<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CENDANT CORPORATION
(Name of Registrant as Specified In Its Charter)
......................................N/A.......................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X} No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
5) Total fee paid:
.......................................................................
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
<PAGE>
1) Amount Previously Paid:
.......................................................................
2) Form, Schedule or Registration Statement No.:
.......................................................................
3) Filing Party:
.......................................................................
4) Date Filed:
.......................................................................
<PAGE>
[GRAPHIC OMITTED]
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cendant Corporation, which will be held at the Ramada Inn and Conference
Center, 130 Route 10 West, East Hanover, New Jersey 07936, on May 27, 1999 at
10:00 a.m., New York Time. We look forward to greeting as many of our
stockholders as possible.
This booklet includes the Notice of Annual Meeting and the Proxy
Statement. The Proxy Statement describes the business to be conducted at the
Annual Meeting and provides other information concerning the Company which you
should be aware of when you vote your shares.
Whether or not you attend the Annual Meeting, it is important that your
shares be represented and voted at the meeting. Stockholders of record can vote
their shares by using the telephone or by marking your votes on the enclosed
proxy card, signing, dating and mailing the proxy card in the enclosed
envelope. If you decide to attend the Annual Meeting and vote in person, you
may then withdraw your proxy.
Admission to the Annual Meeting will be by ticket only. If you are a
registered stockholder planning to attend the meeting, please check the
appropriate box on the proxy card and retain the bottom portion of the card as
your admission ticket. If your shares are held through an intermediary such as
a bank or broker, follow the instructions in the Proxy Statement to obtain a
ticket.
On behalf of the Board of Directors and the employees of Cendant
Corporation, I would like to express my appreciation for your continued
interest in the affairs of the Company.
Sincerely,
/s/ Henry R. Silverman
- ----------------------
Henry R. Silverman
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 27, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Cendant
Corporation (the "Company") will be held on Thursday, May 27, 1999 at 10:00
a.m., Eastern Time, at the Ramada Inn and Conference Center, 130 Route 10 West,
East Hanover, New Jersey 07936 (the "Meeting") to consider and vote upon the
following matters:
1. To elect five directors for a three-year term and until their
successors are duly elected and qualified;
2. Ratification of the appointment of Deloitte & Touche LLP as the
auditors of the Company's financial statements for fiscal year 1999;
3. To approve and adopt certain amendments to the Company's Amended and
Restated By-Laws (the "By-Law Amendments");
4. A stockholder's proposal, NOT recommended by the Board of Directors,
relating to the classification of the Board of Directors; and
5. Approval of such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 29, 1999
as the record date for the Meeting. Only stockholders of record at that time
are entitled to notice of, and to vote at, the Meeting and any adjournment or
postponement thereof. A list of stockholders entitled to vote at the Meeting
will be available for examination by any stockholders, for any purpose germane
to the Meeting, for 10 days prior to the Meeting during ordinary business hours
at the site of the Meeting.
Attendance at the Meeting will be limited to stockholders as of the record
date, their authorized representatives and guests of the Company. Admission
will be by ticket only. For registered stockholders, the bottom portion of the
proxy card enclosed with the Proxy Statement is their Meeting ticket.
Beneficial owners with shares held through an intermediary, such as a bank or
broker, should request tickets in writing from Investor Relations, Cendant
Corporation, 9 West 57th Street, New York, New York 10019, and include proof of
ownership, such as a bank or brokerage firm account statement or letter from
the broker, trustee, bank or nominee holding their stock, confirming beneficial
ownership. Stockholders who do not obtain tickets in advance may obtain them
upon verification of ownership at the Registration Desk on the day of the
Meeting. Admission to the Meeting will be facilitated if tickets are obtained
in advance. Tickets may be issued to others at the discretion of the Company.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached Proxy Statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to date, sign and return the enclosed proxy promptly. This will
ensure the presence of a quorum at the Meeting. PROMPTLY SIGNING, DATING, AND
RETURNING THE PROXY WILL SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF
ADDITIONAL SOLICITATION. A reply envelope, for which no postage is required if
mailed within the United States, is enclosed for your convenience.
Alternatively, in lieu of returning signed proxy cards, the Company's
stockholders of record can vote their shares by calling a specially designated
telephone number set forth on the enclosed proxy card. You are cordially
invited to attend the Meeting in person. The return of the enclosed proxy will
not affect your right to vote if you attend the Meeting in person, as your
proxy is revocable at your option.
By Order of the Board of Directors
/s/ JEANNE M. MURPHY
--------------------
JEANNE M. MURPHY
Secretary
Dated: March 31, 1999
<PAGE>
CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON THURSDAY, MAY 27, 1999
----------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Cendant Corporation, a Delaware
corporation (the "Company"), to be voted at the 1999 Annual Meeting of
Stockholders, and any adjournment or postponement thereof (the "Meeting"), to
be held on the date, at the time and place, and for the purposes set forth in
the foregoing notice. This Proxy Statement, the accompanying notice and the
enclosed proxy card are first being mailed to stockholders on or about March
31, 1999.
The Board of Directors does not intend to bring any matter before the
Meeting except as specifically indicated in the notice, nor does the Board of
Directors know of any matters which anyone else proposes to present for action
at the Meeting. However, if any other matters properly come before the Meeting,
the persons named in the enclosed proxy, or their duly constituted substitutes
acting at the Meeting, will be authorized to vote or otherwise act thereon in
accordance with their judgment on such matters.
Shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), represented by proxies received by the Company (whether
through the return of the enclosed proxy card or by telephone), where the
stockholder has specified his or her choice with respect to the proposals
described in this Proxy Statement (including the election of directors), will
be voted in accordance with the specification(s) so made. If your proxy is
properly executed but does not contain voting instructions, or if you use
telephone voting without indicating how you want to vote, your shares will be
voted "FOR" the election of all five nominees for the Board of Directors, "FOR"
the ratification of the appointment of Deloitte & Touche LLP as auditors of the
Company's financial statements for the year ending December 31, 1999, "FOR" the
approval of the By-Law Amendments and "AGAINST" the stockholder's proposal
listed as Item 4 on the Notice of Annual Meeting.
Except as provided below, any proxy may be revoked at any time prior to
its exercise by notifying the Secretary in writing, by delivering a duly
executed proxy bearing a later date or by attending the Meeting and voting in
person.
For participants in the Cendant Corporation Employee Savings Plan (the
"Employee Savings Plan") and the Cendant Membership Services, Inc. Savings
Incentive Plan (the "Savings Incentive Plan" and together with the Employee
Savings Plan, the "Savings Plans") with shares of Common Stock credited to
their accounts, voting instructions for the trustees of the Savings Plans are
also being solicited through this Proxy Statement. In accordance with the
provisions of the Savings Plans, the trustees will vote shares of Common Stock
in accordance with instructions received from the participants to whose
accounts such shares are credited. To the extent such instructions are not
received prior to twelve o'clock noon, Eastern Time, on May 20, 1999, the
trustee of the Employee Savings Plan will vote the shares with respect to which
it has not received instructions proportionately in accordance with the shares
for which it has received instructions, and the trustee under the Savings
Incentive Plan will abstain from voting such shares. Instructions given with
respect to shares in accounts of the Savings Plans may be changed or revoked
only in writing, and no such instructions may be revoked after twelve o'clock
noon, Eastern Time, on May 20, 1999. Participants in the Savings Plans are not
entitled to vote in person at the Meeting.
If a participant in a Savings Plan has shares of Common Stock credited to
his or her account in one of the Savings Plans and also owns other shares of
Common Stock, he or she should receive separate proxy cards for shares credited
to his or her account in the Savings Plans and any other shares that he or she
owns. All such proxy cards should be completed, signed and returned to the
transfer agent to register voting instructions for all shares owned by him or
her or held for his or her benefit in such Savings Plans' Cendant Stock Fund.
<PAGE>
The accompanying form of proxy is being solicited on behalf of the Board
of Directors of the Company. The expenses of solicitation of proxies for the
Meeting will be paid by the Company. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone by directors,
officers and employees of the Company, who will receive no additional
compensation therefor. Upon request, the Company will reimburse brokers,
dealers, banks and trustees, or their nominees, for reasonable expenses
incurred by them in forwarding material to beneficial owners of shares of
Common Stock. The Company has retained Innisfree M&A Incorporated to aid in the
solicitation of proxies. It is estimated that the fee for Innisfree M&A
Incorporated will be approximately $15,000.00 plus reasonable out-of-pocket
costs and expenses. Such fee will be paid by the Company.
A copy of the Annual Report on Form 10-K filed by the Company with the
Securities and Exchange Commission for its latest fiscal year is available
without charge to stockholders upon written request to Cendant Corporation, 9
West 57th Street, New York, New York 10019, Attention: Investor Relations.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
VOTING SECURITIES AND PRINCIPAL HOLDERS ................................................ 1
Outstanding Shares and Voting Rights .................................................. 1
Security Ownership of Certain Beneficial Owners and Management ........................ 3
ELECTION OF DIRECTORS [Proposal 1] ..................................................... 4
General ............................................................................... 4
Information Regarding the Nominees for Term Expiring in 2002 .......................... 5
Information Regarding Directors Whose Terms Expire in 2000 ............................ 6
Information Regarding Directors Whose Terms Expire in 2001 ............................ 7
Committees and Meetings of the Board of Directors ..................................... 8
Accounting Issues, Class Action Litigation and Management and Corporate Governance
Changes .............................................................................. 10
EXECUTIVE OFFICERS ..................................................................... 12
EXECUTIVE COMPENSATION AND OTHER INFORMATION ........................................... 14
Summary Compensation Table of the Named Executive Officers ............................ 14
Option Grants Table for the Named Executive Officers .................................. 15
Option Exercises and Year-End Option Value Table for the Named Executive Officers ..... 17
Pension Plans ......................................................................... 17
Ten Year Option/SAR Repricings ........................................................ 18
Employment Contracts and Termination, Severance and Change of Control
Arrangements .......................................................................... 19
Compensation Committee Report on Executive Compensation ............................... 21
Compensation Committee Interlocks and Insider Participation ........................... 24
Performance Graph ..................................................................... 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ......................................... 25
Relationship with Chartwell ........................................................... 25
Relationship with Avis Rent A Car, Inc. ............................................... 26
Relationship with NRT ................................................................. 26
Other Relationships ................................................................... 29
Claims of Certain Current and Former Officers and Directors of the Company and HFS .... 30
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ...................................... 30
RATIFICATION OF APPOINTMENT OF AUDITORS [Proposal 2] ................................... 31
APPROVAL OF BY-LAW AMENDMENTS [Proposal 3] ............................................. 32
STOCKHOLDER PROPOSAL CONCERNING DECLASSIFICATION OF THE
BOARD OF DIRECTORS [Proposal 4] ....................................................... 33
STOCKHOLDER PROPOSALS .................................................................. 35
APPENDIX A -- BY-LAW AMENDMENTS ........................................................ 36
</TABLE>
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the Common Stock at the close of business on
March 29, 1999 are entitled to notice of, and to vote at, the Meeting. On that
date, the Company had outstanding 779,323,336 shares of Common Stock, held of
record by 10,821 shareholders.
The presence, in person or by proxy, of the holders of not less than
one-third of the Common Stock entitled to vote at the Meeting will constitute a
quorum. On all matters voted upon at the Meeting and any adjournment or
postponement thereof, the holders of the Common Stock vote together as a single
class, with each record holder of Common Stock entitled to one vote per share.
Directors shall be elected by a plurality of the votes of the shares of
Common Stock present at the Meeting, in person or by proxy, and entitled to
vote in the election of Directors. Under applicable Delaware law, in
determining whether such nominees have received the requisite number of
affirmative votes, abstentions and broker non-votes will have no effect on the
outcome of the vote.
Approval of the proposal relating to the ratification of the appointment
of auditors of the Company's financial statements requires the affirmative vote
of a majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Meeting. Under applicable Delaware law, in determining
whether such proposal has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and will have the same effect
as a vote against the proposal.
The Company's Amended and Restated By-Laws (the "By-Laws") state that the
affirmative vote of 80% of the shares of Common Stock entitled to vote in the
election of Directors (the "80% Vote Requirement") is necessary for
stockholders to approve the By-Law Amendments. Based on advice of counsel, the
Company believes that the 80% Vote Requirement is invalid and unenforceable
under Delaware law, as the 80% Vote Requirement limits the power of the
Company's stockholders to adopt, amend or repeal the By-Laws in contravention
of the rights of stockholders under Delaware law. While the Company is
soliciting approval of the By-Law Amendments pursuant to the 80% Vote
Requirement, if a majority of the outstanding shares present in person or
represented by proxy and entitled to vote at the Meeting approves the By-Law
Amendments, but the 80% Vote Requirement is not satisfied, the Company intends
to treat the By-Law Amendments as having been validly approved and adopted in
accordance with Delaware law. Under applicable Delaware law, in determining
whether such proposal has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and will have the same effect
as a vote against the proposal.
Approval of the stockholder's proposal requires the affirmative vote of a
majority of the shares of Common Stock present and represented by proxy and
entitled to vote at the Meeting. Under applicable Delaware law, in determining
whether such proposal has received the requisite number of affirmative votes,
absentions will be counted and will have the same effect as a vote against the
proposal; broker non-votes will be disregarded and will have no effect on the
outcome of the vote.
In order that your shares of Common Stock may be represented at the
Meeting, you are requested to:
o indicate your instructions on the proxy;
o date and sign the proxy;
o mail the proxy promptly in the enclosed envelope; and
o allow sufficient time for the proxy to be received before the date of
the Meeting.
Alternatively, in lieu of returning signed proxy cards, the Company's
stockholders of record can vote their shares by calling a specially designated
telephone number. The phone voting procedure is designed to authenticate
stockholders' identities, to allow stockholders to provide their voting
instructions, and to confirm that their instructions have been recorded
properly. Specific instructions for stockholders of record who wish to use the
telephone voting procedure are set forth on the enclosed proxy card. A proxy
1
<PAGE>
may be revoked at any time prior to the voting at the Meeting by submitting a
later dated proxy (including a proxy by telephone), by giving timely written
notice of such revocation to the Secretary of the Company or by attending the
Meeting and voting in person.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROXY STATEMENT.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on the following table is furnished as of March
29, 1999 (unless otherwise specified) with respect to any person (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) who is known to the Company to be the
beneficial owner of more than 5% of any class of the Company's voting
securities, and as to those shares of the Company's equity securities
beneficially owned by each of its directors, certain of its executive officers,
and all of its executive officers and directors as a group.
<TABLE>
<CAPTION>
OF THE TOTAL
NUMBER OF SHARES
TOTAL AMOUNT BENEFICIALLY OWNED,
OF SHARES PERCENT OF SHARES WHICH MAY BE
BENEFICIALLY COMMON STOCK ACQUIRED WITHIN
NAME OWNED (1) OWNED (2) 60 DAYS (3)
- -------------------------------------------- -------------- -------------- --------------------
<S> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Capital Research and
Management Company (4) 105,145,240 13.49% N/A
333 South Hope Street
Los Angeles, CA 90071
Massachusetts Financial
Services Company(5) 55,904,878 7.17% N/A
500 Boylston Street
Boston, MA 02116-3741
DIRECTORS AND EXECUTIVE OFFICERS(6):
Henry R. Silverman 20,486,622 2.63% 20,286,622
Stephen P. Holmes(7) 2,811,967 * 2,651,480
Robert D. Kunisch(8) 2,321,695 * 1,293,678
Michael P. Monaco 1,927,921 * 1,911,325
James E. Buckman 2,498,812 * 2,479,712
Leonard S. Coleman 146,155 * 146,155
Martin L. Edelman 86,155 * 86,155
Dr. Carole G. Hankin 26,200 * 26,000
The Rt. Hon. Brian Mulroney,
P.C. LL.D 146,155 * 146,155
Robert E. Nederlander 146,155 * 146,155
Robert W. Pittman 626,775 * 626,775
Robert P. Rittereiser 112,188 * 68,750
E. John Rosenwald, Jr. 203,936 * 146,155
Leonard Schutzman 150,955 * 133,327
Robert F. Smith(9) 150,961 * 146,155
John D. Snodgrass(10) 6,337,504 * 5,064,822
Craig R. Stapleton(11) 36,967 * 26,000
John W. Chidsey 789,143 * 784,284
David M. Johnson 382,999 * 299,999
Samuel L. Katz(12) 813,682 * 805,207
Richard A. Smith 1,601,958 * 1,590,808
Tobia Ippolito 116,884 * 93,094
EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP
(22 PERSONS)(13): 41,891,622 5.37% 38,958,813
</TABLE>
- ----------
* Amount represents less than 1% of the outstanding Common Stock.
3
<PAGE>
(1) Shares beneficially owned includes direct and indirect ownership of shares
and stock options that are currently exercisable or exercisable within 60
days.
(2) Based on 779,323,336 shares of Common Stock outstanding on March 29,
1999.
(3) Includes stock options that are currently exercisable plus stock options
that are exercisable within 60 days ("Vested Options").
(4) Based upon the information contained in a Form 13G/A dated February 8,
1999 by Capital Research and Management Company, a registered investment
advisor, Capital Research and Management Company beneficially owned
105,145,240 shares of Common Stock with sole power to vote none of such
shares and shared power to dispose all of such shares.
(5) Based upon the information contained in a Form 13-G/A dated February 11,
1999 by Massachusetts Financial Services Company ("MFS"), a registered
investment adviser on behalf of itself and the other mutual funds and
institutional clients of MFS, such persons beneficially owned 55,904,878
shares of Common Stock with sole power to vote 55,878,878 of such shares
and sole power to dispose of all of such shares.
