<PAGE>
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.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
$
(5) Total fee paid: $
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
January , 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders
of Cendant Corporation to be held at 10:00 a.m., New York Time, on February __,
2000, at the Ramada Inn and Conference Center, 130 Route 10 West, East Hanover,
New Jersey 07936. At this meeting we will ask you to consider and approve the
Tracking Stock Proposal, the related Stock Option Plan Proposal and the Board
Declassification Proposal and we may ask you to consider and approve the
Adjournment Proposal as described in the accompanying Proxy Statement.
The Tracking Stock Proposal is a proposal to consider the creation of a
new series of common stock of Cendant to be called CompleteHome.com Stock and
which is intended to track the performance of CompleteHome.com Group, our new
internet real estate services portal which we expect to be operational during
January 2000. Before we first issue CompleteHome.com Stock, Cendant's existing
common stock will be reclassified as CD Stock which will be intended to track
the performance of Cendant Group which is comprised of all of Cendant's
businesses other than the CompleteHome.com Group and our retained interest in
CompleteHome.com Group.
The CompleteHome.com Stock and CD Stock are intended to reflect the
economic performance of their respective businesses by incorporating dividend
and liquidation rights and redemption and conversion terms that are expected to
cause the market price of these securities to be highly correlative to the
financial performance of such Group. Subject to provisions of the charter, we
can issue shares of CD Stock in exchange for shares of CompleteHome.com Stock
which would reverse the effects of the Tracking Stock Proposal.
In addition to the Tracking Stock Proposal, we will ask you to consider
and approve a proposal to allow Cendant to assume the stock option plan of its
wholly-owned subsidiary, CompleteHome.com, Inc. and existing grants thereunder.
At the meeting we will also ask you to consider and approve a proposal
to amend our amended and restated certificate of incorporation and by-laws to
eliminate
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the provisions for the classification of Cendant's Board of Directors so that
each person elected as a director at the annual meeting of stockholders in 2000
and subsequent annual meetings of stockholders will be elected for a term of one
year and until their respective successors are elected and qualified.
Finally, we may also ask you to consider and vote upon a proposal to
authorize adjournment or postponement of the meeting, which adjournment could be
used for the purpose, among others, of allowing additional time for the
soliciting of additional votes to approve the other proposals.
The Cendant Board of Directors has carefully considered and unanimously
approved the Tracking Stock Proposal, the Stock Option Plan Proposal, the Board
Declassification Proposal and the Adjournment 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.
Whether or not you attend the 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 meeting and vote in person, you may then withdraw your
proxy.
Admission to the 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
<PAGE>
CENDANT CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY __, 2000
NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders of
Cendant Corporation will be held at 10:00 a.m., New York Time, on February __,
2000, at the Ramada Inn and Conference Center, 130 Route 10 West, East Hanover,
New Jersey 07936 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 to authorize
a new series of common stock to be called CompleteHome.com
Stock as set forth in Annex II to the accompanying Proxy
Statement;
2. To consider and approve the assumption by Cendant of the stock
option plan of CompleteHome.com, Inc., a wholly owned
subsidiary of Cendant, and existing grants thereunder as set
forth in Annex III to the accompanying Proxy Statement;
3. To consider and approve our proposal to amend our amended and
restated certificate of incorporation and our by-laws to
eliminate the provisions for the classification of Cendant's
Board of Directors as set forth in Annexes II and IV to the
accompanying Proxy Statement;
4. To consider a proposal to adjourn or postpone the special
meeting, which adjournment could be used for the purpose,
among others, of allowing additional time for the soliciting
of additional votes to approve the other proposals; and
5. To transact such other business as may properly come before
the special meeting.
We describe the proposals in more detail in the accompanying Proxy
Statement, which you should read in its entirety before voting.
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Only stockholders of record at the close of business on January __,
2000 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.
Because the meeting is being held for the sole purpose of voting on the
Tracking Stock Proposal, the Stock Option Proposal, the Board Declassification
Proposal and the Adjournment Proposal, there will not be any presentations by
officers of Cendant at the meeting, as would be appropriate at an annual meeting
of stockholders.
Attendance at the meeting will be limited to stockholders as of the
record date, their authorized representatives and guests of the Cendant.
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 Cendant.
The enclosed proxy is solicited by the Board of Directors of Cendant.
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, Cendant'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: January , 2000
<PAGE>
PROXY STATEMENT
----------------
CENDANT CORPORATION
-----------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY __, 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 February __, 2000, at the Ramada Inn and Conference Center, 130
Route 10 West, East Hanover, New Jersey 07936. At this meeting we will ask you
to consider and approve the Tracking Stock Proposal, the related Stock Option
Plan Proposal and the Board Declassification Proposal and we may ask you to
consider and approve the Adjournment Proposal as described in this Proxy
Statement.
The Board of Directors has carefully considered and unanimously
approved the Tracking Stock Proposal, the Stock Option Plan Proposal, the Board
Declassification Proposal and the Adjournment 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.
See "Risk Factors" beginning on page 37 for material risks relating to
an evaluation of the Tracking Stock Proposal.
The date of this Proxy Statement is January __, 2000. We are first
sending this Proxy Statement to stockholders on or about that date.
<PAGE>
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING...............................1
PROXY STATEMENT SUMMARY.......................................................5
CENDANT CORPORATION, CENDANT GROUP
AND COMPLETEHOME.COM GROUP................................................6
Cendant Corporation........................................................6
Cendant Group..............................................................7
CompleteHome.com Group.....................................................8
SPECIAL MEETING..............................................................11
PROPOSAL 1-THE TRACKING STOCK PROPOSAL.......................................13
General...................................................................13
Reasons for the Tracking Stock Proposal...................................14
Intercompany Agreements...................................................24
Cash Management and Allocation Policies...................................25
No Appraisal Rights.......................................................26
Material Federal Income Tax Considerations................................26
PROPOSAL 2--STOCK OPTION PLAN PROPOSAL.......................................27
CENDANT CORPORATION
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA..................28
CENDANT GROUP (a wholly owned group of Cendant Corporation)
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA......................29
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Page
COMPLETEHOME.COM GROUP (a wholly owned group of Cendant Corporation)
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA......................31
THE SPECIAL MEETING..........................................................33
RISK FACTORS.................................................................35
Risk Factors Relating to the Tracking Stock Proposal .....................35
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS....................45
PROPOSAL 1--THE TRACKING STOCK PROPOSAL......................................47
General .................................................................47
Background and Reasons for the Tracking Stock Proposal....................48
Description of CD Stock and CompleteHome.com Stock........................51
Cash Management and Allocation Policies...................................75
Intercompany Agreements...................................................80
Material Provisions of the Amended and Restated Certificate of
Incorporation, By-laws and Delaware Law..................................83
No Appraisal Rights.......................................................88
Financial Advisors........................................................88
Stock Transfer Agent and Registrar........................................89
Material Federal Income Tax Considerations................................89
PROPOSAL 2 - STOCK OPTION PLAN PROPOSAL......................................92
CompleteHome.com, Inc. 1999 Stock Option Plan.............................92
New Plan Benefits.........................................................96
PROPOSAL 3--BOARD DECLASSIFICATION PROPOSAL..................................98
PROPOSAL 4 - ADJOURNMENT PROPOSAL...........................................101
EXECUTIVE COMPENSATION AND OTHER INFORMATION................................102
Summary Compensation Table...............................................102
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Page
Option Grants in 1998....................................................104
Aggregated Option Exercises in 1998 and Fiscal Year-End Option
Values .................................................................106
Pension Plans............................................................106
Director Compensation....................................................107
Employment Contracts and Termination, Severance and Change of
Control Arrangements....................................................108
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............112
WHERE YOU CAN FIND MORE INFORMATION.........................................114
STOCKHOLDER PROPOSALS.......................................................117
ANNEX I
Illustration of Terms..............................................I-1
ANNEX II
Amended and Restated Certificate of Incorporation.................II-1
ANNEX III
CompleteHome.com, Inc. 1999 Stock Option Plan....................III-1
ANNEX IV
Amended By-Laws...................................................IV-1
iii
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QUESTIONS AND ANSWERS
ABOUT
THE SPECIAL MEETING
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 track
the performance of a particular business. 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 track 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 DOES THE TRACKING STOCK TRACK THE BUSINESS OF COMPLETEHOME.COM
GROUP?
A: The CompleteHome.com Stock is intended to reflect the economic perfor-
mance of the CompleteHome.com Group by incorporating dividend and
liquidation rights and redemption and conversion terms that are
expected to cause the market price for such securities to be highly
correlative with the financial performance of the CompleteHome.com
Group.
The terms of the tracking stock would prohibit the payment of dividends
on such stock in excess of the amounts which would ordinarily be
available for dividends if such business were a separate company.
Furthermore, liquidation rights (i.e. amounts to be received assuming
the company were liquidated) would be based on the percentage of the
relative market value of the tracking stocks.
Q: HOW AND WHEN WILL YOU INITIALLY ISSUE COMPLETEHOME.COM STOCK?
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A: We currently plan to grant options for CompleteHome.com Stock under
the proposed CompleteHome.com, Inc. 1999 Stock Option Plan to
CompleteHome.com Group employees and Cendant Group employees promptly
following stockholder approval of the Stock Option Plan Proposal and
the Tracking Stock Proposal. In connection with our recent acquisition
of Metro-Rent, Inc. for inclusion in the CompleteHome.com Group, we
issued shares of non-voting redeemable common stock of
CompleteHome.com, Inc., an indirect wholly owned subsidiary of
Cendant, in a private placement to the shareholders of Metro-Rent,
Inc. Such securities are mandatorily redeemable for CompleteHome.com
Stock upon the initial public offering of CompleteHome.com stock. In
addition, as more fully described in "Proxy Statement Summary - Recent
Developments," we have granted Chatham Street Holdings, LLC the right,
until September 30, 2001, to purchase up to $25 million in value of
shares of CompleteHome.com Stock. We may issue similar securities in
connection with other acquisitions or investments prior to the
approval of the Tracking Stock Proposal.
Subject to prevailing market and other conditions, we currently expect
to issue shares of CompleteHome.com Stock in a public offering as soon
as practicable following stockholder approval of the Tracking Stock
Proposal. The specific terms of such offering including the amount of
CompleteHome.com Stock we issue will depend upon factors such as stock
market conditions and the performance of CompleteHome.com Group.
Unless Cendant distributes all or a portion of its retained interest
to Cendant Group stockholders or you elect to purchase shares of
CompleteHome.com Stock in the future, you will not receive any shares
of CompleteHome.com Stock and will only participate in the performance
of CompleteHome.com Stock through Cendant Group's retained interest in
CompleteHome.com Group.
Q: WHEN WILL YOU IMPLEMENT THE TRACKING STOCK PROPOSAL? WHEN WILL YOU
RE-CLASSIFY MY COMMON STOCK INTO CD STOCK?
A: We will implement the Tracking Stock Proposal as soon as reasonably
practicable after the meeting by filing an amended and restated
certificate of incorporation with the Secretary of State of the State
of Delaware which will reclassify your shares of common stock into
shares of CD Stock.
