in those matters
that, as a result of the action, the trust will not fail to be classified
as a grantor trust for United States federal income tax purposes.
A waiver of an indenture event of default will constitute a waiver
of the corresponding declaration event of default.
Any required approval or direction of holders of trust preferred
securities may be given at a separate meeting of holders of trust preferred
securities convened for that purpose, at a meeting of all of the holders of
trust securities or according to written consent. The regular trustees will
cause a notice of any meeting at which holders of trust preferred
securities are entitled to vote, or of any matter upon which action by
written consent of those holders is to be taken, to be mailed to each
holder of record of trust preferred securities. Each notice will include a
statement specifying the following information:
o the date of the meeting or the date by which the action is
to be taken;
o a description of any resolution proposed for adoption at the
meeting on which the holders are entitled to vote or of the
matter upon which written consent is sought; and
o instructions for the delivery of proxies or consents.
No vote or consent of the holders of trust preferred securities
will be required for the trust to cancel trust preferred securities or
distribute debentures in accordance with the declaration.
Notwithstanding that holders of trust preferred securities are
entitled to vote or consent under any of the circumstances described above,
any trust preferred securities that are owned at that time by us or any
entity directly or indirectly controlling or controlled by, or under direct
or indirect common control with, us, shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if
those trust preferred securities were not outstanding.
The procedures by which holders of trust preferred securities may
exercise their voting rights are described below.
Holders of the trust preferred securities will have no rights to
appoint or remove the trustees, who may be appointed, removed or replaced
solely by us as the indirect or direct holder of all of the common
securities.
Modification of the Declaration
The declaration may be modified and amended if approved by the
regular trustees and, in some circumstances, the institutional trustee or
the Delaware trustee. However, if any proposed amendment provides for, or
the regular trustees otherwise propose to effect,
(1) any action that would adversely affect the powers,
preferences or special rights of the trust securities,
whether by way of amendment to the declaration or otherwise
or
(2) the dissolution of the trust other than according to the
terms of the declaration,
then the holders of the trust securities voting together as a single class
will be entitled to vote on that amendment or proposal, and that amendment
or proposal shall not be effective except with the approval of at least a
majority in such stated liquidation amount of the affected trust
securities. If any amendment or proposal referred to in clause (1) above
would adversely affect only the trust preferred securities or the common
securities, then only the affected class will be entitled to vote on that
amendment or proposal and that amendment or proposal shall not be effective
except with the approval of a majority in stated liquidation amount of that
class of securities. In addition, the declaration may be amended without
the consent of the holders of the trust securities to, among other things,
cause the trust to continue to be classified as a grantor trust for United
States federal income tax purposes.
Notwithstanding the above, no amendment or modification may be made
to the declaration if that amendment or modification would
(1) cause the trust to be classified as other than a grantor
trust for United States federal income tax purposes,
(2) reduce or otherwise adversely affect the powers of the
institutional trustee or
(3) cause the trust to be deemed an "investment company" which
is required to be registered under the 1940 Act.
Mergers, Consolidations or Amalgamations
The trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below or as described in "Liquidation Distribution Upon
Dissolution".
The trust may, with the consent of the regular trustees and without
the consent of the holders of the trust securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as
under the laws of any state except that
(1) if the trust is not the surviving entity, the successor
entity either (x) expressly assumes all of the obligations
of the trust under the trust securities or (y) substitutes
for the trust securities other securities having
substantially the same terms as the trust securities (the
"successor securities"). The successor securities must rank
the same as the trust securities with respect to
distributions and payments upon liquidation, redemption and
otherwise,
(2) we expressly acknowledge a trustee of the successor entity
possessing the same powers and duties as the institutional
trustee as the holder of the debentures,
(3) if the trust preferred securities are listed, any successor
securities will be listed upon notification of issuance, on
any national securities exchange or with another
organization on which the trust preferred securities are
then listed or quoted,
(4) the merger, consolidation, amalgamation or replacement does
not cause the trust preferred securities, including any
successor securities, to be downgraded by any nationally
recognized statistical rating organization,
(5) the merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges
of the holders of the trust securities, including any
successor securities, in any material respect other than
with respect to any dilution of the holders' interest in the
new entity,
(6) the successor entity has a purpose substantially identical
to that of the trust,
(7) prior to the merger, consolidation, amalgamation or
replacement, we have received an opinion of a nationally
recognized independent counsel to the trust experienced in
those matters that,
o the merger, consolidation, amalgamation or
replacement does not adversely affect the rights,
preferences and privileges of the holders of the
trust securities, including any successor securities,
in any material respect other than with respect to
any dilution of the holders' interest in the new
entity,
o following the merger, consolidation, amalgamation or
replacement, neither the trust nor the successor
entity will be required to register as an investment
company under the 1940 Act and
o following the merger, consolidation, amalgamation or
replacement, the trust or the successor entity will
continue to be classified as a grantor trust for
United States federal income tax purposes, and
(8) we guarantee the obligations of the successor entity under
the successor securities at least to the extent provided by
the guarantee and the common securities guarantee.
Notwithstanding the above, the trust shall not, except with the
consent of holders of 100% in stated liquidation amount of the trust
securities, consolidate, amalgamate, merge with or into, or be replaced by
any other entity or permit any other entity to consolidate, amalgamate,
merge with or into, or replace it, if that consolidation, amalgamation,
merger or replacement would cause the trust or the successor entity to be
classified as other than a grantor trust for United States federal income
tax purposes.
Book-Entry Only Issuance -- The Depository Trust Company
If the trust preferred securities are issued as one or more
fully-registered global trust preferred securities certificates
representing the total aggregate number of trust preferred securities, the
depositary will act as securities depositary for any trust preferred
securities that are held separately from the Income PRIDES. In that case,
the trust preferred securities will be issued only as fully-registered
securities registered in the name of Cede & Co., the depositary's nominee.
However, under some circumstances, the regular trustees with our consent
may decide not to use the system of book-entry transfers through the DTC
with respect to the trust preferred securities. In that case, certificates
of the trust preferred securities will be printed and delivered to the
holders.
The laws of some jurisdictions require that some purchasers of
securities take physical delivery of securities in definitive form. These
laws may impair the ability to transfer beneficial interests in the global
trust preferred securities as represented by a global certificate.
Purchases of trust preferred securities within the depositary's
system must be made by or through direct participants, which will receive a
credit for the trust preferred securities on the depositary's records. The
beneficial ownership interest of each actual purchaser of each trust
preferred security is in turn to be recorded on the direct and indirect
participants' records. Beneficial owners will not receive written
confirmation from the depositary of their purchases, but beneficial owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
direct or indirect participants through which the beneficial owners
purchased trust preferred securities. Transfers of ownership interests in
the trust preferred securities are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners. Beneficial
owners will not receive certificates representing their ownership interests
in the trust preferred securities, except if use of the book-entry system
for the trust preferred securities is discontinued.
To facilitate subsequent transfers, all the trust preferred
securities deposited by participants with the depositary will be registered
in the name of the depositary's nominee, Cede & Co. The deposit of trust
preferred securities with the depositary and their registration in the name
of Cede & Co. cause no change in beneficial ownership. The depositary has
no knowledge of the actual beneficial owners of the trust preferred
securities. The depositary's records reflect only the identity of the
direct participants to whose accounts those trust preferred securities are
credited, which may or may not be the beneficial owners. The participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
So long as the depositary or its nominee is the registered owner or
holder of a global certificate, the depositary or the nominee will be
considered the sole owner or holder of the trust preferred securities
represented for all purposes under the declaration and the trust preferred
securities. No beneficial owner of an interest in a global certificate will
be able to transfer that interest except in accordance with the depositary
applicable procedures, in addition to those provided for under the
declaration.
The depositary has advised us that it will take any action
permitted to be taken by a holder of trust preferred securities, including
the presentation of trust preferred securities for exchange, only at the
direction of one or more participants to whose account the depositary's
interests in the global certificates are credited and only in respect of
the portion of the stated liquidation amount of trust preferred securities
as to which such participant or participants has or have given such
directions. However, if there is a declaration event of default under the
trust preferred securities, the depositary will exchange the global
certificates for certificated securities, which it will distribute to its
participants.
Conveyance of notices and other communications by the depositary to
direct participants and indirect participants and by direct participants
and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements that may be in force from time to time.
Although voting with respect to the trust preferred securities is
limited, in those cases where a vote is required, neither the depositary
nor Cede & Co. will itself consent or vote with respect to trust preferred
securities. Under its usual procedures, the depositary would mail an
omnibus proxy to the trust as soon as possible after the record date. The
omnibus proxy assigns Cede & Co.'s consenting or voting rights to those
direct participants to whose accounts the trust preferred securities are
credited on the record date. The direct participants are identified in a
listing attached to the omnibus proxy. We and the trust believe that the
arrangements among the depositary, direct and indirect participants, and
beneficial owners will enable the beneficial owners to exercise rights
equivalent in substance to the rights that can be directly exercised by a
record holder of a beneficial interest in the trust.
Distribution payments on the trust preferred securities issued in
the form of one or more global certificates will be made to the depositary
in immediately available funds. The depositary's practice is to credit
direct participants' accounts on the relevant payment date in accordance
with their respective holdings shown on the depositary's records unless the
depositary has reason to believe that it will not receive payments on that
payment date. Payments by participants to beneficial owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the account of customers in bearer form or
registered in "street name." Those payments will be the responsibility of
the participant and not of the depositary, the trust or us, subject to any
statutory or regulatory requirements to the contrary that may be in force
from time to time. Payment of distributions to the depositary is the
responsibility of the trust, disbursement of such payments to direct
participants is the responsibility of the depositary, and disbursement of
those payments to the beneficial owners is the responsibility of direct and
indirect participants.
Except as provided here, a beneficial owner in a global trust
preferred security certificate will not be entitled to receive physical
delivery of trust preferred securities. Accordingly, each beneficial owner
must rely on the procedures of the depositary to exercise any rights under
the trust preferred securities.
Although the depositary has agreed to the above procedure to
facilitate transfer of interests in the global certificates among
participants, the depositary is under no obligation to perform or continue
to perform these procedures and these procedures may be discontinued at any
time. Neither us, nor the trust or any trustee will have any responsibility
for the performance by the depositary or its participants or indirect
participants under the rules and procedures governing the depositary. The
depositary may discontinue providing its services as securities depositary
with respect to the trust preferred securities at any time by giving
reasonable notice to the trust. Under these circumstances, if a successor
securities depositary is not obtained, trust preferred securities
certificates are required to be printed and delivered to holders.
Additionally, the regular trustees, with our consent, may decide to
discontinue use of the system of book-entry transfers through the
depositary or any successor depositary, with respect to the trust preferred
securities. In that case, certificates for the trust preferred securities
will be printed and delivered to holders. In each of the above
circumstances, we will appoint a paying agent with respect to the trust
preferred securities.
The information in this section concerning the depositary and the
depositary's book-entry system has been obtained from sources that we and
the trust believe to be reliable, but neither we nor the trust take
responsibility for its accuracy.
Registrar, Transfer Agent and Paying Agent
Payments in respect of the trust preferred securities represented
by the global certificates shall be made to the depositary. The depositary
shall credit the relevant accounts at the depositary on the applicable
distribution dates. In the case of certificated securities, those payments
shall be made by check mailed to the address of the holder entitled to it
as that address appears on the register. The paying agent shall be
permitted to resign as paying agent upon 30 days' written notice to the
trustees. If First National Bank of Chicago shall no longer be the paying
agent, the regular trustees shall appoint a successor to act as paying
agent, which shall be a bank or trust company.
The First National Bank of Chicago will act as registrar, transfer
agent and paying agent for the trust preferred securities.
Registration of transfers of trust preferred securities will be
made without charge by or on behalf of the trust. However, payment shall be
made and any indemnity as the trust or we may require shall be given in
respect of any tax or other government charge which may be imposed in
relation to it.