(6) Such Director's and/or Executive Officer's Vested Options are deemed
outstanding for purposes of computing the percentages of the class for
such Director and/or Executive Officer.
(7) Includes 2,883 shares of Common Stock held by Mr. Holmes' children.
(8) Includes 167,892 shares of Common Stock held in a grantor retained annuity
trust of which Mr. Kunisch is the income beneficiary, 78,621 shares of
Common Stock held in the Employee Savings Plan and 781,504 shares held by
Alibob Partners, L.P.
(9) Includes 4,806 shares of Common Stock owned by a Keough plan of which Mr.
Smith is the sole beneficiary. Amount does not include 19,244 shares of
Common Stock held in the name of the Smith Family Foundation of which Mr.
Smith is President, as to which Mr. Smith disclaims beneficial ownership.
(10) Amount does not include 33,600 shares held by The Snodgrass Foundation of
which Mr. Snodgrass and his spouse are trustees but in which they have no
pecuniary interest. Mr. Snodgrass disclaims beneficial ownership of such
shares.
(11) Includes 500 shares of Common Stock held by Mr. Stapleton's wife, 3,093
shares of Common Stock held by Mr. Stapleton's mother, 3,374 shares of
Common Stock held by trusts for the benefit of Mr. Stapleton's children
and 2,000 shares of Common Stock held by Mr. Stapleton's son. Mr.
Stapleton disclaims beneficial ownership of the aforementioned shares.
(12) Includes 180 shares of Common Stock held by Mr. Katz's spouse and 1,000
shares of Common Stock held by Mr. Katz's children.
(13) Vested Options of all Executive Officers and Directors are deemed
outstanding for purposes of computing the percentage of class.
ELECTION OF DIRECTORS
[PROPOSAL NO. 1]
GENERAL
The Board of Directors presently consists of seventeen members and is
divided into three classes serving staggered three-year terms. Directors for
each class will be elected at the annual meeting of stockholders held in the
year in which the term for such class expires and will serve for three years.
The Board of Directors has nominated five candidates to be elected at the
Meeting to serve as Class II directors for a three-year term ending at the 2002
annual meeting of stockholders and when their successors are duly elected and
qualified. All nominees are currently directors of the Company. The terms of
the remaining twelve directors expire at the Company's annual meeting of
stockholders to be held in 2000 and 2001.
Each nominee has consented to being named in this Proxy Statement and to
serve if elected. If, prior to the Meeting, any nominee should become
unavailable to serve, the shares of Common Stock represented by a properly
executed and returned proxy (whether through the return of the enclosed proxy
card or by telephone) will be voted for such additional person as shall be
designated by the Board of Directors, unless the Board of Directors determines
to reduce the number of directors in accordance with the Company's Amended and
Restated Certificate of Incorporation and By-Laws.
4
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE
AS DIRECTORS. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY
WILL BE VOTED FOR THE ELECTION OF THE FIVE NOMINEES LISTED BELOW.
Certain information regarding each nominee and as to each incumbent
director whose term of office extends to 2000 and 2001 and who is, therefore,
not a nominee for election as a director at the Meeting is set forth below as
of March 15, 1998, including such individual's age and principal occupation, a
brief account of such individual's business experience during at least the last
five years and other directorships currently held.
INFORMATION REGARDING THE NOMINEES FOR TERM EXPIRING IN 2002
Leonard S. Coleman Robert E. Nederlander
Leonard Schutzman Robert F. Smith
Craig R. Stapleton
MR. COLEMAN, age 50, has been a Director of the Company since December
1997. Mr. Coleman was a Director of HFS from April 1997 until December 1997.
Mr. Coleman has served as President of The National League of Professional
Baseball Clubs since 1994, having previously served since 1992 as Executive
Director, Market Development of Major League Baseball. Mr. Coleman is a
director of the following corporations which file reports pursuant to the
Exchange Act: Avis Rent A Car, Inc., Owens Corning, The Omnicom Group, New
Jersey Resources and H.J. Heinz Company. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--Relationship with Avis Rent A Car Inc."
MR. NEDERLANDER, age 65, has been a Director of the Company since December
1997. Mr. Nederlander was a Director of HFS from July 1995 to December 1997.
Mr. Nederlander has been President and Director since November 1981 of the
Nederlander Organization, Inc., owner and operator of one of the world's
largest chains of legitimate theaters. Mr. Nederlander has been Chairman of the
Board of Riddell Sports Inc. since April 1988 and was the Chief Executive
Officer of such corporation from 1988 through April 1, 1993. From February
until June 1992, Mr. Nederlander was also Riddell Sports Inc.'s interim
President and Chief Operating Officer. He served as the Managing General
Partner of the New York Yankees from August 1990 until December 1991, and has
been a limited partner since 1973. Mr. Nederlander has been President since
October 1985 of Nederlander Television and Film Productions, Inc.; Chairman of
the Board and Chief Executive Officer since January 1988 of Mego Financial
Corp. ("Mego") and Vice Chairman of the Board since February 1988 to early 1993
of Vacation Spa Resorts, Inc., an affiliate of Mego. Mr. Nederlander was a
director of Mego Mortgage Corp. from September 1996 until June 1998. Mr.
Nederlander also served as Chairman of the Board of Allis-Chalmers Corp. from
May 1989 to 1993 and as Vice Chairman of Allis-Chalmers Corp. from 1993 through
October 1996. He is currently a Director of Allis-Chalmers Corp. In October
1996, Mr. Nederlander became a director of New Communications, Inc., a
publisher of community oriented free circulation newspapers. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS--Other Relationships."
MR. SCHUTZMAN, age 52, has been a Director of the Company since December
1997. Mr. Schutzman was a Director of HFS from August 1993 until December 1997.
Mr. Schutzman is a professor at the William E. Simon Graduate School of
Business at the University of Rochester in Rochester, New York. Mr. Schutzman
was Senior Vice President of PepsiCo Inc. from February 1987 to April 1995.
MR. SMITH, age 66, has been a Director of the Company since December 1997.
Mr. Smith was a Director of HFS from February 1993 until December 1997. From
November 1994 until August 1996, Mr. Smith also served as a Director of
Chartwell. Mr. Smith is the retired Chairman and Chief Executive Officer of
American Express Bank, Ltd. ("AEBL"). He joined AEBL's parent company, the
American Express Company, in 1981 as Corporate Treasurer before moving to AEBL
and serving as Vice Chairman and Co-Chief Operating Officer and then President
prior to becoming Chief Executive Officer. Mr. Smith is currently an equity
owner and Senior Managing Director of Car Component Technologies, Inc., an
automobile parts remanufacturer, located in Bedford, New Hampshire.
5
<PAGE>
MR. STAPLETON, age 53, has been a Director of the Company since December
1997. Mr. Stapleton has been President of Marsh & McLennan Real Estate
Advisors, Inc. since 1983. Mr. Stapleton is also a director of the following
corporations which file reports pursuant to the Exchange Act: Alleghany
Properties, Inc. (a subsidiary of Alleghany Corp.), Cornerstone Properties,
T.B. Woods Inc. and Vacu Dry Co.
INFORMATION REGARDING DIRECTORS WHOSE TERMS EXPIRE IN 2000
Henry R. Silverman James E. Buckman
Michael P. Monaco Martin Edelman
Stephen P. Holmes Robert P. Rittereiser
MR. SILVERMAN, age 58, has been President and Chief Executive Officer and
Director of the Company since December 1997 and Chairman of the Board of
Directors and Chairman of the Executive Committee of the Board of Directors
since July 28, 1998. Mr. Silverman is also an officer and/or director of a
number of subsidiaries of the Company. Mr. Silverman was Chairman of the Board,
Chairman of the Executive Committee and Chief Executive Officer of HFS from May
1990 until December 1997. From November 1994 until February 1996, Mr. Silverman
also served as Chairman of the Board and Chief Executive Officer of Chartwell
Leisure Inc. ("Chartwell").
MR. MONACO, age 51, has been a Vice Chairman and a Director of the Company
since December 1997. Mr. Monaco is also Chairman and Chief Executive Officer of
the Alliance Marketing Division of the Company since November 1998. Mr. Monaco
was Chief Financial Officer of the Company from December 1997 until November
1998. Mr. Monaco was Vice Chairman and Chief Financial Officer of HFS from
October 1996 until December 1997 and was a Director of HFS from January 27,
1997 until December 1997. Mr. Monaco also serves as a director and officer of
several subsidiaries of the Company. Mr. Monaco served as Executive Vice
President and Chief Financial Officer of the American Express Company, a
financial services company, from September 1990 to June 1996. Mr. Monaco serves
as a director of Avis Rent A Car, Inc., which files reports pursuant to the
Exchange Act. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Relationship
with Avis Rent A Car, Inc." and "--Relationship with NRT."
MR. HOLMES, age 42, has been a Vice Chairman and Director of the Company
and Chairman and Chief Executive Officer of the Travel Division of the Company
since December 1997. Mr. Holmes was Vice Chairman of HFS from September 1996
until December 1997 and was a Director of HFS from June 1994 until December
1997. From July 1990 through September 1996, Mr. Holmes served as Executive
Vice President, Treasurer and Chief Financial Officer of HFS. Mr. Holmes also
serves as a director and officer of several subsidiaries of the Company. Mr.
Holmes is a director of the following corporations that file reports pursuant
to the Exchange Act: Avis Rent A Car, Inc. and PHH Corporation, a wholly owned
subsidiary of the Company. Mr. Holmes is also a Director of Avis Europe PLC.
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Relationship with Avis
Rent A Car, Inc."
MR. BUCKMAN, age 54, has been a Vice Chairman since November 1998 and
General Counsel and a Director of the Company since December 1997. Mr. Buckman
was a Senior Executive Vice President of the Company from December 1997 until
November 1998. Mr. Buckman was the Senior Executive Vice President and General
Counsel and Assistant Secretary of HFS from May 1997 to December 1997, a
Director of HFS since June 1994 and was Executive Vice President, General
Counsel and Assistant Secretary of HFS from February 1992 to May 1997. Mr.
Buckman also serves as a director and officer of several subsidiaries of the
Company. From November 1994 to February 1996, Mr. Buckman served as the
Executive Vice President, General Counsel and Secretary of Chartwell and until
August 1996 he served as a director of Chartwell. Mr. Buckman also serves as a
Director of PHH Corporation, a wholly owned subsidiary of the Company, which
files reports pursuant to the Exchange Act.
MR. EDELMAN, age 57, has been a Director of the Company since December
1997. Mr. Edelman was a Director of HFS from November 1993 until December 1997.
He has been a partner with Battle Fowler, a New York City law firm, from 1972
through 1993 and since January 1, 1994 has been Of Counsel to that
6
<PAGE>
firm. Mr. Edelman is also a partner of Chartwell Hotels Associates, Chartwell
Leisure Associates L.P., Chartwell Leisure Associates L.P. II, and of certain
of their respective affiliates. Mr. Edelman also serves as a director of the
following corporations which file reports pursuant to the Exchange Act: Avis
Rent A Car, Inc., Capital Trust and Arcadia Trust. Mr. Edelman became Chairman
of the Board of Directors of Avis Rent-A-Car, Inc. in December 1998. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Relationship with Chartwell",
"--Relationship with Avis Rent A Car, Inc." and "--Other Relationships."
MR. RITTEREISER, age 60, has been a Director of the Company since 1982 and
is Chairman and Chief Executive Officer of Gruntal Financial L.L.C., an
investment services firm based in New York City since 1995. He has been
Chairman of Yorkville Associates Corp., a private investment and financial
concern, since its formation in April 1989. He served as a Trustee of the DBL
Liquidating Trust from April 1992 through April 1996. He served as a Director
in 1990, as Chairman in November 1992, and as President and Chief Executive
Officer from March 1993 until February 1995 of Nationar, a New York banking
services company which was taken over on February 6, 1995 by the Acting
Superintendent of Banks of New York State. He is a Director of the following
corporations which file reports pursuant to the Exchange Act: Ferrofluidics
Corporation and Interchange Financial Services Corporation.
INFORMATION REGARDING WHOSE TERMS EXPIRE IN 2001
Robert D. Kunisch Dr. Carole G. Hankin
John D. Snodgrass The Rt. Hon. Brian Mulroney, P.C., LL.D
Robert W. Pittman E. John Rosenwald, Jr.
MR. KUNISCH, age 57, has been a Vice Chairman, Relationship Management and
Corporate Development, and a Director of the Company since December 1997. Mr.
Kunisch was a Vice Chairman of HFS from April 1997 to December 1997 and
Chairman of the Board (since 1989), Chief Executive Officer (since 1988) and
President (since 1984) of PHH Corporation. He is a director of the following
corporations which file reports pursuant to the Exchange Act: CSX Corporation
and GenCorp, Inc. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Other
Relationships."
MR. SNODGRASS, age 41, has been a Director of the Company since December
1997. Mr. Snodgrass was a Director, President and Chief Operating Officer of
HFS from February 1992 until December 1997 and was Vice Chairman of HFS from
September 1996 until December 1997. From December 1997 until June 30, 1998, Mr.
Snodgrass served as a consultant to the Company. From November 1994 through
January 1996, Mr. Snodgrass served as Vice Chairman of the Board of Chartwell.
Since December 1997, Mr. Snodgrass has been an independent investor. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Other Relationships."
DR. HANKIN, age 56, has been a Director of the Company since December
1997. Dr. Hankin is Superintendent of Schools in Syosset, New York, a suburban
K-12 school district; she has served in that district since 1990.
MR. MULRONEY, age 59, has been a Director of the Company since December
1997. Mr. Mulroney was a Director of HFS from April 1997 until December 1997.
Mr. Mulroney was Prime Minister of Canada from 1984 to 1993 and is currently
Senior Partner in the Montreal-based law firm, Ogilvy Renault. He is a director
of the following corporations which file reports pursuant to the Exchange Act:
Archer Daniels Midland Company Inc., Barrick Gold Corporation, Petrofina, S.A,
TrizechahN Corporation Ltd. and Quebecor Printing Inc.
MR. PITTMAN, age 45, has been a Director of the Company since December
1997. Mr. Pittman was a Director of HFS from July 1994 until December 1997.
Since February 1998, Mr. Pittman has been President and Chief Operating Officer
of America Online, Inc., a provider of internet online services. From October
1996 to February 1998, Mr. Pittman was President and Chief Executive Officer of
AOL Networks, a unit of America Online, Inc. From September 1995 through
October 1996, Mr. Pittman served as the Chief Executive Officer and Managing
Partner of the Company's subsidiary, Century 21 Real Estate Corporation. From
1990 until September 1995, Mr. Pittman served as President and Chief
7
<PAGE>
Executive Officer of Time Warner Enterprises, a business development unit of
Time Warner Inc. and, from 1991 to September 1995, additionally, as Chairman
and Chief Executive Officer of Six Flags Entertainment Corporation, the parent
of Six Flags Theme Parks Inc. Mr. Pittman serves as a director of America
Online, Inc., which files reports pursuant to the Exchange Act. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS--Other Relationships."
MR. ROSENWALD, age 68, has been a Director of the Company since December
1997. Mr. Rosenwald was a Director of HFS from September 1996 until December
1997. Mr. Rosenwald has been, since 1988, Vice Chairman of The Bear Stearns
Companies Inc., an investment banking firm. Mr. Rosenwald also serves as a
director of the following corporations which file reports pursuant to the
Exchange Act: The Bear Stearns Companies Inc. and Hasbro, Inc. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS--Other Relationships."
Messrs. Holmes and Pittman were directors and Mr. Snodgrass was Chairman
of the Board of Directors of AMRE, Inc. ("AMRE") within two years prior to
January 20, 1997, the date on which AMRE filed for reorganization under Chapter
11 of the U.S. Bankruptcy Code. Although the Company had a minor investment in
AMRE, AMRE is not an affiliate of or otherwise related to the Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors held eight meetings during 1998. In 1998, all
incumbent directors attended at least 75% of the aggregate number of meetings
of the Board and committees of the Board on which they served that were held
after their appointment.
EXECUTIVE COMMITTEE
From December 17, 1997 to July 28, 1998, the Executive Committee (which
also acts as the nominating committee) was composed of Walter A. Forbes
(Chairman), Henry R. Silverman, E. Kirk Shelton, Christopher K. McLeod, Robert
P. Rittereiser, Michael P. Monaco, Stephen P. Holmes and Martin L. Edelman. On
July 28, 1998, a new Executive Committee of the Board of Directors was
appointed which is composed of Messrs. Silverman (Chairman), Monaco, Holmes and
Edelman (the "Executive Committee"). On August 27, 1998, James E. Buckman and
Robert D. Kunisch were appointed to the Executive Committee. The Executive
Committee has and may exercise all of the powers of the Board of Directors when
the Board is not in session, including the power to authorize the issuance of
stock, except that the Executive Committee has no power to (a) alter, amend or
repeal the By-Laws or any resolution or resolutions of the Board of Directors,
(b) declare any dividend or make any other distribution to the stockholders of
the Company, (c) appoint any member of the Executive Committee, or (d) take any
other action which legally may be taken only by the full Board of Directors.
The Chairman of the Board serves as Chairman of the Executive Committee. The
Executive Committee held five meetings in 1998.
Pursuant to the By-Laws, the Executive Committee acts as the nominating
committee of the Board of Directors, nominating persons for election as
directors. The By-Laws provide that until such time as all claims and causes of
actions relating to the accounting issues at the former CUC International Inc.
