Filed Pursuant to Rule 424(b)(5)
Registration File No. 333-49405
PROSPECTUS SUPPLEMENT DATED November 20, 2000
(TO PROSPECTUS DATED November 18, 1998)
4,051,864 SHARES OF CD COMMON STOCK
OF
CENDANT CORPORATION
This prospectus supplement relates to the offer and sale by Cendant
to Liberty CNDT, Inc., a Delaware corporation and a wholly owned subsidiary
of Liberty Media Corporation, of 4,051,864 shares of common stock of
Cendant designated CD Stock. This prospectus supplement also relates to the
resales of common stock by the holders if they sell in a manner which will
make them underwriters.
Pursuant to the terms and conditions of the purchase agreement dated
as of November 16, 2000, between Cendant and Liberty CNDT, Cendant issued
to Liberty CNDT, and Liberty CNDT purchased from Cendant, the common stock,
in consideration for which Liberty CNDT paid Cendant an aggregate amount
equal to $50,000,000 in cash.
For a description of our common stock, please refer to the
description of common stock in "Summary Comparison of Terms of Existing
Common Stock with Terms of CD Stock and Move.com Stock" in our Proxy
Statement, dated February 11, 2000, which is incorporated herein by
reference.
INVESTING IN THE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 2 OF THIS PROSPECTUS SUPPLEMENT.
Our common stock is listed on the New York Stock Exchange under the
symbol "CD". Any future prospectus supplement will also contain
information, where applicable, as to any other listing on a securities
exchange of the securities covered by it.
Neither the SEC, nor any state securities commission, has approved or
disapproved of these securities or passed upon the accuracy or adequacy of
this prospectus supplement. Any representation to the contrary is a
criminal offense.
You should rely on the information provided or incorporated by
reference in this prospectus supplement and the prospectus. We have not
authorized anyone else to provide you with different information. You
should not assume that information in this prospectus supplement is
accurate as of any date other than the date of this prospectus supplement.
The date of this prospectus supplement is November 20, 2000.
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RISK FACTORS
Your investment in the common stock will involve risks. You should
carefully consider the following discussion of risks as well as other
information contained in this prospectus supplement and accompanying
prospectus.
DISCOVERY OF ACCOUNTING IRREGULARITIES AND RELATED LITIGATION AND
GOVERNMENTAL INVESTIGATIONS
Cendant was created through the merger of HFS into CUC in December
1997 with the resultant corporation being renamed Cendant Corporation. On
April 15, 1998, Cendant announced that in the course of transferring
responsibility for its accounting functions from Cendant personnel
associated with CUC prior to the merger to Cendant personnel associated
with HFS before the merger and preparing for the reporting of first quarter
1998 financial results, it discovered accounting irregularities in some of
the CUC business units. As a result, Cendant, together with its counsel and
assisted by auditors, immediately began an intensive investigation. In
addition, Cendant's audit committee engaged Willkie Farr & Gallagher as
special legal counsel and Wilkie Farr engaged Arthur Andersen LLP to
perform an independent investigation into these accounting irregularities.
On July 14, 1998, Cendant announced that the accounting
irregularities were greater than those initially discovered in April and
that the irregularities affected the accounting records of the majority of
the CUC business units. On August 13, 1998, Cendant announced that its
investigation was complete. On August 27, 1998, Cendant announced that its
audit committee had submitted its report to the board of directors on the
audit committee investigation into the accounting irregularities and its
conclusions regarding responsibility for those actions. A copy of the
report has been filed as an exhibit to Cendant's current report on Form 8-K
dated August 28, 1998.
As a result of the findings of the investigations, Cendant restated
its previously reported financial results for 1997, 1996 and 1995 and the
six months ended June 30, 1998. The 1997 restated amounts also included
adjustments related to accounting errors at the former HFS businesses
substantially comprised of $47.8 million in reductions to merger-related
costs and other unusual charges and a $14.5 million decrease in pre-tax
income excluding unusual charges, which on a net basis increased 1997 net
income from continuing operations. The 1997 annual results were also
restated for a change in accounting policy, effective January 1, 1997,
related to revenue and expense recognition for memberships with a full
refund offer.
Since the April 15, 1998 announcement of the discovery of
accounting irregularities in the former CUC business units, approximately
70 lawsuits claiming to be class actions, three lawsuits claiming to be
brought derivatively on behalf of Cendant and several individual lawsuits
and arbitration proceedings have been filed against Cendant and, among
others several current and former officers and directors of Cendant and
HFS. These lawsuits assert, among other things, various claims under the
federal securities laws including claims under sections 11, 12 and 15 of
the Securities Act of 1933 and sections 10(b), 14(a) and 20(a) of and Rules
10b-5 and 14a-9 under the Securities Exchange Act of 1934 and state
statutory and common laws, including claims that financial statements
previously issued by Cendant were materially false and misleading and that
these statements allegedly caused the price of Cendant's securities to be
artificially inflated.
2
On December 7, 1999, Cendant announced that it reached a preliminary
agreement to settle the principal securities class action pending against
Cendant in the U.S. District Court of Newark, New Jersey brought on behalf
of purchasers of all Cendant and CUC publicly traded securities, other than
PRIDES, between May 1995 and August 1998, In re: Cendant Corporation
Litigation, Master File No. 98-1664 (WHW) (D.N.J.) (the "CalPERS Action").
The CalPERS Action consists of over 60 class action lawsuits, and several
individual lawsuits, that were originally filed in the District of New
Jersey, the District of Connecticut, the Eastern District of Pennsylvania
and the Southern District of New York. Under the settlement agreement,
Cendant agreed to pay the class members approximately $2.85 billion in cash
plus 50% of any recovery on claims Cendant has filed against Ernst & Young
LLP. The definitive settlement document was approved by the U.S. District
Court by order dated August 14, 2000. Certain parties in the class action
have appealed the District Court's orders approving the plan of allocation
of the settlement fund and awarding attorneys' fees and expenses to counsel
for the lead plaintiffs. No appeals challenging the fairness of the $2.85
billion settlement amount were filed. The U.S. Court of Appeals for the
Third Circuit has issued a briefing schedule for the appeals, but has not
yet set dates for oral argument thereof. Accordingly, Cendant will not be
required to fund the settlement amount of $2.85 billion for some time.
However, the settlement agreement required Cendant to post collateral in
the form of credit facilities and/or surety bonds by November 13, 2000.
Accordingly, on November 13, 2000, Cendant posted a surety bond in the
amount of $790 million and letters of credit aggregating $1.71 billion.
Cendant also had the option of forming a trust established for the benefit
of the plaintiffs in lieu of posting collateral. On November 13, 2000,
Cendant funded such trust with a cash deposit of approximately $350
million. Such deposit will serve to reduce the amount of collateral
required to be posted under the Settlement Agreement.
Additionally, on March 17, 1999, Cendant entered into a
stipulation of settlement in Welch & Forbes, Inc. v. Cendant Corp., et al.,
No. 98-2819 (WHW) (the "PRIDES Action"). The PRIDES Action is brought on
behalf of purchasers of Cendant's PRIDES securities between February 24 and
August 28, 1998. Named as defendants are, among others, Cendant and several
current and former officers and directors of Cendant, CUC and HFS. Under
the settlement stipulation, in return for the release of all claims arising
from any purchase of current FELINE PRIDES on or before April 15, 1998,
Cendant was obligated to issue up to 29,161,474 rights with a stated
theoretical value of $11.71 each. Each class member who did not opt out and
who submited a timely and valid proof of claim is entitled to one right for
each current FELINE PRIDES held at the close of business on April 15, 1998.
Under the settlement stipulation, until February 14, 2001, Cendant will
issue two new FELINE PRIDES to every person who delivers to Cendant three
rights and two current FELINE PRIDES. The terms of the new FELINE PRIDES
will be the same as the currently outstanding PRIDES, except that the
conversion rate will be revised so that, at the time the rights are
distributed, each of the new PRIDES will have a value equal to $17.57 more
than each original PRIDES, based upon a generally accepted valuation model.
The settlement does not resolve claims based upon purchases of current
FELINE PRIDES after April 16, 1998.
On September 7, 1999, Cendant moved the United States District
Court for the District of New Jersey for an order disallowing claims by
purported class members seeking a total of approximately 4 million Rights
pursuant to the settlement, on the grounds that such claims were not timely
filed and/or not supported by appropriate documentation. On October 20,
1999, the District Court issued an opinion and order directing counsel for
the PRIDES plaintiffs ("Lead Counsel") to submit additional documentation
regarding the disputed claims. On January 14, 2000, the District Court
issued an order identifying those claims allowed to participate in the
settlement and those
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claims that were disallowed. By stipulation and order dated February 23,
2000, the parties agreed to distribute the undisputed Rights, which, as
discussed in further detail below, Cendant distributed to such claimants in
March 2000. Cendant filed a notice of appeal to the U.S. Court of Appeals
for the Third Circuit in respect of those claimants who were allowed to
participate in the settlement over Cendant's objections.
In March 2000, Santander Merchant Bank filed a motion seeking
relief from the District Court's January 14, 2000 order, which inter alia,
denied Santander's claim seeking 301,400 Rights. On March 17, 2000 the
District Court denied Santander's motion. Santander filed an appeal of the
District Court's March 17, 2000 decision to the United States Court of
Appeals for the Third Circuit.
In April 2000, Mellon Bank, acting as custodian of accounts
that seek a total of 1,395,400 Rights, and Chase Manhattan Bank, acting as
custodian of three mutual funds that seek a total of 2,020,000 Rights,
filed motions seeking relief from the district court's rejection of the
claims filed by Mellon and Chase on behalf of such accounts and mutual
funds. Cendant opposed these motions.
On June 7, 2000 the District Court denied Chase's motion and
granted Mellon's motion for relief from judgement. Both the Cendant and
Chase filed appeals from the District Court's June 7, 2000 decision to the
United States Court of Appeals for the Third Circuit. After the filing of
the Cendant's appeal from the June 7 decision, Cendant and Mellon settled
Mellon's claims and the Cendant withdrew its appeal.
The parties' appeals from the District Court's orders allowing
certain settlement claims and disallowing others have been consolidated for
disposition before the United States Court of Appeals for the Third
Circuit. Oral argument has taken place, but as of November 17, 2000, no
decision has been issued.
On March 14, 2000, pursuant to a court order approving the previously
disclosed PRIDES settlement, Cendant issued approximately 25 million rights
covered by proofs of claim to which there was no objection with a
calculated value of $11.71 per right.
In connection with the issuance of the rights, Cendant recorded a
non-cash credit of $41 million to litigation settlement and related cost
during the first quarter of 2000, with a corresponding decrease to
additional paid-in capital. The credit represented an adjustment relating
to the number of rights to be issued, which was decreased by approximately
3 million, as such rights were unclaimed and uncontested.