Information Concerning the Institutional Trustee
The institutional trustee, prior to the occurrence of a default
with respect to the trust securities and after the curing of any defaults
that may have occurred, undertakes to perform only those duties that are
specified in the declaration. The institutional trustee, after default,
shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to those
provisions, the institutional trustee is under no obligation to exercise
any of the powers vested in it by the declaration at the request of any
holder of trust preferred securities, unless offered reasonable indemnity
by that holder against the costs, expenses and liabilities which it might
incur. The holders of trust preferred securities will not be required to
offer an indemnity in the case that those holders, by exercising their
voting rights, direct the institutional trustee to take any action it is
empowered to take under the declaration following a declaration event of
default. The institutional trustee also serves as trustee under the
guarantee.
The institutional trustee maintains commercial banking
relationships with us.
Governing Law
The declaration and the trust preferred securities will be governed
by, and construed in accordance with, the internal laws of the State of
Delaware.
Miscellaneous
The regular trustees are authorized and directed to operate the
trust in a way that the trust will not be required to register as an
"investment company" under the 1940 Act or be characterized as other than a
grantor trust for United States federal income tax purposes. We are
authorized and directed to conduct our affairs so that the debentures will
be treated as our indebtedness for United States federal income tax
purposes. In this connection, we and the regular trustees are authorized to
take any action not inconsistent with applicable law, the declaration of
trust, the certificate of trust of the trust or our certificate of
incorporation, that we and the regular trustees determine in our discretion
to be necessary or desirable to achieve that end, as long as that action
does not adversely affect the interests of the holders of the trust
preferred securities or vary its terms.
Holders of the trust preferred securities have no preemptive or
similar rights.
DESCRIPTION OF THE GUARANTEE
Provided below is a summary of information concerning the guarantee
which will be executed and delivered by us for the benefit of the holders
from time to time of trust preferred securities. The guarantee will be
qualified as an indenture under the Trust Indenture Act. The Wilmington
Trust Company will act as the guarantee trustee for the purposes of
compliance with the provisions of the Trust Indenture Act. The terms of the
guarantee will be those provided in the guarantee and those made part of
the guarantee by the Trust Indenture Act. The following summary is not
necessarily complete, and reference is made to the copy of the form of
guarantee including the definitions which is filed as an exhibit to the
registration statement relating to this prospectus, and to the Trust
Indenture Act. Whenever particular defined terms of the guarantee are
referred to in this prospectus, these defined terms are incorporated by
reference in this prospectus. The guarantee will be held by the guarantee
trustee for the benefit of the holders of the trust preferred securities.
Overview
Under the guarantee, we will irrevocably and unconditionally agree,
to the extent provided there, to pay in full on a senior unsecured basis,
to the holders of the trust preferred securities issued by the trust, the
guarantee payments. We shall pay the guarantee payments as and when due,
regardless of any defense, right of set-off or counterclaim which the trust
may have or assert. We shall make these payments except to the extent paid
by the trust. The following payments or distributions with respect to trust
preferred securities issued by the trust to the extent not paid by or on
behalf of the trust, will be subject to the guarantee, without duplication:
(a) any accrued and unpaid distributions which are required to
be paid on the trust preferred securities, to the extent the
trust shall have funds available;
(b) the redemption price, including all accumulated and unpaid
distributions to the date of redemption, of trust preferred
securities in respect of which the related debentures have
been redeemed by us upon the occurrence of a tax event
redemption, to the extent the trust shall have funds
available; and
(c) upon a voluntary or involuntary dissolution of the trust,
other than in connection with the distribution of debentures
to the holders of trust preferred securities, the lesser of
o the aggregate of the stated liquidation amount and
all accrued and unpaid distributions on the trust
preferred securities to the date of payment, to the
extent the trust has funds available, and
o the amount of assets of the trust remaining available
for distribution to holders of the trust preferred
securities in liquidation of the trust.
Our obligation to make a guarantee payment may be satisfied by
direct payment of the required amounts by us to the holders of trust
preferred securities or by causing the trust to pay those amounts to the
holders.
The guarantee will be a full and unconditional guarantee on a
senior unsecured basis with respect to the trust preferred securities
issued by the trust, but will not apply to any payment of distributions
except to the extent the trust shall have funds available. If we do not
make interest payments on the debentures purchased by the trust, the trust
will not pay distributions on the trust preferred securities and will not
have funds available.
The guarantee, when taken together with our obligations under the
debentures, the indenture, and the declaration, will have the effect of
providing a full and unconditional guarantee on a senior unsecured basis by
us of payments due on the trust preferred securities.
We have also agreed separately to irrevocably and unconditionally
guarantee the obligations of the trust with respect to the common
securities to the same extent as the guarantee. However, in the case of an
indenture event of default, holders of trust preferred securities shall
have priority over holders of common securities with respect to
distributions and payments on liquidation, redemption or otherwise.
Cendant's Guarantee Covenants
In the guarantee, we will covenant that, so long as any trust
preferred securities issued by the trust remain outstanding, if there shall
have occurred any event that would constitute an event of default under the
guarantee or the declaration, then
(a) we shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of our capital
stock, other than
o purchases or acquisitions of our capital stock in
connection with the satisfaction of our obligations
under any employee or agent benefit plans or under
any contract or security outstanding on the date of
that event requiring us to purchase our capital
stock,
o as a result of a reclassification of our capital
stock or the exchange or conversion of one class or
series of our capital stock for another class or
series of our capital stock,
o the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of our capital stock or the security being
converted or exchanged,
o dividends or distributions in our capital stock (or
rights to acquire capital stock) or repurchases or
redemptions of capital stock solely from the issuance
or exchange of capital stock or
o redemptions or repurchases of any rights outstanding
under a shareholder rights plan;
(b) We shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt
securities issued by us that rank junior to those
debentures; and
(c) We shall not make any guarantee payments with respect to the
above other than according to the guarantee or the common
securities guarantee.
Modification of the Guarantee; Assignment
Except with respect to any changes which do not adversely affect
the rights of holders of trust preferred securities, in which case no vote
will be required, the guarantee may be amended only with the prior approval
of the holders of not less than a majority in stated liquidation amount of
the outstanding trust preferred securities issued by the trust. All
guarantees and agreements contained in the guarantee shall bind the
successors, assigns, receivers, trustees and our representatives and shall
inure to the benefit of the holders of the trust preferred securities then
outstanding.
Termination
The guarantee will terminate
(a) upon distribution of the debentures held by the trust to the
holders of the trust preferred securities,
(b) upon full payment of the redemption price of all the trust
preferred securities in the case that we repurchase all of
the debentures upon the occurrence of a tax event redemption
or
(c) upon full payment of the amounts payable in accordance with
the declaration upon liquidation of the trust.
The guarantee will continue to be effective, or will be
reinstated, if at any time any holder of trust preferred securities must
return payment of any sums paid under the trust preferred securities or the
guarantee.
Events of Default
An event of default under the guarantee will occur upon our failure
to perform any of our payment or other obligations under the guarantee.
The holders of a majority in stated liquidation amount of the trust
preferred securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee
in respect of the guarantee or to direct the exercise of any trust or power
conferred upon the guarantee trustee under the guarantee. If the guarantee
trustee fails to enforce the guarantee, any holder of trust preferred
securities may institute a legal proceeding directly against us to enforce
the holder's rights under the guarantee, without first instituting a legal
proceeding against the trust, the guarantee trustee or any other person or
entity. We waive any right or remedy to require that any action be brought
first against the trust or any other person or entity before proceeding
directly against us.
Status of the Guarantee
The guarantee will constitute our unsecured obligation and will
rank on a parity with all our other senior unsecured obligations.
Information Concerning the Guarantee Trustee
The guarantee trustee, prior to the occurrence of a default with
respect to the guarantee, undertakes to perform only those duties that are
specified in the guarantee. The guarantee trustee, after default, shall
exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. According to these provisions, the
guarantee trustee is under no obligation to exercise any of the powers
vested in it by the guarantee at the request of any holder of trust
preferred securities, unless offered reasonable indemnity against the
costs, expenses and liabilities which it might incur. However, this shall
not relieve the guarantee trustee, upon the occurrence of an event of
default under the guarantee, from exercising the rights and powers vested
in it by the guarantee.
Governing Law
The guarantee will be governed by and construed in accordance with
the internal laws of the State of New York.
DESCRIPTION OF THE DEBENTURES
Provided below is a description of the specific terms of the
debentures in which the trust will invest the proceeds from the issuance
and sale of the trust securities. The following description is not
necessarily complete, and reference is made to the copy of the form of the
indenture to be entered into between us and The Bank of Nova Scotia Trust
Company of New York , as debt trustee, which is filed as an exhibit to the
registration statement relating to this prospectus, and to the Trust
Indenture Act. Certain capitalized terms used here are defined in the
indenture.
Under specific circumstances involving the dissolution of the
trust, debentures may be distributed to the holders of the trust securities
in liquidation of the trust.
Overview
The debentures will be issued as senior unsecured debt under the
indenture and will rank on a parity in right of payment with all our other
senior unsecured debt obligations. The debentures will be limited in
aggregate principal amount to $ million.
The debentures will not be subject to a sinking fund provision.
Unless a tax event redemption has occurred prior to February 16, 2001, the
entire principal amount of the debentures will mature and become due and
payable, together with any accrued and unpaid interest thereon including
compound interest and expenses and taxes of the trust, if any, on February
16, 2003.
We will have the right at any time to dissolve the trust and cause
the debentures to be distributed to the holders of the trust securities. If
debentures are distributed to holders of trust securities in liquidation of
the holders' interests in the trust, those debentures will initially be
issued as a global security.
As described in this prospectus, under specific limited
circumstances, debentures may be issued in certificated form in exchange
for a global security. In the case that debentures are issued in
certificated form, these debentures will be in denominations of $50 and
integral multiples of $50 and may be transferred or exchanged at the
offices described below. Payments on debentures issued as a global security
will be made to the depositary, a successor depositary or, in the case that
no depositary is used, to a paying agent for the debentures. In the case
that debentures are issued in certificated form, principal and interest
will be payable, the transfer of the debentures will be registrable and
debentures will be exchangeable for debentures of other denominations of a
like aggregate principal amount, at the corporate trust office or agency of
the institutional trustee in Wilmington, Delaware. However, at our option,
payment of interest may be made by check mailed to the address of the
entitled holder or by wire transfer to an account appropriately designated
by the entitled holder. Notwithstanding the above, so long as the holder of
any debentures is the institutional trustee, the payment of principal and
interest on the debentures held by the institutional trustee will be made
at the place and to the account as may be designated by the institutional
trustee.
The indenture does not contain provisions that afford holders of
the debentures protection in case we are involved in a highly leveraged
transaction or other similar transaction that may adversely affect those
holders.
Interest
Each debenture shall initially bear interest at the rate of 6.45%
per year from the original date of issuance, payable quarterly in arrears
on February 16, May 16, August 16 and November 16 of each year, commencing
. Each debenture shall bear interest to the person in whose name that
debenture is registered, subject to certain exceptions, at the close of
business on the business day next preceding that interest payment date.
The applicable interest rate on the debentures and the distribution
rate on the related trust preferred securities outstanding on and after
February 16, 2001 will be reset on the third business day immediately
preceding February 16, 2001 to the reset rate. The reset rate will be equal
to the sum of the reset spread and the rate on the two-year benchmark
treasury in effect on the third business day immediately preceding February
16, 2001. The reset rate will be determined by the reset agent as the rate
the trust preferred securities should bear in order for a trust preferred
security to have an approximate market value on the third business day
immediately preceding February 16, 2001 of 100.5% of $50. However, we may
limit the reset rate to be no higher than the rate on the two-year
benchmark treasury on the third business day immediately preceding February
16, 2001 plus 200 basis points (2%). The market value of the trust
preferred securities may be less than 100.5% if the reset spread is limited
to a maximum of 2%.