("CUC") businesses as disclosed in a press release dated July 14, 1998 and a
Current Report on Form 8-K of the Company, dated August 13, 1998 (the
"Accounting Issues") have been settled, adjudicated or otherwise disposed of
pursuant to a final determination that is no longer subject to appeal or
review, (i) the Executive Committee shall nominate for election as directors
Craig R. Stapleton and Robert P. Rittereiser or such alternate candidates as
designated by Messrs. Stapleton and Rittereiser who are not reasonably objected
to by the Executive Committee and (ii) in the event that any one or more of Mr.
Stapleton, Mr. Rittereiser or Dr. Carole Hankin are not elected, resign or are
removed as directors, the Board of Directors shall replace those individual(s)
with an alternate director as designated by the remaining individuals specified
above who are not reasonably objected to by the Board of Directors. The
nominating committee did not meet in 1998. THE BOARD OF DIRECTORS HAS PROPOSED
THE ELIMINATION OF THE FOREGOING PROVISION OF THE BY-LAWS UNDER PROPOSAL 3
HEREIN.
8
<PAGE>
AUDIT COMMITTEE
From December 17, 1997 until July 28, 1998, the Audit Committee (the
"First Audit Committee") was composed of Frederick D. Green (Chairman), Robert
P. Rittereiser, E. John Rosenwald, Jr. and Robert E. Nederlander. The Audit
Committee reviews and evaluates the Company's internal accounting and auditing
procedures; recommends to the Board of Directors the firm to be appointed as
independent accountants to audit the Company's financial statements; reviews
with management and the independent accountants the Company's year-end
operating results; reviews the scope and results of the audit with the
independent accountants; reviews with management the Company's interim
operating results; and reviews the non-audit services to be performed by the
firm of independent accountants and considers the effect of such performance on
the accountants' independence. The First Audit Committee held 13 meetings in
1998.
On July 28, 1998, Mr. Green tendered his irrevocable resignation to the
Board of Directors of the Company which became effective on August 27, 1998. On
August 27, 1998, the Audit Committee (the "New Audit Committee") was
reconstituted and now is comprised of Leonard Schutzman (Chairman), The Rt.
Hon. Brian Mulroney, Robert F. Smith and Robert W. Pittman. The New Audit
Committee held three meetings in 1998.
COMPENSATION COMMITTEE
The Compensation Committee (the "First Compensation Committee") was
composed of Robert F. Smith (Chairman), Leonard Schutzman, Anthony G. Petrello
and Robert T. Tucker. On July 28, 1998, a new Compensation Committee was
appointed which is composed of Messrs. Smith (Chairman), Schutzman, Mulroney
and Coleman (the "Compensation Committee"). As of January 1999, Mr. Mulroney no
longer serves on the Compensation Committee. The Compensation Committee has the
following powers and authority: (i) determining and fixing the compensation for
all senior officers of the Company and those of its subsidiaries that the
Compensation Committee shall from time to time consider appropriate, as well as
all employees of the Company and its subsidiaries compensated at a rate in
excess of such amount per annum as may be fixed or determined from time to time
by the Board; (ii) performing the duties of the committees of the Board
provided for in any present or future stock option, incentive compensation or
employee benefit plan of the Company or, if the Compensation Committee shall so
determine, any such plan of any subsidiary; and (iii) reviewing the operations
of and policies pertaining to any present or future stock option, incentive
compensation or employee benefit plan of the Company or any subsidiary that the
Compensation Committee shall from time to time consider appropriate. Each
resolution of the Compensation Committee requires approval by at least three
members of such committee. The Compensation Committee held six meetings in
1998.
LITIGATION COMMITTEE
On July 28, 1998, the Board of Directors appointed a Litigation Committee
composed of Robert P. Rittereiser, Craig R. Stapleton, E. John Rosenwald and
Robert E. Nederlander (the "Litigation Committee"). The By-Laws provide the
Litigation Committee with the following powers and authority: (i) full and
exclusive power and authority to determine whether the prosecution of any
pending or threatened stockholder derivative actions arising from or related to
the Accounting Issues are or would be in the best interests of the Company and
(ii) full and exclusive power and authority to initiate, maintain or settle on
behalf of the Company any direct action by the Company against any present or
former director (whether sued as a director or as an officer) arising from or
related to the Accounting Issues. The Litigation Committee did not meet during
1998. PURSUANT TO THE BY-LAW AMENDMENTS BEING CONSIDERED UNDER PROPOSAL 3, THE
BOARD OF DIRECTORS HAS PROPOSED THE ELIMINATION OF THE LITIGATION COMMITTEE.
DIRECTOR COMPENSATION
Non-Employee Directors (as defined in Rule 16b-3(b)(3) of the Exchange
Act) of the Company receive an annual retainer of $30,000, plus $4,000 for
chairing a committee and $2,000 for serving as a member of a committee other
than Chairman. On September 23, 1998, the Compensation Committee
9
<PAGE>
approved a requirement that 50% of the annual $30,000 stipend is to be paid to
each Director in Common Stock of the Company. Non-Employee Directors also are
paid $1,000 for each Board meeting attended and $500 ($1,000 for committee
chair) for each Board committee meeting if held on the same day as a Board
meeting and $1,000 ($2,000 for committee chair) for each Board committee
meeting attended on a day on which there is no Board meeting. Non-Employee
Directors are reimbursed for expenses incurred in attending meetings of the
Board of Directors and committees.
The Company provides $100,000 of term life insurance coverage for each
Non-Employee Director to the beneficiary designated by such Non-Employee
Director. In addition, the Company has purchased joint life insurance contracts
in the amount of $1 million for each Director. Upon the death of such Director,
while still in office, the Company will donate an aggregate of $1 million to
one or more charitable organizations designated by such Director from the
proceeds of such insurance policy. With the exception of such joint life
insurance contracts, members of the Board of Directors who are officers or
employees of the Company or any of its subsidiaries do not receive compensation
or reimbursement of expenses for serving in such capacity.
Non-Employee Directors have also received grants of stock options under
one or more of the following plans: 1990 Directors Stock Option Plan, 1992
Directors Stock Option Plan, 1994 Director Stock Option Plan, the 1997 Stock
Incentive Plan and the HFS Incorporated 1993 Stock Option Plan.
Directors shall be elected by the affirmative vote of a plurality of the
shares of Common Stock present at the Meeting, in person or by proxy, and
entitled to vote in the election of directors. Pursuant to applicable Delaware
law, abstentions and broker non-votes will have no effect on the outcome of the
vote.
ACCOUNTING ISSUES, CLASS ACTION LITIGATION AND MANAGEMENT AND CORPORATE
GOVERNANCE CHANGES
Accounting Issues. On April 15, 1998, the Company announced that in the
course of transferring responsibility for the Company's accounting functions
from the former CUC personnel to former HFS accounting personnel as a result of
the merger of HFS with and into CUC (the "Merger") and preparing for the
reporting of first quarter 1998 results, it had discovered the Accounting Issues
in the CUC business units. As a result, upon discovering the Accounting Issues,
the Company together with its counsel and assisted by auditors, immediately
began an intensive investigation. In addition, the Audit Committee of the Board
of Directors engaged Willkie, Farr & Gallagher ("Willkie Farr") as special legal
counsel and Willkie Farr engaged Arthur Andersen LLP to perform an independent
investigation. On July 14, 1998, the Company announced that the accounting
irregularities were greater than those initially discovered in April and that
the irregularities affected the accounting records of all major business units
of CUC. On August 13, 1998, the Company announced that its investigation of
accounting irregularities and errors in the CUC business units was complete. On
August 27, 1998, the Company announced that the Audit Committee of the Board of
Directors had submitted its report (the "Report") to the Board of Directors on
the investigation into the accounting irregularities and its conclusions
regarding responsibility for those actions. A copy of the Report has been filed
as an exhibit to the Company's Current Report on Form 8-K dated August 28, 1998.
As a result of the accounting irregularities discovered by the investigation,
the Company has restated its previously reported financial results for 1997,
1996 and 1995 and the first six months of 1998.
Class Action Litigation and Government Investigation. As a result of the
aforementioned Accounting Issues, numerous lawsuits claiming to be class
actions, two lawsuits claiming to be brought derivatively on the Company's
behalf and three individual lawsuits have been filed against the Company and,
among others, its predecessor, HFS, and certain current and former officers and
directors of the Company and HFS, asserting various claims under the federal
securities laws and certain state statutory and common laws. In addition, the
staff of the Securities and Exchange Commission (the "SEC") and the United
States Attorney for the District of New Jersey are conducting investigations
relating to the Accounting Issues. The SEC staff has advised the Company that
its inquiry should not be construed as an indication by the SEC or its staff
that any violations of law have occurred. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--Claims of Certain Current and Former Officers and Directors of the
Company and HFS."
10
<PAGE>
Management and Corporate Governance Changes. On July 28, 1998, Walter A.
Forbes resigned as Chairman of the Company and as a member of the Board of
Directors. Henry R. Silverman, President and Chief Executive Officer of the
Company, was unanimously elected by the Board of Directors to be Chairman and
will continue to serve as Chief Executive Officer and President of the Company.
Ten members of the Board formerly associated with CUC also resigned.
On July 28, 1998, the Board also approved the adoption of Amended and
Restated By-Laws of the Company and voted to eliminate the governance plan
adopted as part of the Merger, resulting in the elimination of 80%
super-majority vote requirement provisions of the By-Laws relating to the
composition of the Board and the limitations on the removal of the Chairman and
the Chief Executive Officer.
Stock Option Exchange and Cancellation. On September 23, 1998, the
Compensation Committee approved an equity incentive program for the Company's
senior management (the "Senior Management Program") and a program to
effectively reprice certain company stock options granted to middle management
of the Company during December 1997 and the first quarter of 1998. The Senior
Management Program effectively modified the terms of certain options held by
the executive and senior management of the Company. With respect to
approximately 25.8 million options held by Mr. Silverman, (a) 33% were
cancelled, (b) 33% were exchanged for similar options with an exercise price of
$20 per share and (c) 33% were exchanged for similar options with an exercise
price equal to $9.8125 per share (the "New Price"). Although prior to the
effectiveness of the Senior Management Program all of Mr. Silverman's options
were vested, the 17.2 million options granted to Mr. Silverman in such exchange
are unvested and will vest at the rate of 25% per year over the next four years
beginning in October 1999. With respect to an aggregate of approximately 10.3
million options held by Messrs. Buckman, Holmes, Monaco and Kunisch (the "Named
Executive Officers") (a) 25% were cancelled, (b) 25% were exchanged for similar
options with an exercise price of $20 per share, and (c) 50% were exchanged for
similar options with an exercise price equal to the New Price. With respect to
approximately 25 million options held by other senior management (approximately
40 persons) (the "Senior Management"), other than the Named Executive Officers,
(a) 10% were cancelled, (b) 40% were exchanged for similar options with an
exercise price of $12.2656 per share (the New Price plus 25%), and (c) 50% were
exchanged for similar options with an exercise price equal to the New Price. In
addition, to further align the interests of Senior Management (including the
Named Executive Officers) with that of the Company's stockholders, the ability
to obtain modified options was subject to such officers' agreement to
participate in an executive equity incentive program, requiring such officers to
acquire and hold Common Stock having an aggregate market value based upon their
base cash compensation. See "EXECUTIVE COMPENSATION AND OTHER INFORMATION--Ten
Year Option/SAR Repricings."
11
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company as of the date of this Proxy
Statement are set forth in the table below. All executive officers are
appointed at the annual meeting or interim meetings of the Board of Directors.
Each executive officer is appointed by the Board to hold office until his or
her successor is duly appointed and qualified:
<TABLE>
<CAPTION>
NAME OFFICE OR POSITIONS HELD
- -------------------- -----------------------------------------------------------------------
<S> <C>
Henry R. Silverman Chairman of the Board, President and Chief Executive Officer
James E. Buckman Vice Chairman, General Counsel and Assistant Secretary
Stephen P. Holmes Vice Chairman, Chairman and Chief Executive Officer, Travel Division
Robert D. Kunisch Vice Chairman, Relationship Management and Corporate Development
Michael P. Monaco Vice Chairman, Chairman and Chief Executive Officer, Alliance
Marketing Division
John W. Chidsey Chairman and Chief Executive Officer, Insurance/Wholesale Segment
David M. Johnson Senior Executive Vice President and Chief Financial Officer
Samuel L. Katz Executive Vice President, Strategic Development
Richard A. Smith Chairman and Chief Executive Officer, Real Estate Division
Tobia Ippolito Senior Vice President and Corporate Controller
</TABLE>
12
<PAGE>
Other than as set forth below, for biographical information concerning the
Executive Officers of the Company, see "Election of Directors."
<TABLE>
<CAPTION>
NAME OFFICE OR POSITIONS HELD
- ------------------ -----------------------------------------------------------------------
<S> <C>
John W. Chidsey Mr. Chidsey, age 36, has been Chairman and Chief Executive Officer
of the Insurance/Wholesale Segment of the Company since
November 1998. From May 1998 to November 1998, Mr. Chidsey was
President and Chief Operating Officer of the Alliance Marketing
Division of the Company. From December 1997 to May 1998, Mr.
Chidsey was Executive Vice President, Business Development of the
Company. From 1995 to December 1997, Mr. Chidsey was Senior
Vice President, Preferred Alliance Services for HFS. Prior to joining
HFS, Mr. Chidsey was the Chief Financial Officer at two divisions of
Pepsico Inc. with responsibilities for international operations.
David M. Johnson Mr. Johnson, age 38, has been Senior Executive Vice President and
Chief Financial Officer of the Company since November 1998. From
April 1998 until November 1998, Mr. Johnson was Executive Vice
President-Finance of the Company. For the 12 years preceding
April 1998, Mr. Johnson was employed at Merrill Lynch Pierce
Fenner & Smith Incorporated ("Merrill"), most recently as a
managing director of Merrill's Technology Investment Banking
Group. Mr. Johnson is a Director of NRT Incorporated. See
"CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--Relationship with NRT."
Samuel L. Katz Mr. Katz, age 33, has been Executive Vice President, Strategic
Development of the Company since April 1998 and was Senior Vice
President--Acquisitions of the Company from December 1997 to
March 1998. Mr. Katz was Senior Vice President, Acquisitions of HFS
from January 1996 to April 1998. From June 1993 to December 1995,
Mr. Katz was Vice President of Dickstein Partners Inc., a private
investment firm. Mr. Katz is a director of Specialty Catalog Corp. and
NRT Incorporated. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS--Relationship with NRT."
Richard A. Smith Mr. Smith, age 45, has been Chairman and Chief Executive Officer of
the Real Estate Division of the Company since December 17, 1997.
Mr. Smith was President of the Real Estate Division of HFS from
October 23, 1996 to December 17, 1997 and Executive Vice President
of Operations for HFS Incorporated from February 1992 to
October 23, 1996. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS--Relationship with NRT."
Tobia Ippolito Mr. Ippolito, age 34, has been Senior Vice President and Corporate
Controller of the Company since April 1998. From December 17, 1997 to
April 1998, Mr. Ippolito was Vice President and Corporate Controller
of the Company. From January 1995 to December 17, 1997, Mr.
Ippolito was Vice President and Corporate Controller of HFS. From
January 1993 to January 1995, Mr. Ippolito was Corporate Controller
of HFS.
</TABLE>
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE OF THE NAMED EXECUTIVE OFFICERS
The following table sets forth the 1996, 1997 and 1998 cash and noncash
compensation awarded to or earned by each person who served as Chief Executive
Officer of the Company during 1998 and the four other most highly compensated
executive officers of the Company (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation(1) Compensation
------------------------- -------------------
Awards
-------------------
Securities
Underlying All Other
Name and Options/ Compensation
Principal Position Year Salary($) Bonus($) SARs (#)(2) ($)(4)
- -------------------------- ------------- ----------- ----------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Henry R. Silverman 1998 1,610,367 1,207,775 18,908,920 77,626
Chairman of the Board, 1997 1,577,472 2,366,208 19,307,180 6,760
President and Chief 1996 1,501,903 2,250,000 4,806,200 39,804
Executive Officer
Stephen P. Holmes 1998 647,115 388,269 2,436,948 55,667
Vice Chairman and 1997 499,980 299,988 1,025,620 22,903
Chairman and CEO, 1996 417,305 215,621 240,310 4,103
Travel Division
Michael P. Monaco 1998 647,115 388,269 3,247,994 55,537
Vice Chairman and 1997 499,980 299,988 2,347,325 16,514
Chairman and CEO, 1996 105,766 0 1,441,860 0
Alliance Marketing
Division
Robert D. Kunisch 1998(5) 616,870 259,086 1,573,430 20,005
Vice Chairman, 1997 901,480 2,799,251 1,081,240 134,615
Relationship Management 1996 -- -- -- --
and Corporate Development
James E. Buckman 1998 531,759 237,297 2,474,448 22,942
Vice Chairman and 1997 499,980 299,988 1,075,620 6,258
General Counsel 1996 417,305 215,621 240,310 3,940
</TABLE>
- ----------
(1) Prior to December 17, 1997, all cash compensation represents compensation
paid by HFS.