On May 3, 2000, pursuant to the PRIDES settlement, Cendant issued
approximately 4 million additional PRIDES, with a face value of $50 per
additional PRIDES, and received approximately $91 million in cash proceeds
related to the issuance of such securities. Only additional income PRIDES
(having identical terms to the originally issued income PRIDES) were
issued, of which 3,619,374 were immediately converted into 3,619,374 new
income PRIDES and 380,626 remained additional income PRIDES. No additional
growth PRIDES were issued in the offering. Upon the issuance of the
additional income PRIDES, Cendant recorded a reduction to stockholders'
equity of $108 million equal to the value of the total future contract
adjustment payments to be made.
4
The CalPERS and PRIDES settlements do not encompass all litigation
asserting claims associated with the accounting irregularities. Cendant
does not believe that it is feasible to predict or determine the final
outcome or resolution of these unresolved proceedings. An adverse outcome
from such unresolved proceedings could be material with respect to earnings
in any given reporting period. However, Cendant does not believe that the
impact of such unresolved proceedings should result in a material liability
to Cendant in relation to its consolidated financial position or liquidity.
In addition, the staff of the Securities and Exchange Commission, and
the United States Attorney for the District of New Jersey are conducting
investigations relating to the accounting irregularities. On June 14, 2000
the SEC accepted Cendant's offer of settlement and issued an Order
Instituting Public Administrative Proceedings Pursuant to Section 21C of
the Securities and Exchange Act of 1934, Making Findings and Imposing a
Cease and Desist Order. In such Order, the SEC found that Cendant had
violated certain financial reporting provisions of the Securities and
Exchange Act of 1934 and ordered Cendant to cease and desist from
committing any future violations of such provisions. No financial penalties
were imposed against Cendant.
THE PRICE OF OUR COMMON STOCK IS SUBJECT TO POSSIBLE VOLATILITY
The stock market has from time to time experienced significant price
and volume fluctuations that are unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect
the market price of our common stock.
USE OF PROCEEDS
The net proceeds from the sale of the common stock will be used for
general corporate purposes, which may include acquisitions, repayment of
debt, working capital and capital expenditures. Pending the use of the
proceeds in our business, the net proceeds may be invested in short-term
marketable securities.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed and traded on the NYSE under the symbol
"CD". The following table provides, for the calendar quarters indicated,
the high and low closing sales prices per share on the NYSE for the periods
shown below as reported on the NYSE Composite Tape.
MARKET PRICE
------------
PERIOD HIGH LOW
------ ---- ---
1998:
First Quarter.......................... $41 $32 7/16
Second Quarter......................... 41 3/8 18 9/16
Third Quarter.......................... 22 7/16 10
Fourth Quarter......................... 20 5/8 7 1/2
1999:
First Quarter.......................... $22 9/16 $14 7/8
Second Quarter......................... 21 1/16 15 3/8
Third Quarter.......................... 22 6/8 17
5
Fourth Quarter......................... 26 15/16 13 5/8
2000:
First Quarter.......................... 24 5/16 16 3/16
Second Quarter......................... 18 3/4 12 5/32
Third Quarter.......................... 14 3/4 10 5/8
We have never paid a cash dividend on our common stock. We do not
anticipate paying cash dividends on our capital stock in the foreseeable
future and intend to retain all earnings to finance the operations and
expansion of our business and the repurchase of common stock and debt
reduction. The payment of cash dividends in the future will depend on our
earnings, financial condition and capital needs and on other factors deemed
relevant by our board of directors at that time. For further information
regarding our payment of dividends, see "Summary Comparison of Terms of
Existing Common Stock with Terms of CD Stock and Move.com Stock" in our
Proxy Statement, dated February 11, 2000, which is incorporated herein by
reference.
PLAN OF DISTRIBUTION
The 4,051,864 shares of common stock, subject to this prospectus
supplement were offered and sold by us directly to Liberty CNDT, and no
underwriter, agent or other person is entitled to receive any commission or
similar compensation in connection with the offer and sale of these
securities.
Liberty may be deemed to be an "underwriter" within the meaning of
Section 2(11) of the Securities Act if it sells the common stock through a
method which constitutes a distribution of the common stock. In such event,
this prospectus supplement also relates to such resales.
PROSPECTUS
$4,100,000,000
CENDANT CORPORATION
DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK,
STOCK PURCHASE CONTRACTS, STOCK PURCHASE UNITS AND WARRANTS
CENDANT CAPITAL II
CENDANT CAPITAL III
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY GUARANTEED
BY CENDANT CORPORATION
---------------------
Cendant Corporation (the "Company"), directly or through such
agents, dealers or underwriters as may be designated from time to time, may
offer, issue and sell, together or separately, its (i) debt securities (the
"Debt Securities"), which may be senior debt securities (the "Senior Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities"), (ii) shares of its preferred stock, par value $0.01 per share
(the "Preferred Stock"), (iii) shares of its common stock, par value $0.01
per share (the "Common Stock"), (iv) Stock Purchase Contracts ("Stock
Purchase Contracts") to purchase shares of Common Stock, (v) Stock Purchase
Units, each representing ownership of a Stock Purchase Contract and
Preferred Securities (as defined herein) or debt obligations of third
parties, including U.S. Treasury securities, securing the holder's
obligation to purchase Common Stock under the Stock Purchase Contracts
("Stock Purchase Units") and (vi) warrants to purchase Debt Securities,
Preferred Stock, Common Stock or other securities or rights ("Warrants").
Cendant Capital II and Cendant Capital III (each, a "Cendant
Trust"), statutory business trusts formed under the laws of the State of
Delaware, may offer, from time to time, preferred securities, representing
preferred undivided beneficial interests in the assets of the respective
Cendant Trusts ("Preferred Securities"). The payment of periodic cash
distributions ("Distributions") with respect to Preferred Securities out of
moneys held by each of the Cendant Trusts, and payments on liquidation,
redemption or otherwise with respect to such Preferred Securities, will be
guaranteed by the Company to the extent described herein (each, a "Trust
Guarantee"). See "Description of Preferred Securities" and "Description of
Trust Guarantees." The Company's obligations under the Trust Guarantees
will rank junior and subordinate in right of payment to all other
liabilities of the Company and on a parity with its obligations under the
senior most preferred or preference stock of the Company. See "Description
of Trust Guarantees--Status of the Trust Guarantees." Debt Securities may
be issued and sold by the Company in one or more series to a Cendant Trust
or a trustee of such Cendant Trust in connection with the investment of the
proceeds from the offering of Preferred Securities and Common Securities
(as defined herein) of such Cendant Trust. The Debt Securities purchased by
a Cendant Trust may be subsequently distributed pro rata to holders of
Preferred Securities and Common Securities in connection with the
dissolution of such Cendant Trust.
The Debt Securities, Preferred Stock, Common Stock, Stock Purchase
Contracts, Stock Purchase Units, Warrants and Preferred Securities are
herein collectively referred to as the "Securities," with an aggregate
public offering price of up to $4,100,000,000 (or its equivalent in foreign
currencies or foreign currency units based on the applicable exchange rate
at the time of offering) in amounts, at prices and on terms to be
determined at the time of sale.
The form in which the Securities are to be issued, their specific
designation, aggregate principal amount or aggregate initial offering
price, maturity, if any, rate and times of payment of interest or
dividends, if any, redemption, conversion, and sinking fund terms, if any,
voting or other rights, if any, exercise price and detachability, if any,
and other specific terms will be set forth in a Prospectus Supplement (the
"Prospectus Supplement"), together with the terms of offering of such
Securities. Any such Prospectus Supplement will also contain information,
as applicable, about certain material United States Federal income tax
considerations relating to the particular Securities offered thereby.
The Declaration of Trust for each of such Trusts also provides that
to the full extent permitted by law, the Company shall indemnify any
Company Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of any such Trust) by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees), judgments, fines and amounts paid insettlement actually
and reasonably incurred by such person in connection with such action, suit
or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
any such Trust, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such person's conduct was unlawful. Each of
the Declaration of Trusts also provides that to the full extent permitted
by law, the Company shall indemnify any Company Indemnified Person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of any such trust to
procure a judgment in its favor by reason of the fact that such person is
or was a Company Indemnified Person against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with
the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of any such trust and except that no such
indemnification shall be made in respect of any claim, issue or matter as
to which such Company Indemnified Person shall have been adjudged to be
liable to any such trust unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such
Court of Chancery or such other court shall deem proper. The Declaration of
Trust for each such Trust further provides that expenses (including
attorneys' fees) incurred by a Company Indemnified Person in defending a
civil, criminal, administrative or investigative action, suit or proceeding
referred to in the immediately preceding two sentences shall be paid by the
Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
Company as authorized in any such Declaration.
The Declaration of Trust for each Trust also provides that the
Company shall indemnify each Fiduciary Indemnified Person against any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of
the trust or trusts under any such Trust, including the costs and expenses
(including reasonable legal fees and expenses) of defending itself against
or investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties thereunder.
The Company's Common Stock is listed on the New York Stock Exchange
under the symbol "CD". Any Prospectus Supplement will also contain
information, where applicable, as to any other listing on a securities
exchange of the Securities covered by such Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. The
Company reserves the sole right to accept, and together with its agents,
from time to time, to reject in whole or in part any proposed purchase of
Securities to be made directly or through agents. If any agents or
underwriters are involved in the sale of any Securities, the names of such
agents or underwriters and any applicable fees, commissions or discounts
will be set forth in the applicable Prospectus Supplement. See "Plan of
Distribution."
This Prospectus may not be used to consummate any sale of
Securities unless accompanied by a Prospectus Supplement.
The date of this Prospectus is November 18, 1998
No dealer, salesperson or other individual has been authorized to
give any information or make any representations other than those contained
in this prospectus or incorporated herein by reference in connection with
the offering described herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent involved in the offering
described herein. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than those
specifically offered hereby or of any securities offered hereby in any
jurisdiction where, or to any person to whom, it is unlawful to make such
offer or solicitaiton in such jurisdiction. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any
time subsequent to its date.
FORWARD-LOOKING STATEMENTS
The Company makes statements about its future results in this
Prospectus that may constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on the Company's current expectations and the current
economic environment. The Company cautions you that these statements are
not guarantees of future performance. They involve a number of risks and
uncertainties that are difficult to predict. Actual results could differ
materially from those expressed or implied in the forward-looking
statements. Important assumptions and other important factors that could
cause actual results to differ materially from those in the forward-looking
statements, include, but are not limited to:
o the resolution or outcome of the pending litigation and
government investigations relating to the Company's previously announced
accounting irregularities;
o uncertainty as to the Company's future profitability and ability
to integrate and operate successfully acquired businesses and the risks
associated with such businesses;
o the Company's ability to develop and implement operational and
financial systems to manage rapidly growing operations;
o competition in the Company's existing and potential future lines
of business;
o the completion and impact of the sale of the Company's
discontinued operations, such as Hebdo Mag International, Inc. and the
Company's software business;
o the Company's ability to obtain financing on acceptable terms to
finance our growth strategy and for the Company to operate within the
limitations imposed by financing arrangements; and
o the Company's ability and the Company's vendors', franchisees'
and customers' ability to complete the necessary actions to achieve a year
2000 conversion for computer systems and applications.
