SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of
the Commission Only
(as permitted by Rule
14a-6(e)(2))
[ ] 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)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
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by registration statement number, or the Form or Schedule and the
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(1) Amount previously paid:
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CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
November , 1999
Dear Stockholder:
You are cordially invited to attend a Special Meeting of stockholders
of Cendant Corporation ("Cendant") to be held at 10:00 a.m., New York Time,
on January 14, 2000, at the Ramada Inn and Conference Center, 130 Route 10
West, East Hanover, New Jersey 07936. At this Special Meeting we will ask
you to consider and approve the Tracking Stock Proposal and a related Stock
Option Plan Proposal, as described in the accompanying Proxy Statement.
The Tracking Stock Proposal will allow us to issue a new series of
common stock ("CompleteHome.com Stock") intended to reflect the performance
of CompleteHome.com, Inc., our internet real estate services portal (the
"CompleteHome.com Group"). Before we first issue CompleteHome.com Stock,
Cendant's existing common stock would be reclassified as the Cendant Group
Common Stock ("CD Stock"), intended to reflect the performance of our other
businesses and a retained interest in CompleteHome.com Group (the "Cendant
Group").
Specifically, the Tracking Stock Proposal seeks approval of an
amendment to our certificate of incorporation that would (1) authorize a
new series of common stock called CompleteHome.com Stock, intended to
reflect the performance of CompleteHome.com Group, (2) increase the
aggregate number of shares of common stock that we may issue from
2,000,000,000 to 2,500,000,000, initially comprised of 2,000,000,000 shares
of CD Stock and 500,000,000 shares of CompleteHome.com Stock, and (3) re-
classify Cendant's existing common stock as CD Stock.
We believe the Tracking Stock Proposal is in the best interests of
Cendant and its stockholders for the following reasons:
o The proposal will permit the market to review separate
information about CompleteHome.com Group and separately value
CompleteHome.com Stock. This should encourage investors and
analysts to focus more attention on CompleteHome.com Group and
result in greater market recognition of the value of
CompleteHome.com Group to Cendant.
o The proposal will enable us to issue CompleteHome.com Stock in
one or more private or public financings, thus raising capital
for Cendant Group and/or CompleteHome.com Group and to create a
public trading market for CompleteHome.com Stock.
o The proposal will enable us to grant stock options tied to
CompleteHome.com Stock, thereby providing more focused incentives
to CompleteHome.com Group management and employees.
o The proposal will provide us with greater flexibility to raise
capital and respond to strategic opportunities (including
acquisitions), because it will allow us to issue either CD Stock
or CompleteHome.com Stock as appropriate under the circumstances.
o The proposal is expected to enable us to realize more value from
CompleteHome.com Group while preserving the financial, tax,
operational, strategic and other benefits of being a single
consolidated entity.
In addition to the Tracking Stock Proposal, we will ask you to
consider and approve the Stock Option Plan Proposal which seeks the
approval of the assumption by Cendant of the CompleteHome.com, Inc. 1999
Stock Option Plan and existing grants thereunder.
The Cendant Board of Directors has carefully considered and
unanimously approved the Tracking Stock Proposal and the Stock Option Plan
Proposal and recommends that you vote for them. We describe the proposals
in more detail in the accompanying Proxy Statement, which you should read
in its entirety before voting.
Because the Special Meeting is being held solely for the purpose of
voting on the Tracking Stock Proposal and the Stock Option Plan Proposal,
there will not be any presentations by officers of Cendant at the Special
Meeting, as would be appropriate at an annual meeting of stockholders.
Whether or not you attend the Special 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 Special Meeting
and vote in person, you may then withdraw your proxy.
Admission to the Special 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 Notice of Special
Meeting of Stockholders to obtain a ticket.
Thank you for your continued support and interest in Cendant.
Sincerely,
Henry R. Silverman
Chairman of the Board, President and
Chief Executive Officer
CENDANT CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 14, 2000
NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders of
Cendant Corporation (the "Company" or "Cendant") will be held at 10:00
a.m., New York Time, on January 14, 2000, 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 consider and approve our proposal to amend and restate our
amended and restated certificate of incorporation as set forth in
Annex II to the accompanying Proxy Statement (the "Tracking Stock
Proposal");
2. To consider and approve the assumption by the Company of the
CompleteHome.com, Inc. 1999 Stock Option Plan as set forth in
Annex III to the accompanying Proxy Statement (the "Stock Option
Plan Proposal") and existing grants thereunder; and
3. To transact such other business as may properly come before the
meeting.
We describe the proposals in more detail in the accompanying Proxy
Statement, which you should read in its entirety before voting.
Only stockholders of record at the close of business on November 17,
1999 will be entitled to the notice of and to vote at the Meeting or any
adjournment or postponement thereof. A list of stockholders entitled to
vote at the Meeting will be available for examination by any stockholder,
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. "Street Name" holders 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. If you do
not have a ticket, please remember to bring proof of ownership as described
above. 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,
Jeanne M. Murphy
Secretary
New York, New York
Dated: November __________, 1999
PROXY STATEMENT
________________
CENDANT CORPORATION
_________________
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 14, 2000
_________________
The Board of Directors of Cendant Corporation is furnishing this Proxy
Statement in connection with a Special Meeting to be held at 10:00 a.m.,
New York Time, on January 14, 2000, at the Ramada Inn and Conference
Center, 130 Route 10 West, East Hanover, New Jersey 07936. At this Special
Meeting we will ask you to consider and approve the Tracking Stock Proposal
and the related Stock Option Plan Proposal, as described in this Proxy
Statement.
Stockholder approval of the Tracking Stock Proposal will allow us to
issue a new series of common stock ("CompleteHome.com Stock") intended to
reflect the performance of CompleteHome.com, Inc., our internet real estate
services portal (the "CompleteHome.com Group"). Before we first issue
CompleteHome.com Stock, Cendant's existing common stock would be
reclassified as the Cendant Group Common Stock ("CD Stock") intended to
reflect the performance of our other businesses and a retained interest in
CompleteHome.com Group (the "Cendant Group"). Our reasons for proceeding
with the Tracking Stock Proposal are outlined elsewhere in this Proxy
Statement. See "Proposal 1 The Tracking Stock Proposal Background and
Reasons for the Tracking Stock Proposal."
In addition to the Tracking Stock Proposal, we will ask you to
consider and approve the CompleteHome.com, Inc. 1999 Stock Option Plan (the
"Stock Option Plan Proposal").
The Board of Directors has carefully considered and unanimously
approved the Tracking Stock Proposal and the Stock Option Plan Proposal and
recommends that you vote for them. We describe the proposals in more detail
in this Proxy Statement, which you should read in its entirety before
voting.
Because the Special Meeting is being held for the sole purpose of
voting on the Tracking Stock Proposal and the Stock Option Plan Proposal,
there will not be any presentations by officers of Cendant at the Meeting,
as would be appropriate at an annual meeting of stockholders.
See "Risk Factors" beginning on page 31 for certain information
relating to an evaluation of the Tracking Stock Proposal.
The date of this Proxy Statement is November __, 1999. We are first
sending this Proxy Statement to stockholders on or about that date.
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING . . . . . . . . . . . . . 1
PROXY STATEMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . 7
CENDANT CORPORATION, CENDANT GROUP AND COMPLETEHOME.COM GROUP . . . 7
Cendant Corporation . . . . . . . . . . . . . . . . . . . . . . 7
Cendant Group . . . . . . . . . . . . . . . . . . . . . . . . . 8
CompleteHome.com Group . . . . . . . . . . . . . . . . . . . . 8
SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . 11
PROPOSAL 1 THE TRACKING STOCK PROPOSAL . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Reasons for the Tracking Stock Proposal . . . . . . . . . . . 13
Intercompany Agreements . . . . . . . . . . . . . . . . . . . 21
Certain Cash Management and Allocation Policies . . . . . . . 22
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . 22
Certain Federal Income Tax Considerations . . . . . . . . . . 23
PROPOSAL 2 STOCK OPTION PLAN PROPOSAL . . . . . . . . . . . . . . 24
CENDANT CORPORATION SUMMARY HISTORICAL
CONSOLIDATED FINANCIAL AND OTHER DATA . . . . . . . . . . . . 25
CENDANT GROUP SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER
DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
COMPLETEHOME.COM GROUP SUMMARY HISTORICAL
COMBINED FINANCIAL AND OTHER DATA . . . . . . . . . . . . . . 27
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Risk Factors Relating to the Tracking Stock Proposal . . . . . . 31
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . 41
PROPOSAL 1 THE TRACKING STOCK PROPOSAL . . . . . . . . . . . . . . . . 42
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Background and Reasons for the Tracking Stock Proposal . . . . . . 43
Description of CD Stock and CompleteHome.com Stock . . . . . . . . 44
Certain Cash Management and Allocation Policies . . . . . . . . . 69
Intercompany Agreements . . . . . . . . . . . . . . . . . . . . . 74
Certain Other Provisions of the Restated Certificate of
Incorporation, By-laws and Delaware Law . . . . . . . . . . . 77
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . 82
Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . 82
Stock Transfer Agent and Registrar . . . . . . . . . . . . . . . . 82
Certain Federal Income Tax Considerations . . . . . . . . . . . . 83
PROPOSAL 2 STOCK OPTION PLAN PROPOSAL . . . . . . . . . . . . . . . . 86
CompleteHome.com, Inc. 1999 Stock Option Plan . . . . . . . . . . 86
New Plan Benefits . . . . . . . . . . . . . . . . . . . . . . . . 89
EXECUTIVE COMPENSATION AND OTHER INFORMATION . . . . . . . . . . . . . 91
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . 91
Option Grants in 1998 . . . . . . . . . . . . . . . . . . . . . . 93
Aggregated Option Exercises in 1998 and Fiscal Year-End Option
Values . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Director Compensation . . . . . . . . . . . . . . . . . . . . . . 96
Employment Contracts and Termination, Severance and Change of
Control Arrangements . . . . . . . . . . . . . . . . . . . . 97
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 101
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT . . . . . . . . . . . 103
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . 103
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 106
INDEX OF CERTAIN TERMS . . . . . . . . . . . . . . . . . . . . . . . . 108
ANNEX I
Illustration of Certain Terms . . . . . . . . . . . . . . . . . I-1
ANNEX II
Amended and Restated Certificate of Incorporation . . . . . . . II-1
ANNEX III
CompleteHome.com, Inc. 1999 Stock Option Plan . . . . . . . . . III-1
QUESTIONS AND ANSWERS
ABOUT
THE SPECIAL MEETING
Q: WHY AM I RECEIVING THIS PROXY STATEMENT? WHAT IS THE TRACKING STOCK
PROPOSAL?
A: We are sending you this Proxy Statement in connection with a Special
Meeting to be held at 10:00 a.m., New York Time, on January 14, 2000,
at the Ramada Inn and Conference Center, 130 Route 10 West, East
Hanover, New Jersey 07936. At this Special Meeting we will ask you to
consider and approve the Tracking Stock Proposal and the Stock Option
Plan Proposal, as described in this Proxy Statement.
Stockholder approval of the Tracking Stock Proposal would allow us to
amend and restate our charter to:
o Increase the number of authorized shares of common stock from
2,000,000,000 to 2,500,000,000, initially comprised of
2,000,000,000 shares of CD Stock and 500,000,000 shares of
CompleteHome.com Stock.
o Create a new series of common stock to be called CompleteHome.com
Stock that could be issued from time to time by the Board of
Directors.
o Re-classify each outstanding share of existing common stock into
a share of CD Stock.
We intend CompleteHome.com Stock to reflect the performance of
CompleteHome.com Group, our internet real estate services portal. We
intend CD Stock to reflect the performance of Cendant Group which
consists of our other businesses and a retained interest in
CompleteHome.com Group. We have allocated, for financial reporting
purposes, all of Cendant's consolidated assets, liabilities, revenue,
expenses and cash flow between Cendant Group and CompleteHome.com
Group. In the future, we will publish combined financial statements
of Cendant Group and combined financial statements of CompleteHome.com
Group together with consolidated financial statements of Cendant.
Stockholder approval of the Stock Option Plan Proposal would allow us
to grant stock options tied to CompleteHome.com Stock, thereby
providing more focused incentives to CompleteHome.com Group management
and employees.
Q: WHAT IS "TRACKING STOCK"?
A: "Tracking stock," sometimes referred to as "alphabet stock", "letter
stock" or "targeted stock," is a common stock that is intended to
reflect (or "track") the performance of a particular business. As
mentioned above, we propose creating a new series of tracking stock,
to be designated as CompleteHome.com Stock, and reclassifying our
existing common stock into a new series of common stock to be
designated as CD Stock.
We can not assure you that the market values of CD Stock and
CompleteHome.com Stock will in fact reflect the performance of Cendant
Group and CompleteHome.com Group as we intend. Holders of CD Stock
and CompleteHome.com Stock will continue to be common stockholders of
Cendant, and, as such, will be subject to all risks associated with an
investment in Cendant and all of our businesses, assets and
liabilities.
Q: HOW AND WHEN WILL YOU INITIALLY ISSUE COMPLETEHOME.COM STOCK?
A: We currently plan to grant options for CompleteHome.com Stock under
the proposed CompleteHome.com, Inc. 1999 Stock Option Plan (the
"CompleteHome.com Option Plan") to CompleteHome.com Group employees
and certain Cendant Group employees following stockholder approval of
the Stock Option Plan Proposal and the Tracking Stock Proposal.
Subject to prevailing market and other conditions, we currently expect
to issue additional shares of CompleteHome.com Stock in one or more
private or public financings within 12 months of stockholder approval
of the Tracking Stock Proposal. The specific terms of the financings,
including whether they are private or public, the amount of
CompleteHome.com Stock we issue, and the timing of the financings,
will depend upon factors such as stock market conditions and the
performance of CompleteHome.com Group.
Q: WHEN WILL YOU IMPLEMENT THE TRACKING STOCK PROPOSAL? WHEN WILL YOU
RE-CLASSIFY MY COMMON STOCK INTO CD STOCK?
A: Assuming the Tracking Stock Proposal is approved, we expect to file
the amended and restated charter to implement the Tracking Stock
Proposal and re-classify your common stock shortly following the
Meeting and prior to granting options for CompleteHome.com Stock.
Q: WHAT HAPPENS TO MY COMMON STOCK WHEN YOU IMPLEMENT THE TRACKING STOCK
PROPOSAL? DO I NEED TO SEND IN MY STOCK CERTIFICATES?
A: Assuming the Tracking Stock Proposal is approved, when we file the
amended and restated charter implementing the Tracking Stock Proposal,
that filing will automatically re-classify each of your shares of
Cendant common stock into one share of CD Stock, and your existing
stock certificates will automatically represent that CD Stock. Since
the re-classification is automatic, you do not need to send in your
stock certificates or make any notations reflecting the change.
Q: WHY ARE YOU AUTHORIZING COMPLETEHOME.COM STOCK?
We are authorizing CompleteHome.com Stock primarily for the following
reasons:
o The proposal will permit the market to review separate
information about CompleteHome.com Group and separately value
CompleteHome.com Stock. This should encourage investors and
analysts to focus more attention on CompleteHome.com Group and
result in greater market recognition of the value of
CompleteHome.com Group to Cendant.
o The proposal will enable us to issue CompleteHome.com Stock in
one or more private or public financings, thus raising capital
for Cendant Group and/or CompleteHome.com Group and to create a
public trading market for CompleteHome.com Stock.
o The proposal will allow us to grant stock options tied to
CompleteHome.com Stock, thereby providing more focused incentives
to CompleteHome.com Group management and employees.
o The proposal will provide us with greater flexibility to raise
capital and respond to strategic opportunities (such as
acquisitions), because it will allow us to issue either CD Stock
or CompleteHome.com Stock as appropriate under the circumstances.
o The proposal is expected to enable us to realize more value from
CompleteHome.com Group while preserving the financial, tax,
operational, strategic and other benefits of being a single
consolidated entity.
Q: WILL CD STOCK BE LISTED ON THE NYSE? HOW ABOUT COMPLETEHOME.COM
STOCK?
A: When we re-classify our common stock as CD Stock, it will continue to
trade on the NYSE under the symbol "CD". If and when we decide to
issue CompleteHome.com Stock in a public offering, we would expect to
apply for listing of CompleteHome.com Stock on the NYSE.
Q: WHAT VOTING RIGHTS WILL I HAVE?
A: Holders of CD Stock and CompleteHome.com Stock will vote together as a
single class (except in certain limited circumstances). Each share of
CD Stock will entitle the holder to one vote. Each share of
CompleteHome.com Stock will entitle the holder to one vote.
Q: DO YOU INTEND TO PAY DIVIDENDS?
A: We currently intend to retain all of our earnings to finance our
operations, repay indebtedness and fund future growth. We do not
expect to pay any dividends on CD Stock or CompleteHome.com Stock for
the foreseeable future.
Q: WHAT IS THE PURPOSE OF THE STOCK OPTION PLAN PROPOSAL?
A: The Stock Option Plan Proposal is intended to advance the interests of
our stockholders by enabling us to provide management and employees of
both CompleteHome.com Group and Cendant Group with the opportunity to
own an equity interest in CompleteHome.com Group. Because the value
of this equity interest is tied to the performance of CompleteHome.com
Group, we believe those equity awards will help align the interests of
our employees with the holders of CompleteHome.com Stock. We intend
to issue CompleteHome.com Stock under such plan both to
CompleteHome.com Group employees, to provide them with incentives
directly tied to their business, and to certain Cendant Group
employees, to promote cooperation between these businesses and help
ensure that our key employees are motivated by the best interests of
all of our stockholders. However, Cendant does not currently intend
to issue any options under the CompleteHome.com Stock Option Plan to
its Chairman of the Board, President, Chief Executive Officer or any
Vice Chairman of Cendant.
Q: HOW MANY SHARES OF COMPLETEHOME.COM STOCK WILL BE ISSUABLE UNDER THE
STOCK OPTION PLAN?
A: A total of 6,000,000 shares of CompleteHome.com Stock would be
issuable under the CompleteHome.com Option Plan. Based on the
expected retained interest of Cendant Group in CompleteHome.com Group,
the total number of shares issuable under such plan would represent an
approximately 21% interest in CompleteHome.com Group, before giving
effect to the issuance of shares of CompleteHome.com Group in a
private or public offering.
Q: WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
A: The Cendant Board of Directors has carefully considered and
unanimously approved the Tracking Stock Proposal and the Stock Option
Plan Proposal, as described in the Proxy Statement and recommends that
you vote for them.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE TRACKING STOCK PROPOSAL? WHAT
VOTE IS REQUIRED TO APPROVE THE STOCK OPTION PLAN PROPOSAL?
A: The Tracking Stock Proposal requires the affirmative vote of the
holders of a majority of the outstanding shares of Cendant common
stock. The Stock Option Plan Proposal requires the affirmative vote
of the holders of a majority of the shares of Cendant common stock
present in person or represented by proxy at the Special Meeting and
entitled to vote at the Special Meeting.
Q: WHAT DO I DO IF I HAVE ADDITIONAL QUESTIONS?
A: If you have any questions prior to the Special Meeting, please call
Cendant Investor Relations at (212) 413-1933.
PROXY STATEMENT SUMMARY
This summary highlights key aspects of the Tracking Stock Proposal and
the Stock Option Plan Proposal described in more detail elsewhere in this
Proxy Statement. This summary is not a substitute for the more detailed
information contained in the rest of this Proxy Statement. For a more
comprehensive description of the Tracking Stock Proposal and the Stock
Option Plan Proposal you should read the rest of this Proxy Statement.
Capitalized terms used in this summary have the meanings given them
elsewhere in this Proxy Statement. See "Index of Certain Terms" on page
108.
CENDANT CORPORATION, CENDANT GROUP AND
COMPLETEHOME.COM GROUP
CENDANT CORPORATION
Cendant Corporation is one of the foremost consumer and business
services companies in the world. Cendant Corporation provides fee based
services including travel services, real estate services and membership
based consumer and business services to our customers throughout the world.
From an accounting standpoint, we have separated CompleteHome.com
Group, our internet real estate services portal, from Cendant Group, which
includes the rest of our businesses and a retained interest in
CompleteHome.com Group. We have allocated, for financial reporting
purposes, all of our consolidated assets, liabilities, revenue, expenses
and cash flow between CompleteHome.com Group and Cendant Group. These two
divisions are sometimes referred to in this Proxy Statement as "Groups."
Stockholder approval of the Tracking Stock Proposal will allow us to
issue CompleteHome.com Stock, intended to reflect the performance of
CompleteHome.com Group, and CD Stock, intended to reflect the performance
of Cendant Group. We briefly describe Cendant Group and CompleteHome.com
Group below.
CENDANT GROUP
Cendant Group includes:
o All of the businesses currently operated by Cendant in our four
principal divisions: travel related services; real estate
related services; direct marketing services and other consumer
and business services other than Rent Net, Inc. and National Home
Connections, LLC which will become part of the CompleteHome.com
Group.
o A retained interest in CompleteHome.com Group. This retained
interest is currently 100%, but will decline to reflect any
issuances or distributions of CompleteHome.com Stock.
Our principal executive offices are located at 9 West 57th Street,
New York, New York 10019. Our telephone number is (212) 413-1800.
COMPLETEHOME.COM GROUP
CompleteHome.com Group is an Internet company formed by the
combination of online strategies for Cendant's Real Estate Division which
includes the CENTURY 21registered trademark, COLDWELL BANKERregistered
trademark and ERAregistered trademark real estate brands (which collectively
represent over two-thirds of the nationally franchised real estate market),
Rent Net, Inc. (the most popular rental and relocation guide on the web),
Cendant Mortgage (the sixth largest originator of retail mortgages in the
United States), Cendant Mobility (the largest relocation company in the
United States), Welcome Wagon, National Home Connections, LLC and Real Estate
Division-related activities of Cendant's Preferred Alliance department.
Through the resources of these companies, CompleteHome.com Group offers
consumers a variety of home-related products and services. CompleteHome.com
Group's principal business is the development, maintenance and marketing of
its web site http://www.CompleteHome.com as a single source real estate
portal for consumers as well as real estate professionals. The web site
will operate with the following objectives in mind:
o provide consumers with a one-stop solution for all of their
home-related product and service needs before, during and after
their actual move
o build an online community for existing and prospective homeowners
to find and share information regarding their home-related
experiences
o provide brokers and agents, rental property managers and
moving-related service providers with an ideal distribution point
to market their listings, products and services and serve as a
key resource to improve their productivity
The real estate industry is well suited to benefit from Internet
technology. The typical real estate transaction requires that a
significant amount of information be available for proper decision making
among all parties. The Internet enables this sharing of information by
providing consumers with up-to-date information about home and apartment
listings, products and services, while also allowing real estate
professionals to gather and transmit consumer preferences and data in real
time. We believe that the online sector of the real estate industry
represents a significant opportunity for growth and that CompleteHome.com
Group is distinctly poised to become a leading player. CompleteHome.com
Group's strategy is to:
o expand our web site content continuously to reflect consumers'
full-service requirements
o strengthen real estate broker and agent relationships by
developing programs to enhance their productivity and
profitability potential
o build brand awareness of CompleteHome.com as a resource for
home-related products and services through targeted online and
offline marketing
o develop alliances with key partners to create content and/or
drive distribution to our web site
o leverage our content development capabilities and user
demographic to maximize revenue across our sponsors
o utilize emerging technologies to enhance the effectiveness and
stickiness of our web site
CompleteHome.com Group has significant advantages that separate it
from all other real estate web sites:
o long-term agreements with Cendant's CENTURY 21registered
trademark, COLDWELL BANKERregistered trademark and
ERAregistered trademark real estate brands
o the rights to publish or otherwise make available these
brands' home listings through the Internet
o a full-service mortgage capability that is integrated
seamlessly into our web site
o act as a source of online coupon distribution for local
merchants throughout the country
o leverage the advertising efforts of our large real estate
family of companies
o ability to leverage existing relationships arising out of
the Real Estate Division-related activities of Cendant's
Preferred Alliance department.
CompleteHome.com Group's principal executive offices are located at
200 Vallejo Street, San Francisco, California 94111. CompleteHome.com
Group's telephone number at that location is (415) 229-1050.
CompleteHome.com Group's world wide web site is
http://www.CompleteHome.com.
SPECIAL MEETING
TIME, DATE AND PLACE. . . . 10:00 a.m., New York Time, on January 14,
2000, at the Ramada Inn and Conference Center,
130 Route 10 West, East Hanover, New Jersey
07936
RECORD DATE . . . . . . . . November 17, 1999.
PROPOSALS TO BE CONSIDERED VOTE REQUIRED FOR APPROVAL
-------------------------- --------------------------
Proposal 1 - The Tracking Proposal 1 requires the affirmative vote
Stock Proposal of the holders of a majority of the
outstanding shares of existing common
stock.
Proposal 2 - Stock Option Proposal 2 requires the affirmative vote
Plan Proposal of the holders of a majority of the shares
of existing common stock present in person
or represented by proxy at the Special
Meeting and entitled to vote at the
Special Meeting.
QUESTIONS . . . . . . . . If you have any questions prior to the
Special Meeting, please call Cendant
Investor Relations at (212) 413-1933.
THE CENDANT BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED AND UNANIMOUSLY
APPROVED THESE PROPOSALS AND RECOMMENDS THAT YOU VOTE FOR THEM.
PROPOSAL 1 THE TRACKING STOCK PROPOSAL
GENERAL
At the Special Meeting, we will ask you to consider and approve the
Tracking Stock Proposal described in this Proxy Statement. Stockholder
approval of the Tracking Stock Proposal would allow us to amend and restate
our charter to:
o Increase the number of authorized shares of common stock from
2,000,000,000 to 2,500,000,000, initially comprised of
2,000,000,000 shares of CD Stock and 500,000,000 shares of
CompleteHome.com Stock.
o Create a new series of common stock called CompleteHome.com Stock
that could be issued from time to time by the Board of Directors.
o Re-classify each outstanding share of existing common stock into
a share of CD Stock.
We intend CompleteHome.com Stock to reflect the performance of
CompleteHome.com Group, our internet real estate services portal. We
intend CD Stock to reflect the performance of Cendant Group, our other
businesses and a retained interest in CompleteHome.com Group. We have
allocated, for financial reporting purposes, all of Cendant's consolidated
assets, liabilities, revenue, expenses and cash flow between Cendant Group
and CompleteHome.com Group. In the future, we will publish combined
financial statements of Cendant Group and combined financial statements of
CompleteHome.com Group together with consolidated financial statements of
Cendant.
We currently plan to grant options for CompleteHome.com Stock under
the CompleteHome.com Option Plan to CompleteHome.com Group employees and
certain Cendant Group employees following stockholder approval of the Stock
Option Plan Proposal and the Tracking Stock Proposal. Subject to
prevailing market and other conditions, we currently expect to issue
additional shares of CompleteHome.com Stock in one or more private or
public financings within 12 months of stockholder approval of the Tracking
Stock Proposal. The specific terms of the financings, including whether
they are private or public, the amount of CompleteHome.com Stock we issue,
and the timing of the financings, will depend upon factors such as stock
market conditions and the performance of CompleteHome.com Group.
We expect that any public issuance of CompleteHome.com Stock would
occur sometime in the second quarter of 2000. However, we could choose to
conduct such an offering, or not to make an offering at all, depending on
the circumstances at the time.
Assuming the Tracking Stock Proposal is approved, we expect to file
the amended and restated charter implementing the Tracking Stock Proposal
and re-classify your common stock shortly following the Meeting and prior
to granting options for CompleteHome.com Stock.
REASONS FOR THE TRACKING STOCK PROPOSAL
We believe the Tracking Stock Proposal is in the best interests of
Cendant and its stockholders for the following reasons:
o The proposal will permit the market to review separate
information about CompleteHome.com Group and separately value
CompleteHome.com Stock. This should encourage investors and
analysts to focus more attention on CompleteHome.com Group and
result in greater market recognition of the value of
CompleteHome.com Group to Cendant.
o The proposal will enable us to issue CompleteHome.com Stock in
one or more private or public financings, thus raising capital
for CompleteHome.com Group and/or Cendant Group and to create a
public trading market for CompleteHome.com Stock.
o The proposal will enable us to grant stock options tied to
CompleteHome.com Stock, thereby providing more focused incentives
to CompleteHome.com Group management and employees.
o The proposal will provide us with greater flexibility to raise
capital and respond to strategic opportunities (including
acquisitions) because it will allow us to issue either CD Stock
or CompleteHome.com Stock as appropriate under the circumstances.
o The proposal is expected to enable us to realize more value from
CompleteHome.com Group while preserving the financial, tax,
operational, strategic and other benefits of being a single
consolidated entity.
SUMMARY COMPARISON OF TERMS OF EXISTING COMMON STOCK WITH TERMS OF CD STOCK
AND COMPLETEHOME.COM STOCK
The following compares certain terms of our existing common stock to
the proposed terms of CD Stock and CompleteHome.com Stock. This comparison
is not complete and should be read together with the more detailed
information contained in the rest of this Proxy Statement. In particular,
see "Proposal 1 The Tracking Stock Proposal Description of CD Stock and
CompleteHome.com Stock."
<TABLE>
<CAPTION>
EXISTING COMMON TRACKING STOCK PROPOSAL
STOCK
------------------------ -----------------------------------------------------------
COMPLETEHOME.COM
CD STOCK STOCK
------------------------ ---------------------------- -----------------------------
<S> <C> <C> <C>
BASIC Our existing We intend CD Stock to We intend
INVESTMENT common stock reflect the performance CompleteHome.com
CHARACTERI reflects the of Cendant Group. Stock to reflect the
STICS: performance of all Cendant Group performance of
of our businesses. includes all the CompleteHome.com
businesses currently Group, our internet real
operated by Cendant in estate services portal.
its four principal Through the real estate
divisions: travel resources of Cendant,
services; real estate CompleteHome.com
services; direct will offer consumers a
marketing services and variety of home-related
other consumer and products and services
business services (other providing consumers
than Rent Net, Inc.) with a one-stop
and a retained interest solution for all their
in CompleteHome.com home-related product
Group. and service needs
before, during and after
their actual move.
We can not assure you We can not assure you
that the market value of that the market value of
CD Stock will in fact CompleteHome.com
reflect the performance Stock will in fact
of Cendant Group as reflect the performance
we intend. Holders of of CompleteHome.com
CD Stock will continue Group as we intend.
to be common Holders of
stockholders of CompleteHome.com
Cendant and, as such, Stock will continue to
will be subject to all be common
risks associated with an stockholders of
investment in Cendant Cendant and, as such,
and all of our will be subject to all
businesses, assets and risks associated with an
liabilities. investment in Cendant
and all of our businesses,
assets and liabilities.
ISSUANCE: Our existing The amendment and We currently plan to
common stock is restatement of the grant options for
already Certificate of CompleteHome.com
outstanding. Incorporation will re- Stock under the
classify each proposed
outstanding share of CompleteHome.com,
existing common stock Inc. 1999 Stock Option
into a share of CD Plan to
Stock. CompleteHome.com
Group employees and
certain Cendant Group
employees following
stockholder approval of
the Stock Option Plan
Proposal and the
Tracking Stock
Proposal. Subject to
prevailing market and
other conditions, we
currently expect to
issue additional shares
of CompleteHome.com
Stock in one or more
private or public
financings within 12
months of stockholder
approval of the
Tracking Stock
Proposal. The specific
terms of the financings,
including whether they
are private or public,
the amount of
CompleteHome.com
Stock we issue, and the
timing of the
financings, will depend
upon factors such as
stock market conditions
and the performance of
CompleteHome.com
Group.
RETAINED N/A We would adjust the N/A
INTEREST: Retained Interest of
Cendant Group in
CompleteHome.com
Group (which would
initially be 100%) as
appropriate to reflect
issuances, distributions
or repurchases of
CompleteHome.com
Stock, capital
contributions to, or
returns of capital from,
CompleteHome.com
Group and certain other
events.
AUTHORIZED We are currently Stockholder approval Stockholder approval
AND authorized to issue of the Tracking Stock of the Tracking Stock
OUTSTANDING only one series of Proposal will authorize Proposal will authorize
STOCK: common stock. us to issue two series us to issue two series of
of common stock- CD common stock- CD
Stock and Stock and
CompleteHome.com CompleteHome.com
Stock. Stock.
We are currently The Tracking Stock The Tracking Stock Proposal
authorized to issue Proposal will authorize will authorize us to
up to us to increase the increase the number
2,000,000,000 number of authorized of authorized
shares of common shares to shares to 2,500,000,000
stock. 2,500,000,000 shares shares of common stock,
of common stock, initially comprised of
initially comprised of 2,000,000,000 shares of
2,000,000,000 shares CD Stock and 500,000,000
of CD Stock and shares of CompleteHome.com
500,000,000 shares of Stock.
CompleteHome.com Stock.
_____________ shares Immediately following After the Tracking
of the implementation of Stock Proposal is
existing common the Tracking Stock implemented, we
stock were Proposal, ____________ expect to issue from
outstanding on shares of CD Stock time to time shares of
November ____, will be outstanding, CompleteHome.com
1999. These shares based on the number of Stock. These shares,
count against the shares of existing and the shares of CD
total number of common stock Stock then outstanding,
shares of common outstanding on will count against the
stock we are November __, 1999. total number of shares
authorized to issue. These shares, and any of common stock we
shares of are authorized to issue.
CompleteHome.com
Stock outstanding from
time to time, will count
against the total
number of shares of
common stock we are
authorized to issue.
DIVIDENDS: We currently intend We currently intend to We currently intend to
to retain all of our retain all of our retain all of our
earnings for use in earnings for use in the earnings for use in the
the operation and operation and operation and
expansion of our expansion of our expansion of our
business. We do business. We do not business. We do not
not expect to pay expect to pay any expect to pay any
any dividends on dividends on CD Stock dividends on
our existing for the foreseeable CompleteHome.com
common stock for future. Stock for the
the foreseeable foreseeable future.
future.
We are permitted to We will be permitted to pay We will be permitted to pay
pay dividends out dividends on CD Stock out of dividends on CompleteHome.com
of the assets of the lesser of (1) the assets Stock (and corresponding
Cendant legally of Cendant legally amounts to Cendant Group
available for the available for the with respect to its Retained
payment of dividends Interest in CompleteHome.com
under Delaware law and Group) out of the lesser
(2) the Available of (1) the assets of
Dividend Amount for Cendant legally available for
Cendant Group is based the payment of dividends
on the amount that would under Delaware law and (2)
be legally available for the Available Dividend Amount
the payment of dividends for CompleteHome.com Group.
under Delaware law if The Available Dividend
Cendant Group were a Amount for CompleteHome.com
separate Delaware Group is based on the amount
corporation and Cendant that would be legally available
Group's Retained Interest for the payment of dividends
in CompleteHome.com Group under Delaware law if
were represented by CompleteHome.com Group were
outstanding shares. a separate Delaware corporation.