(2) On September 23, 1998, the Compensation Committee approved the Senior
Management Program which effectively modified the terms of certain
Company stock options held by the Named Executive Officers. With respect
to approximately 25.8 million options held by Mr. Silverman, (a) 33% were
cancelled, (b) 33% were exchanged for similar options with an exercise
price of $20 per share and (c) 33% were exchanged for similar options
with an exercise price equal to the New Price. Although prior to the
effectiveness of the Senior Management Program all of Mr. Silverman's
options were vested, the 17.2 million options granted to Mr. Silverman in
such exchange are unexercisable and will vest at the rate of 25% per year
over the next four years beginning in October 1999. With respect to an
aggregate of approximately 10.3 million options held by the other Named
Executive Officers: (a) 25% were cancelled, (b) 25% were exchanged for
similar options with an exercise price of $20 per share, and (c) 50% were
exchanged for similar options with an exercise price equal to the New
Price. In addition, to further align the Senior Management (including the
Named Executive Officers) interest with that of the Company's
stockholders, the ability to obtain modified options was subject to such
officers' agreement to participate in an executive equity incentive
program, requiring such officers to acquire and hold Common Stock having
an aggregate market value based upon their base salary.
(3) As a result of the Senior Management Program, the following total number
of options granted in 1996, 1997 and 1998 were cancelled: Mr. Silverman:
25,813,380; Mr. Holmes: 2,115,930; Mr. Monaco: 3,197,325; Mr. Kunisch:
1,331,240; Mr. Buckman: 2,165,930.
(4) Payments included in these amounts for the fiscal year ended December 31,
1998 consist of (i) Company matching contributions to the Employee
Savings Plan, which is a defined contribution salary reduction 401(k)
plan qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code") and/or under a non-qualified deferred compensation
plan established by HFS in 1996 ("Defined Contribution Match"); (ii)
insurance premiums paid by the Company for supplemental life insurance
coverage; and (iii) unused vacation pay. The payments with respect to the
Defined Contribution Match, life insurance premiums and unused vacation
pay were as follows:
14
<PAGE>
<TABLE>
<CAPTION>
Defined Life Unused
Contribution Insurance Vacation
Year Match($) Premium($) Pay($)
------ -------------- ------------ ---------
<S> <C> <C> <C> <C>
Mr. Silverman 1998 75,226 2,400 0
Mr. Holmes 1998 53,267 2,400 0
Mr. Monaco 1998 53,137 2,400 0
Mr. Kunisch 1998 0 2,400 17,605
Mr. Buckman 1998 20,542 2,400 0
</TABLE>
(5) See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Other Relationships"
for certain non-compensatory payments made to Mr. Kunisch under a
Noncompetition Agreement during 1998.
OPTION GRANTS TABLE FOR THE NAMED EXECUTIVE OFFICERS
The following table summarizes option grants during the last fiscal year
made to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants(3)
--------------------------------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees in Price Expiration Present
Year Granted (#)(1)(2) Fiscal Year ($/Sh) Date Value $(4)
- -------------------- ------------------- -------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Henry R. Silverman 4,806,200(5) 4.59% 9.8125 01/22/2006 27,491,464
3,798,260(5) 3.63% 9.8125 04/30/2007 21,726,047
1,007,940(5) 0.96% 20.000 04/30/2007 4,041,839
7,596,520(5) 7.26% 20.000 12/17/2007 30,462,045
Stephen P. Holmes 240,310(6) 0.23% 9.8125 05/31/2006 1,374,573
480,620(6) 0.46% 9.8125 04/30/2007 2,749,146
337,036(7) 0.32% 9.8125 12/17/2007 1,927,845
207,964(7) 0.20% 20.000 12/17/2007 833,935
321,018(5) 0.31% 20.000 10/14/2008 1,287,282
Michael P. Monaco 1,441,860(6) 1.38% 9.8125 01/16/2007 8,248,011
156,803(6) 0.15% 9.8125 04/30/2007 896,913
203,662(6) 0.19% 20.000 04/30/2007 816,684
545,000(7) 0.52% 20.000 12/17/2007 2,185,450
50,669(5) 0.05% 20.000 10/14/2008 203,182
Robert D. Kunisch 665,620(6) 0.64% 9.8125 04/30/2007 3,807,346
325,000(6) 0.31% 13.3125 11/11/2008 2,522,000
295,620(6) 0.28% 20.000 04/30/2007 1,185,436
37,190(7) 0.04% 20.000 12/17/2007 149,131
James E. Buckman 240,310(6) 0.23% 9.8125 05/31/2006 1,374,573
480,620(6) 0.46% 9.8125 04/30/2007 2,749,146
362,036(7) 0.35% 9.8125 12/17/2007 2,070,845
232,964(7) 0.22% 20.000 12/17/2007 934,185
308,518(5) 0.29% 20.000 10/14/2008 1,237,157
</TABLE>
- ----------
(1) Options granted to the Named Executive Officers expire as specified in
the table. The Compensation Committee retains discretion to modify the
terms of outstanding options provided that the options, as modified, do
not violate the terms of the respective plan under which they were
granted.
15
<PAGE>
(2) The vesting of these options accelerates under certain circumstances
(including a change of control of the Company occurring after the
Effective Time) under the terms of the Named Executive Officers'
respective employment agreements. See "Employment Contracts and
Termination, Severance and Change of Control Arrangements."
(3) On September 23, 1998, the Compensation Committee approved the Senior
Management Program which effectively modified the terms of certain
Company stock options held by the Named Executive Officers. With respect
to approximately 25.8 million options held by Mr. Silverman, (a) 33% were
cancelled, (b) 33% were exchanged for similar options with an exercise
price of $20 per share and (c) 33% were exchanged for similar options
with an exercise price equal to the New Price. Although prior to the
effectiveness of the Senior Management Program all of Mr. Silverman's
options were vested, the 17.2 million options granted to Mr. Silverman in
such exchange are unexercisable and will vest at 25% per year over the
next four years beginning in October 1999. With respect to an aggregate
of approximately 10.3 million options held by the other Named Executive
Officers: (a) 25% were cancelled, (b) 25% were exchanged for similar
options with an exercise price of $20 per share, and (c) 50% were
exchanged for similar options with an exercise price equal to the New
Price. In addition, to further align the Senior Management (including the
Named Executive Officers) interest with that of the Company's
stockholders, the ability to obtain modified options was subject to such
officers' agreement to participate in an executive equity incentive
program, requiring such officers to acquire and hold Common Stock having
an aggregate market value based upon their base cash compensation.
(4) The values assigned to each reported option on this table are computed
using the Black-Scholes option pricing model. The calculations for
options granted on October 14, 1998 each assume a risk-free rate of
return of 4.9%, which represents the ten-year yield of United States
Treasury Notes on the option grant date. The calculations for all option
grant dates assume a 55.0% volatility; however, there can be no assurance
as to the actual volatility of the Common Stock in the future. The
calculations for all grant dates also assume no dividend payout, a
straight-line, and a 6.3 year expected life. In assessing these option
values, it should be kept in mind that no matter what theoretical value
is placed on a stock option on the date of grant to a Key Executive
Officer, its ultimate value will depend on the market value of the Common
Stock at a future date.
(5) These options are scheduled to vest and become exercisable in yearly
increments of 25%, commencing in October 1999.
(6) These options are fully vested and exercisable.
(7) These options are scheduled to vest and become exercisable in yearly
increments of 20%, commencing in January 1999.
16
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE FOR NAMED EXECUTIVE OFFICERS
The following table summarizes the exercise of options by the Named
Executive Officers during the last fiscal year and the value of unexercised
options held by such executives as of the end of such fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexer- Value of Unexercised
cised In-the-Money
Options/SARs Options/SARs
Share Acquired at FY-End (#) at FY-End ($)(1)
On Exercise Value Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- -------------------- ---------------- ---------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Henry R. Silverman 1,900,000 61,063,372 20,286,622 / 17,208,920 317,774,424 / 81,742,370
Stephen P. Holmes 0 0 2,542,481 / 866,018 34,103,810 / 3,201,842
Michael P. Monaco 0 0 1,802,325 / 595,669 15,187,298 / 0
Robert D. Kunisch 0 0 1,286,240 / 37,190 8,273,390 / 0
James E. Buckman 300,000 10,328,510 2,360,713 / 903,518 30,276,386 / 3,439,342
</TABLE>
- ----------
(1) Based upon the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1998, and applicable exercise prices.
(2) On September 23, 1998, the Compensation Committee approved the Senior
Management Program which effectively modified the terms of certain
Company stock options held by the Named Executive Officers. With respect
to approximately 25.8 million options held by Mr. Silverman, (a) 33% were
cancelled, (b) 33% were exchanged for similar options with an exercise
price of $20 per share and (c) 33% were exchanged for similar options
with an exercise price equal to the New Price. Although prior to the
effectiveness of the Senior Management Program all of Mr. Silverman's
options were vested, the 17.2 million options granted to Mr. Silverman in
such exchange are unexercisable and will vest at 25% per year over the
next four years beginning in October 1999. With respect to an aggregate
of approximately 10.3 million options held by the other Named Executive
Officers: (a) 25% were cancelled, (b) 25% were exchanged for similar
options with an exercise price of $20 per share, and (c) 50% were
exchanged for similar options with an exercise price equal to the New
Price. In addition, to further align the Senior Management (including the
Named Executive Officers) interest with that of the Company's
stockholders, the ability to obtain modified options was subject to such
officers' agreement to participate in an executive equity incentive
program, requiring such officers to acquire and hold Common Stock having
an aggregate market value based upon their base cash compensation.
PENSION PLANS
The Company, through PHH Corporation, maintains a tax-qualified pension
plan generally for the benefit of certain employees of PHH Corporation (the
"Pension Plan"). The Pension Plan provides participants a defined retirement
benefit commencing at normal retirement age of 65 (or earlier, with reduced
payments, upon early retirement or disability). Mr. Kunisch is the only Named
Executive Officer who participates in the Pension Plan or any other defined
benefit pension plan of the Company.
The actual retirement benefit provided under the Pension Plan to Mr.
Kunisch is based upon years of credited service and final average compensation.
The maximum aggregate benefit provided to Mr. Kunisch under the Pension Plan is
equal to 60% of his Final Average Compensation. Final Average Compensation for
purposes of computing aggregate benefits is the average, for the five years of
service prior to retirement or other termination of employment, of base salary
and bonus as reported under the "Salary" and "Bonus" columns in the Summary
Compensation Table. Because of Internal Revenue Service limitations on
compensation includible for purposes of the Pension Plan, Mr. Kunisch's Final
Average Compensation would equal $160,000. The estimated annual benefit that
Mr. Kunisch will receive under the Pension Plan upon retirement at age 65 is
$96,000.
17
<PAGE>
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Exercise Original
Underlying of Stock Price Option Term
Options/ at Time at Time of Remaining at
SARs of Repricing Repricing New Date of
Repriced or or or Exercise Repricing
Amended Amendment Amendment Price or
Name Date ($)(1) ($) ($) ($) Amendment
- ----------------------- ---------- ------------------ -------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry R. Silverman, 10/14/98 4,806,200(2) 9.8125 16.78 9.8125 75 months
Chairman, President 10/14/98 3,798,260(2) 9.8125 23.88 9.8125 102 months
and Chief Executive 10/14/98 1,007,940(2) 9.8125 23.88 20.0000 102 months
Officer 10/14/98 7,596,520(2) 9.8125 31.375 20.0000 110 months
Stephen P. Holmes, 10/14/98 240,310(3) 9.8125 25.85 9.8125 91 months
Vice Chairman and 10/14/98 480,620(3) 9.8125 23.88 9.8125 102 months
Chairman and CEO, 10/14/98 337,036(4) 9.8125 31.375 9.8125 110 months
Travel Division 10/14/98 207,964(4) 9.8125 31.375 20.0000 110 months
10/14/98 321,018(5) 9.8125 34.3125 20.0000 111 months
Michael P. Monaco, 10/14/98 1,441,860(3) 9.8125 25.44 9.8125 99 months
Vice Chairman and 10/14/98 156,803(3) 9.8125 23.88 9.8125 102 months
Chairman and CEO, 10/14/98 203,662(3) 9.8125 23.88 20.000 102 months
Alliance Marketing 10/14/98 545,000(4) 9.8125 31.375 20.0000 110 months
Division 10/14/98 50,669(2) 9.8125 34.3125 20.0000 111 months
Robert D. Kunisch, 10/14/98 665,620(3) 9.8125 23.88 9.8125 102 months
Vice Chairman, 10/14/98 295,620(3) 9.8125 23.88 20.0000 102 months
Relationship 10/14/98 37,190(4) 9.8125 31.375 20.0000 110 months
Management and
Corporate
Development
James E. Buckman, 10/14/98 240,310(3) 9.8125 25.85 9.8125 91 months
Vice Chairman 10/14/98 480,620(3) 9.8125 23.88 9.8125 102 months
and General 10/14/98 362,036(4) 9.8125 31.375 9.8125 110 months
Counsel 10/14/98 232,036(4) 9.8125 31.375 20.0000 110 months
10/14/98 308,518(5) 9.8125 34.3125 20.0000 111 months
John W. Chidsey, 10/14/98 240,310(3) 9.8125 23.88 9.8125 102 months
Chairman and Chief 10/14/98 179,845(4) 9.8125 31.375 9.8125 110 months
Executive Officer, 10/14/98 120,155(4) 9.8125 31.375 12.2656 110 months
Insurance/Wholesale 10/14/98 215,969(4) 9.8125 34.3125 12.2656 111 months
Segment 10/14/98 82,625(6) 9.8125 37.50 9.8125 113 months
David M. Johnson, 10/14/98 666,667(7) 9.8125 22.00 9.8125 114 months
Senior Executive 10/14/98 533,333(7) 9.8125 22.00 12.2656 114 months
Vice President and
Chief Financial
Officer
Samuel L. Katz, 10/14/98 120,155(3) 9.8125 25.85 9.8125 91 months
Executive Vice 10/14/98 240,310(3) 9.8125 23.88 9.8125 102 months
President, Strategic 10/14/98 119,768(4) 9.8125 31.375 9.8125 110 months
Development 10/14/98 180,232(4) 9.8125 31.375 12.2656 110 months
10/14/98 203,954(4) 9.8125 34.325 12.2656 111 months
10/14/98 10,000(6) 9.8125 37.50 9.8125 113 months
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Exercise Original
Underlying of Stock Price Option Term
Options/ at Time at Time of Remaining at
SARs of Repricing Repricing New Date of
Repriced or or or Exercise Repricing
Amended Amendment Amendment Price or
Name Date ($)(1) ($) ($) ($) Amendment
- ----------------------- ---------- ---------------- -------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Smith, 10/14/98 120,155(3) 9.8125 25.85 9.8125 91 months
Chairman and Chief 10/14/98 120,155(3) 9.8125 30.69 9.8125 96 months
Executive Officer, 10/14/98 240,310(3) 9.8125 23.88 9.8125 102 months
Real Estate Division 10/14/98 59,690(4) 9.8125 31.375 9.8125 110 months
10/14/98 140,310(4) 9.8125 31.375 12.2656 110 months
10/14/98 291,938(4) 9.8125 34.3125 12.2656 111 months
Tobia Ippolito, 10/14/98 70,000(4) 9.8125 31.375 9.8125 110 months
Senior Vice Presi- 10/14/98 35,000(4) 9.8125 34.3125 9.8125 111 months
dent and Corporate
Controller
</TABLE>
- ----------
(1) These options were effectively modified on October 14, 1998 and, other
than as specified below, have the same expiration date as specified in
the table. These options replace options that were cancelled under the
Senior Management Program.
(2) These options are scheduled to vest and become exercisable in yearly
increments of 25%, commencing in October 1999.
(3) These options are fully vested and exercisable.
(4) These options are scheduled to vest and become exercisable in yearly
increments of 20%, commencing in January 1999.
(5) These options are scheduled to vest and become exercisable in yearly
increments of 20%, commencing in October 1999.
(6) These options represent bonus and salary replacement options, purchased
by the optionee through a deferred compensation plan previously offered
by the Company. These options are scheduled to vest and become
exercisable in yearly increments of one-third, commencing in January
1999.
(7) These options are scheduled to vest and become exercisable in yearly
increments of 25%, commencing in January 1999.
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
Each Named Executive Officer, other than Mr. Kunisch, is employed by the
Company pursuant to a written agreement of employment.
Henry R. Silverman. Mr. Silverman is employed by the Company pursuant to
an employment agreement originally entered into as of September 30, 1991
between Mr. Silverman and HFS and amended and restated from time to time (the
"Silverman Employment Agreement"). The Silverman Employment Agreement was most
recently amended by the Third Amendment to the Silverman Employment Agreement
dated as of December 31, 1998 (the "Third Amendment"). Mr. Silverman serves the
Company as its President and Chief Executive Officer and, pursuant to the Third
Amendment, also as the Chairman of the Board and the Chairman of the Executive
Committee of the Board (such change was effective as of July 28, 1998).
Pursuant to the Third Amendment, the term of employment under the Silverman
Employment Agreement was extended through December 31, 2005, subject to earlier
termination or extension as provided therein; however, in connection with such
extension, an automatic annual renewal provision was removed from the Silverman
Employment Agreement.
In consideration of the additional duties assumed by Mr. Silverman
pursuant to the Third Amendment, the Silverman Employment Agreement, as
amended, provides for Mr. Silverman to receive an annual rate of base salary of
$1,500,000 for the period ending December 31, 1998, and $2,900,000 thereafter,
subject to further increases relating to the Consumer Price Index. The
Silverman Employment Agreement also provides Mr. Silverman an annual bonus
opportunity equal to the lesser of (i) 0.75% of the Company's "EBITDA" (as
defined in the Silverman Employment Agreement) for the applicable fiscal year
or (ii) 150% of his annual base salary.