On the reset announcement date, the two-year benchmark treasury
will be selected and the reset agent will establish the reset spread to be
added to the rate on the two-year benchmark treasury in effect on the third
business day immediately preceding February 16, 2001. On that date, we will
announce the reset spread and the two-year benchmark treasury. We will
cause a notice of the reset spread and the two-year benchmark treasury to
be published on the business day following the reset announcement date by
publication in a daily newspaper in the English language of general
circulation in The City of New York, which is expected to be The Wall
Street Journal. If debentures shall not continue to remain in book-entry
only form, we shall have the right to select record dates, which shall be
more than fifteen business days but less than 60 business days prior to the
interest payment date.
The amount of interest payable for any period will be computed on
the basis of a 360-day year consisting of twelve 30-day months. The amount
of interest payable for any period shorter than a full quarterly period for
which interest is computed will be computed on the basis of the actual
number of days elapsed in that 90-day period. In the case that any date on
which interest is payable on the debentures is not a business day, then
payment of the interest payable on that date will be made on the next
succeeding day that is a business day. However, no interest or other
payment shall be paid in respect of the delay but if that business day is
in the next succeeding calendar year, then that payment shall be made on
the immediately preceding business day, in each case with the same force
and effect as if made on that date.
Tax Event Redemption
If a tax event shall occur and be continuing, we may, at our
option, redeem debentures in whole but not in part at any time prior to
February 16, 2001. The redemption price shall equal, for each debenture,
the redemption amount plus accrued and unpaid interest, including compound
interest and expenses and taxes of the trust, if any, to the date of
redemption. If, following the occurrence of a tax event, we exercise our
option to redeem the debentures, then the proceeds of that redemption will
be applied to redeem trust securities having a liquidation amount equal to
the principal amount of debentures to be paid, in accordance with their
terms, at the redemption price. The redemption price will be payable in
cash to the holders of the trust securities. If a tax event redemption
occurs prior to February 16, 2001, the redemption price payable in
liquidation of the Income PRIDES holders' interest in the trust will be
distributed to the collateral agent. The collateral agent will apply an
amount equal to the redemption amount of the redemption price to purchase
the treasury portfolio on behalf of the holders of Income PRIDES and remit
any remaining portion of the redemption price to the purchase contract
agent for payment to the holders of those Income PRIDES. The treasury
portfolio will be substituted for the trust preferred securities and will
be pledged with the collateral agent to secure the Income PRIDES holders'
obligation to purchase our common stock under the purchase contracts.
However, if the tax event redemption occurs after February 16, 2001, the
treasury portfolio will not be purchased.
Tax event means the receipt by the trust of an opinion of a
nationally recognized independent tax counsel experienced in such matters
that, as a result of
(a) any amendment to, or change, including any announced
prospective change in, the laws or any regulations of the
United States or any political subdivision or taxing
authority or which affects taxation,
(b) any amendment to or change in an interpretation or
application of these laws or regulations by any legislative
body, court, governmental agency or regulatory authority or
(c) any interpretation or pronouncement that provides for a
position with respect to these laws or regulations that
differs from the generally accepted position on the date the
trust securities are issued,
which amendment or change is effective or which interpretation or
pronouncement is announced on or after the date of issuance of the trust
securities under the declaration, there is more than an insubstantial risk
that
(a) interest payable by us on the debentures would not be
deductible, in whole or in part, by us for United States
federal income tax purposes or
(b) the income of the trust would be subject to more than a de
minimis amount of other taxes, duties or other governmental
charges.
Treasury portfolio means, with respect to the applicable principal
amount of debentures
(a) if the tax event redemption date occurs prior to February 16,
2001, a portfolio of zero-coupon U.S. treasury securities
consisting of
o interest or principal strips of U.S. treasury
securities which mature on or prior to February 15,
2001 in an aggregate amount equal to the applicable
principal amount and
o with respect to each scheduled interest payment date
on the debentures that occurs after the tax event
redemption date, interest or principal strips of U.S.
treasury securities which mature on or prior to that
date in an aggregate amount equal to the aggregate
interest payment that would be due on the applicable
principal amount of the debentures on that date, and
(a) if the tax event redemption date occurs after February 16,
2001, a portfolio of zero-coupon U.S. treasury securities
consisting of
o principal or interest strips of U.S. treasury
securities which mature on or prior to February 15,
2003 in an aggregate amount equal to the applicable
principal amount and
o with respect to each scheduled interest payment date
on the debentures that occurs after the tax event
redemption date, interest or principal strips of the
U.S. treasury securities which mature on or prior to
that date in an aggregate amount equal to the
aggregate interest payment that would be due on the
applicable principal amount of the debentures on that
date.
Applicable principal amount means either
o if the tax event redemption date occurs prior to February
16, 2001, the aggregate principal amount of the debentures
corresponding to the aggregate stated liquidation amount of
the trust preferred securities which are components of
Income PRIDES on that tax event redemption date or
o if the tax event redemption occurs on or after February 16,
2001, the aggregate principal amount of the debentures
corresponding to the aggregate stated liquidation amount of
the trust preferred securities outstanding on that tax event
redemption date.
Redemption amount means for each debenture, the product of
o the principal amount of that debenture and
o a fraction whose numerator is the treasury portfolio
purchase price and whose denominator is the applicable
principal amount.
Treasury portfolio purchase price means the lowest aggregate price
quoted by a primary U.S. government securities dealer in New York City to
the quotation agent on the third business day immediately preceding the tax
event redemption date for the purchase of the treasury portfolio for
settlement on the tax event redemption date.
Quotation agent means
o Merrill Lynch Government Securities, Inc. and its respective
successors. However, if they shall cease to be a primary
treasury dealer, we shall substitute another primary
treasury dealer, and
o any other primary treasury dealer selected by us.
Notice of any redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each registered holder of
debentures to be redeemed at its registered address. Unless we default in
payment of the redemption price, on and after the redemption date interest
shall cease to accrue on the redeemed debentures.
Put Option
If a failed remarketing has occurred, holders of debentures,
including the institutional trustee and following the distribution of the
debentures upon a dissolution of the trust those debenture holders, will
have the right to put their debentures to us on March 2, 2001, upon at
least three business days' prior notice at a price per debenture equal to
$50, plus any accrued and unpaid interest. Upon our repurchase of those
debentures, the proceeds from the repurchase shall simultaneously be
applied to redeem, in the case of trust securities, any outstanding trust
preferred securities of those holders having an aggregate stated
liquidation amount equal to the aggregate principal amount of the
debentures so repurchased plus accrued and unpaid distributions, including
any deferred distributions.
Option to Extend Interest Payment Period
We shall have the right at any time, and from time to time, during
the term of the debentures, to defer payments of interest by extending the
interest payment period for a period not extending beyond the maturity date
of the debentures, at the end of which extension period, we shall pay all
interest then accrued and unpaid, including any expenses and taxes of the
trust, together with interest compounded quarterly at the rate of 6.45% per
year through and including February 15, 2001, and at the reset rate
afterwards, to the extent permitted by applicable law ("compound
interest"). However, during any extension period,
(a) we shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of our capital
stock, other than
o purchases or acquisitions of our capital stock in
connection with the satisfaction of our obligations
under any employee or agent benefit plans or under
any contract or security outstanding on the date of
that event requiring us to purchase our capital
stock,
o as a result of a reclassification of our capital
stock or the exchange or conversion of one class or
series of our capital stock for another class or
series of our capital stock,
o the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of our capital stock or the security being
converted or exchanged,
o dividends or distributions in our capital stock (or
rights to acquire capital stock) or repurchases or
redemptions of capital stock solely from the issuance
or exchange of capital stock or
o redemptions or repurchases of any rights outstanding
under a shareholder rights plan,
(b) we shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt
securities issued by us that rank junior to those
debentures, and
(c) we shall not make any guarantee payments with respect to the
above other than according to the guarantee or the common
securities guarantee.
Prior to the termination of any extension period, we may further
defer payments of interest by extending the interest payment period.
However, the extension period, including all previous and further
extensions, may not extend beyond the February 16, 2003. Upon the
termination of any extension period and the payment of all amounts then
due, we may commence a new extension period, subject to the terms specified
in this section. No interest during an extension period, except at its end,
shall be due and payable, but we, at our option, may prepay on any interest
payment date all of the interest accrued during the then elapsed portion of
an extension period. We have no present intention of exercising our right
to defer payments of interest by extending the interest payment period on
the debentures.
If the institutional trustee shall be the sole holder of the
debentures, we shall give the regular trustees and the institutional
trustee notice of its selection of that extension period one business day
prior to the earlier of
(1) the date distributions on the trust preferred securities are
payable or
(2) the date the regular trustees are required to give notice,
if applicable, to the NYSE, other applicable self-regulatory
organization or to holders of the trust preferred securities
of the record or payment date of that distribution.
The regular trustees shall give notice of our selection of that
extension period to the holders of the trust preferred securities. If the
institutional trustee shall not be the sole holder of the debentures, we
shall give the holders of the debentures notice of our selection of that
extension period ten business days prior to the earlier of
(1) the interest payment date or
(2) the date upon which we are required to give notice, if
applicable, to the NYSE, other applicable self-regulatory
organization or to holders of the debentures of the record
or payment date of that related interest payment.
Expenses and Taxes of the Trust
In the indenture, we, as borrower, have agreed to pay all debts and
other obligations, other than with respect to the trust securities, and all
costs and expenses of the trust. These include the costs and expenses
relating to the organization of the trust, the fees and expenses of the
trustees and the costs and expenses relating to the operation of the trust
and any and all related taxes costs and expenses, other than United States
withholding taxes, to which the trust might become subject. We also have
agreed in the indenture to execute those additional agreements as may be
necessary or desirable to give full effect to the above.
Indenture Events of Default
If any indenture event of default shall occur and be continuing,
the institutional trustee, as the holder of the debentures, will have the
right to declare the principal of and the interest on the debentures,
including any compound interest and expenses and taxes of the trust, if
any, and any other amounts payable under the indenture, to be due and
payable and to enforce its other rights as a creditor with respect to the
debentures.
The following are events of default under the indenture with
respect to the debentures:
o failure to pay interest on the debentures when due,
continued for a period of 30 days. However, if we are
permitted by the terms of the debentures to defer the
payment in question, then the date on which that payment is
due and payable shall be the date on which we are required
to make payment following that deferral, if that deferral
has been elected according to the terms of the debentures;
o failure to pay the principal of or premium, if any, on the
debentures when due and payable on February 16, 2003, upon
redemption or otherwise. However, if we are permitted by the
terms of the debentures to defer the payment in question,
the date on which that payment is due and payable shall be
the date on which we are required to make payment following
the deferral, if the deferral has been elected according to
the terms of the debentures;
o failure to observe or perform in any material respect other
covenants contained in the indenture, continued for a period
of 90 days after written notice has been given to us by the
debt trustee or holders of at least 25% in aggregate
principal amount of the outstanding debentures; and
o particular events of our bankruptcy, insolvency or
reorganization.
The indenture provides that the debt trustee shall, within 90 days
after the occurrence of any default or event of default with respect to the
debentures, give the holders of the debentures notice of all uncured
defaults or events of default known to it. The term default includes any
event which after notice or passage of time or both would be an event of
default.
However, 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 that
series, or in the payment of any sinking fund installment with respect to
debt securities of that series, the trustee shall be protected in
withholding that 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
that notice is in the interest of the holders of debt securities of that
series and any related coupons. Except that in the case of an event of
default or a default in a payment on the debentures, the debt trustee shall
be protected in withholding the notice so long as the board of directors,
the executive committee or directors or responsible officers of the debt
trustee in good faith determine that the withholding of that notice is in
the interest of the holders of the debentures.
If an event of default with respect to the debentures occurs and is
continuing, the debt trustee or the holders of at least 25% in aggregate
principal amount of the outstanding debentures, by notice in writing to us
and to the debt trustee if given by the holders of at least 25% in
aggregate principal amount of the debentures, may declare the unpaid
principal of and accrued interest to the date of acceleration on all the
outstanding debentures to be due and payable immediately and, upon that
declaration, the debentures shall become immediately due and payable.