We may pay dividends We may pay dividends
exclusively on the CD exclusively on the
Stock, exclusively on CompleteHome.com Stock,
the CompleteHome.com Stock, exclusively on the CD Stock,
or on both, in equal or or on both, in equal or
unequal amounts. The unequal amounts. The Board
Board of Directors of Directors will not be
will not be required to required to consider the
consider the relative relative Available Dividend
Available Dividend Amounts, the amount of
Amounts, the amount of dividends previously
dividends previously declared on either the
declared on either the CompleteHome.com Stock or the
CD Stock or the CD Stock, their relative
CompleteHome.com Stock, voting or liquidation rights
their relative voting or or any other factor.
liquidation rights
or any other factor.
MANDATORY None. If we dispose of All or If we dispose of All or
DIVIDEND, Substantially All of the Substantially All of the
REDEMPTION OR Assets of Cendant Group Assets of CompleteHome.com
EXCHANGE ON and the disposition Group and the disposition
DISPOSITION OF is not an Exempt is not an Exempt
ASSETS: Disposition, we would be Disposition, we would be
required to choose one of the required to choose one of the
following three alternatives: following three alternatives:
o pay a dividend to o pay a dividend to holders
holders of CD Stock in of CompleteHome.com Stock in
an amount equal an amount equal to their
to their Proportionate Proportionate Interest in
Interest in the Net the Net Proceeds of such
Proceeds of such disposition,
disposition, outstanding
share of CD stock or
o redeem from holders of o redeem from holders of
CD Stock, CompleteHome.com Stock,
for an amount equal to for an amount equal to their
their Proportionate Proportionate Interest in
Interest in the Net the Net Proceeds of such
Proceeds of such disposition, outstanding
disposition, outstanding shares of CompleteHome.com
shares of CD Stock or
Stock or
o issue CompleteHome.com o issue CD Stock in
Stock in exchange for exchange for outstanding
outstanding CD Stock at CompleteHome.com Stock at
a 10% premium (based on the a 10% premium (based on the
average Market Value of average Market Value of
CD Stock as CompleteHome.com Stock as
compared to the average compared to the average
Market Value of Market Value of CD Stock
CompleteHome.com Stock over a specified 20 Trading
over a specified 20 Trading Day period prior to the
Day period prior to the exchange).
exchange).
At any time within one year At any time within one year
after completing a special after completing a special
dividend or partial dividend or partial
redemption referred to redemption referred to
above, we will have the above, we will have the
right to issue right to issue CD Stock in
CompleteHome.com Stock in exchange for outstanding
exchange for outstanding CompleteHome.com Stock at a
CD Stock at a 10% premium 10% premium (based on the
(based on the average average Market Value of
Market Value of CD Stock CompleteHome.com Stock as
as compared to the average compared to the average
Market Value of Market Value of CD Stock over
CompleteHome.com Stock over a specified 20-Trading Day
a specified 20-Trading Day period prior to the exchange).
period prior to the exchange).
EXCHANGE FOR N/A N/A On and after the 18-month
CD STOCK OR anniversary of the earlier of
COMPLETE- (1) the initial issuance of
HOME.COM STOCK CompleteHome.com Stock in a
AT CENDANT'S public offering or (2) the first
OPTION: anniversary of a private placement
of Complete Home.com Stock , we
will have the right to issue CD
Stock in exchange for outstanding
CompleteHome.com Stock at a
premium. The premium will
initially be 20% and will decline
ratably each month over the
following 18 months to 15%.
Prior to the third From and after the third
anniversary of the earlier anniversary of the earlier of (1) the
of (1) the initial issuance initial issuance of CompleteHome.com
of CompleteHome.com Stock in Stock in a public offering or (2) the
a public offering or (2) the first anniversary of a private
first anniversary of placement of CompleteHome.com Stock,
a private placement we will have the right, if
of CompleteHome.com outstanding CompleteHome.com Stock
Stock Cendant will exceeds the 40% of Total Market
not have the right Capitalization Trigger but has not
to cause the exceeded 60% of the Total Market
exchange of CD Stock Capitalization Threshold, to issue
for CompleteHome.com either series of common stock in
Stock. From and exchange for the other on a value
after the third for value basis. In the event that
anniversary of the CompleteHome.com Stock exceeds the
earlier of (1) the 60% of Total Market Capitalization
initial issuance of Threshold, we will lose the right to
the CompleteHome.com effect an exchange on a value for
Stock in a public value basis during such period.
offering or (2) the
first anniversary of
a private placement
of CompleteHome.com
Stock, we will have
the right, if
outstanding
CompleteHome.com
Stock exceeds the
40% of Total Market
Capitalization
Trigger but has not
exceeded 60% of the
Total Market
Capitalization
Threshold, to issue
either series of
common stock in
exchange for the
other on a value for
value basis.
The exchange ratio that The exchange ratio that will
will result in a value result in a value for value
for value exchange will exchange will be based on
be based on the average the average Market Value
Market Value of the of the series of the common
series of the common stock being exchanged as
stock being exchanged as compared to the average
compared to the average Market Value of the other
Market Value of the other series of common stock
series of common stock during the 20 consecutive
during the 20 consecutive Trading Day period
Trading Day period ending on, and including,
ending on, and including, the fifth Trading Day
the fifth Trading Day immediately preceding the
immediately preceding the date on which we mail the
date on which we notice of exchange to
mail the notice of holders of the outstanding
exchange to holders of the shares being exchanged.
outstanding shares
being exchanged.
Notwithstanding the
exchange provisions
outlined above, in the
event that certain adverse
tax law changes were to
take place, we will have
the right to issue shares
of CD Stock in exchange
for outstanding shares
of CompleteHome.com
Stock at a 10% premium,
regardless of when such
adverse tax law changes
take place.
We will have the right, on N/A
or after the third
anniversary of the
earlier of (1) the
initial issuance of
CompleteHome.com
Stock in a public
offering or (2) the
first anniversary of
a private placement of
CompleteHome.com
Stock, when
outstanding
CompleteHome.com
Stock exceeds the 60%
of Total Market
Capitalization
Threshold,to issue
CompleteHome.com
Stock in exchange for
outstanding CD Stock
at a 15% premium. We
will lose the right
to effect such an
exchange during the
period when
CompleteHome.com
Stock equals or falls
below the 60% of
Total Market
Capitalization
Threshold.
The exchange ratio that The exchange ratio that will
will result in the result in the specified
specified premium will be premium will be calculated
calculated based on the based on the average
average Market Value of CD Market Value of CD Stock as
Stock as compared to the compared to the average
average Market Value of Market Value of
CompleteHome.com Stock CompleteHome.com Stock during
during the 20 consecutive the 20 consecutive Trading Day
Trading Day period ending period ending on, and
on, and including, the including, the fifth Trading
fifth Trading Day Day immediately preceding the
immediately preceding the date on which we mail the
date on which we mail the notice of exchange to holders
notice of exchange to of the outstanding shares being
holders of the outstanding exchanged.
shares being exchanged.
CompleteHome.com Stock CompleteHome.com Stock will
will exceed the "60% of exceed the "40% of Total
Total Market Capitalization Market Capitalization
Threshold" or the "40% of Trigger" if the Market
Total Market Capitalization Capitalization of the
Trigger" if the Market outstanding CompleteHome.com
Capitalization of the Stock exceeds 40% of the
outstanding Total Market Capitalization
CompleteHome.com Stock of both series of common
exceeds 60% or 40%, as the stock for 30 Trading Days
case may be, of the Total during any 60 consecutive
Market Capitalization of Trading Day period.
both series of common stock
for 30 Trading Days
during any 60 consecutive
Trading Day period.
Thereafter, CompleteHome.com N/A
Stock will fall below the
"60% of Total Market
Capitalization
Threshold" if the Market
Capitalization of the
outstanding
CompleteHome.com Stock falls
below 60% of the Total
Market Capitalization of both
series of common stock for
30 Trading Days during any
60 consecutive Trading
Day period.
EXCHANGE FOR None. We will have the right at We will have the right at
STOCK OF A any time to transfer all any time to transfer all
SUBSIDIARY AT of the assets and of the assets and liabilities
CENDANT'S liabilities of Cendant of CompleteHome.com Group
OPTION: Group to a subsidiary and to a subsidiary and issue
issue all of the all of the stock of that
stock of that subsidiary subsidiary to the holders
to the holders of the CD of CompleteHome.com
Stock in exchange for all Stock and to the Cendant
of the outstanding CD Stock. Group in exchange for all
of the outstanding
CompleteHome.com Stock and
the elimination of the
Retained Interest.
VOTING RIGHTS: One vote per share. One vote per share. One vote per share.
Holders of CD Stock and Holders of CD Stock and
CompleteHome.com Stock will CompleteHome.com Stock will
vote together as a single vote together as a single
class, except in certain class, except in certain
limited circumstances. limited circumstances.
Each share will continue Each share will continue
to have one vote per share to have one vote per share
following a stock split, following a stock split,
stock dividend or similar stock dividend or similar
reclassification. reclassification.
LIQUIDATION: Upon liquidation of Upon liquidation of Cendant, Upon liquidation of Cendant,
Cendant, holders of holders of CD Stock and holders of CD Stock and
existing common stock CompleteHome.com Stock will CompleteHome.com Stock will
are entitled to be entitled to receive the be entitled to receive the net
receive the net assets net assets of Cendant, if assets of Cendant, if any,
of Cendant, if any, any, remaining for remaining for distribution to
remaining for distribution to stockholders stockholders (after
distribution to (after payment or provision payment or provision for all
stockholders (after for all liabilities of liabilities of Cendant and
payment or provision Cendant and payment of the payment of the liquidation
for all liabilities liquidation preference preference payable to any
of Cendant and payment payable to any holders of holders of Preferred Stock).
of the liquidation Preferred Stock). Amounts Amounts due upon liquidation
preference payable to due upon liquidation in in respect of shares of
any holders of Preferred respect of shares of CD CD Stock and shares of
Stock). Stock and shares of CompleteHome.com Stock will
CompleteHome.com Stock be distributed pro rata in
will be distributed pro proportion to the average
rata in proportion to market value of CD Stock and
the average market value of the average market value
CD Stock and the average of CompleteHome.com Stock
market value of over a specified 20-Trading
CompleteHome.com Stock over day period prior to liquidation.
a specified 20-Trading
day period prior to
Liquidiation.
STOCK EXCHANGE NYSE under the symbol NYSE under the symbol "CD." If and when we issue
LISTINGS: "CD." CompleteHome.com Stock in a
public offering, we would
expect to apply for listing for
CompleteHome.com Stock on the
NYSE.
</TABLE>
INTERCOMPANY AGREEMENTS
Relationships with Real Estate Franchisors. CompleteHome.com Group has
entered into long term agreements (the "Internet Cooperation Agreements")
with each of the three franchisors (the "Franchisors") of the Cendant real
estate brands (the "Brands"): Coldwell Banker Real Estate Corporation,
Century 21 Real Estate Corporation and ERA Franchise Systems, Inc. The
term of each such agreement is 40 years. The agreements are generally on
the same terms and provide that CompleteHome.com Group will provide certain
services to the Brands in connection with the operation and marketing of
the Brand websites, including placement on, access to and links to and from
the CompleteHome.com website as well as assistance in selling advertising
space on the Brand websites and assistance in the management of outsourced
technical support for the Brand websites. The Brands will provide the
Brand listings to CompleteHome.com Group as well as promote
CompleteHome.com's connection to and support of the Brand websites as and
where appropriate in both online and offline advertising. The Brands will
pay a management fee to CompleteHome.com Group for its assistance in
managing the outsourced technical support equal to 6% of the fees paid to
vendors, but only to the extent such assistance results in savings to the
Brands. CompleteHome.com Group will pay the Brands: (1) 10% of
advertising revenue generated through placements arranged by
CompleteHome.com Group on the Brand websites and (2) to the extent
permitted under applicable law, 10% of revenue generated from ancillary
services sold to leads generated from brokers and sales associates of the
respective Brands.
Relationships with Cendant Mortgage. CompleteHome.com Group is currently
negotiating various agreements with Cendant Mortgage Corporation ("Cendant
Mortgage"), a wholly owned subsidiary of Cendant as part of the Cendant
Group, under which CompleteHome.com Group's licensed affiliate,
CompleteHome Mortgage, will serve as an online mortgage broker for
residential mortgage products offered by and through Cendant Mortgage.
Cendant Mortgage will license a customized version of its web-based loan
origination platform to the mortgage broker affiliate. CompleteHome.com
Group will designate an area on the internet portal to market its
affiliate's mortgage program. The parties are continuing to discuss other
cross-marketing and advertising opportunities.
Intercompany Services Arrangements. CompleteHome.com Group and Cendant
will enter into an Intercompany Agreement pursuant to which Cendant will
provide certain corporate services to CompleteHome.com Group similar to
most of the services provided by Cendant to its other subsidiaries. The
services to be provided will include support for finance functions such as
treasury, accounts payable, payroll and external reporting, Human
Resources-related services such as benefits administration and recruiting
and employee relations assistance, legal support, and assistance with
significant transactions such as acquisitions. CompleteHome.com Group will
pay Cendant for such services with fees to be based on (i) actual costs
incurred by Cendant in providing such services and (ii) cost allocation
methodologies employed by Cendant typically for its other subsidiaries.
The term of the Intercompany Agreement will be indefinite, subject to
termination upon a divestiture of CompleteHome.com Group by Cendant.
Relationship with Getko Group, Inc. CompleteHome.com Group has entered
into an Internet Cooperation Agreement with Getko Group, Inc. ("Getko")
dated September 30, 1999, pursuant to which CompleteHome.com Group has
agreed to market Getko's discount offering programs on a designated area of
CompleteHome.com Group's Internet portal. Internet traffic visiting the
designated area will have the opportunity to review the discount offerings
and download coupons for discounts to be redeemed with local merchants.
Getko's appointment of CompleteHome.com Group to market the discount
programs over the Internet is made on an exclusive basis. CompleteHome.com
Group will share with Getko revenues received from the local merchants.
The term of the Internet Cooperation Agreement began on September 30, 1999
and ends on December 31, 2039.
CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES
Because Cendant Group and CompleteHome.com Group are part of a single
company, we have established certain policies relating to cash management,
accounting and other matters between Cendant Group and CompleteHome.com
Group. For a more complete description of how we will allocate cash
between Cendant Group and CompleteHome.com Group, see "Proposal 1 The
Tracking Stock Proposal Certain Cash Management and Allocation Policies."
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, you will not have
appraisal rights in connection with the Tracking Stock Proposal.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
We have been advised by Skadden, Arps, Slate, Meagher & Flom LLP
("Skadden") that neither you nor Cendant will recognize income, gain or
loss for federal income tax purposes as a result of the adoption of the
Tracking Stock Proposal. However, the Internal Revenue Service could
disagree. There are no court decisions or other authorities bearing
directly on the effect of implementation of a proposal such as the Tracking
Stock Proposal. In addition, the Internal Revenue Service has announced
that it will not issue rulings on the characterization of stock with
characteristics similar to CD Stock or CompleteHome.com Stock. Therefore,
the tax treatment of the Tracking Stock Proposal is subject to some
uncertainty under current law.
In light of the foregoing, you should consult your tax advisor
regarding the tax consequences of the Tracking Stock Proposal, including
the state, local and any foreign tax consequences.
PROPOSAL 2 STOCK OPTION PLAN PROPOSAL
At the Special Meeting, we will also ask you to consider and approve a
proposal to approve the assumption by the Company of the CompleteHome.com
Option Plan and the existing grants thereunder. Cendant does not currently
intend to issue any options under the CompleteHome.com Stock Option Plan to
the Chairman of the Board, President, Chief Executive Officer or any Vice
Chairman of Cendant. For a more detailed description of the proposal to
approve this plan, see "Proposal 2 -- Stock Option Plan Proposal."
CENDANT CORPORATION
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL
AND OTHER DATA
The following table presents summary historical consolidated data for
Cendant Corporation as of and for the nine months ended September 30, 1999
and 1998 and as of and for the years ended December 31, 1998, 1997 and
1996. This data was derived from, and should be read in conjunction with,
the Consolidated Financial Statements of Cendant Corporation. After the
issuance of CompleteHome.com Stock, Cendant Corporation will report per
share data for each separate class of common stock, using the two class
method. Earnings per share is determined for each class of stock based on
the separate earnings attributed to the respective Group's financial
statements.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
------------------------- -----------------------------------
SEPTEMBER SEPTEMBER
30, 1999 30, 1998 1998 1997 1996
------------- ----------- ----------- ---------- -----------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenue, net.......................... $ 4,118.7 $ 3,865.1 $ 5,283.8 $ 4,240.0 $ 3,237.7
Depreciation and amortization......... 277.0 241.3 322.7 237.7 145.5
Income from operations................ 1,834.0 842.1 428.9 307.9 547.8
Interest expense, net................. 153.8 72.9 113.9 50.6 14.3
Income from continuing operations
before income taxes and minority
interest(2)...................... 1,680.2 769.2 315.0 257.3 533.5
Net income (loss)..................... 1,426.0 436.9 539.6 (217.2) 330.0
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents............. $ 623.5 $ 1,008.7 $ 67.0 $ 448.1
Total assets.......................... 14,912.8 20,216.5 14,073.4 12,762.5
Total long-term debt.................. 3,344.3 3,362.9 1,246.0 780.8
Stockholders' equity.................. 3,849.3 4,835.6 3,921.4 3,955.7
OTHER DATA:
Net cash provided by operating
activities........................ $ 2,026.5 $ 784.1 $ 808.0 $ 1,213.0 $ 1,493.4
Adjusted EBITDA(1).................... 1,417.6 1,167.6 1,589.9 1,249.7 802.7
Capital expenditures.................. (212.8) (240.8) (355.2) (154.5) (101.2)
Investments and acquisitions, net of
cash acquired..................... (145.8) (2,658.2) (2,852.0) (568.2) (1,608.6)
- -------------------
(1) "Adjusted EBITDA" is defined as earnings before non-operating interest,
income taxes, depreciation and amortization, adjusted to exclude net
gain on disposition of businesses and other items which are of a
non-recurring or unusual nature. Adjusted EBITDA is a measure of
performance which is not recognized under generally accepted accounting
principles and should not replace income from continuing operations or
cash flows in measuring operating results or liquidity. However,
management believes such measure is an informative representation of
how management evaluates the operating performance of Cendant
Corporation and its underlying business segments.
(2) Income from continuing operations before income taxes and minority
interest for the nine months ended September 30, 1999 include a net
gain of $824.8 million associated with the dispositions of certain
non-strategic businesses.
</TABLE>
CENDANT GROUP
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA
The following table presents summary historical combined data for
Cendant Group as of and for the nine months ended September 30, 1999 and
1998 and as of and for the years ended December 31, 1998, 1997 and 1996.
This data was derived from the Combined Financial Statements of Cendant
Group and should be read in conjunction with the Consolidated Financial
Statements of Cendant Corporation. After the issuance of CompleteHome.com
Stock, Cendant Corporation will report earnings per share data for Cendant
Group and CompleteHome.com Group.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------
SEPTEMBER SEPTEMBER
30, 1999 30, 1998 1998 1997 1996
----------- ----------- ---------- ---------- -----------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenue, net........................... $ 4,107.4 $ 3,857.9 $ 5,274.1 $ 4,234.3 $ 3,236.6
Depreciation and amortization.......... 275.4 239.8 320.8 236.8 144.9
Income from operations................. 1,849.2 842.7 430.3 309.4 550.8
Interest expense, net.................. 153.8 72.9 113.9 50.6 14.3
Income from continuing operations before
income taxes and minority
interest(2)....................... 1,695.4 769.8 316.4 258.8 536.6
Income from continuing operations
before retained interest in
CompleteHome.com Group ................ 1,271.6 462.3 160.7 67.2 315.1
Loss related to retained interest in
CompleteHome.com Group................. (19.7) (0.4) (0.8) (0.9) (1.8)
Net income (loss)...................... 1,426.0 436.9 539.6 (217.2) 330.0
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.............. $ 623.5 $ 1,008.7 $ 67.0 $ 448.1
Total assets........................... 14,902.8 20,212.1 14,071.2 12,761.6
Total long-term debt................... 3,344.3 3,362.9 1,246.0 780.8
Group equity........................... 3,849.3 4,835.6 3,921.4 3,955.7
OTHER DATA:
Net cash provided by operating
activities......................... $ 2,030.6 $ 781.6 $ 806.7 $ 1,212.5 $ 1,494.7
Adjusted EBITDA(1)..................... 1,431.2 1,166.7 1,589.4 1,250.3 805.2
Capital expenditures................... (212.4) (240.3) (354.3) (153.8) (101.0)
Investments and acquisitions, net of
cash acquired...................... (145.8) (2,658.2) (2,852.0) (568.2) (1,608.6)
- --------------
(1) "Adjusted EBITDA" is defined as earning before non-operating
interest, income taxes, depreciation and amortization, adjusted to
exclude net gain on disposition of businesses and other items which
are of a non-recurring or unusual nature. Therefore, Cendant Group's
Adjusted EBITDA excludes losses related to its retained interest in
CompleteHome.com Group. Adjusted EBITDA is a measure of performance
which is not recognized under generally accepted accounting
principles and should not replace income from continuing operations
or cash flows in measuring operating results or liquidity. However,
management believes such measure is an informative representation of
how management evaluates the operating performance of Cendant Group
and its underlying business segments.
(2) Income from continuing operations before income taxes and minority
interest for the nine months ended September 30, 1999 include a net
gain of $824.8 million associated with the dispositions of certain
non-strategic businesses.
</TABLE>
COMPLETEHOME.COM GROUP
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA
The following table presents summary historical combined data for
CompleteHome.com Group as of and for the nine months ended September 30,
1999 and 1998, as of and for the period from February 8, 1996 (the
Acquisition Date) through December 31, 1996 and as of and for the years
ended December 31, 1998 and 1997. This data was derived from the Combined
Financial Statements of CompleteHome.com Group and should be read in
conjunction with the Consolidated Financial Statements of Cendant
Corporation. After the issuance of CompleteHome.com Stock, Cendant
Corporation will report earnings per share data for Cendant Group and
CompleteHome.com Group.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
NINE MONTHS ENDED DECEMBER 31, FEBRUARY 8, 1996
-------------------- -------------------- (THE ACQUISITION
SEPTEMBER SEPTEMBER DATE) THROUGH
30, 1999 30, 1998 1998 1997 DECEMBER 31, 1996
--------- --------- ---------- --------- ----------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenue, net $ 11,326 $ 7,250 $ 9,674 $ 5,670 $ 1,081
Cost of operations:
Operating and corporate overhead
allocation............................. 3,230 1,017 1,423 757 393
Marketing and general administrative
expenses............................... 11,764 2,771 3,940 2,599 1,665
Payroll and related costs.............. 9,904 2,554 3,869 2,857 1,522
Depreciation and amortization.......... 1,648 1,469 1,857 945 609
Loss before income taxes (15,220) (561) (1,415) (1,488) (3,108)
Net loss............................... (19,683) (356) (843) (885) (1,842)
BALANCE SHEET DATA (AT PERIOD END):
Total current assets................... $ 8,761 $ 2,882 $ 1,396 $ 591
Total assets........................... 13,448 8,614 7,417 3,559
Total liabilities...................... 10,059 4,379 2,181 878
Group equity........................... 3,389 4,235 5,236 2,681
OTHER DATA:
Net cash provided by (used in)
operating
activities.......................... $ (4,123) $ 2,483 $ 1,279 $ 428 $ (1,215)
Adjusted EBITDA(1)..................... (13,572) 908 442 (543) (2,499)
Capital expenditures................... (358) (450) (881) (662) (242)
- ---------------------
(1) "Adjusted EBITDA" is defined as earnings before non-operating
interest, income taxes, depreciation and amortization. Adjusted
EBITDA is a measure of performance which is not recognized under
generally accepted accounting principles and should not replace
income from continuing operations or cash flows in measuring
operating results or liquidity. However, management believes such
measure is an informative representation of how management evaluates
the operating performance of CompleteHome.com Group and its
underlying business segments.
</TABLE>
RECENT OPERATING RESULTS OF COMPLETEHOME.COM GROUP
Prior to the December 1999 launch of the CompleteHome.com website, the
business is primarily comprised of Rent Net, Inc. ("Rent Net"), a leading
on-line apartment listing guide. Revenues for the nine months ended
September 30, 1999 increased 57% to $11.3 million due to an increase in the
number of apartment listings, average price paid per listing and the launch
of a senior housing listing services. Adjusted EBITDA for the nine months
ended September 30, 1999 was a loss of $13.6 million compared to income of
$0.9 million for the same period in 1998. The loss in 1999 is due to an
incentive program Cendant entered into with Rent Net employees while
assessing various strategic alternatives, an expanded marketing campaign in
the third quarter of 1999 that included Rent Net's first television and
radio advertising and an increase in staffing as the Company prepares for
the launch of the CompleteHome.com website. The number of pageviews during
the nine months ended September 30, 1999 increased 158% to 1.58 million as
Rent Net continued to expand product offerings and its sales efforts to
list new apartments. The number of unique user sessions also increased to
24 million in 1999 compared to 20 million in 1998 due in part to the
aforementioned advertising campaign.
GENERAL
The Board of Directors of Cendant is furnishing this Proxy Statement
to solicit proxies in connection with a Special Meeting to be held at 10:00
a.m., New York Time, on January 14, 2000, at the Ramada Inn and Conference
Center, 130 Route 10 West, East Hanover, New Jersey 07936 and at any
adjournments or postponements thereof. We will vote shares represented by
the proxies received and not properly revoked in accordance with the
instructions contained therein. A stockholder who has given a proxy may
revoke it at any time before it is exercised by filing with the Secretary
of Cendant a written revocation or a duly executed proxy bearing a later
date or by voting in person at the Special Meeting. If no choice is
specified on the form of proxy, the shares will be voted "FOR" the approval
of each of Proposals 1 and 2 described in this Proxy Statement. If you
vote "FOR" the Tracking Stock Proposal at the Special Meeting you may be
forfeiting your right to challenge the Tracking Stock Proposal in the
future.
Stockholders of record at the close of business on November 17, 1999
(the "Record Date") are entitled to vote at the Special Meeting. As of the
close of business on the Record Date, there were _____ stockholders of
record and __________________ shares of common stock were outstanding. A
quorum will be met at the Special Meeting if a majority of the outstanding
shares of common stock are present in person or by proxy. Each holder of
common stock will be entitled to one vote for each share held as of the
Record Date, on all matters brought before the Special Meeting.
Representatives of our independent accountants will be present at the
Special Meeting and will have the opportunity to make a statement if they
so desire. The independent accountants will be available to respond to
appropriate questions you might have.
The affirmative vote of the holders of a majority of the outstanding
shares of common stock as of the Record Date is required to approve the
Tracking Stock Proposal and the affirmative vote of the holders of a
majority of the shares of common stock present in person or represented by
proxy at the Special Meeting and entitled to vote thereon is required to
approve the Stock Option Plan Proposal. Abstentions with respect to any
proposal will have the same effect as negative votes on each of the
proposals. With respect to shares held in "street name", if a broker, which
is the record holder of certain shares, indicates on a form of proxy that
it does not have discretionary authority to vote such shares on any
proposal, or if shares are voted in other circumstances in which proxy
authority is defective or has been withheld with respect to such proposal,
these non-voted shares will be counted for quorum purposes but will have
the same effect as a negative vote on Proposal 1 and will have no effect on
Proposal 2.
We will bear the expense of printing and mailing proxy materials. In
addition to soliciting proxies by mail, certain of our directors, officers
and other employees may solicit proxies by personal interview, telephone or
facsimile. We will not pay additional compensation to such persons for such
solicitation. We will reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation materials to beneficial
owners of common stock. We have also retained ChaseMellon Shareholder
Services to perform various proxy advisory, distribution and solicitation
services at a cost of approximately $__ plus disbursements.
RISK FACTORS
You should carefully consider the risk factors described below, as
well as the other information included in this Proxy Statement, before you
decide how to vote on the proposals.
RISK FACTORS RELATING TO THE TRACKING STOCK PROPOSAL
WE CAN NOT PREDICT HOW THE ISSUANCE OF COMPLETEHOME.COM STOCK WILL AFFECT
THE MARKET PRICE OF CD STOCK.
Because there has been no prior market for the CD Stock or the
CompleteHome.com Stock, we can not assure you of their market prices or
liquidity following the implementation of the Tracking Stock Proposal. If
an active market does develop, we can not assure you that it will be
maintained. Until an orderly market does develop for the CompleteHome.com
Stock, its trading price may fluctuate significantly.
We can not predict the price at which CD Stock will trade following
the issuance of CompleteHome.com Stock. The market price of CD Stock may
not equal or exceed the market price of our existing common stock. Some of
the terms of CD Stock and CompleteHome.com Stock may adversely affect the
trading price of CD Stock (or CompleteHome.com Stock, in the event we
decide to undertake an initial public offering of CompleteHome.com Stock in
the future). Examples include:
o the right of Cendant's Board of Directors to issue CD Stock
in exchange for CompleteHome.com Stock, and
o the discretion of Cendant's Board of Directors in making
various determinations relating to a variety of matters
affecting the rights of the holders of CD Stock and
CompleteHome.com Stock, such as dividends, cash management
and allocation matters.
The market prices of the CD Stock and the CompleteHome.com Stock will
be determined in the trading markets. Many factors could affect the market
price of the CD Stock or CompleteHome.com Stock. These factors include:
o our consolidated results, as well as the respective
performances of the Cendant Group and the CompleteHome.com
Group;
o investors' and analysts' expectations for the Company as a
whole and for each of the Groups;
o trading volume, share issuances and repurchases;
o the amount and level of research analyst coverage;
o Board of Directors' and management decisions described
under " Having two series of common stock could create
potential conflicts of interest and the Cendant Board of
Directors could make decisions that adversely affect
stockholders of either Group";
o certain terms of the CD Stock or the CompleteHome.com
Stock, including respective redemption and conversion
rights applicable upon the disposition of substantially all
the assets of a Group and our ability to convert shares of
one Group into shares of the other Group; and
o general economic and market conditions.
The market price of CompleteHome.com Stock may also be affected by the
number of market makers supporting the CompleteHome.com Stock.
INVESTORS MAY NOT VALUE THE CD STOCK OR COMPLETEHOME.COM STOCK BASED ON
GROUP FINANCIAL INFORMATION AND POLICIES.
We can not assure you that investors will value the CD Stock and the
CompleteHome.com Stock based on the reported financial results and
prospects of the separate Groups.
HOLDERS OF CD STOCK AND COMPLETEHOME.COM STOCK WILL BE COMMON STOCKHOLDERS
OF CENDANT AND WILL NOT HAVE ANY LEGAL RIGHTS RELATING TO SPECIFIC ASSETS
OF CENDANT.
Even though we have allocated, for financial reporting purposes, all
of our consolidated assets, liabilities, revenue, expenses and cash flow
between the two Groups in order to prepare their financial statements, the
Tracking Stock Proposal will not change the legal title to any assets or
responsibility for any liabilities and will not affect the rights of any of
our creditors. Holders of CD Stock and CompleteHome.com Stock will not
have any legal rights related to specific assets of either Group, and, in
any liquidation, will receive a share of the net assets of Cendant based on
the relative trading prices of CD Stock and CompleteHome.com Stock rather
than on any assessment of the actual value of Cendant Group or
CompleteHome.com Group. Holders of CD Stock and CompleteHome.com Stock
will be common stockholders of Cendant and, as such, will be subject to all
of the risks associated with an investment in Cendant and all of our
businesses, assets and liabilities, including the pending class action
litigation.
IF CENDANT ENCOUNTERS FINANCIAL DIFFICULTY, THE VALUE OF EITHER GROUP'S
STOCK MAY SUFFER FOR REASONS UNRELATED TO THE PROSPECTS OF THAT GROUP.
Financial results of either Group will affect Cendant's consolidated
results of operations, financial position and borrowing costs. This could
affect the results of operations or financial position of the other Group
or the market price of shares issued with respect to the other Group.
In addition, net losses of either Group and dividends or distributions
on, or repurchases of, either class of common stock of the Groups or
repurchases of any preferred stock of the Company will reduce the funds we
can pay as dividends on each class of common stock under Delaware law. For
these reasons, you should read our consolidated financial information with
the financial information we provide for each Group.
EXISTING STOCKHOLDERS OF CENDANT WILL HAVE A REDUCED INTEREST IN
COMPLETEHOME.COM GROUP.
Holders of CD Stock will participate in the ownership of
CompleteHome.com Group through Cendant Group's retained interest in
CompleteHome.com Group. Cendant Group's economic interest in
CompleteHome.com Group will decrease as a result of the issuance of
CompleteHome.com Stock. After any issuance of CompleteHome.com Stock, the
existing stockholders of Cendant will no longer share in the gains or
losses attributable to the portion of CompleteHome.com Group that is
represented by the outstanding shares of CompleteHome.com Stock. The price
at which any shares of CompleteHome.com Stock may be sold in the future may
not reflect accurately the value of CompleteHome.com Stock and thus holders
of CD Stock may not appropriately benefit from such issuances. Existing
stockholders of Cendant will not have any special rights to subscribe for
CompleteHome.com Stock.
THE COST OF MAINTAINING SEPARATE GROUPS WILL LIKELY EXCEED THE COSTS
ASSOCIATED WITH OPERATING CENDANT AS A SINGLE ENTITY.
The costs associated with implementing the Tracking Stock Proposal and
the ongoing costs of operating separate Groups will likely exceed the costs
associated with operating Cendant as it currently exists. In particular,
the issuance of the CompleteHome.com Stock will result in a complex capital
structure and additional financial reporting requirements with respect to
each Group.
HAVING TWO SERIES OF COMMON STOCK COULD CREATE POTENTIAL CONFLICTS OF
INTEREST AND THE CENDANT BOARD OF DIRECTORS COULD MAKE DECISIONS THAT
ADVERSELY AFFECT STOCKHOLDERS OF EITHER GROUP.