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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 certificate of incorporation 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: 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". We currently intend to apply
for listing of CompleteHome.com Stock on the NYSE concurrently with
the closing of the first public offering of such securities.
Q: WHAT VOTING RIGHTS WILL I HAVE?
A: Holders of CD Stock and CompleteHome.com Stock will vote together as a
single class on all matters except with respect to any amendment to
the certificate of incorporation would increase or decrease the par
value of the shares of either class or alter or change the powers,
preferences or special rights of the shares of such class so as to
affect them adversely. Each share of CD Stock and CompleteHome.com
Stock will entitle the holder to one vote. Accordingly, the issuance
of shares of CompleteHome.com Stock will dilute the vote of current
Cendant stockholders.
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.
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Q: WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
A: The Cendant Board of Directors has carefully considered and
unanimously approved the Tracking Stock Proposal, the Stock Option
Plan Proposal, the Board Declassification Proposal and the Adjournment
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? WHAT VOTE
IS REQUIRED TO APPROVE THE BOARD DECLASSIFICATION PROPOSAL? WHAT VOTE
IS REQUIRED TO APPROVE THE ADJOURNMENT 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. In accordance with our
amended and restated certificate of incorporation, the Board
Declassification Proposal requires the affirmative vote of at least
80% of the voting power of all shares of Cendant entitled to vote
generally in the election of directors. The Adjournment Proposal
requires to affirmative vote of a majority of the votes cast, in
person or by proxy, at the special meeting, if a quorum is present.
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.
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PROXY STATEMENT SUMMARY
This summary highlights key aspects of the Tracking Stock Proposal, the
Stock Option Plan Proposal ,the Board Declassification Proposal and the Adjourn-
ment 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, the Stock Option Plan Proposal, the Board
Declassification Proposal and the Adjournment 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 "Illustration of
Terms" on page I-1 of Annex I attached hereto.
TRACKING STOCK
Tracking stock represents a separate series of common stock of a
corporation (in this case Cendant) that is intended to track the economic
performance of a specific business segment instead of the overall economic
performance of the company. Because it tracks a specific business segment,
tracking stock has many economic similarities to stock of a subsidiary of the
parent corporation. However, there are a number of differences between tracking
stock and subsidiary stock. In particular, holders of tracking stock have no
direct claim to the businesses' stock or assets and are not represented by a
separate board of directors. Instead, holders of tracking stock are shareholders
of the parent corporation, with a single board of directors and subject to all
of the risks and liabilities of the parent corporation. Accordingly, tracking
stock should not be considered equivalent to stock of a subsidiary which
conducts the tracked business.
The CompleteHome.com Stock and CD Stock are intended to reflect the
economic performance of their respective businesses by incorporating dividend
and liquidation rights and redemption and conversion terms that are expected to
cause the market price of these securities to be highly correlative to the
financial performance of such Group.
The issuance of shares of CompleteHome.com Stock will dilute the vote
of current Cendant stockholders. In addition, Cendant Group's retained interest
will decrease with each issuance of CompleteHome.com Stock whether the proceeds
of such issuance are attributed to Cendant Group or CompleteHome.com Group.
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Subject to provisions in our charter, we can issue CD Stock in exchange for
shares of CompleteHome.com Stock thereby reversing the effects of the Tracking
Stock Proposal.
Cendant Group will not have any voting rights with respect to its
retained interest in CompleteHome.com Group. If any cash dividends are paid on
the CompleteHome.com Stock, Cendant Group will be credited with an amount of
cash equal to its proportionate interest in such dividend. For further
illustrations, see Annex I to this Proxy Statement. 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.
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 new internet real estate services portal which we expect to be
operational during January 2000, 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." CompleteHome.com will be "separated" from Cendant Group
from an accounting standpoint by transferring those assets and liabilities that
comprised CompleteHome.com Group from the balance sheets of Cendant Group, so
the CompleteHome.com Group assets and liabilities are not reflected in the
balance sheet of Cendant Group except with respect to its retained interest. The
actual assets and liabilities of Cendant will not be transferred and the
Tracking Stock Proposal will not affect the interests of Cendant's creditors.
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Cendant will provide separate financial statements and management's
discussion and analysis for each Group, as well as for Cendant. The financial
statements of the Cendant Group will reflect Cendant Group's retained interest
in CompleteHome.com Group.
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 will initially be 100% and will represent a notional
economic interest in CompleteHome.com Group. Cendant Group's
retained interest will not be represented by actual shares of
CompleteHome.com Group and will not carry any voting rights. The
retained interest will decrease with each issuance of
CompleteHome.com Stock, whether the proceeds of such issuance are
allocated to Cendant Group or CompleteHome.com Group. Currently,
CompleteHome.com Group represents an immaterial part of Cendant's
business operations. See Annex I for examples and illustrations
relating to Cendant Group's retained interest in CompleteHome.com
Group.
Our principal executive offices are located at 9 West 57th Street, New
York, New York 10019. Our telephone number is (212) 413-1800.
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COMPLETEHOME.COM GROUP
CompleteHome.com Group, a segment of Cendant, is an internet company
formed by the combination of online strategies for Cendant's Real Estate
Division which includes the CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) real
estate brands (three of the five largest franchisors of residential real estate
offices in the world), Rent Net, Inc. (the most popular rental and relocation
guide on the web based upon Media Metrix audience measurement data), 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. Rent Net, Inc., a
subsidiary of Cendant which became a part of the CompleteHome.com Group, has
been operating its website (http://www.rent.net) for five years. Through the
resources of these companies, CompleteHome.com Group offers consumers a variety
of home-related products and services (e.g., move calendars and advice, home and
rental listings; mortgage origination, home living products and services).
CompleteHome.com Group's principal business is the development, maintenance and
marketing of its website http://www.CompleteHome.com which we expect to be
operational during January 2000 with subsequent enhancements scheduled in
February 2000. This site is intended to be a single source real estate portal
for consumers as well as real estate professionals. The website 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 (e.g. move to a new home)
requires that a significant amount of information (e.g., photographs, floor
plans, amenity lists, virtual
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walk-throughs, directions) 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, as a result of its connection with the Cendant brands, CompleteHome.com
Group is distinctly poised to become a leading player. CompleteHome.com Group's
strategy is to:
o expand our website 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 commercial business deals and make strategic investments
to create content and/or drive distribution to our website
o cross-market the advertising efforts of Cendant's real estate
brands (e.g. CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) )
o utilize emerging technologies to enhance the user's experience
and utilization of our website.
CompleteHome.com Group has significant advantages that separate it from
all other real estate websites by virtue of having all of the following:
o 40 year agreements with Cendant's CENTURY 21(R), COLDWELL
BANKER(R) and ERA(R) real estate brands
o the rights to publish or otherwise make available these brands'
home listings through the internet
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o our intent to become a full-service mortgage broker that is
integrated seamlessly into our website and our mortgage partner,
Cendant Mortgage
o capability to act as a source of online coupon distribution for
local merchants throughout the country utilizing Cendant's
Welcome Wagon brand and services.
o benefits from cross-marketing the advertising efforts of our real
estate franchise systems
o ability to benefit from existing preferred alliance relationships
developed by Cendant's Preferred Alliance department by creating
an additional market outlet for our preferred alliance partners.
RECENT DEVELOPMENTS
On December 17, 1999, Rent Net purchased substantially all of the
assets and assumed substantially all of the liabilities of Metro-Rent, Inc., for
a total consideration of up to $3.5 million in cash and up to $5 million of
stock to be paid over several years subject to meeting certain performance
targets. The stock portion of the consideration consists of a new class of
non-voting common stock of CompleteHome.com, Inc. mandatorily redeemable for
CompleteHome.com Stock upon a public offering. In the event that a public
offering has not occurred by December 31, 2005, or earlier at CompleteHome.com,
Inc.'s option, CompleteHome.com, Inc. must redeem each outstanding share of
CompleteHome.com, Inc. common stock.
In September 1999,Cendant entered into an agreement with Chatham
pursuant to which Chatham was granted the right, until September 30, 2001, to
purchase up to $25 million in value of shares of CompleteHome.com Stock deter
mined as of the date of such agreement, subject to adjustment based on the
valuation of the CompleteHome.com Stock at the time of issuance, which is
referred to as the original purchase price. In addition, for every two shares of
CompleteHome.com Stock purchased by Chatham pursuant to the letter agreement,
Chatham will be entitled to receive a warrant to purchase one share of
CompleteHome.com Stock at a price equal to four times the original purchase
price and a warrant to purchase one share of CompleteHome.com Stock at a price
equal to eight times the original purchase price.
10
<PAGE>
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 website is http://www.CompleteHome.com.
SPECIAL MEETING
TIME, DATE AND PLACE.................. 10:00 a.m., New York Time, on February
__, 2000, at the Ramada Inn and
Conference Center, 130 Route 10 West,
East Hanover, New Jersey 07936
RECORD DATE........................... January __, 2000.
PROPOSALS TO BE CONSIDERED VOTE REQUIRED FOR APPROVAL
o Proposal 1-The Tracking Proposal 1 requires the affirmative
Stock Proposal vote of the holders of a majority of
the outstanding shares of existing
common stock.
o Proposal 2 - Stock Option Proposal 2 requires the affirmative
Plan Proposal vote 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.
o Proposal 3 - Board Proposal 3 requires the affirmative
Declassification Proposal vote of at least 80% of the voting
power of all shares of Cendant
entitled to vote generally in the
election of its directors.
o Proposal 4 - Adjournment Proposal 4 requires the affirmative
Proposal vote 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.
11
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Directors and executive officers
owning 2,662,970 shares, or less than
1% of outstanding Cendant common stock
have indicated that they intend to
vote their shares to approve the four
proposals.
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 UNANI-
MOUSLY APPROVED THESE PROPOSALS AND RECOMMENDS THAT YOU VOTE FOR THEM.
12
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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 Direc-
tors.
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 new internet real estate services portal which we
expect to be operational during January 2000 with further enhancements in
February 2000. 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. At inception, the assets, liabilities, revenues,
expenses and cash flows of the CompleteHome.com Group consist of the assets,
liabilities, revenues, expenses and cash flows of Rent Net, Inc. which has been
owned by Cendant since January 1996. 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 Stock Option Plan to CompleteHome.com Group employees and
Cendant Group employees making direct contributions to CompleteHome.com Group
through intercompany business relationships and arrangements following
stockholder approval of the Stock Option Plan Proposal and the Tracking Stock
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<PAGE>
Proposal. Subject to prevailing market and other conditions, we currently expect
to issue shares of CompleteHome.com Stock in a public offering as soon as
reasonably practicable following stockholder approval of the Tracking Stock
Proposal. The specific terms of such offering, including the amount of
CompleteHome.com Stock we issue, will depend upon factors such as stock market
conditions and the performance of CompleteHome.com Group.
The issuance of shares of CompleteHome.com Stock will dilute the vote
of current Cendant stockholders. In addition, Cendant Group's retained interest
will decrease with each issuance of CompleteHome.com Stock whether the proceeds
of such issuance are allocated to the Cendant Group (similar to a secondary
offering of securities) or to the CompleteHome.com Group (similar to a primary
offering of securities).