In addition, in the case of the debentures held by the trust, if an
event of default has occurred and is continuing, and that event is
attributable to our failure to pay interest or principal, then a holder of
trust preferred securities may directly institute a proceeding against us
for payment.
Any declaration with respect to the debentures may be annulled and
past events of default and defaults, except, unless cured, an event of
default or a default in payment of principal of or interest on the
debentures, may be waived by the holders of a majority of the principal
amount of the outstanding debentures, upon the conditions provided in the
indenture.
The indenture provides that we shall periodically file statements
with the debt trustee regarding compliance by us with some of its
respective covenants and shall specify any event of default or defaults
with respect to the debentures, in performing those covenants, of which we
as signers may have knowledge.
An indenture event of default also constitutes a declaration event
of default. The holders of trust preferred securities in some circumstances
have the right to direct the institutional trustee to exercise its rights
as the holder of the debentures. Notwithstanding the above, if an event of
default has occurred and is continuing and that event is attributable to
our failure to pay interest or principal on the debentures on the date that
interest or principal is otherwise payable, we acknowledge that a holder of
trust preferred securities may directly institute a proceeding for
enforcement of payment to that holder directly of the principal of and
interest on the debentures having a principal amount equal to the aggregate
stated liquidation amount of the trust preferred securities of that holder
after the respective due date specified in the debentures. In connection
with that action, we shall have the right under the indenture to set-off
any payment made to that holder by us. The holders of trust preferred
securities will not be able to exercise directly any other remedy available
to the holders of the debentures.
Book-Entry and Settlement
If distributed to holders of trust preferred securities in
connection with the involuntary or voluntary dissolution of the trust, the
debentures will be issued in the form of one or more global certificates
(each a "global security") registered in the name of the depositary or its
nominee. Except under the limited circumstances described below, debentures
represented by the global security will not be exchangeable for, and will
not otherwise be issuable as, debentures in certificated form. The global
securities described above may not be transferred except 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 to a successor
depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in certificated form. These
laws may impair the ability to transfer beneficial interests in a global
security.
Except as provided below, owners of beneficial interests in a
global security will not be entitled to receive physical delivery of
debentures in certificated form and will not be considered its holders for
any purpose under the indenture. No global security representing debentures
shall be exchangeable, except for another global security of like
denomination and tenor to be registered in the name of the depositary or
its nominee or to a successor depositary or its nominee. Accordingly, each
beneficial owner must rely on the procedures of the depositary or if that
person is not a participant, on the procedures of the participant through
which that person owns its interest to exercise any rights of a holder
under the indenture.
The Depositary
If debentures are distributed to holders of trust preferred
securities in liquidation of those holders' interests in the trust, the
depositary will act as securities depositary for the debentures. As of the
date of this prospectus, the description of the depositary's book-entry
system and the depositary's practices as they relate to purchases,
transfers, notices and payments with respect to the trust preferred
securities apply in all material respects to any debt obligations
represented by one or more global securities held by the depositary. We may
appoint a successor to the depositary or any successor depositary if the
depositary or a successor depositary is unable or unwilling to continue as
a depositary for the global securities.
Neither us nor the trust, the institutional trustee, any paying
agents, any of our other agents or the debt trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global
security for the debentures or for maintaining, supervising or reviewing
any records relating to those beneficial ownership interests.
A global security shall be exchangeable for debentures registered
in the names of persons other than the depositary or its nominee only if
(1) the depositary notifies us that it is unwilling or unable to
continue as a depositary for that global security and no
successor depositary shall have been appointed,
(2) the depositary at any time, ceases to be a clearing agency
registered under the Exchange Act at which time the
depositary is required to be so registered to act as a
depositary and no successor depositary shall have been
appointed,
(3) we, in our sole discretion, determine that the global
security shall be so exchangeable or
(4) there shall have occurred an indenture event of default with
respect to such debentures.
Any global security that is exchangeable according to the preceding
sentence shall be exchangeable for debentures registered in those names as
the depositary shall direct. It is expected that these instructions will be
based upon directions received by the depositary from its participants with
respect to ownership of beneficial interests in the global security.
Governing Law
The indenture and the debentures will be governed by, and construed
in accordance with, the internal laws of the State of New York.
Miscellaneous
We will pay all fees and expenses related to
(1) the offering of the trust securities and the debentures,
(2) the organization, maintenance and dissolution of the trust,
(3) the retention of the trustees and
(4) the enforcement by the institutional trustee of the rights
of the holders of the trust preferred securities.
EFFECT OF OBLIGATIONS UNDER THE
DEBENTURES AND THE GUARANTEE
As provided in the declaration, the sole purpose of the trust is to
issue the trust securities evidencing undivided beneficial interests in the
assets of the trust, and to invest the proceeds from the issuance and sale
in the debentures and engage in only other necessary or incidental
activities.
As long as payments of interest and other payments are made when
due on the debentures, those payments will be sufficient to cover
distributions and payments due on the trust securities because of the
following factors:
o the aggregate principal amount of debentures will be equal
to the sum of the aggregate stated liquidation amount of the
trust securities;
o the interest rate and the interest and other payment dates
on the debentures will match the distribution rate and
distribution and other payment dates for the trust
securities;
o we shall pay, and the trust shall not be obligated to pay,
directly or indirectly, all costs, expenses, debts, and
obligations of the trust, other than with respect to the
trust securities; and
o the declaration further provides that the trustees shall not
take or cause or permit the trust to, among other things,
engage in any activity that is not consistent with the
purposes of the trust.
Payments of distributions, to the extent funds are available, and
other payments due on the trust preferred securities, to the extent funds
therefor are available, are guaranteed by us as to the extent provided
under "Description of the Guarantee." If we do not make interest payments
on the debentures purchased by the trust, the trust will not have
sufficient funds to pay distributions on the trust preferred securities.
The guarantee does not apply to any payment of distributions unless and
until the trust has sufficient funds for the payment of such distributions.
If we fail to make interest or other payments on the debentures
when due, taking account of any extension period, the declaration provides
a mechanism enabling the holders of the trust preferred securities to
direct the institutional trustee to enforce its rights under the indenture.
If the institutional trustee fails to enforce its rights under the
indenture in respect of an indenture event of default, a holder of record
of trust preferred securities may, to the fullest extent permitted by
applicable law, institute a legal proceeding against us to enforce the
institutional trustee's rights under the indenture without first
instituting any legal proceeding against the institutional trustee or any
other person or entity.
Notwithstanding the above, if a declaration event of default has
occurred and is continuing and that event is attributable to our failure to
pay interest or principal on the debentures on the date that interest or
principal is otherwise payable, then a holder of trust preferred securities
may directly institute a proceeding against us for payment. We, under the
guarantee, acknowledge that the guarantee trustee shall enforce the
guarantee on behalf of the holders of the trust preferred securities. If we
fail to make payments under the guarantee, the guarantee provides a
mechanism enabling the holders of the trust preferred securities to direct
the guarantee trustee to enforce its rights under the guarantee.
Notwithstanding the above, if we fail to make a payment under the
guarantee, any holder of trust preferred securities may institute a legal
proceeding directly against us to enforce its rights under the guarantee
without first instituting a legal proceeding against the trust, the
guarantee trustee, or any other person or entity.
The guarantee, when taken together with our obligations under the
debentures and the indenture and its obligations under the declaration,
including its obligations to pay costs, expenses, debts and liabilities of
the trust, other than with respect to the trust securities, has the effect
of providing a full and unconditional guarantee of amounts due on the trust
preferred securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the material United States
federal income tax consequences of the acquisition, ownership and
disposition of FELINE PRIDES, trust preferred securities and common stock
acquired under a purchase contract. Unless otherwise stated, the summary
deals only with FELINE PRIDES, trust preferred securities and common stock
held as capital assets (generally, assets held for investment) by U.S.
holders that purchase FELINE PRIDES from Cendant pursuant to this offering.
The tax treatment of a U.S. holder may vary depending on its particular
situation. This summary does not address all of the tax consequences that
may be relevant to holders that may be subject to special tax treatment
such as, for example, insurance companies, broker dealers, tax-exempt
organizations, or foreign taxpayers. In addition, this summary does not
address the tax consequences to shareholders, partners or beneficiaries of
a holder of FELINE PRIDES, trust preferred securities or common stock, nor
does it address any aspects of state, local, or foreign tax laws. This
summary is based on the United States federal income tax laws in effect as
of the date hereof, which is subject to change, possibly on a retroactive
basis. Each investor should consult its tax advisor as to the particular
tax consequences of acquiring, owning, and disposing of FELINE PRIDES or
trust preferred securities, including the application and effect of United
States federal, state, local, foreign and other tax laws.
No statutory, administrative or judicial authority directly
addresses the treatment of FELINE PRIDES or instruments similar of FELINE
PRIDES for United States federal income tax purposes. As a result, no
assurance can be given that the IRS will agree with the tax consequences
described herein.
For purposes of this summary, the term "U.S. holder" means a holder
of FELINE PRIDES or trust preferred securities that is, for United States
federal income tax purposes, (1) a citizen or resident of the United
States, (2) a corporation or partnership created or organized in or under
the laws of the United States or any state thereof or the District of
Columbia, (3) an estate the income of which is subject to United States
federal income taxation, regardless of its source, (4) a trust if a court
within the United States is able to exercise primary supervision over the
administration of such trust and one or more United States persons have the
authority to control all substantial decisions of such trust or (5) any
person or entity otherwise subject to United States federal income taxation
on a net basis in respect of its investment in FELINE PRIDES
The following summary does not address the tax consequences
associated with the acquisition of rights. Holders that acquire rights as
part of a litigation settlement or otherwise should consult their tax
advisors concerning the tax consequences associated with such acquisition
of the rights.
Acquisition, Ownership and Disposition of FELINE PRIDES
Holders That Acquire and Immediately Exchange Additional FELINE
PRIDES and Rights for New FELINE PRIDES. The purchase of additional FELINE
PRIDES pursuant to this offering by a U.S. holder of rights that is
required to immediately exchange those additional FELINE PRIDES and rights
for new FELINE PRIDES should be treated as a single integrated transaction
for United States federal income tax purposes. Accordingly, (1) such a U.S.
holder's acquisition of additional FELINE PRIDES should be disregarded and
(2) the U.S. holder should be treated as having purchased new FELINE PRIDES
for an amount equal to the sum of the cash paid for the additional FELINE
PRIDES plus the fair market value of the rights exchanged for the new
FELINE PRIDES. In that event, the U.S. holder would recognize gain or loss
on the transfer of the rights equal to the difference between the fair
market value of the rights and the U.S. holder's tax basis in the rights.
The gain or loss would be capital gain or loss, and would generally be
long-term capital gain or loss if the U.S. holder held the rights for more
than one year immediately prior to the exchange. Long-term capital gains of
individuals are eligible for reduced rates of taxation. The deductibility
of capital losses is subject to limitations.
Holders That Purchase and Continue to Hold Additional FELINE
PRIDES. The treatment of the acquisition of additional FELINE PRIDES by
U.S. holders that continue to hold the additional FELINE PRIDES, if any, is
not clear, in part because the purchase contract related to the additional
FELINE PRIDES currently has a negative value and there is no authority
directly on point as to how such negative value should be characterized. It
is possible that a U.S. holder that purchases additional FELINE PRIDES
pursuant to this offering and continues to hold the additional FELINE
PRIDES would be considered to have received consideration to assume the
obligations under the related purchase contract in an amount equal to that
negative value, and to have paid that amount, in addition to the purchase
price, for the trust preferred securities or treasury securities related to
additional FELINE PRIDES. Any U.S. holders that purchase additional FELINE
PRIDES and that continue to hold the additional FELINE PRIDES should
consult their tax advisors concerning the acquisition of additional FELINE
PRIDES when the related purchase contracts have a negative value.