The Silverman Employment Agreement provides that if Mr. Silverman resigns
his employment in connection with a breach by the Company of the Silverman
Employment Agreement, or if he is terminated by the Company without Cause (as
defined in the Silverman Employment Agreement), he will be entitled to receive
a lump sum cash payment equal to (i) the lesser of (a) 150% of his annual base
salary
19
<PAGE>
or (b) the sum of his annual base salary plus 0.75% of EBITDA for the 12 months
preceding the date of termination, multiplied by (ii) the number of years and
partial years remaining in the term of employment under the Silverman
Employment Agreement. In addition, Mr. Silverman would be entitled to continued
health and welfare benefits during the remaining term of employment and the
vesting of any options and restricted stock.
The Silverman Employment Agreement further provides that Mr. Silverman
will be made whole on an after-tax basis with respect to certain excise taxes
in connection with a change of control of the Company which may, in certain
cases, be imposed upon payments thereunder and other compensation and benefit
arrangements.
Messrs. Monaco, Holmes and Buckman. The Company entered into employment
agreements with Messrs. Monaco, Holmes and Buckman dated as of September 12,
1997 (such agreements, respectively, the "Monaco Employment Agreement," the
"Holmes Employment Agreement" and the "Buckman Employment Agreement," and
collectively, the "1997 Employment Agreements"). Each of the 1997 Employment
Agreements originally provided for a period of employment through December 17,
2002; however, such agreements contain automatic extension periods which cause
each respective period of employment to be extended by a one year increment on
an annual basis (a one year extension of the period of employment through
December 17, 2003 has taken effect under each of the 1997 Employment
Agreements).
Each of the 1997 Employment Agreements specifies the position and duties
of the executive during the period of employment. The Monaco Employment
Agreement was amended as of December 23, 1998 to reflect Mr. Monaco's new
duties and responsibilities with the Company and the location of his place of
employment. The Buckman Employment Agreement was amended as of January 11, 1999
to reflect his additional duties and responsibilities with the Company and the
location of his place of employment. The Holmes Employment Agreement was
amended as of January 11, 1999 to reflect the location of his place of
employment. Currently (i) Mr. Monaco serves as Vice Chairman of the Company and
as Chairman and Chief Executive Officer of the Membership and Marketing
Services Division, (ii) Mr. Holmes serves as Vice Chairman of the Company and
Chairman and Chief Executive Officer of the Travel Division and (iii) Mr.
Buckman serves as Vice Chairman and General Counsel of the Company.
Each of the 1997 Employment Agreements specifies the compensation and
benefits provided to the Executive during the period of employment. The Monaco
Employment Agreement and the Holmes Employment Agreement provide that each
Executive will be paid an annual base salary of $650,000 and will be eligible
for annual bonuses based on a target bonus of $650,000. The Buckman Employment
Agreement provides that Mr. Buckman will be paid an annual base salary of
$500,000, and will be eligible for an annual bonus based on a target bonus of
$500,000; however, in connection with the January 11, 1999 amendment to the
Buckman Employment Agreement, such salary and target bonus amounts were
increased to $650,000. Each of Messrs. Monaco, Holmes and Buckman will be
eligible to participate in all of the Company's other compensation and employee
benefit plans or programs and to receive officer perquisites.
Each of the 1997 Employment Agreements provides for certain payments in
the event of termination of the Executive's employment under various
circumstances. The Holmes Employment Agreement and the Monaco Employment
Agreement each provide that if, before January 1, 2000, the Executive's
employment is terminated by the Company other than for Cause (as defined
therein) or by the Executive for Constructive Discharge (as defined therein),
the Company will pay the Executive a lump sum cash payment equal to 300% of the
sum of (i) his annual base salary and (ii) the highest annual bonus he has
received for any of the three preceding years (or $520,000, if higher) ("Salary
plus Bonus"). Each such agreement also provides that if, after December 31,
1999, the Executive's employment is terminated by the Company other than for
Cause or by the Executive for Constructive Discharge, the Company will pay the
Executive a lump sum cash payment equal to 500% of Salary plus Bonus. In any of
the foregoing situations, the Executive would also receive any earned but
unpaid base salary and incentive compensation, his benefits and perquisites
would continue for 36 months and any stock options and restricted stock would
vest (and such options would remain outstanding for the remainder of their
terms without regard
20
<PAGE>
to such termination). Each such agreement also provides that, in certain
circumstances, the Executive's employment would be deemed terminated for
Constructive Discharge in the event that Mr. Silverman's employment with the
Company terminates or his responsibilities are reduced. In such event, the
Executive would receive substantially similar payments and benefits as
described above; however, his cash payment would range from 200% to 400% of
Salary plus Bonus, depending on the date of such termination.
The Buckman Employment Agreement provides that if, before January 1, 2000,
Mr. Buckman's employment is terminated by the Company other than for Cause (as
defined therein) or by Mr. Buckman for Constructive Discharge (as defined
therein), the Company will pay Mr. Buckman a lump sum cash payment equal to
300% of the sum of (i) his annual base salary and (ii) the highest annual bonus
he has received for any of the three preceding years (or $500,000, if higher)
("Buckman Salary plus Bonus"). The Buckman Employment Agreement also provides
that if, after December 31, 1999, Mr. Buckman's employment is terminated by the
Company other than for Cause or by Mr. Buckman for Constructive Discharge, the
Company will pay Mr. Buckman a lump sum cash payment equal to 500% of Buckman
Salary plus Bonus (Mr. Buckman may also resign at any time following such date
and receive a lump sum cash payment equal to 200% of Buckman Salary plus
Bonus). In any of the foregoing situations, Mr. Buckman would also receive any
earned but unpaid base salary and incentive compensation, his benefits and
perquisites would continue for 36 months and any stock options and restricted
stock would vest (and such options would remain outstanding for the remainder
of their terms without regard to such termination). The Buckman Employment
Agreement also provides that, in certain circumstances, his employment would be
deemed terminated for Constructive Discharge in the event that Mr. Silverman's
employment with the Company terminates or his responsibilities are reduced. In
such event, Mr. Buckman would receive substantially similar payments and
benefits as described above however his cash payment would range from 200% to
400% of Buckman Salary plus Bonus, depending on the date of such termination.
Each 1997 Employment Agreement provides that the Executive will be made
whole on an after-tax basis with respect to certain excise taxes in connection
with a change of control of the Company which may, in certain cases, be imposed
upon payments thereunder and other compensation and benefit arrangements.
Stock Options. Generally, all stock options granted to each of the Named
Executive Officers under any applicable stock option plan of the Company will
become fully and immediately vested and exercisable upon the occurrence of any
change of control transaction affecting the Company (as defined in each
employment agreement).
* * *
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act that might incorporate future filings, including
this Proxy Statement, in whole or in part, the following compensation committee
report on executive compensation and performance graph shall not be
incorporated by reference into any such filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administering the Company's executive compensation policies and programs. The
Compensation Committee also reviews and approves the salaries and bonuses of
the Company's executive officers as well as all grants of options to purchase
shares of Common Stock.
Officer Compensation Policy. The Compensation Committee establishes
policies that include:
o aligning the long-term interests of executive officers with the
long-term interests of the Company's shareholders;
o providing competitive levels of compensation which are, in large part,
conditioned on the Company's attainment of specified performance targets;
and
21
<PAGE>
o attracting, motivating and retaining the best possible executive talent
for the benefit of the Company's stockholders.
Employment Agreements. Each of the Named Executive Officers, other than
Mr. Kunisch, is employed by the Company pursuant to a written agreement of
employment. Other executive officers of the Company are also employed pursuant
to employment agreements. The Committee has considered the advisability of
using employment agreements and has determined that it is in the best interests
of the Company insofar as it permits the Company to achieve its desired goals
of motivating and retaining the best possible executive talent. Because of
extraordinary events affecting the Company in 1998, the Compensation Committee
has determined that the use of employment agreements may be necessary in
certain cases to ensure the retention of key executive officers and to attract
additional executive talent to the Company. Each such employment agreement
separately reflects the terms that the Compensation Committee felt were
appropriate and/or necessary to retain the services of the particular executive
officer, within the framework of the Company's compensation policies.
Components of Executive Compensation. The material elements of the
Company's executive compensation arrangements include base salary, annual
performance bonus and stock options. Each executive officer's total
compensation package is designed to condition a significant portion of the
executive's overall anticipated compensation on the Company's success in
achieving specified performance targets.
Base Salaries. Salaries paid to executive officers, other than the Chief
Executive Officer, are reviewed annually by the Chief Executive Officer and the
Executive Vice President-Human Resources based upon their assessment of the
nature of the position and the contribution, experience and tenure of the
executive officer. The Compensation Committee is responsible for determining
the salary of the Chief Executive Officer. Because, as noted above, certain
Named Executive Officers are party to employment agreements, their respective
salary levels are subject to the provisions of such employment agreements (the
employment agreements with the Named Executive Officers are described more
fully under "Employment Contracts and Termination, Severance and Change of
Control Arrangements.") Because base salaries are not tied to the performance
of the Company, the Compensation Committee intends that base salaries paid to
executive officers are at or below market levels, except under special
circumstances.
Annual Bonus. The Named Executive Officers are entitled to annual
performance bonuses based upon the terms of their employment agreements (see
"Employment Contracts and Termination, Severance and Change of Control
Arrangements"), or, in the case of Mr. Kunisch, in accordance with the
Company's annual incentive bonus plan, as described below. As described under
"Employment Contracts and Terminations, Severance and Change in Control
Arrangements," Mr. Silverman's employment agreement provides for an annual
incentive bonus equal to the lesser of (i) 0.75% of the Company's EBITDA (as
defined in such agreement) for the applicable fiscal year or (ii) 150% of his
annual base salary. Under the Company's annual incentive bonus plan, certain
employees are eligible to earn bonuses equal to a percentage of base salary
based upon the degree of achievement of target levels of earnings before
interest, taxes, depreciation and amortization ("EBITDA"). Such percentages of
base salary range from 5% for the lowest level of employees if the minimum
level of earnings is achieved, to a maximum of 100% for Executive Vice
Presidents if the highest level of earnings is achieved. In 1998, bonuses paid
to executive officers generally were paid at less than the target level to the
extent business units for which such executives were responsible did not attain
pre-established levels of EBITDA (or other relevant performance measurement).
The bonuses paid to the Named Executive Officers in respect of 1998 are set
forth in the Summary Compensation Table. At the recommendation of Mr. Silverman
and after consideration by the Compensation Committee, the Compensation
Committee authorized a 50% reduction in the 1998 bonus payable to Mr. Silverman
and a 40% reduction in the 1998 bonuses payable to the other Named Executive
Officers pursuant to their employment agreements.
Stock Options. The Compensation Committee believes that the most effective
way to align the interests of executives with those of shareholders is to
ensure that the executives hold material equity stakes in the Company.
Therefore, the Compensation Committee has determined that the continued use of
stock options is the best mechanism for long term incentive compensation of
executive officers. The
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Compensation Committee administers each of the Company's stock option plans.
Generally, option grants are approved by the Compensation Committee upon the
recommendation of the Chief Executive Officer and the Executive Vice
President-Human Resources, who determine the number of shares subject to such
grants and the applicable terms and conditions of such grants. In general, to
ensure that the use of stock options meets the intended long-term goals of the
Compensation Committee, most stock option grants vest incrementally over a
five-year time frame. In addition, absent special circumstances, the Company
does not grant options with exercise prices below the fair market value of the
Common Stock as of the date of grant. Information with respect to option grants
in 1998 to the Named Executive Officers is set forth in the "Option Grants
Table."
Stock Option Exchange and Cancellation. On September 23, 1998, the
Compensation Committee approved the Senior Management Program and a program to
effectively reprice certain Company stock options granted to middle management
of the Company during December 1997 and the first quarter of 1998. The Senior
Management Program effectively modified the terms of certain options held by
the executive and senior management of the Company. With respect to
approximately 25.8 million options held by Mr. Silverman, (a) 33% were
cancelled (b) 33% were exchanged for similar options with an exercise price of
$20 per share and (c) 33% were exchanged for similar options with an exercise
price equal to the New Price. Although prior to the effectiveness of the Senior
Management Program all of Mr. Silverman's options were vested, the 17.2 million
options granted to Mr. Silverman in such exchange are unvested and will vest at
25% per year over the next four years beginning in October 1999. With respect
to an aggregate of approximately 10.3 million options held by the Named
Executive Officers (a) 25% were cancelled, (b) 25% were exchanged for similar
options with an exercise price of $20 per share; and (c) 50% were exchanged for
similar options with an exercise price equal to the New Price. With respect to
approximately 25 million options held by the Senior Management, other than the
Named Executive Officers, (a) 10% were cancelled, (b) 40% were exchanged for
similar options with an exercise price of $12.2656 per share, and (c) 50% were
exchanged for similar options with an exercise price equal to the New Price.
The decision to implement the foregoing plan was made after the discovery
of the Accounting Issues and the subsequent decline in the price of the Common
Stock. It was the view of the Compensation Committee that stock option grants
with exercise prices that were substantially above the current market price of
the Common Stock would undermine the intended purpose of stock options, namely
to provide incentives to the Company's officers and employees. The Compensation
Committee believes that such equity incentives are a significant factor in the
Company's ability to retain and motivate key employees who are critical to the
Company's long-term success. The Compensation Committee believes that the
disparity between the exercise price of these options at their original
exercise prices and market prices of the Company's Common Stock at the time of
modifying such options for the Company's Common Stock did not provide
meaningful incentives to the employees holding these options. The Compensation
Committee approved the modifications of the option terms as a means of ensuring
that employees will continue to have meaningful equity incentives to motivate
such employees to strive for the success of the Company which is critical for
the Company's stockholders' long-term best interest.
In adopting the Senior Management Program, the Compensation Committee
attempted to strike an appropriate balance by setting the exercise price of a
portion of the options granted to Mr. Silverman and the Named Executive
Officers under such Program at more than twice the then current market price of
the Common Stock and requiring the cancellation of a substantial portion of the
existing options exchanged pursuant to such Program. The Compensation Committee
also considered the fact that, based on the Black-Scholes option pricing model,
the value of the modified options on the date of grant in October 1998 had an
aggregate value of less than one-quarter of the aggregate value of the package
of original options that were either exchanged for the modified options or
cancelled in connection with the modification on the date of their respective
grants. In addition, the value of the modified options and the original options
(including the permanently cancelled options) which were exchanged for the
modified options had substantially the same value under the Black-Scholes
pricing model on the effective date of the option modifications in October 1998
when using the same per share value of the Company Common Stock and other
assumptions such as volatility, expected life and risk-free interest rate in
calculating the
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value of both the modified and original options. To further align the interests
of Senior Management (including the Named Executive Officers) with those of the
Company's stockholders, the ability to obtain modified options was subject to
such officers' agreement to participate in an executive equity incentive
program, requiring such officers to acquire and hold Common Stock having an
aggregate market value based upon their base cash compensation. The
Compensation Committee also considered Mr. Silverman's agreement to extend the
term of the Silverman Employment Agreement in adopting the modifications to Mr.
Silverman's options and the addition of a provision in the modified options
granted to each of the Senior Management in the Senior Management Program which
causes the option to terminate upon the optionee's termination of employment
for Cause (as defined in the option grant agreement).
Chief Executive Officer Compensation. The compensation paid to Mr.
Silverman during 1998 is based upon the terms of his existing employment
agreement. Such agreement, and certain amendments made thereto during 1998, are
described under "Employment Contracts and Termination, Severance and Change of
Control Arrangements". Effective January 1, 1999, Mr. Silverman's annual base
salary was increased to $2.9 million. The Compensation Committee determined
that such increase was appropriate and in the best interests of the
shareholders after considering Mr. Silverman's overall importance to the
Company, as well as his increased responsibilities arising from his assumption
of the roles of Chairman of the Board and Chairman of the Executive Committee,
as well as the material increase in his efforts in connection with
extraordinary events occurring during 1998. Mr. Silverman's annual bonus, which
is disclosed in the Summary Compensation Table, was determined based on a
formula set forth in his employment agreement, and is based directly on the
Company's attainment of EBITDA (as defined in such employment agreement). At
the recommendation of Mr. Silverman and after consideration by the Compensation
Committee, the Compensation Committee authorized a 50% reduction in Mr.
Silverman's 1998 bonus payable pursuant to his employment agreement.
Deductibility of Compensation. In accordance with Section 162(m) of the
Code, the deductibility for corporate tax purposes of compensation paid to
individual executive officers of the Company in excess of $1 million in any
year may be restricted. The Compensation Committee believes that it is in the
best interests of the Company's shareholders to comply with such tax law, while
still maintaining the goals of the Company's executive compensation program.
However, where it is deemed necessary and in the best interests of the Company
to continue to attract and retain the best possible executive talent, and to
motivate such executives to achieve the goals inherent in the Company's
business strategy, the Compensation Committee will recommend, and the Company
is expected to pay, compensation to executive officers which may exceed the
limits of deductibility.
The Compensation Committee
Robert F. Smith (Chair)
Leonard Schutzman The Rt. Hon. Brian Mulroney,
P.C., LL.D*
Leonard S. Coleman
- ----------
* As of January 1999, Mr. Mulroney no longer serves on the Compensation
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Robert F. Smith (Chairman), Anthony Petrello, Leonard Schutzman
and Robert T. Tucker served on the First Compensation Committee. After July 28,
1998, the Compensation Committee was comprised of Messrs. Smith (Chairman),
Schutzman, Mulroney and Coleman. As of January 1999, Mr. Mulroney no longer
serves on the Compensation Committee. Messrs. Smith, Petrello, Mulroney,
Coleman and Schutzman were not employees of the Company during 1998 or before.