Assuming the Tracking Stock Proposal is approved, we expect to file the
amended and restated charter implementing the Tracking Stock Proposal and
reclassify 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 investors and research analysts 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 by highlighting
the current and future potential operations of CompleteHome.com
Group through enhanced financial reporting and by attracting new
internet-focused investors who would otherwise not purchase
Cendant's common stock.
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 on a more cost efficient
basis than issuing CD Stock (or existing Cendant common stock).
We believe
14
<PAGE>
CompleteHome.com Stock will represent a lower cost of equity
capital than Cendant common stock because the value of
CompleteHome.com Group's operations are not fully recognized by
existing Cendant shareholders.
o The proposal will enable us to grant stock options tied to
CompleteHome.com Stock, thereby providing more focused incen-
tives to CompleteHome.com Group and Cendant Group management and
employees. The options granted to the employees of
CompleteHome.com Group will more effectively incentivize them by
creating a more independent atmosphere as well as benefit plans
with equity that is directly linked to the performance of their
business. Options will be granted to Cendant Group employees
making direct contributions to CompleteHome.com Stock through
intercompany business relationships and arrangements to
facilitate cooperation between the two Groups.
o The proposal will provide us with greater flexibility to raise
capital and respond to strategic opportunities (including
acquisitions), be cause it will allow us to issue either CD Stock
or CompleteHome.com Stock as appropriate under the circumstances.
In general, CompleteHome.com Stock should represent a more
attractive currency for acquisition in the internet sector.
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. By remaining a single consolidated entity,
both Groups will remain a part of Cendant thereby preserving
greater flexibility to maximize synergies between the two Group's
businesses.
SUMMARY COMPARISON OF TERMS OF EXISTING COMMON STOCK WITH TERMS OF CD
STOCK AND COMPLETEHOME.COM STOCK
The following discusses the material terms of and changes to the terms
of your existing common stock by comparing 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
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<PAGE>
Tracking Stock Proposal--Description of CD Stock and CompleteHome.com
Stock."
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
Basic Our existing common stock We intend CD Stock to reflect the We intend CompleteHome.com
Investment reflects the performance of performance of Cendant Group. Stock to reflect the performance of
Characteristics: all of our businesses. Cendant Group includes all the CompleteHome.com Group, our
businesses currently operated by new internet real estate services
Cendant in its four principal portal. Through the real estate
divisions: travel services; real estate resources of Cendant,
services; direct marketing services CompleteHome.com will offer
and other consumer and business consumers a variety of home-related
services (other than Rent Net, Inc. products and services providing
and National Home Connections) consumers with a one-stop solution
and a retained interest in for all their home-related product
CompleteHome.com Group. and service needs before, during
and after their actual move.
We can not assure you that the We can not assure you that the
market value of CD Stock will in market value of
fact reflect the performance of CompleteHome.com Stock will in
Cendant Group as we intend. fact reflect the performance of
Holders of CD Stock will continue CompleteHome.com Group as we
to be common stockholders of intend. Holders of
Cendant and, as such, will be subject CompleteHome.com Stock will
to all risks associated with an continue to be common stockholders
investment in Cendant and all of of Cendant and, as such, will be
our businesses, assets and liabilities. subject to all risks associated with
an investment in Cendant and all of
our businesses, assets and liabilities.
</TABLE>
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
Issuance: Our existing common stock The amendment and restatement of We currently plan to grant options
is already outstanding. the amended and restated certificate for CompleteHome.com Stock under
of incorporation will reclassify the proposed
each outstanding share of existing CompleteHome.com, Inc. 1999
common stock into a share Stock Option Plan to
of CD Stock. CompleteHome.com Group
employees and Cendant Group
employees making direct contributions
to CompleteHome.com
through intercompany business
relationships and arrangements
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 is
sue shares of CompleteHome.com
Stock in a public offering as soon
as reasonably practicable following
stockholder approval of the Tracking
Stock Proposal. The specific
terms of such offering including
the amount of CompleteHome.com
Stock we issue will depend upon
factors such as stock market
conditions and the performance of
CompleteHome.com Group.
Retained N/A We would adjust the retained interest N/A
Interest: of Cendant Group in
CompleteHome.com Group (which
would initially be 100%) as appropriate
reflect issuances, distributions
or repurchases of
CompleteHome.com Stock, capital
contributions to, or returns of capital
from, CompleteHome.com
Group and other events.
Authorized and We are currently authorized Stockholder approval of the Track Stockholder approval of the Track
Outstanding to issue only one series of ing Stock Proposal will authorize ing Stock Proposal will authorize
Stock: common stock. us to issue two series of common us to issue two series of common
stock--CD Stock and stock--CD Stock and
CompleteHome.com Stock. CompleteHome.com Stock.
We are currently authorized The Tracking Stock Proposal will The Tracking Stock Proposal will
to issue up to 2,000,000,000 authorize us to increase the number authorize us to increase the number
shares of common stock. of authorized shares to of authorized shares to
2,500,000,000 shares of common 2,500,000,000 shares of common
stock, initially comprised of stock, initially comprised of
2,000,000,000 shares of CD Stock 2,000,000,000 shares of CD Stock
and 500,000,000 shares of and 500,000,000 shares of
CompleteHome.com Stock. CompleteHome.com Stock.
</TABLE>
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
______ shares of existing Immediately following the imple- After the Tracking Stock Proposal
common stock were out mentation of the Tracking Stock is implemented, we expect to issue
standing on _______ , Proposal, _________ shares of CD from time to time shares of
2000. These shares count Stock will be outstanding, based on CompleteHome.com Stock. These
against the total number of the number of shares of existing shares, and the shares of CD Stock
shares of common stock we common stock outstanding on then outstanding, will count against
are authorized to issue. _________ __, 2000. These the total number of shares of
shares, and any shares of common stock we are authorized to
CompleteHome.com Stock out issue.
standing from time to time, will
count against the total number of
shares of common stock we are
authorized to issue.
Dividends: We currently intend to retain We currently intend to retain all of We currently intend to retain all of
all of our earnings for use in our earnings for use in the operation our earnings for use in the opera-
the operation and expansion and expansion of our business. tion and expansion of our business.
of our business. We do not We do not expect to pay any dividends We do not expect to pay any
expect to pay any dividends on CD Stock for the foresee dividends on CompleteHome.com
on our existing common able future. Stock for the foreseeable future.
stock for the foreseeable
future.
We are permitted to pay divi- We will be permitted to pay We will be permitted to pay
dends out of the assets of dividends on CD Stock out of the dividends on CompleteHome.com
Cendant legally available for lesser of (1) the assets of Cendant Stock (and corresponding amounts
the payment of dividends legally available for the payment to Cendant Group with respect to
under Delaware law. of dividends under Delaware law its retained interest in
and (2) the amount that would be CompleteHome.com Group) out of
legally available for the payment the lesser of (1) the assets of
of dividends under Delaware law if Cendant legally available for the
Cendant Group were a separate payment of dividends under Delaware
Delaware corporation and Cendant law and (2) the amount that
Group's retained interest in would be legally available for the
CompleteHome.com Group were payment of dividends under Delaware
represented by outstanding shares. law if CompleteHome.com
Group were a separate Delaware
corporation.
We may pay dividends exclusively We may pay dividends exclusively
on the CD Stock, exclusively on on the CompleteHome.com Stock,
the CompleteHome.com Stock, or exclusively on the CD Stock, or on
on both, in equal or unequal both, in equal or unequal amounts.
amounts. The Board of Directors The Board of Directors will not be
will not be required to consider the required to consider the relative
relative available dividend available dividend amounts, the
amounts, the amount of dividends amount of dividends previously
previously declared on either the declared on either the
CD Stock or the CompleteHome.com Stock or the
CompleteHome.com Stock, their CD Stock, their relative voting or
relative voting or liquidation rights liquidation rights or any other
or any other factor. factor.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
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 subject to limited Group, subject to limited
Disposition of exceptions, we would be exceptions, we would be
Assets: required to choose one of required to choose one of
the following three the following three
alternatives: alternatives:
o pay a dividend to holders o pay a dividend to holders
of CD Stock in an amount of CompleteHome.com Stock
equal to their in an amount equal to their
proportionate interest in proportionate interest in
the net proceeds of such the net proceeds of such
disposition, disposition,
o redeem from holders of CD o redeem from holders of
Stock, for an amount equal CompleteHome.com Stock, for
to their proportionate an amount equal to their
interest in the net proportionate interest in
proceeds of such the net proceeds of such
disposition, outstanding disposition, outstanding
shares of CD Stock or shares of CompleteHome.com
Stock or
o issue CompleteHome.com o issue CD Stock in
Stock in exchange for exchange for outstanding
outstanding CD Stock at a CompleteHome.com Stock at a
10% premium (based on the 10% premium (based on the
average market value of CD average market value of
Stock as compared to the CompleteHome.com Stock as
average market value of compared to the average
CompleteHome.com Stock over market value of CD Stock
a specified 20 trading Day over a specified 20 trading
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 CD CompleteHome.com Stock at a
Stock at a 10% premium 10% premium (based on the
(based on the average average market value of
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 over a specified 20-trading
a specified 20-trading day day period prior to the
period prior to the exchange).
exchange).
Any exchange would impact
Any exchange would impact current Cendant
CompleteHome.com stockholders by diluting
Stockholders at such time their interests because we
by diluting their interests would be required to issue
because we would be shares of CD Stock with a
required to issue shares of market value in excess of
Stock with a market value the market value of shares
in excess of the market of CompleteHome Stock so
value of shares of CD Stock exchanged.
so exchanged.
</TABLE>
19
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
Exchange for N/A N/A On and after the 18-month
CD Stock or anniversary of the earlier of
Complete-Home.com (1) the initial issuance of
Stock at Cendant's CompleteHome.com Stock in a
Option: public offering or (2) the
first anniversary of a
private placement of
CompleteHome.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
anniversary of the earlier of of the earlier of (1) the initial
(1) the initial issuance of issuance of CompleteHome.com Stock in
CompleteHome.com Stock in a a public offering or (2) the first
public offering or (2) the anniversary of a private placement of
first anniversary of a CompleteHome.com Stock, we will have
private placement of the right, if outstanding
CompleteHome.com Stock, CompleteHome.com Stock exceeds 40% of
Cendant will not have the total market capitalization but has
right to cause the exchange not exceeded 60% of total market
of CD Stock for capitalization, to issue either series
CompleteHome.com Stock. From of common stock in exchange for the
and after the third other without a premium. In the event
anniversary of the earlier of that CompleteHome.com Stock exceeds
(1) the initial issuance of 60% of total market capitalization, we
CompleteHome.com Stock in a will lose the right to effect an
public offering or (2) the exchange without a premium during such
first anniversary of a period.
private placement of
CompleteHome.com Stock, we
will have the right, if
outstanding CompleteHome.com
Stock exceeds 40% of total
market capitalization but has
not exceeded 60% of the total
market capitalization, to
issue either series of common
stock in exchange for the
other without a premium.
The exchange ratio that will result in The exchange ratio that will result in
a value for value exchange will be a value for value exchange will be
based on the average market value of based on the average market value of
the series of the common stock being the series of the common stock being
exchanged as compared to the average exchanged as compared to the average
market value of the other series of market value of the other series of
common stock during the 20 consecutive common stock during the 20 consecutive
trading day period ending on, and trading day period ending on, and
including, the fifth trading day including, the fifth trading day
immediately preceding the date on immediately preceding the date on
which we mail the notice of exchange which we mail the notice of exchange
to holders of the outstanding shares to holders of the outstanding shares
being exchanged. being exchanged.
</TABLE>
20
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
Notwithstanding the exchange
provisions outlined above, if we
receive an opinion of tax counsel to
the effect that as a result of
changes in tax law either (i) we, our
subsidiaries or affiliates,
successors or stockholders are, or
will be, subject to tax upon the
issuance of either of the CD Stock or
the CompleteHome.com Stock or (ii)
either the CD Stock or the
CompleteHome.com Stock is not, or
will not be, treated solely as our
stock, 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 or N/A
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 60% of total
market capitalization, 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 60% of total market
capitalization.
The exchange ratio that will The exchange ratio that will
result in the specified premium result in the specified premium
will be calculated based on the will be calculated based on the
average market value of CD Stock average market value of CD Stock
as compared to the average as compared to the average
market value of CompleteHome.com market value of CompleteHome.com
Stock during the 20 consecutive Stock during the 20 consecutive
trading day period ending on, trading day period ending on,
and including, the fifth trading and including, the fifth trading
day immediately preceding the day immediately preceding the
date on which we mail the notice date on which we mail the notice
of exchange to holders of the of exchange to holders of the
outstanding shares being outstanding shares being
exchanged. exchanged.
CompleteHome.com Stock will CompleteHome.com Stock will
exceed 60% of total market exceed 40% of total market
capitalization or 40% of total capitalization if the market
market capitalization if the capitalization of the outstanding
market capitalization of the CompleteHome.com Stock exceeds
outstanding
</TABLE>
21
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
CompleteHome.com Stock exceeds 40% of the total market
60% or 40%, as the case may be, capitalization of both series of
of the total market common stock for 30 trading days
capitalization of both series of during any 60 consecutive
common stock for 30 trading days trading day period.
during any 60 consecutive
Trading Day period.
Thereafter, CompleteHome.com N/A
Stock will fall below 60% of
total market capitalization 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 any We will have the right at any
Stock of a time to transfer all of the time to transfer all of the
Subsidiary at assets and liabilities of assets and liabilities of
Cendant's Option: Cendant Group to a subsidiary CompleteHome.com Group to a
and issue all of the stock of subsidiary and issue all of the
that subsidiary to the holders stock of that subsidiary to the
of the CD Stock in exchange for holders of CompleteHome.com
all of the outstanding CD Stock. Stock and to the Cendant 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 vote CompleteHome.com Stock will vote
together as a single class, together as a single class,
except if any amendment to the except if any amendment to the
charter would increase or charter would increase or
decrease the par value of the decrease the par value of the
shares of either class or alter shares of either class or alter
or change the powers, or change the powers,
preferences or special rights of preferences or special rights of
the shares of such class so as the shares of such class so as
to affect them adversely. Each to affect them adversely. Each
share will continue to have one share will continue to have one
vote per share following a stock vote per share following a stock
split, stock dividend or similar split, stock dividend or similar
reclassification. Cendant reclassification.
Group's retained interest in
CompleteHome.com Group will not
carry any voting rights.
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 are CompleteHome.com Stock will be CompleteHome.com Stock will be
entitled to receive the net entitled to receive the net entitled to receive the net
assets of Cendant, if any, assets of Cendant, if any, assets of Cendant, if any,
remaining for distribution remaining for distribution to remaining for distribution to
to stockholders (after stockholders (after payment or stockholders (after payment or
payment or provision for provision for all liabilities of provision for all liabilities of
all liabilities of Cendant Cendant and payment of the Cendant and payment of the
and payment of the liquidation preference payable liquidation preference payable
liquidation preference to any holders of preferred to any holders of preferred
payable to any holders of stock). Amounts due upon stock). Amounts due upon
preferred stock). liquidation in liquidation in
</TABLE>
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<CAPTION>
TRACKING STOCK PROPOSAL
------------------------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK COMPLETEHOME.COM STOCK
---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C> <C>
respect of shares respect of shares
of CD Stock and shares of of CD Stock and shares of
CompleteHome.com Stock will be CompleteHome.com Stock will be
distributed pro rata in distributed pro rata in
proportion to the average market proportion to the average market
value of CD Stock and the value of CD Stock and the
average market value of average market value of
CompleteHome.com Stock over a CompleteHome.com Stock over a
specified 20-trading day period specified 20-trading day period
prior to liquidation. prior to liquidation.
Stock Exchange NYSE under the symbol "CD." NYSE under the symbol "CD." We currently intend to apply for
Listings: listing of CompleteHome.com
Stock on the NYSE concurrently
with the closing of the first
public offering of such
securities.
23
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INTERCOMPANY AGREEMENTS
Relationships with Real Estate Franchisors. CompleteHome.com Group,
through Cendant's CompleteHome.com, Inc. subsidiary, has entered into long term
internet cooperation agreements with each of the three franchisors of the
Cendant real estate brands: Coldwell Banker Real Estate Corporation, Century 21
Real Estate Corporation and ERA Franchise Systems, Inc. (the "Brands"). The term
of each agreement is 40 years and each agreement provides that CompleteHome.com
Group will provide services to each Brand in connection with the operation and
marketing of the Brand websites. The Brands will provide the Brand listings to
CompleteHome.com Group on an exclusive basis (subject to certain pre-existing
agreements with third parties) as well as promote CompleteHome.com Group's
connection to and support of the Brand websites as and where appropriate in both
online and offline advertising.
Relationships with Cendant Mortgage. CompleteHome.com, Inc., on behalf
of CompleteHome.com Group, is currently negotiating various agreements with
Cendant Mortgage Corporation, a wholly owned subsidiary of Cendant, 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. The terms, including the financial terms, are
currently being negotiated by the parties. If an agreement is reached, Cendant
Mortgage will license a customized version of its web-based loan origination
platform to CompleteHome Mortgage. CompleteHome.com Group will designate an area
on the internet portal to market its affiliate's mortgage program.
Intercompany Services Arrangements. CompleteHome.com, Inc., on behalf
of CompleteHome.com Group, and Cendant will enter into an Intercompany Agree-
ment pursuant to which Cendant Group will provide 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 Group for such services with fees to be based on (i) actual costs
incurred by Cendant Group in providing such services and (ii) cost allocation
methodologies employed by Cendant Group typically for its other subsidiaries
which typically involves an allocation based on a percentage of revenues. The
term of the Intercompany Agreement will be
24
<PAGE>
indefinite, subject to termination only upon breach of the agreement or a
divestiture of CompleteHome.com Group by Cendant. The agreement can only be
amended by mutual agreement of the parties.
Relationship with Getko Group, Inc. CompleteHome.com, Inc., on behalf
of CompleteHome.com Group, has entered into an Internet Cooperation Agreement
with Getko Group, Inc. dated September 30, 1999. 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 receive from
Getko 100% of the gross revenues attributable to online advertising and will
remit to Getko an administrative fee in the amount of 50% of such gross
revenues. The fees may only be adjusted by mutual consent of the parties. The
term of the Internet Cooperation Agreement commenced on September 30, 1999 and
terminates on December 31, 2039, subject to termination in the event of a
material breach of the agreement and in the event Getko is no longer a Cendant
affiliate.
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.
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.
25
<PAGE>
Cendant allocates the cost of various corporate general and
administrative services and shared services to the Groups generally based on
utilization. Where utilization is not warranted, overhead is allocated on a
percentage of revenues basis where practicable.
Income tax expense, which is determined on a consolidated basis, is
allocated to Cendant Group and CompleteHome.com Group, and reflected in their
respective financial statements in accordance with Cendant's tax allocation
policy. If application of the allocation policy results in a positive amount,
such amount will be allocated to CompleteHome.com Group as a tax expense. If
application of the allocation policy results in a negative amount, such amount
will be allocated to CompleteHome.com Group as a tax benefit.
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--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.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
We have been advised by Skadden, Arps, Slate, Meagher & Flom LLP 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 are urged to consult your tax advisor
regarding the tax consequences of the Tracking Stock Proposal, including the
state, local and any foreign tax consequences.
26
<PAGE>
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 Cendant of the CompleteHome.com Stock
Option Plan and the existing grants thereunder. Cendant does not currently
intend to issue any options under the CompleteHome.com Stock Option Plan to its
Chairman of the Board, President and Chief Executive Officer. For a more
detailed description of the proposal to approve this plan, see "Proposal 2 --
Stock Option Plan Proposal."
PROPOSAL 3--BOARD DECLASSIFICATION PROPOSAL
At the special meeting, we will also ask you to consider and approve a
proposal to amend Article 9 of our amended and restated certificate of
incorporation to eliminate the provisions for the classification of Cendant's
Board of Directors effective as of the annual meeting of stockholders in 2000.
If the Board Declassification Proposal is approved, then each person elected a
director at the annual meeting of stockholders in 2000 and subsequent annual
meetings of stockholders will be elected for a term of one year and until their
respective successors are elected and qualified. For a more detailed description
of the proposal to declassify Cendant's Board of Directors, see "Proposal
3--Board Declassification Proposal."
PROPOSAL 4 - ADJOURNMENT PROPOSAL
At the special meeting, we may also ask you to consider and approve a
proposal to adjourn the special meeting, which adjournment could be used for the
purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the other proposals.
27
<PAGE>
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)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
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 1,680.2 769.2 315.0 257.3 533.5
before
income taxes and minority
interest(2)
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 $ 2,026.5 $ 784.1 $ 808.0 $ 1,213.0 $ 1,493.4
activities
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)
</TABLE>
- -------------------
(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. Adjusted EBITDA presented by Cendant may
not be comparable to similarly titled measures by other companies. 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.
28
<PAGE>
CENDANT GROUP
(A WHOLLY OWNED GROUP OF CENDANT CORPORATION)
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)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
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 1,849.2 842.7 430.3 309.4 550.9
Interest expense, net 153.8 72.9 113.9 50.6 14.3
Income from continuing operations 1,695.4 769.8 316.4 258.8 536.6
before
income taxes and minority
interest(2)
Income from continuing operations 1,261.8 462.3 160.7 67.2 315.1
before
retained interest in
CompleteHome.com Group
Loss related to retained interest (9.9) (0.4) (0.8) (0.9) (1.8)
in CompleteHome.com Group
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 20,212.8 14,071.5 12,761.5
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 $ 2,030.6 $ 781.6 $ 806.7 $ 1,212.5 $ 1,494.7
activities
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)
</TABLE>
- --------------
(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. Adjusted EBITDA presented by Cendant Group may not be
comparable to similarly titled measures reported by other companies.
However, management believes such measure is an informative
representation of how management evaluates the operating performance of
Cendant Group and its underlying business segments.
29
<PAGE>
(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.