Holders That Deliver Rights and Current FELINE PRIDES (or
Additional FELINE PRIDES Obtained in the Secondary Market) in Exchange for
New FELINE PRIDES. A holder that delivers rights and current FELINE PRIDES
(or additional FELINE PRIDES acquired in the secondary market) in exchange
for new FELINE PRIDES should be treated (1) in the case of holders of
Income PRIDES only, as transferring the trust preferred securities related
to the current Income PRIDES or additional Income PRIDES in exchange for
the trust preferred securities related to the new Income PRIDES and (2) in
the case of holders of both Income PRIDES and Growth PRIDES, as
transferring the purchase contracts related to the current FELINE PRIDES or
additional FELINE PRIDES, together with the rights, in exchange for the
purchase contracts related to the new FELINE PRIDES.
The exchange of the trust preferred securities related to the
current Income PRIDES (or additional Income PRIDES acquired in the
secondary market) for the trust preferred securities associated with the
new Income PRIDES should not constitute a "significant modification" of the
trust preferred securities (or the underlying debentures) related to the
Income PRIDES for United States federal income tax purposes and,
accordingly, despite the fact that there will be a physical exchange of
securities, the new trust preferred securities should be treated as a
"continuation" of the trust preferred securities surrendered. As a result,
there should be no United States federal income tax consequences with
respect to the exchange of the trust preferred securities related to the
current Income PRIDES (or additional Income PRIDES acquired in the
secondary market) for the trust preferred securities related to the new
Income PRIDES. Therefore, an exchanging U.S. holder should have the same
adjusted tax basis and holding period in the new trust preferred securities
as it had in the surrendered trust preferred securities immediately before
the exchange.
There is no authority addressing the treatment, under current law,
of the transfer of the purchase contracts related to the current FELINE
PRIDES (or additional FELINE PRIDES acquired on the secondary market) and
the rights in exchange for the purchase contracts related to the new FELINE
PRIDES. Although the matter is not free from doubt, a U.S. holder likely
would (1) recognize capital gain or loss on the cancellation of the
purchase contracts related to the current FELINE PRIDES (or additional
FELINE PRIDES acquired on the secondary market) equal to the difference
between the fair market value (which may be negative) of the cancelled
purchase contracts and the U.S. holder's adjusted tax basis in the
cancelled purchase contracts and (2) recognize capital gain or loss on the
transfer of the rights equal to the difference between the fair market
value of the rights and the U.S. holder's tax basis in the transferred
rights. In each case, the capital gain or loss would be long-term or
short-term capital gain or loss depending upon the U.S. holder's holding
period for the surrendered purchase contracts and surrendered rights,
respectively. If the purchase contracts related to the new FELINE PRIDES
were to have a negative value at the time the exchange of purchase
contracts described above took place, it is possible that the U.S. holder's
loss on the cancellation of the purchase contracts related to the current
FELINE PRIDES (or additional FELINE PRIDES acquired on the secondary
market) would be limited to the fair market value of the rights
surrendered. Alternatively, the U.S. holder could be treated as having
received consideration to enter into the purchase contracts related to the
new FELINE PRIDES in an amount equal to their negative value and to have
paid that amount, in addition to the rights, to be released from its
obligation under the purchase contracts surrendered in the exchange. The
U.S. holder's tax basis in the purchase contracts related to the new FELINE
PRIDES likely would equal their fair market value (but likely would not be
less than zero, even if the new purchase contracts had negative value at
the time they were transferred to the holder). U.S. holders should consult
their tax advisors regarding the exchange of the purchase contracts related
to the current FELINE PRIDES (or additional FELINE PRIDES acquired on the
secondary market) and the rights for the purchase contracts related to the
new FELINE PRIDES.
Allocation of Purchase Price. In general, a U.S. holder that
acquires new FELINE PRIDES through the purchase from and immediate
surrender of additional FELINE PRIDES to Cendant or that acquires
additional FELINE PRIDES which such holder is not required to surrender (if
additional FELINE PRIDES are sold to any such persons) should be treated as
acquiring a unit consisting of two components -- in the case of an Income
PRIDES, a trust preferred security and a purchase contract constituting
such Income PRIDES and, in the case of a Growth PRIDES, an interest in a
treasury security and a purchase contract constituting such Growth PRIDES.
The amount paid for each FELINE PRIDES generally will be allocated between
the two components in proportion to their respective fair market values at
the time of purchase. Such allocation will establish the U.S. holder's
initial tax bases in the trust preferred security or interest in the
treasury security, as the case may be, and the purchase contract. The
proper allocation of the purchase price of an additional FELINE PRIDES is
not clear, in part because the purchase contract related to an additional
FELINE PRIDES currently has a negative value and there is no authority
directly on point as to how such negative value should be allocated. It is
possible that the purchase of additional FELINE PRIDES would be treated as
if the U.S. holder received consideration to assume the obligations under
the related purchase contract in an amount equal to that negative value,
and to have paid that amount, in addition to the purchase price, for the
related trust preferred security. Based upon the above, Cendant will report
the fair market value of each trust preferred security and each interest in
a treasury security so that (1) in the case of new FELINE PRIDES, the
entire purchase price of a new FELINE PRIDES will be allocable to the trust
preferred security or interest in the treasury security, as the case may
be, and no amount will be allocable to the purchase contract and (2) in the
case of additional FELINE PRIDES (other than any additional FELINE PRIDES
that are immediately surrendered for new FELINE PRIDES), the entire
purchase price of an additional FELINE PRIDES plus an amount equal to the
negative value of the related purchase contract will be allocable to the
trust preferred security or interest in the treasury security, as the case
may be, and no amount will be allocable to the purchase contract. These
positions will be binding upon each U.S. holder (but not on the IRS) unless
the U.S. holder explicitly discloses a contrary position on a statement
attached to that U.S. holder's timely filed United States federal income
tax return for the taxable year in which a FELINE PRIDES is acquired. Thus,
absent such disclosure, a U.S. holder should allocate the purchase price
for a FELINE PRIDES in accordance with the allocations set forth above. The
remainder of this discussion assumes that these allocations of the purchase
price of new FELINE PRIDES and additional FELINE PRIDES will be respected
for United States federal income tax purposes. A different allocation could
affect the timing and character of income to a U.S. holder.
Ownership of Trust Preferred Securities or Treasury Securities. A
U.S. holder will be treated as owning the trust preferred securities or
treasury securities constituting a part of the Income PRIDES or Growth
PRIDES, respectively. Cendant and, by acquiring FELINE PRIDES, each U.S.
holder agree to treat that holder as the owner, for United States federal,
state and local income and franchise tax purposes, of the trust preferred
securities or treasury securities constituting a part of the FELINE PRIDES
beneficially owned by that U.S. holder. Based upon this agreement, Cendant
intends to take the position, and the remainder of this summary assumes,
that U.S. holders of FELINE PRIDES will be treated as the owners of the
trust preferred securities or treasury securities constituting a part of
their FELINE PRIDES for United States federal, state and local income and
franchise tax purposes. The United States federal income tax consequences
of owning the trust preferred securities or treasury securities are
discussed below. See "-- Trust Preferred Securities", "-- Treasury
Securities" and "-- Tax Event Redemption of Trust Preferred Securities."
Sales, Exchanges or Other Taxable Dispositions of FELINE PRIDES.
Upon a sale, exchange or other taxable disposition (collectively, a
"disposition") of FELINE PRIDES, a U.S. holder will be treated as having
sold, exchanged or disposed of the purchase contract and the trust
preferred securities, treasury portfolio or, in the case of Growth PRIDES,
the treasury securities, that constitute those FELINE PRIDES and will
generally have gain or loss equal to the difference between the portion of
the proceeds to the U.S. holder allocable to the purchase contract and the
trust preferred securities, treasury portfolio or treasury securities, as
the case may be, and that U.S. holder's respective adjusted tax bases in
the purchase contract and the trust preferred securities, treasury
portfolio or treasury securities. Such gain or loss will generally be
capital gain or loss, except to the extent that the U.S. holder is treated
as receiving an amount with respect to accrued but unpaid interest on the
trust preferred securities or the treasury portfolio, which amount will be
treated as ordinary interest income, or to the extent the U.S. holder is
treated as receiving an amount with respect to accrued contract adjustment
payments or deferred contract adjustment payments, which may be treated as
ordinary income, in each case to the extent not previously included in
income. Such capital gain or loss will generally be long-term capital gain
or loss if the U.S. holder held the FELINE PRIDES for more than one year
immediately prior to their disposition. Long-term capital gains of
individuals are eligible for reduced rates of taxation. The deductibility
of capital losses is subject to limitations. If a disposition of FELINE
PRIDES were to occur when the purchase contract had negative value,
although the matter is not free from doubt, the U.S. holder should be
considered to have received additional consideration for the trust
preferred securities, treasury portfolio or treasury securities, as the
case may be, in an amount equal to such negative value and to have paid
that amount to be released from its obligation under the purchase contract.
U.S. holders should consult their tax advisors regarding a disposition of
the FELINE PRIDES at a time when the purchase contract has negative value.
In determining gain or loss, payments to a U.S. holder of contract
adjustment payments or deferred contract adjustment payments properly
excluded from income should either reduce that U.S. holder's adjusted tax
basis in the purchase contract or result in an increase in the amount
realized on the disposition of the purchase contract. Any contract
adjustment payments or deferred contract adjustment payments included in a
U.S. holder's income but not paid should increase the U.S. holder's
adjusted tax basis in the purchase contract. Payments in cash that have
been made by a U.S. holder to create Growth PRIDES but not offset against
payments of contract adjustment payments or deferred contract adjustment
payments may increase the U.S. holder's adjusted tax basis in the purchase
contract or result in a decrease in the amount realized on the disposition
of the purchase contract. See "-- Contract Adjustment Payments and Deferred
Contract Adjustment Payments; Delivery of Cash."
Trust Preferred Securities
Classification of the Trust. Cendant believes that the trust will
be classified as a grantor trust and not as an association taxable as a
corporation for United States federal income tax purposes. As a result,
each U.S. holder of trust preferred securities will be treated as owning an
undivided beneficial ownership interest in the debentures and, as further
discussed below, each U.S. holder of trust preferred securities will be
required to include in its gross income its pro rata share of the interest
income or OID that is paid or accrued on the debentures. See "-- Interest
Income and Original Issue Discount."
Classification of the Debentures. Cendant believes that the
debentures will be classified as indebtedness for United States federal
income tax purposes. Cendant, the trust and, by acquiring Income PRIDES or
trust preferred securities, each U.S. holder agree to treat the debentures
as indebtedness of Cendant for all United States tax purposes.
Interest Income and Original Issue Discount. Under the applicable
Treasury regulations, the debentures will not be considered to have been
issued with OID. Accordingly, except as set forth below, stated interest on
the debentures will generally be included in income by a U.S. holder at the
time such interest income is paid or accrued in accordance with that U.S.
holder's regular method of tax accounting. If, however, Cendant were to
exercise its right to defer payments of interest on the debentures, U.S.
holders (even those using a cash basis method of accounting) would be
required to accrue the stated interest on the debentures (as OID) on a
daily economic accrual basis even though Cendant would not pay such
interest during the deferral period. For periods, if any, after Cendant
exercised its right to defer payments of interest on the debentures, the
debentures would be subject to tax as OID instruments for as long as they
remained outstanding, which would require U.S. holders to include accrued
OID in gross income in advance of the receipt of cash attributable to such
accrued OID. Under the OID economic accrual rules, a U.S. holder would
accrue an amount of interest income each year that approximates the stated
interest payments called for under the terms of the debentures, and actual
cash payments of interest on the debentures would not be reported
separately as taxable income. Any amount of OID included in a U.S. holder's
gross income would increase that U.S. holder's adjusted tax basis in its
trust preferred securities, and the amount of a distribution received by a
U.S. holder with respect to those trust preferred securities would reduce
the adjusted tax basis of such trust preferred securities.