From the Effective Time until July 28, 1998, Mr. Tucker served as a Vice
Chairman and Secretary of the Company.
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PERFORMANCE GRAPH
The following graph assumes $100 invested on December 31, 1993, and
compares (a) the yearly percentage change in the Company's cumulative total
shareholder return on the Common Stock (as measured by dividing (i) the sum of
(A) the cumulative amount of dividends, assuming dividend reinvestment during
the five years commencing on the last trading day before January 1, 1994, and
ending on December 31, 1998, and (B) the difference between the Company's share
price at the end and the beginning of the periods presented; by (ii) the share
price at the beginning of the periods presented) with (b) (i) the Standard &
Poor's 500 Index (the "S&P 500 Index"), and (ii) the Standard & Poor's Services
(Commercial & Consumer) Index (the "S&P SVCS Index").
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CENDANT CORPORATION, THE S&P 500 INDEX
AND THE S&P SERVICES (COMMERCIAL & CONSUMER) INDEX
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND
ACCURATE DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR
THE PURPOSE OF EDGAR FILING.]
Research Data Group Peer Group Total Return Worksheet
Cendant Corp (CD)
CUMULATIVE TOTAL RETURN
---------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
CENDANT CORPORATION 100 92 142 152 215 121
S&P 500 100 101 139 171 229 294
S&P SERVICES
(COMMERCIAL & CONSUMER) 100 92 124 128 175 177
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX.
INCLUDING REIVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH CHARTWELL
On November 22, 1994 (the "Chartwell Effective Date"), HFS (the Company's
predecessor) distributed to its stockholders one (1) share of the common stock
of Chartwell, then a wholly owned subsidiary of HFS, for every ten (10) shares
of HFS Common Stock held of record as of November 14, 1994 (the
"Distribution"). On the Chartwell Effective Date, HFS also transferred the
assets and liabilities of its business of financing and developing casino
gaming and entertainment facilities (the "Casino
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Development Business") to Chartwell and made (and agreed to make) cash capital
contributions to Chartwell aggregating $50 million. As a result of the
Distribution, Chartwell became an independent publicly traded corporation and
ceased to be a subsidiary of HFS.
In connection with the Distribution and for purposes of (i) governing
certain of the ongoing relationships between HFS and Chartwell after the
Distribution, (ii) providing mechanisms for an orderly transition and (iii)
providing HFS with a means of participating in the economic benefits of future
gaming projects, HFS and Chartwell entered into certain agreements, including
the Distribution Agreement, the Financing Agreement, the Marketing Services
Agreement, the Advisory Agreement, the Corporate Services Agreement, the
Facility Lease and the Tax Sharing Agreement on the Chartwell Effective Date.
Copies of such agreements were filed with the Securities and Exchange
Commission as exhibits to Chartwell's Current Report on Form 8-K dated December
2, 1994. As indicated herein under the captions "ELECTION OF DIRECTORS --
Information Regarding Nominees for the Term Expiring in 2001; Information
Regarding Directors Whose Terms Expire in 2000," certain of the Company's
directors and executive officers served during 1997, as directors and executive
officers of Chartwell. Each of these directors and executive officers also
owned certain options to purchase shares of common stock of Chartwell, which,
except for the options which were granted to Mr. Edelman and Mr. Smith, were
cancelled on or before February 1, 1996.
On December 20, 1995, Chartwell Leisure Associates L.P. II, a general
partnership affiliated with the Fisher Brothers and Gordon Getty ("Chartwell
Leisure II") acquired approximately 17% of the outstanding common stock of
Chartwell. Mr. Edelman is a partner in Chartwell Leisure II, owning in the
aggregate a 4.8% beneficial interest in that partnership. On January 23, 1996,
the Company acquired the Travelodge (Registered Trademark) and Thriftlodge
(Registered Trademark) lodging franchise system (the "Travelodge System") and
the related trademarks and trade names in North America from Forte Hotels, Inc.
and Forte Plc and immediately subsequent to such acquisition, Chartwell
acquired Forte Hotels, Inc., including in such purchase approximately 16 hotels
and joint venture interests in 96 hotels, which are now licensed as part of the
Travelodge System. As a result, Chartwell was the largest franchisee of the
Travelodge System. Under the applicable franchise agreements, Chartwell was
required to pay to Travelodge Hotels, Inc. ("THI"), a wholly owned subsidiary
of the Company, annual franchise fees equal to four percent of gross room
revenues for the owned hotel properties plus four percent of gross room
revenues of such properties as marketing and reservation fees. In addition,
Chartwell was required to pay to THI a license fee equal to four percent of
gross room revenues multiplied by Chartwell's percentage interest in each of
the hotel properties owned by joint ventures in which Chartwell acquired an
interest. In connection with such acquisition, in accordance with the Financing
Agreement, the Company guaranteed $75 million of borrowings by Chartwell under
a $125 million revolving credit facility with certain banks. The Company
received an annual guaranty fee of 2% of the $75 million credit extension. In
connection with the Travelodge acquisition, the Advisory Agreement and the
Marketing Services Agreement were terminated, and the Corporate Services
Agreement was modified to provide for a fixed fee of $1.5 million per year, the
provision of certain corporate services only through September 1996 and the
requirement of the Company to provide corporate transaction advisory services.
The Company also received an advisory fee of approximately $2 million from
Chartwell for advisory services in connection with the acquisition by Chartwell
of Forte Hotels, Inc. as described above.
In November 1996, HFS and Chartwell agreed to terminate the Corporate
Services Agreement in return for the payment by Chartwell to HFS of $9,265,000.
$2,500,000 of such amount was paid in cash and the balance was paid by delivery
of a promissory note in the principal amount of $7 million, payable over seven
years commencing on January 1, 1999, bearing interest at the per annum rate of
6%, and payable in semi-annual installments commencing July 1, 1997. The
promissory note was repaid in full on March 20, 1998 in anticipation of the
sale of Chartwell as described below.
As a result of the sale of Chartwell to Whitehall Street Real Estate
Limited Partnership IX on March 25, 1998, Mr. Edelman is no longer affiliated
with Chartwell or the successor to Chartwell.
In 1996, HFS and affiliates of Chartwell entered into master license
relationships with respect to the Travelodge brands in Mexico under which such
affiliates assumed responsibility for providing services to the Mexican
franchisees other than reservation services, which will continue to be provided
by the
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Company. The Company will receive royalties and fees for providing certain
marketing and reservation services under the master license agreements. Rio
Grande Associates LLC (with which Mr. Edelman is affiliated) replaced Chartwell
under the foregoing agreements in connection with the sale of Chartwell on
March 25, 1998.
RELATIONSHIP WITH AVIS RENT A CAR, INC.
Upon entering into a definitive merger agreement to acquire Avis, Inc. in
July 1996, HFS (the Company's predecessor) announced its strategy to dilute its
interest in Avis's ("Avis") car rental operations while retaining assets
associated with the franchise business, including trademarks, reservation
system assets and franchise agreements. In September 1997, HFS completed an
initial public offering ("IPO") of Avis Rent A Car, Inc. ("ARAC"), the company
that operated the car rental operations of Avis, which diluted the Company's
equity interest in such subsidiary to approximately 27.5%. The Company received
no proceeds from the IPO. However, the Company licenses the Avis trademark to
ARAC pursuant to a 50-year master license agreement and receives royalty fees
based upon 4% of ARAC revenue, escalating to 4.5% of ARAC revenue over a 5-year
period. In addition, the Company operates the telecommunications and computer
processing system which services ARAC for reservations, rental agreement
processing, accounting and fleet control for which the Company charges ARAC at
cost. Messrs. Monaco, Holmes, Coleman and Edelman currently serve on the Board
of Directors of ARAC. On March 23, 1998, the Company sold 1,000,000 shares of
ARAC which reduced the Company's equity interest to 20.4%. On January 15, 1999,
the Company sold 1.3 million shares of ARAC to ARAC for $24.25 per share or an
aggregate of $31,525,000 which reduced the Company's equity interest in ARAC to
approximately 20%.
RELATIONSHIP WITH NRT
Formation/Status. NRT Incorporated ("NRT") was incorporated in August 1997
by Apollo Management, L.P. ("Apollo") and the Company. Concurrent with its
formation, NRT acquired the real estate brokerage business and operations of
National Realty Trust (the "Trust") which included the brokerage offices
formerly owned by Coldwell Banker Corporation. In connection with the formation
of NRT, the Company acquired $182.0 million of preferred stock of NRT.
On February 10, 1999, NRT filed a registration statement on Form S-1 with
the Securities and Exchanged Commission to register up to $225 million in
common stock in an initial public offering. The shares to be sold in the
proposed offering are comprised of newly issued shares and shares owned by
Apollo. The underwriters in the offering have an overallotment option to
purchase shares of NRT owned by the Company. The Company has agreed to sell 753
shares of preferred stock of NRT to NRT in the second quarter of 1999 for
approximately $10.7 million.
Franchisee Status. NRT is the largest franchisee, based on gross
commission income, for each of the Company's real estate franchise systems.
NRT's status as a franchisee is governed by franchise agreements (the
"Franchise Agreements") with wholly owned subsidiaries of the Company (the
"Real Estate Franchisors") pursuant to which NRT has the non-exclusive right to
operate as part of the COLDWELL BANKER (Registered Trademark) , ERA (Registered
Trademark) and CENTURY 21 (Registered Trademark) real estate franchise
systems at locations specified in the Franchise Agreements. In February 1999,
NRT entered into new fifty-year franchise agreements with the Real Estate
Franchisors. During 1996 (from May 31, 1996), 1997 and 1998, NRT paid an
aggregate of approximately $24 million, $60 million and $121 million,
respectively, in franchise royalties to the Company.
Acquisition Arrangements. The Company has an agreement with NRT that
reduces NRT's effective purchase price for brokerage acquisitions in which the
Company agrees to participate. In such brokerage acquisitions, the Company
purchases the tradenames, trademarked operating names and, in some cases,
mortgage operations of the brokerages being acquired by NRT, thereby paying a
substantial portion of the total purchase price that otherwise would be payable
by NRT. All other assets of the acquired brokerage are purchased by NRT.
Through December 31, 1998, with the exception of the Trust, the assets of which
were purchased solely with NRT's funds, the Company has provided between 12%
and 90% of the total purchase price for each of the Company's brokerage
acquisitions involving a total purchase price in excess
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of $1 million, and has provided an average of 66% of the total purchase price
for all of NRT's brokerage acquisitions. At the time of NRT's formation, the
Company committed to provide up to approximately $446 million in connection
with NRT's brokerage acquisitions, of which approximately $446 million had been
provided through December 31, 1998. In February 1999, the Company increased its
commitment by up to $1 billion as follows: $500 million is immediately
available and the next $500 million will become available upon the later to
occur of (i) February 9, 2004 and (ii) such time as the first $500 million has
been paid in connection with brokerage acquisitions. As with all of NRT's
existing brokerage offices, all future acquired offices are required to be
operated under the COLDWELL BANKER (Registered Trademark) , ERA (Registered
Trademark) or CENTURY 21 (Registered Trademark) brand name.
The Company acquired $216.1 million of certain intangible assets including
trademarks associated with real estate brokerage firms acquired by NRT in 1997.
Through December 31, 1998, the Company participated in each of NRT's 28
acquisitions of multi-office brokerages and 36 acquisitions of single-office
brokerages. Through December 31, 1998, the Company has paid NRT or the seller
an aggregate of approximately $446 million, and NRT has paid an aggregate of
$227.4 million, in such transactions.
In connection with the amendments to the acquisition arrangements, the
Company and NRT entered into an acquisition services agreement pursuant to
which the Company made an upfront payment of $30 million to NRT for services to
be provided by NRT to the Company related to the identification of potential
acquisition candidates, the negotiation of agreements and other services in
connection with future brokerage acquisitions by NRT. Such fee is refundable in
the event the services are not provided.
Lease Agreements. NRT leases from the Company an aggregate of
approximately 42,500 square feet of office space for its offices in Parsippany,
New Jersey and Mission Viejo, California pursuant to two leases dated August
11, 1997 (the "Leases"). Each Lease has an initial term of five years
commencing on September 1, 1997, with an option exercisable by NRT to extend
the term thereof for an additional five years upon 30 days' written notice to
the Company. Under the Leases, the Company is responsible for property taxes,
maintenance and insurance as well as various ancillary services. Rent is
payable under each Lease at a rate equal to the Company's total annual actual
costs of operating the leased premises. In addition, under each Lease, NRT is
permitted to amend the lease to increase or reduce the square footage of the
premises as needed and as space becomes available, provided that NRT gives 60
days' advance notice to the Company of its intent to do so and the rental
amount is adjusted accordingly. Each Lease is terminable by either party, with
or without cause, upon 180 days' written notice to the other party. During 1997
and 1998, an aggregate of $529,000 and $853,000, respectively, was paid by NRT
to the Company under the Leases.
The Company is currently negotiating a new lease with NRT for space
located at 339 Jefferson Road in Parsippany, New Jersey.
Marketing Agreement. NRT and Cendant Mortgage Corporation ("Cendant
Mortgage") are parties to a Marketing Agreement (the "Marketing Agreement"),
pursuant to which NRT has agreed to assist Cendant Mortgage in the marketing of
its various mortgage programs and products through NRT's real estate brokerage
offices. Cendant Mortgage is required to pay NRT a marketing fee each quarter
based on NRT's total number of closed real estate transactions and the average
sales price of homes sold by NRT during such quarter. The term of the Marketing
Agreement is 40 years unless earlier terminated by Cendant Mortgage with or
without cause or, at NRT's option, in the event of Cendant Mortgage's material
breach or if a nationwide third party provider of mortgage services meeting
certain conditions offers NRT a comparable marketing arrangement and Cendant
Mortgage declines to match the economic terms. During the term of the Marketing
Agreement, NRT may not enter into any similar arrangement with another party.
During 1997, over the four-month period in which the Marketing Agreement was in
effect, an aggregate of $699,000 was paid to NRT under the Marketing Agreement.
During 1998, an aggregate of $11,183,000 was paid to NRT under the Marketing
Agreement.
The Company expects to replace the Marketing Agreement in 1999 with a
joint venture between Cendant Mortgage and NRT, which will provide the services
currently provided by Cendant Mortgage.
Relocation Management. NRT has an arrangement with Cendant Mobility
Services Corporation, a wholly owned subsidiary of the Company ("Cendant
Mobility"), pursuant to which NRT provides its
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brokerage services to relocating employees of the clients of Cendant Mobility,
which are typically large corporations and governmental agencies. Pursuant to
such arrangement, when receiving a referral from Cendant Mobility, NRT receives
a commission on the purchase or sale of the property but is obligated to pay
Cendant Mobility a portion of such commission as a referral fee. During 1997
and 1998, NRT paid an aggregate $6,435,000 and $11,631,000, respectively, in
referral fees to Cendant Mobility. The arrangement with NRT is not embodied in
a written agreement and, accordingly, may be subject to termination or
modification at any time.
Support Agreement. NRT and the Company are parties to a Support Agreement,
dated as of August 11, 1997 (the "Support Agreement"), pursuant to which the
Company has agreed to furnish NRT with certain computer and data related
information services. In consideration of the provision of such services, NRT
has agreed to reimburse the Company directly for certain actual costs incurred
by the Company on behalf of NRT. In addition, NRT was required to pay the
Company a monthly fee of $77,500 during 1997 and is required to pay a monthly
fee of $41,667 during 1998 and $12,500 during 1999. During 1997 and 1998, an
aggregate of $1,448,000 and $1,422,000, respectively, was paid to the Company
under the Support Agreement. The Support Agreement terminates on December 31,
1999, unless earlier terminated by either party.
Development Advance. On January 14, 1997, the Company made an advance of
$20 million (the "Development Advance") to the Trust and one of its
subsidiaries. The Development Advance was assumed by NRT in August 1997, at
which time the term of the Development Advance was amended from 10 years to 40
years. Under the terms of the Development Advance, so long as there is no
material default under any of the Franchise Agreements and NRT maintains
certain levels of gross commissions income, 1/480th of the principal amount of
the Development Advance will be forgiven on a monthly basis over a 40-year
period.
Other. In addition to the above-mentioned agreements, NRT is party to
various other agreements and arrangements with the Company and its affiliates,
including an outsourcing agreement pursuant to which the Company acts as NRT's
exclusive agent in negotiating arrangements on behalf of NRT with third party
service and product providers, a stockholders agreement relating to the voting,
transfer and registration of shares of NRT's capital stock owned by Apollo and
the Company and certain other agreements and arrangements. Pursuant to these
agreements and arrangements, the Company, among other things, provides services
to NRT and receives revenues, directly or indirectly, in respect thereof.
Messrs. Katz, Johnson and Richard A. Smith serve on the Board of Directors
of NRT. Mr. Monaco resigned from the Board of Directors during 1998 and was
replaced by Mr. Johnson.
OTHER RELATIONSHIPS
Mr. Edelman is of counsel to Battle Fowler, a New York City law firm.
Battle Fowler represented HFS (the Company's predecessor) in certain
transactions in 1998. It is expected that Battle Fowler will continue to
represent the Company in connection with certain matters from time to time in
the future.