30
<PAGE>
COMPLETEHOME.COM GROUP
(A WHOLLY OWNED GROUP OF CENDANT CORPORATION)
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 January 8, 1996 (the Rent Net
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)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue, net $ 11,326 $ 7,250 $ 9,674 $ 5,670 $ 1,081
Cost of operations:
Operating and corporate overhead 3,230 1,017 1,423 757 393
allocation
Marketing and general administrative 11,764 2,771 3,940 2,599 1,665
expenses
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 (9,863) (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) $ (4,123) $ 2,483 $ 1,279 $ 428 $ (1,215)
operating
activities
Adjusted EBITDA(1) (13,572) 908 442 (543) (2,499)
Capital expenditures (358) (450) (881) (662) (242)
</TABLE>
- ---------------------
(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. Adjusted EBITDA
presented by the CompleteHome.com Group may not be comparable to similarly
titled measures by other companies. 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.
31
<PAGE>
RECENT OPERATING RESULTS OF COMPLETEHOME.COM GROUP
Prior to the January 2000 launch of the CompleteHome.com website, the
business is primarily comprised of Rent Net, Inc., a leading on-line apartment
listing guide. The financial results include the results of Rent Net as well as
the results arising from the integration of the online strategies of Cendant's
Real Estate Division into the CompleteHome.com website. 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 a bonus
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 Cendant 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. Pageviews
are an additional measure of a web site's popularity and are generated based
upon the number of users and the number of different web pages seen by each
visitor. The number of unique user sessions also increased to 24 million in the
first nine months of 1999 compared to 20 million in the first nine months of
1998 due in part to the aforementioned advertising campaign.
32
<PAGE>
THE SPECIAL MEETING
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 February __, 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. 2, 3 and 4 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 January__, 2000 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, 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 and the Adjournment Proposal. The affirmative vote of at least 80% of
the voting power of all shares of Cendant entitled to vote generally in the
election of its directors is required to approve the Board Declassification
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
33
<PAGE>
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 Proposals 1 and 3
and will have no effect on Proposals 2 and 4.
We will bear the expense of printing and mailing proxy materials. In
addition to soliciting proxies by mail, some 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.
34
<PAGE>
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 upon the completion of an initial public offering of CompleteHome.com
Stock. Examples include:
o the right of Cendant's Board of Directors to issue CD Stock in ex
change 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. The right of Cendant to convert
CompleteHome.com Stock into CD Stock (or in certain situations, CD Stock into
CompleteHome.com Stock) could adversely affect the trading price of one or both
series of stock because it could reduce the attractiveness of the security to
investors
35
<PAGE>
following a conversion and could limit the premium potentially available to
investors absent such a conversion option being incorporated into the terms of
the security.
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.
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. Since the CD Stock and
CompleteHome.com Stock are series of common stock of Cendant, investors may
attribute negative results for one Group to the other Group and the stock of one
Group may decline if there are perceived negative results relating to the other
Group's business.
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 Cendant 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.
36
<PAGE>
EXISTING STOCKHOLDERS OF CENDANT WILL HAVE A REDUCED INTEREST IN
COMPLETEHOME.COM GROUP.
Holders of CD Stock will only participate in the ownership of
CompleteHome.com Group indirectly through Cendant Group's retained interest in
CompleteHome.com Group. In other words, existing stockholders of CD Stock will
not own directly any shares of CompleteHome.com Stock unless they purchase
shares of CompleteHome.com Stock separately or if Cendant elects to distribute
all or a portion of its retained interest in CompleteHome.com Group to
stockholders of CD Stock. 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 COULD RESULT IN THE CENDANT BOARD OF DIRECTORS MAKING 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 Cendant Group and CompleteHome.com Group, there will
likely be inherent conflicts of interest between the two Groups. Cendant Group
and CompleteHome.com Group are parties to various intercompany agreements which
37
<PAGE>
can lead to conflicts between the Groups relating to the services and products
rendered. Officers and directors of Cendant owe fiduciary duties to both classes
of stockholders. However, the fiduciary duties owed by such officers and
directors are to Cendant as a whole, and decisions deemed to be in the best
interest of Cendant as a whole may not be in the best interest of a Group when
considered on its own. 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 be-
tween the two Groups.
38
<PAGE>
o Current Cendant stockholders will receive CD Stock in exchange
for their Cendant common stock if the Tracking Stock Proposal is
approved and adopted. Future decisions which may favor
CompleteHome.com Group to the detriment of Cendant Group may
adversely affect holders of CD Stock. To the extent that current
holders of Cendant common stock are holders of CD Stock at such
time, they may be adversely affected by such decisions.
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 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 Cendant and all of its
stockholders as a whole. For a more comprehensive description of these policies,
see "Proposal 1 --The Tracking Stock Proposal --Cash Management and Allocation
Policies."
PRINCIPLES OF DELAWARE LAW MAY PROTECT DECISIONS OF THE CENDANT BOARD OF DIREC-
TORS THAT HAVE A DISPARATE IMPACT UPON HOLDERS OF CD STOCK AND
COMPLETEHOME.COM STOCK.
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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 all of Cendant's
stockholders and members of the Board of Directors do not have any personal
conflicts of interest. If, for example, the Board of Directors were to make a
decision which it in good faith believed to be in the best interest of Cendant
as a whole, and such decision were to have a positive impact on CompleteHome.com
Stock and negative impact on CD Stock, holders of CD Stock may not be able to
challenge the Board of Directors' decision.
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. Merger consideration
received by Cendant shareholders (which could include cash, stock or other
securities) may be divided between Cendant Group and CompleteHome.com Group
shareholders in a manner that does not provide the same dollar amount or
percentage premium to each class of shareholders or in a manner that provides
different forms of consideration (cash, stock or other securities) to different
classes of shareholders. 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.
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AT TIMES, WE HAVE THE OPTION 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.
At times, we 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 of the
shares being exchanged, 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.
For example, if we reverse the effect of the Tracking Stock Proposal by
issuing CD Stock in exchange for all of the outstanding shares of
CompleteHome.com Stock, Cendant would only have one class of common stock
outstanding. If Cendant had the right to make this exchange during a period when
Cendant was required to pay the CompleteHome.com Group stockholders a premium
for their stock, then the exchange would dilute the holders of CD Stock.
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,
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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, if such option would not be in the best interests of
Cendant's stockholders as a whole.
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 if any amendment to the charter would increase or decrease
the par value of the shares of either class or alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely. When holders of CD Stock and CompleteHome.com Stock vote together as
a single class, holders
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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 Cendant 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 pose financial, legal and administrative obstacles to an acquiring
person. The existence of two series of common stock could 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, the following provisions of our charter, by-laws, and
Delaware law may inhibit changes of control not approved by the Board of
Directors:
o our Board of Directors may issue shares of preferred stock
without further stockholder approval,
o stockholders may not take action by written consent and special
meetings of stockholders may only be called by the Chairman of
the Board of Directors, the President or the Board of Directors
pursuant to a resolution,
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o our by-laws require advance notice for stockholder nominations
and proposals of new business, and this provision of the by-laws
may only be amended by an affirmative vote of at least 80% of the
stock entitled to vote,
o our amended and restated certificate of incorporation includes a
"fair price provision", and
o we are subject to the business combination provisions of Section
203 of the Delaware General Corporation Law,
For a more detailed explanation of these anti-takeover constraints, see
"Proposal 1 --The Tracking Stock Proposal -- Certain Other Provisions of the
Amended and 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.
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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, including market conditions in general,
the financial condition, business operations or prospects of CompleteHome.com
Group, 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, Arps, Slate, Meagher & Flom LLP 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 designation of our common stock as CD
Stock or the subsequent conversion of the CD Stock into the CompleteHome.com
Stock or the conversion of the CompleteHome.com Stock into the CD Stock, would
be treated as a taxable exchange. If so treated, you would recognize gain or
loss equal to the difference between the fair market value of the stock that you
received (i.e., the CD Stock or the CompleteHome.com Stock, as applicable), and
your tax basis in the stock you surrendered (i.e., the common stock, the CD
Stock or the CompleteHome.com Stock, as applicable). In addition, in such case,
we might recognize gain or loss equal to the difference between the fair market
value of the CD Stock or the CompleteHome.com Stock, as applicable, and our tax
basis in such stock (which will generally be zero.)
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-
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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.
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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 Direc-
tors.
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 new internet real estate services portal which is
expected to be operational during January 2000 and enhanced during February
2000. 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 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 "-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 Cendant
Group employees following stockholder approval of the Stock Option Plan Proposal
and the Tracking Stock Proposal. Stock options will be granted to employees
prior to any sale of CompleteHome.com Stock to non-employees.
Subject to prevailing market and other conditions, we currently expect
to issue shares of CompleteHome.com Stock in a public offering as soon as
practicable following stockholder approval of the Tracking Stock Proposal. The
specific terms of such offering, including the amount of CompleteHome.com Stock
we issue, will
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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.
In connection with our recent acquisition of Metro-Rent, Inc. for
inclusion in the CompleteHome.com Group, we issued shares of non-voting
redeemable common stock of CompleteHome.com, Inc., an indirect wholly owned
subsidiary of Cendant, in a private placement to the stockholders of Metro-Rent,
Inc. Such securities are mandatorily redeemable for CompleteHome.com Stock upon
the initial public offering of CompleteHome.com stock. In addition, we have
granted Chatham Street Holdings, LLC a right to purchase $25 million in value of
CompleteHome.com stock until September 30, 2001. We may issue similar securities
in connection with other acquisitions or investments prior to the approval of
the Tracking Stock Proposal.
We expect to file an amended and restated certificate of incorporation
implementing the Tracking Stock Proposal and re-classify your common stock
promptly 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 a sale to
a third party, a spin-off or an initial public offering of stock and the
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 advisor, Goldman, Sachs & Co. and legal advisor, Skadden, Arps,
Slate, Meagher & Flom LLP, 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 material benefits from the authorization of
CompleteHome.com Stock:
o The proposal will permit investors and research analysts to
review separate information about CompleteHome.com Group and
separately
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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 by highlighting the current and
future potential operations of CompleteHome.com Group through
enhanced financial reporting and by attracting to CD Stock and
CompleteHome.com Stock new internet-focused investors who would
otherwise not purchase Cendant's common stock.
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 on a more cost efficient
basis than issuing CD Stock (or existing Cendant common stock).
We believe CompleteHome.com Stock will represent a lower cost of
equity capital than Cendant common stock because the value of
CompleteHome.com Group's operations are not currently fully
recognized by existing Cendant shareholders and the market
generally.
o The proposal will enable us to grant stock options tied to
CompleteHome.com Stock, thereby providing more focused incen-
tives to CompleteHome.com Group and Cendant Group management and
employees. The options granted to the employees of
CompleteHome.com Group will more effectively incentivize them by
creating a more independent atmosphere as well as benefit plans
with stock that is directly linked to the performance of their
business. Options will be granted to Cendant Group employees
making direct contributions to CompleteHome.com Stock through
intercompany business relationships and arrangements to
facilitate cooperation between the two Groups.
o The proposal will provide us with greater flexibility to raise
capital and respond to strategic opportunities (including
acquisitions), be cause it will allow us to issue either CD Stock
or CompleteHome.com Stock as appropriate under the circumstances.
In general, CompleteHome.com Stock should represent a more
attractive currency for acquisitions in the internet sector. The
particular circumstances under which Cendant would issue CD
Stock or CompleteHome.com Stock and the use of the proceeds from
such issuances will depend on a variety of factors such as the
capital needs of each Group's businesses and market conditions at
the time of the offering.
o The proposal is expected to enable us to realize more value from
CompleteHome.com Group while preserving the financial, tax,
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operational, strategic and other benefits of being a single
consolidated entity. By remaining a single consolidated entity,
both Groups will remain a part of Cendant, thereby preserving
greater flexibility to maximize synergies between the two Group's
businesses. Consolidation benefits also include (1) filing a
single consolidated tax return (allowing Cendant to net losses
from one Group against income from the other Group), (2)
maintaining a single credit profile for both Groups (thereby
reducing financing costs) and (3) allowing both Groups to benefit
from Cendant's senior 'management and administrative resources.
The Board of Directors also evaluated the material 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 may be significant and the ongoing cost of operating
separate Groups will likely exceed the costs of operating Cendant
as it currently exists by a significant amount.
o The Tracking Stock Proposal will expand the Board of Directors'
responsibility to oversee the interests of two series of common
stock holders which may conflict at times
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. The Board of Directors considered
their knowledge of the business, financial condition and prospects for Cendant,
and the advice of financial and legal advisors. The Board of Directors
considered each positive and negative factor and concluded that the tracking
stock afforded Cendant stockholders the opportunity to realize economic value
from issuing tracking stock while Cendant
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could still maintain control of the business. In light of the number and variety
of factors that Cendant's Board of Directors considered, Cendant believes that
it is not practicable to assign relative weights to the foregoing factors, and
accordingly Cendant did not do so.
DESCRIPTION OF CD STOCK AND COMPLETEHOME.COM STOCK
THE FOLLOWING DESCRIPTION IS A SUMMARY OF THE MATERIAL TERMS AND
PROVISIONS OF THE CD STOCK AND THE COMPLETEHOME.COM STOCK. IT IS NOT COMPLETE
AND SHOULD BE READ WITH ANNEX II TO THIS PROXY STATEMENT, WHICH CONTAINS THE
FULL TEXT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION THAT WILL BE
FILED PURSUANT TO THE TRACKING STOCK PROPOSAL.
General
Our current amended and restated 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. Only the preferred stock is currently issuable
in series by the Board of Directors. As of December 22, 1999, we had
approximately 711,000,000 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
amended and restated certificate of incorporation which would amend and restate
our current charter. The new amended and 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.)
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We intend CompleteHome.com Stock to reflect the performance of
CompleteHome.com Group, our new internet real estate services portal which is
expected to be operational during January 2000 and enhanced during February
2000. 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.
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.
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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 avail able 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
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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 these limitations and to any other limitations 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. For further examples and
illustrations, see Annex I to this Proxy Statement.
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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, 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
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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 amended and 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
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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 reallocate 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 new 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 amended and restated certificate of incorporation
becomes effective under Delaware law, 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
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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 reallocate 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.
An 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
deter mined 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 there with) of
an entity which is primarily engaged or proposes to engage
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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 contem plated under "--Optional
Exchange of One Series of Common Stock For The Other Series"
below.
The 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. The 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) times the number
of shares of CompleteHome.com 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. For an example and
illustration, see Annex I to this Proxy Statement.
The total number of notional CompleteHome.com shares deemed outstanding
at any time means the number of shares of CompleteHome.com Stock then outstand-
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ing plus the number of shares issuable with respect to Cendant Group's retained
interest in CompleteHome.com Group.
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 40% of total
market capitalization, but has not exceeded 60% of total market capitalization,
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 60% of total market capitalization, 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%.
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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 60% of total market
capitalization, 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 60% of total market capitalization,
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.
A "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.
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CompleteHome.com Stock will exceed 40% of total market capitalization
or 60% of total market capitalization, 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 60% of total market
capitalization if, after exceeding 40% of total market capitalization, 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, 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.
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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),
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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 ex change.
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 re
deemed 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
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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
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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 to the
certificate of incorporation if the amendment would increase or decrease the par
value of the
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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 Securities 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.
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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 repre-
sented at any time by Cendant Group's retained interest in CompleteHome.com
Group the retained interest percentage. At any time, the outstanding interest
percent age 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 amended and 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 22,500,000
as the initial number of shares issuable with respect to Cendant Group's
retained interest in CompleteHome.com Group. We currently plan to reserve
6,000,000 shares of CompleteHome.com Stock for option grants under the
CompleteHome.com Stock Option Plan to CompleteHome.com Group and Cendant 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
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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 6,000,000 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
22,500,000.
o the total number of notional CompleteHome.com Group shares
deemed outstanding would be 22,500,000 but would increase to
28,500,000 if all such options were granted and exercised,
o the outstanding interest percentage would be approximately 21%
if all such options were granted and exercised, and
o the retained interest percentage would be approximately 79% if
all such options were granted and exercised.
The outstanding interest percentage will increase as the retained
interest percentage will decrease upon the issuance of the shares in the Metro
Rent and Chatham Street transaction described in the Proxy Statement under
"Proxy Statement Summary - Recent Developments".
Subject to prevailing market and other conditions, we currently expect
to issue shares of CompleteHome.com Stock in a public offering as soon as
reasonably practicable following stockholder approval of the Tracking Stock
Proposal. The specific terms of such offering including the amount of
CompleteHome.com Stock we issue 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.
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Attribution of Issuances of CompleteHome.com Stock. Whenever we decide
to issue shares of CompleteHome.com Stock, or options therefor, we would deter
mine, 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 in creased 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
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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.
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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 out
standing 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 out standing 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. Cendant Group's retained interest
will decrease with each issuance of CompleteHome.com Stock whether the proceeds
of such issuance are allocated to the Cendant Group (similar to a secondary
offering of securities) or to the CompleteHome.com Group (similar to a primary
offering).
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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 hypothetical dividends, issuances, repurchases and transfers,
see Annex I--"Illustrations of Terms."
Effectiveness of Certain Terms
The terms described under "--Dividends," "--Mandatory Dividend, Re-
demption 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 amended and restated certificate of incorporation would provide
that, subject to applicable law, any determinations made by the Board of
Directors in good faith under the amended and 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.
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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, which includes both CD Stock and CompleteHome.com Stock.
The existence of two series of common stock could present complexities
and could pose financial, legal and administrative obstacles, to an acquiring
person. The existence of two series of common stock could 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 Amended and Restated Certificate of Incorporation, By-laws and
Delaware Law."
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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 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.
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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
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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,
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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.
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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. Such allocations are based upon utilization where possible with any
remaining overhead allocated based on a percentage of revenues. 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
Cendant 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 corporate general and administrative
services and shared services to the Groups generally based on utilization. Where
utilization is not warranted, overhead is allocated on a percentage of revenues
basis. 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
Income tax expense, which is determined on a consolidated basis, is
allocated to Cendant Group and CompleteHome.com Group, and reflected in their
respective financial statements in accordance with Cendant's tax allocation
policy. The tax allocation policy provides that the financial statement expense
or benefit, as the case may be, will be allocated to CompleteHome.com Group in
an amount equal to the difference between (x) the consolidated income tax
expense or benefit of Cendant for
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financial statement purposes, and (y) the consolidated income tax expense or
benefit of Cendant for financial statement purposes computed without including
the CompleteHome.com Group financial statement pre-tax income and any other
relevant amounts properly allocable to CompleteHome.com Group. If the above
computation results in a positive amount, such amount will be allocated to
CompleteHome.com Group as a tax expense. If the above computation results in a
negative amount, such amount will be allocated to CompleteHome.com Group as a
tax benefit.
INTERCOMPANY AGREEMENTS
CompleteHome.com Group is a party to 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, Coldwell
Banker Real Estate Corporation and ERA Franchise Systems, Inc. (collectively,
the "Franchisors") entered into three separate 40-year Internet Cooperation
Agreements. 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 Cooperation Agreement, the respective Franchisor has agreed,
subject to current contractual 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 and to provide CompleteHome.com Group with access to information, data
and content on its website. Such information, data and content will be provided
by each Franchisor as mutually agreed by such Franchisor and CompleteHome Group,
based on a variety of circumstances, including the uniqueness of the
information, data or content to be transferred to CompleteHome.com Group, the
impact on such Franchisor, if any, of the display of such information, data or
content on CompleteHome.com Group's website, the scope and breadth of the
proposed display, the "look and feel" of the proposed display, the duration of
the proposed display, the display of similar information by real estate
brokerage systems other than those operated by the Franchisor and the
Franchisor's cost and expense attributable to the design, development and/or
publication of such information, data and content. Further, each Franchisor has
agreed to place CompleteHome.com Group identifying marks in a prominent location
on its website and, where appropriate, based on the totality of
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circumstances, 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 broker
profile screens and internet traffic reports 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 agree-
ments 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 for this service, it
will meet with CompleteHome.com Group regarding CompleteHome.com Group's
potential appointment as an agency of record.
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
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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, Inc., on behalf
of CompleteHome.com Group, is currently negotiating various agreements with
Cendant Mortgage, a wholly owned subsidiary of Cendant, 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. The terms, including the financial terms, are
currently being negotiated by the parties. If an agreement is reached, Cendant
Mortgage will license a customized version of its web-based loan origination
platform to CompleteHome Mortgage. CompleteHome.com Group will designate an area
on the internet portal to market its affiliate's mortgage program.
Intercompany Services Arrangements. CompleteHome.com, Inc., on behalf
of CompleteHome.com Group, and Cendant will enter into an Intercompany Agree-
ment pursuant to which Cendant will provide 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 which typically
involves an allocation based on a percentage of revenues. The term of the
Intercompany Agreement will be indefinite, subject to termination upon breach of
the agreement or a divestiture of CompleteHome.com Group by Cendant. The
agreement can only be amended by mutual agreement of the parties.
Relationship with Getko Group, Inc. CompleteHome.com Group has entered
into an Internet Cooperation Agreement with Getko Group, Inc. 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
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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 will receive from Getko 100% of the gross revenues
attributable to online advertising and will remit to Getko an administrative fee
in the amount of 50% of such gross revenues. This amount is subject to mutual
adjustment through out the term of the agreement. The term of the Internet
Cooperation Agreement began on September 30, 1999 and ends on December 31, 2039,
subject to termination in the event of a material breach of the agreement and
in the event Getko is no longer a Cendant affiliate.
MATERIAL PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION,
BY-LAWS AND DELAWARE LAW
Preferred Stock
The amended and restated certificate of incorporation, like the current
amended and restated 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.
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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
currently 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 director ship 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,
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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 amended and 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 amended and 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
business combination transactions (including 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
other procedural requirements are met. The amended and 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.
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Certain Provisions of Delaware Law Which May Inhibit Changes of Control
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 stock holder. 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 account able to
corporations or their stockholders for monetary damages for conduct consti-
tuting gross negligence in the exercise of their duty of care. Although Section
102 of
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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 amended and 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
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 amended and
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
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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 amended and 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 amended and 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. as our financial advisor in connec
tion with the Tracking Stock Proposal. Goldman, Sachs & Co. assisted us in our
analysis and consideration of various financial alternatives related to
CompleteHome.com and the formulation of the Tracking Stock Proposal. Prior to
electing to pursue the Tracking Stock Proposal, Goldman, Sachs & Co. and Cendant
reviewed other potential alternatives, including the issuance of stock of a
subsidiary which would own the assets and liabilities of CompleteHome.com Group.
Cendant ultimately decided to pursue the Tracking Stock Proposal instead of a
subsidiary initial public offering structure because of the operational,
financial, tax and strategic benefits of being a single consolidated entity. The
advisor is further assisting us in implementing the Tracking Stock Proposal. We
have also agreed to reimburse the advisor for 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.
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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.
MATERIAL 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 opinion of Skadden, Arps, Slate, Meagher & Flom
LLP discussed below, is based on certain assumptions, representations of Cendant
as to factual matters, 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 opinion of Skadden, Arps, Slate, Meagher
& Flom LLP 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.
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Tax Implications of the Tracking Stock Proposal to Stockholders
Skadden, Arps, Slate, Meagher & Flom LLP 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, Arps, Slate, Meagher & Flom LLP 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, Arps, Slate, Meagher
& Flom LLP is not binding on the Internal Revenue Service or the courts and
merely represents its best judgment based upon existing authorities and
assumptions and representations made to Skadden,
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Arps, Slate, Meagher & Flom LLP by our management. Therefore, it is possible
that the Internal Revenue Service would assert 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. Skadden, Arps,
Slate, Meagher & Flom LLP is of the opinion that the Internal Revenue Service
would not prevail in any such assertion. WE URGE YOU TO 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 stock holder'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.
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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.
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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 was
approved and ratified on October 29, 1999 by Cendant Membership Services, Inc.,
the sole shareholder of CompleteHome.com, Inc.. On October 29, 1999, options to
purchase approximately 2.5 million shares of common stock of CompleteHome.com,
Inc. were granted to employees of CompleteHome.com, Inc. under the Option Plan.
On December , 1999, options to purchase approximately 1.2 million shares of
common stock of CompleteHome.com, Inc. were granted to employees of Cendant
and its subsidiaries other than CompleteHome.com, Inc.
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 become options to purchase shares of CompleteHome.com Stock
equitably adjusted to the extent necessary to adjust for stock splits, reverse
stock splits and the like in connection with the proposed initial public
offering or otherwise, 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 grants 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 stock holder approval is not obtained as may be
necessary in order to satisfy the require-
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ments of Section 162(m) of the Code, 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
and Chief Executive Officer in accordance with such person's request.
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
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of Cendant may designate or by the Board of Directors of Cendant (the "Commit
tee"). The Committee is authorized, among other things, to select the employees
of CompleteHome.com Group and Cendant Group 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. Such selections will be made
to advance the goals set forth above, including to align the interests of the
employees of CompleteHome.com Group and Cendant Group employees who support the
CompleteHome.com Group operations, with the interests of the shareholders of the
CompleteHome.com Stock. 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 Commit tee, 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.
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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.
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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. On December , 1999, options to purchase
approximately 1.2 million shares of common stock of CompleteHome.com, Inc. were
granted to employees of Cendant and its subsidiaries other than
CompleteHome.com, Inc.
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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.
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PROPOSAL 3--BOARD DECLASSIFICATION PROPOSAL
General
On December __, 1999, the Board of Directors approved a resolution to
submit to the stockholders for approval proposed amendments to Article III,
Sections 1, 2 and 3 of the amended and restated by-laws of Cendant and Article 9
(b), (d), (e), (g) and (h) of the amended and restated certificate of
incorporation of Cendant to eliminate classification of the Board and related
matters effective as of the annual meeting of stockholders to be held in 2000.
Currently, the by-laws and amended and restated certificate of incorporation
provide that the Board be divided into three classes with the number of
Directors in each class being as nearly equal as possible. Each Director
currently serves a three year term and Directors for one of the three classes
are elected each year. Accordingly, if the proposed amendments are approved,
stockholders will elect the directors at the annual meeting in 2000 for a term
of one year. The proposed amendment, which can only be approved with the
affirmative vote of 80% of the votes which would be entitled to be cast
generally in an election of Directors, would also eliminate that 80% voting
requirement for any future amendments to Article 9 (b) of the amended and
restated certificate of incorporation and Article III, Sections 1, 2 and 3 of
the by-laws.
Description of Proposal
In 1997, in connection with the merger of CUC International Inc. and
HFS Incorporated to form Cendant, stockholders of the constituent corporations
voted to approve the Certificate of Incorporation providing for a classified
Board of Directors and to require the affirmative vote of 80% of the votes which
would be entitled to be cast generally in the election of directors to amend
such provision. This classified director provision is set forth in Article 9 (b)
of the Restated Certificate of Incorporation and Article III, Section 1 of the
by-laws. Under that classified director provision, approximately one-third of
the Directors are elected annually and serve a three-year term.
Supporters of classified boards of directors believe that they help
maintain continuity of experience and, as a result, may assist a company in
long-term strategic planning. Additionally, supporters argue that a classified
board may encourage a person seeking control of a company to initiate
arm's-length discussions with management and the board, who may be in a position
to negotiate a higher price or
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more favorable terms for stockholders or to seek to prevent a takeover that the
board believes is not in the best interests of stockholders.
On the other hand, a classified board of directors limits the ability
of stock holders to elect directors and exercise influence over a company, and
may discourage proxy contests in which stockholders have an opportunity to vote
for a competing slate of nominees. The election of directors is the primary
avenue for stockholders to influence corporate governance policies and to hold
management accountable for the implementation of those policies. A
non-classified board of directors may enable stockholders to hold all directors
accountable on an annual basis, rather than over a three-year period.
Also, the existence of a classified board of directors may deter some
tender offers or substantial purchases of stock that might give stockholders the
opportunity to sell their shares at a price in excess of what they would
otherwise receive. Accordingly, approval of the proposed amendment to the
amended and restated certificate of incorporation might increase the likelihood
of such a tender offer or substantial stock purchases by a person seeking to
change Cendant's Board of Directors.
At the 1999 annual meeting of stockholders of Cendant, a majority of
the shares voted (although less than 50% of the outstanding shares) were voted
at the meeting in favor of a non-binding stockholder proposal recommending the
declassification of the Board. The Board opposed the proposal to declassify the
Board at the 1999 annual meeting on the basis that a classified board provides
continuity and experience of management. In determining to approve the proposed
amendments to declassify the Board, the Board took into consideration the
support of proposal by the stockholders at the 1999 annual meeting as well as
all the benefits and detriments discussed above.
Under Delaware law, directors of companies that have a classified board
of directors may only be removed for cause unless the certificate of
incorporation provides otherwise. However, under Delaware law, directors of
companies that do not have a classified board may be removed with or without
cause by a majority vote of the stockholders at any annual or special meeting of
stockholders. Accordingly, if the proposed amendment to the amended and restated
certificate of incorporation is approved, Cendant's stockholders would be able
to remove any or all directors without cause at any stockholders meetings after
the 2000 annual meeting of stock holders, when all directors then in office will
have been elected for a term expiring at
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the 2001 annual meeting of stockholders. Under Cendant's by-laws, special
meetings of stockholders can be called only by the Chairman, the President or a
majority of Cendant's Board.
Article 9 of the amended and restated certificate of incorporation also
currently provides that Article 9 (b) and Article III, Sections 1, 2 and 3 of
the by-laws can only be amended by the affirmative vote of 80% of the votes
which would be entitled to be cast generally in an election of directors. The
proposed amendment would delete this requirement with respect to any future
amendments of Article 9 (b) of the amended and restated certificate of
incorporation or Article III, Sections 1, 2 and 3 of the by-laws. Accordingly,
under Delaware law, any subsequent amendment to Article 9 (b) of the amended and
restated certificate of incorporation Article III, Sections 1, 2 and 3 of the
by-laws would require approval of Cendant's Board of Directors and the
affirmative vote of a majority of the outstanding shares entitled to vote
generally in the election of directors.
The proposed amended and restated certificate of incorporation and the
proposed by-law are set forth in Annexes II and IV hereto, respectively, with
deletions indicated by strike-out and additions indicated by brackets.
-----------------
In accordance with the amended and restated certificate of
incorporation, Proposal 3 requires the affirmative vote of at least 80% of the
voting power of all shares of Cendant entitled to vote generally in the election
of Directors. Under Delaware law, in determining whether such proposal has
received the requisite number of affirmative votes, abstentions and broker
non-votes will be counted and will have the same effect as a vote against the
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE BOARD DECLASSIFICATION PROPOSAL.
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PROPOSAL 4 - ADJOURNMENT PROPOSAL
At the special meeting, we may also ask you to consider and approve a
proposal to adjourn the special meeting, which adjournment could be used for the
purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the other proposals.
Proposal 4 requires the affirmative vote of a majority of the votes
cast, in person or by proxy, at the special meeting, if a quorum is present.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE AD JOURNMENT PROPOSAL, IF PRESERVED AT THE SPECIAL
MEETING.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the 1996, 1997 and 1998 cash
and noncash compensation awarded to or earned by each person who served as Chief
Executive Officer of Cendant during 1998 and the four other most highly compen-
sated executive officers of Cendant (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------------------------------------------------------
AWARDS
-----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SARS (#)(2)(3) ($)(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
</TABLE>
- --------------------
(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
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<PAGE>
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 $20 per share,
and (c) 50% were exchanged for similar options with an exercise price
equal to the New Price. In addition, to further align the Senior
Management (including the Named Executive Officers) interest with that
of Cendant's stockholders, the ability to obtain modified options was
subject to such officers' agreement to participate in an executive
equity incentive program, requiring such officers to acquire and hold
Common Stock having an aggregate market value based upon their base
salary.
(3) As a result of the Senior Management Program, the following total
number of options granted in 1996, 1997 and 1998 were cancelled:
Mr. Silverman: 25,813,380; Mr. Holmes: 2,115,930; Mr. Monaco:
3,197,325; Mr. Kunisch: 1,331,240; Mr. Buckman: 2,165,930.
(4) Payments included in these amounts for the fiscal year ended December
31, 1998 consist of (i) Cendant matching contributions to the Employee
Savings Plan, which is a defined contribution salary reduction 401(k)
plan qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") and/or under a non-qualified deferred
compensation plan established by HFS in 1996 ("Defined Contribution
Match"); (ii) insurance premiums paid by Cendant for supplemental life
insurance coverage; and (iii) unused vacation pay. The payments with
respect to the Defined Contribution Match, life insurance premiums and
unused vacation pay were as follows:
<TABLE>
<CAPTION>
DEFINED LIFE UNUSED
CONTRIBUTION INSURANCE VACATION
YEAR MATCH($) PREMIUM($) PAY($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Silverman 1998 75,226 2,400 0
Mr. Holmes 1998 53,267 2,400 0
Mr. Monaco 1998 53,137 2,400 0
Mr. Kunisch 1998 0 2,400 17,605
Mr. Buckman 1998 20,542 2,400 0
</TABLE>
(5) 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.
103
<PAGE>
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
</TABLE>
- --------------------
(1) Options granted to the Named Executive Officers expire as specified in
the table. The Compensation Committee retains discretion to modify the
terms of outstanding options provided that the options, as modified, do
not violate the terms of the respective plan under which they were
granted.
(2) The vesting of these options accelerates under certain circumstances
(including a change of control of Cendant 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 8.8 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
interests of Senior Management (including the Named Executive Officers)
with that of Cendant's stockholders, the
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<PAGE>
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.
105
<PAGE>
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.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
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
</TABLE>
- --------------------
(1) Based upon the closing price of the Common Stock on the New York
Stock Exchange on December 31, 1998, and applicable exercise prices.
(2) On September 23, 1998, the Compensation Committee approved the Senior
Management Program which effectively modified the terms of certain
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.
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
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<PAGE>
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 July 21, 1999, Non-Employee Directors (as defined in Rule
16b- 3(b)(3) of the Exchange Act) of Cendant 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 commencing January 1, 1999, 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 Direc-
107
<PAGE>
tors 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.
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<PAGE>
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 arrange-
ments.
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).
109
<PAGE>
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
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<PAGE>
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
pay ments thereunder and other compensation and benefit arrangements.
111
<PAGE>
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
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 Cendant'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)
- ---- ---------- ----------------- -------------------
<S> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Capital Research and
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
</TABLE>
112
<PAGE>
<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)
- ---- ---------- ----------------- -------------------
<S> <C> <C> <C>
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) 240,185 * 156,155
John D. Snodgrass(10) 6,381,104 * 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): 49,043,816 6.47% 46,380,846
</TABLE>
- --------------------
* 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 Keogh plan of which Mr.
Smith is the sole beneficiary and 60,000 shares of common stock held in a
401K plan account. Amount includes 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 includes 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.
113
<PAGE>
(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.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires Cendant'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 Cendant with copies of all Forms 3, 4 and 5 they
file.
Based solely on Cendant'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, Cendant 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 Cendant, 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 Cendant,
filed a Form 4 correcting certain arithmetic errors in prior filings. On May 8,
1998, Burton Perfit, a former director of Cendant filed a Form 4, which was
late, relating to a purchase of Cendant'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,
114
<PAGE>
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 website 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
Current Report on Form 8-K December 2, 1999
Current Report on Form 8-K December 7, 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
115
<PAGE>
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 ________, 2000 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 JANUARY __, 2000. 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.
116
<PAGE>
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 ten business
days prior to 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, which ever 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 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
117
<PAGE>
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
118
<PAGE>
ANNEX I
ILLUSTRATIONS OF 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
illustra tions, the Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group is initially assumed to be 100.
Unless other wise 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 Outstand ing"
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:
I-1
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after the
Offering.................................................................... 85
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding..........................................0
Newly issued shares for account of CompleteHome.com Group........................15
Total issued and outstanding after the Offering..............................15
</TABLE>
I-3
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares for account of Cendant Group.................................15
Total issued and outstanding after additional offering...................... 30
</TABLE>
I-4
<PAGE>
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
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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.
I-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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,
I-6
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
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 repur
chased 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:
</TABLE>
I-7
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Shares repurchased for account of CompleteHome.com Group........................ 5
Total issued and outstanding after repurchase................................10
</TABLE>
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
I-8
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Shares repurchased for account of CompleteHome.com Group........................ 5
Total issued and outstanding after repurchase................................10
</TABLE>
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).
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
I-9
<PAGE>
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).
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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%.
I-10
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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:
I-11
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares for account of CompleteHome.com Group........................ 3
Total issued and outstanding after dividend..................................18
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
I-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
dividend....................................................................102
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares.............................................................. 0
Total issued and outstanding after contribution..............................15
</TABLE>
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 there tofore 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.
I-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares.............................................................. 0
Total issued and outstanding after contribution..............................15
</TABLE>
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
I-14
<PAGE>
assets transferred ($40) divided by the Market Value of
CompleteHome.com Stock at that time ($20), or 2 shares.
<TABLE>
<CAPTION>
<S> <C>
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 allo
cated to CompleteHome.com Group.............................................. 2
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in CompleteHome.com Group after
contribution.................................................................83
</TABLE>
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%.
I-15
<PAGE>
ANNEX II
PROPOSAL 1--THE TRACKING STOCK PROPOSAL
(AMENDED AND RESTATED CERTIFICATE OF INCORPORATION)
<PAGE>
ANNEX II
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:
II - 1
<PAGE>
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 pur-
chase 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; Designation; 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,
II-2
<PAGE>
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
II-3
<PAGE>
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 Corpo
ration 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 limi tations on
dividends set forth under Sec tion 2 of this Article 4(A),
in an amount having a Fair Value equal to their Propor
tionate 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
II-4
<PAGE>
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).
II-5
<PAGE>
(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).
II-6
<PAGE>
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.
II-7
<PAGE>
(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 Re-
tired"), 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
II-8
<PAGE>
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
II-9
<PAGE>
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 there under) 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 subsid-
iary thereof) are held directly or indirectly by one or more wholly
owned subsidiaries of the Corporation (the "Group Subsidiaries"), the
Corporation shall have the
II-10
<PAGE>
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 ex changed 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 Corpo-
ration.
(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
II-11
<PAGE>
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, ex change 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 be fore 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
II-12
<PAGE>
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 Corpora-
tion shall, not less than 10 Trading Days and not more than 30 Trading
Days before the ex change 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 Corpo-
ration, 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.
II-13
<PAGE>
(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 ex change 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
II-14
<PAGE>
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 ex changed or redeemed, together with any frac-
tional 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 Cor-
poration 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
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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.
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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
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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, re classification 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
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(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 as sets 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 at tribute 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 attrib-
uted 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:
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"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 out standing, (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
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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
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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, how ever, 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
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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 there with) 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
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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 out standing 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
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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 determina-
tion 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
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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 Percent age, 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 other wise) 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
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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 Out
standing. "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 Ex change 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 Out standing.
"Total Number of Notional CompleteHome.com Shares Deemed Outstanding" means
the number of shares of
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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
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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 redeem able and, if
redeemable, the redemption price pay able 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;
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(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
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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 ByLaws, the Board of
Directors may designate one or more directors as alternate members of any
commit tee, 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
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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 good will 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
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creditors, and/or of the stockholders or class of stock holders 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
ByLaws. [From and after the annual meeting of stock holders to be held in
2000,] the Directors shall hold office for a term expiring at the annual
meeting of stockholders to be held in [the year following the year of
their election] with the members to hold office until their successors are
elected and qualified[; provided that the term of any Director appointed
prior to the annual meeting of stockholders held in 2000 shall be
unaffected.] At each annual meeting of the stockholders of the Corpora-
tion, the Directors shall be elected to office for a term expiring at the
annual meeting of
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stockholders held in the 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 [the] death,
resignation, disqualification, [or] removal [of a Director] 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 [(a) to fill any vacancy resulting from the death,
resignation, disqualification or removal of a Director shall hold office
for the remainder of the full term of the Director whose death,
resignation, disqualification or removal created such vacancy and (b) to
fill any vacancy resulting from a newly created directorship shall hold
office until the next annual meeting of stockholders] and[, in each case,]
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
[with or] without cause only by the affirmative vote of the holders of [a
majority] 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
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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 ByLaws 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 [of the
By-Laws] shall not be altered, amended or re pealed 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 [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 a majority 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.]
(h) Amendment, Repeal. Notwithstanding any thing 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, or adopt any provision inconsistent with, or repeal, Article 9 [a.,
c., d., f., g., or h.]
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
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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
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<PAGE>
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 herein after
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
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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) with in 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) with in 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.
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(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 deter mined 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 Stock holder 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 re verse 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.
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<PAGE>
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
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<PAGE>
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-
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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 ex change, 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
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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 percent age may be specified by law, this Amended and Re
stated 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 re peal, 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.
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<PAGE>
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
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<PAGE>
ANNEX III
PROPOSAL 2-STOCK OPTION PLAN PROPOSAL
COMPLETEHOME.COM, INC. 1999 STOCK OPTION PLAN
<PAGE>
ANNEX III
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
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<PAGE>
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.
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(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 Employ ment 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;
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<PAGE>
(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
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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.
III-5
<PAGE>
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
III-6
<PAGE>
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
III-7
<PAGE>
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.
III-8
<PAGE>
(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
III-9
<PAGE>
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
pursu ant 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
III-10
<PAGE>
(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.
III-11
<PAGE>
(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.
III-12
<PAGE>
ANNEX IV
Amended By-Laws
<PAGE>
ANNEX IV
BY-LAW AMENDMENT
ARTICLE I
DIRECTORS
SECTION 1. Number, Election and Terms.
The number of Directors shall be fixed from time to time by the Board
of Directors but shall not be less than three. [From and after the annual
meeting of stockholders to be held in 2000,] the Directors shall hold office for
a term expiring at the annual meeting of stockholders to be held in [the year
following their election], with [each] member to hold office until their
successors are elected and qualified [; provided that the term of any Director
appointed prior to the annual meeting of stockholders to be held in 2000 shall
be unaffected.] At each annual meeting of stockholders, the successors of the
Directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the year following
the year of their election.
The term "entire Board" as used in these By-Laws means the total number
of Directors which the Corporation would have if there were no vacancies.
Nominations for the election of Directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors generally. However,
any stockholder entitled to vote in the election of Directors generally may
nominate one or more persons for election as Directors at a meeting only if
written notice of such stockholders intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of stockholders,
ninety days prior to the anniversary date of the immediately preceding annual
meeting, and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of Directors, the close of business on the tenth
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be
<PAGE>
nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (e) the consent of each nominee to serve as a Director of the
Corporation of so elected. The presiding officer of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
SECTION 2. 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 [the]
death, resignation, disqualification, [or] removal [of a director] 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
Directors elected [(a) to fill any vacancy resulting from the death,
resignation, disqualification or removal of a Director shall hold office for the
remainder of the full term of the Director whose death, resignation,
disqualification or removal created such vacancy and (b) to fill any vacancy
resulting from a newly created directorship shall hold office until the next
annual meeting of stockholders.] and[, in each case,] until such Directors
successor shall have been elected and qualified. No decrease in the number of
Directors constituting the Board of Directors shall shorten the term of any
incumbent Director.
SECTION 3. Removal
Any Director may be removed from office,[with or] without cause, only
by the affirmative vote of the holders of a majority 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.
2
<PAGE>
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
1-800-840-1208 AND FOLLOW THE SIMPLE 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 __, 2000
The undersigned, having received the Notice of Special Meeting of
Stockholders and Proxy Statement, dated __________ __, 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
__, 2000 at 10:00 a.m. New York time and at any adjournments or postponements
thereof 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.
<PAGE>
Proposal 1. Proposal to amend and restate Cendant'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
Comment Rider Proxy Card
Proposal 3. Proposal to amend and restate Cendant's Amended and
Restated Certificate of Incorporation to eliminate the
provisions for the classification of the Board of Directors
effective as of the annual meeting in 2000.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 4. Proposal to adjourn or postpone the special meeting in
order to, among other things, solicit additional votes.
[_] 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 [_]
<PAGE>
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.
---------------------------
(Signature)
---------------------------
(Signature if held jointly)
Dated:____________, 2000