The Company derived the forward-looking statements in this
Prospectus (including the documents incorporated by reference in this
Prospectus) from other factors and assumptions not identified above, and
the failure of such other assumptions to be realized as well as other
factors may also cause actual results to differ materially from those
projected. The Company assumes no obligation to publicly correct or update
these forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements or if the Company later become aware that they are not likely to
be achieved.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration
Statement on Form S-3 (together with all the amendments and exhibits
thereto, the "Registration Statement") filed by the Company and the Cendant
Trusts with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to the Securities. This Prospectus does not contain all of the information
set forth in such Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission,
although it does include a summary of the material terms of the Indenture
and the Declaration of Trust (each as defined herein). Reference is made to
such Registration Statement and to the exhibits relating thereto for
further information with respect to the Company, the Cendant Trusts and the
Securities. Any statements contained herein concerning the provisions of
any document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission or incorporated by reference herein are not
necessarily complete, and, in each instance, reference is made to the copy
of such document so filed for a more complete description of the matter
involved. Each such statement is qualified in its entirety by such
reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and
other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. The Commission also maintains a
website that contains reports, proxy and information statements and other
information. The website address is http.//www.sec.gov. In addition, such
material can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
No separate financial statements of the Cendant Trusts have been
included or incorporated by reference herein. The Company does not consider
that such financial statements would be material to holders of the
Preferred Securities because (i) all of the voting securities of the
Cendant Trusts will be owned, directly or indirectly, by the Company, a
reporting company under the Exchange Act, (ii) the Cendant Trusts have and
will have no independent operations but exist for the sole purpose of
issuing securities representing undivided beneficial interests in their
assets and investing the proceeds thereof in Subordinated Debt Securities
issued by the Company, and (iii) the Company's obligations described herein
and in any accompanying Prospectus Supplement, under the Declaration (as
defined herein)(including the obligation to pay expenses of the Cendant
Trusts), the Subordinated Indenture and any supplemental indentures
thereto, the Subordinated Debt Securities issued to the Cendant Trust and
the Trust Guarantees taken together, constitute a full and unconditional
guarantee by the Company of payments due on the Preferred Securities. See
"Description of Preferred Securities of the Cendant Trusts" and
"Description of Trust Guarantees."
The Cendant Trusts are not currently subject to the information
reporting requirements of the Exchange Act. The Cendant Trusts will become
subject to such requirements upon the effectiveness of the Registration
Statement, although they intend to seek and expect to receive exemptions
therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by
reference: Annual Report on Form 10-K/A for the fiscal year ended December
31, 1997; Quarterly Reports on Form 10-Q for the quarter ended September
30, 1998 and on Form 10-Q/A for the quarters ended March 31, 1998 and June
30, 1998; Current Reports on Form 8-K dated November 16, 1998, November 5,
1998, November 4, 1998, October 14, 1998, October 14, 1998, October 13,
1998, October 5, 1998, August 28, 1998, August 13, 1998, August 4, 1998,
July 29, 1998, July 15, 1998 and July 14, 1998, June 4, 1998, May 18, 1998,
May 5, 1998, April 9, 1998, March 25, 1998, March 6, 1998, March 5, 1998,
February 16, 1998, February 6, 1998, February 2, 1998, January 29, 1998,
January 27, 1998, January 20, 1998 and January 14, 1998, and on Form 8-K/A,
dated September 17, 1998; and the description of the Company's common stock
contained in the Registration Statements on Form 8-A dated July 27, 1984
and August 15, 1989.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of filing of such documents. Any statement contained
in this Prospectus or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
or is deemed to be incorporated herein by reference or in any Prospectus
Supplement modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the documents referred to
above which have been or may be incorporated herein by reference (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies
should be directed to Investor Relations, Cendant Corporation, 6 Sylvan
Way, Parsippany, New Jersey 07054, (Telephone: (973) 428-9700).
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE SECURITIES
OFFERED HEREBY, INCLUDING STABILIZING TRANSACTIONS, THE PURCHASE OF
SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS.
THE COMPANY
The Company is one of the foremost consumer and business services
companies in the world. The Company was created through the merger of CUC
International Inc. ("CUC") and HFS Incorporated ("HFS") in December 1997,
and provides a wide range of complementary consumer and business services
within three principal operating segments:
o Travel Services: the travel segment franchises hotel and car
rental businesses, facilitates vacation timeshare exchanges and manages
corporate and government vehicle fleets;
o Real Estate Services: the real estate segment franchises real
estate brokerage businesses, assists in employee relocation, provides home
buyers with mortgages and provides servicing on home buyer mortgages; and
o Alliance Marketing: the alliance marketing segment provides an
array of value driven products and services through more than 20 membership
clubs and client relationships.
The Company also offers a tax preparation services franchise,
information technology services, credit information services and financial
products.
THE CENDANT TRUSTS
Each of the Cendant Trusts is a statutory business trust formed
under Delaware law pursuant to (i) a declaration of trust (each a
"Declaration") executed by the Company as sponsor for such trust (the
"Sponsor"), and the Cendant Trustees (as defined herein) of such trust and
(ii) the filing of a certificate of trust with the Secretary of State of
the State of Delaware on February 5, 1998. Each Cendant Trust exists for
the exclusive purposes of (i) issuing and selling the Preferred Securities
and common securities representing common undivided beneficial interests in
the assets of such Cendant Trust (the "Common Securities" and, together
with the Preferred Securities, the "Trust Securities"), (ii) using the
gross proceeds from the sale of the Trust Securities to acquire the Debt
Securities and (iii) engaging in only those other activities necessary,
appropriate, convenient or incidental thereto. All of the Common Securities
will be directly or indirectly owned by the Company. The Common Securities
will rank on a parity, and payments will be made thereon pro rata, with the
Preferred Securities, except that, if an event of default under the
Declaration has occurred and is continuing, the rights of the holders of
the Common Securities to payment in respect of distributions and payments
upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities. The Company will
directly or indirectly acquire Common Securities in an aggregate
liquidation amount equal to at least 3% of the total capital of each
Cendant Trust.
Unless otherwise specified in the applicable Prospectus Supplement,
each Cendant Trust has a term of up to 55 years but may terminate earlier,
as provided in the Declaration. Each Cendant Trust's business and affairs
will be conducted by the trustees (the "Cendant Trustees") appointed by the
Company as the direct or indirect holder of all of the Common Securities.
The holder of the Common Securities will be entitled to appoint, remove or
replace any of, or increase or reduce the number of, the Cendant Trustees
of each Cendant Trust. The duties and obligations of the Cendant Trustees
shall be governed by the Declaration of such Cendant Trust. A majority of
the Cendant Trustees (the "Regular Trustees") of each Cendant Trust will be
persons who are employees or officers of or who are affiliated with the
Company. One Cendant Trustee of each Cendant Trust will be a financial
institution (the "Institutional Trustee") that is not affiliated with the
Company and has a minimum amount of combined capital and surplus of not
less than $50,000,000, which shall act as property trustee and as indenture
trustee for the purposes of compliance with the provisions of Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to
the terms set forth in the applicable Prospectus Supplement. In addition,
unless the Institutional Trustee maintains a principal place of business in
the State of Delaware and otherwise meets the requirements of applicable
law, one Cendant Trustee of each Cendant Trust will be an entity having a
principal place of business in, or a natural person resident of, the State
of Delaware (the "Delaware Trustee"). The Company will pay all fees and
expenses related to the Cendant Trust and the offering of the Trust
Securities.
Unless otherwise specified in the applicable Prospectus Supplement,
the Institutional Trustee and Delaware Trustee for each Cendant Trust shall
be Wilmington Trust Company, and its address in the State of Delaware is
Rodney Square North, 1100 North Mamet Street, Wilmington, Delaware 19890.
The principal place of business of each Cendant Trust shall be c/o Cendant
Corporation, 6 Sylvan Way, Parsippany, New Jersey 07054, telephone (973)
428-9700.
USE OF PROCEEDS
Unless otherwise set forth in a Prospectus Supplement, the net
proceeds from the offering of the Securities will be used for general
corporate purposes, which may include acquisitions, repayment of other
debt, working capital and capital expenditures. When a particular series of
Securities is offered, the Prospectus Supplement relating thereto will set
forth the Company's intended use for the net proceeds received from the
sale of such Securities. Pending application for specific purposes, the net
proceeds may be invested in short-term marketable securities.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The table below sets forth the ratio of earnings to fixed charges
of the Company and its consolidated subsidiaries for each of the periods
indicated:
NINE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------
1998 1997 1997 1996 1995
---------- --------- ------------- ---------- ----------
2.44x(1) 2.63x 1.63x 2.64x 2.20x
---------------
(1) Includes 100% of PHH Corporation consolidated net income of which only
40% of consolidated net income is available to the Company pursuant to
PHH's credit arrangements.
The ratio of earnings to fixed charges is computed by dividing the
income from continuing operations before income taxes, extraordinary items
and cumulative effect of accounting charge plus fixed charges, less
capitalized interest by fixed charges. Fixed charges consist of interest
expense on all indebtedness (including amortization of deferred financing
costs) and the portion of operating lease rental expense that is
representative of the interest factor (deemed to be one-third of operating
lease rentals).
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities may be offered from time to time by the Company
as Senior Debt Securities and/or as Subordinated Debt Securities. The
Senior Debt Securities will be issued under an Indenture, as it may be
supplemented from time to time (the "Senior Indenture"), between the
Company and The Bank of Nova Scotia Trust Company of New York, as trustee
(the "Senior Trustee"). The Subordinated Debt Securities will be issued
under an Indenture, as it may be supplemented from time to time (the
"Subordinated Indenture"), between the Company and The Bank of Nova Scotia
Trust Company of New York, as trustee (the "Subordinated Trustee"). The
term "Trustee", as used herein, refers to either the Senior Trustee or the
Subordinated Trustee, as appropriate. The forms of the Senior Indenture and
the Subordinated Indenture (being sometimes referred to herein collectively
as the "Indentures" and individually as an "Indenture") have been filed as
exhibits to the Registration Statement. The terms of the Indentures are
also governed by certain provisions of the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The following summary of certain
material provisions of the Debt Securities does not purport to be complete
and is qualified in its entirety by reference to the Indentures. All
capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Indentures. For a summary of certain
definitions used in this section, see "Certain Definitions" below.