Mr. Edelman is also a partner in Chartwell Hotels Associates ("Chartwell
Hotels"), a general partnership affiliated with the Fisher Brothers and Gordon
Getty, and its affiliate Chequers Investment Associates, which have acquired
certain hotels and mortgages secured by hotels from the Resolution Trust
Corporation. In two transactions with Chartwell Hotels, entered into in
November 1992 and May 1993, and each amended in December 1994, which have
resulted in and will result in the addition of properties to the Company's
franchise systems, the Company has advanced approximately $10 million, and has
agreed to advance up to an additional $4 million if certain additional property
conversions and other requirements are met, in return for Chartwell Hotels
agreeing to franchise the properties with one of the Company's brands. All
Chartwell Hotels properties will pay royalties once they become part of the
Company's franchise systems and these royalties will be credited toward the
recovery of the advance. Certain properties which cannot be converted to
Company brands will also pay a percentage of gross room sales in lieu of
royalties as specified in the agreements. Each advance is required to be fully
recovered over a maximum five year period following the advance. In addition,
as individual properties
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convert to Company brands, the Company will make additional advances to the
franchisee of such properties to fund costs incurred in connection with such
conversion. Such advances are required to be repaid with interest by the
franchisee over a three year period and such repayment has been guaranteed by
Chartwell Hotels.
On March 31, 1995, the Company acquired a 1% general partnership interest
in a limited partnership which develops, promotes and franchises the Wingate
Inn franchise system, a new construction hotel brand. Through December 31,
1995, an additional $15 million of capital was invested in the partnership
through a private placement of limited partnership unit interests, which units
were sold for $50,000 each. The Company had an option to acquire the limited
partner investment at a 30% compounded annual rate of return plus additional
outstanding capital loans and an additional call premium equal to approximately
1.5 times annual royalty revenue, as defined. The Company also agreed to
finance additional limited partner capital contributions up to $60 million at
the prime lending rate, upon the occurrence of certain events, including the
addition of open and operating Wingate Inn properties. Certain executives of
the Company purchased limited partnership units, as follows: Messrs. Silverman,
Pittman and Snodgrass, 10 units each; and Messrs. Buckman and Holmes, 2 units
each and Mr. Smith, 1 unit. In addition, the Company had agreed to guarantee up
to $36 million of borrowings by a subsidiary of the Partnership, which
borrowings were to be used to provide financing for franchises to develop
Wingate Inn facilities. The Company exercised its option to acquire the limited
partnership interests on April 1, 1998 for approximately $114,750 per unit.
In April 1995, the Company and Ramada Franchise Systems, Inc. ("RFS"), a
wholly-owned subsidiary of the Company ("RFS"), entered into a license
agreement with Preferred Equities Corporation ("PEC"), the owner, developer and
operator of interval ownership resort facilities, pursuant to which PEC was
licensed to use certain Ramada servicemarks in connection with its facilities
in the United States. PEC has paid RFS $1 million in initial fees and will pay
a percentage of Gross Sales (as defined) of interval ownership interests during
the term of the agreement. Mr. Nederlander is the Chairman and a significant
shareholder of MEGO Financial Corp., of which PEC is a wholly-owned subsidiary.
The Company entered into an agreement with PEC during the second quarter of
1998 whereby RCI Travel, Inc. a subsidiary of the Company, will provide
corporate and leisure travel services to PEC, including its owners, members and
employees in exchange for fees payable by PEC to the Company.
As part of Mr. Snodgrass's former employment agreement with HFS, the
Company arranged to make available to Mr. Snodgrass a one-quarter interest in a
Hawker 1000 aircraft. On October 1, 1998, Mr. Snodgrass exercised his right to
purchase such interest from the Company for approximately $702,000 in cash
through the purchase of a wholly owned subsidiary of the Company whose sole
asset was such interest.
Mr. Rosenwald serves as Vice Chairman of The Bear Stearns Companies, Inc.,
an investment banking firm. During 1998, The Bear Stearns Companies, Inc.
provided underwriting and advisory services to the Company.
Mr. Pittman is the President and Chief Operating Officer of American
Online, Inc. ("AOL"). Century 21 Real Estate Corporation, an indirect
wholly-owned subsidiary of the Company, is party to an agreement with AOL
pursuant to which the National Advertising Fund for the CENTURY 21 System is
committed to pay a $1,000,000 annual advertising fee to AOL for a period of
five years relating to exclusive advertising rights for the CENTURY 21 System
and for the CENTURY 21 Communitiessm Website on the AOL network. AOL also
serves as the exclusive on-line home of the CENTURY 21 System intranet site,
Century 21 Online (Registered Trademark) . It is expected that AOL and the
Company and its subsidiaries will enter into advertising arrangements and
internet marketing arrangements from time to time in the ordinary course of
business in the future.
On June 3, 1997, the Company entered into a Master Marketing Agreement
with AOL pursuant to which the Company markets its Netmarket (Registered
Trademark) online product and its automobile, shopping, travel and
information/privacy individual membership programs through prominent placement
and promotions on the AOL online services and AOL's Internet website, and also
markets these products to AOL subscribers through various other marketing
mechanisms, including inbound telemarketing, outbound telemarketing and direct
mail. Pursuant to such agreement, the Company makes commission payments to AOL
with
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respect to membership fees and certain other transaction related revenue
received by the Company under this arrangement. The Company made an initial
payment to AOL of $45 million upon execution of the agreement, which will
primarily be credited against future membership commissions payable by the
Company to AOL under such agreement. The Company made payments to AOL in the
total amount of $7,434,819 during 1998.
In connection with the Company's acquisition of PHH Corporation in 1997,
the Company entered into a Noncompetition Agreement with Robert D. Kunisch. The
Noncompetition Agreement generally provided that Mr. Kunisch could not,
directly or indirectly, engage in any activities or be connected to any entity
which is in competition with the then current businesses of the Company or PHH
Corporation, or solicit any employee or customer of the Company or PHH
Corporation in each case during the six year period following such acquisition.
During 1998, in connection with the Company's merger with CUC, the Company had
overlapping executive relationships between continuing key executives of the
Company and key client executives. As a result, the Noncompetition Agreement
became impaired and was terminated in connection with the Merger. The Company
paid $10,744,420 to Mr. Kunisch on January 30, 1998 in satisfaction of its
obligations under the Noncompetition Agreement. Mr. Kunisch continues to be
bound by the Company's policies governing officers and directors regarding
conflicts of interest, confidentiality and noncompetition.
CLAIMS OF CERTAIN CURRENT AND FORMER OFFICERS AND DIRECTORS OF THE COMPANY AND
HFS
In connection with the Merger, certain officers and directors of HFS
exchanged their shares of HFS common stock and options exercisable for HFS
common stock for shares of the Company's Common Stock and options exercisable
for the Company's Common Stock, respectively. As a result of the Accounting
Issues, such officers and directors (some of whom are officers and directors of
the Company) have advised the Company that they believe they have claims
against the Company in connection with such exchange. In addition, certain
current and former officers and directors of the Company would consider
themselves to be members of any class ultimately certified in the federal
securities actions now pending in which the Company is named as a defendant by
virtue of their having been HFS stockholders at the time of the Merger.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and
the New York Stock Exchange. Officers, directors and greater than ten percent
owners are required to furnish the Company with copies of all Forms 3, 4 and 5
they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for a specified fiscal year, except as set
forth below, the Company believes that all its officers, directors, and greater
than ten percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during 1998.
On March 4, 1998, the New Directors filed an amendment to their Forms 3
correcting a typographical error in the exercise price of certain option
grants. On March 4, 1998, Ken Williams, a former director of the Company, filed
a Form 5, which was late. On January 9, 1998, Mr. Snodgrass filed an amendment
to Form 3 correcting a typographical error in his share holdings. On March 31,
1998, Mr. Kunisch filed an amendment to a Form 4 correcting a typographical
error in his share holdings. On April 8, 1998, Mr. Burnap, a former director of
the Company, filed a Form 4 correcting certain arithmetic errors in prior
filings. On May 8, 1998, Burton Perfit, a former director of the Company filed
a Form 4, which was late, relating to a purchase of the Company's FELINE
PRIDES. On December 9, 1998, Mr. Snodgrass filed an amended Form 4 correcting a
typographical error in the balance of Common Stock owned by him.
RATIFICATION OF APPOINTMENT OF AUDITORS
[PROPOSAL NO. 2]
Deloitte & Touche LLP has been appointed by the Board of Directors as the
auditors for the Company's financial statements for 1999. A representative of
Deloitte & Touche LLP is expected to be
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present at the Meeting and will have the opportunity to make a statement if he
desires to do so and will be available to respond to appropriate questions of
stockholders.
On January 20, 1998, in connection with the Company's previously announced
plan to name a successor independent accountant following the Merger with HFS
Incorporated, the Company engaged Deloitte & Touche LLP, the auditor of HFS
Incorporated prior to the Merger, as its new principal independent accountants.
Ernst & Young LLP, the Company's former principal independent accountants,
reported on the results of operations of the Company's former CUC businesses
for the year ended December 31, 1997. The reports of Ernst & Young LLP on the
financial statements for the past two fiscal years of the Company contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. The Audit Committee of
the Company's Board of Directors participated in and approved the decision to
change independent accountants. In connection with its audit for the two most
recent fiscal years and through May 11, 1998, there were no disagreements with
Ernst & Young LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Ernst & Young LLP would
have caused Ernst & Young LLP to make reference thereto in their report on the
financial statements for such years. During the two most recent fiscal years
and through May 11, 1998, there were no reportable events, as that term is
defined in Item 304 (a)(1)(v) of Regulation S-K. However, as previously
reported, the Audit Committee of the Board of Directors of the Company
conducted an investigation into accounting irregularities at former CUC
business units which were audited by Ernst & Young LLP. The results of such
investigation required a restatement of previously reported financial
statements of the Company. Such investigation may result in disagreements by
the Company with Ernst & Young LLP in the future with respect to previously
reported financial statements of the Company which were audited by Ernst &
Young LLP. The Company requested that Ernst & Young LLP furnish it with letters
addressed to the Commission stating whether or not it agrees with the above
statements. A copy of a letter, dated January 22, 1998, is filed as Exhibit 16
to the Company's Current Report Form 8-K dated January 22, 1998. A copy of a
letter, dated May 15, 1998, is filed as Exhibit 16 to the Company's Current
Report on Form 8-K, dated May 18, 1998.
During the two most recent fiscal years and through January 20, 1998, the
Company has not consulted with Deloitte & Touche LLP regarding either:
(i) the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on the Company's financial statements, and neither a written report
was provided to the registrant nor oral advice was provided that Deloitte &
Touche LLP concluded was an important factor considered by the Company in
reaching a decision as to the accounting, auditing or financial reporting
issue; or
(ii) any matter that was either the subject of a disagreement, as the term
is defined in Item 304 (a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that term
is defined in Item 304 (a)(1)(v) of Regulation S-K.
Although stockholder action on this matter is not required, the
appointment of Deloitte & Touche LLP is being recommended to the stockholders
for ratification. Pursuant to applicable Delaware law, the ratification of the
appointment of auditors of the Company requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or represented by
proxy and entitled to vote at the Meeting. Abstentions and broker non-votes
will be counted and will have the same effect as a vote against this proposal.
THE BOARD OF DIRECTORS UNAMIMOUSLY RECOMMENDS THAT
YOU VOTE FOR THIS PROPOSAL.
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APPROVAL OF BY-LAW AMENDMENTS
[PROPOSAL NO. 3]
On March 12, 1999, the Board approved a resolution to submit proposed
amendments to Article V, Sections 1(a), 1(d), 3(d) and 4 of the By-Laws to the
stockholders for approval. The relevant provisions of Article V, Section 1(a)
provide for the Executive Committee of the Board to nominate certain persons
nominated by the former CUC Directors (the "CUC Directors") at the time of the
merger of CUC and HFS in December 1997 as Directors of the Company until such
time as all claims and causes of actions relating to the Accounting Issues have
been settled, adjudicated or otherwise disposed of. Article V, Section 1(d)
established a Litigation Committee comprised of two CUC Directors and two
Directors formerly associated with HFS Incorporated to make certain decisions
relating to litigation by or on behalf of the Company against former Directors
of the Company arising from the Accounting Issues. Article V, Section 3(d)
provides for the Board to appoint an equal number of such CUC Directors as other
Directors to the Litigation Committee thereby requiring the consent of a CUC
Director to initiate certain legal proceedings by the Company against former
Directors arising from the Accounting Issues. Article V, Section 4 specifies the
actions required to amend the aforementioned provisions of the By-Laws.
THE PROPOSAL
The Board of Directors recommends that the Company's stockholders vote in
favor of the amendments to eliminate the provisions of the By-Laws which
provide for: (i) the Executive Committee of the Board of Directors to nominate
the CUC Directors as members of the Board until such time as all claims and
causes of action relating to the Accounting Issues have been settled,
adjudicated or otherwise finally disposed of; (ii) the Litigation Committee;
(iii) appointment of the CUC Directors to the Litigation Committee; and (iv)
the approval standards necessary to amend the foregoing provisions of the
By-Laws. The By-Law Amendments are set forth on Appendix A hereto with
deletions indicated by strike-out.
REASONS FOR THE AMENDMENTS
The Board of Directors has recommended the proposed By-Law Amendments
because the provisions serve no benefit to the Company and may unduly restrict
the Board's ability to nominate Directors and to initiate appropriate legal
proceedings, if warranted, against former Directors of the Company relating to
the Accounting Issues. The By-Law provisions proposed to be eliminated were
added to the By-Laws in July 1998 in connection with the former Directors of
the Company formerly associated with CUC (the "Former CUC Directors") agreeing
to approve the separation from the Company of Walter A. Forbes, former Chairman
of the Board of CUC and the Company, and in connection with the resignation of
the Former CUC Directors who resigned from the Board in July 1998. The Board no
longer believes that such provisions are in the best interests of the Company
and its stockholders.
The By-Laws currently provide that the Litigation Committee has the full
and exclusive power and authority to: (i) determine whether pending or
threatened shareholder derivative actions arising from the Accounting Issues
are or would be in the best interest of the Company; and (ii) initiate,
maintain or settle on behalf of the Company any direct actions by the Company
against any present or former Directors (whether sued as a director or an
officer) arising from the Accounting Issues. In addition, actions of the
Litigation Committee require the affirmative vote of a majority of its members
and, unless a majority of the Litigation Committee votes to support or permit
(by taking a position of neutrality) the continuation and/or prosecution of a
derivative lawsuit by a shareholder, the Litigation Committee will be deemed to
have voted that the prosecution or continuation of such pending or threatened
stockholder derivative action is not in the best interests of the Company.
Since CUC Directors must comprise half of the members of the Litigation
Committee under the current By-Laws, the approval (or the taking of a position
of neutrality) of at least one of the CUC Directors is required for Litigation
Committee action. The Board believes that decisions delegated to the Litigation
Committee would be more appropriately made by a majority vote of the Board. The
Board also believes that decisions concerning the nomination of Directors
should not be constricted in the manner provided by the By-Law provisions
proposed to be eliminated by the By-Law Amendments and that it is inappropriate
to be required to continue to nominate the CUC Directors to the Board for an
indefinite period of time in order to comply with the foregoing provisions of
the By-Laws.
FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR THIS PROPOSAL.
Article V, Section 4 of the By-Laws states that the affirmative vote of
80% of the shares of Common Stock entitled to vote in the election of Directors
(the "80% Vote Requirement") is necessary for
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stockholders to approve the By-Law Amendments. Based on advise of counsel, the
Company believes that the 80% Vote Requirement is invalid and unenforceable
under Delaware law, as the 80% Vote Requirement limits the power of the
Company's stockholders to adopt, amend or repeal the By-Laws in contravention
of the rights of stockholders under Delaware Law. While the Company is
soliciting approval of the By-Law Amendments pursuant to the 80% Vote
Requirement, if a majority of the outstanding shares present in person or
represented by proxy and entitled to vote at the Meeting approves the By-Law
Amendments, but the 80% Vote Requirement is not satisfied, the Company intends
to treat the By-Law Amendments as having been validly approved and adopted in
accordance with Delaware law. Under applicable Delaware law, in determining
whether such proposal has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and will have the same effect
as a vote against the proposal.
STOCKHOLDER PROPOSAL
CONCERNING DECLASSIFICATION OF BOARD OF DIRECTORS
[PROPOSAL NO. 4]
The following proposal, NOT recommended by the Board of Directors, has
been submitted for inclusion in the proxy statement and action at the annual
meeting by the Amalgamated Bank of New York, LongView Collective Investment
Fund, located at 11-15 Union Square, New York, New York 10003:
"RESOLVED: The stockholders of Cendant Corporation request that the Board
of Directors take the necessary steps in accordance with Delaware law to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be carved out in a manner that does not
affect the unexpired terms of directors previously elected."
SUPPORTING STATEMENT SUBMITTED BY STOCKHOLDER
The election of directors is the primary avenue for shareholders to
influence corporate governance policies and to hold management accountable
for its implementation of those policies. We believe that classification of
the board to directors, which results in only a portion of the board being
elected annually, is not in the best interests of our Company and its
stockholders.
We therefore urge our fellow shareholders to support declassification of
the Company's board of directors, which is divided into three classes with
one-third of the directors elected annually to three-year terms.
Eliminating this classification system would require each director to stand
for election annually and would give shareholders an opportunity to
register their views on the performance of the board collectively and each
director individually.
We believe that electing directors in this manner is one of the best
methods available to shareholder to ensure that the Company will be managed
in a manner that is in the best interest of stockholders.
We believe that this step is warranted as a matter of sound corporate
governance. We also deem it appropriate in light of the significant loss of
value that Cendant shareholders have suffered, with the Company's stock
price roughly half the level it was at its peak in early 1998.