Having two series of common stock could give rise to occasions when
the interests of holders of one series might diverge or appear to diverge
from the interests of holders of the other series. In addition, due to the
extensive relationships between, and the similarity of certain businesses
of Cendant Group and CompleteHome.com Group, there will likely be inherent
conflicts of interest between the two Groups. The Cendant Board of
Directors or the special committee created to resolve conflicts between the
Groups, in their sole discretion, will make operational and financial
decisions and implement policies that may affect the businesses of Cendant
Group and CompleteHome.com Group differently, potentially favoring one
Group at the expense of the other. Examples include:
o decisions as to whether to allocate the proceeds of
issuances (or the costs of repurchases) of CompleteHome.com
Stock to Cendant Group in respect of its retained interest
in CompleteHome.com Group or to the equity of
CompleteHome.com Group,
o decisions as to how to allocate consideration received in
connection with a merger involving Cendant between holders
of CD Stock and CompleteHome.com Stock,
o decisions as to whether and when to issue CD Stock in
exchange for CompleteHome.com Stock or CompleteHome.com
Stock in exchange for CD Stock,
o decisions as to whether and when to approve dispositions of
assets of either Group,
o decisions as to how to allocate available cash between
Cendant Group and CompleteHome.com Group and decisions as to
whether and how to make transfers of funds from one Group to
another,
o decisions as to whether to pay or omit the payment of
dividends on CD Stock or CompleteHome.com Stock,
o decisions as to whether and to what extent the two Groups
compete with each other and how corporate opportunities are
allocated between the two Groups.
If directors own disproportionate interests (in percentage or value
terms) in CD Stock and CompleteHome.com Stock, that disparity could create
or appear to create potential conflicts of interest when they are faced
with decisions that could have different implications for the stockholders
of either Group.
THE CENDANT BOARD OF DIRECTORS HAS SOLE DISCRETION TO CHANGE CASH
MANAGEMENT AND ALLOCATION POLICIES AND THIS MAKES IT RISKIER TO BE A HOLDER
OF CD STOCK OR COMPLETEHOME.COM STOCK THAN A HOLDER OF ORDINARY COMMON
STOCK.
The Cendant Board of Directors has adopted certain policies relating
to cash management and allocations between Cendant Group and
CompleteHome.com Group. The Board of Directors may modify or rescind our
policies with respect to the allocation of corporate overhead, taxes, debt,
interest and other matters, or may adopt additional policies, in its sole
discretion without stockholder approval. Although it has no present
intention to do so, the Board of Directors may, in its sole discretion,
modify, rescind or add to any of these policies. The Board of Directors'
discretion to change these policies makes it riskier to be a holder of CD
Stock or CompleteHome.com Stock than a holder of ordinary common stock. A
Board of Directors decision to modify or rescind these policies, or adopt
additional policies could have different effects on holders of CD Stock and
holders of CompleteHome.com Stock or could result in a benefit or detriment
to one class of stockholders compared to the other class. The Board of
Directors will make any such decision in accordance with its good faith
business judgment that the decision is in the best interests of the Company
and all of its stockholders as a whole. For a more comprehensive
description of these policies, see "Proposal 1 The Tracking Stock Proposal
Certain Cash Management and Allocation Policies."
PRINCIPLES OF DELAWARE LAW MAY PROTECT DECISIONS OF THE CENDANT BOARD OF
DIRECTORS THAT HAVE A DISPARATE IMPACT UPON HOLDERS OF CD STOCK AND
COMPLETEHOME.COM STOCK.
Delaware law provides that a Board of Directors owes an equal duty to
all stockholders regardless of class or series and does not have separate
or additional duties to the holders of any particular class or series of
stock. Recent cases in Delaware involving tracking stocks have established
that decisions by directors or officers involving differing treatment of
tracking stocks may be judged under the "business judgment rule." Under
these principles of Delaware law and the "business judgment rule," you may
not be able to challenge Board of Directors' decisions that have a
disparate impact upon holders of CD Stock and CompleteHome.com Stock if the
Board of Directors is adequately informed with respect to such decisions
and acts in good faith and in the honest belief that it is acting in the
best interests of Cendant's stockholders and does not have a conflict of
interest.
STOCKHOLDERS WILL NOT VOTE ON HOW TO ALLOCATE CONSIDERATION RECEIVED IN
CONNECTION WITH A MERGER AMONG HOLDERS OF CD STOCK AND HOLDERS OF
COMPLETEHOME.COM STOCK.
Our charter will not contain any provisions governing how
consideration received in connection with a merger or consolidation
involving Cendant is to be allocated between holders of CD Stock and
holders of CompleteHome.com Stock. Neither holders of CD Stock nor holders
of CompleteHome.com Stock will have a separate class vote in any merger or
consolidation so long as we divide the type and amount of consideration
between holders of CD Stock and holders of CompleteHome.com Stock in a
manner we determine, in our sole discretion, to be fair. In any such
merger or consolidation, the different ways we may divide the consideration
might have materially different results. As a result, the consideration to
be received by holders of CD Stock or CompleteHome.com Stock in any such
merger or consolidation may be materially less valuable than the
consideration they would have received if that business had been sold
separately or if they had a separate class vote on such merger or
consolidation.
WE HAVE THE OPTION, UNDER CERTAIN CIRCUMSTANCES, TO EXCHANGE ONE SERIES OF
COMMON STOCK FOR THE OTHER SERIES AND THIS MAY BE DISADVANTAGEOUS TO
HOLDERS OF CD STOCK OR THE HOLDERS OF COMPLETEHOME.COM STOCK.
Under certain circumstances, we will have the right to issue shares of
one series of common stock in exchange for outstanding shares of the other
series of common stock. Because certain exchanges would be at a premium to
the market value, and since we could determine to effect an exchange at a
time when either or both of CD Stock and CompleteHome.com Stock may be
considered to be overvalued or undervalued, any such exchange may be
disadvantageous to holders of CD Stock or holders of CompleteHome.com
Stock. In addition, such exchange would preclude holders of the exchanged
series of common stock from retaining their investment in a security that
is intended to reflect separately the performance of the corresponding
Group.
WE MAY DISPOSE OF ASSETS OF EITHER CENDANT GROUP OR COMPLETEHOME.COM GROUP
WITHOUT YOUR APPROVAL.
Delaware law requires stockholder approval only for a sale or other
disposition of all or substantially all of the assets of Cendant. As long
as the assets attributed to a Group represent less than substantially all
of Cendant's assets, we may approve sales and other dispositions of any
amount of the assets of that Group without any stockholder approval. If we
dispose of all or substantially all of the assets of either Group, we would
be required, if the disposition is not an exempt disposition under the
terms of our charter, to choose one of the following three alternatives:
o declare and pay a dividend in an amount equal to their
Proportionate Interest in the Net Proceeds of such
disposition,
o redeem shares of the relevant series of stock for an amount
equal to their Proportionate Interest in the Net Proceeds of
such disposition, or
o exchange shares of one series for outstanding shares of the
other series at a 10% premium.
Consequently, holders of either series of common stock may receive less
value for their shares than the value that a third-party buyer might pay
for all or substantially all of the assets of such Group. In addition, we
can not assure you that the net proceeds per share of the common stock
relating to that Group will be equal to or more than the market value per
share of such common stock prior to or after announcement of a disposition.
The Board of Directors will decide, in its sole discretion, how to proceed
and is not required to select the option that would result in the highest
value to holders of CD Stock or CompleteHome.com Stock.
WE ARE NOT REQUIRED TO PAY DIVIDENDS EQUALLY ON CD STOCK AND
COMPLETEHOME.COM STOCK.
Although we do not intend to pay cash dividends in the foreseeable
future, the Cendant Board of Directors could elect to pay dividends on CD
Stock or CompleteHome.com Stock, or both, in equal or unequal amounts.
Such a decision would not necessarily have to reflect:
o the financial performance of either Cendant Group or
CompleteHome.com Group,
o the amount of assets available for dividends on either
series, or
o the amount of prior dividends declared on either series.
HOLDERS OF CD STOCK AND COMPLETEHOME.COM STOCK WILL VOTE TOGETHER AS A
SINGLE CLASS AND WILL HAVE LIMITED SEPARATE VOTING RIGHTS.
Holders of CD Stock and CompleteHome.com Stock will vote together as a
single class, except in certain limited circumstances provided under the
Delaware General Corporation Law. When holders of CD Stock and
CompleteHome.com Stock vote together as a single class, holders of the
series of common stock having a majority of the votes will be in a position
to control the outcome of the vote even if the matter involves a conflict
of interest between holders of CD Stock and holders of CompleteHome.com
Stock. We expect that, for the foreseeable future, the holders of CD Stock
will have a substantial majority of the voting power of the Company because
the aggregate number of outstanding shares of CD Stock will be
substantially higher than the aggregate number of outstanding shares of
CompleteHome.com Stock.
HAVING TWO SERIES OF COMMON STOCK MAY INHIBIT OR PREVENT ACQUISITION BIDS
FOR CENDANT, CENDANT GROUP OR COMPLETEHOME.COM GROUP.
If Cendant Group and CompleteHome.com Group were separate companies,
any person interested in acquiring either Cendant Group or CompleteHome.com
Group without negotiating with management could seek control of that entity
by obtaining control of its outstanding voting stock by means of a tender
offer or proxy contest. Although we intend CD Stock and CompleteHome.com
Stock to reflect the separate performances of Cendant Group and
CompleteHome.com Group, a person interested in acquiring only one Group
without negotiation with Cendant's management could obtain control of that
Group only by obtaining control of the outstanding voting stock of Cendant.
The existence of two series of common stock could present complexities
and could in certain circumstances pose obstacles, financial and otherwise,
to an acquiring person. The existence of two series of common stock could,
under certain circumstances, prevent stockholders from profiting from an
increase in the market value of their shares as a result of a change in
control of Cendant by delaying or preventing such a change in control.
In addition, some of the provisions of our charter, by-laws, and
Delaware law may inhibit changes of control not approved by the Board of
Directors. For additional anti-takeover constraints, see "Proposal 1 The
Tracking Stock Proposal Certain Other Provisions of the Restated
Certificate of Incorporation, By-laws and Delaware Law."
THE VALUES OF CD STOCK AND COMPLETEHOME.COM STOCK MAY DECLINE DUE TO FUTURE
ISSUANCES OF CD STOCK OR COMPLETEHOME.COM STOCK.
Our charter will allow the Cendant Board of Directors, in its sole
discretion, to issue authorized but unissued shares of common stock. The
Board of Directors may issue CD Stock or CompleteHome.com Stock to, among
other things:
o raise capital,
o provide compensation or benefits to employees,
o pay stock dividends, or
o acquire companies or businesses.
Under Delaware General Corporation Law, the Board of Directors would
not need your approval for these issuances. We do not intend to seek your
approval for any such issuances unless:
o stock exchange regulations or other applicable law require
approval or
o the Board of Directors deems it advisable.
WE MAY NOT OFFER COMPLETEHOME.COM STOCK AT ALL.
This Proxy Statement describes our current intentions regarding future
issuances of CompleteHome.com Stock. Because such issuances are subject to
various conditions and uncertainties, we can not assure you that any will
occur.
THE IRS COULD ASSERT THAT THE RECEIPT OF THE TRACKING STOCK IS TAXABLE.
We have been advised by Skadden that neither you nor Cendant will
recognize income, gain or loss for federal income tax purposes as a result
of the adoption of the Tracking Stock Proposal. However, the Internal
Revenue Service could disagree. There are no court decisions or other
authorities bearing directly on the effect of implementation of a proposal
such as the Tracking Stock Proposal. In addition, the Internal Revenue
Service has announced that it will not issue rulings on the
characterization of stock with characteristics similar to CD Stock and
CompleteHome.com Stock. It is possible, therefore, that the Internal
Revenue
Service could successfully assert that the issuance or receipt of CD Stock
or CompleteHome.com Stock, as well as the subsequent conversion of one
stock into the other, could be taxable to us and/or to you.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Some of the information in this Proxy Statement may constitute
forward-looking statements which are subject to various risks and
uncertainties. Such statements can be identified by the use of forward-
looking terminology such as "believes," "may," "will," "expect,"
"anticipate," "estimate," "continue," "plan" or other similar words. These
statements discuss future expectations, contain projections of results of
operations or of financial condition or state other "forward-looking"
information and we can not guarantee that we will actually achieve such
expectations, or projections or plans. When considering such forward-
looking statements, you should keep in mind the factors described in "Risk
Factors" and other cautionary statements appearing elsewhere in this Proxy
Statement. Such risk factors and statements describe circumstances which
could cause actual results to differ materially from those contained in any
forward-looking statement. The forward-looking statements do not reflect
the potential impact of any future acquisitions, merger or dispositions.
We do not assume any obligation to update any forward-looking statement we
make.
PROPOSAL 1 THE TRACKING STOCK PROPOSAL
GENERAL
At the Special Meeting, we will ask you to consider and approve the
Tracking Stock Proposal described in this Proxy Statement. Stockholder
approval of the Tracking Stock Proposal would allow us to amend and restate
our charter to:
o Increase the number of authorized shares of common stock
from 2,000,000,000 to 2,500,000,000, initially consisting
of 2,000,000,000 shares of CD Stock and 500,000,000 shares
of CompleteHome.com Stock.
o Create a new series of common stock called CompleteHome.com
Stock that could be issued from time to time by the Board
of Directors.
o Re-classify each outstanding share of existing common stock
into a share of CD Stock.
We intend CompleteHome.com Stock to reflect the performance of
CompleteHome.com Group, our internet real estate services portal. We
intend CD Stock to reflect the performance of Cendant Group, our other
businesses and a retained interest in CompleteHome.com Group. Cendant
Group's economic interest in CompleteHome.com Group, excluding the interest
represented by any outstanding shares of CompleteHome.com Group held by
third parties, if any, is called the "retained interest." We have
allocated, for financial reporting purposes, all of Cendant's consolidated
assets, liabilities, revenue, expenses and cash flow between Cendant Group
and CompleteHome.com Group. In this Proxy Statement, each of Cendant Group
and CompleteHome.com Group is sometimes called a "Group." In the future,
we will publish combined financial statements of Cendant Group and combined
financial statements of CompleteHome.com Group together with consolidated
financial statements of Cendant. See " Certain Cash Management and
Allocation Policies."
We currently plan to grant options for CompleteHome.com Stock under
the CompleteHome.com Option Plan to CompleteHome.com Group employees and
certain Cendant Group employees following stockholder approval of the Stock
Option Plan Proposal and the Tracking Stock Proposal. Subject to
prevailing market and other conditions, we currently expect to issue
additional shares of CompleteHome.com Stock in one or more private or
public financings within 12 months of stockholder approval of the Tracking
Stock Proposal. The specific terms of the financings, including whether
they are private or public, the amount of CompleteHome.com Stock we issue,
and the timing of the financings, will depend upon factors such as stock
market conditions and the performance of CompleteHome.com Group. In
addition to or in lieu of any offerings, we reserve the right to distribute
CompleteHome.com Stock to stockholders.
We expect to file an amended and restated certificate of incorporation
implementing the Tracking Stock Proposal (the "Restated Certificate of
Incorporation") and re-classify your common stock following the Meeting,
assuming the Tracking Stock Proposal and the Stock Option Plan Proposal are
each approved.
BACKGROUND AND REASONS FOR THE TRACKING STOCK PROPOSAL
We continually review each of our businesses and Cendant as a whole to
determine the best way to realize its inherent value. As a result of this
review process, we recently began to evaluate various alternatives,
including creation of a Cendant "tracking stock" intended to reflect the
performance of CompleteHome.com Group.
Upon management's recommendation and after extensive consultation with
our financial and legal advisors, the Board of Directors determined that
the issuance of tracking stock would be desirable for a number of reasons,
as discussed below. On September 30, 1999, the Cendant Board of Directors
carefully considered the Tracking Stock Proposal and the Stock Option Plan
Proposal described in this Proxy Statement, determined that those proposals
are in the best interests of Cendant and its stockholders, unanimously
approved them and resolved to recommend that you vote for them.
In arriving at its determination and recommendation, the Board of
Directors, with the assistance of its financial and legal advisors,
considered, among other things, the following benefits from the
authorization of CompleteHome.com Stock:
o The proposal will permit investors to review separate
information about CompleteHome.com Group and separately
value CompleteHome.com Stock. This should encourage
investors and analysts to focus more attention on
CompleteHome.com Group and result in greater market
recognition of the value of CompleteHome.com Group to
Cendant.
o The proposal will enable us to issue CompleteHome.com Stock
in a private or public financing, thus raising capital for
Cendant Group and/or CompleteHome.com Group and to create a
public trading market for CompleteHome.com Stock.
o The proposal will enable us to grant stock options tied to
CompleteHome.com Stock, thereby providing more focused
incentives to CompleteHome.com Group management and
employees.
o The proposal will provide us with greater flexibility to
raise capital and respond to strategic opportunities
(including acquisitions), because it will allow us to issue
either CD Stock or CompleteHome.com Stock as appropriate
under the circumstances.
o The proposal is expected to enable us to realize more value
from CompleteHome.com Group while preserving the financial,
tax, operational, strategic and other benefits of being a
single consolidated entity.
The Board of Directors also evaluated the potential negative aspects
of the Tracking Stock Proposal, including the following:
o The Tracking Stock Proposal will require a complex capital
structure and additional financial reporting requirements
with respect to each Group.
o The costs associated with implementing the Tracking Stock
Proposal and the ongoing cost of operating separate Groups
will likely exceed the costs of operating Cendant as it
currently exists.
o The Tracking Stock Proposal will expand the Board of
Directors' responsibility to oversee the interests of two
series of common stockholders.
o The potential diverging or conflicting interests between the
holders of CD Stock and the holders of CompleteHome.com
Stock and issues that the Board of Directors may face in
resolving any conflicts.
The Board of Directors determined that the positive aspects of the
Tracking Stock Proposal outweighed the negative aspects and concluded that
the Tracking Stock Proposal and the Stock Option Plan Proposal are in the
best interests of Cendant and its stockholders.
DESCRIPTION OF CD STOCK AND COMPLETEHOME.COM STOCK
THE FOLLOWING DESCRIPTION IS NOT COMPLETE AND SHOULD BE READ WITH
ANNEX II TO THIS PROXY STATEMENT, WHICH CONTAINS THE FULL TEXT OF THE
RESTATED CERTIFICATE OF INCORPORATION THAT WILL BE FILED PURSUANT TO THE
TRACKING STOCK PROPOSAL.
General
Our current amended and restated certificate of incorporation (which
we call the "Current Certificate of Incorporation") authorizes us to issue
2,010,000,000 shares, consisting of 2,000,000,000 shares of common stock,
par value $.01 per share, and 10,000,000 shares of preferred stock, par
value $.01 per share ("Preferred Stock"). Only the Preferred Stock is
currently issuable in series by the Board of Directors. As of November _____
, 1999, we had approximately ___ million shares of common stock and no
shares of Preferred Stock issued and outstanding.
In order to implement the Tracking Stock Proposal, we would file the
Restated Certificate of Incorporation which would amend and restate our
Current Certificate of Incorporation. The Restated Certificate of
Incorporation would:
o Increase the number of authorized shares of common stock
from 2,000,000,000 to 2,500,000,000, initially composed of
2,000,000,000 shares of CD Stock and 500,000,000 shares of
CompleteHome.com Stock.
o Create a new series of common stock called CompleteHome.com
Stock, which could be issued from time to time by the Board
of Directors.
o Re-classify each outstanding share of common stock into a
share of CD Stock. (The filing would not change the
authorized Preferred Stock.)
We intend CompleteHome.com Stock to reflect the performance of
CompleteHome.com Group, our internet real estate services portal. We intend
CD Stock to reflect the performance of Cendant Group, which consists of our
other businesses and our retained interest in CompleteHome.com Group. We
have allocated, for financial accounting purposes, all of Cendant's
consolidated assets, liabilities, revenue, expenses and cash flow between
Cendant Group and CompleteHome.com Group. In the future, we will publish
combined financial statements of Cendant Group and combined financial
statements of CompleteHome.com Group together with consolidated financial
statements of Cendant.
The full definitions of the terms "Cendant Group" and
"CompleteHome.com Group" are set forth under " Mandatory Dividend,
Redemption or Exchange on Disposition of All or Substantially All of the
Assets of a Group" below.
Before we first issue shares of CompleteHome.com Stock, the Board of
Directors would designate the initial Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group.
See " Cendant Group's Retained Interest in CompleteHome.com Group,"
" Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group" and Annex I for additional information
about Cendant Group's Retained Interest in CompleteHome.com Group and the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group.
The Board of Directors will have the authority to increase or decrease
from time to time the total number of authorized shares comprising either
series of common stock. However, the Board of Directors could not increase
the number of authorized shares of a series above a number which, when
added to all of the authorized shares of the other series of common stock,
would exceed the total authorized number of shares of common stock.
Likewise, the Board of Directors could not decrease the number of
authorized shares of a series below the number of shares of such series
then outstanding.
The Board of Directors will have the authority in its sole discretion
to issue authorized but unissued shares of common stock from time to time
for any proper corporate purpose. The Board of Directors will have the
authority to do so without your approval, except as provided by Delaware
law or the rules and regulations of any securities exchange on which any
series of outstanding common stock may then be listed.
Dividends
We currently intend to retain all of our earnings to finance the
operation and expansion of our business.
We therefore do not expect to pay any cash dividends on CD Stock or
CompleteHome.com Stock in the foreseeable future. Although we do not
expect to pay dividends on CD Stock or CompleteHome.com Stock for the
foreseeable future, we will be permitted to pay dividends on
o CD Stock out of the lesser of (1) the assets of Cendant
legally available for the payment of dividends under
Delaware law and (2) the Available Dividend Amount for
Cendant Group and
o CompleteHome.com Stock (and corresponding amounts to the
Cendant Group with respect to its Retained Interest in
CompleteHome.com Group) out of the lesser of (1) the assets
of Cendant legally available for the payment of dividends
under Delaware law and (2) the Available Dividend Amount for
CompleteHome.com Group.
The "Available Dividend Amount" for Cendant Group at any time is the
amount that would then be legally available for the payment of dividends on
Cendant Group's common stock under Delaware law if (1) Cendant Group and
CompleteHome.com Group were each a separate Delaware corporation, (2)
Cendant Group had outstanding (a) a number of shares of common stock, par
value $0.01 per share, equal to the number of shares of CD Stock that are
then outstanding and (b) a number of shares of preferred stock, par value
$0.01 per share, equal to the number of shares of Preferred Stock of
Cendant that have been attributed to Cendant Group and are then
outstanding, (3) the assumptions about CompleteHome.com Group set forth in
the next sentence were true and (4) Cendant Group owned a number of shares
of CompleteHome.com Stock equal to the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group.
Similarly, the "Available Dividend Amount" for CompleteHome.com Group at
any time is the amount that would then be legally available for the payment
of dividends on CompleteHome.com Stock under Delaware law if
CompleteHome.com Group were a separate Delaware corporation having
outstanding (1) a number of shares of common stock, par value $0.01 per
share, equal to the number of shares of CompleteHome.com Stock that are
then outstanding plus the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group and (2) a number of
shares of preferred stock, par value $0.01 per share, equal to the number
of shares of Preferred Stock of Cendant that have been attributed to
CompleteHome.com Group and are then outstanding.
The amount legally available for the payment of dividends on common
stock of a corporation under Delaware law is generally limited to (1) the
total assets of the corporation less its total liabilities less (2) the
aggregate par or stated value of the outstanding shares of its common and
preferred stock. However, if that amount is not greater than zero, the
corporation may also pay dividends out of the net profits for the
corporation for the fiscal year in which the dividend is declared and/or
the preceding fiscal year. As mentioned above, these restrictions will
form the basis for calculating the Available Dividend Amounts for Cendant
Group and CompleteHome.com Group. These restrictions will also form the
basis for calculating the aggregate amount of dividends that Cendant as a
whole can pay on its common stock (regardless of series). Thus, net losses
of either Group, and any dividends and distributions on, or repurchases of,
either series of common stock, will reduce the assets legally available for
dividends on both series of common stock.
Subject to the foregoing limitations (and to any other limitations set
forth in any future series of Preferred Stock or in any agreements binding
on Cendant from time to time), we have the right to pay dividends on both,
one or neither series of common stock in equal or unequal amounts,
notwithstanding the performance of either Group, the amount of assets
available for dividends on either series, the amount of prior dividends
paid on either series, the respective voting rights of each series or any
other factor.
At the time of any dividend on the outstanding shares of
CompleteHome.com Stock (including any dividend required as a result of a
disposition of All or Substantially All of the Assets of CompleteHome.com
Group, but excluding any dividend payable in shares of CompleteHome.com
Stock) we will credit to Cendant Group, and charge against CompleteHome.com
Group, a corresponding amount in respect of Cendant Group's Retained
Interest in CompleteHome.com Group. Specifically, the corresponding amount
will equal (1) the aggregate amount of such dividend times (2) a fraction,
the numerator of which is the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group and the
denominator of which is the number of shares of CompleteHome.com Stock then
outstanding.
Mandatory Dividend, Redemption or Exchange on Disposition of All or
Substantially All of the Assets of a Group
If we dispose of All or Substantially All of the Assets of a Group to
one or more persons or entities, in one transaction or a series of related
transactions (collectively, a "Disposition"), and the Disposition is not an
Exempt Disposition as defined below, we would be required, by the 85th
Trading Day after the consummation of such Disposition, to choose one of
the following three alternatives:
o declare and pay a dividend to holders of the series of
common stock that relates to that Group (in cash, securities
(other than common stock of Cendant) or other property, or a
combination thereof), in an amount having a Fair Value equal
to their Proportionate Interest in the Net Proceeds of such
Disposition,
o redeem from holders of the series of common stock that
relates to that Group, for cash, securities (other than
common stock of Cendant) or other property (or a combination
thereof) in an amount having a Fair Value equal to their
Proportionate Interest in the Net Proceeds of such
Disposition, all of the outstanding shares of the relevant
series of common stock (or, if such Group continues after
such Disposition to own any material assets other than the
proceeds of such Disposition, a number of shares of such
series of common stock having an aggregate average Market
Value, during the 20 consecutive Trading Day period
beginning on the 16th Trading Day immediately following the
date on which the Disposition is consummated, equal to such
Fair Value), or
o issue shares of the series of common stock that does not
relate to that Group in exchange for all of the outstanding
shares of the series of common stock that relates to that
Group at a 10% premium (based on the average Market Value of
the relevant series of common stock as compared to the
average Market Value of the other series of common stock
during the 20 consecutive Trading Day period beginning on
the 16th Trading Day immediately following the date on which
the Disposition is consummated).
In connection with any special dividend on, or redemption of
CompleteHome.com Stock as described above, we will credit to Cendant Group,
and charge against CompleteHome.com Group a corresponding amount in respect
of Cendant Group's Retained Interest in CompleteHome.com Group.
Specifically, the corresponding amount will equal (1) the aggregate Fair
Value of such dividend or redemption times (2) a fraction, the numerator of
which is the Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group and the denominator of which is
the number of shares of CompleteHome.com Stock then outstanding. In
addition, in connection with any partial redemption of CompleteHome.com
Stock as described above, we will decrease the Number of Shares Issuable
with Respect to Cendant Group's Retained Interest in CompleteHome.com Group
by the same proportion as the proportionate decrease in outstanding shares
of CompleteHome.com Stock caused by such redemption.
At any time within one year after completing any dividend or partial
redemption of the sort referred to above, we will have the right to issue
shares of the series of common stock that does not relate to the Group in
question in exchange for outstanding shares of the series of common stock
that relates to that Group at a 10% premium (based on the average Market
Value of the relevant series of common stock as compared to the average
Market Value of the other series of common stock during the 20 consecutive
Trading Day period ending on the 5th Trading Day immediately preceding the
date on which Cendant mails the notice of exchange to holders of the
relevant series). In determining whether to effect any such exchange
following such a dividend or partial redemption, we would, in addition to
other matters, consider whether the remaining assets of such Group continue
to constitute a viable business, the number of shares of such common stock
remaining issued and outstanding, the per share market price of such common
stock and the ongoing cost of continuing to have a separate series of such
common stock outstanding.
The following terms used in this document have the meanings specified
in our Restated Certificate of Incorporation and are set forth below:
"All or Substantially All of the Assets" of either Group means a
portion of such assets that represents at least 80% of the then-current
Fair Value of the assets of such Group, which for the Cendant Group
includes the value of its Retained Interest in CompleteHome.com Group.
"Cendant Group" means (1) all of the businesses, assets and
liabilities of Cendant and its subsidiaries, other than the businesses,
assets and liabilities that are part of CompleteHome.com Group, (2) the
rights and obligations of Cendant Group under any inter-Group debt deemed
to be owed to or by Cendant Group (as such rights and obligations are
defined in accordance with policies established from time to time by the
Board of Directors) and (3) a proportionate interest in CompleteHome.com
Group (after giving effect to any options, Preferred Stock, other
securities or debt issued or incurred by Cendant and attributed to
CompleteHome.com Group) equal to the Retained Interest Percentage; provided
that:
(a) Cendant may re-allocate assets from one Group to the other
Group in return for other assets or services rendered by that other
Group in the ordinary course of business or in accordance with
policies established by the Board of Directors or a committee thereof
from time to time, and
(b) if Cendant transfers cash, other assets or securities to
holders of shares of CompleteHome.com Stock as a dividend or other
distribution on shares of CompleteHome.com Stock (other than a
dividend or distribution payable in shares of CompleteHome.com Stock),
or as payment in a redemption of shares of CompleteHome.com Stock
effected as a result of a CompleteHome.com Stock Disposition, then the
Board of Directors shall re-allocate from CompleteHome.com Group to
Cendant Group cash or other assets having a Fair Value equal to the
aggregate Fair Value of the cash, other assets or securities so
transferred times a fraction, the numerator of which shall equal the
Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group on the record date for such
dividend or distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of
CompleteHome.com Stock outstanding on such date.
"CompleteHome.com Group" means (1) the internet real estate services
portal called CompleteHome.com, including all of the businesses, assets and
liabilities of Cendant and its subsidiaries that the Board of Directors
has, as of the date on which the Restated Certificate of Incorporation
becomes effective under Delaware law (the "Effective Date"), allocated to
CompleteHome.com Group, (2) any assets or liabilities acquired or incurred
by Cendant or any of its subsidiaries after the Effective Date in the
ordinary course of business and attributable to CompleteHome.com Group, (3)
any businesses, assets or liabilities acquired or incurred by Cendant or
any of its subsidiaries after the Effective Date that the Board of
Directors has specifically allocated to CompleteHome.com Group or that
Cendant otherwise allocates to CompleteHome.com Group in accordance with
policies established from time to time by the Board of Directors, and (4)
the rights and obligations of CompleteHome.com Group under any inter-Group
debt deemed to be owed to or by CompleteHome.com Group (as such rights and
obligations are defined in accordance with policies established from time
to time by the Board of Directors); provided that:
(a) Cendant may re-allocate assets from one Group to the other
Group in return for other assets or services rendered by that other
Group in the ordinary course of business or in accordance with
policies established by the Board of Directors from time to time and
(b) if Cendant transfers cash, other assets or securities to
holders of shares of CompleteHome.com Stock as a dividend or other
distribution on shares of CompleteHome.com Stock (other than a
dividend or distribution payable in shares of CompleteHome.com Stock),
or as payment in a redemption of shares of CompleteHome.com Stock
effected as a result of a CompleteHome.com Stock Disposition, then the
Board of Directors shall re-allocate from CompleteHome.com Group to
Cendant Group cash or other assets having a Fair Value equal to the
aggregate Fair Value of the cash, other assets or securities so
transferred times a fraction, the numerator of which shall equal the
Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group on the record date for such
dividend or distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of
CompleteHome.com Stock outstanding on such date.
"Exempt Disposition" means any of the following:
o a Disposition in connection with the liquidation,
dissolution or winding-up of Cendant and the distribution of
assets to stockholders,
o a Disposition to any person or entity controlled by Cendant
(as determined by the Board of Directors in its sole
discretion),
o a Disposition by either Group for which Cendant receives
consideration primarily consisting of equity securities
(including, without limitation, capital stock of any kind,
interests in a general or limited partnership, interests in
a limited liability company or debt securities convertible
into or exchangeable for, or options or warrants to acquire,
any of the foregoing, in each case without regard to the
voting power or other management or governance rights
associated therewith) of an entity which is primarily
engaged or proposes to engage primarily in one or more
businesses similar or complementary to businesses conducted
by such Group prior to the Disposition, as determined by the
Board of Directors in its sole discretion,
o a dividend, out of CompleteHome.com Group's assets, to
holders of CompleteHome.com Stock and a transfer of a
corresponding amount of CompleteHome.com Group's assets to
Cendant Group in respect of its Retained Interest in
CompleteHome.com Group,
o a dividend, out of Cendant Group's assets, to holders of CD
Stock and
o any other Disposition, if (1) at the time of the Disposition
there are no shares of CD Stock outstanding, (2) at the time
of the Disposition there are no shares of CompleteHome.com
Stock outstanding, or (3) before the 30th Trading Day
following the Disposition we have mailed a notice stating
that we are exercising our right to exchange all of the
outstanding shares of CD Stock or CompleteHome.com Stock for
newly issued shares of the other series of common stock as
contemplated under " Optional Exchange of One Series of
Common Stock For The Other Series" below.
"Fair Value" means (1) in the case of cash, the amount thereof, (2) in
the case of capital stock that has been Publicly Traded for a period of at
least 15 months, the Market Value thereof, and (3) in the case of other
assets or securities, the fair market value thereof as the Board of
Directors shall determine in good faith. Any good faith Board of Directors
determination of Fair Value shall be conclusive and binding on all
stockholders.
"Market Capitalization" of either series of common stock on any date
means the Market Value of a share of such series on such date times the
number of shares of such series outstanding on such date. Shares issuable
with respect to Cendant Group's Retained Interest in CompleteHome.com Group
are not considered to be outstanding unless and until they are in fact
issued to third parties.
"Market Value" of a share of any class or series of capital stock on
any Trading Day generally means the average of the high and low reported
sales prices regular way of a share of such class or series on such Trading
Day, subject to certain exceptions as described in our Restated Certificate
of Incorporation.
The "Net Proceeds" of a Disposition of any of the assets of a Group
means the positive amount, if any, remaining from the gross proceeds of
such Disposition after any payment of, or reasonable provision (as
determined in good faith by the Board of Directors, which determination
will be conclusive and binding on all stockholders) for (1) any taxes
payable by Cendant in respect of such Disposition, (2) any taxes payable by
Cendant in respect of any resulting dividend or redemption, (3) any
transaction costs, including, without limitation, any legal, investment
banking and accounting fees and expenses, and (4) any liabilities
(contingent or otherwise) of, attributed to or related to, such Group,
including, without limitation, any liabilities for deferred taxes, any
indemnity or guarantee obligations which are outstanding or incurred in
connection with the Disposition or otherwise, any liabilities for future
purchase price adjustments and any obligations with respect to outstanding
securities (other than CompleteHome.com Stock) attributed to such Group.
"NYSE" means New York Stock Exchange.
"Proportionate Interest" of holders of CompleteHome.com Stock in the
Net Proceeds of a CompleteHome.com Group Disposition (or in the outstanding
shares of common stock of any subsidiaries holding CompleteHome.com Group's
assets and liabilities) means the amount of such Net Proceeds (or the
number of such shares) times the number of shares of CompleteHome.com Stock
outstanding divided by the Total Number of Notional CompleteHome.com Shares
Deemed Outstanding. "Proportionate Interest" of holders of CD Stock in the
Net Proceeds of a Cendant Group Disposition (or in the outstanding shares
of common stock of any subsidiaries holding Cendant Group's assets and
liabilities) means the amount of such Net Proceeds (or the number of such
shares).
"Publicly Traded" with respect to any class of securities means (1)
registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (or any successor provision of law), and (2)
listed for trading on the NYSE (or any other national securities exchange
registered under Section 7 of the Exchange Act (or any successor provision
of law)) or listed on the Nasdaq NMS (or any successor market system).
"Total Number of Notional CompleteHome.com Shares Deemed Outstanding"
at any time means the number of shares of CompleteHome.com Stock then
outstanding plus the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group.
"Trading Day" means each weekday on which the relevant security (or,
if there are two relevant securities, each relevant security) is traded on
the principal national securities exchange on which it is listed or
admitted to trading or on the Nasdaq NMS or, if such security is not listed
or admitted to trading on a national securities exchange or quoted on the
Nasdaq NMS, traded in the principal over-the-counter market in which it
trades.
Optional Exchange of One Series of Common Stock for the Other Series
Prior to the third anniversary of the earlier of (1) the initial
issuance of CompleteHome.com Stock in a public offering or (2) the first
anniversary of a private placement of CompleteHome.com Stock, we will not
have the right to cause the exchange of CD Stock for CompleteHome.com
Stock.
From and after the third anniversary of the earlier of (1) the
initial issuance of CompleteHome.com Stock in a public offering or (2) the
first anniversary of a private placement of CompleteHome.com Stock, we
will have the right, at any time after outstanding CompleteHome.com Stock
exceeds the 40% of Total Market Capitalization Trigger, but has not
exceeded 60% of Total Market Capitalization Threshold, to issue shares of
either series of common stock in exchange for outstanding shares of the
other series of common stock on a value for value basis. In the event that
CompleteHome.com Stock exceeds the 60% of Total Market Capitalization
Threshold, we will lose the right to effect an exchange on a value for
value basis during such period.
The exchange ratio that will result in a value for value exchange will
be based on the average Market Value of the series of the common stock
being exchanged as compared to the average Market Value of the other series
of common stock during the 20 consecutive Trading Day period ending on, and
including, the 5th Trading Day immediately preceding the date on which we
mail the notice of exchange to holders of the outstanding shares being
exchanged.
On or after the 18-month anniversary of the earlier of (1) the
initial issuance of CompleteHome.com Stock in a public offering or (2) the
first anniversary of a private placement of CompleteHome.com Stock, we
will have the right to issue shares of CD Stock in exchange for
outstanding shares of CompleteHome.com Stock at a premium. The premium
will initially be 20% (for exchanges occurring prior to the nineteenth
month following the initial issuance of CompleteHome.com Stock) and will
decline ratably each month over an 18-month period to 15%.
In addition, we will have the right, on or after the third
anniversary of the earlier of (1) the initial issuance of CompleteHome.com
Stock in a public offering or (2) the first anniversary of a private
placement of CompleteHome.com Stock, when outstanding CompleteHome.com
Stock exceeds the 60% of Total Market Capitalization Threshold, to issue
shares of CompleteHome.com Stock in exchange for outstanding shares of CD
Stock at a 15% premium. In the event that CompleteHome.com Stock equals or
falls below the 60% of Total Market Capitalization Threshold, we will lose
the right to effect such an exchange during such period.
Notwithstanding the preceding paragraphs, upon the occurrence of a Tax
Event (as defined below), we will have the right to issue shares of CD
Stock in exchange for outstanding shares of CompleteHome.com Stock at a 10%
premium regardless of when such adverse tax law changes take place.
"Tax Event" means the receipt by Cendant of an opinion of tax counsel
of Cendant's choice, experienced in such matters, who shall not be an
officer or employee of Cendant or any of its affiliates, to the effect
that, as a result of any amendment to, or change in the laws (or any
regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein (including any proposed change in
such regulations announced by an administrative agency), or as a result of
any official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, it is more likely than
not that for United States federal income tax purposes (1) Cendant, its
subsidiaries or affiliates, or any of its successors or its stockholders
is, or at any time in the future will be, subject to tax upon the issuance
of shares of either CD Stock or CompleteHome.com Stock or (2) either CD
Stock or CompleteHome.com Stock is not, or at any time in the future will
not be, treated solely as stock of Cendant. For purposes of rendering such
opinion, the tax counsel shall assume that any administrative proposals
will be adopted as proposed. However, in the event a change in law is
proposed, the tax counsel shall render an opinion only in the event of
enactment.
The exchange ratio that will result in the specified premium will be
calculated based on the average Market Value of CD Stock as compared to the
average Market Value of CompleteHome.com Stock during the 20 consecutive
Trading Day period ending on, and including the fifth Trading Day
immediately preceding the date on which we mail the notice of exchange to
holders of the outstanding shares being exchanged.
CompleteHome.com Stock will exceed the "40% of Total Market
Capitalization Trigger" or the "60% of Total Market Capitalization
Threshold", as the case may be, if the Market Capitalization of the
outstanding CompleteHome.com Stock exceeds 40% or 60%, as the case may be,
of the Total Market Capitalization of both series of common stock for 30
Trading Days during any 60 consecutive Trading Day period. Thereafter,
CompleteHome.com Stock will fall below the "60% of Total Market
Capitalization Threshold" if, after exceeding the 40% of Total Market
Capitalization Trigger, the Market Capitalization of the outstanding
CompleteHome.com Stock falls below 60% of the total Market Capitalization
of both series of common stock for 30 Trading Days during any 60
consecutive Trading Day period.
Optional Exchange for Stock of a Subsidiary
At any time at which all of the assets and liabilities of a Group (and
no other assets or liabilities of Cendant or any subsidiary thereof) are
held directly or indirectly by one or more wholly owned subsidiaries of
Cendant (the "Group Subsidiaries"), we will have the right to issue to
holders of the relevant series of common stock their Proportionate Interest
in all of the outstanding shares of the common stock of the Group
Subsidiaries in exchange for all of the outstanding shares of such series
of common stock.
o If the series of common stock being exchanged is CD Stock
and the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group is
greater than zero, we will also issue a number of shares of
CompleteHome.com Stock equal to the then current Number of
Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group and issue those shares to
the holders of CD Stock or to one of the Group Subsidiaries,
at our option.
o If the series of common stock being exchanged is
CompleteHome.com Stock and the Number of Shares Issuable
with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group is greater than zero (so that less
than all of the shares of common stock of the Group
Subsidiaries are being issued to the holders of
CompleteHome.com Stock), we may retain the remaining shares
of common stock of the Group Subsidiaries or distribute
those shares as a dividend on CD Stock.
General Dividend, Exchange and Redemption Provisions
If we complete a Disposition of All or Substantially All of the Assets
of a Group (other than an Exempt Disposition), we would be required, not
later than the 10 Trading Days after the consummation of such Disposition,
to issue a press release specifying (1) the Net Proceeds of such
Disposition, (2) the number of shares of the series of common stock related
to such Group then outstanding, (3) the number of shares of such series of
common stock issuable upon conversion, exchange or exercise of any
convertible or exchangeable securities, options or warrants and the
conversion, exchange or exercise prices thereof and (4) if the Group is
CompleteHome.com Group, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group. Not later
than 30 Trading Days after such consummation, we would be required to
announce by press release which of the actions specified in the first
paragraph under " Mandatory Dividend, Redemption or Exchange on Disposition
of All or Substantially All of the Assets of a Group" we have determined to
take, and upon making that announcement, that determination would become
irrevocable. In addition, we would be required, not later than 30 Trading
Days after such consummation and not earlier than 10 Trading Days before
the applicable payment date, redemption date or exchange date, to send a
notice by first-class mail, postage prepaid, to holders of the relevant
series of common stock at their addresses as they appear on our transfer
books.
o If we determine to pay a special dividend, we would be
required to specify in the notice (1) the record date for
such dividend, (2) the payment date of such dividend (which
can not be more than 85 Trading Days after such
consummation) and (3) the aggregate amount and type of
property to be paid in such dividend (and the approximate
per share amount thereof).
o If we determine to undertake a redemption, we would be
required to specify in the notice (1) the date of redemption
(which can not be more than 85 Trading Days after such
consummation), (2) the aggregate amount and type of property
to be paid as a redemption price (and the approximate per
share amount thereof), (3) if less than all shares of the
relevant series of common stock are to be redeemed, the
number of shares to be redeemed and (4) the place or places
where certificates for shares of such series of common
stock, properly endorsed or assigned for transfer (unless we
waive such requirement), should be surrendered in return for
delivery of the cash, securities or other property to be
paid by Cendant in such redemption.
o If we determine to undertake an exchange, we would be
required to specify in the notice (1) the date of exchange
(which can not be more than 85 Trading Days after such
consummation), (2) the number of shares of the other series
of common stock to be issued in exchange for each
outstanding share of such series of common stock and (3) the
place or places where certificates for shares of such series
of common stock, properly endorsed or assigned for transfer
(unless we waive such requirement), should be surrendered in
return for delivery of the other series of common stock to
be issued by Cendant in such exchange.
If we determine to complete any exchange described under " Optional
Exchange of One Series of Common Stock for the Other Series" or " Optional
Exchange for Stock of a Subsidiary," we would be required, between 10 to 30
Trading Days before the exchange date, to send a notice by first-class
mail, postage prepaid, to holders of the relevant series of common stock at
their addresses as they appear on our transfer books, specifying (1) the
exchange date and the other terms of the exchange, and (2) the place or
places where certificates for shares of such series of common stock,
properly endorsed or assigned for transfer (unless we waive such
requirement), should be surrendered for delivery of the stock to be issued
or delivered by Cendant in such exchange.
Neither the failure to mail any required notice to any particular
holder nor any defect therein would affect the sufficiency thereof with
respect to any other holder or the validity of any dividend, redemption or
exchange.
If we are redeeming less than all of the outstanding shares of a
series of common stock as described above, we would redeem such shares pro
rata or by lot or by such other method as the Board of Directors determines
to be equitable.
No holder of shares of a series of common stock being exchanged or
redeemed will be entitled to receive any cash, securities or other property
to be distributed in such exchange or redemption until such holder
surrenders certificates for such shares, properly endorsed or assigned for
transfer, at such place as we specify (unless we waive such requirement).
As soon as practicable after our receipt of certificates for such shares,
we would deliver to the person for whose account such shares were so
surrendered, or to the nominee or nominees of such person, the cash,
securities or other property to which such person is entitled, together
with any fractional payment referred to below, in each case without
interest. If less than all of the shares of common stock represented by
any one certificate were to be exchanged or redeemed, we would also issue
and deliver a new certificate for the shares of such common stock not
exchanged or redeemed.
We would not be required to issue or deliver fractional shares of any
capital stock or any other fractional securities to any holder of common
stock upon any exchange, redemption, dividend or other distribution
described above. If more than one share of common stock were held at the
same time by the same holder, we may aggregate the number of shares of any
capital stock that would be issuable or any other securities that would be
distributable to such holder upon any such exchange, redemption, dividend
or other distribution. If there are fractional shares of any capital stock
or any other fractional securities remaining to be issued or distributed to
any holder, we would, if such fractional shares or securities were not
issued or distributed to such holder, pay cash in respect of such
fractional shares or securities in an amount equal to the Fair Value
thereof (without interest).
From and after the date set for any exchange or redemption, all rights
of a holder of shares of common stock that were exchanged or redeemed would
cease except for the right, upon surrender of the certificates representing
such shares, to receive the cash, securities or other property for which
such shares were exchanged or redeemed, together with any fractional
payment as provided above, in each case without interest (and, if such
holder was a holder of record as of the close of business on the record
date for a dividend not yet paid, the right to receive such dividend). A
holder of shares of common stock being exchanged would not be entitled to
receive any dividend or other distribution with respect to shares of the
other series of common stock until after the shares being exchanged are
surrendered as contemplated above. Upon such surrender, we would pay to the
holder the amount of any dividends or other distributions (without
interest) which theretofore became payable with respect to a record date
occurring after the exchange, but which were not paid by reason of the
foregoing, with respect to the number of whole shares of the other series
of common stock represented by the certificate or certificates issued upon
such surrender. From and after the date set for any exchange, we would,
however, be entitled to treat the certificates for shares of common stock
being exchanged that were not yet surrendered for exchange as evidencing
the ownership of the number of whole shares of the other series of common
stock for which the shares of such common stock should have been exchanged,
notwithstanding the failure to surrender such certificates.
We would pay any and all documentary, stamp or similar issue or
transfer taxes that might be payable in respect of the issue or delivery of
any shares of capital stock and/or other securities on any exchange or
redemption described herein. We would not, however, be required to pay any
tax that might be payable in respect of any transfer involved in the issue
or delivery of any shares of capital stock and/or other securities in a
name other than that in which the shares so exchanged or redeemed were
registered, and no such issue or delivery will be made unless and until the
person requesting such issue pays to Cendant the amount of any such tax or
establishes to our satisfaction that such tax has been paid.
We may, subject to applicable law, establish such other rules,
requirements and procedures to facilitate any dividend, redemption or
exchange contemplated as described above as the Board of Directors may
determine to be appropriate under the circumstances.
Voting Rights
Currently, holders of existing common stock have one vote per share on
all matters submitted to a vote of stockholders. Each share will continue
to have one vote following a stock split, stock dividend or similar
reclassification. Once the Tracking Stock Proposal is implemented, holders
of CD Stock and CompleteHome.com Stock would vote together as one class on
all matters as to which common stockholders generally are entitled to vote,
unless a separate class vote is required by applicable law. On all such
matters for which no separate vote is required, each outstanding share of
CD Stock is entitled to one vote and each outstanding share of
CompleteHome.com Stock is entitled to one vote.
When holders of CD Stock and CompleteHome.com Stock vote together as a
single class, the holders of the series of common stock having a majority
of the votes will be in a position to control the outcome of the vote even
if the matter involves a conflict of interest between the holders of CD
Stock and holders of CompleteHome.com Stock.
The Delaware General Corporation Law requires a separate vote of
holders of shares of common stock of any series on any amendment if the
amendment would increase or decrease the par value of the shares of such
series or alter or change the powers, preferences or special rights of the
shares of such series so as to affect them adversely.
After CompleteHome.com Stock is issued, we would set forth the number
of outstanding shares of CD Stock and CompleteHome.com Stock in our annual
and quarterly reports filed pursuant to the Exchange Act, and disclose in
any proxy statement for a stockholder meeting the number of outstanding
shares of CD Stock and CompleteHome.com Stock.
Liquidation
Currently, holders of common stock are entitled, upon voluntary or
involuntary liquidation, dissolution or winding-up of Cendant, to receive
their proportionate interest in the net assets of Cendant, if any,
remaining for distribution to stockholders (after payment of or provision
for all liabilities, including contingent liabilities, of Cendant and
payment of the liquidation preference payable to any holders of our
Preferred Stock).
If the Tracking Stock Proposal is approved, upon voluntary or
involuntary liquidation, dissolution or winding-up of Cendant, the net
assets of Cendant, if any, remaining for distribution to stockholders
(after payment of or provision for all liabilities, including contingent
liabilities, of Cendant and payment of the liquidation preference payable
to any holders of our Preferred Stock), will be distributed to the holders
of CD Stock and CompleteHome.com Stock pro rata in accordance with the
average Market Value of a share of CD Stock divided by the average Market
Value of a share of CompleteHome.com Stock during the 20 consecutive
Trading Day period ending on (and including) the fifth Trading Day before
the date of the first public announcement of (1) a voluntary liquidation,
dissolution or winding-up by Cendant or (2) the institution of any
proceeding for the involuntary liquidation, dissolution or winding-up of
Cendant.
Neither the merger nor consolidation of Cendant with any other entity,
nor a sale, transfer or lease of all or any part of the assets of Cendant
would alone be deemed a liquidation, dissolution or winding-up for these
purposes.
No holder of CompleteHome.com Stock will have any special right to
receive specific assets of CompleteHome.com Group and no holder of CD Stock
will have any special right to receive specific assets of Cendant Group
upon our dissolution, liquidation or winding up.
Cendant Group's Retained Interest in CompleteHome.com Group
The number of shares of CompleteHome.com Stock that Cendant may issue
for the account of Cendant Group in respect of its Retained Interest in
CompleteHome.com Group is referred to as "Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group."
At the time that we first issue shares of, or options for shares of,
CompleteHome.com Stock, the Board of Directors would designate the initial
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group.
In this document, we call the percentage interest in CompleteHome.com
Group intended to be represented at any time by the outstanding shares of
CompleteHome.com Stock the "Outstanding Interest Percentage," and we call
the remaining percentage interest in CompleteHome.com Group intended to be
represented at any time by Cendant Group's Retained Interest in
CompleteHome.com Group the "Retained Interest Percentage." At any time, the
Outstanding Interest Percentage equals the number of shares of
CompleteHome.com Stock outstanding divided by the Total Number of Notional
CompleteHome.com Shares Deemed Outstanding (expressed as a percentage) and
the Retained Interest Percentage equals the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group
divided by the Total Number of Notional CompleteHome.com Shares Deemed
Outstanding (expressed as a percentage). The sum of the Outstanding
Interest Percentage and the Retained Interest Percentage always equals
100%.
At the time that we file the Restated Certificate of Incorporation,
the Retained Interest Percentage will be 100% and the Outstanding Interest
Percentage will be 0%.
Number of Shares Issuable With Respect to Cendant Group's Retained
Interest in CompleteHome.com Group. We currently intend to designate
_________ as the initial Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group. We currently
plan to grant options for approximately _______ shares of CompleteHome.com
Stock under the CompleteHome.com Option Plan to CompleteHome.com Group
employees following stockholder approval of the Stock Option Plan Proposal.
Assuming we do so, we intend to attribute the net proceeds of the exercise
of such options to the equity of CompleteHome.com Group. The issuance of
shares of CompleteHome.com Stock upon the exercise of those options will
have no effect on the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group. Thus, after giving
effect to the grant of those options,
o there would be no shares of CompleteHome.com Stock
outstanding, but there would be ______ shares of
CompleteHome.com Stock reserved for issuance upon the
exercise of outstanding options,
o the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group would
remain ________,
o the Total Number of Notional CompleteHome.com Group Shares
Deemed Outstanding would be ________, but would increase to
_________ if all such options were granted and exercised,
o the Outstanding Interest Percentage would be approximately
________ if all such options were granted and exercised,
and
o the Retained Interest Percentage would be approximately
________ if all such options were granted and exercised.
Subject to prevailing market and other conditions, we currently expect
to issue additional shares of CompleteHome.com Stock in one or more private
or public financings within 12 months of stockholder approval of the
Tracking Stock Proposal. The specific terms of the financings, including
whether they are private or public, the amount of CompleteHome.com Stock we
issue, and the timing of the financings, will depend upon factors such as
stock market conditions and the performance of CompleteHome.com Group. The
effect of those financings on the Retained Interest Percentage and the
Outstanding Interest Percentage would depend upon the number of shares of
CompleteHome.com Stock sold and whether we elect to attribute the net
proceeds of such financings to the equity of CompleteHome.com Group or to
Cendant Group in respect of its Retained Interest in CompleteHome.com
Group.
Attribution of Issuances of CompleteHome.com Stock. Whenever we
decide to issue shares of CompleteHome.com Stock, or options therefor, we
would determine, in our sole discretion, whether to attribute that issuance
(and the proceeds thereof) to Cendant Group in respect of its Retained
Interest in CompleteHome.com Group (in a manner analogous to a secondary
offering of common stock of a subsidiary owned by a corporate parent) or to
CompleteHome.com Group (in a manner analogous to a primary offering of
common stock). If we issue any shares of CompleteHome.com Stock and
attribute that issuance (and the proceeds thereof) to Cendant Group in
respect of its Retained Interest in CompleteHome.com Group, the Number of
Shares Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group would be reduced by the number of shares so issued,
the number of outstanding shares of CompleteHome.com Stock would be
increased by the same amount, the Total Number of Notional CompleteHome.com
Shares Deemed Outstanding would remain unchanged, the Retained Interest
Percentage would be reduced and the Outstanding Interest Percentage would
be correspondingly increased. If we instead attribute that issuance (and
the proceeds thereof) to CompleteHome.com Stock, the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group would remain unchanged, the number of outstanding
shares of CompleteHome.com Stock and the Total Number of Notional
CompleteHome.com Stock Shares Deemed Outstanding would be increased by the
number of shares so issued, the Retained Interest Percentage would be
reduced and the Outstanding Interest Percentage would be correspondingly
increased.
Issuances of CompleteHome.com Stock as Distributions on CD Stock. We
reserve the right to issue shares of CompleteHome.com Stock as a
distribution on CD Stock, although we do not currently intend to do so. If
we did so, we would attribute that distribution to Cendant Group in respect
of its Retained Interest in CompleteHome.com Group. As a result, the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group would be reduced by the number of shares so
distributed, the number of outstanding shares of CompleteHome.com Stock
would be increased by the same amount, the Total Number of Notional
CompleteHome.com Stock Shares Deemed Outstanding would remain unchanged,
the Retained Interest Percentage would be reduced and the Outstanding
Interest Percentage would be correspondingly increased. If instead we
issued shares of CompleteHome.com Stock as a distribution on
CompleteHome.com Stock, we would attribute that distribution to
CompleteHome.com Group, in which case we would proportionately increase the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group. As a result, the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group and
the Total Number of Notional CompleteHome.com Shares Deemed Outstanding
would each be increased by the same percentage as the number of outstanding
shares of CompleteHome.com Stock is increased and the Retained Interest
Percentage and Outstanding Interest Percentage would remain unchanged.
Dividends on CompleteHome.com Stock. At the time of any dividend on
the outstanding shares of CompleteHome.com Stock (including any dividend
required as a result of a Disposition of All or Substantially All of the
Assets of CompleteHome.com Group, but excluding any dividend payable in
CompleteHome.com Stock), we will credit to Cendant Group, and charge
against CompleteHome.com Group a corresponding amount in respect of Cendant
Group's Retained Interest in CompleteHome.com Group. Specifically, the
corresponding amount will equal (1) the aggregate amount of such dividend
times (2) a fraction, the numerator of which is the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group and the denominator of which is the number of shares
of CompleteHome.com Stock then outstanding.
Repurchases of CompleteHome.com Stock. If we decide to repurchase
shares of CompleteHome.com Stock, we would determine, in our sole
discretion, whether to attribute that repurchase (and the cost thereof) to
Cendant Group (in a manner analogous to a purchase of common stock of a
subsidiary by a corporate parent) or to CompleteHome.com Group (in a manner
analogous to an issuer repurchase). If we repurchase shares of
CompleteHome.com Stock and attribute that repurchase (and the cost thereof)
to Cendant Group, the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group would be increased by
the number of shares so purchased, the number of outstanding shares of
CompleteHome.com Stock would be decreased by the same amount, the Total
Number of Notional CompleteHome.com Shares Deemed Outstanding would remain
unchanged, the Retained Interest Percentage would be increased and the
Outstanding Interest Percentage would be correspondingly decreased. If we
instead attribute that repurchase (and the cost thereof) to
CompleteHome.com Stock, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group would remain
unchanged, the number of outstanding shares of CompleteHome.com Stock and
the Total Number of Notional CompleteHome.com Shares Deemed Outstanding
would be decreased by the number of shares so repurchased, the Retained
Interest Percentage would be increased and the Outstanding Interest
Percentage would be correspondingly reduced.
Transfers of Cash or Other Property Between Cendant Group and
CompleteHome.com Group. We may, in our sole discretion, determine to
transfer cash or other property of CompleteHome.com Group to Cendant Group
in return for a decrease in Cendant Group's Retained Interest in
CompleteHome.com Group (in a manner analogous to a return of capital) or to
transfer cash or other property of Cendant Group to CompleteHome.com Group
in return for an increase in Cendant Group's Retained Interest in
CompleteHome.com Group (in a manner analogous to a capital contribution).
If we determine to transfer cash or other property of CompleteHome.com
Group to Cendant Group in return for a decrease in Cendant Group's Retained
Interest in CompleteHome.com Group, the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group and
the Total Number of Notional CompleteHome.com Shares Deemed Outstanding
would each be decreased by an amount equal to the Fair Value of such cash
or other property divided by the Market Value of a share of
CompleteHome.com Stock on the day of transfer, the number of outstanding
shares of CompleteHome.com Stock would remain unchanged, the Retained
Interest Percentage would be decreased and the Outstanding Interest
Percentage would be correspondingly increased. If we instead determine to
transfer cash or other property of Cendant Group to CompleteHome.com Group
in return for an increase in Cendant Group's Retained Interest in
CompleteHome.com Group, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group and the Total
Number of Notional CompleteHome.com Shares Deemed Outstanding would each be
increased by an amount equal to the Fair Value of such cash or other
property divided by the Market Value of a share of CompleteHome.com Stock
on the day of transfer, the number of outstanding shares of
CompleteHome.com Stock would remain unchanged, the Retained Interest
Percentage would be increased and the Outstanding Interest Percentage would
be correspondingly decreased.
We may not attribute issuances of CompleteHome.com Stock to Cendant
Group, transfer cash or other property of CompleteHome.com Group to Cendant
Group in return for a decrease in its Retained Interest in CompleteHome.com
Group or take any other action to the extent that doing so would cause the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group to decrease below zero.
For illustrations showing how to calculate the Retained Interest
Percentage, the Outstanding Interest Percentage, the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group and the Total Number of Notional CompleteHome.com
Shares Deemed Outstanding after giving effect to certain hypothetical
dividends, issuances, repurchases and transfers, see Annex I "Illustrations
of Certain Terms."
Effectiveness of Certain Terms
The terms described under " Dividends," " Mandatory Dividend,
Redemption or Exchange on Disposition of All or Substantially All of the
Assets of a Group," " Optional Exchange of One Series of Common Stock for
the Other Series," " Optional Exchange for Stock of a Subsidiary," " Voting
Rights" and " Liquidation" above apply only when there are shares of both
series of common stock outstanding.
Determinations by the Board of Directors
The Restated Certificate of Incorporation would provide that, subject
to applicable law, any determinations made by the Board of Directors in
good faith under the Restated Certificate of Incorporation or in any
certificate of designation filed pursuant thereto would be final and
binding on all stockholders of Cendant.
The Board of Directors plans to establish a special subcommittee
comprised of some of Cendant's independent directors to address and
resolve, at the request of Cendant's Board of Directors, any business
issues concerning the relationship between Cendant Group and
CompleteHome.com Group.
The Board of Directors also currently intends to establish a Board of
Directors for CompleteHome.com, Inc. consisting of members of
CompleteHome.com Group management, members of Cendant Group management and
individuals who are not directors, officers or employees of Cendant. The
exact composition of CompleteHome.com Group's Board of Directors will be
determined prior to a public offering of CompleteHome.com Stock, if any.
Preemptive Rights
Holders of CD Stock and CompleteHome.com Stock will not have any
preemptive rights to subscribe for any additional shares of capital stock
or securities that we may issue in the future.
Limitations on Potential Unsolicited Acquisitions; Anti-Takeover
Considerations
If Cendant Group and CompleteHome.com Group were separate independent
companies, any person interested in acquiring either Group without
negotiating with management could seek control of that entity by obtaining
control of its outstanding voting stock by means of a tender offer or proxy
contest. Although we intend CD Stock and CompleteHome.com Stock to reflect
the separate performance of Cendant Group and CompleteHome.com Group, a
person interested in acquiring only one Group without negotiation with
Cendant's management could obtain control of that Group only by obtaining
control of the outstanding voting stock of Cendant.
The existence of two series of common stock could present complexities
and could in certain circumstances pose obstacles, financial and otherwise,
to an acquiring person. The existence of two series of common stock could,
under certain circumstances, prevent stockholders from profiting from an
increase in the market value of their shares as a result of a change in
control of Cendant by delaying or preventing such a change in control.
If the Tracking Stock Proposal is implemented, there would be an
additional 500,000,000 shares of common stock available for future issuance
without further stockholder approval. One of the effects of the existence
of authorized and unissued common stock and Preferred Stock could be to
enable the Board of Directors to issue shares to persons friendly to
current management which could render more difficult or discourage an
attempt to obtain control of Cendant by means of a merger, tender offer,
proxy contest or otherwise, and thereby protect the continuity of our
management. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of Cendant.
For additional anti-takeover considerations, see "-- Certain Other
Provisions of the Restated Certificate of Incorporation, By-laws and
Delaware Law."
CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES
In order to prepare separate financial statements for Cendant Group
and CompleteHome.com Group, Cendant has allocated all of its consolidated
assets, liabilities, revenue, expenses and cash flow between Cendant Group
and CompleteHome.com Group. Thus, the financial statements of Cendant
Group and CompleteHome.com Group, taken together, comprise all of the
accounts included in the corresponding financial statements of Cendant.
The financial statements of Cendant Group and CompleteHome.com Group
reflect the application of certain cash management and allocation policies
adopted by the Board of Directors. These policies are summarized below.
The Board of Directors may, in its sole discretion, modify, rescind or
add to any of these policies, although it has no present intention to do
so. The decision of the Board of Directors to modify, rescind or add to
any of these policies would, however, be subject to the Board of Directors
general fiduciary duties.
Even though Cendant has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between Cendant Group and
CompleteHome.com Group, holders of CompleteHome.com Stock will continue to
be common stockholders of Cendant and, as such, will be subject to all
risks associated with an investment in Cendant and all of its businesses,
assets and liabilities. See "Risk Factors - Risk Factors Relating to the
Tracking Stock Proposal-Holders of CD Stock and CompleteHome.com Stock
will be common stockholders of Cendant and will not have any legal rights
relating to specific assets of Cendant."
Treasury Activities
Cendant manages most treasury activities on a centralized,
consolidated basis. These activities include the investment of surplus
cash, the issuance, repayment and repurchase of short-term and long-term
debt and the issuance and repurchase of common stock and preferred stock.
Each Group generally remits its cash receipts (other than receipts of
foreign operations or operations that are not wholly owned) to Cendant, and
Cendant generally funds each Group's cash disbursements (other than
disbursements of foreign operations or operations that are not wholly
owned) on a daily basis.
In the historical financial statements of Cendant Group and
CompleteHome.com Group, (1) all external debt and equity transactions (and
the proceeds thereof) were attributed to Cendant Group, (2) whenever
CompleteHome.com Group held cash, that cash was transferred to Cendant
Group and accounted for as a return of capital (i.e., as a reduction in
CompleteHome.com Group's division equity and Cendant Group's Retained
Interest in CompleteHome.com Group) and (3) whenever CompleteHome.com Group
had a cash need, that cash need was funded by Cendant Group and accounted
for as a capital contribution (i.e., as an increase in CompleteHome.com
Group's division equity and Cendant Group's Retained Interest in
CompleteHome.com Group). Cendant intends to continue these practices until
CompleteHome.com Stock is first issued. Accordingly, no interest expense
has been or will be reflected in the financial statements of
CompleteHome.com Group, and no interest income from CompleteHome.com Group
has been or will be reflected in the financial statements of Cendant Group,
for any period prior to the date on which CompleteHome.com Stock is first
issued.
After the date on which CompleteHome.com Stock is first issued:
(1) Cendant will attribute each future incurrence or issuance of
external debt or preferred stock (and the proceeds thereof) to Cendant
Group, unless the Board of Directors determines otherwise. The Board
of Directors may, but is not required to attribute an incurrence or
issuance of debt or preferred stock (and the proceeds thereof) to
CompleteHome.com Group to the extent that Cendant incurs or issues the
debt or preferred stock for the benefit of CompleteHome.com Group.
(2) Cendant will attribute each future issuance of CD Stock (and
the proceeds thereof) to Cendant Group. Cendant may attribute any
future issuance of CompleteHome.com Stock (and the proceeds thereof)
to Cendant Group in respect of its Retained Interest in
CompleteHome.com Group (in a manner analogous to a secondary offering
of common stock of a subsidiary owned by a corporate parent) or to
CompleteHome.com Group (in a manner analogous to a primary offering of
common stock). Dividends on and repurchases of CD Stock will be
charged against Cendant Group, and dividends on and repurchases of
CompleteHome.com Stock will be charged against CompleteHome.com Group.
In addition, at the time of any dividend on CompleteHome.com Stock,
Cendant will credit to Cendant Group, and charge against
CompleteHome.com Group a corresponding amount per share in respect of
Cendant Group's Retained Interest in CompleteHome.com Group. See
" Description of CD Stock and CompleteHome.com Stock."
(3) Whenever CompleteHome.com Group holds cash, CompleteHome.com
Group will normally transfer that cash to Cendant Group. Conversely,
whenever CompleteHome.com Group has a cash need, Cendant Group will
normally fund that cash need. However, the Board of Directors will
determine, in its sole discretion, whether to provide any particular
funds to either Group and will not be obligated to do so.
(4) Cendant will account for all cash transfers from one Group
to or for the account of the other Group (other than transfers in
return for assets or services rendered or transfers in respect of
Cendant Group's Retained Interest that correspond to dividends paid on
CompleteHome.com Stock), as inter-Group revolving credit advances
unless:
o the Board of Directors determines that a given transfer (or
type of transfer) should be accounted for as a long-term
loan,
o the Board of Directors determines that a given transfer (or
type of transfer) should be accounted for as a capital
contribution increasing Cendant Group's Retained Interest in
CompleteHome.com Group, or
o the Board of Directors determines that a given transfer (or
type of transfer) should be accounted for as a return of
capital reducing Cendant Group's Retained Interest in
CompleteHome.com Group.
There are no specific criteria to determine when Cendant will account
for a cash transfer as a long-term loan, a capital contribution or a return
of capital rather than an inter-Group revolving credit advance.
The Board of Directors would make such a determination in the exercise
of its business judgment at the time of such transfer, or the first of such
type of transfer, based upon all relevant circumstances. Factors the Board
of Directors would expect to consider include:
o the current and projected capital structure of each Group,
o the relative levels of internally generated funds of each
Group,
o the financing needs and objectives of the recipient Group,
o the investment objectives of the transferring Group,
o the availability, cost and time associated with alternative
financing sources and
o prevailing interest rates and general economic conditions.
(5) Any cash transfer accounted for as an inter-Group revolving
credit advance will bear interest at the rate at which the Board of
Directors, in its sole discretion, determines Cendant could borrow
such funds on a revolving credit basis. Any cash transfer accounted
for as a long-term loan will have interest rate, amortization,
maturity, redemption and other terms that generally reflect the then
prevailing terms on which the Board of Directors, in its sole
discretion, determines Cendant could borrow such funds.
(6) Any cash transfer from Cendant Group to CompleteHome.com
Group, or for CompleteHome.com Group's account, accounted for as a
capital contribution, will correspondingly increase CompleteHome.com
Group's division equity and Cendant Group's Retained Interest in
CompleteHome.com Group. As a result, the number of shares of
CompleteHome.com Stock that Cendant may issue for the account of
Cendant Group in respect of its Retained Interest in CompleteHome.com
Group (which we call the "Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group") will
increase by the amount of such capital contribution divided by the
Market Value of CompleteHome.com Group on the date of transfer.
(7) Any cash transfer from CompleteHome.com Group to Cendant
Group, or for Cendant Group's account, accounted for as a return of
capital, will correspondingly reduce CompleteHome.com Group's division
equity and Cendant Group's Retained Interest in CompleteHome.com
Group. As a result, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group will
decrease by the amount of such return of capital divided by the Market
Value of CompleteHome.com Stock on the date of transfer.
We will prepare financial statements in accordance with generally
accepted accounting principles, consistently applied, for the Cendant Group
and the CompleteHome.com Group, and these financial statements, taken
together, will comprise all of the accounts included in our corresponding
consolidated financial statements. The financial statements of each of
Cendant Group and CompleteHome.com Group will reflect the financial
condition, results of operations and cash flows of the businesses included
therein.
Group financial statements will also include allocated portions of our
debt, interest, corporate overhead and costs of administrative shared
services and taxes. We will make these allocations for the purpose of
preparing each Group's financial statements; however, holders of CD Stock
and CompleteHome.com Stock will continue to be subject to all of the risks
associated with an investment in the Company and all of its businesses,
assets and liabilities. See "Risk Factors - If Cendant encounters
financial difficulty, the value of either Group's stock may suffer for
reasons unrelated to the prospects of that Group."
Corporate General and Administrative Expenses
Cendant allocates the cost of certain corporate general and
administrative services and shared services to the Groups generally based
on utilization. These shared services include legal, accounting (tax and
financial), information services, telecommunications, purchasing,
marketing, intellectual property, public relations, corporate office and
travel expenses. Where determinations based on utilization alone are
impracticable, Cendant uses other methods and criteria that management
believes to be equitable and to provide a reasonable estimate of the cost
attributable to each Group.
Taxes
Federal income taxes, which are determined on a consolidated basis,
are allocated to each Group, and reflected in their respective financial
statements in accordance with Cendant's tax allocation policy. In general,
this policy provides that the consolidated tax provision and related tax
payments or refunds are allocated between the Groups based principally upon
the financial income, taxable income, credits and other amounts directly
related to the respective Groups. Tax benefits that can not be used by the
Group generating such attributes, but can be utilized on a consolidated
basis are allocated to the Group that generated such benefits. As a
result, the allocated Group amounts of taxes payable or refundable are not
necessarily comparable to those that would have resulted if the Groups had
filed separate tax returns. State income taxes generally are computed on a
separate company basis.
INTERCOMPANY AGREEMENTS
CompleteHome.com Group is a party to certain long-term agreements with
various companies in the Cendant Group.
Relationships with Real Estate Franchisors. On October 1, 1999
CompleteHome.com Group and each of Century 21 Real Estate Corporation
("Century 21"), Coldwell Banker Real Estate Corporation ("Coldwell Banker")
and ERA Franchise Systems, Inc. ("ERA") (collectively, the "Franchisors")
entered into three separate 40-year Internet Cooperation Agreements (each,
a "Cooperation Agreement"). The Franchisors are the franchisors of three
of the five largest national real estate brokerage franchise systems in the
United States, measured by the number of franchised real estate brokerage
offices.
Under each such Cooperation Agreement, the respective Franchisor has
agreed, subject to current restrictions, to provide its residential real
estate listings to CompleteHome.com Group on an exclusive basis. In
addition, each Franchisor has agreed to promote CompleteHome.com Group to
its brokers and agents, to provide CompleteHome.com Group with access to
information, data and content on its website (at such time as such
Franchisor determines it is appropriate to provide such content to
CompleteHome.com Group), to place CompleteHome.com Group identifying marks
in a prominent location on its website and, where appropriate, reference
CompleteHome.com Group in its TV, radio and other "off-line" advertising.
In return, CompleteHome.com Group has agreed to display the
Franchisor's listings on the CompleteHome.com Group website, to provide the
Franchisor with access to content, information and data developed by
CompleteHome.com Group, to provide each of Century 21 and Coldwell Banker
with 50,000, and ERA with 25,000, banner advertisement impressions per
month on the CompleteHome.com Group site (the number is subject to mutual
adjustment throughout the term of each Cooperation Agreement), and to both
provide certain services to each Franchisor's brokers and agents and allow
such brokers and agents to participate in various ancillary services
offered by CompleteHome.com Group.
Pursuant to each Cooperation Agreement, CompleteHome.com Group has
been assigned, and has agreed to undertake management of, the Franchisor's
agreements with Internet website hosting companies regarding the
maintenance and support of its website. In addition, CompleteHome.com
Group has agreed to serve as a non-exclusive business development
representative for the Franchisor, with respect to third party advertising
on the Franchisor's website. In connection with this appointment,
CompleteHome.com Group has the right to place all but 6% of the advertising
on the Franchisor's website (the excluded percentage being subject to
mutual adjustments throughout the term of the Cooperation Agreement).
CompleteHome.com Group is also serving as a non-exclusive advertising
placement consultant for each Franchisor, with respect to the placement of
each Franchisor's advertising on third party websites; each Franchisor has
agreed that prior to appointing any party as agency of record ("AOR") for
this service, it will, prior to entering into any such arrangement, meet
with CompleteHome.com Group regarding CompleteHome.com Group's potential
appointment as an AOR.
Pursuant to each Cooperation Agreement, CompleteHome.com Group has
agreed, where permitted by law, to (1) pay each Franchisor 10% of the
revenue generated from ancillary services sold by CompleteHome.com Group on
the CompleteHome.com Group website, where the leads are attributable to the
brokers or agents of such Franchisor (the percentage is subject to mutual
adjustment throughout the term of each Cooperation Agreement) and (2) pay
each Franchisor 10% of the advertising revenues received by
CompleteHome.com Group in connection with advertising placed on each
Franchisor's website (the percentage is subject to mutual adjustment
throughout the term of each Cooperation Agreement). Each Franchisor has
agreed to pay to CompleteHome.com Group 6% of the value of the Internet
website management/hosting services rendered by third parties to such
Franchisor; however, this amount is only payable out of any savings
realized by such Franchisor as a result of CompleteHome.com Group's
assumption and management of the third party hosting agreements for such
Franchisor's website.
Relationships with Cendant Mortgage. CompleteHome.com Group is
currently negotiating various agreements with Cendant Mortgage Corporation
("Cendant Mortgage"), a wholly owned subsidiary of Cendant as part of the
Cendant Group, under which CompleteHome.com Group's licensed affiliate,
CompleteHome Mortgage, will serve as an online mortgage broker for
residential mortgage products offered by and through Cendant Mortgage.
Cendant Mortgage will license a customized version of its web-based loan
origination platform to the mortgage broker affiliate. CompleteHome.com
Group will designate an area on the internet portal to market its
affiliate's mortgage program. The parties are continuing to discuss other
cross-marketing and advertising opportunities.
Intercompany Services Arrangements. CompleteHome.com Group and
Cendant will enter into an Intercompany Agreement pursuant to which Cendant
will provide certain corporate services to CompleteHome.com Group similar
to most of the services provided by Cendant to its other subsidiaries. The
services to be provided will include support for finance functions such as
treasury, accounts payable, payroll and external reporting, Human
Resources-related services such as benefits administration and recruiting
and employee relations assistance, legal support, and assistance with
significant transactions such as acquisitions. CompleteHome.com Group will
pay Cendant for such services with fees to be based on (i) actual costs
incurred by Cendant in providing such services and (ii) cost allocation
methodologies employed by Cendant typically for its other subsidiaries.
The term of the Intercompany Agreement will be indefinite, subject to
termination upon a divestiture of CompleteHome.com Group by Cendant.
Relationship with Getko Group, Inc. CompleteHome.com Group has
entered into an Internet Cooperation Agreement with Getko Group, Inc.
("Getko") dated September 30, 1999, pursuant to which CompleteHome.com
Group has agreed to market Getko's discount offering programs on a
designated area of CompleteHome.com Group's Internet portal. Internet
traffic visiting the designated area will have the opportunity to review
the discount offerings and download coupons for discounts to be redeemed
with local merchants. Getko's appointment of CompleteHome.com Group to
market the discount programs over the Internet is made on an exclusive
basis. CompleteHome.com Group will share with Getko revenues received from
the local merchants. The term of the Internet Cooperation Agreement began
on September 30, 1999 and ends on December 31, 2039.
CERTAIN OTHER PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION, BY-
LAWS AND DELAWARE LAW
Preferred Stock
The Restated Certificate of Incorporation, like the Current
Certificate of Incorporation, provides that the Board of Directors may
issue shares of Preferred Stock in one or more series from time to time and
the Board of Directors, without further approval of stockholders, has the
authority to fix by resolution or resolutions the designations and the
powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of each series of Preferred Stock,
including without limitation the dividend rights and terms, conversion
rights, voting rights, liquidation preference, sinking funds and any other
rights, preferences, privileges and restrictions.
The purpose of authorizing the Board of Directors to determine such
rights and preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
power of holders of our common stock and make it more difficult for a third
party to gain control of Cendant. There are no outstanding shares of
preferred stock and no designated series of preferred stock.
Staggered Board of Directors
The Board of Directors is divided into three classes, each of whose
members serve for a staggered three-year term. Upon the expiration of the
term of a class of directors, directors in such class are elected for
three-year terms at the annual meeting of stockholders in the year in which
such term expires. The classification of the Board of Directors has the
effect of making it more difficult for stockholders to change the
composition of the Board of Directors, because only a minority of the
directors are up for election at each annual meeting, and the Board of
Directors may not be replaced by vote of the stockholders at any one time.
Number of Directors; Removal; Filling Vacancies
The number of members of the Board of Directors will be fixed from
time to time pursuant to our by-laws but shall not be less than three. By-
laws provide that the directors may be removed without cause only by the
affirmative vote of the holders of 80% of the combined voting power of the
then outstanding shares of stock entitled to vote generally in the election
of Directors. Newly created directorship and vacancies (whether arising
through death, resignation, disqualification, removal or other) may only be
filled by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board of Directors.
A director elected to fill a vacancy shall serve for the remainder of
his term of office of the class to which he/she is elected.
No Stockholder Action by Written Consent; Special Meetings
Any action required or permitted to be taken by the stockholders of
Cendant must be duly effected at a duly called annual or special meeting of
such holders and may not be taken by any consent in writing by such
holders. Special meetings of stockholders of Cendant may be called only by
the Chairman of the Board of Directors, the President or the Board of
Directors pursuant to a resolution stating the purpose or purposes of the
special meeting. No business other than that stated in the notice shall be
transacted at any special meeting. These provisions have the effect of
delaying consideration of a stockholder proposal until the next annual
meeting unless a special meeting is called by the Chairman, President or
the Board of Directors for consideration of such proposal.
Advance Notice for Stockholder Nominations and Proposals of New Business
Our by-laws establish an advance notice procedure. This procedure
requires stockholders to deliver to Cendant notice of any proposal to be
presented or of a candidate to be nominated for election as a director of
Cendant not less than 60 nor more than 90 days prior to the date of the
meeting. However, if the date of the meeting is first publicly announced
or disclosed (in a public filing or otherwise) is less than 70 days prior
to the date of the meeting, such advance notice shall be given not later
than 10 days after such date is first so announced or disclosed.
Accordingly, failure by a stockholder to act in compliance with the notice
provisions will mean that the stockholder will not be able to nominate
directors or propose new business.
Amendments
The affirmative vote of holders of at least 80% of the stock entitled
to vote generally in the election of directors, voting together as a single
class, or a majority of the Board of Directors is required to amend
provisions of our by-laws relating to the advance notice provisions,
stockholder action without a meeting, the calling of special meetings, the
number (or manner of determining the number) of Cendant's directors, the
election and term of Cendant's directors, the filling of vacancies and the
removal of directors.
Fair Price Provisions
Under the Delaware General Corporation Law and the Restated
Certificate of Incorporation, an agreement of merger, sale, lease or
exchange of all or substantially all of Cendant's assets must be approved
by the Board of Directors and adopted by the holders of a majority of the
outstanding shares of stock entitled to vote thereon. However, the
Restated Certificate of Incorporation includes what generally is referred
to as a "fair price provision", which requires the affirmative vote of the
holders of at least 80% of the outstanding shares of capital stock entitled
to vote generally in the election of Cendant directors, voting together as
a single class, to approve certain business combination transactions
(including certain mergers, recapitalization and the issuance or transfer
of securities of Cendant or a subsidiary having an aggregate fair market
value of $10 million or more) involving Cendant or a subsidiary and an
owner or any affiliate of an owner of 5% or more of the outstanding shares
of capital stock entitled to vote, unless either (i) such business
combination is approved by a majority of disinterested directors, or (ii)
the shareholders receive a "fair price" for their Cendant securities and
certain other procedural requirements are met. The Restated Certificate of
Incorporation provides that this provision may not be repealed or amended
in any respect except by the affirmative vote of the holders of not less
than 80% of the outstanding shares of capital stock entitled to vote
generally in the election of Cendant directors.
Certain Provisions of Delaware Law
Cendant is subject to the business combination provisions of Section
203 of the Delaware General Corporation Law. In general, such provisions
prohibit a publicly-held Delaware corporation from engaging in various
business combination transactions with any interested stockholder for a
period of three years after the date of the transaction in which the person
became an interested stockholder unless: (1) the business combination
transaction, or the transaction in which the interested stockholder became
an interested stockholder, is approved by the Board of Directors prior to
the date the interested stockholder obtained such status, (2) upon
consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer or (3) on or
subsequent to such date the business combination is approved by the Board
of Directors and authorized at an annual or special meeting of stockholders
by the affirmative vote of at least 662/3% of the outstanding voting stock
which is not owned by the interested stockholder. A "business combination"
is defined to include mergers, asset sales and other transactions resulting
in financial benefit to a stockholder. In general, an "interested
stockholder" is a person who, together with affiliates and associates, owns
(or, within three years, did own) 15% or more of a corporation's voting
stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to Cendant and, accordingly, may
discourage attempts to acquire Cendant.
Limitations on Liability and Indemnification of Officers and Directors
Section 102 of the Delaware General Corporation Law authorizes a
Delaware corporation to include a provision in its certificate of
incorporation limiting or eliminating the personal liability of its
directors to the corporation or its stockholders for monetary damages for
breach of the directors' fiduciary duty of care. The duty of care requires
that, when acting on behalf of the corporation, directors exercise an
informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by such provision,
directors are accountable to corporations or their stockholders for
monetary damages for conduct constituting gross negligence in the exercise
of their duty of care. Although Section 102 of the Delaware General
Corporation Law does not change a director's duty of care, it enables
corporations to limit available relief to equitable remedies such as
injunction or rescission. Our Restated Certificate of Incorporation and
by-laws include provisions which limit or eliminate the personal liability
of Cendant's directors to the fullest extent permitted by Section 102 of
the Delaware General Corporation Law. Consequently, a director will not be
personally liable to Cendant or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for any breach of the
directors' duty of loyalty to Cendant or its stockholders, acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, unlawful payments of dividends or unlawful stock
repurchases, redemptions or other distributions and any transaction from
which the director derived an improper personal benefit.
Our by-laws provide that Cendant will indemnify to the full extent
permitted by law any person made or threatened to be made a party to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer or employee of Cendant or serves or served at the request of
Cendant any other enterprise as a director, officer or employee. Our by-
laws provide that expenses, including attorneys' fees, incurred by any such
person in defending any such action, suit or proceeding will be paid or
reimbursed by Cendant promptly upon receipt by it of an undertaking of such
person to repay such expenses if it shall ultimately be determined that
such person is not entitled to be indemnified by Cendant. The inclusion of
these indemnification provisions in our by-laws is intended to enable
Cendant to attract qualified persons to serve as directors and officers who
might otherwise be reluctant to do so.
The directors and officers of Cendant are insured under policies of
insurance maintained by Cendant, subject to the limits of such policies,
against certain losses arising from any claim made against them by reason
of being or having been such officers or directors.
In addition, the limited liability provisions in our Restated
Certificate of Incorporation and the indemnification provisions in our by-
laws may discourage stockholders from bringing a lawsuit against directors
for breach of their fiduciary duty (including breaches resulting from
grossly negligent conduct) and may have the effect of reducing the
likelihood of derivative litigation against directors and officers, even
though such an action, if successful, might otherwise have benefitted
Cendant and our stockholders. Furthermore, a stockholder's investment in
Cendant may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers of Cendant
pursuant to the indemnification provisions in our by-laws. The limited
liability provisions in our Restated Certificate of Incorporation will not
limit the liability of directors under federal securities laws.
Section 203 of the Delaware General Corporation Law, and the
provisions of our Restated Certificate of Incorporation and by-laws
described above, may make it more difficult for a third party to acquire or
discourage bids for Cendant. Section 203 and these provisions could have
the effect of inhibiting attempts to change the membership of the Board of
Directors.
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, you will not have
appraisal rights in connection with the Tracking Stock Proposal.
FINANCIAL ADVISORS
We have engaged Goldman, Sachs & Co. (the "Advisor") as our financial
advisor in connection with the Tracking Stock Proposal. The Advisor
assisted us in our analysis and consideration of various financial
alternatives related to CompleteHome.com and the formulation of the
Tracking Stock Proposal. The Advisor is further assisting us in
implementing the Tracking Stock Proposal. We are paying our advisor
customary fees for their services. We have also agreed to reimburse the
Advisor for certain reasonable out-of-pocket expenses (including fees and
expenses of their legal counsel) and have agreed to indemnify the Advisor
against certain liabilities, including liabilities under the federal
securities laws.
The Advisor will not participate in the solicitation of proxies.
STOCK TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the registrar and transfer
agent for our existing common stock. We expect ChaseMellon Shareholder
Services, L.L.C. to serve as registrar and transfer agent for CD Stock and
CompleteHome.com Stock.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material United States
federal income tax consequences of the implementation of the Tracking Stock
Proposal. This discussion, including the Skadden opinion discussed below,
is based on certain assumptions and representations of Cendant as well as
on the Internal Revenue Code of 1986 (the "Code"), Treasury Department
regulations, published positions of the Internal Revenue Service and court
decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. For example, Congress could enact legislation affecting
the treatment of stock with characteristics similar to the CD Stock or
CompleteHome.com Stock or the Treasury Department could issue regulations
or other guidance that change current law. Any future legislation or
regulations (or other guidance) could apply retroactively to the
implementation of the Tracking Stock Proposal and render the Skadden
opinion obsolete.
This discussion addresses you only if you hold your existing common
stock and would hold your CD Stock and CompleteHome.com Stock, if any, as
capital assets. We have included this discussion for general information
only; it does not discuss all aspects of United States federal income
taxation that may be relevant to you in light of your particular tax
circumstances or any future transactions that may be undertaken with
respect to CD Stock or CompleteHome.com Stock. For example, this
discussion does not apply to you if you are a tax-exempt organization, S
corporation or other pass-through entity, mutual fund, small business
investment company, regulated investment company, insurance company or
other financial institution, or broker-dealer or are otherwise subject to
special treatment under the federal income tax laws. This discussion also
does not apply to you if you hold your existing common stock as part of a
straddle, hedging or conversion transaction. You should consult your tax
advisor with regard to the application of the federal income tax laws, as
well as to the applicability and effect of any state, local, or foreign tax
laws to which you may be subject.
Tax Implications of the Tracking Stock Proposal to Stockholders
Skadden has provided us with an opinion that the implementation of the
Tracking Stock Proposal will qualify as a "reorganization" for federal
income tax purposes in which you are deemed to exchange your existing
common stock for CD Stock. This means that:
o Neither you nor Cendant will recognize any income, gain or
loss on the deemed exchange of your existing common stock
for shares of CD Stock;
o Your tax basis in the existing common stock that you held
immediately before the implementation of the Tracking Stock
Proposal will be transferred (or "carried over") to the CD
Stock you are deemed to receive; and
o Your holding period for the CD Stock will include the
holding period of your existing common stock.
Tax Implications of a Conversion into Different Series of Tracking Stock
Skadden has advised us that, under current law, if we exercise our
option to convert one series of common stock into the other series of
common stock, that conversion also will be a reorganization and will be
treated for federal income tax purposes, as discussed above. Therefore,
you will not recognize income, gain or loss, you will have a carry-over tax
basis in your newly received common stock and a holding period that
includes the holding period of the common stock you surrendered in the
exchange.
No Internal Revenue Service Ruling
We have not sought a ruling from the Internal Revenue Service as to
the tax consequences of the Tracking Stock Proposal. Moreover, the
Internal Revenue Service has announced that it will not issue any advance
rulings on the classification of an instrument that has voting and
liquidation rights in an issuing corporation but whose dividend rights are
determined by reference to the earnings of a segregated portion of the
issuing corporation's assets, including assets held by a subsidiary. In
addition, there are no court decisions or other authorities that directly
discuss or analyze the tax impact of stock such as the CD Stock or
CompleteHome.com Stock. The opinion of Skadden is not binding on the
Internal Revenue Service or the courts and merely represents its best
judgment based upon existing authorities and certain assumptions and
representations made to Skadden by our management. Therefore, the tax
treatment of the Tracking Stock Proposal is subject to some uncertainty
under current law.
It is possible that the Internal Revenue Service might assert
successfully that the deemed receipt of CD Stock as well as a subsequent
conversion or exchange of CD Stock or CompleteHome.com Stock could be
taxable to us and/or to you. YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE
TAX CONSEQUENCES OF THE ADOPTION OR IMPLEMENTATION OF THE TRACKING STOCK
PROPOSAL.
Back-up Withholding
Certain non-corporate holders of existing common stock and CD Stock or
CompleteHome.com Stock could be subject to backup withholding at a rate of
31% on the payment of dividends on or proceeds from the sale of such stock.
Back-up withholding will apply only if the stockholder (1) fails to furnish
its taxpayer identification number ("TIN") which, for an individual, would
be his or her social security number, (2) furnishes an incorrect TIN, (3)
is notified by the Internal Revenue Service that it has failed to properly
report payments of interest or dividends or (4) under certain
circumstances, fails to certify under penalties of perjury that it has
furnished a correct TIN and has been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report
payments of interest or dividends. Stockholders should consult their tax
advisors regarding their qualifications for exemption from backup
withholding and the procedures for obtaining such an exemption if
applicable. The amount of any backup withholding from a payment to a
stockholder will be allowed as a credit against such stockholder's federal
income tax liability and may entitle such holder to a refund, provided that
the required information is furnished to the Internal Revenue Service.
_________________
Approval of Proposal 1 will require the affirmative vote of the
holders of a majority of the outstanding shares of existing common stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE TRACKING STOCK PROPOSAL.
PROPOSAL 2 STOCK OPTION PLAN PROPOSAL
COMPLETEHOME.COM, INC. 1999 STOCK OPTION PLAN
General
On October 29, 1999, the Board of Directors of CompleteHome.com, Inc.
adopted the CompleteHome.com, Inc. 1999 Stock Option Plan (the "Option
Plan"). The Option Plan was approved and ratified on October 29, 1999 by
Cendant Membership Services, Inc., the sole shareholder of
CompleteHome.com, Inc.. Between _____ , 1999 and _____ , 1999, a number of
options to purchase shares of common stock of CompleteHome.com, Inc. were
granted to employees of CompleteHome.com Group under the Option Plan (the
"Existing Grants").
Subject to the approval of the stockholders of Cendant (i) the Option
Plan and the Existing Grants will be ratified and assumed by Cendant, (ii)
all Existing Grants will be equitably adjusted to become options to
purchase shares of CompleteHome.com Stock and (iii) the remaining shares
available to be issued in connection with the grant of options under the
Option Plan will be equitably adjusted to become shares of CompleteHome.com
Stock. If such stockholder approval is not obtained, the Existing Options
will remain options to purchase shares of CompleteHome.com, Inc. common
stock, the Option Plan will remain an obligation of CompleteHome.com, Inc.,
and no additional grants will be made under the Option Plan.
Section 162(m) of the Code provides that a publicly traded company may
not deduct for federal income tax purposes compensation paid to the chief
executive officer or any of the four most highly compensated other officers
("Covered Employees") to the extent such compensation exceeds $1,000,000 in
any one tax year, unless the payments, among other things, are made based
upon the attainment of objective performance goals established by a
committee of the Board of Directors, comprised solely of two or more
outside directors, and based upon business criteria and other material
terms approved by stockholders of such publicly traded company. The Option
Plan is designed so that options may be granted to Covered Employees in a
manner considered performance-based and hence fully deductible. If such
stockholder approval is not obtained, it is possible that options granted
under the Option Plan to Covered Employees may not be fully deductible for
federal tax purposes.
The Board of Directors of Cendant believes that attracting and
retaining key employees is essential to CompleteHome.com Group's growth
potential and success, and that the long term success of CompleteHome.com
Group requires a competitive incentive compensation program designed to
motivate and reward such employees for outstanding service, including
awards that link compensation to applicable measures of CompleteHome.com
Group's performance, profitability and creation of stockholder value. Such
awards will enable CompleteHome.com Group and Cendant to attract and retain
key employees and enable such persons to acquire and/or increase their
proprietary interest in CompleteHome.com Group and thereby align their
interests with the interests of Cendant and its stockholders. However,
Cendant does not currently intend to issue any options under the Option
Plan to the Chairman of the Board, President, Chief Executive Officer or
any Vice Chairman of Cendant.
The following is a brief description of the material features of the
Option Plan, as modified as a result of its adoption by Cendant. Such
description is qualified in its entirety by reference to the full text of
the Option Plan, which is attached as Annex III to this Proxy Statement.
The Option Plan provides for grants of options to eligible employees
of CompleteHome.com Group and Cendant Group, at the sole discretion of the
Committee (as defined below). It is expected that a majority of the
employees of CompleteHome.com Group will be granted options under the
Option Plan. Subject to adjustment as provided in the Option Plan, the
total number of shares of CompleteHome.com Stock reserved and available for
delivery to optionees is six million (6,000,000). No optionee may be
granted options under the Option Plan covering more than 50% of the total
number of shares of CompleteHome.com Stock authorized for issuance under
the Option Plan over any consecutive two (2) year period. Shares subject
to an option may be authorized and unissued shares or may be treasury
shares. If any option terminates without being exercised, the shares of
CompleteHome.com Stock subject to such option will again be available for
option grants under the Option Plan.
The Option Plan will be administered by the Compensation Committee of
the Board of Directors of Cendant or by such other committee as the Board
of Directors of Cendant may designate or by the Board of Directors of
Cendant (the "Committee"). The Committee is authorized, among other
things, to select the employees of CompleteHome.com Group and Cendant to
whom options will be granted, the number of shares and per share exercise
price applicable thereto, as well as to determine the terms and conditions
of such options. Subject to the terms and conditions of the Option Plan,
the Committee is authorized to interpret the Option Plan and adopt
administrative rules, guidelines, policies and practices applicable to the
Option Plan, as well as to make all determinations under the Option Plan.
Options to purchase shares of CompleteHome.com Stock are the only
awards authorized to be granted under the Option Plan. No option granted
under the Option Plan may qualify as an Incentive Stock Option as defined
in Section 422 of the Code. The exercise price per share applicable to any
option is determined by the Committee, but may not be less than the Fair
Market Value (as defined in the Option Plan) of a share of CompleteHome.com
Stock as of the date of grant.
Stock Options may be settled in the form of cash, or by such other
manner determined by the Committee. The Committee may permit optionees to
defer the receipt of shares issuable in connection with the exercise of any
option. Except as set forth in the Option Plan, options may not be
transferred or otherwise assigned, pledged or encumbered in any way.
All options granted under the Option Plan will be subject to a vesting
schedule established by the Committee.
The Option Plan provides for the termination of options in the event
that any optionee's employment is terminated for Cause (as defined in the
Option Plan). The Option Plan also has provisions for treatment of
outstanding options in the event an optionee terminates employment with
CompleteHome.com for any other reason.
The Option Plan will terminate by its terms on October 29, 2009, but
may be earlier terminated or amended at any time by the Board of Directors
of Cendant at its sole discretion, except that no such termination or
amendment may impair the rights of any optionee with respect to any then
outstanding options.
Federal Income Tax Implications of the Option Plan
The following is a brief description of the federal income tax
consequences generally arising with respect to options under the Option
Plan.
THE FOLLOWING DISCUSSION ADDRESSES ONLY THE GENERAL FEDERAL INCOME TAX
CONSEQUENCES OF OPTIONS. IT DOES NOT ADDRESS THE IMPACT OF STATE AND LOCAL
TAXES, THE FEDERAL ALTERNATIVE MINIMUM TAX, AND SECURITIES LAWS
RESTRICTIONS, AND IS NOT INTENDED AS TAX ADVICE TO PARTICIPANTS IN THE
OPTION PLAN, WHO SHOULD CONSULT THEIR OWN TAX ADVISORS.
The grant of an option pursuant to the Option Plan will not be a
taxable event for the optionee, Cendant or CompleteHome.com Group. Upon
the exercise of an option, the optionee generally will recognize ordinary
income equal to the difference between the exercise price and fair market
value of the shares acquired on the date of exercise. Cendant or
CompleteHome.com Group, as the case may be, generally will be required to
withhold the appropriate amount in respect of such income and will be
entitled to a tax deduction equal to the amount recognized as ordinary
income by the optionee in connection with the exercise of an option. The
sale or other disposition of the CompleteHome.com Stock received pursuant
to the exercise of such option, generally will result in capital gain or
loss in an amount equal to the difference between the amount realized on
such sale or other disposition, and the seller's tax basis in the
CompleteHome.com Stock.
NEW PLAN BENEFITS
Grants of options under the Option Plan are subject to the discretion
of the Committee and therefore indeterminable. However, as of the date
hereof, no options have been granted to any officer, employee or director
of Cendant Group and 2,502,000 options have been granted to employees of
CompleteHome.com Group under the Option Plan.
_________________
Proposal 2 requires the affirmative vote of the holders of a majority
of the shares of common stock present in person or represented by proxy at
the Special Meeting and entitled to vote thereat.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE STOCK OPTION PLAN PROPOSAL.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------------------------------------------------------
AWARDS
-----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS (#)(2)(3) ($)(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
Direct Marketing
Division
Robert D. Kunisch (5) 1998 616,870 259,086 1,573,430 20,005
Former 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
- --------------------
(1) Prior to December 17, 1997, all cash compensation represents
compensation paid by HFS Incorporated (the
predecessor to Cendant).
(2) On September 23, 1998, the Compensation Committee approved the
Senior Management Program which effectively modified the terms of
certain Cendant 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
$20 per share, and (c) 50% were exchanged for similar options with
an exercise price equal to the New Price. In addition, to further
align the Senior Management (including the Named Executive
Officers) interest with that of Cendant's stockholders, the
ability to obtain modified options was subject to such officers'
agreement to participate in an executive equity incentive program,
requiring such officers to acquire and hold Common Stock having an
aggregate market value based upon their base salary.
(3) As a result of the Senior Management Program, the following total
number of options granted in 1996, 1997 and 1998 were cancelled:
Mr. Silverman: 25,813,380; Mr. Holmes: 2,115,930; Mr. Monaco:
3,197,325; Mr. Kunisch: 1,331,240; Mr. Buckman: 2,165,930.
(4) Payments included in these amounts for the fiscal year ended
December 31, 1998 consist of (i) Cendant matching contributions to
the Employee Savings Plan, which is a defined contribution salary
reduction 401(k) plan qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and/or
under a non-qualified deferred compensation plan established by
HFS in 1996 ("Defined Contribution Match"); (ii) insurance
premiums paid by Cendant for supplemental life insurance coverage;
and (iii) unused vacation pay. The payments with respect to the
Defined Contribution Match, life insurance premiums and unused
vacation pay were as follows:
</TABLE>
<TABLE>
<CAPTION>
DEFINED LIFE UNUSED
CONTRIBUTION INSURANCE VACATION
YEAR MATCH($) 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
(5) Mr. Kunisch resigned as an officer and employee of Cendant and
each of its subsidiaries as of June 30, 1999, and
remains a member of the Cendant Board of Directors.
</TABLE>
OPTION GRANTS IN 1998
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)
-----------------------------------------------
YEAR NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
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
- --------------------
(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.
(2) The vesting of these options accelerates under certain
circumstances (including a change of control of Cendant 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 Cendant 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 Cendant'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.
</TABLE>
AGGREGATED OPTION EXERCISES IN 1998 AND FISCAL YEAR-END OPTION VALUES
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.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARE OPTIONS/SARS IN-THE-MONEY
ACQUIRED VALUE AT FY-END (#) OPTIONS/SARS
ON EXERCISE REALIZED EXERCISABLE/ AT FY-END ($)(1)
NAME (#) ($) UNEXERCISABLE EXERCISABLE/ 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
- --------------------
(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 Cendant 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 Cendant'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.
</TABLE>
PENSION PLANS
The Company, through PHH Corporation (a wholly owned subsidiary),
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 Cendant.
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 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 limitation 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.
DIRECTOR COMPENSATION
Effective February 21, 1999, Non-Employee Directors (as defined in
Rule 16b-3(b)(3) of the Exchange Act) of the Company receive an annual
retainer of $40,000, plus $5,000 for chairing a committee and $3,000 for
serving as a member of a committee other than as Chairman. On September
23, 1998, the Compensation Committee approved a requirement that 50% of the
annual stipend is to be paid to each Director in common stock of Cendant
for the 1999 fiscal year. Effective January 1, 2000, 100% of the annual
stipend is to be paid to each Director in common stock of Cendant on a
quarterly basis. Non-Employee Directors also are paid $1,000 for each
Board of Directors meeting attended and $500 ($1,000 for committee chair)
for each board committee meeting if held on the same day as a Board of
Directors 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.
Cendant provides $100,000 of term life insurance coverage for each
Non-Employee Director to the beneficiary designated by such Non-Employee
Director. In addition, Cendant 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, Cendant 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 Cendant 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.
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
Each Named Executive Officer, other than Mr. Kunisch, is employed by
Cendant pursuant to a written agreement of employment.
Henry R. Silverman. Mr. Silverman is employed by Cendant 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 amended by the Third Amendment to the Silverman Employment Agreement
dated as of December 31, 1998 (the "Third Amendment") and by the Fourth
Amendment, dated as of August 2, 1999 (the "Fourth Amendment"). Mr.
Silverman serves Cendant 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
Cendant'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 Cendant of the
Silverman Employment Agreement, or if he is terminated by Cendant 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 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 Fourth Amendment provides that after termination of
Mr. Silverman's employment with Cendant other than due to death or for
Cause (but including a resignation for good reason), (i) Cendant would
provide Mr. Silverman, through August 31, 2009, term life insurance in the
amount of $100 million, all premiums to be paid by Cendant; and (ii)
Cendant would provide him certain benefits for life, including office and
clerical support, executive transportation services (including use of
aircraft), security services, continued access to other general facilities
and services and reimbursement of any properly documented business
expenses. During such period, Mr. Silverman would be required to keep
himself reasonably available to Cendant to render advice or to provide
services for more than 30 days per year, in return for which he will be
paid $30,000 per month.
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 Cendant which may, in
certain cases, be imposed upon payments thereunder and other compensation
and benefit arrangements.
Messrs. Monaco, Holmes and Buckman. Cendant 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 Cendant 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 Cendant 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 Cendant and as Chairman and Chief Executive Officer of the
Membership and Marketing Services Division, (ii) Mr. Holmes serves as Vice
Chairman of Cendant and Chairman and Chief Executive Officer of the Travel
Division and (iii) Mr. Buckman serves as Vice Chairman and General Counsel
of Cendant.
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
Cendant'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 Cendant other than for Cause (as defined
therein) or by the Executive for Constructive Discharge (as defined
therein), Cendant 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
Cendant other than for Cause or by the Executive for Constructive
Discharge, Cendant 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 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 Cendant 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 Cendant other than for
Cause (as defined therein) or by Mr. Buckman for Constructive Discharge (as
defined therein), Cendant 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 Cendant other than for Cause or by Mr. Buckman
for Constructive Discharge, Cendant 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 Cendant 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 Cendant 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 Cendant
will become fully and immediately vested and exercisable upon the
occurrence of any change of control transaction affecting Cendant (as
defined in each employment agreement).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information set forth on the following table is furnished as of
November 1, 1999 (unless otherwise specified) with respect to any person
(including any "group" as that term is used in Section 13(d)(3) of the
Exchange Act) who is known to Cendant to be the beneficial owner of more
than 5% of any class of 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
TOTAL AMOUNT OF SHARES BENEFICIALLY
OF SHARES OWNED, SHARES WHICH
BENEFICIALLY PERCENT OF COMMON MAY BE ACQUIRED
NAME OWNED (1) STOCK OWNED (2) WITHIN 60 DAYS (3)
- ---- ---------- ----------------- --------------------
PRINCIPAL STOCKHOLDERS:
Capital Research and
<S> <C> <C> <C>
Management Company (4) 99,321,262 13.97% N/A
333 South Hope Street
Los Angeles, CA 90071
Massachusetts Financial
Services Company (5) 45,764,202 6.44% N/A
500 Boylston Street
Boston, MA 02116-3741
DIRECTORS AND EXECUTIVE OFFICERS (6):
Henry R. Silverman 27,718,952 3.75% 27,418,852
Stephen P. Holmes(7) 2,892,222 * 2,731,734
Robert D. Kunisch(8) 2,328,238 * 1,723,430
Michael P. Monaco 1,940,588 * 1,923,992
James E. Buckman 2,575,941 * 2,556,841
Leonard S. Coleman 156,155 * 156,155
Martin L. Edelman 96,155 * 96,155
Dr. Carole G. Hankin 36,200 * 36,000
The Rt. Hon. Brian
Mulroney, P.C. LLD 156,155 * 156,155
Robert E. Nederlander 156,155 * 156,155
Robert W. Pittman 636,775 * 636,775
Leonard Schutzman 160,955 * 143,327
Robert F. Smith(9) 220,961 * 156,155
John D. Snodgrass(10) 6,347,504 * 5,074,822
John W. Chidsey 704,806 * 698,284
David M. Johnson 392,999 * 299,999
Samuel L. Katz(11) 789,274 * 775,207
Richard A. Smith 1,651,958 * 1,640,808
Jon Danski 29,000 0
EXECUTIVE OFFICERS AND DIRECTORS AS A
GROUP (19 PERSONS)(12): 48,990,992 6.47% 46,380,846
- --------------------
* Amount represents less than 1% of the outstanding Common Stock.
(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 711,140,914 shares of Common Stock outstanding on November 1,
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 13F dated August 11,
1999 by Capital Research and Management Company, a registered
investment advisor, Capital Research and Management Company
beneficially owned 99,321,262 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 13F dated November 5,
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
45,764,202 shares of Common Stock with sole power to vote 45,764,202
of such shares and sole power to dispose 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 79,042 shares of Common Stock held in the Employee Savings
Plan and 525,766 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 and 60,000 shares of common stock
held in a 401K plan account. Amount does not include 19,224 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 180 shares of Common Stock held by Mr. Katz's spouse and
1,000 shares of Common Stock held by Mr. Katz's children.
(12) Vested Options of all Executive Officers and Directors are deemed
outstanding for purposes of computing the percentage of class.
</TABLE>
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 Form 5's 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 amendment Form 4 correcting a typographical error in the
balance of common stock owned by him.
WHERE YOU CAN FIND MORE INFORMATION
Cendant files annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may
read and copy any reports, statements or other information we file at the
Securities and Exchange Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC filings of Cendant are also available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" information into this
Proxy Statement. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC.
The information incorporated by reference is deemed to be part of this
Proxy Statement, except for any information superseded by information in
this Proxy Statement. This Proxy Statement incorporates by reference the
documents set forth below that we have previously filed with the SEC.
These documents contain important information about our company and its
finances.
CENDANT CORPORATION SEC FILING (FILE NO. 1-10308) PERIOD
Annual Report on Form 10-K/A Year ended December 31, 1998
Quarterly Report on Form 10-Q/A Quarter ended March 31,
1999
Quarterly Report on Form 10-Q/A Quarter ended June 30,
1999
Quarterly Report on Form 10-Q Quarter ended September 30, 1999
We are also incorporating by reference additional documents that we
file with the SEC between the date of this Proxy Statement and the date of
the Special Meeting of our stockholders.
If you are a stockholder, we may have previously sent you some of the
documents incorporated by reference. You can obtain any of the
incorporated documents by contacting us or the SEC. We will send you the
documents incorporated by reference without charge, excluding exhibits to
the information that is incorporated by reference, unless we have
specifically incorporated by reference the exhibit in this document.
Stockholders may obtain documents incorporated by reference in this
document by requesting them in writing or by telephone from the appropriate
party at the following address:
Cendant Corporation
9 West 57th Street
New York, New York 10019
(212) 413-1933
Attention: Investor Relations
If you would like to request documents from us, including any
documents we may subsequently file with the Securities and Exchange
Commission prior to the Special Meeting, please do so by December 15, 1999
so that you will receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT TO VOTE ON THE PROPOSALS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED
NOVEMBER ___, 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE,
AND THE MAILING OF THE PROXY STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY
IMPLICATION TO THE CONTRARY.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Special
Meeting should be directed to the Vice President, Legal at 9 West 57th
Street, New York, New York 10019. A stockholder proposal must be received
a reasonable period of time before the printing and mailing of this Proxy
Statement for inclusion in this Proxy Statement.
In order for a stockholder to present a matter for action at the
Special Meeting (other than matters included in Cendant's proxy materials
in accordance with Rule 14a-8 under the Exchange Act), Cendant's by-laws
require that Cendant be given advance written notice of the matter. The
Vice President, Legal of Cendant must receive such notice at the address
noted above not less than 60 nor more than 90 days prior to the date of the
Special meeting; provided, however, if less than 70 days' notice or prior
public disclosure of the date of the Special Meeting is given or made to
stockholders, such notice shall have been mailed or delivered to the Vice
President, Legal not later than the close of business on the 10th day
following the date on which the notice of the Special Meeting was mailed or
public disclosure was made, whichever occurs first. If a stockholder
proposal is not presented within a reasonable period of time before the
mailing of this Proxy Statement, then management proxies would be allowed
to use their discretionary voting authority to vote on the proposal when
the proposal is raised at the Special Meeting, even though there is no
discussion of the proposal in this Proxy Statement.
Proposals received from stockholders are given careful consideration
by Cendant 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
Cendant on or before December 22, 1999. Any proposal should be directed to
the attention of Vice President, Legal, Cendant Corporation, 9 West 57th
Street, New York, New York 10019. 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 Cendant on or
prior to March 28, 2000 and in order for a proposal to be timely under
Cendant'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,
Cendant Corporation
Jeanne M. Murphy
Secretary
INDEX OF CERTAIN TERMS
Page on which
term is defined in
Term the Proxy Statement
---- --------------------
40% of Total Market Capitalization Trigger . . . . . . . . . . . . . . 57
60% of Total Market Capitalization Threshold . . . . . . . . . . . . . 57
All or Substantially All of the Assets. . . . . . . . . . . . . . . . . 50
Available Dividend Amount . . . . . . . . . . . . . . . . . . . . . . . 47
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Exempt Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Market Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 53
Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Net Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Non-Employee Directors . . . . . . . . . . . . . . . . . . . . . . . . 96
Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group . . . . . . . . . . . . . . . . 63
Outstanding Interest Percentage . . . . . . . . . . . . . . . . . . . . 63
Proportionate Interest . . . . . . . . . . . . . . . . . . . . . . . . 54
Publicly Traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Retained Interest . . . . . . . . . . . . . . . . . . . . . 8, I-1, II-24
Retained Interest Percentage . . . . . . . . . . . . . . . . . 63, II-24
Total Number of Notional CompleteHome.com Shares Deemed
Outstanding . . . . . . . . . . . . . . . . . . . . . 54, I-1, II-24
Trading Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ANNEX I
ILLUSTRATIONS OF CERTAIN TERMS
The following illustrations show how to calculate the Retained
Interest Percentage, the Outstanding Interest Percentage, the Number of
Shares Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group and the Total Number of Notional CompleteHome.com
Shares Deemed Outstanding after giving effect to certain hypothetical
dividends, issuances, repurchases and transfers, in each case based on the
assumptions set forth herein. In these illustrations, the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group is initially assumed to be 100. Unless otherwise
specified, each illustration below should be read independently as if none
of the other transactions referred to below had occurred. These
illustrations are not intended to be complete explanations of the matters
covered and are qualified in their entirety by the more detailed
information contained elsewhere in the Proxy Statement. These
illustrations are purely hypothetical and the numbers used (including
assumptions of market value) were chosen to simplify the calculations and
are not intended to represent estimates of actual numbers or values. Any
capitalized terms which are not defined in Annex I have the meaning
ascribed to them in the Proxy Statement.
"Total Number of Notional CompleteHome.com Shares Deemed Outstanding"
means the number of shares of CompleteHome.com Stock outstanding plus the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group.
At any given time, the percentage interest in CompleteHome.com
intended to be represented by the outstanding shares of CompleteHome.com
Stock (i.e., the Outstanding Interest Percentage) is equal to:
Number of outstanding shares of CompleteHome.com Stock
--------------------------------------------------------------------
Total Number of Notional CompleteHome.com Shares Deemed Outstanding
and the remaining percentage interest in CompleteHome.com Group intended to
be represented by Cendant Group's Retained Interest in CompleteHome.com
Group (i.e., the Retained Interest Percentage) is equal to:
Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group
-------------------------------------------------------------------
Total Number of Notional CompleteHome.com Shares Deemed Outstanding
The sum of the Outstanding Interest Percentage and the Retained
Interest Percentage would always equal 100%. In the examples below, before
the first issuance of shares of CompleteHome.com Stock the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group and the Total Number of Notional CompleteHome.com
Shares Deemed Outstanding are each equal to 100, the Retained Interest
Percentage is 100% and the Outstanding Interest Percentage is 0%.
ISSUANCE OF COMPLETEHOME.COM STOCK
The following illustrations reflect an assumed issuance by Cendant of
15 shares of CompleteHome.com Stock under the Stock Option Plan or in an
offering.
Issuance for Account of Cendant Group
Assume the issuance is attributed to Cendant Group in respect of its
Retained Interest in CompleteHome.com Group (as currently planned), with
the net proceeds credited solely to Cendant Group.
Shares previously issued and outstanding . . . . . . . . . . . . . 0
Newly issued shares for account of Cendant Group . . . . . . . . . 15
Total issued and outstanding after the Offering . . . . . . . 15
o The Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group would
decrease by the number of shares of CompleteHome.com Stock
sold for the account of Cendant Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to the
Offering . . . . . . . . . . . . . . . . . . . . . . . . 100
Shares issued in the Offering . . . . . . . . . . . . . . . 15
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after the
Offering . . . . . . . . . . . . . . . . . . . . . . . . 85
o As a result, the issued and outstanding shares (15) would
represent an Outstanding Interest Percentage of 15%,
calculated as follows:
15
-------
15 + 85
The Retained Interest Percentage would accordingly be 85%.
o In this case, in the event of any dividend or other
distribution paid on the outstanding shares of
CompleteHome.com Stock (other than a dividend or other
distribution payable in shares of CompleteHome.com Stock),
Cendant Group would be credited, and CompleteHome.com Group
would be charged, with an amount equal to 567% (representing
the ratio of the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group
(85) to the total number of shares of CompleteHome.com Stock
issued and outstanding following the Offering (15)) of the
aggregate amount of such dividend or distribution. If, for
example, a dividend of $1.00 per share were declared and paid
on the 15 shares of CompleteHome.com Stock outstanding (an
aggregate of $15), Cendant Group would be credited with $85,
and CompleteHome.com Group would be charged with that amount
in addition to the $15 dividend paid to the holders of
CompleteHome.com Stock (a total of $100).
ISSUANCE FOR ACCOUNT OF COMPLETEHOME.COM GROUP
Assume the issuance is attributed to CompleteHome.com Group as an
increase in its equity, with the net proceeds credited solely to
CompleteHome.com Group.
Shares previously issued and outstanding . . . . . . . . . . 0
Newly issued shares for account of CompleteHome.com Group . . 15
Total issued and outstanding after the Offering . . . . . . 15
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group (100) would remain
unchanged.
o As a result, the issued and outstanding shares (15) would
represent an Outstanding Interest Percentage of about 13%,
calculated as follows:
15
--------
15 + 100
The Retained Interest Percentage would accordingly be about 87%.
o In this case, in the event of any dividend or other
distribution paid on the outstanding shares of
CompleteHome.com Stock (other than a dividend or other
distribution payable in shares of CompleteHome.com Stock),
Cendant Group would be credited, and CompleteHome.com Group
would be charged, with an amount equal to 667% (representing
the ratio of the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group
(100) to the total number of shares of CompleteHome.com Stock
issued and outstanding following the Offering (15)) of the
aggregate amount of such dividend or distribution.
ADDITIONAL ISSUANCES OF COMPLETEHOME.COM STOCK
The following illustrations reflect an assumed issuance of an
additional 15 shares of CompleteHome.com Stock after the assumed initial
issuance of 15 shares for the account of Cendant Group.
ADDITIONAL ISSUANCES FOR ACCOUNT OF CENDANT GROUP
Assume the issuance is attributed to Cendant Group in respect of its
Retained Interest in CompleteHome.com Group, with the net proceeds credited
solely to Cendant Group.
Shares previously issued and outstanding . . . . . . . . . . 15
Newly issued shares for account of Cendant Group . . . . . . 15
Total issued and outstanding after additional offering. . . 30
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group would decrease by
the number of shares of CompleteHome.com Stock issued for the
account of Cendant Group
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to the
additional offering . . . . . . . . . . . . . . . . . . . . 85
Newly issued shares for account of Cendant Group . . . . . . 15
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after the
additional offering . . . . . . . . . . . . . . . . . . . . 70
o As a result, the total issued and outstanding shares (30)
would in the aggregate represent an Outstanding Interest
Percentage of 30%, calculated as follows:
30
--------
30 + 70
The Retained Interest Percentage would accordingly be reduced to 70%.
o In this case, in the event of any dividend or other
distribution paid on CompleteHome.com Stock (other than a
dividend or other distribution payable in shares of
CompleteHome.com Stock), Cendant Group would be credited, and
CompleteHome.com Group would be charged, with an amount equal
to 233% (representing the ratio of the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group (70) to the total number of shares of
CompleteHome.com Stock issued and outstanding following the
additional offering (30)) of the aggregate amount of such
dividend or distribution.
ADDITIONAL ISSUANCES FOR ACCOUNT OF COMPLETEHOME.COM GROUP
Assume the issuance is attributed to CompleteHome.com Group as an
increase in its equity, with the net proceeds credited solely to
CompleteHome.com Group.
Shares previously issued and outstanding . . . . . . . . . . 15
Newly issued shares for account of CompleteHome.com Group . . 15
Total issued and outstanding after the additional offering 30
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group (85) would remain
unchanged.
o As a result, the total issued and outstanding shares (30)
would in the aggregate represent an Outstanding Interest
Percentage of about 26%, calculated as follows:
30
--------
30 + 85
The Retained Interest Percentage would accordingly be reduced to about 74%.
o In this case, in the event of any dividend or other
distribution paid on CompleteHome.com Stock (other than a
dividend or other distribution payable in shares of
CompleteHome.com Stock), Cendant Group would be credited, and
CompleteHome.com Group would be charged, with an amount equal
to 283% (representing the ratio of the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group (85) to the total number of shares of
CompleteHome.com Stock issued and outstanding following the
additional offering (30)) of the aggregate amount of such
dividend or distribution.
ISSUANCES OF CONVERTIBLE SECURITIES
If we were to issue any securities convertible into or exercisable for
shares of CompleteHome.com Stock, the Outstanding Interest Percentage and
the Retained Interest Percentage would be unchanged at the time of such
issuance. If any shares of CompleteHome.com Stock were issued upon
conversion or exercise of such securities, however, then the Outstanding
Interest Percentage and the Retained Interest Percentage would be affected
as shown above under "Additional Issuances for Account of Cendant Group",
if such securities were attributed to Cendant Group, or under "Additional
Issuances for Account of CompleteHome.com Group", if such securities were
attributed to CompleteHome.com Group.
REPURCHASES OF COMPLETEHOME.COM STOCK
The following illustrations reflect an assumed repurchase by Cendant
of 5 shares of CompleteHome.com Stock after the assumed initial issuance of
15 shares of CompleteHome.com Stock for the account of Cendant Group.
REPURCHASE FOR THE ACCOUNT OF CENDANT GROUP
Assume the repurchase is attributed to Cendant Group as an increase in
its Retained Interest in CompleteHome.com Group, with the cost charged
solely against Cendant Group.
Shares previously issued and outstanding . . . . . . . . . . 15
Shares repurchased for account of Cendant Group . . . . . . . 5
Total issued and outstanding after repurchase . . . . . . . 10
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group would be increased
by the number of any shares of CompleteHome.com Stock
repurchased for the account of Cendant Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to
repurchase . . . . . . . . . . . . . . . . . . . . . . . . 85
Number of shares repurchased for the account of Cendant Group. 5
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
repurchase . . . . . . . . . . . . . . . . . . . . . . . . 90
o As a result, the total issued and outstanding shares (10)
would in the aggregate represent an Outstanding Interest
Percentage of 10%, calculated as follows:
10
-------
10 + 90
The Retained Interest Percentage would accordingly be increased to 90%.
REPURCHASE FOR ACCOUNT OF COMPLETEHOME.COM GROUP WITHOUT PARTICIPATION BY
CENDANT GROUP
Assume the repurchase is attributed to CompleteHome.com Group, with
the cost being charged solely against CompleteHome.com Group. Further
assume that the Board of Directors does not determine to transfer assets
from CompleteHome.com Group to Cendant Group to hold constant the
Outstanding Interest Percentage and Retained Interest Percentage.
Shares previously issued and outstanding . . . . . . . . . . 15
Shares repurchased for account of CompleteHome.com Group . 5
Total issued and outstanding after repurchase . . . . . . . 10
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group (85) would remain
unchanged.
o As a result, the total issued and outstanding shares (10)
would in the aggregate represent an Outstanding Interest
Percentage of about 11%, calculated as follows:
10
-------
10 + 85
The Retained Interest Percentage would accordingly be increased to about
89%.
REPURCHASE FOR ACCOUNT OF COMPLETEHOME.COM GROUP WITH PARTICIPATION BY
CENDANT GROUP
Assume the repurchase is attributed to CompleteHome.com Group, with
the cost being charged solely against CompleteHome.com Group. Further
assume that the repurchase is made in connection with a tender offer for 5,
or 33%, of the then outstanding shares at a price of $20 per share, and
that the Board of Directors determines to transfer cash or other assets
from CompleteHome.com Group to Cendant Group to hold constant the
Outstanding Interest Percentage and Retained Interest Percentage.
Shares previously issued and outstanding . . . . . . . . . . 15
Shares repurchased for account of CompleteHome.com Group . 5
Total issued and outstanding after repurchase . . . . . . . 10
o In order to hold constant the Outstanding Interest Percentage
and Retained Interest Percentage, the Board of Directors could
determine that the Market Value of a share of CompleteHome.com
Stock in this context is $20 and transfer from
CompleteHome.com Group to Cendant Group an amount of cash or
other assets equal to 567% (representing the ratio of the
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group (85) to the total
number of shares of CompleteHome.com Stock issued and
outstanding (15), in each case immediately prior to the
repurchase) of the aggregate amount of the cash paid in the
tender offer to holders of outstanding shares of
CompleteHome.com Stock ($100), or a total of $567.
o In that case, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group
(85) would decrease by the amount of cash so transferred
($567) divided by the Market Value per share of
CompleteHome.com Stock ($20).
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to
transfer . . . . . . . . . . . . . . . . . . . . . . . . . 85
Adjustment in respect of Cendant Group's Retained Interest
in CompleteHome.com Group to reflect transfer to Cendant
Group of funds theretofore allocated to CompleteHome.com
Group . . . . . . . . . . . . . . . . . . . . . . . . . 28
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
transfer . . . . . . . . . . . . . . . . . . . . . . . . . 57
o As a result, the total issued and outstanding shares (10)
would in the aggregate continue to represent an Outstanding
Interest Percentage of 15%, calculated as follows:
10
-------
10 + 57
The Retained Interest Percentage would accordingly continue to be 85%.
o Assuming that the Board of Directors transferred only half of
the $567 amount, or $283.50, from CompleteHome.com Group to
Cendant Group, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in CompleteHome.com Group
(85) would decrease by the amount of cash so transferred
($283.50) divided by the Market Value per share of
CompleteHome.com Stock ($20).
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to
transfer . . . . . . . . . . . . . . . . . . . . . . . . . 85
Adjustment in respect of Cendant Group's Retained Interest
in CompleteHome.com Group to reflect transfer to Cendant
Group of cash theretofore allocated to CompleteHome.com
Group . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
transfer . . . . . . . . . . . . . . . . . . . . . . . . . 71
o In that case, as a result, the total issued and outstanding
shares (10) would in the aggregate represent an Outstanding
Interest Percentage of about 12%, calculated as follows:
10
-------
10 + 71
The Retained Interest Percentage would accordingly be increased to about
88%.
COMPLETEHOME.COM STOCK DIVIDENDS
The following illustrations reflect assumed dividends of
CompleteHome.com Stock on outstanding shares of CD Stock and outstanding
shares of CompleteHome.com Stock, respectively, after the assumed initial
issuance of 15 shares of CompleteHome.com Stock for the account of Cendant
Group.
CompleteHome.com Stock Dividend on CD Stock
Assume 1,000 shares of CD Stock are outstanding and Cendant declares a
dividend of 1/20 of a share of CompleteHome.com Stock on each outstanding
share of CD Stock.
Shares previously issued and outstanding . . . . . . . . . . 15
Newly issued shares for account of Cendant Group . . . . . . 50
Total issued and outstanding after dividend . . . . . . . . 65
o Any dividend of shares of CompleteHome.com Stock to the
holders of shares of CD Stock would be treated as a reduction
in the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in CompleteHome.com Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to
dividend . . . . . . . . . . . . . . . . . . . . . . . . . 85
Number of shares distributed on outstanding shares of
Cendant Stock for account of Cendant Group . . . . . . . . 50
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
dividend . . . . . . . . . . . . . . . . . . . . . . . . . 35
o As a result, the total issued and outstanding shares (65)
would in the aggregate represent an Outstanding Interest
Percentage of 65%, calculated as follows:
65
-------
65 + 35
The Retained Interest Percentage would accordingly be reduced to 35%.
Note, however, that after the dividend, the holders of CD Stock would also
hold 50 shares of CompleteHome.com Stock, which would be intended to
represent a 50% interest in the value attributable to CompleteHome.com
Group.
COMPLETEHOME.COM STOCK DIVIDEND ON COMPLETEHOME.COM STOCK
Assume Cendant declares a dividend of 1/5 of a share of
CompleteHome.com Stock on each outstanding share of CompleteHome.com Stock.
Shares previously issued and outstanding . . . . . . . . . . 15
Newly issued shares for account of CompleteHome.com Group . . 3
Total issued and outstanding after dividend . . . . . . . . 18
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group would be increased
proportionately to reflect the stock dividend payable in
shares of CompleteHome.com Stock to holders of shares of
CompleteHome.com Stock. That is, the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group would be increased by a number equal to
567% (representing the ratio of the Number of Shares Issuable
with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group (85) to the number of shares of
CompleteHome.com Stock issued and outstanding (15), in each
case immediately prior to such dividend) of the aggregate
number of shares issued in connection with such dividend (3),
or 17.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to
dividend . . . . . . . . . . . . . . . . . . . . . . . . . 85
Adjustment in respect of Cendant Group's Retained Interest
to reflect shares distributed on outstanding shares of
CompleteHome.com Stock . . . . . . . . . . . . . . . . . 17
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
dividend . . . . . . . . . . . . . . . . . . . . . . . . 102
o As a result, the total issued and outstanding shares (18)
would in the aggregate continue to represent an Outstanding
Interest Percentage of 15%, calculated as follows:
18
--------
18 + 102
The Retained Interest Percentage would accordingly continue to be 85%.
CAPITAL TRANSFERS OF CASH OR OTHER ASSETS BETWEEN CENDANT GROUP AND
COMPLETEHOME.COM GROUP
Capital Contribution of Cash or Other Assets from Cendant Group to
CompleteHome.com Group
The following illustration reflects the assumed contribution by
Cendant Group to CompleteHome.com Group, after the assumed initial issuance
of 15 shares of CompleteHome.com Stock for the account of Cendant Group, of
$40 of assets allocated to Cendant Group at a time when the Market Value of
the CompleteHome.com Stock is $20 per share.
Shares previously issued and outstanding . . . . . . . . . . 15
Newly issued shares . . . . . . . . . . . . . . . . . . . . . 0
Total issued and outstanding after contribution . . . . . . 15
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group would be increased
to reflect the contribution to CompleteHome.com Group of
assets theretofore allocated to Cendant Group by a number
equal to the value of the assets contributed ($40) divided by
the Market Value of CompleteHome.com Stock at that time ($20),
or 2 shares.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to
contribution . . . . . . . . . . . . . . . . . . . . . . . 85
Increase to reflect contribution to CompleteHome.com Group
of assets allocated to Cendant Group . . . . . . . . . . . 2
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
contribution . . . . . . . . . . . . . . . . . . . . . . . 87
o As a result, the total issued and outstanding shares (15)
would in the aggregate represent an Outstanding Interest
Percentage of a little less than 15%, calculated as follows:
15
-------
15 + 87
The Retained Interest Percentage would accordingly be increased to a little
more than 85%.
Return of Capital Transfer of Cash or Other Assets from
CompleteHome.com Group to Cendant Group
The following illustration reflects the assumed transfer by
CompleteHome.com Group to Cendant Group, after the assumed initial issuance
of 15 shares of CompleteHome.com Stock for the account of Cendant Group, of
$40 of assets allocated to CompleteHome.com Group on a date on which the
Market Value of CompleteHome.com Stock is $20 per share.
Shares previously issued and outstanding . . . . . . . . . . 15
Newly issued shares . . . . . . . . . . . . . . . . . . . . . 0
Total issued and outstanding after contribution . . . . . . 15
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group would be decreased
to reflect the transfer to Cendant Group of assets theretofore
allocated to CompleteHome.com Group by a number equal to the
value of the assets transferred ($40) divided by the Market
Value of CompleteHome.com Stock at that time ($20), or 2
shares.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group prior to
contribution . . . . . . . . . . . . . . . . . . . . . . . 85
Decrease to reflect transfer to Cendant Group of assets
allocated to CompleteHome.com Group . . . . . . . . . . . 2
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
contribution . . . . . . . . . . . . . . . . . . . . . . . 83
o As a result, the total issued and outstanding shares (15)
would in the aggregate represent an Outstanding Interest
Percentage of a little more than 15%, calculated as follows:
15
-------
15 + 83
The Retained Interest Percentage would accordingly be decreased to a little
less than 85%.
ANNEX II
PROPOSAL 1 THE TRACKING STOCK PROPOSAL
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENDANT CORPORATION
The undersigned, James E. Buckman, certifies that he is the Vice
Chairman and General Counsel of Cendant Corporation, a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), and does hereby further certify as follows:
(1) The name of the Corporation is Cendant Corporation.
(2) The name under which the Corporation was originally
incorporated was Comp-U-Card of America, Inc. and the original
Certificate of Incorporation of the Corporation was filed with
the Secretary of State of the State of Delaware on August 1,
1974.
(3) This Amended and Restated Certificate of Incorporation
was duly adopted in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of
Delaware.
(4) The text of the Amended and Restated Certificate of
Incorporation of the Corporation as amended hereby is restated to
read in its entirety, as follows:
1. The name of the Corporation is Cendant Corporation
(hereinafter, the "Corporation").
2. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. Capital Stock
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 2,510,000,000, consisting of
(i) 2,500,000,000 shares of Common Stock, $0.01 par value per share
("Common Stock"), and (ii) 10,000,000 shares of Preferred Stock, $0.01 par
value per share ("Preferred Stock"). No stockholder shall have any
preemptive right to subscribe to or purchase any additional shares of stock
of the Corporation or any securities convertible into any such shares or
representing a right or option to purchase any such shares.
A. Common Stock
1. Issuance of Common Stock in Series; Design-
ation; Reclassification.
The Corporation shall have the authority to issue shares of Common
Stock in two series. One series of Common Stock shall be designated as
Cendant Corporation CD Common Stock ("CD Stock"). The second series of
Common Stock shall be designated as Cendant Corporation
CompleteHome.com Common Stock ("CompleteHome.com Stock"). When the filing
of this Amended and Restated Certificate of Incorporation becomes
effective, each share of Common Stock outstanding immediately prior thereto
shall automatically be reclassified as one share of CD Stock (and
outstanding certificates that had theretofore represented shares of Common
Stock shall thereupon represent an equal number of shares of CD Stock
despite the absence of any indication thereon to that effect).
The total number of shares of CD Stock which the Corporation shall
have the authority to issue shall initially be 2,000,000,000, and the total
number of shares of CompleteHome.com Stock which the Corporation shall have
the authority to issue shall initially be 500,000,000. The Board of
Directors shall have the authority to increase or decrease from time to
time the total number of shares of Common Stock of either series which the
Corporation shall have the authority to issue, but not above the number
which, when added to the total number of shares of the other series of
Common Stock that the Corporation would have the authority to issue, would
exceed the total number of shares of Common Stock that the Corporation has
the authority to issue, and not below the number of shares of such series
then outstanding. The Board of Directors shall have the authority to
designate, prior to the time of the first issuance of the CompleteHome.com
Stock, the number which, immediately prior to such first issuance, will
constitute the Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group and any other terms which are
consistent with applicable law and the provisions of this Article 4. The
voting powers, preferences and relative, participating, optional or other
special rights of the CD Stock and CompleteHome.com Stock, and the
qualifications and restrictions thereon, shall be as set forth in this
Section A.
2. Dividends
(a) Dividends. Subject to the preferences and other terms of any
outstanding series of Preferred Stock, the holders of either series of
Common Stock shall be entitled to receive dividends on their shares of
Common Stock if, as and when declared by the Board of Directors, out of
legally available funds, but (i) the Corporation will be permitted to pay
dividends on CD Stock out of the lesser of (x) the assets of the
Corporation legally available for the payment of dividends under Delaware
law or (y) the Available Dividend Amount for Cendant Group and (ii) the
Corporation will be permitted to pay dividends on CompleteHome.com Stock
(and corresponding amounts to the Cendant Group with respect to its
Retained Interest in CompleteHome.com Group) out of the lesser of (x) the
assets of the Corporation legally available for the payment of dividends
under Delaware law or (y) the Available Dividend Amount for
CompleteHome.com Group.
(b) Discrimination Between or Among Series of Common Stock. Subject
to paragraph (a) of this Section 2 and subject to the preferences and other
terms of any outstanding series of Preferred Stock, the Corporation shall
have the authority to declare and pay dividends on both, one or neither
series of Common Stock in equal or unequal amounts, notwithstanding the
performance of either Group, the amount of assets available for dividends
on either series of Common Stock, the amount of prior dividends paid on
either series of Common Stock, the respective voting rights of each series
of Common Stock or any other factor.
3. Mandatory Dividend, Redemption or Exchange on Disposition of All
or Substantially All of the Assets of a Group; Exchange of One Series of
Common Stock for the Other Series or for Stock of a Subsidiary at the
Corporation's Option.
(a) Mandatory Dividend, Redemption or Exchange.
(i) In the event of a Disposition of All or Substantially All of
the Assets of a Group (other than an Exempt Disposition), the
Corporation shall, on or prior to the 85th Trading Day after the
consummation of such Disposition, either:
(x) declare and pay a dividend to holders of the series of
Common Stock that relates to that Group (in cash, securities
(other than Common Stock) or other property, or a
combination thereof), subject to the limitations on
dividends set forth under Section 2 of this Article 4(A), in
an amount having a Fair Value equal to their Proportionate
Interest in the Net Proceeds of such Disposition;
(y) redeem from holders of the series of Common Stock that
relates to that Group, for cash, securities (other than
Common Stock) or other property (or a combination thereof)
in an amount having a Fair Value equal to their
Proportionate Interest in the Net Proceeds of such
Disposition, all of the outstanding shares of the relevant
series of Common Stock (or, if such Group continues after
such Disposition to own any material assets other than the
proceeds of such Disposition, a number of shares of such
series of Common Stock (rounded, if necessary, to the
nearest whole number) having an aggregate average Market
Value, during the 20 consecutive Trading Day period
beginning on (and including) the 16th Trading Day
immediately following the date on which the Disposition is
consummated, equal to such Fair Value); or
(z) issue, in exchange for all of the outstanding shares of
the series of Common Stock that relates to that Group, a
number of shares of the series of Common Stock that does not
relate to that Group (rounded, if necessary, to the nearest
whole number) having an aggregate value equal to 110% of the
aggregate value of all of the outstanding shares of the
series of Common Stock that relates to that Group (with
value in each case based on the average Market Value of a
share of the relevant series of Common Stock during the 20
consecutive Trading Day period beginning on (and including)
the 16th Trading Day immediately following the date on which
the Disposition is consummated).
(ii) At any time within one year after completing any dividend
or partial redemption pursuant to (x) or (y) of the preceding
sentence, the Corporation may issue, in exchange for all of the
remaining outstanding shares of the series of Common Stock that
relates to the Group that consummated the applicable Disposition,
a number of shares of the series of Common Stock that does not
relate to that Group (rounded, if necessary, to the nearest whole
number) having an aggregate value equal to 110% of the aggregate
value of all of the outstanding shares of the series of Common
Stock that relates to that Group (with value in each case based
on the average Market Value of a share of the relevant series of
Common Stock during the 20 consecutive Trading Day period ending
on (and including) the 5th Trading Day immediately preceding the
date on which the Corporation mails the notice of exchange to
holders of the relevant series).
(iii) For purposes of this Section 3, if a Group consummates a
Disposition in a series of related transactions, such Disposition
shall not be deemed to have been completed until consummation of
the last of such transactions.
(b) Optional Exchange of One Series of Common Stock for the Other
Series.
(i) Prior to the third anniversary of the earlier of (a) the
initial issuance of CompleteHome.com Stock in a public offering
or (b) the first anniversary of a private placement of
CompleteHome.com Stock, the Corporation will not have the right
to cause the exchange of CD Stock for CompleteHome.com Stock.
(ii) From and after the 18-month anniversary of the earlier of
(a) the initial issuance of CompleteHome.com Stock in a public
offering or (b) the first anniversary of a private placement of
CompleteHome.com Stock, the Corporation may issue, in exchange
for all of the outstanding shares of CompleteHome.com Stock, a
number of shares of CD Stock (rounded, if necessary, to the
nearest whole number) having an aggregate value equal to the
percentage of the aggregate value of all of the outstanding
shares of CompleteHome.com Stock (the "Applicable Percentage")
specified for the applicable date of exchange below. (In each
case value is based on the average Market Value of a share of the
relevant series of Common Stock during the 20 consecutive Trading
Day period ending on (and including) the 5th Trading Day
immediately preceding the date on which the Corporation mails the
notice of exchange to holders of CompleteHome.com Stock).
The Applicable
Percentage Will
be the Percentage
If the Exchange Date Falls During Specified for
the Period Indicated Below Such Period Below
--------------------------------- -----------------
Eighteenth Month................. 120%
Nineteenth Month................. 119.722222%
Twentieth Month.................. 119.444444%
Twenty-first Month............... 119.166667%
Twenty-second Month.............. 118.888889%
Twenty-third Month............... 118.611111%
Twenty-fourth Month.............. 118.333333%
Twenty-fifth Month............... 118.055556%
Twenty-sixth Month............... 117.777778%
Twenty-seventh Month............. 117.5%
Twenty-eighth Month.............. 117.222222%
Twenty-ninth Month............... 116.944444%
Thirtieth Month.................. 116.666667%
Thirty-first Month............... 116.388889%
Twenty-second Month.............. 116.111111%
Thirty-third Month............... 115.833333%
Thirty-fourth Month.............. 115.555556%
Thirty-fifth Month............... 115.277778%
Thirty-sixth Month and after..... 115%
For purposes of the foregoing chart, (x) the eighteenth
"Month" is the period from and including the date which is the
earlier of (1) the first issuance of shares of CompleteHome.com
Stock in a public offering or (2) the first anniversary of a
private placement of CompleteHome.com Stock, to but excluding the
one month anniversary of such date (provided that, if the date is
the 29th, 30th or 31st day of any month, the first "Month" will
be the period from and including such date to but excluding the
one month anniversary of the first day of the month immediately
following the month in which such date falls) and (y) each
subsequent "Month" is the period from and including the day after
the end of the prior Month to but excluding the one month
anniversary of such day.
(iii) From and after the third anniversary of the earlier of (a)
the initial issuance of CompleteHome.com Stock in a public
offering or (b) the first anniversary of a private placement of
CompleteHome.com Stock, the Corporation may, at any time after
outstanding CompleteHome.com Stock exceeds the 40% of Total
Market Capitalization Trigger but has not exceeded 60% of the
Total Market Capitalization Threshold, issue, in exchange for all
of the outstanding shares of either series of Common Stock (the
"Series of Common Stock Being Retired"), a number of shares of
the other series of Common Stock (rounded, if necessary, to the
nearest whole number) having an aggregate value equal to the
aggregate value of all of the outstanding shares of the Series of
Common Stock Being Retired (with value in each case based on the
average Market Value of a share of the relevant series of Common
Stock during the 20 consecutive Trading Day period ending on (and
including) the 5th Trading Day immediately preceding the date on
which the Corporation mails the notice of exchange to holders of
the Series of Common Stock Being Retired). In the event that
CompleteHome.com Stock exceeds the 60% of Total Market
Capitalization Threshold, the Corporation will lose the right to
effect an exchange on a value for value basis during such period.
The Corporation will have the right, on or after the third
anniversary of the earlier of (a) the initial issuance of
CompleteHome.com Stock in a public offering or (b) the first
anniversary of a private placement of CompleteHome.com Stock, if
outstanding CompleteHome.com Stock exceeds the 60% of Total
Market Capitalization Threshold, to issue a number of shares of
CompleteHome.com Stock, in exchange for all of the outstanding CD
Stock, having an aggregate value equal to 115% of the aggregate
value of all of the outstanding shares of CD Stock. (In each
case value is based on the average Market Value of a share of
relevant series of Common Stock during the 20 consecutive Trading
Day period ending on (and including) the 5th Trading Day
immediately preceding the date on which the Corporation mails the
notice of exchange to holders of CD Stock). In the event that
CompleteHome.com Stock equals or falls below the 60% of Total
Market Capitalization Threshold, the Corporation will lose the
right to effect such an exchange during such period.
CompleteHome.com Stock will exceed the "40% of Total Market
Capitalization Trigger" if the Market Capitalization of the
outstanding CompleteHome.com Stock exceeds 40% of the Total
Market Capitalization of both series of Common Stock for 30
Trading Days during any 60 consecutive Trading Day period.
CompleteHome.com Stock will be equal to or below the "60% of
Total Market Capitalization Threshold" if the Market
Capitalization of the outstanding CompleteHome.com Stock is equal
to or below 60% of the Total Market Capitalization of both series
of Common Stock for 30 Trading Days during any 60 consecutive
Trading Day period.
If the Corporation has the right, on the date on which it mails a
notice of exchange as contemplated above, to issue shares of CD
Stock or CompleteHome.com Stock in exchange for outstanding
shares of the other series of Common Stock as described above,
the Corporation will not lose that right if CompleteHome.com
Stock subsequently falls below the 40% of Total Market
Capitalization Trigger or exceeds the 60% of Total Market
Capitalization Threshold.
(iv) Notwithstanding the preceding paragraphs, if a Tax Event
has occurred, the Corporation may issue, in exchange for all of
the outstanding shares of CompleteHome.com Stock, a number of
shares of CD Stock (rounded, if necessary, to the nearest whole
number) having an aggregate value equal to 110% of the aggregate
value of all of the outstanding shares of CompleteHome.com Stock
(with value based on the average Market Value of a share of the
relevant series of Common Stock during the 20 consecutive Trading
Day period ending on (and including) the 5th Trading Day
immediately preceding the date on which the Corporation mails the
notice of exchange to holders of CompleteHome.com Stock being
retired). "Tax Event" means the receipt by the Corporation of an
opinion of tax counsel of the Corporation's choice experienced in
such matters, who shall not be an officer or employee of the
Corporation or any of its affiliates, to the effect that, as a
result of any amendment to, or change in, the laws (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein (including any
proposed change in such regulations announced by an
administrative agency), or as a result of any official or
administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, it is more
likely than not that for United States federal income tax
purposes (1) the Corporation, its subsidiaries or affiliates or
any of its successors or its stockholders is, or at any time in
the future will be, subject to tax upon the issuance of shares of
either CD Stock or CompleteHome.com Stock or (2) either CD Stock
or CompleteHome.com Stock is not, or at any time in the future
will not be, treated solely as stock of the Corporation. For
purposes of rendering such opinion, the tax counsel shall assume
that any administrative proposals will be adopted as proposed.
However, in the event a change in law is proposed, tax counsel
shall render an opinion only in the event of enactment.
(c) Optional Exchange for Stock of a Subsidiary.
(i) At any time at which all of the assets and liabilities of a
Group (and no other assets or liabilities of the Corporation or
any subsidiary thereof) are held directly or indirectly by one or
more wholly owned subsidiaries of the Corporation (the "Group
Subsidiaries"), the Corporation shall have the right to issue to
holders of the relevant series of Common Stock (including Cendant
Group in the case of CompleteHome.com Stock) their Proportionate
Interest in all of the outstanding shares of the common stock of
the Group Subsidiaries in exchange for all of the outstanding
shares of such series of Common Stock.
(ii) If the series of Common Stock being exchanged pursuant to
Section 3(c)(i) above is CD Stock and the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group is greater than zero, the Corporation
shall also issue a number of shares of CompleteHome.com Stock
equal to the then current Number of Shares Issuable with Respect
to Cendant Group's Retained Interest in CompleteHome.com Group
and issue those shares to the holders of CD Stock or to one of
the Group Subsidiaries, at the option of the Corporation.
(iii) If the series of Common Stock being exchanged pursuant to
Section 3(c)(i) above is CompleteHome.com Stock and the Number of
Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group is greater than zero (so that less than
all of the shares of common stock of the Group Subsidiaries are
being delivered to the holders of CompleteHome.com Stock), the
Corporation may retain the remaining shares of common stock of
the Group Subsidiaries or distribute those shares as a dividend
on CD Stock.
(d) General Dividend, Exchange and Redemption Provisions.
(i) If the Corporation completes a Disposition of All or
Substantially All of the Assets of a Group (other than an Exempt
Disposition), the Corporation shall, not more than the 10 Trading
Days after the consummation of such Disposition, issue a press
release specifying (w) the Net Proceeds of such Disposition, (x)
the number of shares of the series of Common Stock related to
such Group then outstanding, (y) the number of shares of such
series of Common Stock issuable upon conversion, exchange or
exercise of any convertible or exchangeable securities, options
or warrants and the conversion, exchange or exercise prices
thereof and (z) if the Group is CompleteHome.com Group, the
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group. The Corporation
shall, not more than 30 Trading Days after such consummation,
announce by press release which of the actions specified in
Section 3(a)(i) of this Article 4(A) it has determined to take,
and upon making that announcement, that determination will be
irrevocable. In addition, the Corporation shall, not later than
30 Trading Days after such consummation and not earlier than 10
Trading Days before the applicable payment date, redemption date
or exchange date, send a notice by first-class mail, postage
prepaid, to holders of the relevant series of Common Stock at
their addresses as they appear on the transfer books of the
Corporation, specifying:
(1) if the Corporation has determined to pay a special dividend,
(A) the record date for such dividend, (B) the payment date of
such dividend (which cannot be more than 85 Trading Days after
such consummation) and (C) the aggregate amount and type of
property to be paid in such dividend (and the approximate per
share amount thereof);
(2) if the Corporation has determined to undertake a redemption,
(A) the date of redemption (which cannot be more than 85 Trading
Days after such consummation), (B) the aggregate amount and type
of property to be paid as a redemption price (and the approximate
per share amount thereof), (C) if less than all shares of the
relevant series of Common Stock are to be redeemed, the number of
shares to be redeemed and (D) the place or places where
certificates for shares of such series of Common Stock, properly
endorsed or assigned for transfer (unless the Corporation waives
such requirement), should be surrendered in return for delivery
of the cash, securities or other property to be paid by the
Corporation in such redemption; and
(3) if the Corporation has determined to undertake an exchange,
(A) the date of exchange (which cannot be more than 85 Trading
Days after such consummation), (B) the number of shares of the
other series of Common Stock to be issued in exchange for each
outstanding share of such series of Common Stock and (C) the
place or places where certificates for shares of such series of
Common Stock, properly endorsed or assigned for transfer (unless
the Corporation waives such requirement), should be surrendered
in return for delivery of the other series of Common Stock to be
issued by the Corporation in such exchange.
(ii) If the Corporation has determined to complete any exchange
described in Section 3(b) or (c) of this Article 4(A), the
Corporation shall, not less than 10 Trading Days and not more
than 30 Trading Days before the exchange date, send a notice by
first-class mail, postage prepaid, to holders of the relevant
series of Common Stock at their addresses as they appear on the
transfer books of the Corporation, specifying (x) the exchange
date and the other terms of the exchange and (y) the place or
places where certificates for shares of such series of Common
Stock, properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), should be surrendered for
delivery of the stock to be issued or delivered by the
Corporation in such exchange.
(iii) Neither the failure to mail any notice required by this
Section 3(d) to any particular holder nor any defect therein
would affect the sufficiency thereof with respect to any other
holder or the validity of any dividend, redemption or exchange
contemplated hereby.
(iv) If the Corporation is redeeming less than all of the
outstanding shares of a series of Common Stock pursuant to
Section 3(a)(i) of this Article 4(A), the Corporation shall
redeem such shares pro rata or by lot or by such other method as
the Board of Directors determines to be equitable.
(v) No holder of shares of a series of Common Stock being
exchanged or redeemed shall be entitled to receive any cash,
securities or other property to be distributed in such exchange
or redemption until such holder surrenders certificates for such
shares, properly endorsed or assigned for transfer, at such place
as the Corporation shall specify (unless the Corporation waives
such requirement). As soon as practicable after the Corporation's
receipt of certificates for such shares, the Corporation shall
deliver to the person for whose account such shares were so
surrendered, or to the nominee or nominees of such person, the
cash, securities or other property to which such person shall be
entitled, together with any fractional payment referred to below,
in each case without interest. If less than all of the shares of
Common Stock represented by any one certificate is exchanged or
redeemed, the Corporation shall also issue and deliver a new
certificate for the shares of such Common Stock not exchanged or
redeemed.
(vi) The Corporation shall not be required to issue or deliver
fractional shares of any capital stock or any other fractional
securities to any holder of Common Stock upon any exchange,
redemption, dividend or other distribution described above. If
more than one share of Common Stock shall be held at the same
time by the same holder, the Corporation may aggregate the number
of shares of any capital stock that would be issuable or any
other securities that would be distributable to such holder upon
any such exchange, redemption, dividend or other distribution. If
there are fractional shares of any capital stock or any other
fractional securities remaining to be issued or distributed to
any holder, the Corporation shall, if such fractional shares or
securities are not issued or distributed to such holder, pay cash
in respect of such fractional shares or securities in an amount
equal to the Fair Value thereof (without interest).
(vii) From and after the date set for any exchange or redemption
contemplated by this Section 3, all rights of a holder of shares
of Common Stock being exchanged or redeemed shall cease except
for the right, upon surrender of the certificates theretofore
representing such shares, to receive the cash, securities or
other property for which such shares were exchanged or redeemed,
together with any fractional payment as provided above, in each
case without interest (and, if such holder was a holder of record
as of the close of Business on the record date for a dividend not
yet paid, the right to receive such dividend). A holder of shares
of Common Stock being exchanged shall not be entitled to receive
any dividend or other distribution with respect to shares of the
other series of Common Stock until after certificates theretofore
representing the shares being exchanged are surrendered as
contemplated above. Upon such surrender, the Corporation shall
pay to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable
with respect to a record date occurring after the exchange, but
which were not paid by reason of the foregoing, with respect to
the number of whole shares of the other series of Common Stock
represented by the certificate or certificates issued upon such
surrender. From and after the date set for any exchange, the
Corporation shall, however, be entitled to treat the certificates
for shares of a series of Common Stock being exchanged that were
not yet surrendered for exchange as evidencing the ownership of
the number of whole shares of the other series of Common Stock
for which the shares of such Common Stock should have been
exchanged, notwithstanding the failure to surrender such
certificates.
(viii) The Corporation shall pay any and all documentary, stamp
or similar issue or transfer taxes that might be payable in
respect of the issue or delivery of any shares of capital stock
and/or other securities on any exchange or redemption
contemplated by this Section 3; provided, however, that the
Corporation shall not be required to pay any tax that might be
payable in respect of any transfer involved in the issue or
delivery of any shares of capital stock and/or other securities
in a name other than that in which the shares so exchanged or
redeemed were registered, and no such issue or delivery will be
made unless and until the person requesting such issue pays to
the Corporation the amount of any such tax, or establishes to the
satisfaction of the Corporation that such tax has been paid.
(ix) The Corporation may, subject to applicable law, establish
such other rules, requirements and procedures to facilitate any
dividend, redemption or exchange contemplated by this Section 3
as the Board of Directors may determine to be appropriate under
the circumstances.
4. Voting Rights.
At every meeting of stockholders, the holders of CD Stock and the
holders of CompleteHome.com Stock shall vote together as a single class on
all matters as to which common stockholders generally are entitled to vote,
unless a separate vote is required by applicable law. On all such matters
for which no separate vote is required, (a) holders of CD Stock shall be
entitled to one vote per share of CD Stock held and (b) holders of
CompleteHome.com Stock shall be entitled to a one vote per share of
CompleteHome.com Stock held. Each share of CD Stock and each share of
CompleteHome.com Stock shall continue to have one vote following a stock
split, stock dividend or similar reclassification.
5. Liquidation Rights.
In the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, holders of CD Stock and holders of
CompleteHome.com Stock shall be entitled to receive in respect of shares of
CD Stock and shares of CompleteHome.com Stock their proportionate interests
in the net assets of the Corporation, if any, remaining for distribution to
stockholders (after payment of or provision for all liabilities, including
contingent liabilities, of the Corporation and payment of the liquidation
preference payable to any holders of Preferred Stock), in proportion to the
respective number of liquidation units per share of CD Stock and
CompleteHome.com Stock. Each share of CD Stock shall have one liquidation
unit and each share of CompleteHome.com Stock shall have a number of
liquidation units (including a fraction of one liquidation unit) equal to
the quotient (rounded to the nearest five decimal places) of the average
Market Value of one share of CompleteHome.com Stock during the 20
consecutive Trading Day period ending on, and including, the 5th Trading
Day before the date of the first public announcement of (1) a voluntary
liquidation, dissolution or winding-up of the Corporation or (2) the
institution of any proceeding for the involuntary liquidation, dissolution
or winding-up of the Corporation divided by the average Market Value of one
share of CD Stock during such 20 Trading Day period.
If the Corporation shall in any manner subdivide (by stock split,
reclassification or otherwise) or combine (by reverse stock split,
reclassification or otherwise) the outstanding shares of CD Stock or
CompleteHome.com Stock, or declare a dividend in shares of either series to
holders of such series, the per share liquidation units of such series of
Common Stock specified in the preceding paragraph, as adjusted from time to
time, shall be appropriately adjusted as determined by the Board of
Directors, so as to avoid dilution in the aggregate, relative liquidation
rights of the shares of any series of Common Stock.
Neither the merger nor consolidation of the Corporation into or with
any other entity, nor a sale, transfer or lease of all or any part of the
assets of the Corporation, shall, alone, be deemed a liquidation or winding
up of the Corporation or cause the dissolution of the Corporation, for
purposes of this Section 5.
6. Adjustments to Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group.
The Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group, as in effect from time to time, shall,
automatically without action by the Board of Directors or any other person,
be:
(a) adjusted in proportion to any changes in the number of
outstanding shares of CompleteHome.com Stock caused by
subdivisions (by stock split, reclassification or otherwise) or
combinations (by reverse stock split, reclassification or
otherwise) of shares of CompleteHome.com Stock or by dividends or
other distributions of shares of CompleteHome.com Stock on shares
of CompleteHome.com Stock (and, in each such case, rounded, if
necessary, to the nearest whole number);
(b) decreased by (i) if the Corporation issues any shares of
CompleteHome.com Stock and the Board of Directors attributes that
issuance (and the proceeds thereof) to Cendant Group, the number
of shares of CompleteHome.com Stock so issued, and (ii) if the
Board of Directors reallocates to Cendant Group any cash or other
assets theretofore allocated to CompleteHome.com Group in
connection with a redemption of shares of CompleteHome.com Stock
(as required pursuant to clause (ii) of the proviso to the
definition of Cendant Group below) or in return for a decrease in
the Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group, the number (rounded,
if necessary, to the nearest whole number) equal to (x) the
aggregate Fair Value of such cash or other assets divided by (y)
the Market Value of one share of CompleteHome.com Stock as of the
date of such reallocation; and
(c) increased by (i) if the Corporation repurchases any shares of
CompleteHome.com Stock and the Board of Directors attributes that
repurchase (and the consideration therefor) to Cendant Group, the
number of shares of CompleteHome.com Stock so repurchased and
(ii) if the Board of Directors re-allocates to CompleteHome.com
Group any cash or other assets theretofore allocated to Cendant
Group in return for an increase in the Number of Shares Issuable
with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group, the number (rounded, if necessary, to the
nearest whole number) equal to (x) the Fair Value of such cash or
other assets divided by (y) the Market Value of one share of
CompleteHome.com Stock as of the date of such re-allocation.
Neither the Corporation nor the Board of Directors shall take any
action that would, as a result of any of the foregoing adjustments, reduce
the Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group to below zero. Subject to the preceding
sentence, the Board of Directors may attribute the issuance of any shares
of CompleteHome.com Stock (and the proceeds here from) or the repurchase of
CompleteHome.com Stock (and the consideration therefor) to Cendant Group or
to CompleteHome.com Group, as the Board of Directors determines in its sole
discretion; provided, however, that the Board of Directors must attribute
to Cendant Group the issuance of any shares of CompleteHome.com Stock that
are issued (1) as a dividend or other distribution on, or as consideration
for the repurchase of, shares of CD Stock or (2) as consideration to
acquire any assets or satisfy any liabilities attributed to Cendant Group.
7. Additional Definitions.
As used in this Article 4, the following terms shall have the
following meanings (with terms defined in singular having comparable
meaning when used in the plural and vice versa), unless the context
otherwise requires:
"All or Substantially All of the Assets" of either Group means a
portion of such assets that represents at least 80% of the then-current
Fair Value of the assets of such Group, which for Cendant Group includes
the value of its Retained Interest in CompleteHome.com Group.
"Available Dividend Amount" for Cendant Group, on any day on which
dividends are paid on shares of CD Stock, is the amount that would,
immediately prior to the payment of such dividends, be legally available
for the payment of dividends on shares of CD Stock under Delaware law if
(a) Cendant Group and CompleteHome.com Group were each a separate Delaware
corporation, (b) Cendant Group had outstanding (i) a number of shares of
common stock, par value $0.01 per share, equal to the number of shares of
CD Stock that are then outstanding and (ii) a number of shares of preferred
stock, par value $0.01 per share, equal to the number of shares of
Preferred Stock that have been attributed to Cendant Group and are then
outstanding, (c) the assumptions about CompleteHome.com Group set forth in
the next sentence were true and (d) Cendant Group owned a number of shares
of CompleteHome.com Stock equal to the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in CompleteHome.com Group.
"Available Dividend Amount" for CompleteHome.com Group, on any day on
which dividends are paid on shares of CompleteHome.com Stock, is the amount
that would, immediately prior to the payment of such dividends, be legally
available for the payment of dividends on shares of CompleteHome.com
Group's common stock under Delaware law if CompleteHome.com Group were a
separate Delaware corporation having outstanding (a) a number of shares of
common stock, par value $0.01 per share, equal to the number of shares of
CompleteHome.com Stock that are then outstanding plus the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group and (b) a number of shares of preferred stock, par
value $0.01 per share, equal to the number of shares of Preferred Stock
that have been attributed to CompleteHome.com Group and are then
outstanding.
"Cendant Group" means (a) all of the businesses, assets and
liabilities of the Corporation and its subsidiaries, other than the
businesses, assets and liabilities that are part of CompleteHome.com Group,
(b) the rights and obligations of Cendant Group under any inter-Group debt
deemed to be owed to or by Cendant Group (as such rights and obligations
are defined in accordance with policies established from time to time by
the Board of Directors) and (c) a proportionate interest in
CompleteHome.com Group (after giving effect to any options, Preferred
Stock, other securities or debt issued or incurred by the Corporation and
attributed to CompleteHome.com Group) equal to the Retained Interest
Percentage; provided, however, that:
(i) the Corporation may re-allocate assets from one Group to the
other Group in return for other assets or services rendered by
that other Group in the ordinary course of business or in
accordance with policies established by the Board of Directors,
or a committee thereof, from time to time, and
(ii) if the Corporation transfers cash, other assets or
securities to holders of shares of CompleteHome.com Stock as a
dividend or other distribution on shares of CompleteHome.com
Stock (other than a dividend or distribution payable in shares of
CompleteHome.com Stock), or as payment in a redemption of shares
of CompleteHome.com Stock required by Section 3(a) of this
Article 4(A), then the Board of Directors shall re-allocate from
CompleteHome.com Group to Cendant Group cash or other assets
having a Fair Value equal to the aggregate Fair Value of the
cash, other assets or securities so transferred multiplied by a
fraction, the numerator of which shall equal the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group on the record date for such dividend or
distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of
CompleteHome.com Stock outstanding on such date.
"CompleteHome.com Group" means (a) the internet real estate services
portal called CompleteHome.com, including all of the businesses, assets and
liabilities of the Corporation and its subsidiaries that the Board of
Directors has, as of the Effective Date, allocated to CompleteHome.com
Group, (b) any assets or liabilities acquired or incurred by the
Corporation or any of its subsidiaries after the Effective Date in the
ordinary course of business and attributable to CompleteHome.com Group, (c)
any businesses, assets or liabilities acquired or incurred by the
Corporation or any of its subsidiaries after the Effective Date that the
Board of Directors has specifically allocated to CompleteHome.com Group or
that the Corporation otherwise allocates to CompleteHome.com Group in
accordance with policies established from time to time by the Board of
Directors and (d) the rights and obligations of CompleteHome.com Group
under any inter-Group debt deemed to be owed to or by CompleteHome.com
Group (as such rights and obligations are defined in accordance with
policies established from time to time by the Board of Directors);
provided, however, that:
(i) the Corporation may re-allocate assets from one Group to the
other Group in return for other assets or services rendered by
that other Group in the ordinary course of business or in
accordance with policies established by the Board of Directors
from time to time, and
(ii) if the Corporation transfers cash, other assets or
securities to holders of shares of CompleteHome.com Stock as a
dividend or other distribution on shares of CompleteHome.com
Stock (other than a dividend or distribution payable in shares of
CompleteHome.com Stock), or as payment in a redemption of shares
of CompleteHome.com Stock required by Section 3(a) of this
Article 4(A), then the Board of Directors shall re-allocate from
CompleteHome.com Group to Cendant Group cash or other assets
having a Fair Value equal to the aggregate Fair Value of the
cash, other assets or securities so transferred multiplied by a
fraction, the numerator of which shall equal the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group on the record date for such dividend or
distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of
CompleteHome.com Stock outstanding on such date.
"Disposition" means a sale, transfer, assignment or other disposition
(whether by merger, consolidation, sale or otherwise) of All or
Substantially All of the Assets of a Group to one or more persons or
entities, in one transaction or a series of related transactions.
"Effective Date" means the date on which this Amended and Restated
Certificate of Incorporation becomes effective under Delaware law.
"Exempt Disposition" means any of the following:
(a) a Disposition in connection with the liquidation, dissolution or
winding-up of the Corporation and the distribution of assets to
stockholders,
(b) a Disposition to any person or entity controlled by the
Corporation (as determined by the Board of Directors in its sole
discretion),
(c) a Disposition by either Group for which the Corporation receives
consideration primarily consisting of equity securities (including,
without limitation, capital stock of any kind, interests in a general
or limited partnership, interests in a limited liability company or
debt securities convertible into or exchangeable for, or options or
warrants to acquire, any of the foregoing, in each case without regard
to the voting power or other management or governance rights
associated therewith) of an entity which is primarily engaged or
proposes to engage primarily in one or more businesses similar or
complementary to businesses conducted by such Group prior to the
Disposition, as determined by the Board of Directors in its sole
discretion,
(d) a dividend, out of CompleteHome.com Group's assets, to holders of
CompleteHome.com Stock and a re-allocation of a corresponding amount
of CompleteHome.com Group's assets to Cendant Group as required
pursuant to clause (ii) of the proviso to the definition of Cendant
Group above,
(e) a dividend, out of Cendant Group's assets, to holders of CD
Stock, and
(f) any other Disposition, if (i) at the time of the Disposition
there are no shares of CD Stock outstanding, (ii) at the time of the
Disposition there are no shares of CompleteHome.com Stock outstanding
or (iii) before the 30th Trading Day following the Disposition the
Corporation has mailed a notice stating that it is exercising its
right to exchange all of the outstanding shares of CD Stock or
CompleteHome.com Stock for newly issued shares of the other series of
Common Stock as contemplated under Section 3(b) of this Article 4.
"Fair Value" means (a) in the case of cash, the amount thereof, (b) in
the case of capital stock that has been Publicly Traded for a period of at
least 15 months, the Market Value thereof and (c) in the case of other
assets or securities, the fair market value thereof as the Board of
Directors shall determine in good faith (which determination shall be
conclusive and binding on all stockholders).
"Group" means either Cendant Group or CompleteHome.com Group.
"Market Capitalization" of either series of Common Stock on any date
means the Market Value of a share of such series on such date multiplied by
the number of shares of such series outstanding on such date.
"Market Value" of a share of any class or series of capital stock on
any Trading Day means the average of the high and low reported sales prices
regular way of a share of such class or series on such Trading Day or, in
case no such reported sale takes place on such Trading Day, the average of
the reported closing bid and asked prices regular way of a share of such
class or series on such Trading Day, in either case as reported on the New
York Stock Exchange ("NYSE") Composite Tape or, if the shares of such class
or series are not listed or admitted to trading on the NYSE on such Trading
Day, on the principal national securities exchange on which the shares of
such class or series are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange on such Trading
Day, on The Nasdaq National Market of the Nasdaq Stock Market ("Nasdaq
NMS") or, if the shares of such class or series are not listed or admitted
to trading on any national securities exchange or quoted on the Nasdaq NMS
on such Trading Day, the average of the closing bid and asked prices of a
share of such class or series in the over-the-counter market on such
Trading Day as furnished by any NYSE member firm selected from time to time
by the Corporation, or, if such closing bid and asked prices are not made
available by any such NYSE member firm on such Trading Day, or if such
class or series of stock is not listed on the NYSE, a national securities
exchange, or the Nasdaq NMS or quoted in the over-the-counter market, the
fair market value of a share of such class or series as the Board of
Directors shall determine in good faith (which determination shall be
conclusive and binding on all stockholders); provided, that, for purposes
of determining the average Market Value of a share of any class or series
of capital stock for any period, (a) the "Market Value" of a share of any
class or series of capital stock on any day prior to any "ex-dividend" date
or any similar date occurring during such period for any dividend or
distribution (other than any dividend or distribution contemplated by
clause (b)(ii) of this sentence) paid or to be paid with respect to such
capital stock shall be reduced by the Fair Value of the per share amount of
such dividend or distribution and (b) the "Market Value" of a share of any
class or series of capital stock on any day prior to (i) the effective date
of any subdivision (by stock split or otherwise) or combination (by reverse
stock split or otherwise) of outstanding shares of such class or series of
capital stock occurring during such period or (ii) any "ex-dividend" date
or any similar date occurring during such period for any dividend or
distribution with respect to such capital stock to be made in shares of
such class or series of capital stock, shall be appropriately adjusted, as
determined by the Board of Directors, to reflect such subdivision,
combination, dividend or distribution; and provided further, if (a) the
Corporation repurchases outstanding shares of CompleteHome.com Stock and
the Board of Directors attributes that repurchase (and the consideration
therefor) to CompleteHome.com Group and (b) the Board of Directors
determines to reallocate to Cendant Group cash or other assets theretofore
allocated to CompleteHome.com Group in order to avoid a change in the
Retained Interest Percentage, the "Market Value" of a share
CompleteHome.com Stock used to compute the corresponding reduction in the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group shall equal the Fair Value of the consideration
paid per share of CompleteHome.com Stock so repurchased; and provided
further, if the Corporation redeems a portion of the outstanding shares of
CompleteHome.com Stock (and the Board of Directors reallocates to Cendant
Group cash or other assets theretofore allocated to CompleteHome.com Group
in the manner required by clause (ii) of the proviso to the definition of
Cendant Group below), the "Market Value" of a share CompleteHome.com Stock
used to compute the corresponding reduction in the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
CompleteHome.com Group shall equal the Fair Value of the consideration paid
per share of CompleteHome.com Stock so redeemed.
"Net Proceeds" of a Disposition of any of the assets of a Group means
the positive amount, if any, remaining from the gross proceeds of such
Disposition after any payment of, or reasonable provision (as determined in
good faith by the Board of Directors, which determination shall be
conclusive and binding on all stockholders) for, (a) any taxes payable by
the Corporation in respect of such Disposition, (b) any taxes payable by
the Corporation in respect of any resulting dividend or redemption, (c) any
transaction costs, including, without limitation, any legal, investment
banking and accounting fees and expenses and (d) any liabilities
(contingent or otherwise) of, attributed to or related to, such Group,
including, without limitation, any liabilities for deferred taxes, any
indemnity or guarantee obligations which are outstanding or incurred in
connection with the Disposition or otherwise, any liabilities for future
purchase price adjustments and any obligations with respect to outstanding
securities (other than CompleteHome.com Stock) attributed to such Group.
"Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in CompleteHome.com Group" shall initially be a number the Board
of Directors designates prior to the time the Corporation first issues
shares of CompleteHome.com Stock, or options therefor, as the number of
shares of CompleteHome.com Stock that could be issued by the Corporation
for the account of Cendant Group in respect of its Retained Interest in
CompleteHome.com Group; provided, however, that such number as in effect
from time to time shall automatically be adjusted as required by Section 6
of this Article 4(A).
"Proportionate Interest" of holders of CompleteHome.com Stock in the
Net Proceeds of a CompleteHome.com Group Disposition (or in the outstanding
shares of common stock of any subsidiaries holding CompleteHome.com Group's
assets and liabilities) means the amount of such Net Proceeds (or the
number of such shares) multiplied by the number of shares of
CompleteHome.com Stock outstanding divided by the Total Number of Notional
CompleteHome.com Shares Deemed Outstanding. "Proportionate Interest" of
holders of CD Stock in the Net Proceeds of a Cendant Group Disposition (or
in the outstanding shares of common stock of any subsidiaries holding
Cendant Group's assets and liabilities) means the amount of such Net
Proceeds (or the number of such shares).
"Publicly Traded" with respect to any security means (a) registered
under Section 12 of the Securities Exchange Act of 1934, as amended (or any
successor provision of law), and (b) listed for trading on the NYSE (or any
other national securities exchange registered under Section 7 of the
Securities Exchange Act of 1934, as amended (or any successor provision of
law)) or listed on the Nasdaq NMS (or any successor market system).
"Retained Interest" means Cendant Group's interest in CompleteHome.com
Group, excluding the interest represented by outstanding shares of
CompleteHome.com Stock.
"Retained Interest Percentage" means the Number of Shares Issuable
with Respect to Cendant Group's Retained Interest in CompleteHome.com Group
divided by the Total Number of Notional CompleteHome.com Shares Deemed
Outstanding.
"Total Number of Notional CompleteHome.com Shares Deemed Outstanding"
means the number of shares of CompleteHome.com Stock outstanding plus the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest
in CompleteHome.com Group.
"Trading Day" means each weekday on which the relevant security (or,
if there are two relevant securities, each relevant security) is traded on
the principal national securities exchange on which it is listed or
admitted to trading or on the Nasdaq NMS or, if such security is not listed
or admitted to trading on a national securities exchange or quoted on the
Nasdaq NMS, traded in the principal over-the-counter market in which it
trades.
8. Effectiveness of Sections 2 Through 7 of this
Article 4(A).
The terms of Sections 2 through 7, inclusive, of this Article 4(A)
shall apply only when there are shares of both series of Common Stock
outstanding.
9. Determinations by the Board of Directors.
Subject to applicable law, any determinations made by the Board of
Directors in good faith under the Certificate of Incorporation, as it may
be amended from time to time, including without limitation any such
determinations with respect to the businesses, assets and liabilities of
either Group, transactions between the Groups or the rights of holders of
any series of Common Stock or Preferred Stock made pursuant to or in the
furtherance hereof, shall be final and binding on all stockholders of the
Corporation. A record of all formal determinations of the Board of
Directors made as contemplated hereby shall be filed with the records of
the actions of the Board of Directors.
B. Preferred Stock
The Board of Directors is expressly authorized to adopt, from
time to time, a resolution or resolutions providing for the issuance of
Preferred Stock in one or more series, to fix the number of shares in each
such series (subject to the aggregate limitations thereon in this Article)
and to fix the designations and the powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions, of each such series. The authority of the
Board of Directors with respect to each such series shall include
determination of the following (which may vary as between the different
series of Preferred Stock):
(a) The number of shares constituting the shares and the distinctive
designation of the series;
(b) The dividend rate on the shares of the series and the extent, if
any, to which dividends thereon shall be cumulative;
(c) Whether shares of the series shall be redeemable and, if
redeemable, the redemption price payable on redemption thereof, which
price may, but need not, vary according to the time or circumstances
of such redemption;
(d) The amount or amounts payable upon the shares of the series in
the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation prior to any payment or distribution of
the assets of the Corporation to any class or classes of stock of the
Corporation ranking junior to the Preferred Stock;
(e) Whether the shares of the series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or
redemption of shares of the series and, if so entitled, the amount of
such fund and the manner of its application, including the price or
prices at which the shares may be redeemed or purchased through the
application of such fund;
(f) Whether the shares of the series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, and, if so convertible or exchangeable, the conversion
price or prices, or the rates of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange;
(g) The extent, if any, to which the holders of shares of the series
shall be entitled to vote on any question or in any proceedings or to
be represented at or to receive notice of any meeting of stockholders
of the Corporation;
(h) Whether, and the extent to which, any of the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of any such series may be made dependent upon facts
ascertainable outside of the Amended and Restated Certificate of
Incorporation or of any amendment thereto, or outside the resolution
or resolutions providing for the issuance of such series adopted by
the Board of Directors, provided that the manner in which such facts
shall operate upon the voting powers, designations, preferences,
rights and qualifications, limitations or restrictions of such series
is clearly and expressly set forth in the resolution or resolutions
providing for the issuance of such series adopted by the Board of
Directors; and
(i) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors
may deem advisable, which shall not affect adversely any other class
or series of Preferred Stock at the time outstanding and which shall
not be inconsistent with the provisions of this Amended and Restated
Certificate of Incorporation.
Shares of Common Stock and of Preferred Stock may be issued from
time to time as the Board of Directors shall determine and on such terms
and for such consideration, not less than par value, as shall be fixed by
the Board of Directors. No consent by any series of Preferred Stock shall
be required for the issuance of any other series of Preferred Stock unless
the Board of Directors in the resolution providing for the issuance of any
series of Preferred Stock expressly provides that such consent shall be
required.
Subject to the rights, if any, of holders of shares of Preferred
Stock from time to time outstanding, dividends may be paid upon the Common
Stock as and when declared by the Board of Directors out of any funds
legally available therefor.
Except as otherwise provided by law or as otherwise expressly
provided in the resolution or resolutions providing for the issuance of
shares of any series of the Preferred Stock, the holders of shares of the
Common Stock shall have the exclusive right to vote for the election of
directors and for all other purposes. Each holder of shares of Common
Stock of the Corporation entitled at any time to vote shall have one vote
for each share thereof held. Except as otherwise provided with respect to
shares of Preferred Stock authorized from time to time by the Board of
Directors, the exclusive voting power for all purposes shall be vested in
the holders of shares of Common Stock.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized:
(a) To make, alter, or repeal the By-Laws of the Corporation.
(b) To authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation.
(c) To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created.
(d) Subject to the provisions of the By-Laws, to designate one
or more committees, each committee to consist of one or more of the
directors of the Corporation. Subject to the provisions of the By-
Laws, the Board of Directors may designate one or more directors as
alternate members of any committee, who shall replace any absent or
disqualified member at any meeting of the committee in the manner
specified in such designation. Any such committee, to the extent
provided in the resolution of the Board of Directors adopted in
accordance with the By-Laws of the Corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers
which may require it; but no such committee shall have the power or
authority in reference to amending the Amended and Restated
Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the By-Laws
of the Corporation; and, unless the resolution or By-Laws expressly so
provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
(e) When and as authorized by the stockholders in accordance
with statute, to sell, lease, or exchange all or substantially all of
the property and assets of the Corporation, including its goodwill and
its corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or
property, including shares of stock in, and/or other securities of,
any other corporation or corporations, as its Board of Directors shall
deem expedient and for the best interests of the Corporation.
7. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of this Corporation or of any creditor or stockholder
thereof, or on the application of any receiver or receivers appointed for
this Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions
of Section 279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, agree to any compromise or arrangement to any
reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders of this Corporation, as the case
may be, and also on this Corporation.
8. Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the statues)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the By-Laws of the
Corporation. Elections of directors need not be by written ballot unless
the By-Laws of the Corporation shall so provide.
9. For the management of the business and for the conduct of
the affairs of the Corporation, and in further creation, definition,
limitation and regulation of the power of the Corporation and of its
directors and of its stockholders, it is further provided:
(a) Election of Directors. Elections of Directors need not be
by written ballot unless the By-Laws of the Corporation shall so
provide.
(b) Number, Election and Terms of Directors. The number of
Directors of the Corporation shall be fixed from time to time by or
pursuant to the By-Laws. The Directors shall be classified, with
respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible, as shall be provided
in the manner specified in the By-Laws, one class to hold office
initially for a term expiring at the annual meeting of stockholders to
be held in 1986, another class to hold office initially for a term
expiring at the annual meeting of stockholders to be held in 1987, and
another class to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1988, with the members of
each class to hold office until their successors are elected and
qualified. At each annual meeting of the stockholders of the
Corporation, the successors to the class of Directors whose term
expires at that meeting shall be elected to the office for a term
expiring at the annual meeting of stockholders held in the third year
following the year of their election.
(c) Stockholder Nomination of Director Candidates. Advance
notice of nominations for the election of Directors, other than by the
Board of Directors or a Committee thereof, shall be given in the
manner provided in the By-Laws.
(d) Newly Created Directorships and Vacancies. Newly created
directorships resulting from any increase in the number of Directors
and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled
solely by the affirmative vote of a majority of the remaining
Directors then in office, even though less than a quorum of the Board
of Directors. Any Director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the
class of Directors for which the new directorship was created or the
vacancy occurred and until such Director's successor shall have become
elected and qualified. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any
incumbent Director.
(e) Removal of Directors. Any Director may be removed from
office without cause only by the affirmative vote of the holders of
80% of the combined voting power of the then outstanding shares of
stock entitled to vote generally in the election of Directors voting
together as a single class.
(f) Stockholder Action. Any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a
duly called annual or special meeting of such holders and may not be
effected by any consent in writing by such holders. Except as
otherwise required by law, special meetings of stockholders of the
Corporation may be called only by the Chairman of the Board, the
President or the Board of Directors pursuant to a resolution approved
by a majority of the entire Board or Directors.
(g) By-Law Amendments. The Board of Directors shall have power
to make, alter, amend and repeal the By-Laws (except so far as the By-
Laws adopted by the stockholders shall otherwise provide). Any By-
Laws made by the Directors under the powers conferred hereby may be
altered, amended or repealed by the Directors or by the stockholders.
Notwithstanding the foregoing and anything contained in this Amended
and Restated Certificate of Incorporation to the contrary, Sections 1,
2 and 3 of Article II, and Sections 1, 2 and 3 of Article III of the
By-Laws shall not be altered, amended or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote
of the holders of at least 80% of the voting power of all the shares
of the Corporation entitled to vote generally in the election of
Directors, voting together as a single class.
(h) Amendment, Repeal. Notwithstanding anything contained in
this Amended and Restated Certificate of Incorporation to the
contrary, 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 to alter, amend, adopt any provision
inconsistent with, or repeal, this Article 9 or any provision hereof.
10. (a) Vote Required for Certain Business Combinations.
A. Higher Vote for Certain Business Combinations. In addition
to any affirmative vote required by law or this Amended and Restated
Certificate of Incorporation, and except as otherwise expressly
provided herein:
(1) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested
Stockholder (as hereinafter defined) or (b) any other corporation
(whether or not itself an Interested Stockholder) which is, or
after such merger or consolidation would be, an Affiliate (as
hereinafter defined) of an Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value of $10 million or more; or
(3) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or series of transactions) of any
securities of the Corporation or any subsidiary to any Interested
Stockholder or to any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate Fair Market Value of $10 million or
more; or
(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on
behalf of any Interested Stockholder or any Affiliate of any
Interested Stockholder; or
(5) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
Equity Security (as hereinafter defined) of the Corporation or
any Subsidiary which is directly or indirectly owned by any
Interested Stockholder or any Affiliate of any Interested
Stockholder;
shall require the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock"), voting together as a
single class (it being understood that for the purposes of
Article 10, each share of the Voting Stock shall have one vote).
Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national
securities exchange or otherwise.
B. Definition of "Business Combination". The term "Business
Combination" used in this Article 10 shall mean any transaction which
is referred to in any one or more of clauses (1) through (5) of
Paragraph A hereof.
(b) When Higher Vote is Not Required. The provisions of
Article 10(a) shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such
affirmative vote as is required by law and any other provision of this
Amended and Restated Certificate of Incorporation, if all of the
conditions specified in either of the following Paragraphs A and B are
met:
A. Approval by Disinterested Directors. The Business Combination
shall have been approved by majority of the Disinterested Directors
(as hereinafter defined).
B. Price and Procedure Requirements. All of the following
conditions shall have been met:
(i) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration other
than cash to be received per share by holders of Common Stock in
such Business Combination shall be at least equal to the higher
of the following:
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common
Stock acquired by it (1) within the two-year period immediately
prior to the first public announcement of the terms of the
proposed Business Combination (the "Announcement Date") or (2) in
the transaction in which it became an Interested Stockholder,
whichever is higher; and
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this Paragraph 10 as the "Determination Date"),
whichever is higher.
(ii) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received per
share by holders of shares of any other class of outstanding
Voting Stock shall be at least equal to the higher of the
following:
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common
Stock acquired by it (1) within the two-year period immediately
prior to the Announcement Date or (2) in the transaction in which
it became an Interested Stockholder, whichever is higher; and
(b) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
(iii) The consideration to be received by holders of
Voting Stock shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such
class of Voting Stock. If the Interested Stockholder has paid
for any Voting Stock with varying forms of consideration, the
form of consideration for such Voting Stock shall be either cash
or the form used to acquire the largest number of shares of such
Voting Stock previously acquired by it. The price determined in
accordance with paragraphs B(i) and B(ii) of this Article 10(b)
shall be subject to appropriate adjustment in the event of any
stock dividend, stock split, combination of shares or similar
event.
(iv) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combinations: (a) there shall have been (1) no
reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the
Disinterested Directors, and (2) an increase in such annual rate
of dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of
reducing the number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate is approved by
a majority of the Disinterested Directors; and (b) such
Interested Stockholder shall have not become the beneficial owner
of any additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming
an Interested Stockholder.
(c) Certain Definitions. For the purpose of this Article
10:
A. A "person" shall mean any individual, firm, corporation or
other entity.
B. "Interested Stockholder" shall mean any person (other than
the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly,
of 5% or more of the voting power of the outstanding Voting
Stock; or
(ii) is an Affiliate of the Corporation and at any
time within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of 5%
or more of the voting power of the then outstanding Voting Stock;
or
(iii) is an assignee of or has otherwise succeeded to
any shares of Voting Stock which were at any time within the two-
year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns directly or
indirectly; or
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
D. For the purpose of determining whether a person is an
Interested Stockholder pursuant to paragraph B of this Article 10(c),
the number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of paragraph C of the
Article 10(c) but shall not include any other shares of Voting Stock
which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1985.
F. "Subsidiary" means any corporation of which a majority of
any class of Equity Security is owned, directly or indirectly, by the
Corporation, provided, however, that for the purposes of the
definition of Interested Stockholder set forth in paragraph B of this
Article 10(c), the term "Subsidiary" shall mean only a corporation of
which a majority of each class of Equity Security is owned, directly
or indirectly, by the Corporation.
G. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was
a member of the Board of Directors prior to the time that the
Interested Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director who is unaffiliated with the
Interested Stockholder and is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
H. "Fair Market Value" means: (i) in the case of stock, the
highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotation
System or any system then in use, or, if such stock is then listed on
an exchange, the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such stock on
the Composition Tape for New York Stock Exchange -- Listed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange or quoted as aforesaid,
the fair market value on the date in question of a share of such stock
as determined by the Board of Directors in good faith; and (ii) in the
case of property other than cash or stock, the fair market value of
such property on the date in question as determined by the Board of
Directors, in good faith.
I. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in paragraphs B(i) and (ii) of Article 10(b) shall
include the shares of Common Stock retained by the holders of such
shares.
J. "Equity Security" shall have the meaning ascribed to such
term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in
effect on January 1, 1985.
(d) Powers of the Board of Directors. A majority of the
Directors shall have the power and duty to determine for the purposes
of this Article 10 on the basis of information known to them after
reasonable inquiry, (A) whether a person is an Interested Stockholder,
(B) the number of shares of Common Stock beneficially owned by any
person, (C) whether a person is an Affiliate or Associate of another
(D) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for an issuance
of transfer of securities by the Corporation or any Subsidiary in any
Business Combination has, or an issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of $10 million or more. A majority of the
Directors shall have the further power to interpret all of the terms
and provisions of this Article 10.
(e) No Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article 10 shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
(f) Amendment, Repeal, etc. Notwithstanding any other
provisions of this Amended and Restated Certificate of Incorporation
or the By-Laws (and notwithstanding the fact that a lesser percentage
may be specified by law, this Amended and Restated Certificate of
Incorporation or the By-Laws) the affirmative vote of the holders of
80% or more of the outstanding Voting Stock, voting together as a
single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with this Article 10.
11. No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however, that this
Article 11 shall not eliminate or limit the liability of a director to the
extent provided by applicable law (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit. No amendment to
or repeal of this Article 11 shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be executed this __ day of _____,
_____.
CENDANT CORPORATION
By: __________________________
Name: James E. Buckman
Title: Vice Chairman and
General Counsel
ANNEX III
PROPOSAL 2 STOCK OPTION PLAN PROPOSAL
COMPLETEHOME.COM, INC. 1999 STOCK OPTION PLAN
CENDANT CORPORATION
COMPLETEHOME.COM GROUP
1999 STOCK OPTION PLAN
AS ASSUMED BY CENDANT CORPORATION FROM COMPLETEHOME.COM, INC. AND
AMENDED AND RESTATED EFFECTIVE AS OF JANUARY _ , 2000.
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give Cendant Corporation (the
"Corporation") a competitive advantage in attracting, retaining and
motivating its employees, including employees of CompleteHome.com Group,
and to provide the Corporation and its Affiliates with a stock plan
providing incentives to plan participants directly linked to the
performance of the CompleteHome.com Group businesses and increases in
CompleteHome.com Group shareholder value. The Plan was formerly an
obligation of CompleteHome.com, Inc. and has been assumed by Cendant
Corporation and equitably adjusted such that, among other things, existing
and future grants of options hereunder shall be options to purchase shares
of that class of common stock of the Corporation identified as
"CompleteHome.com Stock".
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Affiliate" means a corporation or other entity controlled by,
controlling or under common control with the Corporation.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Cause" means an optionee's (1) failure to substantially perform
his or her duties as an employee of the Corporation or any Affiliate (other
than any such failure resulting from incapacity due to physical or mental
illness); (2) any act of fraud, misappropriation, dishonesty, embezzlement
or similar conduct against the Corporation or any Affiliate; (3) conviction
of a felony or any crime involving moral turpitude (which conviction, due
to the passage of time or otherwise, is not subject to further appeal) or
(4) negligence in the performance of his or her duties. Notwithstanding
the foregoing, if an optionee is a party to an employment agreement with
the Corporation or any Affiliate that contains a definition of "Cause,"
such definition shall apply to such Stock Options granted to such optionee
under the Plan except to the extent otherwise provided by the Committee in
the agreement relating to any Stock Option. Any determination regarding
the existence of "Cause" shall be made by the Committee in its sole
discretion and any such determination shall be binding on the optionee, the
Corporation and any Affiliate.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Commission" means the Securities and Exchange Commission or any
successor agency.
(f) "Committee" means the Committee referred to in Section 2.
(g) "Common Stock" means CompleteHome.com Stock, a series of common
stock of the Corporation, par value $0.01 per share, intended to track the
performance of CompleteHome.
(h) "CompleteHome" means the CompleteHome.com Group.
(i) "Corporation" means Cendant Corporation, a Delaware corporation.
(j) "Disability" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(l) "Fair Market Value" means, as of any given date, the fair market
value of the Common Stock as determined by the Committee in good faith and
in its sole discretion, taking into account, to the extent applicable, the
trading price of the Common Stock on the New York Stock Exchange, or, if
not listed on such exchange, on any other national securities exchange on
which the Common Stock is listed, or on NASDAQ, or in any other regular
public trading market for the Common Stock which may exist as of such date,
or, if not publicly-traded, taking into account such other financial and
valuation considerations which it deems appropriate. The determination of
the Committee shall be conclusive in determining the fair market value of
the Common Stock and shall be final and binding on all parties.
(m) "Plan" means this Cendant Corporation CompleteHome.com Group 1999
Stock Option Plan, as set forth herein and as hereinafter amended from time
to time.
(n) "Retirement" means retirement from active employment with the
Corporation or an Affiliate at or after age 65.
(o) "Stock Option" means any option granted under Section 5.
(p) "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Corporation, if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing
50% or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
(q) "Termination of Employment" means the termination of the
optionee's active employment with the Corporation and its Affiliates. An
optionee employed by an Affiliate shall also be deemed to incur a
Termination of Employment if such Affiliate ceases to be an Affiliate and
the optionee does not immediately thereafter become an employee of the
Corporation or another Affiliate. Temporary absences from employment
because of illness, vacation or leave of absence and transfers among the
Corporation and its Affiliates shall not be considered Terminations of
Employment.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee or such
other committee of the Board as the Board may from time to time designate
or, if no such committee is designated, the Board (the "Committee").
The Committee shall have plenary authority to grant Stock Options
pursuant to the terms of the Plan to employees of the Corporation and its
Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) To select the employees to whom Stock Options may from time to time
be granted;
(b) To determine the number of shares of Common Stock to be covered by
each Stock Option granted hereunder;
(c) To determine the terms and conditions of any Stock Option granted
hereunder (including, but not limited to, the option price (subject to
Section 5(a) hereof), any vesting condition, restriction or limitation
(which may be related to the performance of the optionee, the Corporation
or any Affiliate) and any vesting acceleration or forfeiture waiver
regarding any Stock Option and the shares of Common Stock relating
thereto), based on such factors as the Committee shall determine;
(d) To modify, amend or adjust the terms and conditions of any Stock
Option, at any time or from time to time, including extending the
expiration date of options during any period in which exercises are not
permitted either by law or pursuant to a corporate policy;
(e) To determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to a Stock Option may be
deferred; and
(f) To determine under what circumstances a Stock Option may be settled
in cash or Common Stock under Section 5(d).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it
shall from time to time deem advisable, to interpret the terms and
provisions of the Plan and any Stock Option issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the administration
of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their
number or any officer of the Corporation to execute and deliver documents
on behalf of the Committee.
Any determination made by the Committee or pursuant to authority
delegated as contemplated by the provisions of the Plan with respect to any
Stock Option shall be made in the sole discretion of the Committee or such
delegate at the time of the grant of the Stock Option or, unless in
contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Committee or any appropriately delegated officer
pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Corporation and optionees.
Any authority granted to the Committee may also be exercised by the full
Board. To the extent that any permitted action taken by the Board
conflicts with action taken by the Committee, the Board action shall
control.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
(a) Stock Authorized. The total number of shares of Common Stock
initially reserved and available for grant under the Plan shall be six
million (6,000,000). No optionee may be granted Stock Options under the
Plan covering in the aggregate more than 50% of the total number of shares
of Common Stock authorized for issuance under the Plan over any consecutive
two (2) year period. Shares subject to a Stock Option under the Plan may
be authorized and unissued shares or may be treasury shares.
If any Stock Option terminates without being exercised, shares of Common
Stock subject to such Stock Options shall again be available for
distribution in connection with Stock Options under the Plan.
(b) Adjustment of Shares. In the event of any change in corporate
capitalization, such as a stock split or a corporate transaction, or any
merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Corporation, any reorganization
(whether or not such reorganization comes within the definition of such
term in Section 368 of the Code), any partial or complete liquidation of
the Corporation or any exchange of the Corporation's common securities for
securities to be issued by the Corporation's parent corporation, including
but not limited to securities commonly referred to as a "tracking stock",
the Committee or Board may make such substitution or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan,
the limit on options that may be granted to an individual optionee under
paragraph (a) above in the number, the kind and option price of shares
subject to outstanding Stock Options granted under the Plan and/or such
other equitable substitution or adjustments as it may determine to be
appropriate in its sole discretion, taking into account the application of
generally accepted accounting principles and any resultant accounting
charge as a result of such substitution or adjustments; provided, however,
that the number of shares subject to any Stock Option shall always be a
whole number.
SECTION 4. ELIGIBILITY
All active employees of the Corporation and its subsidiaries employed
primarily in the CompleteHome business, and those other active employees of
the Corporation designated from time to time by the Committee in its sole
discretion are eligible to be granted Stock Options under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. The grant of a Stock Option shall occur on
the date the Committee by resolution selects an individual to be a
participant in any grant of a Stock Option, determines the number of shares
of Common Stock to be subject to such Stock Option to be granted to such
individual and specifies the terms and provisions of the Stock Option (or
such later date as is specified in such resolution). The Corporation shall
notify an optionee of any grant of a Stock Option, and a written option
agreement or agreements shall be duly executed and delivered by the
Corporation to the optionee. Such agreement or agreements shall become
effective upon execution by the Corporation.
Except as otherwise provided by direction of the Committee in the letter
or agreement documenting such Stock Options, Stock Options granted under
the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions as the Committee shall deem
desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee
and set forth in the option agreement, and shall not be less than the
Fair Market Value of the Common Stock subject to the Stock Option on the
date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by
the Committee.
(c) Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment
exercise provisions, in whole or in part, based on such factors as the
Committee may determine. In addition, the Committee may at any time
accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section
5, Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the
Corporation specifying the number of shares of Common Stock subject to
the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price by certified or bank check or such other instrument as the
Corporation may accept. If approved by the Committee, payment, in full
or in part, may also be made in the form of unrestricted Common Stock
already owned by the optionee of the same class as the Common Stock
subject to the Stock Option (based on the Fair Market Value of the
Common Stock on the date the Stock Option is exercised); provided,
however, that such already owned shares have been held by the optionee
for at least six (6) months at the time of exercise.
In the discretion of the Committee, payment for any shares subject
to a Stock Option may also be made by delivering a properly executed
exercise notice to the Corporation, together with a copy of the
irrevocable instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds necessary to pay the
purchase price, and, if requested, the amount of any federal, state,
local or foreign withholding taxes. To facilitate the foregoing, the
Corporation may enter into agreements for coordinated procedures with
one or more brokerage firms.
In addition, in the discretion of the Committee, payment for any
shares subject to a Stock Option may also be made by instructing the
Committee to withhold a number of such shares having a Fair Market Value
on the date of exercise equal to the aggregate exercise price of such
Stock Option.
No shares of Common Stock shall be issued until full payment
therefor has been made. An optionee shall have no rights as a
shareholder of the Corporation solely by virtue of the issuance of a
Stock Option as contemplated by this Plan; provided, however, that,
except with respect to (i) any deferral option shares pursuant to
Section 5(j) below and (ii) any option shares for which share
certificates have not been issued or delivered as contemplated under
Section 8(a) below, an optionee shall have all of the rights of a
shareholder of the Corporation holding the class or series of Common
Stock that is subject to such Stock Option (including, if applicable,
the right to vote the shares and the right to receive dividends), when
and if the optionee has given written notice of exercise, has paid in
full for such shares.
(e) Transferability of Stock Options. Stock Options shall be
transferable by the optionee only pursuant to the following methods:
(i) by will or the laws of descent and distribution; (ii) pursuant to a
domestic relations order, as defined in the Code or Title I of the
Employee Retirement Income Security Act, as amended, or the regulations
thereunder; or (iii) subject to such conditions as the Committee may
prescribe from time to time, and upon written approval of the Secretary
of the Corporation, as a gift to family members of the optionee or
trusts for the benefit of family members of the optionee. Except to the
extent provided in this Section 5(e), Stock Options may not be assigned,
transferred, pledged, hypothecated or disposed of in any way (whether by
operation of law or otherwise), shall not be subject to execution,
attachment or similar process, and may be exercised during the lifetime
of the holder thereof only by such holder.
(f) Termination by Death or Disability. Unless otherwise
determined by the Committee in its sole discretion, if an optionee's
employment terminates by reason of death or Disability, any Stock Option
held by such optionee may thereafter be exercised, whether or not it was
exercisable at the time of such termination, for a period of twelve (12)
months (or such other period as the Committee may specify in the option
agreement) from the date of such termination or until the expiration of
the stated term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Retirement. Unless otherwise
determined by the Committee in its sole discretion, if an optionee's
employment terminates by reason of Retirement, any Stock Option held by
such optionee may thereafter be exercised by the optionee, to the extent
it was exercisable at the time of such Retirement, or on such
accelerated basis as the Committee may determine, for a period of twelve
(12) months (or such other period as the Committee may specify in the
option agreement) from the date of such termination of employment or
until the expiration of the stated term of such Stock Option, whichever
period is the shorter. Any Stock Option not vested as of the date of
such Retirement and not accelerated by action of the Committee shall be
cancelled as of the date of such Retirement.
(h) Cause. If an optionee incurs a Termination of Employment for
Cause, any Stock Option held by such optionee, whether or not then
exercisable, shall be immediately and automatically canceled as of the
date of such Termination of Employment and shall then be of no further
force or effect.
(i) Other Termination. Unless otherwise determined by the
Committee in its sole discretion, if an optionee incurs a Termination of
Employment for any reason other than death, Disability or Retirement,
any Stock Option held by such optionee, to the extent then exercisable,
or on such accelerated basis as the Committee may determine, may be
exercised for the lesser of thirty (30) days from the date of such
Termination of Employment or the balance of such Stock Option's term.
Any Stock Option not vested as of the date of such Termination of
Employment and not accelerated by action of the Committee shall be
cancelled as of the date of such Termination of Employment.
(j) Deferral of Option Shares. The Committee may from time to
time establish procedures pursuant to which an optionee may elect to
defer, until a time or times later than the exercise of an Option,
receipt of all or a portion of the shares subject to such Option and/or
to receive cash at such later time or times in lieu of such deferred
shares, all on such terms and conditions as the Committee shall
determine. If any such deferrals are permitted, then notwithstanding
Section 5(d) above, an optionee who elects such deferral shall not have
any rights as a stockholder with respect to such deferred shares unless
and until certificates representing such shares are actually delivered
to the optionee with respect thereto, except to the extent otherwise
determined by the Committee.
No Stock Option granted hereunder shall be an "incentive stock option"
as defined in Section 422 of the Code.
SECTION 6. TERM, AMENDMENT AND TERMINATION
The Plan will terminate ten (10) years after the effective date of the
Plan. Under the Plan, Stock Options outstanding as of such date shall not
be affected or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights
of an optionee under a Stock Option theretofore granted without the
optionee's or recipient's consent.
The Committee may amend the terms of any Stock Option theretofore
granted, prospectively or retroactively, but no such amendment shall impair
the rights of any holder without the holder's consent.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules
as well as other developments, and to grant Stock Options which qualify for
beneficial treatment under such rules without stockholder approval.
SECTION 7. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation.
SECTION 8. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving
shares pursuant to a Stock Option to represent to and agree with the
Corporation in writing that such person is acquiring the shares without a
view to the distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Corporation shall not be required to issue or deliver
any certificate or certificates for shares of Common Stock under the Plan
prior to fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance of
such shares on the New York Stock Exchange, Inc., or such other
securities exchange as may at the time be the principal market for the
Common Stock;
(2) Any registration or other qualification of such shares of the
Corporation under any state or federal law or regulation, or the
maintaining in effect of any such registration or other qualification
which the Committee shall, in its absolute discretion upon the advice of
counsel, deem necessary or advisable; and
(3) Obtaining any other consent, approval, or permit from any
state or federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to
be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
Affiliate from adopting other or additional compensation arrangements for
its employees.
(c) Adoption of the Plan shall not confer upon any employee any right
to continued employment, nor shall it interfere in any way with the right
of the Corporation or any Affiliate to terminate the employment of any
employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of an optionee for federal income tax
purposes with respect to any Stock Option under the Plan, the optionee
shall pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding the payment of, any federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Corporation, withholding
obligations may be settled with Common Stock, including Common Stock that
is part of the Stock Option that gives rise to the withholding
requirement. The obligations of the Corporation under the Plan shall be
conditional on such payment or arrangements, and the Corporation and its
Affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the optionee. The
Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations
with Common Stock.
(e) The Committee shall establish such procedures as it deems
appropriate for an optionee to designate a beneficiary to whom any amounts
payable in the event of the optionee's death are to be paid or by whom any
rights of the optionee, after the optionee's death, may be exercised.
(f) In the case of a grant of a Stock Option to any employee of an
Affiliate of the Corporation, the Corporation may, if the Committee so
directs, issue or transfer the shares of Common Stock, if any, covered by
the Stock Option to the Affiliate, for such lawful consideration as the
Committee may specify, upon the condition or understanding that the
Affiliate will transfer the shares of Common Stock to the employee in
accordance with the terms of the Stock Option specified by the Committee
pursuant to the provisions of the Plan.
(g) The Plan and all Stock Options made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State
of Delaware, without reference to principles of conflict of laws.
(h) Anything in this Plan to the contrary notwithstanding, the Board
may, without further approval by the shareholders, substitute new options
for, or assume, prior options of any corporation which engages with the
Corporation or any of its Affiliates in a transaction to which Section
424(a) of the Code would apply (assuming for such purpose that the option
assumed or substituted were an incentive stock option), or any parent or
any subsidiary of such corporation.
SECTION 9. EFFECTIVE DATE OF PLAN
The Plan became effective on October 29, 1999, the date upon which the
Plan was approved by the Board of Directors of CompleteHome.com, Inc.
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
Whether or not you plan to attend the Special Meeting of Stockholders,
you can ensure your shares are represented in 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 INSTRUCTIONS
BY TELEPHONE. CALL TOLL FREE 1-800-___-____ AND FOLLOW THE SAMPLE
INSTRUCTIONS. Thank you for your attention to this important matter.
CENDANT CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
ON JANUARY 14, 2000
The undersigned, having received the Notice of Special Meeting of
Stockholders and Proxy Statement, dated November __, 1999 (the "Proxy
Statement") of Cendant Corporation, hereby appoints Henry R. Silverman,
James E. Buckman and Stephen P. Holmes, and each of them, proxies of the
undersigned, with full power of substitution, to represent the undersigned
at the Special Meeting of Stockholders of Cendant Corporation to be held at
the Ramada Inn and Conference Center, 130 Route 10 West, East Hanover, New
Jersey 07936 on January 14, 2000 at 10:00 a.m. New York time and at any
adjournments or postponements thereof (the "Special Meeting") and to vote
all shares of Common Stock which the undersigned would be entitled to vote
if personally present at the Special Meeting in the manner the undersigned
specifies in this Proxy Card (or, if the undersigned does not specify how
to vote, to vote all such shares FOR all Proposals referred to in this
Proxy Card and to vote in the discretion of the proxies as to any other
matters coming before the Special Meeting).
Please promptly mark this Proxy Card to specify how you would like
your shares voted and date, sign and mail it in the enclosed envelope. No
postage is required. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
ALL OF THE PROPOSALS REFERRED TO IN THIS PROXY CARD.
IF YOU EXECUTE AND RETURN THIS PROXY CARD BUT DO NOT SPECIFY THE
MANNER IN WHICH THE PROXIES SHOULD VOTE YOUR SHARES, THE PROXIES WILL VOTE
YOUR SHARES FOR ALL OF THE PROPOSALS AND IN THEIR DISCRETION AS TO ANY
OTHER MATTERS COMING BEFORE THE MEETING.
Proposal 1. Proposal to amend and restate the Company's Amended and
Restated Certificate of Incorporation in the manner
described in the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 2. Proposal to approve the CompleteHome.com, Inc. 1999 Stock
Option Plan as described in the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
[_] FOR [_] AGAINST [_] ABSTAIN
In addition, the undersigned authorizes such proxies to vote such
shares in their discretion as to any other matters coming before the
Special Meeting.
I PLAN TO ATTEND THE MEETING
MARK HERE [_]
I HAVE NOTED AN ADDRESS CHANGE AND/OR COMMENT ON THE REVERSE SIDE OF THE
CARD
MARK HERE [_]
Please date this Proxy Card and sign your name exactly as it appears
hereon. Where there is more than one owner, each should sign. When signing
as an attorney, administrator, executor, guardian or trustee, please add
your title as such. If executed by a corporation, this Proxy Card should
be signed by a duly authorized officer. If executed by a partnership,
please sign in partnership name by authorized persons.
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(Signature)
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(Signature if held jointly)
Dated: ____________, 1999