The Treasury regulations described above have not yet been
addressed in any rulings or other interpretations by the IRS, and it is
possible that the IRS could take a contrary position. If the IRS were to
assert successfully that the stated interest on the debentures was OID
regardless of whether or not Cendant exercised its right to defer payments
of interest on such debentures, all U.S. holders would be required to
include stated interest on the debentures in income on a daily economic
accrual basis as described above.
U.S. holders that are corporations will not be entitled to a
dividends received deduction with respect to any income recognized with
respect to the trust preferred securities.
Distribution of Debentures to U.S. Holders of Trust Preferred
Securities. A distribution by the trust of the debentures as described
under the caption "Description of the Trust Preferred Securities --
Liquidation Distribution Upon Dissolution" would not be a taxable event to
U.S. holders. In the event of such a distribution, a U.S. holder would have
an aggregate adjusted tax basis in the debentures received in the
liquidation equal to the aggregate adjusted tax basis that the U.S. holder
had in its trust preferred securities surrendered in the liquidation of the
trust, and the holding period of those debentures would include the period
during which the U.S. holder had held those trust preferred securities. In
addition, a U.S. holder would continue to include interest (or OID) in
respect of debentures received from the trust in the manner described under
"-- Interest Income and Original Issue Discount."
Sales, Exchanges or Other Taxable Dispositions of Trust Preferred
Securities. Gain or loss will be recognized by a U.S. holder on a
disposition of a trust preferred security (including a redemption for cash
or the remarketing of the trust preferred security) in an amount equal to
the difference between the amount realized by the U.S. holder on the
disposition of the trust preferred security (except to the extent that the
amount realized is characterized as a payment in respect of accrued but
unpaid interest on the U.S. holder's allocable share of the debentures that
the U.S. holder has not previously included in gross income, which amount
will be subject to tax as ordinary interest income) and the U.S. holder's
adjusted tax basis in that trust preferred security. Selling expenses
incurred by a U.S. holder, including the remarketing fee, will reduce the
amount of gain or increase the amount of loss recognized by the U.S. holder
upon a disposition of a trust preferred security. Gain or loss realized by
a U.S. holder on a disposition of a trust preferred security generally will
be capital gain or loss and generally will be long-term capital gain or
loss if the U.S. holder held that trust preferred security for more than
one year immediately prior to its disposition. Long-term capital gains of
individuals are eligible for reduced rates of taxation. The deductibility
of capital losses is subject to limitations.
Treasury Securities
Original Issue Discount. A U.S. holder of Growth PRIDES will be
required to treat its ownership interest in the treasury securities
comprising a Growth PRIDES as an interest in a bond that was originally
issued on the date the Growth PRIDES is purchased and that has OID equal to
the excess of the stated amount of the Growth PRIDES over the purchase
price of the Growth PRIDES. A U.S. holder will be required to include that
OID in income on a daily economic accrual basis over the period between the
issue date of the Growth PRIDES and the day immediately preceding the
purchase contract settlement date, regardless of the U.S. holder's method
of tax accounting and in advance of the receipt of cash attributable to
that OID. Amounts of OID included in a U.S. holder's gross income will
increase the U.S. holder's adjusted tax basis in its interest in the
treasury securities.
Sales, Exchanges or Other Taxable Dispositions of Treasury
Securities. In the event that a U.S. holder obtains the release of treasury
securities by delivering trust preferred securities to the collateral
agent, gain or loss will be recognized by the U.S. holder on a subsequent
disposition of the treasury securities in an amount equal to the difference
between the amount realized by the U.S. holder on the disposition and the
U.S. holder's adjusted tax basis in the treasury securities. Such gain or
loss generally will be capital gain or loss and generally will be long-term
capital gain or loss if the U.S. holder held those treasury securities for
more than one year immediately prior to their disposition. Long-term
capital gains of individuals are eligible for reduced rates of taxation.
The deductibility of capital losses is subject to limitations.
Purchase Contracts
Contract Adjustment Payments and Deferred Contract Adjustment
Payments; Delivery of Cash. There is no direct authority addressing the
treatment, under current law, of the contract adjustment payments and
deferred contract adjustment payments, or the delivery of cash in respect
of excess accrued contract adjustment payments by a U.S. Holder of Income
PRIDES upon the creation of Growth PRIDES and such treatment is, therefore,
unclear. Contract adjustment payments and deferred contract adjustment
payments may constitute taxable income to a U.S. holder of FELINE PRIDES
when received or accrued, in accordance with the U.S. holder's regular
method of tax accounting. To the extent that Cendant is required to file
information returns with respect to contract adjustment payments or
deferred contract adjustment payments, it intends to report those payments
as taxable income to each U.S. holder. U.S. holders should consult their
tax advisors concerning the treatment of contract adjustment payments and
deferred contract adjustment payments and the delivery of cash upon the
creation of Growth PRIDES, including the possibility that any contract
adjustment payment or deferred contract adjustment payment may be treated
as a loan, purchase price adjustment, rebate or payment analogous to an
option premium, rather than being includible in income on a current basis,
and that the delivery of cash upon the creation of Growth PRIDES may be
treated as an offset to contract adjustment payments or deferred contract
adjustment payments or as a purchase price adjustment. The treatment of
contract adjustment payments, deferred contract adjustment payments and the
delivery of cash upon the creation of Growth PRIDES could affect a U.S.
holder's adjusted tax basis in a purchase contract or common stock received
under a purchase contract or the amount realized by a U.S. holder upon the
disposition of a FELINE PRIDES or the termination of a purchase contract.
See "--Acquisition of Common Stock Under a Purchase Contract," "-- Sales,
Exchanges or Other Taxable Dispositions of FELINE PRIDES" and
"--Termination of Purchase Contract."
Acquisition of Common Stock Under a Purchase Contract. A U.S.
holder of FELINE PRIDES generally will not recognize gain or loss on the
purchase of common stock under a purchase contract, except with respect to
any cash received in lieu of a fractional share of common stock. Subject to
the following discussion, a U.S. holder's aggregate initial tax basis in
the common stock received under a purchase contract should generally equal
the purchase price paid for such common stock plus that U.S. holder's
adjusted tax basis in the purchase contract, if any, less the portion of
that purchase price and adjusted tax basis allocable to the fractional
share. Payments of contract adjustment payments or deferred contract
adjustment payments that have been received in cash by a U.S. holder but
not included in income by that U.S. holder should reduce the U.S. holder's
adjusted tax basis in the purchase contract or the common stock to be
received under that purchase contract; payments in cash that have been made
by a U.S. holder to create Growth PRIDES but not offset against payments of
contract adjustment payments or deferred contract adjustment payments may
increase that U.S. holder's adjusted tax basis in the purchase contract or
the common stock to be received under that purchase contract. See "--
Contract Adjustment Payments and Deferred Contract Adjustment Payments."
The holding period for common stock received under a purchase contract will
commence on the day following the acquisition of that common stock.
Ownership of Common Stock Acquired Under the Purchase Contract. Any
distribution on common stock paid by Cendant out of its current or
accumulated earnings and profits, as determined for United States federal
income tax purposes, will constitute a dividend and will be includible in
income by a U.S. holder when received. Any dividend on the common stock
will be eligible for the dividends received deduction if received by an
otherwise qualifying corporate U.S. holder that meets the holding period
and other requirements for the dividends received deduction.
Upon a disposition of common stock, a U.S. holder generally will
recognize capital gain or loss equal to the difference between the amount
realized and the U.S. holder's adjusted tax basis in the common stock. Such
capital gain or loss generally will be long-term capital gain or loss if
the U.S. holder held that common stock for more than one year immediately
prior to its disposition. Long-term capital gains of individuals are
eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations.
Early Settlement of Purchase Contract. A U.S. holder of FELINE
PRIDES will not recognize gain or loss on the receipt of its proportionate
share of trust preferred securities, treasury securities or the treasury
portfolio upon early settlement of a purchase contract and will have the
same adjusted tax basis in those trust preferred securities, treasury
securities or the treasury portfolio as before the early settlement. Any
contract adjustment payments or deferred contract adjustment payments that
have been included in a U.S. holder's income but forfeited and not paid
upon early settlement of a purchase contract should increase that U.S.
holder's adjusted tax basis in the common stock received under a purchase
contract.
Termination of Purchase Contract. If a purchase contract
terminates, a U.S. holder of FELINE PRIDES will recognize gain or loss
equal to the difference between the amount realized, if any, upon the
termination and the U.S. holder's adjusted tax basis, if any, in the
purchase contract at the time of the termination. Payments of contract
adjustment payments or deferred contract adjustment payments received by a
U.S. holder but not included in income by the U.S. holder should either
reduce the U.S. holder's adjusted tax basis in the purchase contract or
increase the amount realized on the termination of the purchase contract.
Any contract adjustment payments or deferred contract adjustment payments
included in a U.S. holder's income but not paid should increase the U.S.
holder's adjusted tax basis in the purchase contract; payments in cash that
have been made by a U.S. holder to create Growth PRIDES but not offset
against payments of contract adjustment payments or deferred contract
adjustment payments may increase the U.S. holder's adjusted tax basis in
the purchase contract or result in a deduction on the termination of the
purchase contract. See "-- Contract Adjustment Payments and Deferred
Contract Adjustment Payments." Such gain or loss generally will be capital
gain or loss and generally will be long-term capital gain or loss if the
U.S. holder held the purchase contract for more than one year immediately
prior to its termination. Long-term capital gains of individuals are
eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations. A U.S. holder will not recognize gain or loss on
the receipt of its proportionate share of the trust preferred securities,
treasury securities or treasury portfolio upon termination of the purchase
contract and will have the same adjusted tax basis in those trust preferred
securities, treasury securities or treasury portfolio as before that
termination.
Adjustment to Settlement Rate. U.S. holders of FELINE PRIDES might
be treated as receiving a constructive dividend distribution from Cendant
if (1) the settlement rate is adjusted and as a result of that adjustment,
the proportionate interest of U.S. holders of FELINE PRIDES in the assets
or earnings and profits of Cendant is increased and (2) the adjustment is
not made pursuant to a bona fide, reasonable anti-dilution formula. An
adjustment in the settlement rate would not be considered made pursuant to
such a formula if the adjustment were made to compensate a U.S. holder for
certain taxable distributions with respect to the Cendant's common stock.
Substitution of Treasury Securities to Create or Recreate Growth PRIDES
A U.S. holder of an Income PRIDES that delivers treasury securities
to the collateral agent in substitution for trust preferred securities will
generally not recognize gain or loss upon the delivery of those treasury
securities or the release of the trust preferred securities to the U.S.
holder. The U.S. holder will continue to take into account items of income
or deduction otherwise includible or deductible, respectively, by that U.S.
holder with respect to those treasury securities and trust preferred
securities, and the U.S. Holder's adjusted tax bases in the treasury
securities, the trust preferred securities and the purchase contract will
not be affected by such delivery and release.
Substitution of Trust Preferred Securities to Create or Recreate Income PRIDES
A U.S. holder of a Growth PRIDES that delivers trust preferred
securities to the collateral agent in substitution for treasury securities
will generally not recognize gain or loss upon the delivery of those trust
preferred securities or the release of the treasury securities to the U.S.
holder. The U.S. holder will continue to take into account items of income
or deduction otherwise includible or deducible, respectively, by that U.S.
holder with respect to those treasury securities and trust preferred
securities, and the U.S. holder's adjusted tax bases in the treasury
securities, the trust preferred securities and the purchase contract will
not be affected by such delivery and release.
Tax Event Redemption of Trust Preferred Securities
A tax event redemption will be a taxable event for U.S. holders of
trust preferred securities which will be subject to tax in the manner
described under "Trust Preferred Securities -- Sales, Exchanges or Other
Taxable Dispositions of Trust Preferred Securities."
Ownership of Treasury Portfolio. Cendant, the trust and, by
acquiring Income PRIDES, each U.S. holder agree to treat that U.S. holder
as the owner, for United States federal, state and local income and
franchise tax purposes, of its applicable ownership interest of the
treasury portfolio constituting a part of the Income PRIDES beneficially
owned by that U.S. holder in the event of a tax event redemption prior to
the purchase contract settlement date. Based upon this agreement, each U.S.
holder will include in income any amount earned on its pro rata portion of
the treasury portfolio for all United States federal, state and local
income and franchise tax purposes. The remainder of this summary assumes
that U.S. holders of Income PRIDES will be treated as the owners of the
applicable ownership interest of the treasury portfolio constituting a part
of those Income PRIDES for United States federal, state and local income
and franchise tax purposes.
Original Issue Discount. The treasury portfolio will consist of
stripped U.S. treasury securities. Following a tax event redemption prior
to the purchase contract settlement date, a U.S. holder of Income PRIDES
will be required to treat its pro rata portion of each U.S. treasury
security in the treasury portfolio as a bond that was originally issued on
the date the collateral agent acquired the relevant U.S. treasury security
and that has OID equal to the U.S. holder's pro rata portion of the excess
of the amounts payable on that U.S. treasury security over the value of the
U.S. treasury security at the time the collateral agent acquires them on
behalf of holders of Income PRIDES. A U.S. holder will be required to
include that OID in income on a daily economic basis over the life of the
U.S. treasury security. The aggregate amount of this excess will constitute
only a portion of the total amounts payable in respect of the treasury
portfolio. Consequently, a portion of each scheduled interest payment to
U.S. holders will be treated as a return of the U.S. holders' investment in
the treasury portfolio and will not be considered current income for United
States federal income tax purposes.
A U.S. holder, whether on the cash or accrual method of tax
accounting, will be required to include OID (other than OID on short-term
U.S. treasury securities as defined below) in income for United States
federal income tax purposes as it accrues on a constant yield to maturity
basis. See "-- Trust Preferred Securities-- Interest Income and Original
Issue Discount." In the case of any U.S. treasury security with a maturity
of one year or less from the date of its issue (as "short-term U.S.
treasury security"), in general only accrual basis taxpayers will be
required to include OID in income as it accrues. Unless an accrual basis
U.S. holder elects to accrue the OID on a short-term U.S. treasury security
according to the constant-yield-to-maturity method, such OID will be
accrued on a straight-line basis.
Tax Basis of the Treasury Portfolio. A U.S. holder's initial tax
basis in its applicable ownership interest of the treasury portfolio will
equal the U.S. holder's pro rata portion of the amount paid by the
collateral agent for the treasury portfolio. A U.S. holder's adjusted tax
basis in the treasury portfolio will be increased by the amount of OID
included in income with respect to the treasury portfolio and decreased by
the amount of cash received in respect of the treasury portfolio.
PLAN OF DISTRIBUTION
We may sell the additional FELINE PRIDES offered in this prospectus
in any of, or any combination of, the following ways:
o directly to purchasers;
o through agents;
o through underwriters; or
o through dealers.
Offers to purchase may be solicited directly by us or by agents
designated by us from time to time. Any agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act of 1933, involved
in the offer or sale of the additional FELINE PRIDES will be named, and any
commissions payable by us to that agent will be described in prospectus
supplement. Unless otherwise indicated, any agent will be acting on a best
efforts basis for the period of its appointment, which is usually five
business days or less.
If an underwriter or underwriters are utilized in the offer or sale
of the additional FELINE PRIDES, we will execute an underwriting agreement
with the underwriters at the time of their sale to the underwriters and the
names of the underwriters and the principal terms of our agreement with the
underwriters will be described in prospectus supplement.
If a dealer is utilized in the offer or sale of additional FELINE
PRIDES, we will sell the additional FELINE PRIDES to that dealer, as
principal. That dealer may then resell them to the public at varying prices
to be determined by that dealer at the time of resale. The name of the
dealer and the principal terms of our agreement with that dealer will be
described in the prospectus supplement.
Agents, underwriters, and dealers may be entitled under agreements
with us to indemnification by us against certain liabilities, including
liabilities under the Securities Act of 1933. Agents, dealers and
underwriters may also be customers of, engage in transactions with, or
perform services for us in the ordinary course of their business.
Underwriters, agents or their controlling persons may engage in
transactions with and perform services for us in the ordinary course of
business.
The place and time of delivery for the additional FELINE PRIDES
will be described in the prospectus supplement.
LEGAL OPINIONS
The validity of the purchase contracts, the common stock issuable
upon their settlement and the debentures will be passed upon for us by Eric
J. Bock, Esq., our Vice President-Legal, and Skadden, Arps, Slate, Meagher
& Flom LLP. Several matters of Delaware law with respect to the validity of
the trust preferred securities offered here will be passed upon for us and
for the trust by Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Bock owns
common stock and options to acquire shares of our common stock.
EXPERTS
The consolidated financial statements incorporated in this
prospectus by reference from our annual report on Form 10-K/A for the year
ended December 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, (which expresses an
unqualified opinion and includes explanatory paragraphs relating to certain
litigation as described in Note 18, and the change in the method of
recognizing revenue and membership solicitation costs as described in Note
2) which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of PHH for the year ended December 31,
1996, are consolidated with those of Cendant. The Cendant financial
statements which are incorporated by reference in this prospectus, have
been incorporated by reference in reliance upon the report of KPMG LLP,
independent auditors, incorporated herein by reference and upon the
authority of such firm as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
We make statements about our future results in this prospectus that
may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are
based on our current expectations and the current economic environment. We
caution you that these statements are not guarantees of future performance.
They involve a number of risks and uncertainties that are difficult to
predict. Our actual results could differ materially from those expressed or
implied in the forward-looking statements. Important assumptions and other
important factors that could cause our actual results to differ materially
from those in the forward-looking statements, include, but are not limited
to:
o the resolution or outcome of the pending litigation and government
investigations relating to the previously announced accounting
irregularities;
o uncertainty as to our future profitability and our ability to
integrate and operate successfully acquired businesses and the
risks associated with such businesses, including the merger that
created Cendant and the NPC acquisition;
o our ability to successfully divest non-strategic assets and
implement our new Internet strategy;
o our ability to develop and implement operational and financial
systems to manage rapidly growing operations;
o competition in our existing and potential future lines of business;
o our ability to obtain financing on acceptable terms to finance our
growth strategy and for us to operate within the limitations
imposed by financing arrangements; and
o our ability and our vendors', franchisees' and customers' ability
to complete the necessary actions to achieve a year 2000 conversion
for computer systems and applications.
We derived the forward-looking statements in this prospectus,
including the documents incorporated by reference in this prospectus, from
the above factors and from other factors and assumptions, and the failure
of such assumptions to be realized as well as other factors may also cause
actual results to differ materially from those projected. We assume no
obligation to publicly correct or update these forward-looking statements
to reflect actual results, changes in assumptions or changes in other
factors affecting such forward-looking statements or if we later become
aware that they are not likely to be achieved.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
securities and Exchange Commission. Our filings with the commission are
available to the public over the Internet at the commission's web site at
http:www.sec.gov. You may also read and copy any document we file at the
commission at the public reference rooms of the commission in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the commission
at 1-800-SEC-0330 for further information on the public reference rooms.
The commission allows us to "incorporate by reference" the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus and
information that we file later with the commission will automatically
update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the commission
under sections 13(a), 13(c), 14 or 15(d) of the Exchange until we sell all
of the securities.
o Annual Report on Form 10-K for the year ended December 31, 1998
o Annual Report on Form 10-K/A for the year ended December 31, 1998.
o Current Report on Form 8-K dated April 22, 1999
o The description of our common stock contained in the registration
statements on Form 8-A dated July 27, 1984 and August 15, 1989
You may request a copy of these filings at no cost, by writing or
telephoning us at the following:
Investor Relations
Cendant Corporation
9 West 57th Street
New York, NY 10019
Telephone: (212) 413-1800
-------------------
You should rely only on the information contained or incorporated
by reference in this prospectus. Neither we nor any underwriter has
authorized anyone to provide you with different information. Neither we nor
any underwriter is making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should not
assume that the information contained or incorporated by reference in this
prospectus is accurate as of any date other than the date on the front
cover of this prospectus.
======================================== =================================
No dealer, salesperson or other
individual has been authorized to give
any information or to make any
representation other than those
contained or incorporated by reference Cendant Corporation
in this prospectus in connection with Cendant Capital II
the offer made by this prospectus. If
given or made, this information or
representations must not be relied
upon as having been authorized by us,
the trust or any underwriter. Neither
the delivery of this prospectus, nor New FELINE PRIDE(SM)
any sale made under it, shall under
any circumstances, create an 4,000,000
implication that there has been change Additional FELINE PRIDE(SM)
in our affairs or the affairs of the
trust since the date of this
prospectus. This prospectus shall not 6.45% Trust Originated
constitute an offer or solicitation by Preferred Securities
anyone in any state in which an offer ("TOPrS"(SM))
or solicitation is not authorized or
in which the person making that offer
or solicitation is not qualified to do
so or to anyone to whom it is unlawful
to make such offer or solicitation. Prospectus
TABLE OF CONTENTS
Page
THE OFFERING - Q&A..........................
RISK FACTORS................................
THE COMPANY.................................
THE TRUST...................................
PRICE RANGE OF COMMON STOCK AND
DIVIDENDS................................
ACCOUNTING TREATMENT........................
USE OF PROCEEDS.............................
EXECUTION OF THE LITIGATION SETTLEMENT......
DESCRIPTION OF THE FELINE PRIDES............
DESCRIPTION OF THE PURCHASE CONTRACTS.......
PROVISIONS OF THE CONTRACT PURCHASE
AGREEMENT AND THE PLEDGE AGREEMENT.........
DESCRIPTION OF THE TRUST PREFERRED
SECURITIES................................
DESCRIPTION OF THE GUARANTEE................
DESCRIPTION OF THE DEBENTURES...............
EFFECT OF OBLIGATIONS UNDER THE
DEBENTURES AND THE GUARANTEE...............
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES................................
PLAN OF DISTRIBUTION........................
LEGAL OPINIONS..............................
EXPERTS.....................................
FORWARD-LOOKING STATEMENTS..................
WHERE YOU CAN FIND MORE INFORMATION.........
1999
========================================= ==================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission Registration Fee.... $
Trustee's Expenses.....................................
*Accounting Fees and Expenses..........................
*Legal Fees and Expenses...............................
*Miscellaneous.........................................
Total Expenses $
- ---------------
* Estimated for purposes of completing the information required pursuant
to this Item 14.
The Company will pay all fees and expenses associated with filing
the Registration Statement.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a
Delaware corporation to indemnify any 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 such corporation)
by reason of the fact that such person is or was a director, officer,
employee or agent of such corporation or is or was serving at the request
of such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding, provided
that such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interest of the corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe such person's conduct was unlawful. A Delaware corporation
may indemnify directors, officers, employees and other agents of such
corporation in an action by or in the right of a corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the person to be indemnified has been adjudged to be liable to
the corporation. Where a director, officer, employee or agent of the
corporation is successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to above or in defense of any claim,
issue or matter therein, the corporation must indemnify such person against
the expenses (including attorneys' fees) which he or she actually and
reasonably incurred in connection therewith.
The Registrant's By-Laws contain provisions that provide for
indemnification of officers and directors and their heirs and distributees
to full extent permitted by, and in the manner permissible under, the
General Corporation Law of the State of Delaware.
As permitted by Section 102(b)(7) of the General Corporation Law of
the State of Delaware, registrant's Amended and Restated Certificate of
Incorporation contains a provision eliminating the personal liability of a
director to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, subject to certain exceptions.
The Company maintains, at its expense, a policy of insurance which
insures its directors and officers, subject to certain exclusions and
deductions as are usual in such insurance policies, against certain
liabilities which may be incurred in those capacities.
Article IV of the Declaration of Trust for the Trust limits the
liability to the Trust and certain other persons and provides for the
indemnification by the Trust or the Company of Trustees, the Officers,
other employees and certain other persons.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1 Form of Underwriting Agreement (Standard Provisions) for
Debt Securities. (Incorporated by reference to Exhibit 1.1
to the Company's Form S-3 Registration Statement No.
333-45227)
1.2 Form of Underwriting Agreement (Standard Provisions) for
Common Stock. (Incorporated by reference to Exhibit 1.2 to
the Company's Form S-3 Registration Statement No.
333-45227)
1.3 Form of Underwriting Agreement (Standard Provisions) for
Preferred Stock. (Incorporated by reference to Exhibit 1.3
to the Company's Form S-3 Registration Statement No.
333-45227)
1.4 Forms of Underwriting Agreement for Offering of Preferred
Securities, Stock Purchase Units, Stock Purchase
Contracts, Guarantees and Warrants. (To be filed under
subsequent Form 8-K, which is incorporated herein by
reference)
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Appendix B to the
Joint Proxy Statement/Prospectus included as part of the
Registration Statement on Form S-4 of the Registrant,
Registration No. 333-34517).
3.2 Amended and Restated By-Laws of the Registrant
(incorporated by reference to Appendix C of the
Registrant's Proxy Statement/Prospectus included as part
of the Registration Statement on Form S-4 of the
Registrant, Registration No. 333-34517).
4.1 Form of Certificate for the Company's Common Stock, par
value $.01 per share. (Incorporated by reference to
Exhibit 4.1 to the Company's Form S-3 Registration
Statement No. 333-45227)
4.2 Form of Senior Indenture to be entered into by the Company
and The Bank of Nova Scotia Trust Company of New York, as
Trustee. (Incorporated by reference to Exhibit 4.2 to the
Company's Form S-3 Registration Statement No. 333-45227)
4.3 Form of Subordinated Indenture to be entered into by the
Company and The Bank of Nova Scotia Trust Company of New
York, as Trustee. (Incorporated by reference to Exhibit
4.3 to the Company's Form S-3 Registration Statement No.
333-45227)
4.4 Certificate of Trust of Cendant Capital II. (Incorporated
by reference to Exhibit 4.5 to the Company's Form S-3
Registration Statement No. 333-45227)
4.5 Declaration of Trust of Cendant Capital II. (Incorporated
by reference to Exhibit 4.8 to the Company's Form S-3
Registration Statement No. 333-45227)
4.6 Form of Amended and Restated Declaration of Trust of
Cendant Capital II. (Including as Exhibit A-1 the form of
Preferred Security)(Incorporated by reference to Exhibit
4.11 to the Company's Form S-3 Registration Statement No.
333-45227)
4.7 Form of Preferred Securities Guarantee Agreement by
Cendant Corporation with respect to Cendant Capital II.
(Incorporated by reference to Exhibit 4.14 to the
Company's Form S-3 Registration Statement No. 333-45227)
5.1 Opinion of Eric J. Bock, Esq. regarding the legality of
the Securities being registered by the Company hereby.**
5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the Securities being registered
by the Cendant Trusts hereby.**
12.1 Statement re: Computation of Consolidated Ratio of
Earnings to Fixed Charges.**
23.1 Consent of Deloitte & Touche LLP related to the financial
statements of Cendant Corporation.
23.2 Consent of KPMG LLP related to the financial statements of
PHH Corporation.
24.1 Power of Attorney (included in signature page hereto).
25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of The Bank of Nova Scotia Trust
Company of New York, as Trustee for the Debentures.**
25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Trustee under the Declaration of Trust of Cendant Capital
II.**
25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Trustee under the Preferred Securities Guarantee of
Cendant Capital II.**
- ---------------------
* Previously filed.
** To be filed by amendment.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Cendant Corporation on Form S-3 of our report dated May 10, 1999 (which
expresses an unqualified opinion and includes explanatory paragraphs
relating to certain litigation as described in Note 18, and the change in
the method of recognizing revenue and membership solicitation costs as
described in Note 2), appearing in the Annual Report on Form 10-K/A of
Cendant Corporation for the year ended December 31, 1998 and to the
reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Parsippany, NJ
May 10, 1999
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
PHH Corporation:
We consent to the incorporation by reference in the Registration Statement
on Form S-3 of Cendant Corporation of our report dated April 30, 1997, with
respect to the consolidated statements of income, shareholder's equity and
cash flows of PHH Corporation and subsidiaries (the "Company") for the year
ended December 31, 1996, before the restatement related to the merger of
Cendant Corporation's relocation business with the Company and
reclassifications to conform to the presentation used by Cendant
Corporation, which report is included in the Annual Report on Form 10-K/A
of Cendant Corporation for the year ended December 31, 1998. We also
consent to the reference to our firm under the heading "Experts" in the
Registration Statement.
/s/ KPMG LLP
KPMG LLP
Baltimore, Maryland
May 10, 1999
ITEM 17. UNDERTAKINGS.
(a) The Undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement, to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrants hereby undertake that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of each such Registrant's annual report pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof;
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrants of expenses incurred or
paid by a director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, such Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(i) The undersigned Registrants hereby undertake that:
(1) For the purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Cendant
Corporation certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement, to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on
May 14, 1999.
CENDANT CORPORATION
By: /s/ James E. Buckman
______________________________
James E. Buckman
Vice Chairman
General Counsel and
Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signatures appear below, constitutes and appoints each of James E. Buckman,
Stephen P. Holmes and Eric J. Bock, or any of them, each acting alone, his
true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for such person and in his name, place and stead, in
any and all capacities, in connection with the Registrant's Registration
Statement in the name and on behalf of the Registrant or on behalf of the
undersigned as a director or officer of the Registrant, on Form S-3 under
the Securities Act of 1933, as amended, including, without limiting the
generality of the foregoing, to sign the Registration Statement and any and
all amendments (including post-effective amendments) to the Registration
Statement, and any subsequent registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as they
might or could do in person, thereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Henry R. Silverman
---------------------------- Chairman of the Board, May 14, 1999
(Henry R. Silverman) President, Chief
Executive Officer
and Director
/s/ James E. Buckman
---------------------------- Vice Chairman, May 14, 1999
(James E. Buckman) General Counsel and
Director
/s/ Stephen P. Holmes
---------------------------- Vice Chairman and May 14, 1999
(Stephen P. Holmes) Director
/s/ Robert D. Kunisch
--------------------------- Vice Chairman and May 14, 1999
(Robert D. Kunisch) Director
/s/ Michael P. Monaco
--------------------------- Vice Chairman and May 14, 1999
(Michael P. Monaco) Director
/s/ David M. Johnson Senior Executive Vice May 14, 1999
--------------------------- President and Chief
(David M. Johnson) Financial Officer
(Principal Financial
Officer)
/s/ Tobia Ippolito Senior Vice President May 14, 1999
--------------------------- and Corporate Controller
(Tobia Ippolito) (Principal Accounting
Officer)
/s/ John D, Snodgrass Director May 14, 1999
--------------------------
(John D. Snodgrass)
/s/ Leonard S. Coleman Director May 14, 1999
---------------------------
(Leonard S. Coleman)
/s/ Martin L. Edelman Director May 14, 1999
----------------------------
(Martin L. Edelman)
/s/ Dr. Carole G. Hankin Director May 14, 1999
-----------------------------
(Dr. Carole G. Hankin)
/s/ The Rt, Hon. Brian Mulroney Director May 14, 1999
-------------------------------
(The Rt. Hon. Brian Mulroney,
P.C., LL.D.)
/s/ Robert W. Pittman Director May 14, 1999
------------------------------
(Robert W. Pittman)
/s/ E. John Rosenwald, Jr. Director May 14, 1999
------------------------------
(E. John Rosenwald, Jr.)
/s/ Robert P. Rittereiser Director May 14, 1999
------------------------------
(Robert P. Rittereiser)
/s/ Leonard Schutzman Director May 14, 1999
------------------------------
(Leonard Schutzman)
/s/ Robert F. Smith Director May 14, 1999
-------------------------------
(Robert F. Smith)
/s/ Craig R. Stapleton Director May 14, 1999
-------------------------------
(Craig R. Stapleton)
/s/ Robert E. Nererlander Director May 14, 1999
--------------------------------
(Robert E. Nederlander)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Cendant
Capital II certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and that it has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of
New York on May 14, 1999.
CENDANT CAPITAL II
By: /s/ Michael P. Monaco
----------------------------
Michael P. Monaco,
Trustee
By: /s/ James E. Buckman
----------------------------
James E. Buckman,
Trustee
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
1.1 Form of Underwriting Agreement (Standard Provisions) for
Debt Securities. (Incorporated by reference to Exhibit 1.1
to the Company's Form S-3 Registration Statement No.
333-45227)
1.2 Form of Underwriting Agreement (Standard Provisions) for
Common Stock. (Incorporated by reference to Exhibit 1.2 to
the Company's Form S-3 Registration Statement No.
333-45227)
1.3 Form of Underwriting Agreement (Standard Provisions) for
Preferred Stock. (Incorporated by reference to Exhibit 1.3
to the Company's Form S-3 Registration Statement No.
333-45227)
1.4 Forms of Underwriting Agreement for Offering of Preferred
Securities, Stock Purchase Units, Stock Purchase
Contracts, Guarantees and Warrants. (To be filed under
subsequent Form 8-K, which is incorporated herein by
reference)
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Appendix B to the
Joint Proxy Statement/Prospectus included as part of the
Registration Statement on Form S-4 of the Registrant,
Registration No. 333-34517).
3.2 Amended and Restated By-Laws of the Registrant
(incorporated by reference to Appendix C of the
Registrant's Proxy Statement/Prospectus included as part
of the Registration Statement on Form S-4 of the
Registrant, Registration No. 333-34517).
4.1 Form of Certificate for the Company's Common Stock, par
value $.01 per share. (Incorporated by reference to
Exhibit 4.1 to the Company's Form S-3 Registration
Statement No. 333-45227)
4.2 Form of Senior Indenture to be entered into by the Company
and The Bank of Nova Scotia Trust Company of New York, as
Trustee. (Incorporated by reference to Exhibit 4.2 to the
Company's Form S-3 Registration Statement No. 333-45227)
4.3 Form of Subordinated Indenture to be entered into by the
Company and The Bank of Nova Scotia Trust Company of New
York, as Trustee. (Incorporated by reference to Exhibit
4.3 to the Company's Form S-3 Registration Statement No.
333-45227)
4.4 Certificate of Trust of Cendant Capital II. (Incorporated
by reference to Exhibit 4.5 to the Company's Form S-3
Registration Statement No. 333-45227)
4.5 Declaration of Trust of Cendant Capital II. (Incorporated
by reference to Exhibit 4.8 to the Company's Form S-3
Registration Statement No. 333-45227)
4.6 Form of Amended and Restated Declaration of Trust of
Cendant Capital II. (Including as Exhibit A-1 the form of
Preferred Security)(Incorporated by reference to Exhibit
4.11 to the Company's Form S-3 Registration Statement No.
333-45227)
4.7 Form of Preferred Securities Guarantee Agreement by
Cendant Corporation with respect to Cendant Capital II.
(Incorporated by reference to Exhibit 4.14 to the
Company's Form S-3 Registration Statement No. 333-45227)
5.1 Opinion of Eric J. Bock, Esq. regarding the legality of
the Securities being registered by the Company hereby.**
5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the Securities being registered
by the Cendant Trusts hereby.**
12.1 Statement re: Computation of Consolidated Ratio of
Earnings to Fixed Charges.**
23.1 Consent of Deloitte & Touche LLP related to the financial
statements of Cendant Corporation.
23.2 Consent of KPMG LLP related to the financial statements of
PHH Corporation.
24.1 Power of Attorney (included in signature page hereto).
25.1 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of The Bank of Nova Scotia Trust
Company of New York, as Trustee for the Debentures.**
25.2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Trustee under the Declaration of Trust of Cendant Capital
II.**
25.3 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Wilmington Trust Company, as
Trustee under the Preferred Securities Guarantee of
Cendant Capital II.**
* Previously filed.
** To be filed by amendment.