GENERAL
The Indentures will provide for the issuance of Debt Securities in
series up to the aggregate amount from time to time authorized by the
Company for each series. A Prospectus Supplement will set forth the
following terms (to the extent such terms are applicable to such Debt
Securities) of and information relating to the Debt Securities in respect
of which this Prospectus is delivered: (1) the designation of such Debt
Securities; (2) classification as Senior or Subordinated Debt Securities;
(3) the aggregate principal amount of such Debt Securities; (4) the
percentage of their principal amount at which such Debt Securities will be
issued; (5) the date or dates on which such Debt Securities will mature;
(6) the rate or rates, if any, per annum, at which such Debt Securities
will bear interest, or the method of determination of such rate or rates;
(7) the times and places at which such interest, if any, will be payable;
(8) provisions for sinking, purchase or other analogous fund, if any; (9)
the date or dates, if any, after which such Debt Securities may be redeemed
at the option of the Company or of the holder and the redemption price or
prices; (10) the date or the dates, if any, after which such Debt
Securities may be converted or exchanged at the option of the holder into
or for shares of Common Stock or Preferred Stock of the Company and the
terms for any such conversion or exchange; and (11) any other specific
terms of the Debt Securities. Principal, premium, if any, and interest, if
any, will be payable and the Debt Securities offered hereby will be
transferable, at the corporate trust office of the Trustee's agent in the
borough of Manhattan, City of New York, provided that payment of interest,
if any, may be made at the option of the Company by check mailed to the
address of the person entitled thereto as it appears in the Security
Register. (Section 301 of each Indenture)
If a Prospectus Supplement specifies that a series of Debt
Securities is denominated in a currency or currency unit other than United
States dollars, such Prospectus Supplement shall also specify the
denomination in which such Debt Securities will be issued and the coin or
currency in which the principal, premium, if any, and interest, if any, on
such Debt Securities will be payable, which may be United States dollars
based upon the exchange rate for such other currency or currency unit
existing on or about the time a payment is due. Special United States
federal income tax considerations applicable to any Debt Securities so
denominated are also described in the applicable Prospectus Supplement.
The Debt Securities may be issued in registered or bearer form and,
unless otherwise specified in a Prospectus Supplement, in denominations of
$1,000 and integral multiples thereof. Debt Securities may be issued in
book-entry form, without certificates. Any such issue will be described in
the Prospectus Supplement relating to such Debt Securities. No service
charge will be made for any transfer or exchange of the Debt Securities,
but the Company or the Trustee may require payment of a sum sufficient to
cover any tax or other government charge payable in connection therewith.
Debt Securities may be issued under the Indentures as Original
Issue Discount Securities to be sold at a substantial discount from their
stated principal amount. United States Federal income tax consequences and
other considerations applicable thereto will be described in the Prospectus
Supplement relating to such Debt Securities.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indentures will provide that the Company shall not consolidate
with or merge into any other corporation or convey, transfer or lease its
properties and assets substantially as an entirety to any Person, unless:
(1) the corporation formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an
entirety (A) shall be a corporation, partnership, limited liability company
or trust organized and validly existing under the laws of the United States
of America, any state thereof or the District of Columbia and (B) shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
Company's obligation for the due and punctual payment of the principal of
(and premium, if any, on) and interest on all the Debt Securities and the
performance and observance of every covenant of the Indentures on the part
of the Company to be performed or observed; (2) immediately after giving
effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; and (3) the Company or such Person shall have
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer
or lease and such supplemental indenture comply with this "Merger,
Consolidation and Sale of Assets" section and that all conditions precedent
herein provided for relating to such transaction have been complied with.
This paragraph shall apply only to a merger or consolidation in which the
Company is not the surviving corporation and to conveyances, leases and
transfers by the Company as transferor or lessor. (Section 801 of each
Indenture)
The Indentures will further provide that upon any consolidation by
the Company with or merger by the Company into any other corporation or any
conveyance, transfer or lease of the properties and assets of the Company
substantially as an entirety to any Person in accordance with the preceding
paragraph, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under the Indentures with the same effect as if
such successor Person had been named as the Company therein, and in the
event of any such conveyance or transfer, the Company (which term shall for
this purpose mean Cendant Corporation or any successor Person which shall
theretofore become such in the manner described in the preceding
paragraph), except in the case of a lease, shall be discharged of all
obligations and covenants under the Indentures and the Debt Securities and
the coupons and may be dissolved and liquidated. (Section 802 of each
Indenture)
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indentures with
respect to Debt Securities of any series:
(1) default in the payment of any interest on any Debt Securities
of that series or any related coupon, when such interest or coupon becomes
due and payable, and continuance of such default for a period of 30 days;
or
(2) default in the payment of the principal of (or premium, if any,
on) any Debt Securities of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment when and as
due pursuant to the terms of the Debt Securities of that series and Article
Twelve of the Indentures; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in the Indentures (other than a default in the
performance, or breach, of a covenant or warranty which is specifically
dealt with elsewhere under this "Events of Default" section), and
continuance of such default or breach for a period of 90 days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of all Outstanding Debt Securities, a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" thereunder; or
(5) the entry of a decree or order by a court having jurisdiction
in the premises adjudging the Company bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under the Federal
Bankruptcy Code or any other applicable federal or state law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of 90
consecutive days; or
(6) the institution by the Company of proceedings to be adjudicated
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Code or any other applicable federal or state law, or
the consent by it to the filing of any such petition or to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due; or
(7) (A) there shall have occurred one or more defaults by the
Company in the payment of the principal of (or premium, if any, on) Debt
aggregating $50 million or more, when the same becomes due and payable at
the stated maturity thereof, and such default or defaults shall have
continued after any applicable grace period and shall not have been cured
or waived, or (B) Debt of the Company aggregating $50 million or more shall
have been accelerated or otherwise declared due and payable, or required to
be prepaid or repurchased (other than by regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(8) any other Event of Default provided with respect to Debt
Securities of that series.
If an Event of Default described in clause (1), (2), (3), (4), (7)
or (8) above with respect to Debt Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of not less than 25% in principal amount of the Outstanding
Debt Securities of that series may declare the principal amount (or, if the
Debt Securities of that series are Original Issue Discount Securities or
Indexed Securities, such portion of the principal amount as may be
specified in the terms of that series) of all of the Debt Securities of
that series to be due and payable immediately, by a notice in writing to
the Company (and to the Trustee if given by Holders), and upon any such
declaration such principal amount (or specified portion thereof) shall
become immediately due and payable. If an Event of Default described in
clause (5) or (6) above occurs and is continuing, then the principal amount
of all the Debt Securities shall become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Holder, subject, however, to all rights, powers and limitations provided
for by the Federal Bankruptcy Code or any other applicable Federal or State
Law.
At any time after a declaration of acceleration with respect to
Debt Securities of any series (or of all series, as the case may be) has
been made and before a judgment or decree for payment of the money due has
been obtained by the Trustee as provided in Article Five of the Indentures,
the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series (or of all series, as the case may be), by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay in the Currency in which the Debt Securities of such
series are payable (except as otherwise specified pursuant to Section 301
of the Indentures for the Debt Securities of such series and except, if
applicable, as provided in certain provisions of Section 312 of the
Indentures):
(A) all overdue interest on all Outstanding Debt Securities of
that series (or of all series, as the case may be) and any related
coupons;
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Debt Securities of that series (or of all series, as the
case may be) which has become due otherwise than by such declaration
of acceleration, and interest on such unpaid principal at the rate or
rates prescribed therefor in such Debt Securities;
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate or rates prescribed therefor
in such Debt Securities; and
(D) all sums paid or advanced by the Trustee thereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Debt Securities of that
series (or of all series, as the case may be), other than the non-payment
of amounts of principal of (or premium, if any, on) or interest on Debt
Securities of that series (or of all series, as the case may be) which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513 of the Indentures.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Debt Securities because of an
Event of Default specified in clause (7) of the first paragraph of this
section shall have occurred and be continuing, such declaration of
acceleration shall be automatically annulled if the Debt that is the
subject of such Event of Default has been discharged or the holders thereof
have rescinded their declaration of acceleration in respect of such Debt,
and written notice of such discharge or rescission, as the case may be,
shall have been given to the Trustee by the Company and countersigned by
the holders of such Debt or a trustee, fiduciary or agent for such holders,
within 30 days after such declaration of acceleration in respect of the
Debt Securities, and no other Event of Default has occurred during such
30-day period which has not been cured or waived during such period.
(Section 502 of each Indenture)
Subject to Section 502 of each Indenture, the Holders of not less
than a majority in principal amount of the Outstanding Debt Securities of
any series may on behalf of the Holders of all the Debt Securities of such
series waive any past default described in clause (1), (2), (3), (4), (7),
or (8) of the first paragraph of this section (or, in the case of a default
described in clause (5) or (6) of the first paragraph of this section, the
Holders of not less than a majority in principal amount of all Outstanding
Debt Securities may waive any such past default), and its consequences,
except a default (i) in respect of the payment of the principal of (or
premium, if any, on) or interest on any Debt Security or any related
coupon, or (ii) in respect of a covenant or provision which under the
Indentures cannot be modified or amended without the consent of the Holder
of each Outstanding Debt Security of such series affected. (Section 513 of
each Indenture)
Upon any such waiver, any such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of the Indentures; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right
consequent thereon. (Section 513 of each Indenture)
No Holder of any Debt Security of any series or any related coupons
shall have any right to institute any proceeding, judicial or otherwise,
with respect to the Indentures, or for the appointment of a receiver or
trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given written notice to the Trustee of a continuing Event of
Default with respect to the Debt Securities of that series; (ii) the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series in the case of any Event of Default under clause
(1), (2), (3), (4), (7) or (8) of the first paragraph of this section, or,
in the case of any Event of Default described in clause (5) or (6) of the
first paragraph of this section, the Holders of not less than 25% in
principal amount of all Outstanding Debt Securities, shall have made
written request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee under each of the Indentures;
(iii) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request; (iv) the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has failed to
institute any such proceeding; and (v) no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by
the Holders of a majority or more in principal amount of the Outstanding
Debt Securities of that series in the case of any Event of Default
described in clause (1), (2), (3), (4), (7) or (8) of the first paragraph
of this section, or, in the case of any Event of Default described in
clause (5) or (6) of the first paragraph of this section, by the Holders of
a majority or more in principal amount of all Outstanding Debt Securities.
(Section 507 of each Indenture)
During the existence of an Event of Default, the Trustee is
required to exercise such rights and powers vested in it under either
Indenture in good faith. Subject to the provisions of the Indentures
relating to the duties of the Trustee, in case an Event of Default shall
occur and be continuing, the Trustee under the Indentures is not under any
obligation to exercise any of its rights or powers under the Indentures at
the request or direction of any of the Holders unless such Holders shall
have offered to the Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, with respect to
the Debt Securities of any series, the Holders of not less than a majority
in principal amount of the Outstanding Debt Securities of such series shall
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee under the Indentures.
Within 90 days after the occurrence of any Default with respect to
Debt Securities of any series, the Trustee shall transmit in the manner and
to the extent provided in TIA Section 313(c), notice of such Default known
to the Trustee, unless such Default shall have been cured or waived;
provided, however, that, except in the case of a Default in the payment of
the principal of (or premium, if any, on) or interest on any Debt
Securities of such series, or in the payment of any sinking fund
installment with respect to Debt Securities of such series, the Trustee
shall be protected in withholding such notice if and so long as the board
of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interest of the Holders of Debt
Securities of such series and any related coupons; and provided further
that, in the case of any Default of the character specified in clause (7)
of the first paragraph of this section with respect to Debt Securities of
such series, no such notice to Holders shall be given until at least 30
days after the occurrence thereof.
The Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a brief certificate of the Company's
compliance with all of the conditions and covenants under the Indentures.
DEFEASANCE OR COVENANT DEFEASANCE OF THE INDENTURES
The Indentures will provide that the Company may, at its option and
at any time, terminate the obligations of the Company with respect to the
Outstanding Debt Securities of any series ("defeasance"). Such defeasance
means that the Company shall be deemed to have paid and discharged the
entire indebtedness represented by the Outstanding Debt Securities and any
related coupons, except for the following which shall survive until
otherwise terminated or discharged under the Indentures: (A) the rights of
Holders of such Outstanding Debt Securities and any related coupons (i) to
receive, solely from the trust fund described in the Indentures, payments
in respect of the principal of (and premium, if any, on) and interest on
such Debt Securities and any related coupons when such payments are due,
and (ii) to receive shares of common stock or other Securities from the
Company upon conversion of any convertible Debt Securities issued
thereunder, (B) the Company's obligations to issue temporary Debt
Securities, register the transfer or exchange of any Debt Securities,
replace mutilated, destroyed, lost or stolen Debt Securities, maintain an
office or agency for payments in respect of the Debt Securities and, if the
Company acts as its own Paying Agent, hold in trust, money to be paid to
such Persons entitled to payment, and with respect to Additional Amounts,
if any, on such Debt Securities as contemplated in the Indentures, (C) the
rights, powers, trusts, duties and immunities of the Trustee under the
Indentures and (D) the defeasance provisions of the Indentures. With
respect to Subordinated Debt Securities, money and securities held in trust
pursuant to the Defeasance and Covenant Defeasance provisions described
herein, shall not be subject to the subordination provisions of the
Subordinated Indenture. In addition, the Company may, at its option and at
any time, elect to terminate the obligations of the Company with respect to
certain covenants that are set forth in the Indentures, some of which are
described in the "Certain Covenants" section above, and any omission to
comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Debt Securities ("covenant defeasance").
(Section 1403 of each Indenture)
In order to exercise either defeasance or covenant defeasance:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee, in trust, for the purpose of making the
following payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Debt Securities and any
related coupons, (A) money in an amount (in such Currency in which such
Debt Securities and any related coupons are then specified as payable at
Stated Maturity), or (B) Government Obligations applicable to such Debt
Securities (determined on the basis of the Currency in which such Debt
Securities are then specified as payable at Stated Maturity) which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment of principal (including any premium) and interest,
if any, under such Debt Securities and any related coupons, money in an
amount or (C) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants to pay and
discharge (i) the principal of (and premium, if any, on) and interest on
the Outstanding Debt Securities and any related coupons on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and
premium, if any) or installment or interest and (ii) any mandatory sinking
fund payments or analogous payments applicable to the Outstanding Debt
Securities and any related coupons on the day on which such payments are
due and payable in accordance with the terms of the Indentures and of such
Debt Securities and any related coupons; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such Government Obligations to said payments with respect to such Debt
Securities and any related coupons. Before such a deposit, the Company may
give to the Trustee, in accordance with certain redemption provisions in
the Indentures, a notice of its election to redeem all or any portion of
such Outstanding Debt Securities at a future date in accordance with the
terms of the Debt Securities of such series and the redemption provisions
of the Indentures, which notice shall be irrevocable. Such irrevocable
redemption notice, if given, shall be given effect in applying the
foregoing; and
(2) no Default or Event of Default with respect to the Debt
Securities and any related coupons shall have occurred and be continuing on
the date of such deposit or, insofar as the Event of Default described in
clauses (5) and (6) of the Events of Default section above are concerned,
at any time during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period); (3) such defeasance or
covenant defeasance shall not result in a breach or violation of, or
constitute a default under, the Indentures or any other material agreement
or instrument to which the Company is a party or by which it is bound; (4)
in the case of a defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that (x) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (y) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding
Debt Securities and any related coupons will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance
had not occurred; (5) in the case of a covenant defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Debt Securities and any related coupons
will not recognize income, gain or loss for federal income tax purposes as
a result of such covenant defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred; (6)
notwithstanding any other provisions of the defeasance and covenant
defeasance provisions of the Indentures, such defeasance or covenant
defeasance shall be effected in compliance with any additional or
substitute terms, conditions or limitations in connection therewith
pursuant to Section 301 of the Indentures; and (7) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent under the Indentures to
either defeasance or covenant defeasance, as the case may be, have been
complied with. (Section 1404 of each Indenture)
SATISFACTION AND DISCHARGE
The Indentures shall upon Company Request cease to be of further
effect with respect to any series of Debt Securities (except as to any
surviving rights of registration of transfer or exchange of Debt Securities
of such series herein expressly provided for and the obligation of the
Company to pay any Additional Amounts as contemplated by Section 1005 of
each Indenture) and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge of such
Indenture as to such series when (1) either (A) all Debt Securities of such
series theretofore authenticated and delivered and all coupons, if any,
appertaining thereto (other than (i) coupons appertaining to Bearer
Securities surrendered for exchange for Registered Securities and maturing
after such exchange, whose surrender is not required or has been waived as
provided in Section 305 of the Indentures, (ii) Debt Securities and coupons
of such series which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306 of the Indentures, (iii)
coupons appertaining to Debt Securities called for redemption and maturing
after the relevant Redemption Date, whose surrender has been waived as
provided in Section 1106 of the Indentures, and (iv) Debt Securities and
coupons of such series for whose payment money has theretofore been
deposited in trust with the Trustee or any Paying Agent or segregated and
held in trust by the Company and thereafter repaid to the Company, as
provided in Section 1003 of the Indentures) have been delivered to the
Trustee for cancellation; or (B) all Debt Securities of such series and, in
the case of (i) or (ii) below, any coupons appertaining thereto not
theretofore delivered to the Trustee for cancellation (i) have become due
and payable, or (ii) will become due and payable at their Stated Maturity
within one year, or (iii) if redeemable at the option of the Company, are
to be called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company, and the Company, in the case of
(i), (ii) or (iii) above, has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose an
amount, in the Currency in which the Debt Securities of such series are
payable, sufficient to pay and discharge the entire indebtedness on such
Debt Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest to the date of such
deposit (in the case of Debt Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be; (2) the
Company has paid or caused to be paid all other sums payable hereunder by
the Company; and (3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of
the Indentures as to such series have been complied with. (Section 401 of
each Indenture)
AMENDMENTS AND WAIVERS
The Indentures will provide that at any time and from time to time,
the Company and the Trustee may, without the consent of any holder of Debt
Securities, enter into one or more indentures supplemental thereto for
certain specified purposes, including, among other things, (i) to cure
ambiguities, defects or inconsistencies, or to make any other provisions
with respect to questions or matters arising under the Indentures (provided
that such action shall not adversely affect the interests of the Holders in
any material respect), (ii) to effect or maintain the qualification of the
Indentures under the Trust Indenture Act, or (iii) to evidence the
succession of another person to the Company and the assumption by any such
successor of the obligations of the Company in accordance with the
Indentures and the Debt Securities. (Section 901 of each Indenture). Other
amendments and modifications of the Indentures or the Debt Securities may
be made by the Company and the Trustee with the consent of the holders of
not less than a majority of the aggregate principal amount of all of the
then Outstanding Debt Securities of any Series; provided, however, that no
such modification or amendment may, without the consent of the holder of
each Outstanding Debt Security affected thereby, (1) change the Stated
Maturity of the principal of, or any installment of interest on, any Debt
Security or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or change any
obligation of the Company to pay Additional Amounts contemplated by Section
1005 of each Indenture (except as contemplated and permitted by certain
provisions of the Indentures), or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502
of the Indentures of the amount thereof provable in bankruptcy pursuant to
Section 504 of the Indentures, or adversely affect any right of repayment
at the option of any Holder of any Debt Security, or change any Place of
Payment where, or the Currency in which, any Debt Security or any premium
or the interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption or repayment at the option of the
Holder, on or after the Redemption Date or Repayment Date, as the case may
be), or adversely affect any right to convert or manage any Debt Securities
as may be provided pursuant to Section 301 of the Indentures, or (2) reduce
the percent in principal amount of the Outstanding Debt Securities of any
series, the consent of whose Holders is required for any such supplemental
indenture, for any waiver of compliance with certain provisions of the
Indentures or certain defaults thereunder and their consequences provided
for in the Indentures, or reduce the requirements for quorum or voting.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by and
construed in accordance with the laws of the State of New York. The
Indentures are subject to the provisions of the Trust Indenture Act that
are required to be a part thereof and shall, to the extent applicable, be
governed by such provisions.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used
in the Indentures.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Capital Stock" means any and all shares, interests,
participations, rights or equivalents (however designated) of corporate
stock of the Company or any Principal Subsidiary.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to
the Trustee.
"Debt" means notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Fair Market Value" means the fair market value of the item in
question as determined by the Board of Directors acting in good faith and
in exercise of its fiduciary duties.
"Holder" means a Person in whose name a Debt Security is registered
in the Security Register.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Debt Securities.
"Issue Date" means the date of first issuance of the Debt
Securities under either Indenture.
"Maturity", when used with respect to any Debt Securities, means
the date on which the principal of such Debt Security or an installment of
principal becomes due and payable as therein or herein provided, whether at
the Stated Maturity or by declaration of acceleration, notice of
redemption, notice of option to elect repayment or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman,
the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, including an employee of the Company, and who
shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Debt Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 502 of the Indentures.
"Outstanding", when used with respect to Debt Securities, means, as
of the date of determination, all Debt Securities theretofore authenticated
and delivered under the Indentures, except:
(i) Debt Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Debt Securities, or portions thereof, for whose payment, money
in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Debt Securities;
(iii) Debt Securities, except to the extent provided in the
"Defeasance or Covenant Defeasance of the Indentures" section, with respect
to which the Company has effected defeasance and/or covenant defeasance as
provided in the Indenture; and
(iv) Mutilated, destroyed, lost or stolen Debt Securities which
have become or are about to become due and payable which have been paid
pursuant to Section 306 of the Indentures or in exchange for or in lieu of
which other Debt Securities have been authenticated and delivered pursuant
to the Indenture, other than any such Debt Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it
that such Debt Securities are held by a bona fide purchaser in whose hands
the Debt Securities are valid obligations of the Company; provided,
however, that in determining whether the Holders of the requisite principal
amount of Outstanding Debt Securities have given any request, demand,
authorization, direction, notice, consent or waiver under the Indentures,
and for the purpose of making the calculations required by TIA Section 313,
Debt Securities owned by the Company or any other obligor upon the Debt
Securities or any Affiliate of the Company or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in making such calculation or in
relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Debt Securities which the Trustee knows to be so
owned shall be so disregarded. Debt Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Debt Securities and that the pledgee is not the
Company or any other obligor upon the Debt Securities or any Affiliate of
the Company or such other obligor.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and
premium, if any, on) or interest on any Debt Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors,
the chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer,
the cashier, any assistant cashier, any trust officer or assistant trust
officer, the controller or any assistant controller or any other officer of
the Trustee customarily performing functions similar to those performed by
any of the above-designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Rolling Period" shall mean with respect to any fiscal quarter,
such fiscal quarter and the three immediately preceding fiscal quarters
considered as a single accounting period.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305 of the Indenture.
"Stated Maturity", when used with respect to any Debt Security or
any installment of principal thereof or interest thereon, means the date
specified in such Debt Security as the fixed date on which the principal of
such Debt Security or such installment of principal or interest is due and
payable.
"Subsidiary" means any corporation of which at the time of
determination the Company, directly and/or indirectly through one or more
Subsidiaries, owns more than 50% of the Voting Stock.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939 as in force at the date as of which the Indentures were executed,
except that any supplemental indenture executed pursuant to the Indentures
shall conform to the requirements of the Trust Indenture Act as in effect
on the date of execution thereof.
"Trustee" means The Bank of Nova Scotia Trust Company of New York
until a successor Trustee shall have become such pursuant to the applicable
provisions of the Indentures, and thereafter "Trustee" shall mean such
successor Trustee.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president".
"Voting Stock" means stock of the class or classes having general
voting power under ordinary circumstances to elect at least a majority of
the board of directors, managers or trustees of a corporation (irrespective
of whether or not at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any
contingency).
GENERAL DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the more complete descriptions thereof set forth in the
Company's Amended and Restated Certificate of Incorporation (the
"Certificate"), and Amended and Restated By-laws (the "By-laws") which
documents are exhibits to this Registration Statement.
The Company is authorized to issue up to 2,000,000,000 shares of
Common Stock, par value $.01 per share, and up to 10,000,000 shares of
Preferred Stock, par value $1.00 per share. As of November 12, 1998, there
were 853,078,387 shares of Common Stock and no shares of Preferred Stock
outstanding.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The following summary contains a description of certain general
terms of the Company's Preferred Stock. The particular terms of any series
of Preferred Stock that may be offered will be described in the applicable
Prospectus Supplement. If so indicated in a Prospectus Supplement, the
terms of any such series may differ from the terms set forth below. The
summary of terms of the Preferred Stock does not purport to be complete and
is subject to and qualified in its entirety by reference to the provisions
of the Certificate and the Certificate of Designation (the "Certificate of
Designation") relating to a particular series of offered Preferred Stock
which is or will be in the form filed or incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part at
or prior to the time of the issuance of such series of Preferred Stock.
The Board of Directors of the Company has the power, without
further action by the shareholders, to issue Preferred Stock in one or more
series, with such designations of series, dividend rates, redemption
provisions, special or relative rights in the event of liquidation,
dissolution, distribution or winding up of the Company, sinking fund
provisions, conversion or exchange provisions, voting rights thereof and
other preferences, privileges, powers, rights, qualifications, limitations
and restrictions, as shall be set forth as and when established by the
Board of Directors of the Company. The shares of any series of Preferred
Stock will be, when issued, fully paid and non-assessable and holders
thereof will have no preemptive rights in connection therewith.
RANK
Unless otherwise specified in the Prospectus Supplement relating to
a particular series of Preferred Stock, each series of Preferred Stock will
rank on parity as to dividends and liquidation rights in all respects with
each other series of Preferred Stock. DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of funds legally available therefor, cash dividends at such rates and
on such dates as are set forth in the Prospectus Supplement relating to
such series of Preferred Stock. Different series of the Preferred Stock may
be entitled to dividends at different rates or based upon different methods
of determination. Such rates may be fixed or variable or both. Each such
dividend will be payable to the holders of record as they appear on the
stock books of the Company on such record dates as will be fixed by the
Board of Directors of the Company or a duly authorized committee thereof.
Dividends on any series of the Preferred Stock may be cumulative or
noncumulative, as provided in the Prospectus Supplement relating thereto.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of each series of
Preferred Stock will be entitled to receive out of assets of the Company
available for distribution to stockholders, before any distribution of
assets is made to holders of Common Stock or any other class of stock
ranking junior to such series of the Preferred Stock upon liquidation,
liquidating distributions in the amount set forth in the Prospectus
Supplement relating to such series of Preferred Stock plus an amount equal
to accrued and unpaid dividends for the then current dividend period and,
if such series of the Preferred Stock is cumulative, for all dividend
periods prior thereto, all as set forth in the Prospectus Supplement with
respect to such series of Preferred Stock.
REDEMPTION
The terms, if any, on which shares of a series of Preferred Stock
may be subject to optional or mandatory redemption, in whole or in part,
will be set forth in the Prospectus Supplement relating to such series.
CONVERSION AND EXCHANGE
The terms, if any, on which shares of a series of Preferred Stock
are convertible into another series of Preferred Stock or Common Stock or
exchangeable for another series of Preferred Stock or Common Stock will be
set forth in the Prospectus Supplement relating thereto. Such terms may
include provisions for conversion, either mandatory, at the option of the
holder, or at the option of the Company, in which case the number of shares
of another series of Preferred Stock or Common Stock to be received by the
holders of such series of Preferred Stock would be calculated as of a time
and in the manner stated in such Prospectus Supplement.
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursement agent for
each series of Preferred Stock will be designated in the applicable
Prospectus Supplement. The registrar for shares of each series of Preferred
Stock will send notices to shareholders of any meetings at which holders of
the Preferred Stock have the right to elect directors of the Company or to
vote on any other matter.
VOTING RIGHTS
The holders of Preferred Stock of a series offered hereby will not
be entitled to vote except as indicated in the Prospectus Supplement
relating to such series of Preferred Stock or as required by applicable
law.
DESCRIPTION OF COMMON STOCK
GENERAL
Subject to the rights of the holders of any shares of the Company's
Preferred Stock which may at the time be outstanding, holders of Common
Stock are entitled to such dividends as the Board of Directors may declare
out of funds legally available therefor. The holders of Common Stock will
possess exclusive voting rights in the Company, except to the extent the
Board of Directors specifies voting power with respect to any Preferred
Stock issued. Except as hereinafter described, holders of Common Stock are
entitled to one vote for each share of Common Stock, but will not have any
right to cumulate votes in the election of directors. In the event of
liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive, after payment of all of the Company's
debts and liabilities and of all sums to which holders of any Preferred
Stock may be entitled, the distribution of any remaining assets of the
Company. Holders of the Common Stock will not be entitled to preemptive
rights with respect to any shares which may be issued. Any shares of Common
Stock sold hereunder will be fully paid and non-assessable upon issuance
against full payment of the purchase price therefor. The Common Stock is
listed on the New York Stock Exchange under the symbol "CD."
CERTAIN PROVISIONS
The provisions of the Company's Certificate and By-Laws which are
summarized below may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in such stockholder's best interest, including
those attempts that might result in a premium over the market price for the
shares held by stockholders.
CLASSIFIED BOARD
The Board of Directors is divided into three classes that are
elected for staggered three-year terms. A director may be removed by the
stockholders without cause only by the affirmative vote of the holders,
voting as a single class, of 80% or more of the total number of votes
entitled to be cast by all holders of the voting stock, which shall include
all capital stock of the Company which by its terms may vote on all matters
submitted to stockholders of the Company generally.
COMMITTEES OF THE BOARD OF DIRECTORS
Pursuant to the Certificate, the Board of Directors' authority to
designate committees shall be subject to the provisions of the By-Laws. The
Board of Directors may designate one or more directors as alternate members
of any committee to fill any vacancy on the committee and to fill a vacant
chairmanship of a committee occurring as a result of a member of chairman
leaving the committee, whether through death, resignation, removal or
otherwise. Pursuant to the By-Laws, the Board of Directors shall have the
following committees:
Executive Committee. An Executive Committee that shall consist of
not less than three directors elected by a majority vote of the Board of
Directors.
Compensation Committee. A Compensation Committee consisting of not
less than three directors elected by a majority vote of the Board of
Directors.
Audit Committee. An Audit Committee consisting of not less than
four directors elected by a majority vote of the Board of Directors.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Newly created directorships resulting from any increase in the
number of Directors and any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled solely by the affirmative vote of a majority of the remaining
Directors then in office, even though less than a quorum of the Board of
Directors. Any Directors elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of
Directors in which the new directorship was created or the vacancy occurred
and until such Director's 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.
SPECIAL MEETINGS OF STOCKHOLDERS
A special meeting of stockholders may be called only by the
Chairman of the Board of Directors, the President or the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors.
QUORUM AT STOCKHOLDER MEETINGS
The holders of one-third of the shares entitled to vote at any
meeting of the stockholders, present in person or by proxy, shall
constitute a quorum at all stockholder meetings.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Stockholder action by written consent in lieu of a meeting is
prohibited under the Certificate. As a result, stockholder action can be
taken only at an annual or special meeting of stockholders. This prevents
the holders of a majority of the outstanding voting stock of the Company
from using the written consent procedure to take stockholder action without
giving all the stockholders of the Company entitled to vote on a proposed
action the opportunity to participate in determining the proposed action.
ADVANCE NOTICE OF STOCKHOLDER--PROPOSED BUSINESS AT ANNUAL MEETINGS
The By-Laws provide that for business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to
be timely must be so received not later than the close of business on the
tenth day following the date on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A stockholder's
notice to the Secretary must set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
business desired to be brought before the annual meeting, (ii) the name and
address, as they appear on the Company's books, of the stockholder
proposing such business, (iii) the class and number of shares of the
Company which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business.
In addition, the By-Laws provide that for a stockholder to properly
nominate a director at a meeting of stockholders, the stockholder must have
given timely notice thereof in writing to the Secretary of the Company. To
be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Company (i) in the case
of an annual meeting, at least 90 days prior to the date of the last annual
meeting of the Company stockholders and (ii) with respect to a special
meeting of stockholders, the close of business on the 10th day following
the date on which notice of such meeting is first given to stockholders.
Such stockholder's notice to the Secretary must set forth: (i) the name and
address of the stockholder who intends to make the nomination and of the
person or persons to be nominated, (ii) a representation that the
stockholder is holder of record of Common Stock and intends to appear in
person or by proxy at the meeting to nominate each such nominee, (iii) a
description of all arrangements between such stockholder and each nominee,
(iv) such other information with respect to each nominee as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Commission, and (v) the consent of each nominee to serve as
director of the Company if so elected.
AMENDMENT OF GOVERNING DOCUMENTS
In addition to the provisions of the Certificate that require a
super-majority of stockholders to approve certain amendments to the
Certificate and By-Laws, until the earlier of July 28, 2004 or such time as
all litigation relating to the Accounting Issues has been finally disposed
of, the affirmative vote of a majority of the Litigation Committee and a
super-majority of the stockholders shall be required to adopt certain
amendments to certain provisions of the By-Laws described under
"--Committees of the Board of Directors."
FAIR PRICE PROVISIONS
Under the Delaware General Corporation Law and the Certificate, an
agreement of merger, sale, lease or exchange of all or substantially all of
the Company's assets must be approved by the Board of Directors and adopted
by the holders of a majority of the outstanding shares of stock entitled to
vote thereon. However, the Certificate includes what generally is referred
to as a "fair price provision," which requires the affirmative vote of the
holders of at least 80% of the outstanding shares of capital stock entitled
to vote generally in the election of the Company's directors, voting
together as a single class, to approve certain business combination
transactions (including certain mergers, recapitalization and the issuance
or transfer of securities of the Company or a subsidiary having an
aggregate fair market value of $10 million or more) involving the Company
or a subsidiary and an owner or any affiliate of an owner of 5% or more of
the outstanding shares of capital stock entitled to vote, unless either (i)
such business combination is approved by a majority of disinterested
directors, or (ii) the shareholders receive a "fair price" for their
securities and certain other procedural requirements are met. The
Certificate provides that this provision may not be repealed or amended in
any respect except by the affirmative vote of the holders of not less than
80% of the outstanding shares of capital stock entitled to vote generally
in the election of directors.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Debt Securities,
Preferred Stock, Common Stock or any combination thereof, and such Warrants
may be issued independently or together with any such Securities and may be
attached to or separate from such Securities. Each series of Warrants will
be issued under a separate warrant agreement (each a "Warrant Agreement")
to be entered into between the Company and a warrant agent ("Warrant
Agent"). The Warrant Agent will act solely as an agent of the Company in
connection with the Warrants of each such series and will not assume any
obligation or relationship of agency for or with holders or beneficial
owners of Warrants. The following sets forth certain general terms and
provisions of the Warrants offered hereby. Further terms of the Warrants
and the applicable Warrant Agreement will be set forth in the applicable
Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any
Warrants in respect of which this Prospectus is being delivered, including
the following: (i) the title of such Warrants; (ii) the aggregate number of
such Warrants; (iii) the price or prices at which such Warrants will be
issued; (iv) the currency or currencies, including composite currencies, in
which the price of such Warrants may be payable; (v) the designation and
terms of the Securities (other than Preferred Securities and Common
Securities) purchasable upon exercise of such Warrants; (vi) the price at
which and the currency or currencies, including composite currencies, in
which the Securities (other than Preferred Securities and Common
Securities) purchasable upon exercise of such Warrants may be purchased;
(vii) the date on which the right to exercise such Warrants shall commence
and the date on which such right shall expire; (viii) whether such Warrants
will be issued in registered form or bearer form; (ix) if applicable, the
minimum or maximum amount of such Warrants which may be exercised at any
one time; (x) if applicable, the designation and terms of the Securities
(other than Preferred Securities and Common Securities) with which such
Warrants are issued and the number of such Warrants issued with each such
Security; (xi) if applicable, the date on and after which such Warrants and
the related Securities (other than Preferred Securities and Common
Securities) will be separately transferable; (xii) information with respect
to book-entry procedures, if any; (xiii) if applicable, a discussion of
certain United States Federal income tax considerations; and (xiv) any
other terms of such Warrants, including terms, procedures and limitations
relating to the exchange and exercise of such Warrants.
DESCRIPTION OF PREFERRED SECURITIES OF THE CENDANT TRUSTS
GENERAL
Each Cendant Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Cendant Trust authorizes the
Regular Trustees of such Cendant Trust to issue on behalf of such Cendant
Trust one series of Preferred Securities. Each Declaration will be
qualified as an indenture under the Trust Indenture Act. The Institutional
Trustee, an independent trustee, will act as indenture trustee for the
Preferred Securities for purposes of compliance with the provisions of the
Trust Indenture Act. The Preferred Securities will have such terms,
including distributions, redemption, voting, liquidation rights and such
other preferred, deferred or other special rights or such restrictions as
shall be established by the Regular Trustees in accordance with the
applicable Declaration or as shall be set forth in the Declaration or made
part of the Declaration by the Trust Indenture Act. Reference is made to
any Prospectus Supplement relating to the Preferred Securities of a Cendant
Trust for specific terms of the Preferred Securities, including, to the
extent applicable, (i) the distinctive designation of such Preferred
Securities, (ii) the number of Preferred Securities issued by such Cendant
Trust, (iii) the annual distribution rate (or method of determining such
rate) for Preferred Securities issued by such Cendant Trust and the date or
dates upon which such distributions shall be payable (provided, however,
that distributions on such Preferred Securities shall, subject to any
deferral provisions, and any provisions for payment of defaulted
distributions, be payable on a quarterly basis to holders of such Preferred
Securities as of a record date in each quarter during which such Preferred
Securities are outstanding), (iv) any right of such Cendant Trust to defer
quarterly distributions on the Preferred Securities as a result of an
interest deferral right exercised by the Company on the Subordinated Debt
Securities held by such Cendant Trust; (v) whether distributions on
Preferred Securities shall be cumulative, and, in the case of Preferred
Securities having such cumulative distribution rights, the date or dates or
method of determining the date or dates from which distributions on
Preferred Securities shall be cumulative, (vi) the amount or amounts which
shall be paid out of the assets of such Cendant Trust to the holders of
Preferred Securities upon voluntary or involuntary dissolution, winding-up
or termination of such Cendant Trust, (vii) the obligation or option, if
any, of such Cendant Trust to purchase or redeem Preferred Securities and
the price or prices at which, the period or periods within which and the
terms and conditions upon which Preferred Securities shall be purchased or
redeemed, in whole or in part, pursuant to such obligation or option with
such redemption price to be specified in the applicable Prospectus
Supplement, (viii) the voting rights, if any, of Preferred Securities in
addition to those required by law, including the number of votes per
Preferred Security and any requirement for the approval by the holders of
Preferred Securities as a condition to specified action or amendments to
the Declaration, (ix) the terms and conditions, if any, upon which
Subordinated Debt Securities held by such Cendant Trust may be distributed
to holders of Preferred Securities, and (x) any other relevant rights,
preferences, privileges, limitations or restrictions of Preferred
Securities consistent with the Declaration or with applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company to
the extent set forth below under "Description of Trust Guarantees." The
Trust Guarantee issued to each Cendant Trust, when taken together with the
Company's back-up undertakings, consisting of its obligations under each
Declaration (including the obligation to pay expenses of each Cendant
Trust), the applicable Indenture and any applicable supplemental indentures
thereto and the Subordinated Debt Securities issued to any Cendant Trust
will provide a full and unconditional guarantee by the Company of amounts
due on the Preferred Securities issued by each Cendant Trust. The payment
terms of the Preferred Securities will be the same as the Subordinated Debt
Securities issued to the applicable Cendant Trust by the Company.
Each Declaration authorizes the Regular Trustees to issue on behalf
of the applicable Trust one series of Common Securities having such terms
including distributions, redemption, voting, liquidation rights or such
restrictions as shall be established by the Regular Trustees in accordance
with the Declaration or as shall otherwise be set forth therein. The terms
of the Common Securities issued by each Cendant Trust will be substantially
identical to the terms of the Preferred Securities issued by such Cendant
Trust, and the Common Securities will rank on a parity, and payments will
be made thereon pro rata, with the Preferred Securities except that, if an
event of default under such Declaration has occurred and is continuing, the
rights of the holders of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will
be subordinated to the rights of the holders of the Preferred Securities.
The Common Securities will also carry the right to vote and to appoint,
remove or replace any of the Cendant Trustees of such Cendant Trust. All of
the Common Securities of each Cendant Trust will be directly or indirectly
owned by the Company.
The financial statements of any Cendant Trust that issues Preferred
Securities will be reflected in the Company's consolidated financial
statements with the Preferred Securities shown as Company-obligated
mandatorily-redeemable preferred securities of a subsidiary trust under
minority interest in consolidated subsidiaries. In a footnote to the
Company's audited financial statements there will be included statements
that the applicable Cendant Trust is wholly-owned by the Company and that
the sole asset of such Cendant Trust is the Subordinated Debt Securities
(indicating the principal amount, interest rate and maturity date thereof).
DESCRIPTION OF TRUST GUARANTEES
Set forth below is a summary of information concerning the Trust
Guarantees that will be executed and delivered by the Company for the
benefit of the holders, from time to time, of Preferred Securities. Each
Trust Guarantee will be qualified as an indenture under the Trust Indenture
Act. Unless otherwise specified in the applicable Prospectus Supplement,
Wilmington Trust Company will act as independent indenture trustee for
Trust Indenture Act purposes under each Trust Guarantee (the "Preferred
Securities Guarantee Trustee"). The terms of each Trust Guarantee will be
those set forth in such Trust Guarantee and those made part of such Trust
Guarantee by the Trust Indenture Act. The following summary does not
purport to be complete and is subject to and qualified in its entirety by
reference to the provisions of the form of Trust Guarantee, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and the Trust Indenture Act. Each Trust Guarantee
will be held by the Preferred Securities Guarantee Trustee for the benefit
of the holders of the Preferred Securities of the applicable Cendant Trust.
GENERAL
Unless otherwise specified in the applicable Prospectus Supplement,
pursuant to each Trust Guarantee, the Company will agree, to the extent set
forth therein, to pay in full to the holders of the Preferred Securities,
the Guarantee Payments (as defined below) (except to the extent paid by
such Cendant Trust), as and when due, regardless of any defense, right of
set-off or counterclaim which such Cendant Trust may have or assert. The
following payments or distributions with respect to the Preferred
Securities (the "Guarantee Payments"), to the extent not paid by such
Cendant Trust, will be subject to the Trust Guarantee (without
duplication): (i) any accrued and unpaid distributions that are required to
be paid on such Preferred Securities, to the extent such Cendant Trust
shall have funds available therefor, (ii) the redemption price, including
all accrued and unpaid distributions to the date of redemption (the
"Redemption Price"), to the extent such Cendant Trust has funds available
therefor, with respect to any Preferred Securities called for redemption by
such Cendant Trust and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of such Cendant Trust (other than in connection
with such distribution of Debt Securities to the holders of Preferred
Securities or the redemption of all of the Preferred Securities upon
maturity or redemption of the Subordinated Debt Securities) the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on such Preferred Securities to the date of payment, to the
extent such Cendant Trust has funds available therefor or (b) the amount of
assets of such Cendant Trust remaining for distribution to holders of such
Preferred Securities in liquidation of such Cendant Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment
of the required amounts by the Company to the holders of Preferred
Securities or by causing the applicable Cendant Trust to pay such amounts
to such holders.
Each Trust Guarantee will not apply to any payment of distributions
except to the extent the applicable Cendant Trust shall have funds
available therefor. If the Company does not make interest or principal
payments on the Subordinated Debt Securities purchased by such Cendant
Trust, such Cendant Trust will not pay distributions on the Preferred
Securities issued by such Cendant Trust and will not have funds available
therefore.
The Company has also agreed to guarantee the obligations of each
Cendant Trust with respect to the Common Securities (the "Common
Guarantee") issued by such Cendant Trust to the same extent as the Trust
Guarantee, except that, if an Event of Default under the Subordinated
Indenture has occurred and is continuing, holders of Preferred Securities
under the Trust Guarantee shall have priority over holders of the Common
Securities under the Common Guarantee with respect to distributions and
payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise specified in the applicable Prospectus Supplement,
in each Trust Guarantee, the Company will covenant that, so long as any
Preferred Securities issued by the applicable Cendant Trust remain
outstanding, if there shall have occurred any event of default under such
Trust Guarantee or under the Declaration of such Cendant Trust, then (a)
the Company will not declare or pay any dividend on, make any distributions
with respect to, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock (other than (i) purchases or
acquisitions of capital stock of the Company in connection with the
satisfaction by the Company of its obligations under any employee or agent
benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security outstanding on the date of such event
requiring the Company to purchase capital stock of the Company, (ii) as a
result of a reclassification of the Company's capital stock (other than
into cash or other property) or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock, (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted
or exchanged, (iv) dividends or distributions in capital stock of the
Company (or rights to acquire capital stock) or repurchases or redemptions
of capital stock solely from the issuance or exchange of capital stock or
(v) redemptions or repurchases of any rights outstanding under a
shareholder rights plan); (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem
any debt securities issued by the Company which rank junior to the
Subordinated Debt Securities issued to the applicable Cendant Trust and (c)
the Company shall not make any guarantee payments with respect to the
foregoing (other than pursuant to a Trust Guarantee).
MODIFICATION OF THE TRUST GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not adversely affect the
rights of holders of Preferred Securities (in which case no consent of such
holders will be required), each Trust Guarantee may be amended only with
the prior approval of the holders of not less than a majority in
liquidation amount of the outstanding Preferred Securities of such Cendant
Trust. The manner of obtaining any such approval of holders of such
Preferred Securities will be set forth in accompanying Prospectus
Supplement. All guarantees and agreements contained in a Trust Guarantee
shall bind the successors, assigns, receivers, trustees and representatives
of the Company and shall inure to the benefit of the holders of the
Preferred Securities of the applicable Cendant Trust then outstanding.
EVENTS OF DEFAULT
An event of default under a Trust Guarantee will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder. The holders of a majority in liquidation amount of the
Preferred Securities to which such Trust Guarantee relates have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Preferred Securities Guarantee Trustee in respect
of such Trust Guarantee or to direct the exercise of any trust or power
conferred upon the Preferred Securities Guarantee Trustee under such Trust
Guarantee.
If the Preferred Securities Guarantee Trustee fails to enforce such
Trust Guarantee, any record holder of Preferred Securities to which such
Trust Guarantee relates may institute a legal proceeding directly against
the Company to enforce the Preferred Securities Guarantee Trustee's rights
under such Trust Guarantee without first instituting a legal proceeding
against the applicable Cendant Trust, the Preferred Securities Guarantee
Trustee or any other person or entity. Notwithstanding the foregoing, if
the Company has failed to make a Guarantee Payment under a Trust Guarantee,
a record holder of Preferred Securities to which such Trust Guarantee
relates may directly institute a proceeding against the Company for
enforcement of such Trust Guarantee for such payment to the record holder
of the Preferred Securities to which such Trust Guarantee relates of the
principal of or interest on the applicable Debt Securities on or after the
respective due dates specified in the Debt Securities, and the amount of
the payment will be based on the holder's pro rata share of the amount due
and owing on all of the Preferred Securities to which such Trust Guarantee
relates. The Company has waived any right or remedy to require that any
action be brought first against the applicable Cendant Trust or any other
person or entity before proceeding directly against the Company. The record
holder in the case of the issuance of one or more global Preferred
Securities certificates will be The Depository Trust Company acting at the
direction of the beneficial owners of the Preferred Securities.
The Company will be required to provide annually to the Preferred
Securities Guarantee Trustee a statement as to the performance by the
Company of certain of its obligations under each outstanding Trust
Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE
The Preferred Securities Guarantee Trustee, prior to the occurrence
of a default to a Trust Guarantee, undertakes to perform only such duties
as are specifically set forth in such Trust Guarantee and, after default
with respect to such Trust Guarantee, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to such provision, the Preferred Securities Guarantee
Trustee is under no obligation to exercise any of the powers vested in it
by a Trust Guarantee at the request of any holder of Preferred Securities
to which such Trust Guarantee relates unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION
Each Trust Guarantee will terminate as to the Preferred Securities
issued by the applicable Cendant Trust upon full payment of the Redemption
Price of all Preferred Securities of such Cendant Trust, upon distribution
of the Debt Securities held by such Cendant Trust to the holders of all of
the Preferred Securities of such Cendant Trust or upon full payment of the
amounts payable in accordance with the Declaration of such Cendant Trust
upon liquidation of such Cendant Trust. Each Trust Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time
any holder of Preferred Securities issued by the applicable Cendant Trust
must restore payment of any sums paid under such Preferred Securities or
such Trust Guarantee.
STATUS OF THE TRUST GUARANTEES
The Trust Guarantees will constitute senior unsecured obligations
of the Company and will rank on a parity with all of the Company's other
senior unsecured obligations.
Each Trust Guarantee will constitute a guarantee of payment and not
of collection (that is, the guaranteed party may institute a legal
proceeding directly against the Company to enforce its rights under such
Trust Guarantee without instituting a legal proceeding against any other
person or entity).
GOVERNING LAW
The Trust Guarantees will be governed by and construed in
accordance with the law of the State of New York.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, including contracts
obligating holders to purchase from the Company, and the Company to sell to
the holders, a specified number of shares of Common Stock or Preferred
Stock at a future date or dates. The consideration per share of Common
Stock or Preferred Stock may be fixed at the time the Stock Purchase
Contracts are issued or may be determined by reference to a specific
formula set forth in the Stock Purchase Contracts. The Stock Purchase
Contracts may be issued separately or as a part of units ("Stock Purchase
Units") consisting of a Stock Purchase Contract and Debt Securities,
Preferred Securities or debt obligations of third parties, including U.S.
Treasury securities, securing the holders' obligations to purchase the
Common Stock or Preferred Stock under the Stock Purchase Contracts. The
Stock Purchase Contracts may require the Company to make periodic payments
to the holders of the Stock Purchase Units or vice versa, and such payments
may be unsecured or prefunded on some basis. The Stock Purchase Contracts
may require holders to secure their obligations thereunder in a specified
manner.
The applicable Prospectus Supplement will describe the terms of any
Stock Purchase Contracts or Stock Purchase Units. The description in the
Prospectus Supplement will not necessarily be complete, and reference will
be made to the Stock Purchase Contracts, and, if applicable, collateral
arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
PLAN OF DISTRIBUTION
The Company may sell the Securities and the Cendant Trusts may sell
Preferred Securities being offered hereby in any of, or any combination of,
the following ways: (i) directly to purchasers; (ii) through agents; (iii)
through underwriters; and/or (iv) through dealers.
Offers to purchase Securities may be solicited directly by the
Company and/or a Cendant Trust or by agents designated by the Company
and/or a Cendant Trust from time to time. Any such agent, who may be deemed
to be an underwriter as that term is defined in the Securities Act,
involved in the offer or sale of Securities, will be named, and any
commissions payable by the Company and/or a Cendant Trust to such agent
will be set forth, in the Prospectus Supplement. Unless otherwise indicated
in a Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment (ordinarily five business days or
less).
If an underwriter or underwriters are utilized in the offer or sale
of Securities, the Company and/or the applicable Cendant Trust will execute
an underwriting agreement with such underwriters at the time of sale of
such Securities to such underwriters and the names of such underwriters and
the principal terms of the Company's and/or the applicable Cendant Trust's
agreement with such underwriters will be set forth in the appropriate
Prospectus Supplement.
If a dealer is utilized in the offer or sale of Securities, the
Company and/or the applicable Cendant Trust will sell such Securities to
such dealer, as principal. Such dealer may then resell such Securities to
the public at varying prices to be determined by such dealer at the time of
resale. The name of such dealer and the principal terms of the Company's
and/or the applicable Cendant Trust's agreement with such dealer will be
set forth in the appropriate Prospectus Supplement.
Agents, underwriters, and dealers may be entitled under agreements
with the Company and/or a Cendant Trust to indemnification by the Company
and/or a Cendant Trust against certain liabilities, including liabilities
under the Securities Act. Agents, dealers and underwriters may also be
customers of, engage in transactions with, or perform services for the
Company in the ordinary course of their business.
Underwriters, agents or their controlling persons may engage in
transactions with and perform services for the Company in the ordinary
course of business.
The place and time of delivery for Securities will be set forth in
the accompanying Prospectus Supplement for such Securities.
LEGAL OPINIONS
Certain matters of Delaware law relating to the validity of the
Preferred Securities will be passed upon on behalf of the Cendant Trusts by
Skadden, Arps, Slate, Meagher & Flom LLP. The validity of the Securities
offered hereby by the Company will be passed on for the Company by Eric J.
Bock, Esq., Vice President--Legal, of the Company. Mr. Bock holds shares of
Common Stock and options to acquire shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company and its
consolidated subsidiaries, except PHH Corporation ("PHH"), as of December
31, 1996 and for the years ended December 31, 1996 and January 31, 1996,
Davidson and Associates, Inc. ("Davidson") for the year ended December 31,
1995 and Ideon Group, Inc. ("Ideon") for the year ended December 31, 1995
incorporated by reference from the Company's Annual Report on Form 10-K/A
for the year ended December 31, 1997 and included in this Prospectus have
been audited by Deloitte & Touche LLP, as stated in their report appearing
herein and incorporated herein by reference, which report expresses an
unqualified opinion and includes explanatory paragraphs related to the
restatement as described in Note 3, certain litigation as described in Note
17, and the change in method of recognizing revenue and membership
solicitation costs as described in Notes 2 and 3. The consolidated
financial statements of PHH and Davidson (consolidated with the Company's
financial statements) have been audited by KPMG Peat Marwick LLP, as stated
in their reports appearing herein and incorporated herein by reference. The
consolidated financial statements of Ideon (consolidated with the Company's
financial statements) have been audited by PricewaterhouseCoopers LLP, as
stated in their report appearing herein and incorporated herein by
reference. Such consolidated financial statements of the Company and its
subsidiaries are included and incorporated by reference herein in reliance
upon the respective reports of such firms given upon their authority as
experts in accounting and auditing. All of the foregoing firms are
independent auditors.
The consolidated financial statements of National Parking
Corporation incorporated in this Prospectus by reference from the Company's
Current Report on Form 8-K, dated November 4, 1998 have been audited by
Deloitte & Touche, chartered accountants and registered auditors, as stated
in their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Avis Rent A Car, Inc.
incorporated in this Prospectus by reference from the Company's Current
Report on Form 8-K, dated February 6, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