A number of companies have declassified boards. We regard as unfounded
the concern expressed by some that the annual election of all directors
could leave companies without experienced directors in the event that all
incumbents are voted out by stockholders. In the unlikely event that
stockholders do vote to replace all incumbent directors and reflect the
need for change.
"WE URGE YOU TO VOTE FOR THIS RESOLUTION!"
RECOMMENDATION OF BOARD OF DIRECTORS ON STOCKHOLDER PROPOSAL 4
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST THIS STOCKHOLDER PROPOSAL.
In connection with the merger of CUC and HFS, as approved by the
stockholders of the constituent companies, it was determined to divide the
Board of Directors into three classes with the number of
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directors in each class being as nearly equal as possible. Each director serves
a three year term and directors for one of the three classes are elected each
year. Similar procedures for this staggered election approval have been adopted
by many major corporations and, in fact, more than half of the other Fortune
500 companies provide for the election of their directors in this manner.
The Board of Directors plays an important role in overseeing the direction
of the Company. The staggered election of directors is intended to provide
continuity of experienced directors on the Board and prevent a precipitous
change in the composition of the Board. With staggered elections, at least two
annual stockholder meetings would be required to effect a change in control of
the Board of Directors. One benefit derived from that situation is an
enhancement of management's ability to negotiate in the best interest of all
the stockholders with a person seeking to gain control of the Company. A
further benefit is the assurance of continuity and stability in the management
of the business and affairs of the Company since a majority of the directors
will always have prior experience as directors of the Company. The diverse
nature of the Company's businesses necessitates Directors serve on the Board of
Directors for a number of years in order to better understand the prospects and
to become acquainted with the various elements of the Company's businesses. The
Board believes this experience and continuity is critical to ensure that
stockholders have knowledgeable oversight provided by their elected directors.
Elimination of the classified board, in accordance with the Certificate of
Incorporation, would require stockholder approval of a Board proposal to amend
the Certificate to elect directors on an annual basis. Passage would require
that 75% of the shares outstanding be voted in favor of the resolution.
FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST THE STOCKHOLDER PROPOSAL IN ITEM 3.
Approval of this stockholder proposal will require the affirmative vote of
a majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Meeting. Under applicable Delaware law, in determining
whether such proposal has received the requisite number of affirmative votes,
absentions will be counted and will have the same effect as a vote against the
proposal; broker non-votes will be disregarded and will have no effect on the
outcome of the vote.
STOCKHOLDER PROPOSALS
Proposals received from stockholders are given careful consideration by
the Company in accordance with Rule 14a-8 under the Exchange Act. Stockholder
proposals are eligible for consideration for inclusion in the proxy statement
for the Year 2000 Annual Meeting if they are received by the Company on or
before December 22, 1999. Any proposal should be directed to the attention of
the Secretary, Cendant Corporation, 6 Sylvan Way, Parsippany, New Jersey 07054.
In order for a shareholder proposal submitted outside of Rule 14a-8 to be
considered "timely" within the meaning of Rule 14a-4(c) such proposal must be
received by the Company on or prior to March 28, 2000 and in order for a
proposal to be timely under the Company's By-Laws it must be received on or
prior to March 28, 2000 but no earlier than February 27, 2000.
By Order of the Board of Directors
/s/ JEANNE M. MURPHY
--------------------
JEANNE M. MURPHY
Secretary
Dated: March 31, 1999
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APPENDIX A
BY-LAW AMENDMENTS
ARTICLE V.
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. DESIGNATION.
The Board of Directors of the Corporation shall have the following
committees:
a) An Executive Committee consisting of not less than three Directors may
be elected by a majority vote of the Board to serve until the Board shall
otherwise determine. The Executive Committee shall have and may exercise all of
the powers of the Board of Directors when the Board is not in session, including
the power to authorize the issuance of stock, except that the Executive
Committee shall have no power to (i) alter, amend or repeal these By-Laws or any
resolution or resolutions of the Board of Directors; (ii) declare any dividend
or make any other distribution to the stockholders of the Corporation; (iii)
appoint any member of the Executive Committee; or (iv) take any other action
which legally may be taken only by the Board. The Executive Committee shall also
act as the nominating committee, nominating persons for election as Directors.
[Strike-out begins] Subject to the classification of Directors provided for
under Section 1 of Article III and until such time as all claims and causes of
actions relating to the Accounting Issues (as defined in Section 1(d) of this
Article V) have been settled, adjudicated or otherwise disposed of pursuant to a
final determination that is no longer subject to appeal or review, (x) the
Executive Committee shall nominate for election as Directors Craig R. Stapleton
and Robert P. Rittereiser or such alternate candidates as designated by Messrs.
Stapleton and Rittereiser who are not reasonably objected to by the Executive
Committee (collectively, the "CUC Directors") and (y) in the event that any one
or more of Mr. Stapleton, Mr. Rittereiser or Carole Hankin are not elected,
resign or are removed as Directors, then the Board will replace that
individual(s) with an alternate Director as designated by the remaining
individuals specified above who are not reasonably objected to by the Board. In
addition, the Executive Committee shall nominate Carole Hankin for election as a
Director at the Corporation's 1998 Annual Meeting of Stockholders for a term of
three years. [Strike-out ends] The Chairman of the Board will also serve as
Chairman of the Executive Committee. Each resolution of the Executive Committee
will require approval by a majority of the members of such Committee.
b) A Compensation Committee consisting of not less than three Directors
may be elected by a majority vote of the Board to serve until the Board shall
otherwise determine. The Compensation Committee will have the following powers
and authority: (i) determining and fixing the compensation for all senior
officers of the Corporation and those of its subsidiaries that the Compensation
Committee shall from time to time consider appropriate, as well as all
employees of the Corporation and its subsidiaries compensated at a rate in
excess of such amount per annum as may be fixed or determined from time to time
by the Board; (ii) performing the duties of the committees of the Board
provided for in any present or future stock option, incentive compensation or
employee benefit plan of the Corporation or, if the Compensation Committee
shall so determine, any such plan of any subsidiary; and (iii) reviewing the
operations of and policies pertaining to any present or future stock option,
incentive compensation or employee benefit plan of the Corporation or any
subsidiary that the Compensation Committee shall from time to time consider
appropriate. Each resolution of the Compensation Committee will require
approval by a majority of the members of such committee.
c) An Audit Committee consisting of not less than four Directors may be
elected by a majority vote of the Board to serve until the Board shall
otherwise determine. The Audit Committee will have the following powers and
authority: (i) employing independent public accountants to audit the books of
account, accounting procedures, and financial statements of the Corporation and
to perform such other duties from time to time as the Audit Committee may
prescribe; (ii) receiving the reports and comments of the Corporation's
internal auditors and of the independent public accountants employed by the
Audit
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Committee and to take such action with respect thereto as may seem appropriate;
(iii) requesting the Corporation's consolidated subsidiaries and affiliated
companies to employ independent public accountants to audit their respective
books of account, accounting procedures, and financial statements; (iv)
requesting the independent public accountants to furnish to the Compensation
Committee the certifications required under any present or future stock option,
incentive compensation or employee benefit plan of the Corporation; (v)
reviewing the adequacy of internal financial controls; (vi) approving the
accounting principles employed in financial reporting; (vii) approving the
appointment or removal of the Corporation's general auditor; and (viii)
reviewing the accounting principles employed in financial reporting. Each
resolution of the Audit Committee will require approval by a majority of the
members of such committee. Notwithstanding the foregoing, there will be no
changes in the composition of the Audit Committee prior to the date of the
adoption of a resolution of the Audit Committee approving its final report
concerning the Accounting Issues (as defined in Section 1(d)).
d) [Strike-out begins] A Litigation Committee shall consist of no more than
four Directors as determined by a majority vote of the Board, subject to the
provisions of Section 3(d) of this Article V. The Litigation Committee will have
(i) full and exclusive power and authority to determine whether the prosecution
of any pending or threatened stockholder derivative actions arising from or
related to the accounting issues at CUC International Inc. businesses as
disclosed by the Corporation in a press release dated July 14, 1998 or as are
being investigated by the Audit Committee as of July 28, 1998 (the "Accounting
Issues") are or would be in the best interests of the Corporation; and (ii) full
and exclusive power and authority to initiate, maintain or settle on behalf of
the Corporation any direct action by the Corporation against any present or
former Director (whether sued as a director or as an officer) arising from or
related to the Accounting Issues. Each resolution of the Litigation Committee
will require approval by a majority of the entire committee; provided that, in
the event that only two members of the Litigation Committee (or one member in
the event the size of the Committee shall have been reduced to two) (such
members, the "Approving Members") shall have voted to approve and authorize a
settlement of an action contemplated by clause (ii) above against any defendant
or defendants, independent legal counsel mutually acceptable to the Approving
Members, on the one hand, and the other member(s) of the Litigation Committee,
on the other hand, shall be appointed to determine whether such settlement shall
be approved and such counsel's determination shall be binding upon the
Litigation Committee. Unless a majority of the Litigation Committee votes to
support or permit (by taking a position of neutrality) the continuation and/or
prosecution of a derivative lawsuit by a shareholder, the Litigation Committee
will be deemed to have voted that the prosecution or continuation of such
pending or threatened stockholder derivative action is not in the best interests
of the Corporation. The Litigation Committee shall be authorized to retain
independent counsel. All persons who were Directors on the date of adoption of
the By-Laws embodied in Sections 1(a) and (d) of this Article V shall have the
right to enforce compliance with this By-Law. [Strike-out ends]
SECTION 2. MEETINGS; NOTICE.
Regular meetings of committees shall be held at such times and places as
the Board or the committee in question may from time to time determine. Special
meetings of any committee may be called at any time, at any place and for any
purpose by the Chairman of such committee, the Chairman of the Board, or the
President, or by any officer of the Corporation upon the request of a majority
of the members of such committee. Notice of regular meetings of the committees
need not be given. Notice of every special meeting of any committee shall be
given to each member at his usual place of business, or at such other address
as shall have been furnished by him for the purpose. Such notice shall be given
at least twenty-four hours before the meeting by telephone or by being
personally delivered, mailed, or telegraphed. Such notice need not include a
statement of the business to be transacted at, or the purpose of, any such
meeting.
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SECTION 3. COMMITTEE MEMBERS; BOARD OF DIRECTOR NOMINATIONS.
a) Each member of any committee of the Board shall hold office until such
member's successor is elected and has qualified, unless such member sooner
dies, resigns or is removed.
b) Subject to Section 3(d) of this Article V, the Board may remove a
director from a committee or change the chairmanship of a committee by
resolution adopted by a majority of the Board.
c) Subject to Section 3(d) of this Article V, the Board may designate one
or more Directors as alternate members of any committee to fill any vacancy on
a committee and to fill a vacant chairmanship of a committee, occurring as a
result of a member or chairman leaving the committee, whether through death,
resignation, removal or otherwise. Any such designation may be made or amended
by the affirmative vote of a majority of the Board.
[Strike-out begins]
d) The Board shall designate the members of the Litigation Committee in
accordance with the following: The members of the Litigation Committee shall
consist of an equal number of CUC Directors and directors other than the CUC
Directors (the "Non-CUC Directors"). In the event that a CUC Director serving
on the Litigation Committee shall no longer serve as a member of such
committee, then a Non-CUC Director serving on the Litigation Committee shall
immediately resign as a member of the Litigation Committee and no action shall
be taken by the Litigation Committee prior to the resignation of such Non-CUC
Director. In the event that there is only one CUC Director serving on the
Litigation Committee and such person shall cease serving as a member of such
committee (whether because of resignation, removal or failure to be reelected
as a Director by the stockholders of the Corporation), to the extent consistent
with Delaware law and the Certificate of Incorporation, then such CUC Director
shall be replaced on the Litigation Committee by a person who at the time of
such replacement is a Director designated by Carole G. Hankin and Christopher
K. McLeod or their successors appointed or elected pursuant to Section 1(a) of
this Article V to the extent they are serving as Directors (such person
thereinafter to be deemed a CUC Director). No CUC Director who is a member of
the Litigation Committee may be removed from the Litigation Committee.
[Strike-out ends]
d) From and after August 28, 1998, any new appointees to the Audit
Committee shall be composed solely of independent directors. For this purpose,
an independent director is one who:
(1) has not been employed by the Corporation or an affiliate of the
Corporation in an executive capacity within the last five years;
(2) is not an employee of a company that is one of the Corporation's
paid advisors or consultants;
(3) is not employed by a significant customer or supplier of the
Corporation;
(4) is not remunerated by the Corporation for personal services
(consisting of legal, accounting, investment banking, and management
consulting services) whether or not as an employee of a corporation,
division, or similar organization that actually provides the personal
services, nor is an employee of an entity which derives more than 50
percent of its gross revenues from the Corporation;
(5) is not employed by a tax-exempt organization that receives
significant contributions from the Corporation;
(6) is not a relative of any member of the senior management of the
Corporation;
(7) has no business or financial ties to the Corporation's Chief
Executive Officer or other executive officers or directors other than
relationships with the Corporation; and
(8) is not part of an interlocking directorate in which the Chief
Executive Officer or another executive officer of the Corporation serves on
the board of another corporation that employs the director.
[Strike-out begins]
SECTION 4. AMENDMENTS.
Notwithstanding anything contained in these By-Laws or the Certificate of
Incorporation to the contrary and in addition to any other requirement set
forth herein and therein, until the earlier of July 28,
A-3
<PAGE>
2004 or such time as all litigation relating to the Accounting Issues has been
settled, adjudicated or otherwise disposed of pursuant to a final determination
that is no longer subject to appeal or review, the affirmative vote of a
majority of the Litigation Committee shall be required for the Board to amend,
modify or repeal, or adopt any provision inconsistent with, the provisions of
Section 1 (a), (c) or (d) or 3(d) of this Article V or this Section 4 and the
affirmative vote of the holders of at least 80% of the voting power of all
shares of the Corporation entitled to vote generally in the election of
Directors, voting together as a single class, shall be required for
stockholders to amend, modify or repeal, or adopt any provision inconsistent
with, the provisions of Section 1(a), (c) or (d) or 3(d) of this Article V or
this Section 4.
[Strike-out ends]
A-4
<PAGE>
CENDANT CORPORATION
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Whether or not you plan to attend the Annual Meeting of Stockholders, you can
ensure your shares are represented at the Meeting by promptly completing,
signing and returning your proxy (attached below) to ChaseMellon Shareholder
Services L.L.C., in the enclosed postage-paid envelope. We urge you to return
your proxy as soon as possible. AS AN ALTERNATIVE TO COMPLETING THIS FORM, YOU
MAY ENTER YOUR VOTE INSTRUCTION BY TELEPHONE. CALL TOLL FREE 1-800-840-1208 AND
FOLLOW THE SIMPLE INSTRUCTIONS. Thank you for your attention to this important
matter.
CENDANT CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON MAY 27, 1999
The undersigned stockholder of Cendant Corporation ("Cendant") hereby appoints
Henry R. Silverman, Stephen P. Holmes and James E. Buckman, and each of them
individually, with full power of substitution, attorneys and proxies for the
undersigned and authorizes them to represent and vote, as designated below, all
of the shares of common stock of Cendant ("Cendant Common Stock") which the
undersigned may be entitled, in any capacity, to vote at the Annual Meeting of
Stockholders to be held at the Ramada Inn and Conference Center, 130 Route 10
West, East Hanover, New Jersey 07936, May 27, 1999, at 10:00 a.m. Eastern Time
and at any adjournments or postponements of such meeting, for the following
purposes, and with discretionary authority as to any other matters that may
properly come before the meeting, all in accordance with, and as described in,
the Notice and accompanying Proxy Statement. The undersigned acknowledges
receipt of the Notice of Annual Meeting of Stockholders dated March 31, 1999,
and the accompanying Proxy Statement. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NAMED NOMINEES AND FOR PROPOSALS
2 AND 3 AND AGAINST PROPOSAL 4.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY USING THE ENCLOSED ENVELOPE.)See Reverse Side
<PAGE>
[[X]] PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE.
1. Election Of Directors.
NOMINEES: Robert E. Nederlander, Leonard S. Coleman, Robert F. Smith, Leonard
S. Schutzman and Craig R. Stapleton.
THE BOARD OF DIRECTORS OF CENDANT RECOMMENDS A VOTE FOR THE ELECTION AS
DIRECTORS OF EACH OF THE NOMINEES.
FOR ALL NOMINEES [ ] WITHHELD FOR ALL NOMINEES [ ]
For all nominees, except vote withheld from the following:
2. To ratify and approve the appointment of Deloitte & Touche LLP as the
Company's Independent Auditors for year ending December 31, 1999.
THE BOARD OF DIRECTORS OF CENDANT RECOMMENDS A VOTE FOR PROPOSAL 2.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To approve amendments to the Company's By-Laws.
THE BOARD OF DIRECTORS OF CENDANT RECOMMENDS A VOTE FOR PROPOSAL 3.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Stockholder proposal concerning declassification of Board of Directors.
THE BOARD OF DIRECTORS OF CENDANT RECOMMENDS A VOTE AGAINST PROPOSAL 4.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
I plan to attend the meeting [ ] I have noted an address change or comment
on the reverse side of the card
[ ]
Please sign exactly as name
appears. If signing for trusts,
estates or corporations, capacity
or title should be stated. If
shares are owned jointly, both
owners must sign. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS.
DATED: , 1999
---------------------------------
SIGNATURE(S)
---------------------------------
SIGNATURE IF HELD JOINTLY:
