<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party Other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CENDANT CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
$
(5) Total fee paid: $
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
January __, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders
of Cendant Corporation to be held at 10:00 a.m., New York Time, on February __,
2000, at the Ramada Inn and Conference Center, 130 Route 10 West, East Hanover,
New Jersey 07936. At this meeting we will ask you to consider and approve the
Tracking Stock Proposal, the related Stock Option Plan Proposal and the Board
Declassification Proposal and we may ask you to consider and approve the
Adjournment Proposal as described in the accompanying Proxy Statement.
The Tracking Stock Proposal is a proposal to consider the creation of a
new series of common stock of Cendant to be called Move.com Stock which is
intended to track the performance of Move.com Group, a group of businesses which
will be engaged in providing a broad range of home-related services through a
new internet services portal which we expect to be operational during January
2000. Currently, Move.com Group represents an immaterial part of Cendant's
business operations. Before we first issue Move.com Stock, Cendant's existing
common stock will be reclassified as CD Stock which is intended to track the
performance of Cendant Group, consisting of all of Cendant's businesses, other
than Move.com Group, and our retained interest in Move.com Group.
The Move.com Stock and CD Stock will have dividend and liquidation
rights and redemption and exchange terms, modeled after other publicly traded
tracking stocks, that attempt to provide economic rights in the businesses they
track that are similar to the rights that common stock would represent if the
"tracked" business were a separate corporation. Our goal in creating these
separate securities is to enable the market to treat each security as if it
represented stock in a separate corporation and therefore react to the business
performance and transactions of each Group as if it were stock in a separate
corporation. Even if the Tracking Stock Proposal is approved and we issue
Move.com Stock, we will still have the ability, subject to provisions of the
charter, to issue shares of CD Stock in exchange for shares of Move.com Stock
which would reverse the effects of the Tracking Stock Proposal.
<PAGE>
In addition to the Tracking Stock Proposal, we will ask you to consider
and approve a proposal to allow Cendant to assume the stock option plan of its
wholly owned subsidiary, Move.com, Inc., and existing grants under that plan.
At the meeting we will also ask you to consider and approve a proposal
to amend our amended and restated certificate of incorporation and by-laws to
eliminate the provisions for the classification of Cendant's Board of Directors
so that each person elected as a director at the annual meeting of stockholders
in 2000 and subsequent annual meetings of stockholders will be elected for a
term of one year and until their respective successors are elected and
qualified.
Finally, we may also ask you to consider and vote upon a proposal to
authorize adjournment or postponement of the meeting, which adjournment could be
used for the purpose, among others, of allowing additional time for the
soliciting of additional votes to approve the Tracking Stock Proposal and the
Stock Option Plan Proposal.
The Cendant Board of Directors has carefully considered and unanimously
approved the Tracking Stock Proposal, the Stock Option Plan Proposal, the Board
Declassification Proposal and the Adjournment Proposal and recommends that you
vote for them. We describe the proposals in more detail in the accompanying
Proxy Statement, which you should read in its entirety before voting.
Whether or not you attend the meeting, it is important that your shares
be represented and voted at the meeting. Stockholders of record can vote their
shares by using the telephone or by marking your votes on the enclosed proxy
card, signing, dating and mailing the proxy card in the enclosed envelope. If
you decide to attend the meeting and vote in person, you may then withdraw your
proxy.
Admission to the meeting will be by ticket only. If you are a
registered stockholder planning to attend the meeting, please check the
appropriate box on the proxy card and retain the bottom portion of the card as
your admission ticket. If your shares are held through an intermediary such as a
bank or broker, follow the instructions in the Notice of Special Meeting of
Stockholders to obtain a ticket.
Thank you for your continued support and interest in Cendant.
Sincerely,
Henry R. Silverman
Chairman of the Board, President and
Chief Executive Officer
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CENDANT CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY __, 2000
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Cendant Corporation will be held at 10:00 a.m., New York Time, on February __,
2000, at the Ramada Inn and Conference Center, 130 Route 10 West, East Hanover,
New Jersey 07936 to consider and vote upon the following matters:
1. To consider and approve our proposal to amend and restate our
amended and restated certificate of incorporation to authorize
a new series of common stock to be called Move.com Stock as
set forth in Annex II to the accompanying Proxy Statement and
to reclassify the outstanding Cendant common stock as CD
Stock;
2. To consider and approve the assumption by Cendant of the stock
option plan of Move.com, Inc., a wholly owned subsidiary of
Cendant, and existing grants thereunder as set forth in Annex
III to the accompanying Proxy Statement;
3. To consider and approve our proposal to amend our amended and
restated certificate of incorporation and our by-laws to
eliminate the provisions for the classification of Cendant's
Board of Directors as set forth in Annexes II and IV to the
accompanying Proxy Statement;
4. To consider a proposal to adjourn or postpone the special
meeting, which adjournment could be used for the purpose,
among others, of allowing additional time for the soliciting
of additional votes to approve the Tracking Stock Proposal and
the Stock Option Plan Proposal; and
5. To transact such other business as may properly come before
the special meeting.
We describe the proposals in more detail in the accompanying Proxy
Statement, which you should read in its entirety before voting.
<PAGE>
Only stockholders of record at the close of business on January 24,
2000 will be entitled to the notice of and to vote at the meeting or any
adjournment or postponement thereof. A list of stockholders entitled to vote at
the meeting will be available for examination by any stockholder, for any
purpose germane to the meeting, for 10 days prior to the meeting during ordinary
business hours at the site of the meeting.
Because the meeting is being held for the sole purpose of voting on the
Tracking Stock Proposal, the Stock Option Proposal, the Board Declassification
Proposal and, if necessary, the Adjournment Proposal, there will not be any
presentations by officers of Cendant at the meeting, as would be appropriate at
an annual meeting of stockholders.
Attendance at the meeting will be limited to stockholders as of the
record date, their authorized representatives and guests of the Cendant.
Admission will be by ticket only. For registered stockholders, the bottom
portion of the proxy card enclosed with the Proxy Statement is their meeting
ticket. "Street Name" holders with shares held through an intermediary, such as
a bank or broker, should request tickets in writing from Investor Relations,
Cendant Corporation, 9 West 57th Street, New York, New York 10019, and include
proof of ownership, such as a bank or brokerage firm account statement or letter
from the broker, trustee, bank or nominee holding their stock, confirming
beneficial ownership. Stockholders who do not obtain tickets in advance may
obtain them upon verification of ownership at the registration desk on the day
of the meeting. If you do not have a ticket, please remember to bring proof of
ownership as described above. Admission to the meeting will be facilitated if
tickets are obtained in advance. Tickets may be issued to others at the
discretion of Cendant.
The enclosed proxy is solicited by the Board of Directors of Cendant.
Reference is made to the attached Proxy Statement for further information with
respect to the business to be transacted at the meeting. The Board of Directors
urges you to date, sign and return the enclosed proxy promptly. This will ensure
the presence of a quorum at the meeting. PROMPTLY SIGNING, DATING, AND RETURNING
THE PROXY WILL SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF ADDITIONAL
SOLICITATION. A reply envelope, for which no postage is required if mailed
within the United States, is enclosed for your convenience. Alternatively, in
lieu of returning signed proxy cards, Cendant's stockholders of record can vote
their shares by calling a specially designated telephone number set forth on
the enclosed proxy card. You may change your vote when voting by telephone by
calling and placing another vote but only the last vote will be
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counted. You are cordially invited to attend the meeting in person. The return
of the enclosed proxy will not affect your right to vote if you attend the
meeting in person, as your proxy is revocable at your option.
By order of the Board of Directors,
Jeanne M. Murphy
Secretary
New York, New York
Dated: January __, 2000
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<PAGE>
PROXY STATEMENT
----------------
CENDANT CORPORATION
-----------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY __, 2000
-----------------
The Board of Directors of Cendant Corporation is furnishing this Proxy
Statement in connection with a special meeting to be held at 10:00 a.m., New
York Time, on February __, 2000, at the Ramada Inn and Conference Center, 130
Route 10 West, East Hanover, New Jersey 07936. At this meeting we will ask you
to consider and approve the Tracking Stock Proposal, the related Stock Option
Plan Proposal and the Board Declassification Proposal and we may ask you to
consider and approve the Adjournment Proposal as described in this Proxy
Statement.
The Board of Directors has carefully considered and unanimously
approved the Tracking Stock Proposal, the Stock Option Plan Proposal, the Board
Declassification Proposal and the Adjournment Proposal and recommends that you
vote for them. We describe the proposals in more detail in this Proxy Statement,
which you should read in its entirety before voting.
See "Risk Factors" beginning on page 35 for material risks relating to
the Tracking Stock Proposal.
The date of this Proxy Statement is January __, 2000. We are first
sending this Proxy Statement to stockholders on or about that date.
<PAGE>
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING...............................1
PROXY STATEMENT SUMMARY......................................................10
TRACKING STOCK.............................................................10
CENDANT CORPORATION, CENDANT GROUP
AND MOVE.COM GROUP.......................................................11
Cendant Corporation......................................................11
Cendant Group .......................................................12
Move.com Group .......................................................13
Recent Developments......................................................14
SPECIAL MEETING..............................................................14
PROPOSAL 1 -- THE TRACKING STOCK PROPOSAL....................................16
General .........................................................16
Reasons for the Tracking Stock Proposal....................................17
Summary Comparison of Terms of Existing Common Stock with Terms
of CD Stock and Move.com Stock...........................................18
Cash Management and Allocation Policies....................................27
No Appraisal Rights........................................................27
Material Federal Income Tax Considerations.................................28
PROPOSAL 2 -- STOCK OPTION PLAN PROPOSAL.....................................29
PROPOSAL 3 -- BOARD DECLASSIFICATION PROPOSAL................................29
PROPOSAL 4 -- ADJOURNMENT PROPOSAL...........................................29
CENDANT CORPORATION SUMMARY HISTORICAL CONSOLIDATED
FINANCIAL AND OTHER DATA...................................................30
MOVE.COM GROUP...............................................................31
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Page
----
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA.........................31
Recent Operating Results of Move.com Group.................................32
THE SPECIAL MEETING..........................................................33
RISK FACTORS.................................................................35
Risk Factors Relating to the Tracking Stock Proposal.......................35
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS.................................................46
PROPOSAL 1 -- THE TRACKING STOCK PROPOSAL....................................47
General....................................................................47
Background and Reasons for the Tracking Stock Proposal.....................48
Description of CD Stock and Move.com Stock.................................52
Cash Management and Allocation Policies....................................75
Intercompany Agreements....................................................81
Material Provisions of the Amended and Restated Certificate of
Incorporation, By-laws and Delaware Law..................................84
No Appraisal Rights........................................................88
Financial Advisors.........................................................88
Stock Transfer Agent and Registrar.........................................89
Material Federal Income Tax Considerations.................................89
PROPOSAL 2 -- STOCK OPTION PLAN PROPOSAL.....................................93
Move.com, Inc. 1999 Stock Option Plan.....................................93
New Plan Benefits .........................................................96
PROPOSAL 3 -- BOARD DECLASSIFICATION PROPOSAL................................97
PROPOSAL 4 -- ADJOURNMENT PROPOSAL..........................................100
EXECUTIVE COMPENSATION AND OTHER INFORMATION................................101
Aggregated Option Exercises in 1999 and Fiscal Year-End Option
Values..................................................................104
Director Compensation.....................................................104
Employment Contracts and Termination, Severance and Change of
Control Arrangements....................................................107
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Page
----
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT..........................................112
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...........................114
WHERE YOU CAN FIND MORE INFORMATION.........................................114
STOCKHOLDER PROPOSALS.......................................................117
ANNEX I Illustration of Terms.........................................I-1
ANNEX II Amended and Restated Certificate of Incorporation............II-1
ANNEX III Move.com, Inc. 1999 Stock Option Plan.......................III-1
ANNEX IV Amended By-Laws..............................................IV-1
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<PAGE>
QUESTIONS AND ANSWERS
ABOUT
THE SPECIAL MEETING
Q: WHAT IS "TRACKING STOCK"?
A: "Tracking stock," sometimes referred to as "alphabet stock," "letter
stock" or "targeted stock," is a common stock that is designed to
represent an ownership interest not in the entire corporation which
issues it, but only in a specified group of its assets or businesses.
It is therefore said to track the performance of those assets or
businesses. We propose creating a new series of tracking stock, to be
designated as Move.com Stock, and reclassifying our existing common
stock into a new series of common stock to be designated as CD Stock.
We can not assure you that the market values of CD Stock and Move.com
Stock will in fact track the performance of Cendant Group and Move.com
Group as we intend. Holders of CD Stock and Move.com Stock will
continue to be common stockholders of Cendant, and, as such, will be
subject to all risks associated with an investment in Cendant and all
of our businesses, assets and liabilities.
Q: HOW DOES THE TRACKING STOCK TRACK THE BUSINESS OF MOVE.COM GROUP?
A: The Move.com Stock and CD Stock will have dividend and liquidation
rights and redemption and exchange terms, modeled after other publicly
traded tracking stocks, that attempt to provide economic rights in the
businesses they track that are similar to the rights that common stock
would represent if the "tracked" business were a separate corporation.
Our goal in creating these separate securities is to enable the market
to treat each security as if it represented stock in a separate
corporation and therefore react to the business performance and
transactions of each Group as if it were stock in a separate
corporation. However, there can be no assurance that the Move.com Stock
and CD Stock will accurately reflect the economic performance of each
Group.
The terms of the tracking stock would prohibit the payment of dividends
on such stock in excess of the amounts that would ordinarily be
available for dividends if such tracked business were a separate
corporation. Although Cendant does not intend to pay dividends on
Move.com Stock for the indefinite future, many
<PAGE>
high growth companies do not intend to pay dividends and Cendant does
not believe this will affect the market performance of the Move.com
Stock.
Liquidation rights (i.e. amounts to be received if the company were
liquidated) on the Move.com Stock would be determined based on the
percentage of the fair market value of the Move.com Stock relative to
CD Stock prior to liquidation. In addition, the amount payable to
holders of Move.com Stock in the event of a sale of the businesses of
the Move.com Group to third parties would be based upon the proceeds of
the sale and their proportionate ownership of Move.com Stock; the
holders of CD Stock would not be able to participate except
derivatively through Cendant Group's retained interest in Move.com
Group. We would, however, in those circumstances have the ability to
require the holders of Move.com Stock to exchange their stock for CD
Stock having a value equal to a premium over the market price of the
Move.com Stock, rather than distributing the sale proceeds to holders
of Move.com Stock. In the event of a sale of substantially all of the
assets of Cendant Group (other than the Move.com Group), the proceeds
would be payable only to the holders of the CD Stock and not to the
holders of the Move.com Stock. We are not contemplating the sale of
all the assets of either Cendant Group or Move.com Group.
Q: WHAT IS MOVE.COM GROUP?
A: Move.com Group is a group of businesses owned by Cendant Corporation
that will be engaged in providing a broad range of home-related
services through a new internet services portal at http://www.Move.com.
The website is not yet operational but is expected to become functional
during January 2000. In addition to its main asset, the Move.com and
related websites, the Move.com Group includes Rent Net, Inc., the
MetroRent business and National Home Connections, LLC. Other major
assets of the Move.com group are its rights under contracts with
Cendant and its subsidiaries and its rights under contracts with third
parties. Through arrangements with Cendant Corporation, the Move.com
website provides online home listings from CENTURY 21(R), COLDWELL
BANKER(R) and ERA(R) real estate brands and online local merchant
discount coupons through Welcome Wagon. The Move.com site also allows
users to apply for and obtain mortgage products and services through
arrangements with Cendant Mortgage and provides users with a wealth of
relocation services and information through arrangements with
Cendant Mobility and other third party content and service providers.
Currently, the Move.com Group represents an immaterial part of
Cendant's business operations.
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The following corporate chart shows the Move.com Group within Cendant
Corporation:
Cendant Corporation
Cendant Group* Move.com Group*
Move.com, Inc.
(DE)
6/21/99
Move.com Move.com National Home Rent Net, Inc.
Mortgage, Inc. Operations, Inc. Connections, LLC (DE)
(DE) (DE) (DE) 2/3/99
6/21/99 6/21/99 4/15/99
(1% owned by
Move.com
Operations, Inc.)
* The term "Move.com Group" does not represent a separately incorporated
entity but rather means those businesses, assets and liabilities of Cendant
Corporation which will be engaged in providing a broad range of
home-related services through a new internet services portal. The term
"Cendant Group" does not represent a separately incorporated entity but
rather means all the businesses currently operated by Cendant Corporation
other than the businesses which comprise the Move.com Group. All the assets
attributed to Move.com Group are held by Move.com, Inc. or its
subsidiaries.
Q: WHAT IS THE BUSINESS OF MOVE.COM GROUP?
A: Through its website, Move.com Group will offer consumers a one-stop
solution for their home-related service needs before, during and after
a move, providing those consumers with a simple and efficient way to
manage the entire home buying, moving and relocation process. The
website is not yet operational but is expected to become functional
during January 2000. Customers will enter the Move.com website and have
two primary ways to access our services. First, we will provide
tailored site paths for customers who are in various stages of their
home-related decision. A visitor to the website can select from
planning, buying, selling, financing, renting, moving, renovating and
living options. Each of these paths will contain customized content,
tools and transaction capabilities applicable to each specific
situation. The customer's experience will be simplified by the use of a
path checklist that guides the customer through the various
requirements of his or her home-related decision.
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The second major way to navigate our website will be to use our various
self-serve tools directly. These key tools and features will be
directly available from our home page and will be prominently featured
through a range of quick links throughout the rest of our website.
Some of the key features of the website will include:
o Planning. We will provide customers with an organized plan and
planning checklist that helps them to effectively manage the
various stages of finding a home, from deciding whether to buy
or rent, to moving to a new home.
o Buying. Consumers will be able to search our home listings
using customized criteria and subscribe to an e-mail service
that provides weekly updates of new listings. We will provide
our consumers with information concerning the sale of their
existing home, and the purchase or rental of their new home.
We will also provide neighborhood and school information.
o Renting. Through our website, users will be able to search for
an apartment, vacation rental, senior or corporate housing. We
also will provide customers with information about their
tenant rights.
o Mortgage. We will offer an easy-to-use online home loan
application through Move.com Mortgage. We also will offer
analytical tools for helping consumers decide whether they
will benefit from refinancing. Consumers who already own a
home will be able to use our services to refinance their
existing mortgages.
o Moving. To assist in the actual moving process, we will
provide several tools, including a moving day calendar and a
one-stop shop of moving resources, including packing,
shipping, storage, trucking, insurance providers and the
ability to connect and disconnect utilities and change
addresses online.
o Living. We will also offer a host of valuable resources to
meet consumers' furniture, child care and home improvement
needs. Further, by visiting the Welcome Wagon area of
Move.com's site, consumers will be able to download coupons
for discounts to be redeemed with local merchants.
Q: HOW AND WHEN WILL YOU INITIALLY ISSUE MOVE.COM STOCK?
A: Upon approval of the Tracking Stock Proposal and the Stock Option Plan
Proposal, the options previously granted under the Move.com, Inc. 1999
Stock Option Plan to Move.com Group employees and to Cendant Group
employees will be assumed by Cendant and all existing grants will
become options to purchase Move.com Stock. In connection with our
recent acquisition of MetroRent business for inclusion in the Move.com
Group, we issued shares of nonvoting redeemable common stock of
Move.com, Inc., an indirect subsidiary of Cendant, to the two
shareholders of MetroRent, Inc. Upon the initial public offering of
Move.com Stock those shares of Move.com, Inc. will be exchanged for up
to 293,000 shares of Move.com Stock at a valuation of $20.51 per share.
In addition, we have granted Chatham Street Holdings, LLC the right,
until September 30, 2001, to purchase up to 1,561,000 shares of
Move.com Stock for approximately $16.02 per share. The
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foregoing investments and the resultant share price valuations were
determined through arms' length negotiations of the parties. We may
issue similar securities in connection with other acquisitions or
investments prior to the approval of the Tracking Stock Proposal.
Subject to prevailing market and other conditions, we currently expect
to issue shares of Move.com Stock in a public offering as soon as
practicable following stockholder approval of the Tracking Stock
Proposal and the filing and effectiveness of a registration statement
for that offering. The specific terms of such offering including the
amount of Move.com Stock we issue and the public offering price will
depend upon factors such as stock market conditions and the performance
of Move.com Group.
Unless Cendant Group distributes all or a portion of its retained
interest in Move.com Group to Cendant Group stockholders or you elect
to purchase shares of Move.com Stock in the future, you will not
receive any shares of Move.com Stock and will participate in the
performance of Move.com Stock only through Cendant Group's retained
interest in Move.com Group.
Q: WHAT IS CENDANT GROUP'S RETAINED INTEREST IN MOVE.COM GROUP?
A: After receiving approval to issue Move.com Stock and prior to the
issuance of any such stock, Cendant Group will own 100% of the economic
interest in Move.com Group. This interest is referred to as Cendant
Group's retained interest. Cendant Group's retained interest will not
be represented by actual shares of Move.com Stock and will not carry
any voting rights. Following the issuance of Move.com Stock in a public
offering, private placement or stock option exercise, Cendant Group's
retained interest will decrease or be diluted to the extent such shares
are issued. After an initial public offering of Move.com Stock, we
currently expect the retained interest to be between 50% and 90%. The
retained interest will decrease with any future issuances of Move.com
Stock, whether the proceeds of such issuance are allocated to Cendant
Group or Move.com Group.
Q: WHEN WILL THE TRACKING STOCK PROPOSAL BECOME EFFECTIVE? WHEN WILL YOU
RECLASSIFY MY COMMON STOCK INTO CD STOCK?
A: The Tracking Stock Proposal will become effective as soon as reasonably
practicable after its approval at the meeting when we file an amended
and restated certificate of incorporation with the Secretary of State
of the State of Delaware. We expect this to occur within 1 week after
the meeting. Upon such a filing, your shares of common stock will be
automatically reclassified into shares of CD Stock. We currently have
no obligation to issue shares of Move.com Stock immediately following
the filing of the restated and amended certificate of incorporation,
although we will assume the options previously discussed.
Q: WHAT HAPPENS TO MY COMMON STOCK WHEN THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION IS FILED AND THE TRACKING STOCK PROPOSAL
BECOMES EFFECTIVE? DO I NEED TO SEND IN MY STOCK CERTIFICATES?
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A: Assuming the Tracking Stock Proposal is approved, when we file the
amended and restated certificate of incorporation to effectuate the
Tracking Stock Proposal, each of your shares of Cendant Corporation
common stock will automatically be reclassified into one share of CD
Stock, and your existing stock certificates will automatically
represent that CD Stock. Since the reclassification is automatic, you
do not need to send in your stock certificates or make any notations
reflecting the change.
Q: WILL CD STOCK BE LISTED ON THE NYSE? HOW ABOUT MOVE.COM STOCK?
A: When we reclassify our common stock as CD Stock, it will continue to
trade on the NYSE under the symbol "CD." We currently intend to apply
for listing of Move.com Stock on the NYSE under the symbol "MOV"
concurrently with the first public offering of such securities.
Q: WHAT VOTING RIGHTS WILL I HAVE?
A: Holders of CD Stock and Move.com Stock will vote together as a single
class on all matters except with respect to any amendment to the
certificate of incorporation that would increase or decrease the par
value of the shares of either class or alter or change the powers,
preferences or special rights of the shares of such class so as to
affect them adversely. Each share of CD Stock and Move.com Stock will
entitle the holder to one vote. Accordingly, the issuance of shares of
Move.com Stock will dilute the vote of current Cendant stockholders.
Q: DO YOU INTEND TO PAY DIVIDENDS?
A: We do not expect to pay any dividends on CD Stock or Move.com Stock for
the foreseeable future. Subject to the cash management and allocation
policies regarding the movement of cash between the Groups, we
currently intend to retain all of the earnings of Move.com Group to
finance Move.com Group's operations and fund its future growth and to
use any retained earnings of Cendant Group to finance the operations,
repay indebtedness and fund the future growth of Cendant Group. We
believe that our intention to retain all our earnings for the
indefinite future will not have an adverse impact on the market price
of either class of stock since many high growth companies do not pay
dividends.
Q: WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
A: The Cendant Board of Directors has carefully considered and unanimously
approved the Tracking Stock Proposal, the Stock Option Plan Proposal,
the Board Declassification Proposal and the Adjournment Proposal as
described in the Proxy Statement and recommends that you vote for them.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE TRACKING STOCK PROPOSAL?
WHAT VOTE IS REQUIRED TO APPROVE THE STOCK OPTION PLAN PROPOSAL?
WHAT VOTE IS REQUIRED TO APPROVE THE BOARD DECLASSIFICATION
PROPOSAL? WHAT VOTE IS REQUIRED TO APPROVE THE ADJOURNMENT
PROPOSAL?
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A: The Tracking Stock Proposal requires the affirmative vote of the
holders of a majority of the outstanding shares of Cendant common
stock. The Stock Option Plan Proposal requires the affirmative vote of
the holders of a majority of the shares of Cendant common stock present
in person or represented by proxy at the special meeting and entitled
to vote at the special meeting. In accordance with our amended and
restated certificate of incorporation, the Board Declassification
Proposal requires the affirmative vote of at least 80% of the voting
power of all shares of Cendant entitled to vote generally in the
election of directors. The Adjournment Proposal requires the
affirmative vote of a majority of the votes cast, in person or by
proxy, at the special meeting, if a quorum is present.
Q: WHAT DO I DO IF I HAVE ADDITIONAL QUESTIONS?
A: If you have any questions prior to the special meeting, please call
Cendant Investor Relations at (212) 413-1933.
7
<PAGE>
PROXY STATEMENT SUMMARY
This summary highlights key aspects of the Tracking Stock Proposal, the
Stock Option Plan Proposal, the Board Declassification Proposal and the
Adjournment Proposal described in more detail elsewhere in this Proxy Statement.
This summary is not a substitute for the more detailed information contained in
the rest of this Proxy Statement. For a more comprehensive description of the
Tracking Stock Proposal, the Stock Option Plan Proposal, the Board
Declassification Proposal and the Adjournment Proposal you should read the rest
of this Proxy Statement. Capitalized terms used in this summary have the
meanings given them elsewhere in this Proxy Statement. See "Illustration of
Terms" on page I-1 of Annex I attached hereto.
TRACKING STOCK
Tracking stock represents a separate series of common stock of a
corporation (in this case Cendant) that is intended to track the economic
performance of a specific business segment instead of the overall economic
performance of the company. Because it tracks a specific business segment,
tracking stock has many economic similarities to stock of a subsidiary of the
parent corporation. However, there are a number of differences between tracking
stock and subsidiary stock. In particular, holders of tracking stock have no
direct claim to the businesses' stock or assets and are not represented by a
separate board of directors. Instead, holders of tracking stock are stockholders
of the parent corporation, with a single board of directors and subject to all
of the risks and liabilities of the parent corporation. Accordingly, tracking
stock should not be considered equivalent to stock of a subsidiary which
conducts the tracked business.
Move.com Stock and CD Stock will have dividend and liquidation rights
and redemption and exchange terms, modeled after other publicly traded tracking
stocks, that attempt to provide economic rights in the businesses they track
that are similar to the rights that common stock would have if the "tracked
business" were a separate corporation. Our goal in creating these separate
securities is to enable the market to treat each security as if it represented
an ownership interest in a separate corporation and to react to the business
performance and transactions of each Group as if it were stock in a separate
corporation.
Holders of CD Stock and Move.com Stock will continue to be common
stockholders of Cendant Corporation, and, as such, will be subject to all risks
associated with an investment in Cendant and all of our businesses, assets and
liabilities.
The issuance of shares of Move.com Stock will dilute the vote of
current Cendant stockholders. In addition, Cendant Group's retained interest
will decrease with each issuance of Move.com Stock whether the proceeds of such
issuance are attributed to Cendant Group or Move.com Group. After an initial
public offering of Move.com Stock, we currently expect the retained interest to
be between 50% and 90%.
Subject to provisions in our charter, we can issue CD Stock in exchange
for outstanding shares of Move.com Stock at any time after the 18-month
anniversary of the earlier of (1) initial issuance of Move.com Stock in a public
offering or (2) the first anniversary of a private placement of Move.com Stock,
thereby reversing the effects of the Tracking Stock Proposal.
8
<PAGE>
Cendant Group will not have any voting rights with respect to its
retained interest in Move.com Group. If any cash dividends are paid on the
Move.com Stock, Cendant Group will be credited with an amount of cash equal to
its proportionate interest in such dividend. For further illustrations, see
Annex I to this Proxy Statement.
CENDANT CORPORATION, CENDANT GROUP
AND MOVE.COM GROUP
CENDANT CORPORATION
Cendant Corporation is one of the foremost real estate-related,
travel-related and membership-based consumer and business services companies in
the world.
From an accounting standpoint, we have separated Move.com Group from
Cendant Group which includes the rest of our businesses and a retained interest
in Move.com Group. We have allocated, for financial reporting purposes, all of
our consolidated assets, liabilities, revenue, expenses and cash flow between
Move.com Group and Cendant Group. These two divisions are sometimes referred to
in this Proxy Statement as "Groups." Currently, Move.com Group represents an
immaterial part of Cendant's business operations. Move.com Group has been
"separated" from Cendant Group from an accounting standpoint by transferring
those assets and liabilities that comprised Move.com Group from the balance
sheets of Cendant Group, so that Move.com Group assets and liabilities are not
reflected in the balance sheet of Cendant Group except with respect to its
retained interest. The actual assets and liabilities of Move.com Group will
remain assets and liabilities of Cendant Corporation and the Tracking Stock
Proposal will not affect the interests of Cendant's creditors. Since the
inception of the Move.com Group on July 1, 1999, the assets, liabilities,
revenues, expenses and cash flows have consisted of the assets, liabilities,
revenues, expenses and cash flows of Rent Net, Inc. which has been owned by
Cendant since January 1996, the Metro Rent business which was acquired in the
fourth quarter of 1999 and National Home Connections LLC, which was acquired in
May 1999. Prior to July 1, 1999, the financial results of Move.com Group's
businesses consisted of the results of Rent Net and National Home Connections.
The assets and liabilities were allocated between each Group based on the
business related to such assets and liabilities. Cendant's historical financial
statements include internet real estate assets and liabilities which are used
and will continue to be used in Cendant Group's business and others which will
have been used in businesses which will be conducted by the Move.com Group in
the future. In some cases, determination of which Group would conduct the future
business was made based on contractual restrictions, such as the continuation of
the use of individual internet websites by the Century 21, Coldwell Banker and
ERA franchise operations as part of the Cendant Group, while in other cases, a
determination was made based solely on our belief as to which Group was more
suitable for the future development of that portion of the business, with the
presumption being that if the business was predominately internet related and
had a home-related service function, it would be allocated to the Move.com
Group.
Cendant Corporation will provide separate financial statements and
management's discussion and analysis for Move.com Group as well as for Cendant
Corporation.
Stockholder approval of the Tracking Stock Proposal will allow us to
issue Move.com Stock, intended to reflect the performance of Move.com Group, and
CD Stock, intended to reflect the performance of Cendant Group. We briefly
describe Cendant Group and Move.com Group below.
9
<PAGE>
CENDANT GROUP
Cendant Group includes:
o All of the businesses currently operated by Cendant in our
four principal divisions: travel related services; real estate
related services; direct marketing services and other consumer
and business services other than businesses which comprise
Move.com Group.
o A retained interest in Move.com Group. After receiving
approval to issue Move.com Stock and prior to the issuance of
any such stock, Cendant Group's retained interest in Move.com
Group will be 100% and will represent 100% of the economic
interest in Move.com Group. After an initial public offering
of Move.com Stock, we currently expect the retained interest
to be between 50% to 90%. See Annex I for examples and
illustrations relating to Cendant Group's retained interest in
Move.com Group.
Our principal executive offices are located at 9 West 57th Street, New
York, New York 10019. Our telephone number is (212) 413-1800.
MOVE.COM GROUP
Move.com Group is a group of businesses which will provide a broad
range of home-related services through a new internet services portal at
http://www.Move.com. In addition to its main asset, the Move.com website, the
Move.com Group includes the businesses of Rent Net, Inc. (a popular residential
rental and relocation guide on the internet), the Metro Rent business (an online
provider of apartment rental listings for buildings with 25 or fewer units) and
National Home Connections, LLC (a facilitator of connecting and disconnecting
utilities, processor of address changes, and provider of moving-related services
and products). Certain aspects of National Home Connections, LLC are not
currently internet based but are expected to become internet based during 2000.
The offline resources of Cendant's Real Estate Division as well as individual
websites of each of Cendant's real estate brands will remain part of Cendant
Group. Through agreements with Cendant Corporation, the Move.com website will
provide online home listings from CENTURY 21(R), COLDWELL BANKER(R) and ERA(R)
real estate brands and online local merchant discount coupons through Welcome
Wagon (a distributor of welcoming packages to new homeowners and consumers
throughout the United States and Canada with more than 55,000 participating
merchants). The Move.com site also will allow users to apply for and obtain
mortgage products and services through arrangements with Cendant Mortgage and
provides users with a wealth of relocation services and information through
arrangements with Cendant Mobility and other third party content and service
providers. In addition, through contractual sponsorships with third parties,
Move.com Group will enable its customers to obtain information about and make
online purchases of numerous products and services related to the home,
including, among others, self storage facilities, furniture and renovating
services. Currently, the Move.com Group represents an immaterial part of
Cendant's business operations.
10
<PAGE>
RECENT DEVELOPMENTS
On December 17, 1999, Rent Net, a wholly owned subsidiary of Cendant
Corporation and part of the Move.com Group, purchased substantially all of the
assets and assumed substantially all of the liabilities of MetroRent, Inc., for
a total consideration of up to $3 million in cash and up to $6 million of
stock to be paid over several years subject to meeting certain performance
targets. The stock portion of the consideration consists of a new class of
nonvoting common stock of Move.com, Inc., which is mandatorily redeemable for
Move.com Stock upon a public offering of Move.com Stock. The Move.com, Inc.
nonvoting common stock is redeemable for up to 293,000 shares of Move.com Stock
valued at $20.51 per share. In the event that a public offering has not occurred
by December 31, 2005, Move.com, Inc. must redeem each outstanding share of
Move.com, Inc. common stock for cash and may do so at any time at its option.
In September 1999, Cendant entered into an agreement with Chatham
Street Holdings, LLC pursuant to which Chatham was granted the right, until
September 30, 2001, to purchase up to 1,561,000 shares of Move.com Stock for
approximately $16.02 per share. In addition, for every two shares of Move.com
Stock purchased by Chatham pursuant to the letter agreement, Chatham will be
entitled to receive a warrant to purchase one share of Move.com Stock at a price
equal to $64.08 per share and a warrant to purchase one share of Move.com Stock
at a price equal to $128.16 per share.
Move.com Group's principal executive offices are located at 200 Vallejo
Street, San Francisco, California 94111. Move.com Group's telephone number at
that location is (415) 229-1050. Move.com Group's world wide website is
http://www.Move.com.
SPECIAL MEETING
TIME, DATE AND PLACE................10:00 a.m., New York Time, on February __,
2000, at the Ramada Inn and Conference
Center, 130 Route 10 West, East Hanover, New
Jersey 07936
RECORD DATE.........................January 24, 2000.
PROPOSALS TO BE CONSIDERED VOTE REQUIRED FOR APPROVAL
o Proposal 1 -- The Tracking Proposal 1 requires the affirmative vote of
Stock Proposal the holders of a majority of the outstanding
shares of existing common stock.
o Proposal 2 -- Stock Option Proposal 2 requires the affirmative vote of
Plan Proposal the holders of a majority of the shares of
existing common stock present in person or
represented by proxy at the special meeting
and entitled to vote at the special meeting.
o Proposal 3 -- Board Proposal 3 requires the affirmative vote of
Declassification Proposal at least 80% of the voting power of all
shares of Cendant entitled to vote generally
in the election of its directors.
11
<PAGE>
o Proposal 4 -- Adjournment Proposal 4 requires the affirmative vote of
Proposal the holders of a majority of the shares of
existing common stock present in person or
represented by proxy at the special meeting
and entitled to vote at the special meeting.
Directors and executive officers owning
2,662,970 shares, or less than 1% of
outstanding Cendant common stock have
indicated that they intend to vote their
shares to approve the four proposals.
QUESTIONS..........................If you have any questions prior to the
special meeting, please call Cendant
Investor Relations at (212) 413-1933.
THE CENDANT BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED AND UNANIMOUSLY
APPROVED THESE PROPOSALS AND RECOMMENDS THAT YOU VOTE FOR THEM.
12
<PAGE>
PROPOSAL 1 -- THE TRACKING STOCK PROPOSAL
GENERAL
At the special meeting, we will ask you to consider and approve the
Tracking Stock Proposal described in this Proxy Statement. Stockholder approval
of the Tracking Stock Proposal would allow us to amend and restate our charter
to:
o Increase the number of authorized shares of common stock from
2,000,000,000 to 2,500,000,000, initially comprised of
2,000,000,000 shares of CD Stock and 500,000,000 shares of
Move.com Stock.
o Create a new series of common stock called Move.com Stock that
could be issued from time to time by the Board of Directors.
o Reclassify each outstanding share of existing common stock
into a share of CD Stock.
We have allocated, for financial reporting purposes, all of Cendant's
consolidated assets, liabilities, revenue, expenses and cash flow between
Cendant Group and Move.com Group. Since July 1, 1999, the assets, liabilities,
revenues, expenses and cash flows of the Move.com Group have consisted of the
assets, liabilities, revenues, expenses and cash flows of Rent Net, Inc. which
has been owned by Cendant since January 1996, the Metro Rent business which was
acquired in the fourth quarter of 1999, National Home Connections LLC, which was
acquired in May 1999 and Move.com Group's rights under its contracts with
Cendant and its subsidiaries and third parties. In the future, we will publish
financial statements of Move.com Group together with consolidated financial
statements of Cendant Corporation.
Upon approval of the Tracking Stock Proposal and Stock Option Plan
Proposal, the options previously granted under the Move.com, Inc. 1999 Stock
Option Plan to Move.com Group employees and to Cendant Group employees will be
assumed by Cendant and all existing grants will become options to purchase
Move.com Stock. Subject to prevailing market and other conditions, we currently
expect to issue shares of Move.com Stock in a public offering as soon as
reasonably practicable following stockholder approval of the Tracking Stock
Proposal. The specific terms of such offering, including the amount of Move.com
Stock we issue, will depend upon factors such as stock market conditions and the
performance of Move.com Group. After an initial public offering of Move.com
Stock, we currently expect the retained interest to be between 50% and 90%.
Holders of CD Stock and Move.com Stock will have one vote per share and
will vote together as a class on matters submitted to a vote of stockholders
except with respect to any amendment to the certificate of incorporation that
would increase or decrease the par value of the shares of either class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. Accordingly, the issuance of shares of Move.com
Stock will dilute the vote of current Cendant stockholders.
Assuming the Tracking Stock Proposal is approved, we expect to file the
amended and restated charter implementing the Tracking Stock Proposal and
reclassify your common stock shortly following the meeting and prior to granting
options for Move.com Stock.
13
<PAGE>
REASONS FOR THE TRACKING STOCK PROPOSAL
We believe the Tracking Stock Proposal is in the best interests of
Cendant and its stockholders for the following reasons:
o The proposal will permit investors and research analysts to
review separate information about Move.com Group and
separately value Move.com Stock. This should encourage
investors and analysts to focus more attention on Move.com
Group and result in greater market recognition of the value of
Move.com Group to Cendant by highlighting the operations of
Move.com Group through enhanced financial reporting and by
attracting new internet-focused investors who would otherwise
not purchase Cendant's common stock.
o The proposal will enable us to issue Move.com Stock in private
or public financings. In recent years, a number of publicly
traded companies with activities consisting of more than one
line of business have found that the market valuation of the
entire company does not necessarily reflect the aggregate
value of their separate businesses. In order to enable the
market value of the whole company to more closely track that
of similar but separate companies engaged in the same
businesses, many of these companies have either publicly sold
a portion of a subsidiary or subsidiaries or have reclassified
their companies' stock into two or more series of tracking
stock. We believe that the creation of the Move.com Group and
the issuance of Move.com Stock will enable the market to more
effectively value the Move.com Group as if it were a separate
corporation, and that Cendant Group's retained interest in the
Move.com Group should also reflect that valuation. Unlocking
this value in the public markets would make Move.com
securities a new currency available to Cendant both for
raising additional equity and for future acquisitions. While
Cendant believes these securities will be valued more highly
by the market than Cendant's currently outstanding common
stock, future values will depend on future performance and
general market conditions and there is no assurance that these
beliefs will ever be realized or sustained.
o The proposal will enable us to grant stock options tied to
Move.com Stock or CD Stock, thereby providing more focused
incentives to Move.com Group and Cendant Group management and
employees. The options granted to the employees of Move.com
Group will more effectively incentivize them by creating a
more independent atmosphere as well as benefit plans with
equity that is directly linked to the performance of their
business. Move.com options will also be granted to Cendant
Group employees making direct contributions to Move.com Stock
through intercompany business relationships and arrangements
to facilitate cooperation between the two Groups.
o The proposal will provide us with greater flexibility to raise
capital and respond to strategic opportunities (including
acquisitions), because it will allow us to issue either CD
Stock or Move.com Stock as appropriate under the
circumstances. In general, Move.com Stock should represent a
more attractive currency for acquisitions in the internet
sector.
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<PAGE>
o The proposal is expected to enable us to realize more value from
Move.com Group while preserving the financial, tax, operational,
strategic and other benefits of being a single consolidated
entity. By remaining a single consolidated entity, both Groups
will remain a part of Cendant thereby preserving greater
flexibility to maximize synergies between the two Group's
businesses through economies generated in advertising, sales,
corporate overhead, and economies of scale obtained by using a
single carrier for telecommunications and other purchasing
requirements such as office supplies.
SUMMARY COMPARISON OF TERMS OF EXISTING COMMON STOCK WITH TERMS OF CD STOCK AND
MOVE.COM STOCK
The following discusses the material terms of and changes to the terms of
your existing common stock by comparing terms of our existing common stock to
the proposed terms of CD Stock and Move.com Stock. This comparison is not
complete and should be read together with the more detailed information
contained in the rest of this Proxy Statement. In particular, see "Proposal 1 --
The Tracking Stock Proposal -- Description of CD Stock and Move.com Stock."
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
BASIC INVESTMENT CHARACTERISTICS: Our existing common We intend CD Stock to reflect We intend Move.com
stock reflects the the market value of Cendant Stock to reflect the
performance of all of Group. Cendant Group includes market value of
our businesses. all the businesses currently Move.com Group, our
operated by Cendant in its four new internet home-related
principal divisions: travel services business.
services; real estate services; Move.com Group will
direct marketing services and offer consumers a variety
other consumer and business of home-related products
services (other than Rent Net, and services providing
Inc. and National Home consumers with a
Connections) and a retained one-stop solution for all
interest in Move.com Group. their home-related
product and service
needs before, during and
after their actual move.
We can not assure you that the We can not assure you
market value of CD Stock will that the market value of
in fact reflect the performance Move.com Stock will in
of Cendant Group as we intend. fact reflect the
Holders of CD Stock will performance of
continue to be common Move.com Group as we
stockholders of Cendant and, as intend. Holders of Move
such, will be subject to all risks .com Stock will continue
associated with an investment in to be common stockholders
Cendant and all of our of Cendant and, as such,
businesses, assets and liabilities. will be associated with an
investment in Cendant
and all of our businesses,
assets and liabilities.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
ISSUANCE: Our existing common The amendment and restatement Upon approval of the
stock is already out of the amended and restated Tracking Stock Proposal
standing. certificate of incorporation will and the Stock Option Plan
reclassify each outstanding share Proposal, options
of existing common stock into a previously granted under
share of CD Stock. the Move.com, Inc. 1999
Stock Option Plan to
Move.com Group employees
and to Cendant Group
employees will be assumed
by Cendant and all
existing grants will
become options to purchase
Move.com Stock. Subject to
prevailing market and
other conditions, we
currently expect to
Move.com Stock in a public
offering as soon as
reasonably practicable
following
stockholder approval
of the Tracking
Stock Proposal. The
specific terms of
such offering
including the amount
of Move.com Stock we
issue will depend
upon factors such as
stock market
conditions and the
performance of
Move.com Group.
RETAINED INTEREST: N/A We would adjust N/A
the retained
interest of Cendant
Group in Move.com
Group (which would
initially be 100%)
to reflect
issuances,
distributions or
repurchases of
Move.com Stock,
capital
contributions to, or
returns of capital
from, Move.com Group
and other events.
AUTHORIZED AND OUTSTANDING STOCK: We are currently Stockholder approval of the Stockholder approval of
authorized to issue only Tracking Stock Proposal will the Tracking Stock
one series of common authorize us to issue two series Proposal will authorize us
stock. of common stock- CD Stock to issue two series of
and Move.com Stock. common stock-CD Stock and
Move.com Stock.
We are currently The Tracking Stock Proposal The Tracking Stock
authorized to issue up to will authorize us to increase the Proposal will authorize us
2,000,000,000 shares of number of authorized shares to to increase the number of
common stock. 2,500,000,000 shares of authorized shares to
common stock, initially 2,500,000,000 shares of
comprised of 2,000,000,000 common stock, initially
shares of CD Stock and comprised of
500,000,000 shares of 2,000,000,000 shares of
Move.com Stock. CD Stock and
500,000,000 shares of
Move.com Stock.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
______ shares of Immediately following the After the Tracking Stock
existing common stock implementation of the Tracking Proposal is implemented,
were outstanding on Stock Proposal, ______ shares we expect to issue from
_______ __, 2000. of CD Stock will be outstanding, time to time shares of
These shares count based on the number of shares of Move.com Stock. These
against the total number existing common stock shares, and the shares of
of shares of common outstanding on _________ __, CD Stock then
stock we are authorized 2000. These shares, and any outstanding, will count
to issue. shares of Move.com Stock against the total number
outstanding from time to time, of shares of common
will count against the total stock we are authorized to
number of shares of common issue.
stock we are authorized to issue.
DIVIDENDS: We currently intend to We currently intend to retain all We currently intend to
retain all of our earnings of our earnings for use in the retain all of our earnings
for use in the operation operation and expansion of our for use in the operation
and expansion of our business. We do not expect to and expansion of our
business. We do not pay any dividends on CD Stock business. We do not
expect to pay any for the foreseeable future. expect to pay any
dividends on our dividends on Move.com
existing common stock Stock for the foreseeable
for the foreseeable future.
future.
We are permitted to pay We will be permitted to pay We will be permitted to
dividends out of the dividends on CD Stock out of pay dividends on
assets of Cendant legally the lesser of (1) the assets of Move.com Stock (and
available for the Cendant legally available for the corresponding amounts to
payment of dividends payment of dividends under Cendant Group with
under Delaware law. Delaware law and (2) the respect to its retained
amount that would be legally interest in Move.com
available for the payment of Group) out of the lesser
dividends under Delaware law if of (1) the assets of
Cendant Group were a separate Cendant legally available
Delaware corporation and for the payment of
Cendant Group's retained dividends under Delaware
interest in Move.com Group law and (2) the amount
were represented by outstanding that would be legally
shares. available for the payment
of dividends under
Delaware law if
Move.com Group were a
separate Delaware
corporation.
We may pay dividends We may pay dividends
exclusively on the CD Stock, exclusively on the
exclusively on the Move.com Move.com Stock,
Stock, or on both, in equal or exclusively on the CD
unequal amounts. The Board of Stock, or on both, in
Directors will not be required to equal or unequal amounts.
consider the relative available The Board of Directors
dividend amounts, the amount of will not be required to
dividends previously declared on consider the relative
either the CD Stock or the available dividend
Move.com Stock, their relative amounts, the amount of
voting or liquidation rights or dividends previously
any other factor. declared on either the
Move.com Stock or the
CD Stock, their
relative voting or
liquidation rights
or any other factor.
MANDATORY None. If we disposed of all or If we disposed of all or
DIVIDEND, substantially all of the assets of substantially all of the
REDEMPTION OR EXCHANGE ON Cendant Group and the assets of Move.com
disposition was not an exempt Group and the disposition
disposition, we would be was not an exempt
required to disposition, we would be
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
DISPOSITION choose one of the required to choose one of
OF ASSETS: following three alternatives: alternatives:
o pay a dividend to holders of o pay a dividend to
CD Stock in an amount equal holders of Move.com
to their proportionate interest Stock in an amount
in the net proceeds of such equal to their
disposition, proportionate interest
in the net proceeds of
such disposition,
o redeem from holders of CD o redeem from holders of
Stock, for an amount equal to Move.com Stock, for
their proportionate interest in an amount equal to
the net proceeds of such dis their proportionate in
position, outstanding shares terest in the net pro
of CD Stock or ceeds of such disposi
tion, outstanding
shares of Move.com
Stock or
o issue Move.com Stock in o issue CD Stock in
exchange for outstanding CD exchange for
Stock at a 10% premium outstanding Move.com
(based on the average market Stock at a 10%
value of CD Stock as premium (based on the
compared to the average average market value
market value of Move.com of Move.com Stock as
Stock over a specified 20 compared to the
trading Day period prior to average market value
the exchange). of CD Stock over a
specified 20 trading
day period prior to the
exchange).
An exempt disposition An exempt disposition
means any of the means any of
following: the following:
o a disposition in connection o a disposition in
with the liquidation, connection with the
dissolution or winding-up of liquidation, dissolution
Cendant and the distribution or winding-up of
of assets to stockholders, Cendant and the
distribution of assets
to stockholders,
o a disposition to any person or o a disposition to any
entity controlled by Cendant person or entity
(as determined by the Board controlled by Cendant
of Directors in its sole (as determined by the
discretion), Board of Directors in
its sole discretion),
o a disposition by either Group o a disposition by either
for which Cendant receives Group for which
consideration primarily Cendant receives
consisting of equity securities consideration primarily
of an entity which is primarily consisting of equity
engaged or proposes to securities of an entity
engage primarily in one or which is primarily
more businesses similar or engaged or proposes to
complementary to businesses engage primarily in one
conducted by such Group or more businesses
prior to the disposition, as similar or
determined by the Board of complementary to
Directors in its sole businesses conducted
discretion, by such Group prior to
the disposition, as de
termined by the Board
of Directors in its sole
discretion,
o a dividend, out of
Move.com Group's
assets, to holders of
Move.com Stock and a
transfer of a
corresponding amount
of
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
Move.com Group's assets to
Cendant Group in respect of
its retained interest in
o a dividend, out of Cendant Move.com Group,
Group's assets, to holders of
CD Stock and
o any other
o any other disposition, if disposition, if (1)
(1) at the time of the at the time of the
disposition there is disposition there is
only one class of only one class of
common stock common stock
outstanding, or (2) outstanding, or (2)
before the 30th before the 30th
trading day trading day
following the following the
disposition we have disposition we have
mailed a notice mailed a notice
stating that we are stating that we are
exercising our right exercising our right
to exchange all of to exchange all of
the outstanding the outstanding
shares of CD Stock shares of CD Stock
or Move.com Stock or Move.com Stock
for newly issued for newly issued
shares of the other shares of the other
series of common series of common
stock as stock as
contemplated under contemplated under
"--Optional Exchange "--Optional Exchange
of One Series of of One Series of
Common Stock For The Common Stock For The
Other Series." Other Series."
Any exchange would impact Any exchange would impact
Move.com Stockholders at such current Cendant stockholders
time by diluting their economic by diluting their economic
interests because we would be interests because we would
required to issue shares of be required to issue shares
Stock with a market value in of CD Stock with a market
excess of the market value of value in excess of the
shares of CD Stock so market value of shares of
exchanged. Move.com Stock so
exchanged.
EXCHANGE FOR N/A N/A On and after the
CD STOCK OR 18-month anniversary
MOVE.COM of the earlier of
STOCK AT (1) the initial
CENDANT'S issuance of Move.com
OPTION: Stock in a public
offering or (2) the
first anniversary of
a private placement
of Move.com Stock,
we will have the
right to issue CD
Stock in exchange
for outstanding
Move.com Stock at a
premium. The premium
will initially be
20% and will decline
ratably each month
over the following
18 months to 15%.
Prior to the third From and after the
anniversary of the third anniversary of
earlier of (1) the the earlier of (1)
initial issuance of the initial issuance
Move.com Stock in a of Move.com Stock in
public offering or a public offering or
(2) the first (2) the first
anniversary of a anniversary of a
private placement of private placement
Move.com
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
Stock, Cendant will not have the of Move.com Stock, we will have
right to cause the exchange of CD the right, if outstanding
Stock for Move.com Stock. Move.com Stock exceeds 40%
From and after such time, we of total market capitalization
will have the right, if but has not exceeded 60% of
outstanding Move.com Stock total market capitalization, to
exceeds 40% of total market issue either series of common
capitalization but has not stock in exchange for the other
exceeded 60% of the total without a premium. In the
market capitalization, to issue event that Move.com Stock
either series of common stock in exceeds 60% of total market
exchange for the other without a capitalization, we will lose the
premium. right to effect an exchange
without a premium during such
period.
The exchange ratio that will The exchange ratio that will
result in an exchange without a result in an exchange without a
premium will be based on the premium will be based on the
average market value of the average market value of the
series of the common stock series of the common stock
being exchanged as compared being exchanged as compared
to the average market value of to the average market value of
the other series of common the other series of common
stock during the 20 consecutive stock during the 20
trading day period ending on, consecutive trading day period
and including, the fifth trading ending on, and including, the
day immediately preceding the fifth trading day immediately
date on which we mail the preceding the date on which
notice of exchange to holders of we mail the notice of exchange
the outstanding shares being to holders of the outstanding
exchanged. shares being exchanged.
Notwithstanding the
exchange provisions
outlined above, if we
receive an opinion of tax
counsel to the effect that
as a result of changes in
tax law either (i) we, our
subsidiaries or
affiliates, successors or
stockholders are, or will
be, subject to tax upon
the issuance of either of
the CD Stock or the
Move.com Stock or (ii)
either the CD Stock or the
Move.com Stock is not, or
will not be, treated
solely as our stock, we
will have the right to
issue shares of CD Stock
in exchange for
outstanding shares of
Move.com Stock at a 10%
premium, regardless of
when such adverse tax law
changes take place.
We will have the right, on or N/A
after the third anniversary of the
earlier of (1) the initial issuance
of Move.com Stock in a public
offering or (2) the first
anniversary of a private
placement of Move.com Stock,
when
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
outstanding Move.com
Stock exceeds 60% of total
market capitalization, to issue
Move.com Stock in exchange
for outstanding CD Stock at a
15% premium. We will lose the
right to effect such an exchange
during the period when
Move.com Stock equals or falls
below 60% of total market
capitalization.
The exchange ratio that will The exchange ratio that will
result in the specified premium result in the specified premium
will be calculated based on the will be calculated based on the
average market value of CD average market value of CD
Stock as compared to the Stock as compared to the
average market value of average market value of
Move.com Stock during the 20 Move.com Stock during the 20
consecutive trading day period consecutive trading day period
ending on, and including, the ending on, and including, the
fifth trading day immediately fifth trading day immediately
preceding the date on which we preceding the date on which
mail the notice of exchange to we mail the notice of exchange
holders of the outstanding to holders of the outstanding
shares being exchanged. shares being exchanged.
Move.com Stock will exceed Move.com Stock will exceed
60% of total market 40% of total market
capitalization or 40% of total capitalization if the market
market capitalization if the capitalization of the
market capitalization of the outstanding Move.com Stock
outstanding Move.com Stock exceeds 40% of the total
exceeds 60% or 40%, as the market capitalization of both
case may be, of the total market series of common stock for 30
capitalization of both series of trading days during any 60
common stock for 30 trading consecutive trading day period.
days during any 60 consecutive
Trading Day period.
Thereafter, Move.com Stock N/A
will fall below 60% of total
market capitalization if the
market capitalization of the
outstanding Move.com Stock
falls below 60% of the total
market capitalization of both
series of common stock for 30
trading days during any 60
consecutive trading day period.
EXCHANGE FOR None. We will have the right at any We will have the right at any
STOCK OF A time to transfer all of the assets time to transfer all of the assets
SUBSIDIARY AT and liabilities of Cendant Group and liabilities of Move.com
CENDANT'S to a subsidiary and issue all of Group to a subsidiary and issue
OPTION: the stock of that subsidiary to all of the stock of that
the holders of the CD Stock in subsidiary to the holders of
exchange for all of the Move.com Stock and to the
outstanding CD Stock. Cendant Group in exchange
for all of the outstanding
Move.com Stock and the
elimination of the retained
interest.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
------------------------- -------------------------------- -------------------------
<S> <C> <C> <C>
VOTING RIGHTS: One vote per share. One vote per share. One vote per share.
Holders of CD Stock and Holders of CD Stock and
Move.com Stock will vote Move.com Stock will vote
together as a single class, except together as a single class,
if any amendment to the charter except if any amendment to the
would increase or decrease the charter would increase or
par value of the shares of either decrease the par value of the
class or alter or change the shares of either class or alter or
powers, preferences or special change the powers,
rights of the shares of such class preferences or special rights of
so as to affect them adversely. the shares of such class so as
Each share will continue to to affect them adversely. Each
have one vote per share share will continue to have one
following a stock split, stock vote per share following a
dividend or similar stock split, stock dividend or
reclassification. Cendant similar reclassification.
Group's retained interest in
Move.com Group will not carry
any voting rights.
LIQUIDATION: Upon liquidation of Upon liquidation of Cendant, Upon liquidation of Cendant,
Cendant, holders of holders of CD Stock and holders of CD Stock and
existing common Move.com Stock will be Move.com Stock will be
stock are entitled to entitled to receive the net assets entitled to receive the net
receive the net assets of Cendant, if any, remaining assets of Cendant, if any,
of Cendant, if any, for distribution to stockholders remaining for distribution to
remaining for (after payment or provision for stockholders (after payment or
distribution to all liabilities of Cendant and provision for all liabilities of
stockholders (after payment of the liquidation Cendant and payment of the
payment or provision preference payable to any liquidation preference payable
for all liabilities of holders of preferred stock). to any holders of preferred
Cendant and payment Amounts due upon liquidation stock). Amounts due upon
of the liquidation in respect of shares of CD Stock liquidation in respect of shares
preference payable to and shares of Move.com Stock of CD Stock and shares of
any holders of will be distributed pro rata in Move.com Stock will be
preferred stock). proportion to the average distributed pro rata in
market value of CD Stock and proportion to the average
the average market value of market value of CD Stock and
Move.com Stock over a the average market value of
specified 20-trading day period Move.com Stock over a
prior to liquidation. specified 20-trading day period
prior to liquidation.
STOCK NYSE under the NYSE under the symbol "CD." We currently intend to apply
EXCHANGE symbol "CD." for listing of Move.com Stock
LISTINGS: on the NYSE under the symbol
"MOV" concurrently with the
first public offering of such
securities.
</TABLE>
22
<PAGE>
CASH MANAGEMENT AND ALLOCATION POLICIES
In order to prepare separate financial statements for Move.com Group,
Cendant has allocated all of its consolidated assets, liabilities, revenue,
expenses and cash flow between Cendant Group and Move.com Group. Thus, the
financial statements for Cendant Corporation will include separate financial
data for each Group.
Cendant manages most treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the issuance,
repayment and repurchase of short-term and long-term debt and the issuance and
repurchase of common stock and preferred stock. Each Group will remit its cash
receipts (other than receipts of foreign operations or operations that are not
wholly owned) to Cendant, and Cendant will generally fund each Group's cash
disbursements (other than disbursements of foreign operations or operations
that are not wholly owned) on a daily basis.
Cendant will allocate the cost of various corporate general and
administrative services and shared services to the Groups generally based on
utilization. Where utilization is not warranted, overhead will be allocated on a
percentage of revenues basis where practicable.
Income tax expense, which is determined on a consolidated basis, will
be allocated to Cendant Group and Move.com Group, and reflected in the financial
statements for Move.com Group in accordance with Cendant's tax allocation
policy. If application of the allocation policy results in a positive amount,
such amount will be allocated to Move.com Group as a tax expense. If application
of the allocation policy results in a negative amount, such amount will be
allocated to Move.com Group as a tax benefit.
For a more complete description of how we will allocate cash between
Cendant Group and Move.com Group, see "Proposal 1 -- The Tracking Stock Proposal
- -- Cash Management and Allocation Policies."
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, you will not have appraisal
rights in connection with the Tracking Stock Proposal.
23
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
We have been advised by Skadden, Arps, Slate, Meagher & Flom LLP that
neither you nor Cendant will recognize income, gain or loss for federal income
tax purposes as a result of the adoption of the Tracking Stock Proposal.
However, the Internal Revenue Service could disagree. There are no court
decisions or other authorities bearing directly on the effect of implementation
of a proposal such as the Tracking Stock Proposal. In addition, the Internal
Revenue Service has announced that it will not issue rulings on the
characterization of stock with characteristics similar to CD Stock or Move.com
Stock. Therefore, the tax treatment of the Tracking Stock Proposal is subject to
some uncertainty under current law.
In light of the foregoing, you are urged to consult your tax advisor
regarding the tax consequences of the Tracking Stock Proposal, including the
state, local and any foreign tax consequences.
24
<PAGE>
PROPOSAL 2 -- STOCK OPTION PLAN PROPOSAL
At the special meeting, we will also ask you to consider and approve a
proposal to approve the assumption by Cendant of the Move.com, Inc. 1999 Stock
Option Plan and the existing grants thereunder. Cendant does not currently
intend to issue any options under the Move.com, Inc. 1999 Stock Option Plan to
its Chairman of the Board, President and Chief Executive Officer. For a more
detailed description of the proposal to approve this plan, see "Proposal 2 --
Stock Option Plan Proposal."
PROPOSAL 3 -- BOARD DECLASSIFICATION PROPOSAL
At the special meeting, we will also ask you to consider and approve a
proposal to amend Article 9 of our amended and restated certificate of
incorporation to eliminate the provisions for the classification of Cendant's
Board of Directors effective as of the annual meeting of stockholders in 2000.
The terms of the proposed settlement of a class action lawsuit against us
requires us to present the Board Reclassification Proposal to our stockholders
for approval. We are also presenting this proposal to our stockholders at the
meeting because our stockholders approved a non-binding stockholder proposal at
our 1999 annual meeting of stockholders recommending the declassification of our
Board of Directors. If the Board Declassification Proposal is approved, then
each person elected a director at the annual meeting of stockholders in 2000 and
subsequent annual meetings of stockholders will be elected for a term of one
year and until their respective successors are elected and qualified. For a more
detailed description of the proposal to declassify Cendant's Board of Directors,
see "Proposal 3 -- Board Declassification Proposal."
PROPOSAL 4 -- ADJOURNMENT PROPOSAL
At the special meeting, we may also ask you to consider and approve a
proposal to adjourn the special meeting, which adjournment could be used for the
purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the Tracking Stock Proposal and the Stock Option
Plan Proposal.
25
<PAGE>
CENDANT CORPORATION
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL
AND OTHER DATA
The following table presents summary historical consolidated data for
Cendant Corporation as of and for the nine months ended September 30, 1999 and
1998 and as of and for the years ended December 31, 1998, 1997 and 1996. This
data was derived from, and should be read in conjunction with, the Consolidated
Financial Statements of Cendant Corporation. After the issuance of Move.com
Stock, Cendant Corporation will report per share data for each separate class of
common stock, using the two class method. Earnings per share is determined for
each class of stock based on the separate earnings attributed to the respective
Group.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------- --------------------------------------
1999 1998 1998 1997 1996
--------------------------- ----------- --------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue, net........................... $ 4,118.7 $ 3,865.1 $ 5,283.8 $ 4,240.0 $ 3,237.7
Depreciation and amortization.......... 277.0 241.3 322.7 237.7 145.5
Income from operations................. 1,834.0 842.1 428.9 307.9 547.8
Interest expense, net.................. 153.8 72.9 113.9 50.6 14.3
Income from continuing operations
before income taxes and minority
interest(1).......................... 1,680.2 769.2 315.0 257.3 533.5
Net income (loss)...................... 1,426.0 436.9 539.6 (217.2) 330.0
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.............. $ 623.5 $ 1,008.7 $ 67.0 $ 448.1
Total assets........................... 14,912.8 20,216.5 14,073.4 12,762.5
Total long-term debt................... 3,344.3 3,362.9 1,246.0 780.8
Stockholders' equity................... 3,849.3 4,835.6 3,921.4 3,955.7
OTHER DATA:
Net cash provided by operating
activities........................... $ 2,026.5 $ 784.1 $ 808.0 $ 1,213.0 $ 1,493.4
Net cash provided by (used in)
investing activities................. 1,193.6 (4,027.4) (4,351.8) (2,328.6) (3,090.8)
Net cash (used in) provided by
financing activities................. (3,637.0) 5,052.6 4,689.6 900.1 1,780.8
Capital expenditures................... (212.8) (240.8) (355.2) (154.5) (101.2)
Investments and acquisitions, net of
cash acquired........................ (145.8) (2,658.2) (2,852.0) (568.2) (1,608.6)
</TABLE>
- -------------------
(1) Income from continuing operations before income taxes and minority
interest for the nine months ended September 30, 1999 include a net
gain of $824.8 million associated with the dispositions of certain
nonstrategic businesses.
26
<PAGE>
MOVE.COM GROUP
(WHOLLY OWNED BY THE CENDANT CORPORATION)
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA
The following table presents summary historical combined data for
Move.com Group(1) as of and for the nine months ended September 30, 1999 and
1998, as of and for the period from January 8, 1996 (the Rent Net Acquisition
Date) through December 31, 1996 and as of and for the years ended December 31,
1998 and 1997. Prior to the inception of Move.com on July 1, 1999, the financial
results of Move.com included solely those of Rent Net. Since inception, the
results include those of Rent Net as well as revenues from a contract assigned
to the Move.com Group and expenses associated with the development and marketing
of the Move.com website. This data was derived from the financial statements of
Move.com Group and should be read in conjunction with the Consolidated Financial
Statements of Cendant Corporation. After the issuance of Move.com Stock, Cendant
Corporation will report earnings per share data for Cendant Group and Move.com
Group.
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED YEAR ENDED FEBRUARY 8, 1996
SEPTEMBER 30, DECEMBER 31, (THE ACQUISITION
--------------------- --------------------- DATE) THROUGH
1999 1998 1998 1997 DECEMBER 31, 1996
---------- ---------- --------------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue, net........................... $ 11,326 $ 7,804 $ 9,674 $ 5,670 $ 1,081
Cost of operations:
Operating and corporate overhead
allocation........................... 3,191 1,156 1,423 757 393
Marketing and general administrative
expenses............................. 9,238 5,250 3,940 2,599 1,665
Payroll and related costs.............. 12,470 2,920 3,869 2,857 1,522
Depreciation and amortization.......... 1,648 1,352 1,857 945 609
Loss before income taxes............... (15,221) (854) (1,415) (1,488) (3,108)
Net loss............................... (9,018) (509) (843) (885) (1,842)
BALANCE SHEET DATA (AT PERIOD END):
Total current assets................... $ 9,198 $ 2,882 $ 1,396 $ 591
Total assets........................... 15,047 8,614 7,417 3,559
Total liabilities...................... 10,813 4,379 2,181 878
Group equity........................... 4,234 4,235 5,236 2,681
OTHER DATA:
Net cash (used in) provided by
operating activities................. $ (7,926) $ 2,829 $ 1,279 $ 428 $ (1,215)
Net cash used in investing activities.. (1,091) (691) (1,121) (3,868) (242)
Net (increase) decrease in funding
from Parent.......................... (9,017) 2,138 158 (3,440) (1,457)
Capital expenditures................... (491) (451) (881) (662) (242)
- -----------------
</TABLE>
(1) The Move.com Group includes Move.com, Inc. and its subsidiaries, Rent
Net, Inc., National Home Connections, LLC, Move.com Operations, Inc.
and Move.com Mortgage, Inc.
27
<PAGE>
RECENT OPERATING RESULTS OF MOVE.COM GROUP
Prior to the January 2000 launch of the Move.com website, the business of
the Move.com Group has been primarily comprised of Rent Net, Inc., a popular
online apartment listing guide. The financial results of Move.com Group through
May 1999 were solely attributable to Rent Net. During May 1999, Cendant acquired
assets of National Home Connections which have been attributed to Move.com
Group. The financial results for the nine months ended September 30, 1999
include the results of Rent Net and National Home Connections, as well as the
results from arrangements relating to managing Cendant's Real Estate Division's
websites and online mortgage marketing operations that were immaterial to
Move.com Group.
Revenues for the nine months ended September 30, 1999 increased 57% to
$11.3 million due to an increase in the number of apartment listings, average
price paid per listing and the launch of a senior housing listing service. The
loss in 1999 is due to a retention bonus incentive program Cendant entered into
with Rent Net employees that resulted in additional cash payments to Rent Net
employees, an expanded marketing campaign in the third quarter of 1999 that
included Rent Net's first television and radio advertising and an increase in
staffing as Cendant prepares for the launch of the Move.com website. The number
of pageviews during the nine months ended September 30, 1999 increased 141% to
158 million as Rent Net continued to expand product offerings and its sales
efforts to list new apartments. Pageviews are an additional measure of a web
site's popularity and are calculated based upon the number of user sessions
multiplied by the average number of different web pages seen by each such
visitor. The number of unique user sessions also increased to 24 million in the
first nine months of 1999 compared to 20 million in the first nine months of
1998 due in part to the aforementioned advertising campaign.
28
<PAGE>
THE SPECIAL MEETING
The Board of Directors of Cendant is furnishing this Proxy Statement to
solicit proxies in connection with a special meeting to be held at 10:00 a.m.,
New York Time, on February __, 2000, at the Ramada Inn and Conference Center,
130 Route 10 West, East Hanover, New Jersey 07936 and at any adjournments or
postponements thereof. We will vote shares represented by the proxies received
and not properly revoked in accordance with the instructions contained therein.
A stockholder who has given a proxy may revoke it at any time before it is
exercised by filing with the Secretary of Cendant a written revocation or a duly
executed proxy bearing a later date or by voting in person at the special
meeting. If no choice is specified on the form of proxy, the shares will be
voted "FOR" the approval of each of Proposals 1, 2, 3 and 4 described in this
Proxy Statement. If you vote "FOR" the Tracking Stock Proposal at the special
meeting you may be forfeiting your right to challenge the Tracking Stock
Proposal in the future. Alternatively, in lieu of returning signed proxy cards,
stockholders can vote their shares by calling a specially designated telephone
number set forth on the enclosed proxy card. You may change your vote when
voting by telephone by calling and placing a subsequent vote but only the last
vote will be counted.
Stockholders of record at the close of business on January 24, 2000 are
entitled to vote at the special meeting. As of the close of business on the
record date, there were ____ stockholders of record and ______ shares of common
stock were outstanding. A quorum will be met at the special meeting if a
majority of the outstanding shares of common stock are present in person or by
proxy. Each holder of common stock will be entitled to one vote for each share
held as of the record date, on all matters brought before the special meeting.
Representatives of our independent accountants will be present at the
special meeting and will have the opportunity to make a statement if they so
desire. The independent accountants will be available to respond to appropriate
questions you might have.
The affirmative vote of the holders of a majority of the outstanding
shares of common stock as of the record date is required to approve the Tracking
Stock Proposal, the affirmative vote of the holders of a majority of the shares
of common stock present in person or represented by proxy at the special meeting
and entitled to vote thereon is required to approve the Stock Option Plan
Proposal and the Adjournment Proposal. The affirmative vote of at least 80% of
the voting power of all shares of Cendant entitled to vote generally in the
election of its directors is required to approve the Board
Declassification Proposal. Abstentions with respect to any proposal will have
the same
29
<PAGE>
effect as negative votes on each of the proposals. With respect to shares held
in "street name," if a broker, which is the record holder of certain shares,
indicates on a form of proxy that it does not have discretionary authority to
vote such shares on any proposal, or if shares are voted in other circumstances
in which proxy authority is defective or has been withheld with respect to such
proposal, these nonvoted shares will be counted for quorum purposes but will
have the same effect as a negative vote on Proposals 1 and 3 and will have no
effect on Proposals 2 and 4.
We will bear the expense of printing and mailing proxy materials. In
addition to soliciting proxies by mail, some of our directors, officers and
other employees may solicit proxies by personal interview, telephone or
facsimile. We will not pay additional compensation to such persons for such
solicitation. We will reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation materials to beneficial owners of common
stock. We have also retained ChaseMellon Shareholder Services to perform various
proxy advisory, distribution and solicitation services at a cost of
approximately $__ plus disbursements.
30
<PAGE>
RISK FACTORS
You should carefully consider the risk factors described below, as well
as the other information included in this Proxy Statement, before you decide how
to vote on the proposals.
RISK FACTORS RELATING TO THE TRACKING STOCK PROPOSAL
WE CAN NOT PREDICT HOW THE ISSUANCE OF MOVE.COM STOCK WILL AFFECT THE MARKET
PRICE OF CD STOCK AND THE PRICE OF MOVE.COM STOCK MAY BE VOLATILE.
Because there has been no prior market for the CD Stock or the Move.com
Stock, we can not assure you of their market prices or liquidity following the
implementation of the Tracking Stock Proposal. If an active market does
develop, we can not assure you that it will be maintained. Until an orderly
market does develop for the Move.com Stock, its trading price may fluctuate
significantly. We believe that following a public offering of Move.com Stock,
the fluctuation in the value of Move.com Stock may cause a fluctuation in the
value of CD Stock because the Cendant Group is expected initially to have a
greater than 50% retained interest in Move.com Group. Volatility in the price of
Move.com Stock may make the market price of CD Stock more volatile.
We can not predict the price at which CD Stock will trade following the
issuance of Move.com Stock. The market price of CD Stock may not equal or exceed
the market price of our existing common stock. Some of the terms of CD Stock and
Move.com Stock may adversely affect the trading price of CD Stock upon the
completion of an initial public offering of Move.com Stock. Examples include:
o the right of Cendant's Board of Directors to issue CD Stock in
exchange for Move.com Stock, and
o the discretion of Cendant's Board of Directors in making
various determinations relating to a variety of matters
affecting the rights of the holders of CD Stock and Move.com
Stock, such as dividends, cash management and allocation
matters.
The market prices of the CD Stock and the Move.com Stock will be
determined in the trading markets. Many factors could affect the market price of
the CD Stock or Move.com Stock. The right of Cendant to issue shares of CD Stock
in exchange for shares of Move.com Stock (or in certain situations, Move.com
Stock in exchange for
31
<PAGE>
CD Stock) could adversely affect the trading price of one or both series of
stock because it could reduce the attractiveness of the security to investors
following an exchange and could limit the premium potentially available to
investors absent such an exchange option being incorporated into the terms of
the security.
HOLDERS OF CD STOCK AND MOVE.COM STOCK WILL BE COMMON STOCKHOLDERS OF CENDANT
AND WILL NOT HAVE ANY LEGAL RIGHTS RELATING TO SPECIFIC ASSETS OF CENDANT.
Even though we have allocated, for financial reporting purposes, all of
our consolidated assets, liabilities, revenue, expenses and cash flow between
the two Groups in order to prepare the financial statements for Move.com Group,
the Tracking Stock Proposal will not change the legal title to any assets or
responsibility for any liabilities and will not affect the rights of any of our
creditors. Holders of CD Stock and Move.com Stock will not have any legal rights
related to specific assets of either Group, and, in any liquidation, will
receive a share of the net assets of Cendant based on the relative trading
prices of CD Stock and Move.com Stock rather than on any assessment of the
actual value of Cendant Group or Move.com Group. Holders of CD Stock and
Move.com Stock will be common stockholders of Cendant and, as such, will be
subject to all of the risks associated with an investment in Cendant and all of
our businesses, assets and liabilities, including the pending class action
litigation.
THE VALUE OF EITHER GROUP'S STOCK MAY SUFFER FOR REASONS UNRELATED TO THE
PROSPECTS OF THAT GROUP.
Financial results of either Group will affect Cendant's consolidated
results of operations, financial position and borrowing costs. This could affect
the results of operations or financial position of the other Group or the market
price of shares issued with respect to the other Group. Since the CD Stock and
Move.com Stock are series of common stock of Cendant, investors may attribute
negative results for one Group to the other Group and the stock of one Group may
decline if there are perceived negative results relating to the other Group's
business.
In addition, net losses of either Group and dividends or distributions
on, or repurchases of, either class of common stock of the Groups or repurchases
of any preferred stock of Cendant may reduce the funds we can pay as dividends
on each class of common stock under Delaware law. For these reasons, you should
read our consolidated financial information with the financial information we
provide for each Group.
32
<PAGE>
EXISTING STOCKHOLDERS OF CENDANT WILL HAVE A REDUCED INTEREST IN MOVE.COM GROUP.
Holders of CD Stock will only participate in the ownership of Move.com
Group indirectly through Cendant Group's retained interest in Move.com Group. In
other words, existing stockholders of CD Stock will not own directly any shares
of Move.com Stock unless they purchase shares of Move.com Stock separately or if
Cendant elects to distribute all or a portion of the shares issuable with
respect to its retained interest in Move.com Group to stockholders of CD Stock.
Cendant Group's economic interest in Move.com Group will decrease as a result of
the issuance of Move.com Stock. After any issuance of Move.com Stock, the
existing stockholders of Cendant will no longer share in the gains or losses
attributable to the portion of Move.com Group that is represented by the
outstanding shares of Move.com Stock. The price at which any shares of Move.com
Stock may be sold in the future may not reflect accurately the value of Move.com
Stock and thus holders of CD Stock may not appropriately benefit from such
issuances. Existing stockholders of Cendant will not have any special rights to
subscribe for Move.com Stock.
THE COST OF MAINTAINING SEPARATE GROUPS WILL EXCEED THE COSTS ASSOCIATED WITH
OPERATING CENDANT AS A SINGLE ENTITY.
The costs associated with implementing the Tracking Stock Proposal and
the ongoing costs of separate Groups will exceed the costs associated with
operating Cendant as it currently exists. In particular, the issuance of the
Move.com Stock will result in a complex capital structure and additional
financial reporting requirements with respect to each Group. The increased
financial reporting requirements will result in additional personnel costs,
higher audit costs, increased shareholder communications costs and additional
public relations costs. We currently estimate these costs to be approximately
$500,000 per year.
HAVING TWO SERIES OF COMMON STOCK COULD CREATE POTENTIAL CONFLICTS OF INTEREST
AND COULD RESULT IN THE CENDANT BOARD OF DIRECTORS MAKING DECISIONS THAT
ADVERSELY AFFECT STOCKHOLDERS OF EITHER GROUP.
Having two series of common stock could give rise to occasions when the
interests of holders of one series might diverge or appear to diverge from the
interests of holders of the other series. In addition, due to the extensive
relationships between Cendant Group and Move.com Group, there will likely be
inherent conflicts of interest between the two Groups. Cendant Group and
Move.com Group are parties to various intercompany agreements which can lead to
conflicts between the Groups relating to the services and products rendered.
Officers and directors of Cendant owe fiduciary
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duties to both classes of stockholders. However, the fiduciary duties owed by
such officers and directors are to Cendant as a whole, and decisions deemed to
be in the best interest of Cendant as a whole may not be in the best interest of
a Group when considered on its own. The Cendant Board of Directors or the
special committee -- comprised of independent directors who are not employed by
or otherwise affiliated with either Group -- which may be created to resolve
conflicts between the Groups, in their sole discretion, will make operational
and financial decisions and implement policies that may affect the businesses of
Cendant Group and Move.com Group differently, potentially favoring one Group at
the expense of the other. Examples include:
o decisions as to whether to allocate the proceeds of issuances
(or the costs of repurchases) of Move.com Stock to Cendant
Group in respect of its retained interest in Move.com Group or
to the equity of Move.com Group -- which decisions would
affect the amount of funds available to each Group to fund its
operational and cash requirements and the cost of such funds,
o decisions as to how to allocate consideration received in
connection with a merger involving Cendant between holders of
CD Stock and Move.com Stock -- which decisions could be
favorable or unfavorable to stockholders of either class
depending on how such proceeds are allocated,
o decisions as to whether and when to issue CD Stock in exchange
for Move.com Stock or Move.com Stock in exchange for CD Stock
-- which decisions could be favorable or unfavorable to
stockholders of either class depending on their investment
strategy and whether or not such issuance requires the payment
of a premium,
o decisions as to whether and when to approve dispositions of
assets of either Group -- which decisions could be favorable
or unfavorable to the stockholders of either class depending
on the amount and type of the consideration received in such
disposition, the holder's investment strategy and the Board's
determination to either pay a dividend or redeem his or her
shares or to issue shares of the other class in exchange
therefor,
o decisions as to how to allocate available cash between Cendant
Group and Move.com Group and decisions as to whether and how
to make
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transfers of funds from one Group to another -- which
decisions would affect the amount of funds available to each
Group to fund its operational and cash requirements and the
cost of such funds,
o decisions as to whether to pay or omit the payment of
dividends on CD Stock or Move.com Stock,
o decisions as to whether and to what extent the two Groups
compete with each other and how corporate opportunities are
allocated between the two Groups -- which decisions could be
favorable or unfavorable to the stockholders of either class
depending on the effect of such competition on the relevant
Group and how the corporate opportunities are allocated.
Current Cendant stockholders will receive CD Stock in exchange for their Cendant
common stock if the Tracking Stock Proposal is approved and adopted. Future
decisions which may favor Move.com Group to the detriment of Cendant Group may
adversely affect holders of CD Stock. To the extent that current holders of
Cendant common stock are holders of CD Stock at such time, they may be adversely
affected by such decisions.
If directors own disproportionate interests (in percentage or value
terms) in CD Stock and Move.com Stock, that disparity could create or appear to
create potential conflicts of interest when they are faced with decisions that
could have different implications for the stockholders of either Group.
Except as set forth under "Intercompany Agreements" and "Cash
Management and Allocation Policies," no formal policies have been established to
resolve conflicts of interest between the Groups or to determine which issues
are presented to a special committee when it is created. The members of the
Board of Directors or of any special committee which may be created to resolve
conflicts between the Groups will make all determinations in good faith and in
the best interest of Cendant as a whole. No special committee has yet been
created nor does the Board have any intention to create such a committee prior
to the initial public offering of Move.com Stock. If a special commit tee is
formed, it is likely to consist of independent directors who are not employed by
or otherwise affiliated with either Group.
THE CENDANT BOARD OF DIRECTORS HAS SOLE DISCRETION TO CHANGE CASH MANAGEMENT AND
ALLOCATION POLICIES AND THIS MAKES IT RISKIER TO BE A HOLDER OF CD STOCK OR
MOVE.COM STOCK THAN A HOLDER OF ORDINARY COMMON STOCK.
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The Cendant Board of Directors has adopted policies relating to cash
management and allocations between Cendant Group and Move.com Group. The Board
of Directors may modify or rescind our policies with respect to the allocation
of corporate overhead, taxes, debt, interest and other matters, or may adopt
additional policies, in its sole discretion without stockholder approval.
Although it has no present intention to do so, the Board of Directors may, in
its sole discretion, modify, rescind or add to any of these policies. The Board
of Directors' discretion to change these policies makes it riskier to be a
holder of CD Stock or Move.com Stock than a holder of ordinary common stock. A
Board of Directors decision to modify or rescind these policies, or adopt
additional policies could have different effects on holders of CD Stock and
holders of Move.com Stock or could result in a benefit or detriment to one class
of stockholders compared to the other class. The Board of Directors will make
any such decision in accordance with its good faith business judgment that the
decision is in the best interests of Cendant and all of its stockholders as a
whole. There may be certain circumstances in which a decision can be made only
in a fashion that will have a disproportionate impact on the holders of one
class compared to the holders of the other class. In such situations, the
interests of Cendant's stockholders as a whole will not be consistent and the
Board may turn to a special committee or retain outside advisors with respect to
the interests of one or more of the classes. Although it is not possible to
indicate all factors or even specific factors which may influence the Board's
decision, the Board will consider all relevant factors under the circumstances
including the fairness to all stockholders taken as a whole. For a more
comprehensive description of these policies, see "Proposal 1 --The Tracking
Stock Proposal -- Cash Management and Allocation Policies."
PRINCIPLES OF DELAWARE LAW MAY PROTECT DECISIONS OF THE CENDANT BOARD OF
DIRECTORS THAT HAVE A DISPARATE IMPACT UPON HOLDERS OF CD STOCK AND MOVE.COM
STOCK.
Delaware law provides that a Board of Directors owes an equal duty to
all stockholders regardless of class or series and does not have separate or
additional duties to the holders of any particular class or series of stock.
Recent cases in Delaware involving tracking stocks have established that
decisions by directors or officers involving differing treatment of tracking
stocks may be judged under the "business judgment rule." Under these principles
of Delaware law and the "business judgment rule," you may not be able to
challenge Board of Directors' decisions that have a disparate impact upon
holders of CD Stock and Move.com Stock if the Board of Directors is adequately
informed with respect to such decisions and acts in good faith and in the honest
belief that it is acting in the best interests of all of Cendant's stock holders
and members of the Board of Directors do not have any personal conflicts of
interest. If, for example, the Board of Directors were to make a decision which
it in
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good faith believed to be in the best interest of Cendant as a whole, and such
decision were to have a positive impact on Move.com Stock and negative impact on
CD Stock, holders of CD Stock may not be able to challenge the Board of
Directors' decision.
STOCKHOLDERS WILL NOT VOTE ON HOW TO ALLOCATE CONSIDERATION RECEIVED IN
CONNECTION WITH A MERGER AMONG HOLDERS OF CD STOCK AND HOLDERS OF MOVE.COM
STOCK.
Our charter will not contain any provisions governing how consideration
received in connection with a merger or consolidation involving Cendant is to be
allocated between holders of CD Stock and holders of Move.com Stock. Neither
holders of CD Stock nor holders of Move.com Stock will have a separate class
vote in any merger or consolidation so long as we divide the type and amount of
consideration between holders of CD Stock and holders of Move.com Stock in a
manner which the Board of Directors determines, in good faith, to be fair. In
any such merger or consolidation, the different ways we may divide the
consideration might have materially different results. Merger consideration
received by Cendant stockholders (which could include cash, stock or other
securities) may be divided between Cendant Group and Move.com Group stockholders
in a manner that does not provide the same dollar amount or percentage premium
to each class of stockholders or in a manner that provides different forms of
consideration (cash, stock or other securities) to different classes of
stockholders. As a result, the consideration to be received by holders of CD
Stock or Move.com Stock in any such merger or consolidation may be materially
less valuable than the consideration they would have received if that business
had been sold separately or if they had a separate class vote on such merger or
consolidation.
AT TIMES, WE HAVE THE OPTION TO EXCHANGE ONE SERIES OF COMMON STOCK FOR THE
OTHER SERIES AND THIS MAY BE DISADVANTAGEOUS TO HOLDERS OF CD STOCK OR THE
HOLDERS OF MOVE.COM STOCK.
At times, we have the right to issue shares of one series of common
stock in exchange for outstanding shares of the other series of common stock.
Because certain exchanges would be at a premium to the market value of the
shares being exchanged, and since we could determine to effect an exchange at a
time when either or both of CD Stock and Move.com Stock may be considered to be
overvalued or undervalued, any such exchange may be disadvantageous to holders
of CD Stock or holders of Move.com Stock. In addition, such exchange would
preclude holders of the exchanged series of common stock from retaining their
investment in a security that is intended to reflect separately the performance
of the corresponding Group.
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For example, if we reverse the effect of the Tracking Stock Proposal by
issuing CD Stock in exchange for all of the outstanding shares of Move.com
Stock, Cendant would only have one class of common stock outstanding. If Cendant
had the right to make this exchange during a period when Cendant was required to
pay the Move.com Group stockholders a premium for their stock, then the exchange
would dilute the economic interests of holders of CD Stock from a financial
perspective by diluting earnings per share.
WE MAY DISPOSE OF ASSETS OF EITHER CENDANT GROUP OR MOVE.COM GROUP WITHOUT YOUR
APPROVAL.
Delaware law requires stockholder approval only for a sale or other
disposition of all or substantially all of the assets of Cendant. As long as the
assets attributed to a Group represent less than substantially all of Cendant's
assets, we may approve sales and other dispositions of any amount of the assets
of that Group without any stock holder approval. If we dispose of all or
substantially all of the assets of either Group, we would be required, if the
disposition is not an exempt disposition under the terms of our charter, to
choose one of the following three alternatives:
o declare and pay a dividend in an amount equal to their
Proportionate Interest in the Net Proceeds of such
disposition,
o redeem shares of the relevant series of stock for an amount
equal to their Proportionate Interest in the Net Proceeds of
such disposition, or
o issue shares of one series in exchange for outstanding shares
of the other series at a 10% premium.
Consequently, holders of either series of common stock may receive less value
for their shares than the value that a third-party buyer might pay for all or
substantially all of the assets of such Group. In addition, we can not assure
you that the net proceeds per share of the common stock relating to that Group
will be equal to or more than the market value per share of such common stock
prior to or after announcement of a disposition. The Board of Directors will
decide, in its sole discretion, how to proceed and is not required to select the
option that would result in the highest value to holders of CD Stock or Move.com
Stock, if such option would not be in the best interests of Cendant's
stockholders as a whole.
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WE ARE NOT REQUIRED TO PAY DIVIDENDS EQUALLY ON CD STOCK AND MOVE.COM STOCK.
Although we do not intend to pay cash dividends in the foreseeable
future, the Cendant Board of Directors could elect to pay dividends on CD Stock
or Move.com Stock, or both, in equal or unequal amounts. Such a decision would
not necessarily have to reflect:
o the financial performance of either Cendant Group or Move.com
Group,
o the amount of assets available for dividends on either series,
or
o the amount of prior dividends declared on either series.
HOLDERS OF CD STOCK AND MOVE.COM STOCK WILL VOTE TOGETHER AS A SINGLE CLASS AND
WILL HAVE LIMITED SEPARATE VOTING RIGHTS.
Holders of CD Stock and Move.com Stock will vote together as a single
class, except if any amendment to the charter would increase or decrease the par
value of the shares of either class or alter or change the powers, preferences
or special rights of the shares of such class so as to affect them adversely.
When holders of CD Stock and Move.com Stock vote together as a single class,
holders of the series of common stock having a majority of the votes will be in
a position to control the outcome of the vote even if the matter involves a
conflict of interest between holders of CD Stock and holders of Move.com Stock.
We expect that, for the foreseeable future, the holders of CD Stock will have a
substantial majority of the voting power of Cendant because the aggregate number
of outstanding shares of CD Stock will be substantially greater than the
aggregate number of outstanding shares of Move.com Stock.
HAVING TWO SERIES OF COMMON STOCK MAY INHIBIT OR PREVENT ACQUISITION BIDS FOR
CENDANT, CENDANT GROUP OR MOVE.COM GROUP.
If Cendant Group and Move.com Group were separate companies, any person
interested in acquiring either Cendant Group or Move.com Group without
negotiating with management could seek control of that entity by obtaining
control of its outstanding voting stock by means of a tender offer or proxy
contest. Although we intend CD Stock and Move.com Stock to reflect the separate
performances of Cendant Group and Move.com Group, respectively, a person
interested in acquiring only one Group without negotiation with Cendant's
management could obtain control of that Group only by obtaining control of the
outstanding voting stock of Cendant. In addition, since Cendant believes the
issuance of tracking stock could lead to an increase
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in its market value, the cost of obtaining control by a third party would be
greater and the acquirer would be required to deal with holders of two separate
classes of stock who might have entirely different investment objectives.
The existence of two series of common stock could present complexities
to an acquiring person, which could prevent stockholders from profiting from an
increase in the market value of their shares as a result of a change in control
of Cendant by delaying or preventing such a change in control.
In addition, the following provisions of our charter, by-laws, and
Delaware law may inhibit changes of control not approved by the Board of
Directors:
o our Board of Directors may issue shares of preferred stock
without further stockholder approval,
o stockholders may not take action by written consent and
special meetings of stockholders may only be called by the
Chairman of the Board of Directors, the President or the Board
of Directors pursuant to a resolution,
o our by-laws require advance notice for stockholder nominations
and proposals of new business, and this provision of the
by-laws may only be amended by an affirmative vote of at least
80% of the stock entitled to vote,
o our amended and restated certificate of incorporation includes
a "fair price provision,"
o we are subject to the business combination provisions of
Section 203 of the Delaware General Corporation Law, and
o if the Board Declassification Proposal is not approved, our
current amended and restated certificate of incorporation and
by-laws provide for a classified Board of Directors.
For a more detailed explanation of these anti-takeover constraints, see
"Proposal 1 -- The Tracking Stock Proposal -- Certain Other Provisions of the
Amended and Restated Certificate of Incorporation, By-laws and Delaware Law."
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THE VALUES OF CD STOCK AND MOVE.COM STOCK MAY DECLINE DUE TO FUTURE ISSUANCES OF
CD STOCK OR MOVE.COM STOCK.
Our charter will allow the Cendant Board of Directors, in its sole
discretion, to issue authorized but unissued shares of either class of common
stock. The Board of Directors may issue CD Stock or Move.com Stock to, among
other things:
o raise capital,
o provide compensation or benefits to employees,
o pay stock dividends, or
o acquire companies or businesses.
Under Delaware General Corporation Law, the Board of Directors would
not need your approval for these issuances. We do not intend to seek your
approval for any such issuances unless:
o stock exchange regulations or other applicable law require
approval or
o the Board of Directors deems it advisable.
THE IRS COULD ASSERT THAT THE RECEIPT OF THE TRACKING STOCK IS TAXABLE.
We have been advised by Skadden, Arps, Slate, Meagher & Flom LLP that
neither you nor Cendant will recognize income, gain or loss for federal income
tax purposes as a result of the adoption of the Tracking Stock Proposal.
However, the Internal Revenue Service could disagree. There are no court
decisions or other authorities bearing directly on the effect of implementation
of a proposal such as the Tracking Stock Proposal. In addition, the Internal
Revenue Service has announced that it will not issue rulings on the
characterization of stock with characteristics similar to CD Stock and Move.com
Stock. It is possible, therefore, that the Internal Revenue Service could
successfully assert that the designation of our common stock as CD Stock or the
subsequent issuance of Move.com Stock in exchange for CD Stock or the issuance
of CD Stock in exchange for Move.com Stock, would be treated as a taxable
exchange. If so treated, you would recognize gain or loss equal to the
difference between the fair market value of the stock that you received (i.e.,
the CD Stock or the Move.com Stock, as applicable), and your tax basis in the
stock you surrendered (i.e.,
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Cendant's existing common stock, the CD Stock or the Move.com Stock, as applica-
ble). In addition, in such case, we might recognize gain or loss equal to the
difference between the fair market value of the CD Stock or the Move.com Stock,
as applicable, and our tax basis in such stock (which will generally be zero.)
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Some of the information in this Proxy Statement may constitute forward-
looking statements which are subject to various risks and uncertainties. Such
statements can be identified by the use of forward-looking terminology such as
"believes," "may," "will," "expect," "anticipate," "estimate," "continue,"
"plan" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward-looking" information and we can not guarantee that we will
actually achieve such expectations, or projections or plans. When considering
such forward-looking statements, you should keep in mind the factors described
in "Risk Factors" and other cautionary statements appearing else where in this
Proxy Statement. Such risk factors and statements describe circumstances which
could cause actual results to differ materially from those contained in any
forward-looking statement. The forward-looking statements do not reflect the
potential impact of any future acquisitions, merger or dispositions.
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PROPOSAL 1 -- THE TRACKING STOCK PROPOSAL
GENERAL
At the special meeting, we will ask you to consider and approve the
Tracking Stock Proposal described in this Proxy Statement. Stockholder approval
of the Tracking Stock Proposal would allow us to amend and restate our charter
to:
o Increase the number of authorized shares of common stock from
2,000,000,000 to 2,500,000,000, initially consisting of
2,000,000,000 shares of CD Stock and 500,000,000 shares of
Move.com Stock.
o Create a new series of common stock called Move.com Stock that
could be issued from time to time by the Board of Directors.
o Reclassify each outstanding share of existing common stock
into a share of CD Stock.
We intend Move.com Stock to reflect the performance of Move.com Group
and the operations of our new home-related services portal which we expect to be
operational during January 2000. We intend CD Stock to reflect the performance
of Cendant Group, our other businesses and a retained interest in Move.com
Group. Cendant Group's economic interest in Move.com Group, excluding the
interest represented by any outstanding shares of Move.com Group held by third
parties, if any, is called the "retained interest." We have allocated, for
financial reporting purposes, all of Cendant's consolidated assets, liabilities,
revenue, expenses and cash flow between Cendant Group and Move.com Group. In the
future, we will publish financial statements of Move.com Group together with
consolidated financial statements of Cendant. See "-- Cash Management and
Allocation Policies."
Upon approval of the Tracking Stock Proposal and the Stock Option Plan
Proposal, the options previously granted under the Move.com, Inc. 1999 Stock
Option Plan to Move.com Group employees and to Cendant Group employees will be
assumed by Cendant and all existing grants will become options to purchase
Move.com Stock. Stock options will be granted to employees prior to any sale of
Move.com Stock to non-employees.
Subject to prevailing market and other conditions, we currently expect
to issue shares of Move.com Stock in a public offering as soon as practicable
following stockholder approval of the Tracking Stock Proposal. The specific
terms of such
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offering, including the amount of Move.com Stock we issue, will depend upon
factors such as stock market conditions and the performance of Move.com Group.
In addition to or in lieu of any offerings, we reserve the right to distribute
Move.com Stock to holders of CD Stock in respect of Cendant Group's retained
interest in Move.com Group.
In connection with our recent acquisition of the MetroRent business
for inclusion in the Move.com Group, we issued shares of nonvoting redeemable
common stock of Move.com, Inc., an indirect subsidiary of Cendant, in a private
placement to the stockholders of MetroRent, Inc. Upon the initial public
offering of Move.com Stock, those shares of Move.com, Inc. will be exchanged for
up to 293,000 shares of Move.com Stock at a valuation of $20.51 per share. In
addition, we have granted Chatham Street Holdings, LLC the right, until
September 30, 2001, to purchase up to 1,561,000 shares of Move.com Stock for
approximately $16.02 per share. We may issue similar securities in connection
with other acquisitions or investments prior to the approval of the Tracking
Stock Proposal.
We expect to file an amended and restated certificate of incorporation
implementing the Tracking Stock Proposal and reclassify your common stock
promptly following the meeting, assuming the Tracking Stock Proposal and the
Stock Option Plan Proposal are each approved.
BACKGROUND AND REASONS FOR THE TRACKING STOCK PROPOSAL
We continually review each of our businesses and Cendant as a whole to
determine the best way to realize its inherent value. As a result of this review
process, we recently began to evaluate various alternatives, including a sale to
a third party, a spin-off or an initial public offering of stock and the
creation of a Cendant "tracking stock" intended to reflect the performance of
Move.com Group.
Upon management's recommendation and after extensive consultation with
our financial advisor, Goldman, Sachs & Co., and legal advisor, Skadden, Arps,
Slate, Meagher & Flom LLP, the Board of Directors determined that the issuance
of tracking stock would be desirable for a number of reasons, as discussed
below.
On September 30, 1999, the Cendant Board of Directors carefully
considered the Tracking Stock Proposal and the Stock Option Plan Proposal
described in this Proxy Statement, determined that those proposals are in the
best interests of Cendant and its stockholders, unanimously approved them and
resolved to recommend that you vote for them.
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In arriving at its determination and recommendation, the Board of
Directors, with the assistance of its financial and legal advisors, considered,
among other things, the following material benefits from the authorization of
Move.com Stock:
o The proposal will permit investors and research analysts to
review separate information about Move.com Group and
separately value Move.com Stock. This should encourage
investors and analysts to focus more attention on Move.com
Group and result in greater market recognition of the value
of Move.com Group to Cendant by highlighting the operations of
Move.com Group through enhanced financial reporting and by
attracting to Move.com Stock new internet-focused investors
who would otherwise not purchase Cendant's common stock.
o The proposal will enable us to issue Move.com Stock in private
or public financings. In recent years, a number of publicly
traded companies with activities consisting of more than one
line of business have found that the market valuation of the
entire company does not necessarily reflect the aggregate
value of their separate businesses. In order to enable the
market value of the whole company to more closely track that
of similar but separate companies engaged in the same
businesses, many of these companies have either publicly sold
a portion of a subsidiary or subsidiaries or have reclassified
their companies' stock into two or more series of tracking
stock. We believe that the creation of Move.com Group and the
issuance of Move.com Stock will enable the market to more
effectively value the Move.com Group as if it were a separate
corportaion, and that Cendant Group's retained interest in the
Move.com Group should also reflect that valuation. Unlocking
this value in the public markets would make Move.com
securities a new currency avail able to Cendant both for
raising additional equity and for future acquisitions. While
Cendant believes these securities will be valued more highly
by the market than Cendant's currently outstanding common
stock, future values will depend on future performance and
general market conditions and there is no assurance that these
beliefs will ever be realized or sustained.
o The proposal will enable us to grant stock options tied to
Move.com Stock, thereby providing more focused incentives to
Move.com Group and Cendant Group management and employees. The
options granted to the employees of Move.com Group will more
effectively incentivize them by creating a more independent
atmosphere as well as benefit
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plans with stock that is directly linked to the performance of
their business. Options will be granted to Cendant Group
employees making direct contributions to Move.com Stock
through intercompany business relationships and arrangements
to facilitate cooperation between the two Groups.
o The proposal will provide us with greater flexibility to raise
capital and respond to strategic opportunities (including
acquisitions), because it will allow us to issue either CD
Stock or Move.com Stock as appropriate under the
circumstances. In general, Move.com Stock should represent a
more attractive currency for acquisitions in the internet
sector. The particular circumstances under which Cendant would
issue CD Stock or Move.com Stock and the use of the proceeds
from such issuances will depend on a variety of factors such
as the capital needs of each Group's businesses and market
conditions at the time of the offering.
o The proposal is expected to enable us to realize more value
from Move.com Group while preserving the financial, tax,
operational, strategic and other benefits of being a single
consolidated entity. By remaining a single consolidated
entity, both Groups will remain a part of Cendant, thereby
preserving greater flexibility to maximize synergies between
the two Group's businesses through economies generated in
advertising, sales, corporate overhead and economies of scale
obtained by using a single carrier for telecommunications and
other purchasing requirements such as office supplies. Further
benefits of remaining a single consolidated entity include (1)
filing a single consolidated tax return (allowing Cendant to
utilize net losses from one Group against income from the
other Group), (2) maintaining a single credit arrangement for
the entire company, thereby increasing flexibility in
financing all parts of the business and (3) allowing both
Groups to benefit from Cendant's senior management and
administrative resources.
The Board of Directors also evaluated the material negative aspects of
the Tracking Stock Proposal, including the following:
o The Tracking Stock Proposal will result in a capital structure
with two classes of common stock with complex exchange,
liquidation and other terms which could create difficult
choices for directors in the future and
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create the need to produce separate audited financial
statements with respect to Move.com Group.
o The costs associated with implementing the Tracking Stock
Proposal may be significant (estimated at approximately
$850,000) and the ongoing additional cost of operating
separate Groups is estimated at approximately $500,000 per
year.
o The Tracking Stock Proposal will expand the Board of
Directors' responsibility to oversee the interests of two
series of common stockholders which may conflict at times
o The potential diverging or conflicting interests between the
holders of CD Stock and the holders of Move.com Stock and
issues that the Board of Directors may face in resolving any
conflicts.
The Board of Directors determined that the positive aspects of the
Tracking Stock Proposal outweighed the negative aspects and concluded that the
Tracking Stock Proposal and the Stock Option Plan Proposal are in the best
interests of Cendant and its stockholders. The Board of Directors considered
their knowledge of the business, financial condition and prospects for Cendant,
and the advice of financial and legal advisors. The Board of Directors
considered each positive and negative factor and concluded that the tracking
stock afforded Cendant stockholders the opportunity to realize economic value
from issuing tracking stock while Cendant could still maintain control of the
business. In light of the number and variety of factors that Cendant's Board of
Directors considered, Cendant believes that it is not practicable to assign
relative weights to the foregoing factors, and accordingly Cendant did not do
so.
Of the alternatives considered, the sale of the Move.com Group
businesses to a third party was not considered a viable option for several
reasons. These businesses are in an early stage of development and it is
unlikely that the full market potential of these businesses would be realized in
any such sale. Additionally, part of the unique attraction of the Move.com Group
businesses is their close relationships to and support provided by other parts
of Cendant, including the CENTURY 21(R), COLDWELL BANKER(R) and ERA(R) real
estate brands, Cendant Mobility and Cendant Mortgage. In order to maximize the
value of the Move.com Group businesses to a third party, Cendant would have to
give that party the benefit of this relationship and the Board did not believe
it to be in Cendant's best interests to do so.
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Of more interest to the Board was a partial spin-off of the Move.com
Group businesses through the sale of stock in a separate subsidiary which
conducts the Move.com Group businesses. While this proposal had the advantage of
giving more certainty that the Move.com Group businesses would be valued as a
separate corporation by the market, assuring the employees and stockholders of
Move.com Group that they would have a board of directors with fiduciary
obligations to no other entity or group and a much simpler structure than a
tracking stock proposal, certain disadvantages were also considered. These
disadvantages included the need, in a subsidiary public offering, to create and
maintain separate corporate and administrative infrastructures and boards of
directors, which can greatly increase expenses, the loss of flexibility in
responding to future opportunities for Cendant as a whole, the need to maintain
an 80% ownership interest in the public subsidiary to file consolidated Federal
income tax returns, the small public float and therefore diminished interest in
the subsidiary when viewed apart from Cendant and the loss of the ability to
raise additional equity in Move.com without giving up additional control over
its operations and policies. Finally, the Board considered the relationships
between Move.com Group and Cendant's other business entities discussed above and
felt these relationships were easier to maintain in an entity which remained
within Cendant but existed separately only for financial reporting purposes.
When the Cendant Board of Directors considered and was advised that the
use of tracking stocks has become much more accepted by the market, the Cendant
Board unanimously adopted the proposal to utilize a tracking stock structure for
Cendant.
DESCRIPTION OF CD STOCK AND MOVE.COM STOCK
THE FOLLOWING DESCRIPTION IS A SUMMARY OF THE MATERIAL TERMS AND
PROVISIONS OF THE CD STOCK AND THE MOVE.COM STOCK. IT IS NOT COMPLETE AND SHOULD
BE READ WITH ANNEX II TO THIS PROXY STATEMENT, WHICH CONTAINS THE FULL TEXT OF
THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION THAT WILL BE FILED
PURSUANT TO THE TRACKING STOCK PROPOSAL.
General
Our current amended and restated certificate of incorporation
authorizes us to issue 2,010,000,000 shares, consisting of 2,000,000,000 shares
of common stock, par value $.01 per share, and 10,000,000 shares of preferred
stock, par value $.01 per share. Only the preferred stock is currently issuable
in series by the Board of Directors. As of December 22, 1999, we had
approximately 711,000,000 shares of common stock and no shares of preferred
stock issued and outstanding.
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In order to implement the Tracking Stock Proposal, we would file the
amended and restated certificate of incorporation which would amend and restate
our current charter. The new amended and restated certificate of incorporation
would:
o Increase the number of authorized shares of common stock from
2,000,000,000 to 2,500,000,000, initially composed of
2,000,000,000 shares of CD Stock and 500,000,000 shares of
Move.com Stock.
o Create a new series of common stock called Move.com Stock,
which could be issued from time to time by the Board of
Directors.
o Reclassify each outstanding share of common stock into a share
of CD Stock. (The filing would not change the authorized
preferred stock.)
Move.com Stock and CD Stock will have dividend and liquidation rights
and redemption and exchange terms, modeled after other publicly traded tracking
stocks, that attempt to provide economic rights in the businesses they track
that are similar to the rights that common stock would have if the "tracked
business" were a separate corporation. Our goal in creating these separate
securities is to enable the market to treat each security as if it represented
an ownership interest in a separate corporation and to react to the business
performance and transactions of each Group as if it were stock in a separate
corporation. We have allocated, for financial accounting purposes, all of
Cendant's consolidated assets, liabilities, revenue, expenses and cash flow
between Cendant Group and Move.com Group. In the future, we will publish
financial statements of Move.com Group together with consolidated financial
statements of Cendant.
Before we first issue shares of Move.com Stock in a public offering,
the Board of Directors would designate the number of shares issuable to the
public and those which will represent Cendant Group's retained interest in
Move.com Group after the offering. The primary factors that the Board of
Directors will take into account in designating the initial number of shares
issuable with respect to Cendant Group's retained interest will include (1) the
expected market value of the Move.com Group at
the time of the initial public offering, (2) the desired initial per share
filing range for the initial public offering and (3) the Board of Directors'
view as to the likelihood of future appreciation in that value. At this time,
however, Cendant is unable to determine the expected market value of the
Move.com Group at the time of the initial public offering. See "-- Cendant
Group's Retained Interest in Move.com Group," "-- Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in Move.com Group" and Annex I for
additional information about Cendant Group's retained interest
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in Move.com Group and the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group.
The Board of Directors will have the authority to increase or decrease
from time to time the total number of authorized shares comprising either series
of common stock. However, the Board of Directors could not increase the number
of authorized shares of a series above a number which, when added to all of the
authorized shares of the other series of common stock, would exceed the total
authorized number of shares of common stock. Likewise, the Board of Directors
could not decrease the number of authorized shares of a series below the number
of shares of such series then outstanding.
The Board of Directors will have the authority in its sole discretion
to issue authorized but unissued shares of common stock from time to time for
any proper corporate purpose. The Board of Directors will have the authority to
do so without your approval, except as provided by Delaware law or the rules and
regulations of any securities exchange on which any series of outstanding common
stock may then be listed.
Dividends
We currently intend to retain all of our earnings to finance the
operation and expansion of our business.
We therefore do not expect to pay any cash dividends on CD Stock or
Move.com Stock in the foreseeable future. Although we do not expect to pay
dividends on CD Stock or Move.com Stock for the foreseeable future, we will be
permitted to pay dividends on
o CD Stock out of the lesser of (1) the assets of Cendant
legally available for the payment of dividends under Delaware
law and (2) the available dividend amount for Cendant Group
and
o Move.com Stock (and corresponding amounts to the Cendant Group
with respect to its retained interest in Move.com Group) out
of the lesser of (1) the assets of Cendant legally available
for the payment of dividends under Delaware law and (2) the
available dividend amount for Move.com Group.
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The available dividend amount for Cendant Group at any time is the
amount that would then be legally available for the payment of dividends on
Cendant Group's common stock under Delaware law if (1) Cendant Group and
Move.com Group were each a separate Delaware corporation, (2) Cendant Group had
outstanding (a) a number of shares of common stock, par value $0.01 per share,
equal to the number of shares of CD Stock that are then outstanding and (b) a
number of shares of preferred stock, par value $0.01 per share, equal to the
number of shares of preferred stock of Cendant that have been attributed to
Cendant Group and are then outstanding, (3) the assumptions about Move.com Group
set forth in the next sentence were true and (4) Cendant Group owned a number of
shares of Move.com Stock equal to the number of shares issuable with respect to
Cendant Group's retained interest in Move.com Group. Similarly, the available
dividend amount for Move.com Group at any time is the amount that would then be
legally available for the payment of dividends on Move.com Stock under Delaware
law if Move.com Group were a separate Delaware corporation having outstanding
(1) a number of shares of common stock, par value $0.01 per share, equal to the
number of shares of Move.com Stock that are then outstanding plus the number of
shares issuable with respect to Cendant Group's retained interest in Move.com
Group and (2) a number of shares of preferred stock, par value $0.01 per share,
equal to the number of shares of preferred stock of Cendant that have been
attributed to Move.com Group and are then outstanding.
The amount legally available for the payment of dividends on common
stock of a corporation under Delaware law is generally limited to (1) the total
assets of the corporation less its total liabilities less (2) the aggregate par
or stated value of the outstanding shares of its common and preferred stock.
However, if that amount is not greater than zero, the corporation may also pay
dividends out of the net profits for the corporation for the fiscal year in
which the dividend is declared and/or the preceding fiscal year. As mentioned
above, these restrictions will form the basis for calculating the available
dividend amounts for Cendant Group and Move.com Group. These restrictions will
also form the basis for calculating the aggregate amount of dividends that
Cendant as a whole can pay on its common stock, regardless of series. Thus, net
losses of either Group, and any dividends and distributions on, or repurchases
of, either series of common stock, may reduce the assets legally available for
dividends on both series of common stock.
Subject to the these limitations and to any other limitations in any
future series of preferred stock or in any agreements binding on Cendant from
time to time, we have the right to pay dividends on both, one or neither series
of common stock in equal or unequal amounts, notwithstanding the performance of
either Group, the amount of
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assets available for dividends on either series, the amount of prior dividends
paid on either series, the respective voting rights of each series or any other
factor.
At the time of any dividend on the outstanding shares of Move.com Stock
(including any dividend required as a result of a disposition of all or
substantially all of the assets of Move.com Group, but excluding any dividend
payable in shares of Move.com Stock) we will credit to Cendant Group, and charge
against Move.com Group, a corresponding amount in respect of Cendant Group's
retained interest in Move.com Group. Specifically, the corresponding amount will
equal (1) the aggregate amount of such dividend times (2) a fraction, the
numerator of which is the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group and the denominator of which is the
number of shares of Move.com Stock then outstanding. For further examples and
illustrations, see Annex I to this Proxy Statement.
Mandatory Dividend, Redemption or Exchange on Disposition of All or
Substantially All of the Assets of a Group
If we dispose of all or substantially all of the assets of a Group to
one or more persons or entities, in one transaction or a series of related
transactions, and the disposition is not an exempt disposition as defined below,
we would be required, by the 85th trading day after the consummation of such
disposition, to choose one of the following three alternatives:
o declare and pay a dividend to holders of the series of common
stock that relates to that Group (in cash, securities (other
than common stock of Cendant) or other property, or a
combination thereof), in an amount having a fair value equal
to their proportionate interest in the net proceeds of such
disposition,
o redeem from holders of the series of common stock that relates
to that Group, for cash, securities (other than common stock
of Cendant) or other property (or a combination thereof) in an
amount having a fair value equal to their proportionate
interest in the net proceeds of such disposition, all of the
outstanding shares of the relevant series of common stock (or,
if such Group continues after such disposition to own any
material assets other than the proceeds of such disposition, a
number of shares of such series of common stock having an
aggregate average market value, during the 20 consecutive
trading day period
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beginning on the 16th trading day immediately following the
date on which the disposition is consummated, equal to such
fair value), or
o issue shares of the series of common stock that does not
relate to that Group in exchange for all of the outstanding
shares of the series of common stock that relates to that
Group at a 10% premium (based on the average market value of
the relevant series of common stock as compared to the average
market value of the other series of common stock during the 20
consecutive trading day period beginning on the 16th trading
day immediately following the date on which the disposition
is consummated).
There could be substantial benefits or detriments to the holders of the
CD Stock or Move.com Stock depending upon the alternative selected by the Board
of Directors for distributing the proceeds of such a sale, and also depending
upon, among other factors: (i) the amount and type of consideration that Cendant
receives in any such disposition, (ii) Cendant's tax basis in the assets
disposed of, (iii) the tax basis of the holders in their shares of stock and
(iv) the market price of the CD Stock or Move.com Stock, as applicable. For
example, if all or substantially all of the assets of the Move.com Group are
sold and Cendant's tax basis in those assets is relatively low, the payment of a
dividend with respect to, or the redemption of, Move.com Stock will result in
the holders of Move.com Stock bearing all of the corporate-level taxes on that
sale, while the issuance of shares of CD Stock in exchange for Move.com Stock
may result in that tax cost being shared by all of the holders of Cendant's
common stock (to the extent the market price of the Move.com stock does not
adjust to fully account for such taxes). Depending on the market price of the
Move.com Stock at the time of such a disposition, the Board of Directors'
determination to pay a dividend on, or redeem shares of, Move.com Stock, as
compared to issuing shares of CD Stock in exchange therefor, will result in more
or less value to the holders of such shares. To the extent that the holders of
Move.com Stock receive greater value as a result of such a disposition, the
holders of CD Stock will own a relatively less valuable corporation. In
addition, depending on the tax basis of a holder in his or her CD Stock or
Move.com Stock, among other factors, the tax consequences of an exchange of
Move.com Stock or CD Stock, respectively, for stock of the other Group (which
generally would be tax-free) might be more favorable than the tax consequences
of a dividend on, or redemption of, the Move.com Stock or CD Stock, respectively
(which generally would be taxable).
In connection with any special dividend on, or redemption of Move.com
Stock as described above, we will credit to Cendant Group, and charge against
Move.com Group a corresponding amount in respect of Cendant Group's retained
interest in Move.com Group. Specifically, the corresponding amount will equal
(1) the aggregate
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fair value of such dividend or redemption times (2) a fraction, the numerator of
which is the number of shares issuable with respect to Cendant Group's retained
interest in Move.com Group and the denominator of which is the number of shares
of Move.com Stock then outstanding. In addition, in connection with any partial
redemption of Move.com Stock as described above, we will decrease the number of
shares issuable with respect to Cendant Group's retained interest in Move.com
Group by the same proportion as the proportionate decrease in outstanding shares
of Move.com Stock caused by such redemption.
At any time within one year after completing any dividend or partial
redemption of the sort referred to above, we will have the right to issue
shares of the series of common stock that does not relate to the Group in
question in exchange for outstanding shares of the series of common stock that
relates to that Group at a 10% premium (based on the average market value of the
relevant series of common stock as compared to the average market value of the
other series of common stock during the 20 consecutive trading day period
ending on the 5th trading day immediately preceding the date on which Cendant
mails the notice of exchange to holders of the relevant series). In determining
whether to effect any such exchange following such a dividend or partial
redemption, we would, in addition to other matters, consider whether the
remaining assets of such Group continue to constitute a viable business, the
number of shares of such common stock remaining issued and outstanding, the per
share market price of such common stock and the ongoing cost of continuing to
have a separate series of such common stock outstanding.
The following terms used in this document have the meanings specified
in our amended and restated certificate of incorporation and are set forth
below:
All or substantially all of the assets of either Group means a portion
of such assets that represents at least 80% of the then-current fair value of
the assets of such Group, which for the Cendant Group includes the value of its
retained interest in Move.com Group.
Cendant Group means (1) all of the businesses, assets and liabilities
of Cendant and its subsidiaries, other than the businesses, assets and
liabilities that are part of Move.com Group, (2) the rights and obligations of
Cendant Group under any inter-Group debt deemed to be owed to or by Cendant
Group (as such rights and obligations are defined in accordance with policies
established from time to time by the Board of Directors) and (3) a proportionate
interest in Move.com Group (after giving effect to any options, preferred stock,
other securities or debt issued or incurred by Cendant and attributed to
Move.com Group) equal to the retained interest percentage; provided that:
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(a) Cendant may reallocate assets from one Group to the other
Group in return for other assets or services rendered by that other
Group in the ordinary course of business or in accordance with policies
established by the Board of Directors or a committee thereof from time
to time, and
(b) if Cendant transfers cash, other assets or securities to
holders of shares of Move.com Stock as a dividend or other distribution
on shares of Move.com Stock (other than a dividend or distribution
payable in shares of Move.com Stock), or as payment in a redemption of
shares of Move.com Stock effected as a result of a Move.com Stock
Disposition, then the Board of Directors shall reallocate from
Move.com Group to Cendant Group cash or other assets having a fair
value equal to the aggregate fair value of the cash, other assets or
securities so transferred times a fraction, the numerator of which
shall equal the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group on the record date for such
dividend or distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of Move.com Stock
outstanding on such date.
Move.com Group means (1) the internet home-related services businesses
to be offered primarily through the Move.com website, including all of the
businesses, assets and liabilities of Cendant and its subsidiaries that the
Board of Directors has, as of the date on which the amended and restated
certificate of incorporation becomes effective under Delaware law, allocated to
Move.com Group, (2) any assets or liabilities acquired or incurred by Cendant or
any of its subsidiaries after the effective date in the ordinary course of
business and attributable to Move.com Group, (3) any businesses, assets or
liabilities acquired or incurred by Cendant or any of its subsidiaries after the
effective date that the Board of Directors has specifically allocated to
Move.com Group or that Cendant otherwise allocates to Move.com Group in
accordance with policies established from time to time by the Board of
Directors, and (4) the rights and obligations of Move.com Group under any
inter-Group debt deemed to be owed to or by Move.com Group (as such rights and
obligations are defined in accordance with policies established from time to
time by the Board of Directors); provided that:
(a) Cendant may reallocate assets from one Group to the other
Group in return for other assets or services rendered by that other
Group in the ordinary course of business or in accordance with policies
established by the Board of Directors from time to time and
(b) if Cendant transfers cash, other assets or securities to
holders of shares of Move.com Stock as a dividend or other distribution
on shares of
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Move.com Stock (other than a dividend or distribution payable in shares
of Move.com Stock), or as payment in a redemption of shares of Move.com
Stock effected as a result of a Move.com Stock disposition, then the
Board of Directors will reallocate from Move.com Group to Cendant
Group cash or other assets having a fair value equal to the aggregate
fair value of the cash, other assets or securities so transferred times
a fraction, the numerator of which shall equal the number of shares
issuable with respect to Cendant Group's retained interest in Move.com
Group on the record date for such dividend or distribution, or on the
date of such redemption, and the denominator of which shall equal the
number of shares of Move.com Stock outstanding on such date.
An exempt disposition means any of the following:
o a disposition in connection with the liquidation, dissolution
or winding-up of Cendant and the distribution of assets to
stockholders,
o a disposition to any person or entity controlled by Cendant
(as deter mined by the Board of Directors in its sole
discretion),
o a disposition by either Group for which Cendant receives
consideration primarily consisting of equity securities
(including, without limitation, capital stock of any kind,
interests in a general or limited partnership, interests in a
limited liability company or debt securities convertible into
or exchangeable for, or options or warrants to acquire, any of
the foregoing, in each case without regard to the voting
power or other management or governance rights associated
therewith) of an entity which is primarily engaged or proposes
to engage primarily in one or more businesses similar or
complementary to businesses conducted by such Group prior to
the disposition, as determined by the Board of Directors in
its sole discretion,
o a dividend, out of Move.com Group's assets, to holders of
Move.com Stock and a transfer of a corresponding amount of
Move.com Group's assets to Cendant Group in respect of its
retained interest in Move.com Group,
o a dividend, out of Cendant Group's assets, to holders of CD
Stock and
o any other disposition, if (1) at the time of the disposition
there are no shares of CD Stock outstanding, (2) at the time
of the disposition there
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are no shares of Move.com Stock outstanding, or (3) before the
30th trading day following the disposition we have mailed a
notice stating that we are exercising our right to exchange
all of the outstanding shares of CD Stock or Move.com Stock
for newly issued shares of the other series of common stock as
contemplated under "--Optional Exchange of One Series of
Common Stock For The Other Series" below.
The proportionate interest of holders of Move.com Stock in the net
proceeds of a Move.com Group disposition (or in the outstanding shares of common
stock of any subsidiaries holding Move.com Group's assets and liabilities) means
the amount of such net proceeds (or the number of such shares) times the number
of shares of Move.com Stock outstanding divided by the total number of notional
Move.com shares deemed outstanding. The proportionate interest of holders of CD
Stock in the net proceeds of a Move.com Group disposition (or in the outstanding
shares of common stock of any subsidiaries holding Move.com Group's assets and
liabilities) means the amount of such net proceeds (or the number of such
shares) times the number of shares of Move.com shares issuable with respect to
Cendant Group's retained interest in Move.com Group divided by the total number
of notional Move.com shares deemed outstanding. For an example and illustration,
see Annex I to this Proxy Statement.
The total number of notional Move.com shares deemed outstanding at any
time means the number of shares of Move.com Stock then outstanding plus the
number of shares then issuable with respect to Cendant Group's retained interest
in Move.com Group.
Optional Exchange of One Series of Common Stock for the Other Series
Prior to the third anniversary of the earlier of (1) the initial
issuance of Move.com Stock in a public offering or (2) the first anniversary of
a private placement of Move.com Stock, we will not have the right to cause the
exchange of CD Stock for Move.com Stock.
From and after the third anniversary of the earlier of (1) the initial
issuance of Move.com Stock in a public offering or (2) the first anniversary of
a private placement of Move.com Stock, we will have the right, at any time after
outstanding Move.com Stock exceeds 40% of total market capitalization, but has
not exceeded 60% of total market capitalization, to issue shares of either
series of common stock in exchange for outstanding shares of the other series of
common stock without a premium. In the event that Move.com Stock exceeds 60% of
total market capitalization, we will lose the right to effect an exchange
without a premium during such period.
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The exchange ratio that will result in an exchange without a premium
will be based on the average market value of the series of the common stock
being exchanged as compared to the average market value of the other series of
common stock during the 20 consecutive trading day period ending on, and
including, the 5th trading day immediately preceding the date on which we mail
the notice of exchange to holders of the outstanding shares being exchanged.
On or after the 18-month anniversary of the earlier of (1) the initial
issuance of Move.com Stock in a public offering or (2) the first anniversary of
a private placement of Move.com Stock, we will have the right to issue shares of
CD Stock in exchange for outstanding shares of Move.com Stock at a premium. The
premium will initially be 20% (for exchanges occurring prior to the nineteenth
month following the initial issuance of Move.com Stock) and will decline ratably
each month over an 18-month period to 15%.
In addition, we will have the right, on or after the third anniversary
of the earlier of (1) the initial issuance of Move.com Stock in a public
offering or (2) the first anniversary of a private placement of Move.com Stock,
when outstanding Move.com Stock exceeds 60% of total market capitalization, to
issue shares of Move.com Stock in exchange for outstanding shares of CD Stock at
a 15% premium. In the event that Move.com Stock equals or falls below 60% of
total market capitalization, we will lose the right to effect such an exchange
during such period.
Cendant believes that providing a 15-20% premium in connection with the
issuance of Move.com Stock in exchange for CD Stock at a time when a 15-20%
premium would be payable upon the issuance of CD Stock in exchange for Move.com
Stock would present the Cendant Board of Directors with an insurmountable
conflict. Because both of these exchanges produce the same economic, legal and
tax result if the premium is not considered, the Cendant Board would be faced
with a tremendous conflict of interest in deciding which exchange to effectuate
given that the class of stockholders receiving the premium would benefit at the
expense of the other class of stockholders. Accordingly, the exchange provisions
were designed to avoid this conflict and to provide a premium to the smaller
class of stockholders.
The exchange rights incorporated into the Move.com Stock and CD Stock
were designed to strike an appropriate balance between (1) providing Cendant
with sufficient future financial flexibility and (2) providing investors in
Move.com Stock with some degree of certainty that their stock will not be CD
Stock in the near future without a premium. The terms that have been adopted are
similar to the terms of other recent
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issuances of tracking stock and were selected by the Cendant Board of Directors
in consultation with its financial and legal advisors.
Notwithstanding the preceding paragraphs, upon the occurrence of a Tax
Event (as defined below), we will have the right to issue shares of CD Stock in
exchange for outstanding shares of Move.com Stock at a 10% premium regardless of
when such adverse tax law changes take place.
A "Tax Event" means the receipt by Cendant of an opinion of tax counsel
of Cendant's choice, experienced in such matters, who cannot be an officer or
employee of Cendant or any of its affiliates, to the effect that, as a result of
any amendment to, or change in the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein (including any proposed change in such regulations announced by an
administrative agency), or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws
or regulations, it is more likely than not that for United States federal income
tax purposes (1) Cendant, its subsidiaries or affiliates, or any of its
successors or its stockholders is, or at any time in the future will be, subject
to tax upon the issuance of shares of either CD Stock or Move.com Stock or (2)
either CD Stock or Move.com Stock is not, or at any time in the future will not
be, treated solely as stock of Cendant. For purposes of rendering such opinion,
the tax counsel shall assume that any administrative proposals will be adopted
as proposed. However, in the event a change in law is proposed, the tax counsel
shall render an opinion only in the event of enactment.
The exchange ratio that will result in the specified premium will be
calculated based on the average market value of CD Stock as compared to the
average market value of Move.com Stock during the 20 consecutive trading day
period ending on, and including the fifth trading day immediately preceding the
date on which we mail the notice of exchange to holders of the outstanding
shares being exchanged.
Move.com Stock will exceed 40% of total market capitalization of
Cendant Corporation or 60% of total market capitalization of Cendant
Corporation, as the case may be, if the market capitalization of the outstanding
Move.com Stock exceeds 40% or 60%, as the case may be, of the total market
capitalization of all classes of common stock of Cendant Corporation for 30
trading days during any 60 consecutive trading day period. Thereafter, Move.com
Stock will fall below 60% of total market capitalization if, after exceeding
40% of total market capitalization, the market capitalization of the outstanding
Move.com Stock falls below 60% of total market capitalization of a series of
common stock for 30 trading days during any 60 consecutive trading day period.
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Optional Exchange for Stock of a Subsidiary
At any time at which all of the assets and liabilities of a Group (and
no other assets or liabilities of Cendant or any subsidiary thereof) are held
directly or indirectly by one or more wholly owned subsidiaries of Cendant, we
will have the right to issue to holders of the relevant series of common stock
their proportionate interest in all of the outstanding shares of the common
stock of the Group subsidiaries in exchange for all of the outstanding shares of
such series of common stock.
o If the series of common stock being exchanged is CD Stock and
the number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group is greater than zero, we
will also issue a number of shares of Move.com Stock equal to
the then current number of shares issuable with respect to
Cendant Group's retained interest in Move.com Group and issue
those shares to the holders of CD Stock or to one of the Group
subsidiaries, at our option.
o If the series of common stock being exchanged is Move.com
Stock and the number of shares issuable with respect to
Cendant Group's retained interest in Move.com Group is greater
than zero (so that less than all of the shares of common stock
of the Group subsidiaries are being issued to the holders of
Move.com Stock), we may retain the remaining shares of common
stock of the Group subsidiaries or distribute those shares as
a dividend on CD Stock.
General Dividend, Exchange and Redemption Provisions
If we complete a disposition of all or substantially all of the assets
of a Group (other than an exempt disposition), we would be required, not later
than the 10 trading days after the consummation of such disposition, to issue a
press release specifying (1) the net proceeds of such disposition, (2) the
number of shares of the series of common stock related to such Group then
outstanding, (3) the number of shares of such series of common stock issuable
upon conversion, exchange or exercise of any convertible or exchangeable
securities, options or warrants and the conversion, exchange or exercise prices
thereof and (4) if the Group is Move.com Group, the number of shares issuable
with respect to Cendant Group's retained interest in Move.com Group. Not later
than 30 trading days after such consummation, we would be required to announce
by press release which of the actions specified in the first paragraph under "--
Mandatory Dividend, Redemption or Exchange on Disposition of All or
Substantially All of the Assets of a Group" we have determined to take, and upon
making that announcement,
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that determination would become irrevocable. In addition, we would be required,
not later than 30 trading days after such consummation and not earlier than 10
trading days before the applicable payment date, redemption date or exchange
date, to send a notice by first-class mail, postage prepaid, to holders of the
relevant series of common stock at their addresses as they appear on our
transfer books.
o If we determine to pay a special dividend, we would be
required to specify in the notice (1) the record date for such
dividend, (2) the payment date of such dividend (which can not
be more than 85 trading days after such consummation) and (3)
the aggregate amount and type of property to be paid in such
dividend (and the approximate per share amount thereof).
o If we determine to undertake a redemption, we would be
required to specify in the notice (1) the date of redemption
(which can not be more than 85 trading days after such
consummation), (2) the aggregate amount and type of property
to be paid as a redemption price (and the approximate per
share amount thereof), (3) if less than all shares of the
relevant series of common stock are to be redeemed, the number
of shares to be redeemed and (4) the place or places where
certificates for shares of such series of common stock,
properly endorsed or assigned for transfer (unless we waive
such requirement), should be surrendered in return for
delivery of the cash, securities or other property to be paid
by Cendant in such redemption.
o If we determine to undertake an exchange, we would be required
to specify in the notice (1) the date of exchange (which can
not be more than 85 trading days after such consummation), (2)
the number of shares of the other series of common stock to be
issued in exchange for each outstanding share of such series
of common stock and (3) the place or places where certificates
for shares of such series of common stock, properly endorsed
or assigned for transfer (unless we waive such requirement),
should be surrendered in return for delivery of the other
series of common stock to be issued by Cendant in such
exchange.
If we determine to complete any exchange described under "-- Optional
Exchange of One Series of Common Stock for the Other Series" or "-- Optional
Exchange for Stock of a Subsidiary," we would be required, between 10 to 30
trading days before the exchange date, to send a notice by first-class mail,
postage prepaid, to holders of the relevant series of common stock at their
addresses as they appear on our
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transfer books, specifying (1) the exchange date and the other terms of the
exchange, and (2) the place or places where certificates for shares of such
series of common stock, properly endorsed or assigned for transfer (unless we
waive such requirement), should be surrendered for delivery of the stock to be
issued or delivered by Cendant in such exchange.
Neither the failure to mail any required notice to any particular
holder nor any defect therein would affect the sufficiency thereof with respect
to any other holder or the validity of any dividend, redemption or exchange.
If we are redeeming less than all of the outstanding shares of a series
of common stock as described above, we would redeem such shares pro rata or by
lot or by such other method as the Board of Directors determines to be
equitable.
No holder of shares of a series of common stock being exchanged or
redeemed will be entitled to receive any cash, securities or other property to
be distributed in such exchange or redemption until such holder surrenders
certificates for such shares, properly endorsed or assigned for transfer, at
such place as we specify (unless we waive such requirement). As soon as
practicable after our receipt of certificates for such shares, we would deliver
to the person for whose account such shares were so surrendered, or to the
nominee or nominees of such person, the cash, securities or other property to
which such person is entitled, together with any fractional payment referred to
below, in each case without interest. If less than all of the shares of common
stock represented by any one certificate were to be exchanged or redeemed, we
would also issue and deliver a new certificate for the shares of such common
stock not exchanged or redeemed.
We would not be required to issue or deliver fractional shares of any
capital stock or any other fractional securities to any holder of common stock
upon any exchange, redemption, dividend or other distribution described above.
If more than one share of common stock were held at the same time by the same
holder, we may aggregate the number of shares of any capital stock that would be
issuable or any other securities that would be distributable to such holder upon
any such exchange, redemption, dividend or other distribution. If there are
fractional shares of any capital stock or any other fractional securities
remaining to be issued or distributed to any holder, we would, if such
fractional shares or securities were not issued or distributed to such holder,
pay cash in respect of such fractional shares or securities in an amount equal
to the fair value thereof without interest.
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From and after the date set for any exchange or redemption, all rights
of a holder of shares of common stock that were exchanged or redeemed would
cease except for the right, upon surrender of the certificates representing such
shares, to receive the cash, securities or other property for which such shares
were exchanged or redeemed, together with any fractional payment as provided
above, in each case without interest (and, if such holder was a holder of record
as of the close of business on the record date for a dividend not yet paid, the
right to receive such dividend). A holder of shares of common stock being
exchanged would not be entitled to receive any dividend or other distribution
with respect to shares of the other series of common stock until after the
shares being exchanged are surrendered as contemplated above. Upon such
surrender, we would pay to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable with respect
to a record date occurring after the exchange, but which were not paid by reason
of the foregoing, with respect to the number of whole shares of the other series
of common stock represented by the certificate or certificates issued upon such
surrender. From and after the date set for any exchange, we would, however, be
entitled to treat the certificates for shares of common stock being exchanged
that were not yet surrendered for exchange as evidencing the ownership of the
number of whole shares of the other series of common stock for which the shares
of such common stock should have been exchanged, notwithstanding the failure to
surrender such certificates.
We would pay any and all documentary, stamp or similar issue or
transfer taxes that might be payable in respect of the issue or delivery of any
shares of capital stock and/or other securities on any exchange or redemption
described herein. We would not, however, be required to pay any tax that might
be payable in respect of any transfer involved in the issue or delivery of any
shares of capital stock and/or other securities in a name other than that in
which the shares so exchanged or redeemed were registered, and no such issue or
delivery will be made unless and until the person requesting such issue pays to
Cendant the amount of any such tax or establishes to our satisfaction that such
tax has been paid.
We may, subject to applicable law, establish such other rules,
requirements and procedures to facilitate any dividend, redemption or exchange
contemplated as described above as the Board of Directors may determine to be
appropriate under the circumstances.
Voting Rights
Currently, holders of existing common stock have one vote per share on
all matters submitted to a vote of stockholders. Each share will continue to
have one vote
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following a stock split, stock dividend or similar reclassification. Once the
Tracking Stock Proposal is implemented, holders of CD Stock and Move.com Stock
would vote together as one class on all matters as to which common stockholders
generally are entitled to vote, unless a separate class vote is required by
applicable law. On all such matters for which no separate vote is required, each
outstanding share of CD Stock is entitled to one vote and each outstanding share
of Move.com Stock is entitled to one vote.
When holders of CD Stock and Move.com Stock vote together as a single
class, the holders of the series of common stock having a majority of the votes
will be in a position to control the outcome of the vote even if the matter
involves a conflict of interest between the holders of CD Stock and holders of
Move.com Stock.
The Delaware General Corporation Law requires a separate vote of
holders of shares of common stock of any series on any amendment to the
certificate of incorporation if the amendment would increase or decrease the
par value of the shares of such series or alter or change the powers,
preferences or special rights of the shares of such series so as to affect them
adversely.
After Move.com Stock is issued, we would set forth the number of
outstanding shares of CD Stock and Move.com Stock in our annual and quarterly
reports filed pursuant to the Securities Exchange Act, and disclose in any proxy
statement for a stockholder meeting the number of outstanding shares of CD Stock
and Move.com Stock.
Liquidation
Currently, holders of common stock are entitled, upon voluntary or
involuntary liquidation, dissolution or winding-up of Cendant, to receive their
proportionate interest in the net assets of Cendant, if any, remaining for
distribution to stockholders (after payment of or provision for all liabilities,
including contingent liabilities, of Cendant and payment of the liquidation
preference payable to any holders of our preferred stock).
If the Tracking Stock Proposal is approved, upon voluntary or
involuntary liquidation, dissolution or winding-up of Cendant, the net assets of
Cendant, if any, remaining for distribution to stockholders (after payment of or
provision for all liabilities, including contingent liabilities, of Cendant and
payment of the liquidation preference payable to any holders of our preferred
stock), will be distributed to the holders of CD Stock and Move.com Stock pro
rata in accordance with the average
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market value of a share of CD Stock divided by the average market value of a
share of Move.com Stock during the 20 consecutive trading day period ending on
(and including) the fifth trading day before the date of the first public
announcement of (1) a voluntary liquidation, dissolution or winding-up by
Cendant or (2) the institution of any proceeding for the involuntary
liquidation, dissolution or winding-up of Cendant.
Neither the merger nor consolidation of Cendant with any other entity,
nor a sale, transfer or lease of all or any part of the assets of Cendant would
alone be deemed a liquidation, dissolution or winding-up for these purposes.
No holder of Move.com Stock will have any special right to receive
specific assets of Move.com Group and no holder of CD Stock will have any
special right to receive specific assets of Cendant Group upon our dissolution,
liquidation or winding up.
Like other tracking stocks, the liquidation provisions for the CD Stock
and Move.com Stock do not provide stockholders with proceeds based directly on
the value of the underlying assets and liabilities of each Group. However,
because the market value of each class of stock may represent the best indirect
proxy for the value of each Group, the value realized by each class of
stockholders upon a liquidation of Cendant may approximate the value such
holders would realize if liquidation were based on the market value of the
underlying assets. These liquidation provisions were adopted for a variety of
reasons including (1) providing consistency with other tracking stock
transactions, (2) easing the administrative burden of allocating proceeds upon
liquidation and (3) helping to ensure classes of stock are treated as Cendant
stock for tax purposes.
Cendant Group's Retained Interest in Move.com Group
The number of shares of Move.com Stock that Cendant may issue for the
account of Cendant Group in respect of its retained interest in Move.com Group
is referred to as number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group. At the time that we first issue shares of,
or options for shares of, Move.com Stock, the Board of Directors would designate
the initial number of shares issuable with respect to Cendant Group's retained
interest in Move.com Group.
In this document, we call the percentage interest in Move.com Group
intended to be represented at any time by the outstanding shares of Move.com
Stock, the outstanding interest percentage, and we call the remaining percentage
interest in
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Move.com Group intended to be represented at any time by Cendant Group's
retained interest in Move.com Group, the retained interest percentage. At any
time, the outstanding interest percentage equals the number of shares of
Move.com Stock outstanding divided by the total number of notional Move.com
shares deemed out standing (expressed as a percentage) and the retained interest
percentage equals the number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group divided by the total number of notional
Move.com shares deemed outstanding (expressed as a percentage). The sum of the
outstanding interest percent age and the retained interest percentage always
equals 100%.
At the time that we file the amended and restated certificate of
incorporation, the retained interest percentage will be 100% and the outstanding
interest percentage will be 0%.
Number of Shares Issuable With Respect to Cendant Group's Retained
Interest in Move.com Group prior to the public offering. We currently intend to
designate 22,500,000 as the initial number of shares issuable with respect to
Cendant Group's interest in Move.com Group. We currently plan to reserve
6,000,000 shares of Move.com Stock for option grants under the Move.com, Inc.
1999 Stock Option Plan to Move.com Group and Cendant Group employees following
stockholder approval of the Stock Option Plan Proposal. Assuming we do so, we
intend to attribute the net proceeds of the exercise of such options to the
equity of Move.com Group. The issuance of shares of Move.com Stock upon the
exercise of those options will have no effect on the number of shares issuable
with respect to Cendant Group's retained interest in Move.com Group. Thus, after
giving effect to the grant of those options,
o there would be no shares of Move.com Stock outstanding, but
there would be 6,000,000 shares of Move.com Stock reserved for
issuance upon the exercise of outstanding options,
o the number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group would remain 22,500,000.
o the total number of notional Move.com Group shares deemed
outstanding would be 22,500,000 but would increase to
28,500,000 if all such options were granted and exercised,
o the outstanding interest percentage would be approximately 21%
if all such options were granted and exercised, and
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o the retained interest percentage would be approximately 79% if
all such options were granted and exercised.
The outstanding interest percentage will increase and the retained
interest percentage will decrease upon the issuance of the shares in the Metro
Rent and Chatham Street transaction described in the Proxy Statement under
"Proxy Statement Summary -- Recent Developments."
Subject to prevailing market and other conditions, we currently expect
to issue shares of Move.com Stock in a public offering as soon as reasonably
practicable following stockholder approval of the Tracking Stock Proposal. The
specific terms of such offering including the amount of Move.com Stock we issue
will depend upon factors such as stock market conditions and the performance of
Move.com Group. The effect of those financings on the retained interest
percentage and the outstanding interest percentage would depend upon the number
of shares of Move.com Stock sold and whether we elect to attribute the net
proceeds of such financings to the equity of Move.com Group or to Cendant Group
in respect of its retained interest in Move.com Group.
Attribution of Issuances of Move.com Stock. Whenever we decide to issue
shares of Move.com Stock, or options therefor, we would determine, in our sole
discretion, whether to attribute that issuance (and the proceeds thereof) to
Cendant Group in respect of its retained interest in Move.com Group (in a manner
analogous to a secondary offering of common stock of a subsidiary owned by a
corporate parent) or to Move.com Group (in a manner analogous to a primary
offering of common stock). If we issue any shares of Move.com Stock and
attribute that issuance (and the proceeds thereof) to Cendant Group in respect
of its retained interest in Move.com Group, the number of shares issuable with
respect to Cendant Group's retained interest in Move.com Group would be reduced
by the number of shares so issued, the number of outstanding shares of Move.com
Stock would be increased by the same amount, the total number of notional
Move.com shares deemed outstanding would remain unchanged, the retained
interest percentage would be reduced and the outstanding interest percentage
would be correspondingly increased. If we instead attribute that issuance (and
the proceeds thereof) to Move.com Stock, the number of shares issuable with
respect to Cendant Group's retained interest in Move.com Group would remain
unchanged, the number of outstanding shares of Move.com Stock and the total
number of notional Move.com Stock shares deemed outstanding would be increased
by the number of shares so issued, the retained interest percentage would be
reduced and the outstanding interest percentage would be correspondingly
increased.
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Issuances of Move.com Stock as Distributions on CD Stock. We reserve
the right to issue shares of Move.com Stock as a distribution on CD Stock,
although we do not currently intend to do so. If we did so, we would attribute
that distribution to Cendant Group in respect of its retained interest in
Move.com Group. As a result, the number of shares issuable with respect to
Cendant Group's retained interest in Move.com Group would be reduced by the
number of shares so distributed, the number of outstanding shares of Move.com
Stock would be increased by the same amount, the total number of notional
Move.com Stock shares deemed outstanding would remain unchanged, the retained
interest percentage would be reduced and the outstanding interest percentage
would be correspondingly increased. If instead we issued shares of Move.com
Stock as a distribution on Move.com Stock, we would attribute that distribution
to Move.com Group, in which case we would proportionately increase the number of
shares issuable with respect to Cendant Group's retained interest in Move.com
Group. As a result, the number of shares issuable with respect to Cendant
Group's retained interest in Move.com Group and the total number of notional
Move.com shares deemed outstanding would each be increased by the same
percentage as the number of outstanding shares of Move.com Stock is increased
and the retained interest percentage and outstanding interest percentage would
remain unchanged.
Dividends on Move.com Stock. At the time of any dividend on the
outstanding shares of Move.com Stock (including any dividend required as a
result of a disposition of all or substantially all of the assets of Move.com
Group, but excluding any dividend payable in Move.com Stock), we will credit to
Cendant Group, and charge against Move.com Group a corresponding amount in
respect of Cendant Group's retained interest in Move.com Group. Specifically,
the corresponding amount will equal (1) the aggregate amount of such dividend
times (2) a fraction, the numerator of which is the number of shares issuable
with respect to Cendant Group's retained interest in Move.com Group and the
denominator of which is the number of shares of Move.com Stock then outstanding.
Repurchases of Move.com Stock. If we decide to repurchase shares of
Move.com Stock, we would determine, in our sole discretion, whether to attribute
that repurchase (and the cost thereof) to Cendant Group (in a manner analogous
to a purchase of common stock of a subsidiary by a corporate parent) or to
Move.com Group (in a manner analogous to an issuer repurchase). If we repurchase
shares of Move.com Stock and attribute that repurchase (and the cost thereof) to
Cendant Group, the number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group would be increased by the number of shares
so purchased, the number of outstanding shares of Move.com Stock would be
decreased by the same amount, the total number of notional Move.com shares
deemed outstanding would
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remain unchanged, the retained interest percentage would be increased and the
outstanding interest percentage would be correspondingly decreased. If we
instead attribute that repurchase (and the cost thereof) to Move.com Stock, the
number of shares issuable with respect to Cendant Group's retained interest in
Move.com Group would remain unchanged, the number of outstanding shares of
Move.com Stock and the total number of notional Move.com shares deemed
outstanding would be decreased by the number of shares so repurchased, the
retained interest percentage would be increased and the outstanding interest
percentage would be correspondingly reduced.
Transfers of Cash or Other Property Between Cendant Group and Move.com
Group. We may, in our sole discretion, determine to transfer cash or other
property of Move.com Group to Cendant Group in return for a decrease in Cendant
Group's retained interest in Move.com Group (in a manner analogous to a return
of capital) or to transfer cash or other property of Cendant Group to Move.com
Group in return for an increase in Cendant Group's retained interest in Move.com
Group (in a manner analogous to a capital contribution). If we determine to
transfer cash or other property of Move.com Group to Cendant Group in return for
a decrease in Cendant Group's retained interest in Move.com Group, the number of
shares issuable with respect to Cendant Group's retained interest in Move.com
Group and the total number of notional Move.com shares deemed outstanding would
each be decreased by an amount equal to the fair value of such cash or other
property divided by the market value of a share of Move.com Stock on the day of
transfer, the number of outstanding shares of Move.com Stock would remain
unchanged, the retained interest percentage would be decreased and the
outstanding interest percentage would be correspondingly increased. If we
instead determine to transfer cash or other property of Cendant Group to
Move.com Group in return for an increase in Cendant Group's retained interest in
Move.com Group, the number of shares issuable with respect to Cendant Group's
retained interest in Move.com Group and the total number of notional Move.com
shares deemed outstanding would each be increased by an amount equal to the fair
value of such cash or other property divided by the market value of a share of
Move.com Stock on the day of transfer, the number of outstanding shares of
Move.com Stock would remain unchanged, the retained interest percentage would be
increased and the outstanding interest percentage would be correspondingly
decreased.
We may not attribute issuances of Move.com Stock to Cendant Group,
transfer cash or other property of Move.com Group to Cendant Group in return for
a decrease in its retained interest in Move.com Group or take any other action
to the extent that doing so would cause the number of shares issuable with
respect to Cendant Group's retained interest in Move.com Group to decrease below
zero. Cendant Group's retained interest will decrease with each issuance of
Move.com Stock whether the proceeds of such
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issuance are allocated to the Cendant Group (similar to a secondary offering of
securities) or to the Move.com Group (similar to a primary offering).
For illustrations showing how to calculate the retained interest
percentage, the outstanding interest percentage, the number of shares issuable
with respect to Cendant Group's retained interest in Move.com Group and the
total number of notional Move.com shares deemed outstanding after giving effect
to hypothetical dividends, issuances, repurchases and transfers, see Annex I --
"Illustrations of Terms."
Effectiveness of Certain Terms
The terms described under "-- Dividends," "-- Mandatory Dividend,
Redemption or Exchange on Disposition of All or Substantially All of the Assets
of a Group," "-- Optional Exchange of One Series of Common Stock for the Other
Series," "-- Optional Exchange for Stock of a Subsidiary," "-- Voting Rights"
and "-- Liquidation" above apply only when there are shares of both series of
common stock outstanding.
Determinations by the Board of Directors
The amended and restated certificate of incorporation would provide
that, subject to applicable law, any determinations made by the Board of
Directors in good faith under the amended and restated certificate of
incorporation or in any certificate of designation filed pursuant thereto would
be final and binding on all stockholders of Cendant.
The Board of Directors intends to establish a special committee upon
the issuance of Move.com Stock. Until that time, we do not believe it is
necessary to establish a special committee because there will be no Move.com
stockholders prior to an initial public offering of Move.com Stock and no person
will have a right to acquire Move.com Stock which is not conditional upon
completion of a public offering. The special committee will be comprised of
directors of Cendant who are not employed by or otherwise affiliated with either
Group. The special committee will address and resolve, at the request of
Cendant's Board of Directors, any business issues concerning the relationship
between Cendant Group and Move.com Group.
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Preemptive Rights
Holders of CD Stock and Move.com Stock will not have any preemptive
rights to subscribe for any additional shares of capital stock or securities
that we may issue in the future.
Limitations on Potential Unsolicited Acquisitions; Anti-Takeover
Considerations
If Cendant Group and Move.com Group were separate independent
companies, any person interested in acquiring either Group without negotiating
with management could seek control of that entity by obtaining control of its
outstanding voting stock by means of a tender offer or proxy contest. Although
we intend CD Stock and Move.com Stock to reflect the separate performance of
Cendant Group and Move.com Group, a person interested in acquiring only one
Group without negotiation with Cendant's management could obtain control of that
Group only by obtaining control of the outstanding voting stock of Cendant,
which includes both CD Stock and Move.com Stock.
The existence of two series of common stock could prevent stockholders
from profiting from an increase in the market value of their shares as a result
of a change in control of Cendant by delaying or preventing such a change in
control.
If the Tracking Stock Proposal is implemented, there would be an
additional 500,000,000 shares of common stock available for future issuance
without further stockholder approval. One of the effects of the existence of
authorized and unissued common stock and preferred stock could be to enable the
Board of Directors to issue shares to persons friendly to current management
which could render more difficult or discourage an attempt to obtain control of
Cendant by means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management. Such additional shares also
could be used to dilute the stock ownership of persons seeking to obtain control
of Cendant.
For additional anti-takeover considerations, see "-- Certain Other
Provisions of the Amended and Restated Certificate of Incorporation, By-laws and
Delaware Law."
CASH MANAGEMENT AND ALLOCATION POLICIES
In order to prepare separate financial statements for Move.com Group,
Cendant has allocated all of its consolidated assets, liabilities, revenue,
expenses and cash flow between Cendant Group and Move.com Group. Thus, the
financial statements for Cendant Corporation will include separate financial
data for each Group.
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The financial statements of Move.com Group reflect the application of
cash management and allocation policies adopted by the Board of Directors. These
policies are summarized below.
The Board of Directors may, in its sole discretion, modify, rescind or
add to any of these policies, although it has no present intention to do so. The
decision of the Board of Directors to modify, rescind or add to any of these
policies would, however, be subject to the Board of Directors general fiduciary
duties.
Even though Cendant has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between Cendant Group and Move.com
Group, holders of Move.com Stock will continue to be common stockholders of
Cendant and, as such, will be subject to all risks associated with an investment
in Cendant and all of its businesses, assets and liabilities. See "Risk Factors
- -- Risk Factors Relating to the Tracking Stock Proposal -- Holders of CD Stock
and Move.com Stock will be common stockholders of Cendant and will not have any
legal rights relating to specific assets of Cendant."
Treasury Activities
Cendant manages most treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the issuance,
repayment and repurchase of short-term and long-term debt and the issuance and
repurchase of common stock and preferred stock. Each Group generally remits its
cash receipts (other than receipts of foreign operations or operations that are
not wholly owned) to Cendant, and Cendant generally funds each Group's cash
disbursements (other than disbursements of foreign operations or operations that
are not wholly owned) on a daily basis.
In the historical financial statements of Move.com Group, (1) all
external debt and equity transactions (and the proceeds thereof) were attributed
to Cendant Group, (2) whenever Move.com Group held cash, that cash was
transferred to Cendant Group and accounted for as a return of capital (i.e., as
a reduction in Move.com Group's division equity and Cendant Group's retained
interest in Move.com Group) and (3) whenever Move.com Group had a cash need,
that cash need was funded by Cendant Group and accounted for as a capital
contribution (i.e., as an increase in Move.com Group's division equity and
Cendant Group's retained interest in Move.com Group). Cendant intends to
continue these practices until Move.com Stock is first issued. Accordingly, no
interest expense has been or will be reflected in the financial
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statements of Move.com Group for any period prior to the date on which Move.com
Stock is first issued.
After the date on which Move.com Stock is first issued:
(1) Cendant will attribute each future incurrence or issuance
of external debt or preferred stock (and the proceeds thereof) to
Cendant Group, unless the Board of Directors determines otherwise. The
Board of Directors may, but is not required to attribute an incurrence
or issuance of debt or preferred stock (and the proceeds thereof) to
Move.com Group to the extent that Cendant incurs or issues the debt or
preferred stock for the benefit of Move.com Group. If Cendant incurs
debt to finance Move.com Group and the debt is allocated to Cendant
Group, then Cendant Group would be treated as increasing its retained
interest in Move.com Group.
(2) Cendant will attribute each future issuance of CD Stock
(and the proceeds thereof) to Cendant Group. Cendant may attribute any
future issuance of Move.com Stock (and the proceeds thereof) to Cendant
Group in respect of its retained interest in Move.com Group (in a
manner analogous to a secondary offering of common stock of a
subsidiary owned by a corporate parent) or to Move.com Group (in a
manner analogous to a primary offering of common stock). Cendant may
attribute any future repurchases of Move.com Stock to Cendant Group in
respect of its retained interest in Move.com Group or to Move.com
Group. Dividends on CD Stock will be charged against Cendant Group, and
dividends on Move.com Stock will be charged against Move.com Group. In
addition, at the time of any dividend on Move.com Stock, Cendant will
credit to Cendant Group, and charge against Move.com Group a
corresponding amount per share in respect of Cendant Group's retained
interest in Move.com Group. See "-- Description of CD Stock and
Move.com Stock."
(3) Whenever Move.com Group holds cash, Move.com Group will
normally transfer that cash to Cendant Group. Conversely, whenever
Move.com Group has a cash need, Cendant Group will normally fund that
cash need. However, the Board of Directors will determine, in its sole
discretion, whether to provide any particular funds to either Group and
will not be obligated to do so.
(4) Cendant will account for all cash transfers from one Group
to or for the account of the other Group (other than transfers in
return for assets or services rendered or transfers in respect of
Cendant Group's retained interest
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that correspond to dividends paid on Move.com Stock), as inter-Group
revolving credit advances unless:
o the Board of Directors determines that a given transfer (or
type of transfer) should be accounted for as a long-term loan,
o the Board of Directors determines that a given transfer (or
type of transfer) should be accounted for as a capital
contribution increasing Cendant Group's retained interest in
Move.com Group, or
o the Board of Directors determines that a given transfer (or
type of transfer) should be accounted for as a return of
capital reducing Cendant Group's retained interest in Move.com
Group.
There are no specific criteria to determine when Cendant will account
for a cash transfer as a long-term loan, a capital contribution or a return of
capital rather than an inter-Group revolving credit advance.
The Board of Directors would make such a determination in the exercise
of its business judgment at the time of such transfer, or the first of such type
of transfer, based upon all relevant circumstances. Factors the Board of
Directors would expect to consider include:
o the current and projected capital structure of each Group,
o the relative levels of internally generated funds of each
Group,
o the financing needs and objectives of the recipient Group,
o the investment objectives of the transferring Group,
o the availability, cost and time associated with alternative
financing sources,
o prevailing interest rates and general economic conditions and
o the nature of the assets or operations to be financed.
Based on our intention to consummate a public offering of
Move.com Stock, we currently expect that, following an initial public
offering, cash
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transfers used to fund the day-to-day operations of Move.com Group will
be accounted for as inter-Group revolving credit advances. If, however,
Move.com Group were to acquire substantial assets, including as a
result of significant business acquisitions expected to provide
long-term benefits, the Board of Directors would likely account for the
required cash funding as a combination of inter-Group revolving credit
advance, long-term loan and/or capital contribution in a manner similar
to which Move.com Group would fund such assets if it were an
independent company with financing costs similar to those of Cendant.
Furthermore, the Board of Directors currently intends to account for
cash transfers in the aggregate such that the short-term liabilities,
long-term liabilities and equity of Move.com Group were generally
proportion ate to the short-term liabilities, long-term liabilities and
equity of comparable businesses with financing costs similar to those
of Cendant.
(5) Any cash transfer accounted for as an inter-Group
revolving credit advance will bear interest at the rate at which the
Board of Directors, in its sole discretion, determines Cendant could
borrow such funds on a revolving credit basis. Any cash transfer
accounted for as a long-term loan will have interest rate,
amortization, maturity, redemption and other terms that generally
reflect the then prevailing terms on which the Board of Directors, in
its sole discretion, determines Cendant could borrow such funds.
(6) Any cash transfer from Cendant Group to Move.com Group, or
for Move.com Group's account, accounted for as a capital contribution,
will correspondingly increase Move.com Group's division equity and
Cendant Group's retained interest in Move.com Group. As a result, the
number of shares of Move.com Stock that Cendant may issue for the
account of Cendant Group in respect of its retained interest in
Move.com Group which we call the "number of shares issuable with
respect to Cendant Group's retained interest in Move.com Group will
increase by the amount of such capital contribution divided by the
market value of Move.com Group on the date of transfer.
(7) Any cash transfer from Move.com Group to Cendant Group, or
for Cendant Group's account, accounted for as a return of capital, will
correspondingly reduce Move.com Group's division equity and Cendant
Group's retained interest in Move.com Group. As a result, the number of
shares issuable with respect to Cendant Group's retained interest in
Move.com Group will decrease by the amount of such return of capital
divided by the market value of Move.com Stock on the date of transfer.
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We will prepare financial statements in accordance with generally
accepted accounting principles, consistently applied, for Move.com Group. Thus,
the financial statements for Cendant Corporation will include separate financial
data for each Group. The financial statements of Move.com Group will reflect the
financial condition, results of operations and cash flows of the businesses
included therein.
The Move.com Group financial statements will also include allocated
portions of our debt, interest, corporate overhead and costs of administrative
shared services and taxes. Such allocations are based upon utilization where
possible with any remaining overhead allocated based on a percentage of
revenues. We will make these allocations for the purpose of preparing the
financial statements for Move.com Group; however, holders of CD Stock and
Move.com Stock will continue to be subject to all of the risks associated with
an investment in Cendant and all of its businesses, assets and liabilities. See
"Risk Factors -- If Cendant encounters financial difficulty, the value of either
Group's stock may suffer for reasons unrelated to the prospects of that Group."
Corporate General and Administrative Expenses
Cendant allocates the cost of corporate general and administrative
services and shared services to the Groups generally based on utilization. Where
utilization is not warranted, overhead is allocated on a percentage of revenues
basis. These shared services include legal, accounting (tax and financial),
information services, telecommunications, purchasing, marketing, intellectual
property, public relations, corporate office and travel expenses. Where
determinations based on utilization alone are impracticable, Cendant uses other
methods and criteria that management believes to be equitable and to provide a
reasonable estimate of the cost attributable to each Group.
Taxes
Income tax expense, which is determined on a consolidated basis, is
allocated to Cendant Group and Move.com Group, and reflected in the Move.com
Group financial statements in accordance with Cendant's tax allocation policy.
The tax allocation policy provides that the financial statement expense or
benefit, as the case may be, will be allocated to Move.com Group in an amount
equal to the difference between (x) the consolidated income tax expense or
benefit of Cendant for financial statement purposes, and (y) the consolidated
income tax expense or benefit of Cendant for financial statement purposes
computed without including the Move.com Group financial statement pretax income
and any other relevant amounts properly allocable to Move.com Group. If the
above computation results in a positive amount, such amount will be allocated to
Move.com Group as a tax expense. If the above computation
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results in a negative amount, such amount will be allocated to Move.com Group as
a tax benefit.
INTERCOMPANY AGREEMENTS
Move.com Group is a party to long-term agreements with various
companies in the Cendant Group.
Relationships with Real Estate Franchisors. On October 1, 1999 Move.com
Group and each of Century 21 Real Estate Corporation, Coldwell Banker Real
Estate Corporation and ERA Franchise Systems, Inc. entered into three separate
40-year Internet Cooperation Agreements.
Under each Cooperation Agreement, the respective franchisor has agreed
to provide its residential real estate listings to Move.com Group. In addition,
each Franchisor has agreed to promote Move.com Group to its brokers and agents
and to provide Move.com Group with access to content (e.g. information, articles
and promotional material) from its website. Such content will be provided by
each franchisor as mutually agreed by such franchisor and Move.com Group, based
on a variety of circumstances taken as a whole, including the uniqueness of the
content to be provided to Move.com Group, the impact on such franchisor, if any,
of the display of such content on Move.com Group's website, the scope and
breadth of the proposed display, the "look and feel" of the proposed display,
the duration of the proposed display, the display of similar information by real
estate brokerage systems other than those operated by the franchisor and the
franchisor's cost and expense attributable to the design, development and/or
publication of such content. Further, each franchisor has agreed to place
Move.com Group identifying marks in a prominent location on its website and,
where appropriate, based on the totality of circumstances, reference Move.com
Group in its television, radio and other offline advertising.
In return, Move.com Group has agreed to display the franchisor's
listings on the Move.com website, to provide the franchisor with access to
content developed by Move.com Group, to provide each of Century 21 and Coldwell
Banker with 50,000, and ERA with 25,000, banner advertisement impressions per
month on the Move.com website (the number is subject to mutual adjustment
throughout the term of each Cooperation Agreement), and to both provide broker
profile screens and internet traffic reports to each franchisor's brokers and
agents and allow such brokers and agents to participate in various ancillary
services developed and offered by Move.com Group in its ordinary course of
business.
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Pursuant to each Cooperation Agreement, Move.com Group has been
assigned, and has agreed to undertake management of, the franchisor's agreements
with internet website hosting companies regarding the maintenance and support of
its website. In addition, Move.com Group has agreed to serve as a nonexclusive
business development representative for the franchisor, with respect to third
party advertising on the franchisor's website. In connection with this
appointment, Move.com Group has the right to place all but 6% of the advertising
on the franchisor's website (the excluded percentage being subject to mutual
adjustments throughout the term of the Cooperation Agreement). Move.com Group is
also serving as a nonexclusive advertising placement consultant for each
franchisor, with respect to the placement of each franchisor's advertising on
third party websites; each franchisor has agreed that prior to appointing any
party as agency of record for this service, it will meet with Move.com Group
regarding Move.com Group's potential appointment as an agency of record.
Pursuant to each Cooperation Agreement, Move.com Group has agreed,
where permitted by law, to (1) pay each franchisor 10% of the revenue generated
from ancillary services sold by Move.com Group on the Move.com Group website,
where the leads are attributable to the brokers or agents of such franchisor
(the percentage is subject to mutual adjustment throughout the term of each
Cooperation Agreement) and (2) pay each franchisor 10% of the advertising
revenues received by Move.com Group in connection with advertising placed on
each franchisor's website (the percentage is subject to mutual adjustment
throughout the term of each Cooperation Agreement). Each franchisor has agreed
to pay to Move.com Group 6% of the value of the internet website
management/hosting services rendered by third parties to such franchisor;
however, this amount is only payable out of any savings realized by such
franchisor as a result of Move.com Group's assumption and management of the
third party hosting agreements for such franchisor's website. In other words, if
in the course of such franchisor assigning its website management/hosting
services agreements to Move.com Group, Move.com Group is able to obtain a lower
fee for such services, then Move.com Group will share in such savings, up to 6%
of the fair market value of the website management/hosting services rendered.
Relationship with Cendant Mortgage. Move.com, on behalf of Move.com
Group, is currently negotiating various agreements with Cendant Mortgage, a
wholly owned subsidiary of Cendant, under which Move.com Group's licensed
affiliate, Move.com Mortgage, will serve as an online mortgage broker for
residential mortgage products offered by and through Cendant Mortgage. In other
words, Move.com Mortgage will be the point of contact for online customers,
counseling such customers on mortgage options and procedures, guiding the
customer through the mortgage process, taking any customer applications and
providing other standard mortgage
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broker services. Completed applications will be forwarded to Cendant Mortgage or
another lender, for underwriting and closing. The terms, including the financial
terms, are currently being negotiated by the parties. If an agreement is
reached, Cendant Mortgage will license a customized version of its web-based
loan origination platform to Move.com Mortgage. This web-based loan origination
platform will, among other things, enable Move.com Group to accept customer
information to complete mortgage applications online, thereby facilitating
Move.com Mortgage's role as a mortgage broker. Move.com Group will designate an
area on the internet portal to market its affiliate's mortgage program. There
can be no assurance that the parties will reach agreement on all terms or that
any of the foregoing agreements will be entered into.
Intercompany Services Arrangements. Move.com, on behalf of Move.com
Group, and Cendant will enter into an Intercompany Agreement pursuant to which
Cendant will provide corporate services to Move.com Group similar to most of the
services provided by Cendant to its other subsidiaries. The services to be
provided will include support for finance functions such as treasury, accounts
payable, payroll and external reporting, human resources-related services such
as benefits administration and recruiting and employee relations assistance,
legal support, and assistance with significant transactions such as
acquisitions. Move.com Group will pay Cendant for such services with fees to be
based on (i) actual costs incurred by Cendant in providing such services and
(ii) cost allocation methodologies employed by Cendant for its other
subsidiaries which typically involves an allocation based on a percentage of
revenues. The term of the Intercompany Agreement will be indefinite, subject to
termination upon breach of the agreement or a divestiture of Move.com Group by
Cendant which we do not believe is a material risk to Cendant's stockholders.
The agreement can only be amended by mutual agreement of the parties.
Relationship with Getko Group, Inc. On September 30, 1999, Move.com
Group has entered into an Internet Cooperation Agreement with Getko Group, Inc.,
a wholly owned subsidiary of Cendant which owns the rights to the Welcome Wagon
brand name. Move.com Group has exclusive rights to market Welcome Wagon's
discount programs over the internet. Move.com Group will be able to utilize
Getko's experienced and vast sales force to promote their online products.
Internet traffic visiting the designated area of Move.com Group's website will
have the opportunity to review Welcome Wagon's discount offerings and download
coupons for discounts to be redeemed with local merchants. In exchange for
providing Getko with an online presence, Getko will pay Move.com 100% of the
fees local merchants pay to Getko to distribute their discount coupons online.
Move.com Group will remit to Getko an administrative fee in the amount of 50% of
such gross revenues. This amount is subject to mutual adjustment throughout the
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term of the agreement. The term of the Internet Cooperation Agreement began on
September 30, 1999 and ends on December 31, 2039, subject to termination in the
event of a material breach of the agreement and in the event Getko is no longer
a Cendant affiliate.
MATERIAL PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION,
BY-LAWS AND DELAWARE LAW
Preferred Stock
The amended and restated certificate of incorporation, like the current
amended and restated certificate of incorporation, provides that the Board of
Directors may issue shares of preferred stock in one or more series from time to
time and the Board of Directors, without further approval of stockholders, has
the authority to fix by resolution or resolutions the designations and the
powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of each series of preferred stock, including
without limitation the dividend rights and terms, conversion rights, voting
rights, liquidation preference, sinking funds and any other rights, preferences,
privileges and restrictions.
The purpose of authorizing the Board of Directors to determine such
rights and preferences is to eliminate delays associated with a stockholder vote
on specific issuances. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of
holders of our common stock and make it more difficult for a third party to gain
control of Cendant. There are no outstanding shares of preferred stock and no
designated series of preferred stock.
Number of Directors; Removal; Filling Vacancies
The number of members of the Board of Directors will be fixed from time
to time pursuant to our by-laws but shall not be less than three. By-laws
currently provide that the directors may be removed without cause only by the
affirmative vote of the holders of 80% of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
Directors. Newly created directorship and vacancies (whether arising through
death, resignation, disqualification, removal or other) may only be filled by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors.
A director elected to fill a vacancy shall serve for the remainder of
his term of office of the class to which he/she is elected.
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No Stockholder Action by Written Consent; Special Meetings
Any action required or permitted to be taken by the stockholders of
Cendant must be duly effected at a duly called annual or special meeting of such
holders and may not be taken by any consent in writing by such holders. Special
meetings of stockholders of Cendant may be called only by the Chairman of the
Board of Directors, the President or the Board of Directors pursuant to a
resolution stating the purpose or purposes of the special meeting. No business
other than that stated in the notice shall be transacted at any special meeting.
These provisions have the effect of delaying consideration of a stockholder
proposal until the next annual meeting unless a special meeting is called by the
Chairman, President or the Board of Directors for consideration of such
proposal.
Advance Notice for Stockholder Nominations and Proposals of New Business
Our by-laws establish an advance notice procedure. This procedure
requires stockholders to deliver to Cendant notice of any proposal to be
presented or of a candidate to be nominated for election as a director of
Cendant not less than 60 nor more than 90 days prior to the date of the meeting.
However, if the date of the meeting is first publicly announced or disclosed (in
a public filing or otherwise) is less than 70 days prior to the date of the
meeting, such advance notice shall be given not later than 10 days after such
date is first so announced or disclosed. Accordingly, failure by a stockholder
to act in compliance with the notice provisions will mean that the stock holder
will not be able to nominate directors or propose new business.
Amendments
The affirmative vote of holders of at least 80% of the stock entitled
to vote generally in the election of directors, voting together as a single
class, or a majority of the Board of Directors is required to amend provisions
of our by-laws relating to the advance notice provisions, stockholder action
without a meeting, the calling of special meetings, the number (or manner of
determining the number) of Cendant's directors, the election and term of
Cendant's directors, the filling of vacancies and the removal of directors.
Fair Price Provisions
Under the Delaware General Corporation Law and the amended and restated
certificate of incorporation, an agreement of merger, sale, lease or exchange of
all or substantially all of Cendant's assets must be approved by the Board of
Directors and
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adopted by the holders of a majority of the outstanding shares of stock entitled
to vote thereon. However, the amended and restated certificate of incorporation
includes what generally is referred to as a "fair price provision," which
requires the affirmative vote of the holders of at least 80% of the outstanding
shares of capital stock entitled to vote generally in the election of Cendant
directors, voting together as a single class, to approve business combination
transactions (including mergers, recapitalization and the issuance or transfer
of securities of Cendant or a subsidiary having an aggregate fair market value
of $10 million or more) involving Cendant or a subsidiary and an owner or any
affiliate of an owner of 5% or more of the outstanding shares of capital stock
entitled to vote, unless either (i) such business combination is approved by a
majority of disinterested directors, or (ii) the stockholders receive a "fair
price" for their Cendant securities and other procedural requirements are met.
The amended and restated certificate of incorporation provides that this
provision may not be repealed or amended in any respect except by the
affirmative vote of the holders of not less than 80% of the outstanding shares
of capital stock entitled to vote generally in the election of Cendant
directors.
Certain Provisions of Delaware Law Which May Inhibit Changes of Control
Cendant is subject to the business combination provisions of Section
203 of the Delaware General Corporation Law. In general, such provisions
prohibit a publicly held Delaware corporation from engaging in various business
combination transactions with any interested stockholder for a period of three
years after the date of the transaction in which the person became an
interested stockholder unless: (1) the business combination transaction, or the
transaction in which the interested stockholder became an interested
stockholder, is approved by the Board of Directors prior to the date the
interested stockholder obtained such status, (2) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
by (a) persons who are directors and also officers and (b) employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer or (3) on or subsequent to such date the business combination is approved
by the Board of Directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder. A "business
combination" is defined to include mergers, asset sales and other transactions
resulting in financial benefit to a stockholder. In general, an "interested
stockholder" is a person who, together with affiliates and
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associates, owns (or, within three years, did own) 15% or more of a
corporation's voting stock. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to Cendant and, accordingly,
may discourage attempts to acquire Cendant.
Limitations on Liability and Indemnification of Officers and Directors
Section 102 of the Delaware General Corporation Law authorizes a
Delaware corporation to include a provision in its certificate of incorporation
limiting or eliminating the personal liability of its directors to the
corporation or its stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors exercise an informed business judgment
based on all material information reasonably available to them. Absent the
limitations authorized by such provision, directors are accountable to
corporations or their stockholders for monetary damages for conduct constituting
gross negligence in the exercise of their duty of care. Although Section 102 of
the Delaware General Corporation Law does not change a director's duty of care,
it enables corporations to limit available relief to equitable remedies such as
injunction or rescission. Our amended and restated certificate of incorporation
and by-laws include provisions which limit or eliminate the personal liability
of Cendant's directors to the fullest extent permitted by Section 102 of the
Delaware General Corporation Law. Consequently, a director will not be
personally liable to Cendant or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for any breach of the directors' duty of
loyalty to Cendant or its stockholders, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, unlawful
payments of dividends or unlawful stock repurchases, redemptions or other
distributions and any transaction from which the director derived an improper
personal benefit.
Our by-laws provide that Cendant will indemnify to the full extent
permitted by law any person made or threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer or employee of
Cendant or serves or served at the request of Cendant any other enterprise as a
director, officer or employee. Our by-laws provide that expenses, including
attorneys' fees, incurred by any such person in defending any such action, suit
or proceeding will be paid or reimbursed by Cendant promptly upon receipt by it
of an undertaking of such person to repay such expenses if it shall ultimately
be determined that such person is not entitled to be indemnified by Cendant. The
inclusion of these indemnification provisions in our by-laws is intended
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to enable Cendant to attract qualified persons to serve as directors and
officers who might otherwise be reluctant to do so.
The directors and officers of Cendant are insured under policies of
insurance maintained by Cendant, subject to the limits of such policies, against
losses arising from any claim made against them by reason of being or having
been such officers or directors.
In addition, the limited liability provisions in our amended and
restated certificate of incorporation and the indemnification provisions in our
by-laws may discourage stockholders from bringing a lawsuit against directors
for breach of their fiduciary duty (including breaches resulting from grossly
negligent conduct) and may have the effect of reducing the likelihood of
derivative litigation against directors and officers, even though such an
action, if successful, might otherwise have benefitted Cendant and our
stockholders. Furthermore, a stockholder's investment in Cendant may be
adversely affected to the extent we pay the costs of settlement and damage
awards against directors and officers of Cendant pursuant to the indemnification
provisions in our by-laws. The limited liability provisions in our amended and
restated certificate of incorporation will not limit the liability of directors
under federal securities laws.
Section 203 of the Delaware General Corporation Law, and the provisions
of our amended and restated certificate of incorporation and by-laws described
above, may make it more difficult for a third party to acquire or discourage
bids for Cendant. Section 203 and these provisions could have the effect of
inhibiting attempts to change the membership of the Board of Directors.
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, you will not have appraisal
rights in connection with the Tracking Stock Proposal.
FINANCIAL ADVISORS
We have engaged Goldman, Sachs & Co. as our financial advisor in
connection with the Tracking Stock Proposal. Goldman, Sachs & Co. was engaged to
assist us in our analysis and consideration of various financial and structural
alternatives related to Move.com and the formulation of the Tracking Stock
Proposal. Prior to electing to pursue the Tracking Stock Proposal, Goldman,
Sachs & Co. and Cendant reviewed other potential alternatives, including the
issuance of stock of a subsidiary which would
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own the assets and liabilities of Move.com Group. In connection with its role as
financial advisor, Goldman Sachs made an oral presentation to Cendant and
provided general background information regarding tracking stock and subsidiary
initial public offering structures and discussed other precedent transactions.
These discussion materials were designed to educate Cendant's Board of Directors
and management about the financial and structural aspects of tracking stock and
compare and contrast tracking stock with a subsidiary initial public offering
structure. Goldman, Sachs & Co. also discussed a number of precedent
transactions and why various structures were utilized, but did not, however,
make any formal recommendation to Cendant or provide any fairness or other form
of opinion. Cendant ultimately decided to pursue the Tracking Stock Proposal
instead of a subsidiary initial public offering structure because of the
operational, financial, tax and strategic benefits of being a single
consolidated entity. The advisor is further assisting us in implementing the
Tracking Stock Proposal, including helping us determine the terms of the
Move.com Stock. We have agreed to reimburse the advisor for reasonable
out-of-pocket expenses (including fees and expenses of their legal counsel) and
have agreed to indemnify the advisor against certain liabilities, including
liabilities under the federal securities laws. The advisor will not receive a
fee for the above-described services regardless of whether the Tracking Stock
Proposal is approved.
The advisor will not participate in the solicitation of proxies.
STOCK TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the registrar and transfer
agent for our existing common stock. We expect ChaseMellon Shareholder Services,
L.L.C. to serve as registrar and transfer agent for CD Stock and Move.com Stock.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material United States
federal income tax consequences of the implementation of the Tracking Stock
Proposal. This discussion, including the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP discussed below, is based on certain assumptions,
representations of Cendant as to factual matters, the Internal Revenue Code of
1986 (the "Code"), Treasury Department regulations, published positions of the
Internal Revenue Service and court decisions now in effect, all of which are
subject to change, possibly on a retroactive basis. For example, Congress could
enact legislation affecting the treatment of stock with characteristics similar
to the CD Stock or Move.com Stock or the Treasury Department could issue
regulations or other guidance that change current law. Any future
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legislation or regulations (or other guidance) could apply retroactively to the
implementation of the Tracking Stock Proposal and render the opinion of Skadden,
Arps, Slate, Meagher & Flom LLP obsolete.
This discussion addresses you only if you hold your existing common
stock and would hold your CD Stock as capital assets. We have included this
discussion for general information only; it does not discuss all aspects of
United States federal income taxation that may be relevant to you in light of
your particular tax circumstances or any future transactions that may be
undertaken with respect to CD Stock or Move.com Stock. For example, this
discussion does not apply to you if you are a tax-exempt organization,
S corporation or other pass-through entity, mutual fund, small business
investment company, regulated investment company, insurance company or other
financial institution, or broker-dealer or are otherwise subject to special
treatment under the federal income tax laws. This discussion also does not apply
to you if you hold your existing common stock as part of a straddle, hedging or
conversion transaction. You should consult your tax advisor with regard to the
application of the federal income tax laws, as well as to the applicability and
effect of any state, local, or foreign tax laws to which you may be subject.
Tax Implications of the Tracking Stock Proposal to Stockholders
Skadden, Arps, Slate, Meagher & Flom LLP has provided us with an
opinion that the implementation of the Tracking Stock Proposal will qualify as a
"reorganization" for federal income tax purposes in which you are deemed to
exchange your existing common stock for CD Stock. This means that:
o Neither you nor Cendant will recognize any income, gain or
loss on the deemed exchange of your existing common stock for
shares of CD Stock;
o Your tax basis in the existing common stock that you held
immediately before the implementation of the Tracking Stock
Proposal will be transferred or "carried over" to the CD Stock
you are deemed to receive; and
o Your holding period for the CD Stock will include the holding
period of your existing common stock.
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Tax Implications of a Conversion into Different Series of Tracking Stock
Skadden, Arps, Slate, Meagher & Flom LLP has advised us that, under
current law, if we exercise our option to issue one series of common stock in
exchange for the other series of common stock, that exchange also will be a
reorganization and will be treated for federal income tax purposes, as discussed
above. Therefore, you will not recognize income, gain or loss, you will have a
carry-over tax basis in your newly received common stock and a holding period
that includes the holding period of the common stock you surrendered in the
exchange.
No Internal Revenue Service Ruling
We have not sought a ruling from the Internal Revenue Service as to the
tax consequences of the Tracking Stock Proposal. Moreover, the Internal Revenue
Service has announced that it will not issue any advance rulings on the
classification of an instrument that has voting and liquidation rights in an
issuing corporation but whose dividend rights are determined by reference to the
earnings of a segregated portion of the issuing corporation's assets, including
assets held by a subsidiary. In addition, there are no court decisions or other
authorities that directly discuss or analyze the tax impact of stock such as the
CD Stock or Move.com Stock. The opinion of Skadden, Arps, Slate, Meagher & Flom
LLP is not binding on the Internal Revenue Service or the courts and merely
represents its best judgment based upon existing authorities and assumptions and
representations made to Skadden, Arps, Slate, Meagher & Flom LLP by our
management. Therefore, it is possible that the Internal Revenue Service would
assert that the deemed receipt of CD Stock as well as a subsequent conversion or
exchange of CD Stock or Move.com Stock could be taxable to us and/or to you.
Skadden, Arps, Slate, Meagher & Flom LLP is of the opinion that the Internal
Revenue Service would not prevail in any such assertion. WE URGE YOU TO CONSULT
YOUR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE ADOPTION OR IMPLEMENTATION OF
THE TRACKING STOCK PROPOSAL.
Back-up Withholding
Certain noncorporate holders of existing common stock and CD Stock or
Move.com Stock could be subject to backup withholding at a rate of 31% on the
payment of dividends on or proceeds from the sale of such stock. Back-up
withholding will apply only if the stockholder (1) fails to furnish its taxpayer
identification number ("TIN") which, for an individual, would be his or her
social security number, (2) furnishes an incorrect TIN, (3) is notified by the
Internal Revenue Service that it has failed to properly report payments of
interest or dividends or (4) under certain
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<PAGE>
circumstances, fails to certify under penalties of perjury that it has furnished
a correct TIN and has been notified by the Internal Revenue Service that it is
subject to backup withholding for failure to report payments of interest or
dividends. Stockholders should consult their tax advisors regarding their
qualifications for exemption from backup withholding and the procedures for
obtaining such an exemption if applicable. The amount of any backup withholding
from a payment to a stockholder will be allowed as a credit against such
stockholder's federal income tax liability and may entitle such holder to a
refund, provided that the required information is furnished to the Internal
Revenue Service.
-----------------
Approval of Proposal 1 will require the affirmative vote of the holders
of a majority of the outstanding shares of existing common stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE TRACKING STOCK PROPOSAL.
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PROPOSAL 2 -- STOCK OPTION PLAN PROPOSAL
MOVE.COM, INC. 1999 STOCK OPTION PLAN
General
On October 29, 1999, the Board of Directors of Move.com, Inc. adopted
the Move.com, Inc. 1999 Stock Option Plan. The Option Plan was approved and
ratified on October 29, 1999 by Cendant Membership Services, Inc., the sole
shareholder of Move.com., Inc. On October 29, 1999, options to purchase
approximately 2.5 million shares of common stock of Move.com, Inc. were granted
to employees of Move.com Group under the Option Plan. In December 1999, options
to purchase approximately 1.2 million shares of common stock of Move.com, Inc.
were granted to employees of Cendant and its subsidiaries other than Move.com
Group.
Subject to the approval of the stockholders of Cendant (i) the Option
Plan and the existing grants will be ratified and assumed by Cendant, (ii) all
existing grants will become options to purchase shares of Move.com Stock
equitably adjusted to the extent necessary to adjust for stock splits, reverse
stock splits and the like in connection with the proposed initial public
offering or otherwise, and (iii) the remaining shares avail able to be issued in
connection with the grant of options under the Option Plan will be equitably
adjusted to become shares of Move.com Stock. If such stockholder approval is not
obtained, the existing grants will remain options to purchase shares of
Move.com, Inc. common stock, the Option Plan will remain an obligation of
Move.com, Inc., and no additional grants will be made under the Option Plan.
Section 162(m) of the Code provides that a publicly traded company may
not deduct for federal income tax purposes compensation paid to the chief
executive officer or any of the four most highly compensated other officers
("Covered Employees") to the extent such compensation exceeds $1,000,000 in any
one tax year, unless the payments, among other things, are made based upon the
attainment of objective performance goals established by a committee of the
Board of Directors, comprised solely of two or more outside directors, and based
upon business criteria and other material terms approved by stockholders of such
publicly traded company. The Option Plan is designed so that options may be
granted to Covered Employees in a manner considered performance-based and hence
fully deductible. If such stockholder approval is not obtained as may be
necessary in order to satisfy the requirements of Section 162(m) of the Code, it
is possible that options granted under the Option Plan to Covered Employees may
not be fully deductible for federal tax purposes.
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<PAGE>
The Board of Directors of Cendant believes that attracting and
retaining key employees is essential to Move.com Group's growth potential and
success, and that the long term success of Move.com Group requires a competitive
incentive compensation program designed to motivate and reward such employees
for outstanding service, including awards that link compensation to applicable
measures of Move.com Group's performance, profitability and creation of
stockholder value. Such awards will enable Move.com Group and Cendant to attract
and retain key employees and enable such persons to acquire and/or increase
their proprietary interest in Move.com Group and thereby align their interests
with the interests of Cendant and its stockholders. How ever, Cendant does not
currently intend to issue any options under the Option Plan to the Chairman of
the Board, President and Chief Executive Officer in accordance with such
person's request.
The following is a brief description of the material features of the
Option Plan, as modified as a result of its adoption by Cendant. Such
description is qualified in its entirety by reference to the full text of the
Option Plan, which is attached as Annex III to this Proxy Statement.
The Option Plan provides for grants of options to eligible employees of
Move.com Group and Cendant Group, at the sole discretion of the Committee (as
defined below). It is expected that a majority of the employees of Move.com
Group will be granted options under the Option Plan. Subject to adjustment as
provided in the Option Plan, the total number of shares of Move.com Stock
reserved and available for delivery to optionees is six million (6,000,000). No
optionee may be granted options under the Option Plan covering more than 50% of
the total number of shares of Move.com Stock authorized for issuance under the
Option Plan over any consecutive two (2) year period. Shares subject to an
option may be authorized and unissued shares or may be treasury shares. If any
option terminates without being exercised, the shares of Move.com Stock subject
to such option will again be available for option grants under the Option Plan.
The Option Plan will be administered by the Compensation Committee of
the Board of Directors of Cendant or by such other committee as the Board of
Directors of Cendant may designate or by the Board of Directors of Cendant (the
"Committee"). The Committee is authorized, among other things, to select the
employees of Move.com Group and Cendant Group to whom options will be granted,
the number of shares and per share exercise price applicable thereto, as well as
to determine the terms and conditions of such options. Such selections will be
made to advance the goals set forth above, including to align the interests of
the employees of Move.com Group and Cendant Group employees who support the
Move.com Group operations, with the
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interests of the stockholders of the Move.com Stock. Subject to the terms and
conditions of the Option Plan, the Committee is authorized to interpret the
Option Plan and adopt administrative rules, guidelines, policies and practices
applicable to the Option Plan, as well as to make all determinations under the
Option Plan.
Options to purchase shares of Move.com Stock are the only awards
authorized to be granted under the Option Plan. No option granted under the
Option Plan may qualify as an Incentive Stock Option as defined in Section 422
of the Code. The exercise price per share applicable to any option is determined
by the Committee, but may not be less than the fair market value (as defined in
the Option Plan) of a share of Move.com Stock as of the date of grant.
Stock Options may be settled in the form of cash, or by such other
manner determined by the Committee. The Committee may permit optionees to defer
the receipt of shares issuable in connection with the exercise of any option.
Except as set forth in the Option Plan, options may not be transferred or
otherwise assigned, pledged or encumbered in any way.
All options granted under the Option Plan will be subject to a vesting
schedule established by the Committee.
The Option Plan provides for the termination of options in the event
that any optionee's employment is terminated for cause (as defined in the Option
Plan). The Option Plan also has provisions for treatment of outstanding options
in the event an optionee terminates employment with Move.com for any other
reason.
The Option Plan will terminate by its terms on October 29, 2009, but
may be earlier terminated or amended at any time by the Board of Directors of
Cendant at its sole discretion, except that no such termination or amendment may
impair the rights of any optionee with respect to any then outstanding options.
Federal Income Tax Implications of the Option Plan
The following is a brief description of the federal income tax
consequences generally arising with respect to options under the Option Plan.
THE FOLLOWING DISCUSSION ADDRESSES ONLY THE GENERAL FEDERAL INCOME TAX
CONSEQUENCES OF OPTIONS. IT DOES NOT ADDRESS THE IMPACT OF STATE AND LOCAL
TAXES, THE FEDERAL ALTERNATIVE MINIMUM TAX, AND SECURITIES LAWS RESTRICTIONS,
AND IS NOT
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<PAGE>
INTENDED AS TAX ADVICE TO PARTICIPANTS IN THE OPTION PLAN, WHO SHOULD CONSULT
THEIR OWN TAX ADVISORS.
The grant of an option pursuant to the Option Plan will not be a
taxable event for the optionee, Cendant or Move.com Group. Upon the exercise of
an option, the optionee generally will recognize ordinary income equal to the
difference between the exercise price and fair market value of the shares
acquired on the date of exercise. Cendant or Move.com Group, as the case may be,
generally will be required to withhold the appropriate amount in respect of such
income and will be entitled to a tax deduction equal to the amount recognized as
ordinary income by the optionee in connection with the exercise of an option.
The sale or other disposition of the Move.com Stock received pursuant to the
exercise of such option, generally will result in capital gain or loss in an
amount equal to the difference between the amount realized on such sale or other
disposition, and the seller's tax basis in the Move.com Stock.
NEW PLAN BENEFITS
Grants of options under the Option Plan are subject to the discretion
of the Committee and therefore indeterminable. However, as of the date hereof,
no options have been granted to any officer, employee or director of Cendant
Group and 2,502,000 options have been granted to employees of Move.com Group
under the Option Plan. In December 1999, options to purchase approximately
1.2 million shares of common stock of Move.com. were granted to employees of
Cendant and its subsidiaries other than Move.com.
-----------------
Proposal 2 requires the affirmative vote of the holders of a majority
of the shares of common stock present in person or represented by proxy at the
special meeting and entitled to vote thereat.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE STOCK OPTION PLAN PROPOSAL.
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PROPOSAL 3 -- BOARD DECLASSIFICATION PROPOSAL
General
On December 6, 1999, the Board of Directors approved a resolution to
submit to the stockholders for approval proposed amendments to Article III,
Sections 1, 2 and 3 of the amended and restated by-laws of Cendant and Article 9
(b), (d), (e), (g) and (h) of the amended and restated certificate of
incorporation of Cendant to eliminate classification of the Board and related
matters effective as of the annual meeting of stockholders to be held in 2000.
Currently, the by-laws and amended and restated certificate of incorporation
provide that the Board be divided into three classes with the number of
Directors in each class being as nearly equal as possible. Each Director
currently serves a three year term and Directors for one of the three classes
are elected each year. Accordingly, if the proposed amendments are approved,
stockholders will elect the directors at the annual meeting in 2000 for a term
of one year. The proposed amendment, which can only be approved with the
affirmative vote of 80% of the votes which would be entitled to be cast
generally in an election of Directors, would also eliminate that 80% voting
requirement for any future amendments to Article 9 (b) of the amended and
restated certificate of incorporation and Article III, Sections 1, 2 and 3 of
the by-laws.
Description of Proposal
In 1997, in connection with the merger of CUC International Inc. and
HFS Incorporated to form Cendant, stockholders of the constituent corporations
voted to approve the Certificate of Incorporation providing for a classified
Board of Directors and to require the affirmative vote of 80% of the votes which
would be entitled to be cast generally in the election of directors to amend
such provision. This classified director provision is set forth in Article 9 (b)
of the Restated Certificate of Incorporation and Article III, Section 1 of the
by-laws. Under that classified director provision, approximately one-third of
the Directors are elected annually and serve a three-year term.
Supporters of classified boards of directors believe that they help
maintain continuity of experience and, as a result, may assist a company in
long-term strategic planning. Additionally, supporters argue that a classified
board may encourage a person seeking control of a company to initiate
arm's-length discussions with management and the board, who may be in a
position to negotiate a higher price or more favorable terms for stockholders or
to seek to prevent a takeover that the board believes is not in the best
interests of stockholders.
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On the other hand, a classified board of directors limits the ability
of stockholders to elect directors and exercise influence over a company, and
may discourage proxy contests in which stockholders have an opportunity to vote
for a competing slate of nominees. The election of directors is the primary
avenue for stockholders to influence corporate governance policies and to hold
management accountable for the implementation of those policies. A
nonclassified board of directors may enable stockholders to hold all directors
accountable on an annual basis, rather than over a three-year period.
Also, the existence of a classified board of directors may deter some
tender offers or substantial purchases of stock that might give stockholders the
opportunity to sell their shares at a price in excess of what they would
otherwise receive. Accordingly, approval of the proposed amendment to the
amended and restated certificate of incorporation might increase the likelihood
of such a tender offer or substantial stock purchases by a person seeking to
change Cendant's Board of Directors.
At the 1999 annual meeting of stockholders of Cendant, a majority of
the shares voted (although less than 50% of the outstanding shares) were voted
at the meeting in favor of a nonbinding stockholder proposal recommending the
declassification of the Board. The Board opposed the proposal to declassify the
Board at the 1999 annual meeting on the basis that a classified board provides
continuity and experience of management. The Board has since decided, in
connection with the settlement of the common stock class action lawsuit against
Cendant, to support the proposed amendments to declassify the Board because of
the support for the proposal by the stockholders at the 1999 annual meeting, as
well as of the factors discussed above which made the proposal an acceptable
additional inducement to plaintiffs to help settle the litigation. Pursuant to
the terms of the common stock class action settlement, the Board agreed to
present this proposal to stockholders and not to object to this proposal.
Under Delaware law, directors of companies that have a classified board
of directors may only be removed for cause unless the certificate of
incorporation provides otherwise. However, under Delaware law, directors of
companies that do not have a classified board may be removed with or without
cause by a majority vote of the stockholders at any annual or special meeting of
stockholders. Accordingly, if the proposed amendment to the amended and restated
certificate of incorporation is approved, Cendant's stockholders would be able
to remove any or all directors without cause at any stockholders meetings after
the 2000 annual meeting of stockholders, when all directors then in office will
have been elected for a term expiring at the 2001 annual meeting of
stockholders. Under Cendant's by-laws, special meetings of
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stockholders can be called only by the Chairman, the President or a majority of
Cendant's Board.
Article 9 of the amended and restated certificate of incorporation also
currently provides that Article 9 (b) and Article III, Sections 1, 2 and 3 of
the by-laws can only be amended by the affirmative vote of 80% of the votes
which would be entitled to be cast generally in an election of directors. The
proposed amendment would delete this requirement with respect to any future
amendments of Article 9 (b) of the amended and restated certificate of
incorporation or Article III, Sections 1, 2 and 3 of the by-laws. Accordingly,
under Delaware law, any subsequent amendment to Article 9 (b) of the amended and
restated certificate of incorporation Article III, Sections 1, 2 and 3 of the
by-laws would require approval of Cendant's Board of Directors and the
affirmative vote of a majority of the outstanding shares entitled to vote
generally in the election of directors.
The proposed amended and restated certificate of incorporation and the
proposed by-law are set forth in Annexes II and IV hereto, respectively, with
deletions indicated by strike-out and additions indicated by brackets.
-----------------
In accordance with the amended and restated certificate of
incorporation, Proposal 3 requires the affirmative vote of at least 80% of the
voting power of all shares of Cendant entitled to vote generally in the election
of Directors. Under Delaware law, in determining whether such proposal has
received the requisite number of affirmative votes, abstentions and broker
nonvotes will be counted and will have the same effect as a vote against the
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE BOARD DECLASSIFICATION PROPOSAL.
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PROPOSAL 4 -- ADJOURNMENT PROPOSAL
At the special meeting, we may also ask you to consider and approve a
proposal to adjourn the special meeting, which adjournment could be used for the
purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the Tracking Stock Proposal and the Stock Option
Plan Proposal
Proposal 4 requires the affirmative vote of a majority of the votes
cast, in person or by proxy, at the special meeting, if a quorum is present.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE ADJOURNMENT PROPOSAL, IF PRESERVED AT THE SPECIAL
MEETING.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the 1997, 1998 and 1999 cash and noncash
compensation awarded to or earned by each person who served as Chief Executive
Officer of Cendant during 1999 and the four other most highly compensated
executive officers of Cendant (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
-----------------------------------------------------------------------------
AWARDS
---------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) SARS (#)(3)(4) ($)(5)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Henry R. Silverman 1999 2,900,000 4,350,000 3,000,000 267,934
Chairman of the Board, 1998 1,610,367 1,207,775 18,908,920 77,626
President and Chief 1997 1,577,472 2,366,208 19,307,180 6,760
Executive Officer
Stephen P. Holmes 1999 661,050 661,050 600,000 84,912
Vice Chairman and 1998 647,115 388,269 2,436,948 55,667
Chairman and CEO, 1997 499,980 299,988 1,025,620 22,903
Travel Division
Michael P. Monaco 1999 661,050 661,050 600,000 111,349
Vice Chairman and 1998 647,115 388,269 3,247,994 55,537
Chairman and CEO, 1997 499,980 299,988 2,347,325 16,514
Direct Marketing Division
James E. Buckman 1999 661,050 661,050 600,000 79,058
Vice Chairman and 1998 531,759 237,297 2,474,448 22,942
General Counsel 1997 499,980 299,988 1,075,620 6,258
Samuel L. Katz 1999 500,000 600,000 500,000 47,719
Senior Executive Vice 1998 379,669 140,000 1,534,419 24,766
President, Strategic 1997 313,171 250,527 540,310 18,811
Development
</TABLE>
- --------------------
(1) Prior to December 17, 1997, all cash compensation represents
compensation paid by HFS Incorporated.
(2) For 1999, bonus amounts include fiscal year 1999 profit-sharing bonuses
expected to be paid in February 2000. Such bonus amounts have not been
finally determined or approved but are reported at targeted level and
assume attainment of all applicable performance goals and Compensation
Committee certification.
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(3) On September 23, 1998, the Compensation Committee approved the Senior
Management Program which effectively modified the terms of certain
Cendant stock options held by the Named Executive Officers. With
respect to approximately 25.8 million options held by Mr. Silverman,
(a) 33% were canceled, (b) 33% were exchanged for similar options with
an exercise price of $20 per share and (c) 33% were exchanged for
similar options with an exercise price per share equal to $9.8125 (the
"New Price"). Although prior to the effectiveness of the Senior
Management Program all of Mr. Silverman's options were vested, the 17.2
million options granted to Mr. Silverman in such exchange are
unexercisable and will vest at the rate of 25% per year over the next
four years beginning in October 1999. With respect to an aggregate of
approximately 7.5 million options held by Messrs. Holmes, Monaco and
Buckman: (a) 25% were canceled, (b) 25% were exchanged for similar
options with an exercise price of $20 per share, and (c) 50% were
exchanged for similar options with an exercise price per share equal to
the New Price. With respect to approximately 1.0 million options held
by Mr. Katz: (a) 10% were cancelled, (b) 40% were exchanged for similar
options with an exercise price per share at 25% above the New Price and
(c) 50% were exchanged for similar options with an exercise price per
share equal to the New Price. In addition, to further align the Senior
Management (including the Named Executive Officers) interest with that
of Cendant's stockholders, the ability to obtain modified options was
subject to such officers' agreement to participate in an executive
equity incentive program, requiring such officers to acquire and hold
Common Stock having an aggregate market value based upon their base
salary.
(4) As a result of the Senior Management Program, the following total
number of options granted in 1996, 1997 and 1998 were canceled: Mr.
Silverman: 25,813,380; Mr. Holmes: 2,115,930; Mr. Monaco: 3,197,325;
Mr. Katz: 970,465; Mr. Buckman: 2,165,930.
(5) Payments included in these amounts for the fiscal year ended December
31, 1999 consist of (i) Cendant matching contributions to the Employee
Savings Plan, which is a defined contribution salary reduction 401(k)
plan qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") and/or under a non-qualified deferred
compensation plan maintained by Cendant ("Defined Contribution Match"),
(ii) insurance premiums paid by Cendant for life insurance coverage,
(iii) executive medical benefits and (iv) auto allowance. Defined
Contribution Match includes estimated contributions relating to
deferrals of fiscal year 1999 profit sharing bonuses, expected to be
paid in February 2000. The foregoing amounts were as follows:
<TABLE>
<CAPTION>
DEFINED LIFE EXECUTIVE AUTO
CONTRIBUTION INSURANCE MEDICAL ALLOWANCE
YEAR MATCH ($) PREMIUM ($) BENEFITS ($) ($)
- ------------------ ------------------------------ ------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Silverman 1999 261,910 1,224 4,800 0
Mr. Holmes 1999 79,316 796 4,800 0
Mr. Monaco 1999 52,742 796 4,800 53,011
Mr. Buckman 1999 73,633 625 4,800 0
Mr. Katz 1999 45,923 490 720 586
</TABLE>
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OPTION GRANTS IN 1999
The following table summarizes option grants during the last fiscal
year made to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
YEAR GRANTED (#)(1) FISCAL YEAR ($/SH) DATE VALUE $(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Henry R. Silverman 3,000,000 9.52% $17.875 04/21/2009 33,780,000
Stephen P. Holmes 600,000 1.90% $17.875 04/21/2009 6,756,000
Michael P. Monaco 600,000 1.90% $17.875 04/21/2009 6,756,000
James E. Buckman 600,000 1.90% $17.875 04/21/2009 6,756,000
Samuel L. Katz 500,000 1.59% $17.875 04/21/2009 5,630,000
</TABLE>
- --------------------
(1) The vesting of these options accelerates under certain circumstances
(including a change of control of Cendant under the terms of the Named
Executive Officers' respective employment agreements). See "Employment
Contracts and Termination, Severance and Change of Control Arrangements."
(2) The values assigned to each reported option on this table are computed
using the Black-Scholes option pricing model. The calculations assume a
risk-free rate of return of 6.4%, which represents the ten-year yield of
United States Treasury Notes on the option grant date. The calculations
for all option grant dates assume a 60% volatility; however, there can be
no assurance as to the actual volatility of the Common Stock in the
future. The calculations for all grant dates also assume no dividend
payout, a straight-line, and a 6.2 year expected life. In assessing these
option values, it should be kept in mind that no matter what theoretical
value is placed on a stock option on the date of grant to a Named
Executive Officer, its ultimate value will depend on the market value of
the Common Stock at a future date.
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AGGREGATED OPTION EXERCISES IN 1999 AND FISCAL YEAR-END OPTION VALUES
The following table summarizes the exercise of options by the Named
Executive Officers during the last fiscal year and the value of unexercised
options held by such executives as of the end of such fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS/SARS OPTIONS/SARS
ON EXERCISE REALIZED AT FY-END (#) AT FY-END ($)(1)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henry R. Silverman 270,000 4,745,146 27,318,852/12,906,690 534,239,222/150,443,603
Stephen P. Holmes 0 0 2,731,734/1,276,765 54,465,475/12,400,614
Michael P. Monaco 0 0 1,923,992/1,074,002 28,912,575/8,323,138
James E. Buckman 0 0 2,556,841/1,307,390 49,416,290/12,805,341
Samuel L. Katz 100,000 1,140,000 775,207/1,189,832 10,422,958/15,144,474
</TABLE>
- --------------------
(1) Based upon the closing price of the Common Stock on the New York Stock
Exchange on December 31, 1999.
DIRECTOR COMPENSATION
Effective July 21, 1999, Non-Employee Directors (as defined in Rule
16b-3(b)(3) of the Exchange Act) of Cendant receive an annual retainer of
$40,000, plus $5,000 for chairing a committee and $3,000 for serving as a member
of a committee other than as Chairman. Commencing January 1, 1999, 50% of the
annual stipend was paid to each Director in common stock of Cendant for the 1999
fiscal year. Effective January 1, 2000, 100% of the annual stipend is to be paid
to each Director in common stock of Cendant on a quarterly basis. The
calculations of stock paid to non-employee directors is made based on the
average of the closing price of Cendant common stock on the New York Stock
Exchange on the last five trading days of the calendar quarter to which such
stock payment relates. Cendant has implemented a program providing its
Non-Employee Directors the opportunity to defer the receipt of their annual
stipend until their separation of service from the Board. Non-Employee Directors
also are paid $1,000 for each Board of Directors meeting attended and $500
($1,000 for committee chair) for each board committee meeting if held on the
same day as a Board of Directors meeting and $1,000 ($2,000 for
committee chair) for each board committee meeting attended on a day on which
there is
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no board meeting. Non-Employee Directors are reimbursed for expenses incurred in
attending meetings of the Board of Directors and committees.
Cendant provides $100,000 of term life insurance coverage for each
Non-Employee Director to the beneficiary designated by such Non-Employee
Director. In addition, Cendant has purchased joint life insurance contracts in
the amount of $1 million for each Director. Upon the death of such Director,
while still in office, Cendant will donate an aggregate of $1 million to one or
more charitable organizations designated by such Director from the proceeds of
such insurance policy. With the exception of such joint life insurance
contracts, members of the Board of Directors who are officers or employees of
Cendant or any of its subsidiaries do not receive compensation or reimbursement
of expenses for serving in such capacity.
Non-Employee Directors have also received grants of stock options under
one or more of the following plans: 1990 Directors Stock Option Plan, 1992
Directors Stock Option Plan, 1994 Director Stock Option Plan, the 1997 Stock
Incentive Plan and the HFS Incorporated 1993 Stock Option Plan. Non-Employee
Directors did not receive any grants of stock options in 1999.
TEN YEAR OPTIONS/SAR REPRICINGS
<TABLE>
<CAPTION>
Exercise Length of
Number of Market Price Original
Securities Price of at Time Option
Underlying Stock of Term
Options/ at Time Repricing Remaining at
SARs of Repricing or New Date of
Repriced or or Amend- Exercise Repricing
Amended Amendment ment Price or
Name Date ($)(1) ($) ($) ($) Amendment
- ------------------------------ ----------- --------------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Henry R. Silverman, 10/14/98 4,806,200(2) 9.8125 16.78 9.8125 75 months
Chairman, 10/14/98 3,798,260(2) 9.8125 23.88 9.8125 102 months
President and 10/14/98 1,007,940(2) 9.8125 23.88 20.0000 102 months
Chief Executive 10/14/98 7,596,520(2) 9.8125 31.375 20.0000 110 months
Officer
Stephen P. Holmes, 10/14/98 240,310(3) 9.8125 25.85 9.8125 91 months
Vice Chairman 10/14/98 480,620(3) 9.8125 23.88 9.8125 102 months
and Chairman 10/14/98 337,036(4) 9.8125 31.375 9.8125 110 months
and CEO, Travel 10/14/98 207,964(4) 9.8125 31.375 20.0000 110 months
Division 10/14/98 321,018(5) 9.8125 34.3125 20.0000 111 months
- ------------------------------ ----------- --------------- -------------- ----------- ----------- ---------------
</TABLE>
101
<PAGE>
<TABLE>
<CAPTION>
Exercise Length of
Number of Market Price Original
Securities Price of at Time Option
Underlying Stock of Term
Options/ at Time Repricing Remaining at
SARs of Repricing or New Date of
Repriced or or Amend- Exercise Repricing
Amended Amendment ment Price or
Name Date ($)(1) ($) ($) ($) Amendment
- ------------------------------ ----------- --------------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael P. Monaco, 10/14/98 1,441,860(3) 9.8125 25.44 9.8125 99 months
Vice Chairman 10/14/98 156,803(3) 9.8125 23.88 9.8125 102 months
and Chairman 10/14/98 203,662(3) 9.8125 23.88 20.0000 102 months
and CEO, 10/14/98 545,000(4) 9.8125 31.375 20.0000 110 months
Alliance 10/14/98 50,669(2) 9.8125 34.3125 20.0000 111 months
Marketing
Division
James E. Buckman, 10/14/98 240,310(3) 9.8125 25.85 9.8125 99 months
Vice Chairman 10/14/98 480,620(3) 9.8125 23.88 9.8125 102 months
and General 10/14/98 362,036(4) 9.8125 31.375 9.8125 110 months
Counsel 10/14/98 232,036(4) 9.8125 31.375 20.0000 110 months
10/14/98 308,518(5) 9.8125 34.3125 20.0000 111 months
John W. Chidsey, 10/14/98 240,310(3) 9.8125 23.88 9.8125 102 months
Chairman and 10/14/98 179,845(4) 9.8125 31.975 9.8125 110 months
Chief Executive 10/14/98 120,155(4) 9.8125 31.975 12.2656 110 months
Officer, 10/14/98 215,969(4) 9.8125 34.3125 12.2656 111 months
Insurance/ 10/14/98 82,625(6) 9.8125 37.50 9.8125 113 months
Wholesale
Segment
David M. Johnson, 10/14/98 666,667(7) 9.8125 22.00 9.8125 114 months
Senior Executive 10/14/98 533,333(7) 9.8125 22.00 12.2656 114 months
Vice President
and
Chief Financial
Officer
Samuel L. Katz, 10/14/98 120,155(3) 9.8125 25.85 9.8125 91 months
Senior Executive 10/14/98 240,310(3) 9.8125 23.88 9.8125 102 months
Vice 10/14/98 119,768(4) 9.8125 31.375 9.8125 110 months
President, 10/14/98 180,232(4) 9.8125 31.375 12.2656 110 months
Strategic 10/14/98 203,954(4) 9.8125 34.3125 12.2656 111 months
Development 10/14/98 10,000(6) 9.8125 37.50 9.8125 113 months
Richard A. Smith 10/14/98 120,155(3) 9.8125 25.85 9.8125 91 months
Chairman and 10/14/98 120,155(3) 9.8125 30.69 9.8125 96 months
Chief Executive 10/14/98 240,310(3) 9.8125 23.88 9.8125 102 months
Officer, Real 10/14/98 59,690(4) 9.8125 31.375 9.8125 110 months
Estate Division 10/14/98 140,310(4) 9.8125 31.375 12.2656 110 months
10/14/98 291,938(4) 9.8125 34.3125 12.2656 111 months
- ------------------------------ ----------- --------------- -------------- ----------- ----------- ---------------
</TABLE>
102
<PAGE>
(1) These options were effectively modified on October 14, 1998 and, other
than as specified below, have the same expiration date as specified in
the table. These options replace options that were cancelled under the
Senior Management Program.
(2) These options are scheduled to vest and become exercisable in yearly
increments of 25%, commencing in October 1999.
(3) These options are fully vested and exercisable.
(4) These options are scheduled to vest and become exercisable in yearly
increments of 20%, commencing in January 1999.
(5) These options are scheduled to vest and become exercisable in yearly
increments of 20%, commencing in October 1999.
(6) These options represent bonus and salary replacement options, purchased
by the optionee through a deferred compensation plan previously offered
by the Company. These options are scheduled to vest and become
exercisable in yearly increments of one-third, commencing in January
1999.
(7) These options are scheduled to vest and become exercisable in yearly
increments of 25%, commencing in January 1999.
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
Each Named Executive Officer is employed by Cendant pursuant to a written
agreement of employment.
Henry R. Silverman. Mr. Silverman is employed by Cendant pursuant to an
employment agreement originally entered into as of September 30, 1991 between
Mr. Silverman and HFS and amended and restated from time to time (the "Silverman
Employment Agreement"). The Silverman Employment Agreement was amended by the
Third Amendment to the Silverman Employment Agreement dated as of December 31,
1998 (the "Third Amendment") and by the Fourth Amendment, dated as of August 2,
1999 (the "Fourth Amendment"). Mr. Silverman serves Cendant as its President and
Chief Executive Officer and, pursuant to the Third Amendment, also as the
Chairman of the Board and the Chairman of the Executive Committee of the Board
(such change was effective as of July 28, 1998). Pursuant to the Third
Amendment, the term of employment under the Silverman Employment Agreement was
extended through December 31, 2005, subject to earlier termination or extension
as provided therein; however, in connection with such extension, an automatic
annual renewal provision was removed from the Silverman Employment Agreement.
In consideration of the additional duties assumed by Mr. Silverman pursuant
to the Third Amendment, the Silverman Employment Agreement, as amended, provides
for Mr. Silverman to receive an annual rate of base salary of $1,500,000 for the
period ending December 31, 1998, and $2,900,000 thereafter, subject to further
increases relating to the Consumer Price Index. The Silverman Employment
Agreement also provides Mr. Silverman an annual bonus opportunity equal to the
lesser of (i) 0.75% of Cendant's "EBITDA" (as defined in the Silverman
Employment Agreement) for the applicable fiscal year or (ii) 150% of his annual
base salary.
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<PAGE>
The Silverman Employment Agreement provides that if Mr. Silverman resigns
his employment in connection with a breach by Cendant of the Silverman
Employment Agreement, or if he is terminated by Cendant without Cause (as
defined in the Silverman Employment Agreement), he will be entitled to receive a
lump sum cash payment equal to (i) the lesser of (a) 150% of his annual base
salary or (b) the sum of his annual base salary plus 0.75% of EBITDA for the 12
months preceding the date of termination, multiplied by (ii) the number of years
and partial years remaining in the term of employment under the Silverman
Employment Agreement. In addition, Mr. Silverman would be entitled to continued
health and welfare benefits during the remaining term of employment and the
vesting of any options and restricted stock. The Fourth Amendment provides that
after termination of Mr. Silverman's employment with Cendant other than due to
death or for Cause (but including a resignation for good reason), (i) Cendant
would provide Mr. Silverman, through August 31, 2009, term life insurance in the
amount of $100 million, all premiums to be paid by Cendant; and (ii) Cendant
would provide him certain benefits for life, including office and clerical
support, executive transportation services (including use of aircraft), security
services, continued access to other general facilities and services and
reimbursement of any properly documented business expenses. During such period,
Mr. Silverman would be required to keep himself reasonably available to Cendant
to render advice or to provide services for more than 30 days per year, in
return for which he will be paid $30,000 per month.
The Silverman Employment Agreement further provides that Mr. Silverman will
be made whole on an after-tax basis with respect to certain excise taxes in
connection with a change of control of Cendant which may, in certain cases, be
imposed upon payments thereunder and other compensation and benefit
arrangements.
Messrs. Monaco, Holmes and Buckman. Cendant entered into employment
agreements with Messrs. Monaco, Holmes and Buckman dated as of September 12,
1997 (such agreements, respectively, the "Monaco Employment Agreement," the
"Holmes Employment Agreement" and the "Buckman Employment Agreement," and
collectively, the "1997 Employment Agreements"). Each of the 1997 Employment
Agreements originally provided for a period of employment through December 17,
2002; however, such agreements contain automatic extension periods which cause
each respective period of employment to be extended by a one year increment on
an annual basis (an extension of the period of employment through December 17,
2004 has taken effect under each of the 1997 Employment Agreements).
Each of the 1997 Employment Agreements specifies the position and duties of
the executive during the period of employment. The Monaco Employment Agreement
was amended as of December 23, 1998 to reflect Mr. Monaco's new duties and
responsibilities
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<PAGE>
with Cendant and the location of his place of employment. The Buckman Employment
Agreement was amended as of January 11, 1999 to reflect his additional duties
and responsibilities with Cendant and the location of his place of employment.
The Holmes Employment Agreement was amended as of January 11, 1999 to reflect
the location of his place of employment. Currently (i) Mr. Monaco serves as Vice
Chairman of Cendant and as Chairman and Chief Executive Officer of the
Membership and Marketing Services Division, (ii) Mr. Holmes serves as Vice
Chairman of Cendant and Chairman and Chief Executive Officer of the Travel
Division and (iii) Mr. Buckman serves as Vice Chairman and General Counsel of
Cendant.
Each of the 1997 Employment Agreements specifies the compensation and
benefits provided to the Executive during the period of employment. The Monaco
Employment Agreement and the Holmes Employment Agreement provide that each
Executive will be paid an annual base salary of $650,000 and will be eligible
for annual bonuses based on a target bonus of $650,000. The Buckman Employment
Agreement provides that Mr. Buckman will be paid an annual base salary of
$500,000, and will be eligible for an annual bonus based on a target bonus of
$500,000; however, in connection with the January 11, 1999 amendment to the
Buckman Employment Agreement, such salary and target bonus amounts were
increased to $650,000. Each of Messrs. Monaco, Holmes and Buckman will be
eligible to participate in all of Cendant's other compensation and employee
benefit plans or programs and to receive officer perquisites.
Each of the 1997 Employment Agreements provides for certain payments in
the event of termination of the Executive's employment under various
circumstances. The Holmes Employment Agreement and the Monaco Employment
Agreement each provide that if, before January 1, 2000, the Executive's
employment is terminated by Cendant other than for Cause (as defined therein) or
by the Executive for Constructive Discharge (as defined therein), Cendant will
pay the Executive a lump sum cash payment equal to 300% of the sum of (i) his
annual base salary and (ii) the highest annual bonus he has received for any of
the three preceding years (or $520,000, if higher) ("Salary plus Bonus"). Each
such agreement also provides that if, after December 31, 1999, the Executive's
employment is terminated by Cendant other than for Cause or by the Executive for
Constructive Discharge, Cendant will pay the Executive a lump sum cash payment
equal to 500% of Salary plus Bonus. In any of the foregoing situations, the
Executive would also receive any earned but unpaid base salary and incentive
compensation, his benefits and perquisites would continue for 36 months and any
stock options and restricted stock would vest (and such options would remain
outstanding for the remainder of their terms without regard to such
termination). Each such agreement also provides that, in certain circumstances,
the Executive's employment would be deemed terminated for Constructive Discharge
in the event that Mr. Silverman's employment with Cendant terminates or his
responsibilities are
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<PAGE>
reduced. In such event, the Executive would receive substantially similar
payments and benefits as described above; however, his cash payment would range
from 200% to 400% of Salary plus Bonus, depending on the date of such
termination.
The Buckman Employment Agreement provides that if, before January 1,
2000, Mr. Buckman's employment is terminated by Cendant other than for Cause (as
defined therein) or by Mr. Buckman for Constructive Discharge (as defined
therein), Cendant will pay Mr. Buckman a lump sum cash payment equal to 300% of
the sum of (i) his annual base salary and (ii) the highest annual bonus he has
received for any of the three preceding years (or $500,000, if higher) ("Buckman
Salary plus Bonus"). The Buckman Employment Agreement also provides that if,
after December 31, 1999, Mr. Buckman's employment is terminated by Cendant other
than for Cause or by Mr. Buckman for Constructive Discharge, Cendant will pay
Mr. Buckman a lump sum cash payment equal to 500% of Buckman Salary plus Bonus
(Mr. Buckman may also resign at any time following such date and receive a lump
sum cash payment equal to 200% of Buckman Salary plus Bonus). In any of the
foregoing situations, Mr. Buckman would also receive any earned but unpaid base
salary and incentive compensation, his benefits and perquisites would continue
for 36 months and any stock options and restricted stock would vest (and such
options would remain outstanding for the remainder of their terms without regard
to such termination). The Buckman Employment Agreement also provides that, in
certain circumstances, his employment would be deemed terminated for
Constructive Discharge in the event that Mr. Silverman's employment with Cendant
terminates or his responsibilities are reduced. In such event, Mr. Buckman would
receive substantially similar payments and benefits as described above however
his cash payment would range from 200% to 400% of Buckman Salary plus Bonus,
depending on the date of such termination.
Each 1997 Employment Agreement provides that the Executive will be made
whole on an after-tax basis with respect to certain excise taxes in connection
with a change of control of Cendant which may, in certain cases, be imposed upon
payments thereunder and other compensation and benefit arrangements.
Mr. Katz. Mr. Katz is employed by Cendant pursuant to an employment
agreement dated as of April 1, 1999 (the "Katz Agreement"). The Katz agreement
provides that Mr. Katz will serve for a term of employment ending December 31,
2002. Mr. Katz currently serves as Senior Executive Vice President, Strategic
Development.
The Katz agreement provides that during his term of employment, Mr. Katz
will be paid an annual base salary equal to $500,000 and will be eligible for
annual bonuses based on a target of 60% of annual base salary. Effective fiscal
year 2000, Cendant agreed to increase Mr. Katz' annual bonus target to 100% of
his annual base salary. Mr. Katz will
106
<PAGE>
be eligible to participate in all of Cendant's other compensation and employee
benefit plans or programs and to receive officer perquisites.
The Katz Agreement provides for certain payments in the event of
termination of Mr. Katz's employment under various circumstances. The Katz
Agreement provides that if Mr. Katz's employment is terminated by Cendant other
than for Cause (as defined therein) or by Mr. Katz for Constructive Discharge
(as defined therein), Cendant will pay Mr. Katz a lump sum cash payment equal to
the sum of (i) his annual base salary and (ii) his target annual bonus,
multiplied by the greater of one (1) or the number of full and partial years
remaining in his term of employment under the Katz Agreement. In addition, in
such event, any stock options granted to Mr. Katz on or after the date of the
Katz Agreement will become fully vested and exercisable and will remain
exercisable until the first to occur of the third anniversary of the date of Mr.
Katz's termination and the original expiration date of such option. The Katz
Agreement provides that during his term of employment, and for a period of two
years thereafter, Mr. Katz will not be permitted to affiliate himself with any
entity that competes with Cendant or its affiliates.
Other Change of Control Provisions. In connection with the merger of
HFS Incorporated and CUC International Inc., action was taken by Cendant to
provide that any employee formerly with HFS Incorporated who incurs a golden
parachute excise tax under Section 4999 of the Code, if and to the extent
applicable, will be reimbursed by Cendant for the economic costs incurred by
such employee, including a tax gross-up payment to account for any additional
golden parachute excise tax incurred by reason of such reimbursement, if any.
Stock Options. Generally, all stock options granted to each of the Named
Executive Officers under any applicable stock option plan of Cendant will become
fully and immediately vested and exercisable upon the occurrence of any change
of control transaction affecting Cendant (as defined in each employment
agreement).
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on the following table is furnished as November
1, 1999 (unless otherwise specified) with respect to any person (including any
"group" as that term is used in Section 13(d)(3) of the Exchange Act) who is
known to Cendant to be the beneficial owner of more than 5% of any class of
voting securities, and as to those shares of Cendant's equity securities
beneficially owned by each of its directors, certain of its executive officers,
and all of its executive officers and directors as a group.
<TABLE>
<CAPTION>
OF THE TOTAL NUMBER
OF SHARES BENEFICIALLY
TOTAL AMOUNT OWNED, SHARES WHICH
OF SHARES MAY BE
BENEFICIALLY PERCENT OF COMMON ACQUIRED WITHIN
NAME OWNED (1) STOCK OWNED (2) 60 DAYS (3)
- ----------------------------------------- ----------------- ------------------- --------------------
<S> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Capital Research and
Management Company (4) 99,321,262 13.97% N/A
333 South Hope Street
Los Angeles, CA 90071
Massachusetts Financial
Services Company (5) 45,764,202 6.44% N/A
500 Boylston Street
Boston, MA 02116-3741
DIRECTORS AND EXECUTIVE OFFICERS (6):
Henry R. Silverman 27,718,952 3.75% 27,418,852
Stephen P. Holmes(7) 2,892,222 * 2,731,734
Robert D. Kunisch(8) 2,328,238 * 1,723,430
Michael P. Monaco 1,940,588 * 1,923,992
James E. Buckman 2,575,941 * 2,556,841
Leonard S. Coleman 156,155 * 156,155
Martin L. Edelman 96,155 * 96,155
Dr. Carole G. Hankin 36,200 * 36,000
The Rt. Hon. Brian Mulroney, P.C. LLD
Robert E. Nederlander 156,155 * 156,155
Robert W. Pittman 156,155 * 156,155
Leonard Schutzman 636,775 * 636,775
Robert F. Smith(9) 160,955 * 143,327
John D. Snodgrass(10) 240,185 * 156,155
John W. Chidsey 6,381,104 * 5,074,822
David M. Johnson 704,806 * 698,284
Samuel L. Katz(11) 392,999 * 299,999
Richard A. Smith 789,274 * 775,207
Jon Danski 1,651,958 * 1,640,808
29,000 0
EXECUTIVE OFFICERS AND DIRECTORS AS A
GROUP (19 PERSONS)(12): 49,043,816 6.47% 46,380,846
</TABLE>
108
<PAGE>
- --------------------
* Amount represents less than 1% of the outstanding Common Stock.
(1) Shares beneficially owned includes direct and indirect ownership of
shares and stock options that are currently exercisable or exercisable
within 60 days.
(2) Based on 711,140,914 shares of Common Stock outstanding on November 1,
1999.
(3) Includes stock options that are currently exercisable plus stock
options that are exercisable within 60 days ("Vested Options").
(4) Based upon the information contained in a Form 13F dated August 11,
1999 by Capital Research and Management Company, a registered
investment advisor, Capital Research and Management Company
beneficially owned 99,321,262 shares of Common Stock with sole power to
vote none of such shares and shared power to dispose all of such
shares.
(5) Based upon the information contained in a Form 13F dated November 5,
1999 by Massachusetts Financial Services Company ("MFS"), a registered
investment adviser on behalf of itself and the other mutual funds and
institutional clients of MFS, such persons beneficially owned
45,764,202 shares of Common Stock with sole power to vote 45,764,202 of
such shares and sole power to dispose all of such shares.
(6) Such Director's and/or Executive Officer's Vested Options are deemed
outstanding for purposes of computing the Percentages of the class for
such Director and/or Executive Officer.
(7) Includes 2,883 shares of Common Stock held by Mr. Holmes' children.
(8) Includes 79,042 shares of Common Stock held in the Employee Savings
Plan and 525,766 shares held by Alibob Partners, L.P.
(9) Includes 4,806 shares of Common Stock owned by a Keogh plan of which
Mr. Smith is the sole beneficiary and 60,000 shares of common stock
held in a 401K plan account. Amount includes 19,224 shares of Common
Stock held in the name of the Smith Family Foundation of which Mr.
Smith is President, as to which Mr. Smith disclaims beneficial
ownership.
(10) Amount includes 33,600 shares held by The Snodgrass Foundation of which
Mr. Snodgrass and his spouse are trustees but in which they have no
pecuniary interest. Mr. Snodgrass disclaims beneficial ownership of
such shares.
(11) Includes 180 shares of Common Stock held by Mr. Katz's spouse and 1,000
shares of Common Stock held by Mr. Katz's children.
(12) Vested Options of all Executive Officers and Directors are deemed
outstanding for purposes of computing the percentage of class.
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<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires Cendant's officers and
directors, and persons who own more than ten percent of a registered class of
the company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and
the New York Stock Exchange. Officers, directors and greater than ten percent
owners are required to furnish Cendant with copies of all Forms 3, 4 and 5 they
file.
Based solely on Cendant's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Form 5's for a specified fiscal year, except as set
forth below, Cendant believes that all its officers, directors, and greater than
ten percent beneficial owners complied with all filing requirements applicable
to them with respect to transactions during 1999.
On January 27, 1999, David M. Johnson resubmitted a Form 4 in respect
of an acquisition of shares of common stock during November 1998 which was
originally filed without a signature. On September 20, 1999, Robert F. Smith
filed a late Form 4 in respect of an acquisition of shares of common stock
during August 1999.
WHERE YOU CAN FIND MORE INFORMATION
Cendant files annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information we file at the Securities
and Exchange Commission's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. The SEC filings of Cendant are also available to the public from
commercial document retrieval services and at the website maintained by the SEC
at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" information into this
Proxy Statement. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Proxy Statement, except
for any information superseded by information in this Proxy Statement. This
Proxy Statement incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about our company and its finances.
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<PAGE>
CENDANT CORPORATION SEC FILING (FILE NO. 1-10308) PERIOD
- ------------------------------------------------- ------
Annual Report on Form 10-K/A Year ended December 31,
1998
Quarterly Report on Form 10-Q/A Quarter ended March 31,
1999
Quarterly Report on Form 10-Q/A Quarter ended June 30, 1999
Quarterly Report on Form 10-Q Quarter ended September
30, 1999
Current Report on Form 8-K December 2, 1999
Current Report on Form 8-K December 7, 1999
We are also incorporating by reference additional documents that we
file with the SEC between the date of this Proxy Statement and the date of the
special meeting of our stockholders.
If you are a stockholder, we may have previously sent you some of the
documents incorporated by reference. You can obtain any of the incorporated
documents by contacting us or the SEC. We will send you the documents
incorporated by reference without charge, excluding exhibits to the information
that is incorporated by reference, unless we have specifically incorporated by
reference the exhibit in this document.
Stockholders may obtain documents incorporated by reference in this
document by requesting them in writing or by telephone from the appropriate
party at the following address:
Cendant Corporation
9 West 57th Street
New York, New York 10019
(212) 413-1933
Attention: Investor Relations
If you would like to request documents from us, including any documents
we may subsequently file with the Securities and Exchange Commission prior to
the special meeting, please do so by ________, 2000 so that you will receive
them before the special meeting.
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<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT TO VOTE ON THE PROPOSALS. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT. THIS PROXY STATEMENT IS DATED JANUARY __, 2000. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN SUCH DATE, AND THE MAILING OF THE PROXY STATEMENT TO
STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
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<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the special
meeting should be directed to the Vice President, Legal at 9 West 57th Street,
New York, New York 10019. A stockholder proposal must be received ten business
days prior to the printing and mailing of this Proxy Statement for inclusion in
this Proxy Statement.
In order for a stockholder to present a matter for action at the
special meeting (other than matters included in Cendant's proxy materials in
accordance with Rule 14a-8 under the Exchange Act), Cendant's by-laws require
that Cendant be given advance written notice of the matter. The Vice President,
Legal of Cendant must receive such notice at the address noted above not less
than 60 nor more than 90 days prior to the date of the special meeting;
provided, however, if less than 70 days' notice or prior public disclosure of
the date of the special meeting is given or made to stockholders, such notice
shall have been mailed or delivered to the Vice President, Legal not later than
the close of business on the 10th day following the date on which the notice of
the special meeting was mailed or public disclosure was made, whichever occurs
first. If a stockholder proposal is not presented within a reasonable period of
time before the mailing of this Proxy Statement, then management proxies would
be allowed to use their discretionary voting authority to vote on the proposal
when the proposal is raised at the special meeting, even though there is no
discussion of the proposal in this Proxy Statement.
Proposals received from stockholders are given careful consideration by
Cendant in accordance with Rule 14a-8 under the Exchange Act. Stockholder
proposals are eligible for consideration for inclusion in the proxy statement
for the 2000 annual meeting if they are received by Cendant on or before
December 22, 1999. Any proposal should be directed to the attention of Vice
President, Legal, Cendant Corporation, 9 West 57th Street, New York, New York
10019. In order for a stockholder proposal submitted outside of Rule 14a-8 to be
considered "timely" within the meaning of Rule 14a-4(c), such proposal must be
received by Cendant on or prior to March 28, 2000 and in order for a proposal to
be timely under Cendant's By-Laws it must be received on or prior to March 28,
2000 but no earlier than February 27, 2000.
By order of the Board of Directors,
Cendant Corporation
Jeanne M. Murphy
Secretary
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<PAGE>
ANNEX I
ILLUSTRATIONS OF TERMS
The following illustrations show how to calculate the Retained Interest
Percentage, the Outstanding Interest Percentage, the Number of Shares Issuable
with Respect to Cendant Group's Retained Interest in Move.com Group and the
Total Number of Notional Move.com Shares Deemed Outstanding after giving effect
to certain hypothetical dividends, issuances, repurchases and transfers, in each
case based on the assumptions set forth herein. In these illustrations, the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest in
Move.com Group is initially assumed to be 100. Unless otherwise specified, each
illustration below should be read independently as if none of the other
transactions referred to below had occurred. These illustrations are not
intended to be complete explanations of the matters covered and are qualified
in their entirety by the more detailed information contained elsewhere in the
Proxy Statement. These illustrations are purely hypothetical and the numbers
used (including assumptions of market value) were chosen to simplify the
calculations and are not intended to represent estimates of actual numbers or
values. Any capitalized terms which are not defined in Annex I have the meaning
ascribed to them in the Proxy Statement.
"Total Number of Notional Move.com Shares Deemed Outstanding" means the
number of shares of Move.com Stock outstanding plus the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in Move.com Group.
At any given time, the percentage interest in Move.com intended to be
represented by the outstanding shares of Move.com Stock (i.e., the Outstanding
Interest Percentage) is equal to:
Number of outstanding shares of Move.com Stock
-----------------------------------------------------------
Total Number of Notional Move.com Shares Deemed Outstanding
and the remaining percentage interest in Move.com Group intended to be
represented by Cendant Group's Retained Interest in Move.com Group (i.e., the
Retained Interest Percentage) is equal to:
Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group
-----------------------------------------------------------
Total Number of Notional Move.com Shares Deemed Outstanding
<PAGE>
The sum of the Outstanding Interest Percentage and the Retained
Interest Percentage would always equal 100%. In the examples below, before the
first issuance of shares of Move.com Stock the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in Move.com Group and the Total
Number of Notional Move.com Shares Deemed Outstanding are each equal to 100, the
Retained Interest Percentage is 100% and the Outstanding Interest Percentage is
0%.
ISSUANCE OF MOVE.COM STOCK
The following illustrations reflect an assumed issuance by Cendant of
15 shares of Move.com Stock under the Stock Option Plan or in an offering.
Issuance for Account of Cendant Group
Assume the issuance is attributed to Cendant Group in respect of its
Retained Interest in Move.com Group (as currently planned), with the net
proceeds credited solely to Cendant Group.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares previously issued and outstanding...................................................0
Newly issued shares for account of Cendant Group..........................................15
--
Total issued and outstanding after the Offering..................................15
==
o The Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in Move.com Group would
decrease by the number of shares of Move.com Stock sold for
the account of Cendant Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to the Offering...................100
Shares issued in the Offering................................................... 15
---
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after the Offering...................... 85
===
</TABLE>
o As a result, the issued and outstanding shares (15)
would represent an Outstanding Interest Percentage of 15%,
calculated as follows:
15
-------
15 + 85
I-2
<PAGE>
The Retained Interest Percentage would accordingly be 85%.
o In this case, in the event of any dividend or other
distribution paid on the outstanding shares of Move.com Stock
(other than a dividend or other distribution payable in shares
of Move.com Stock), Cendant Group would be credited, and
Move.com Group would be charged, with an amount equal to 567%
(representing the ratio of the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in Move.com Group
(85) to the total number of shares of Move.com Stock issued
and outstanding following the Offering (15)) of the aggregate
amount of such dividend or distribution. If, for example, a
dividend of $1.00 per share were declared and paid on the 15
shares of Move.com Stock outstanding (an aggregate of $15),
Cendant Group would be credited with $85, and Move.com Group
would be charged with that amount in addition to the $15
dividend paid to the holders of Move.com Stock (a total of
$100).
ISSUANCE FOR ACCOUNT OF MOVE.COM GROUP
Assume the issuance is attributed to Move.com Group as an increase in
its equity, with the net proceeds credited solely to Move.com Group.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares previously issued and outstanding..........................................0
Newly issued shares for account of Move.com Group................................15
--
Total issued and outstanding after the Offering..............................15
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group (100) would remain unchanged.
o As a result, the issued and outstanding shares (15)
would represent an Outstanding Interest Percentage of about
13%, calculated as follows:
</TABLE>
15
--------
15 + 100
The Retained Interest Percentage would accordingly be about 87%.
I-3
<PAGE>
o In this case, in the event of any dividend or other
distribution paid on the outstanding shares of Move.com Stock
(other than a dividend or other distribution payable in shares
of Move.com Stock), Cendant Group would be credited, and
Move.com Group would be charged, with an amount equal to 667%
(representing the ratio of the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in Move.com Group
(100) to the total number of shares of Move.com Stock issued
and outstanding following the Offering (15)) of the aggregate
amount of such dividend or distribution.
ADDITIONAL ISSUANCES OF MOVE.COM STOCK
The following illustrations reflect an assumed issuance of an
additional 15 shares of Move.com Stock after the assumed initial issuance of 15
shares for the account of Cendant Group.
ADDITIONAL ISSUANCES FOR ACCOUNT OF CENDANT GROUP
Assume the issuance is attributed to Cendant Group in respect of its
Retained Interest in Move.com Group, with the net proceeds credited solely to
Cendant Group.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares for account of Cendant Group.................................15
--
Total issued and outstanding after additional offering...................... 30
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would decrease by the
number of shares of Move.com Stock issued for the account of
Cendant Group
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to the
additional offering..........................................................85
Newly issued shares for account of Cendant Group.................................15
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after the additional
offering.....................................................................70
==
</TABLE>
I-4
<PAGE>
o As a result, the total issued and outstanding shares (30)
would in the aggregate represent an Outstanding Interest
Percentage of 30%, calculated as follows:
30
-------
30 + 70
The Retained Interest Percentage would accordingly be reduced to 70%.
o In this case, in the event of any dividend or other
distribution paid on Move.com Stock (other than a dividend or
other distribution payable in shares of Move.com Stock),
Cendant Group would be credited, and Move.com Group would be
charged, with an amount equal to 233% (representing the ratio
of the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group (70) to the total
number of shares of Move.com Stock issued and outstanding
following the additional offering (30)) of the aggregate
amount of such dividend or distribution.
ADDITIONAL ISSUANCES FOR ACCOUNT OF MOVE.COM GROUP
Assume the issuance is attributed to Move.com Group as an increase in
its equity, with the net proceeds credited solely to Move.com Group.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares for account of Move.com Group................................15
--
Total issued and outstanding after the additional offering...................30
==
</TABLE>
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group (85) would remain
unchanged.
o As a result, the total issued and outstanding shares (30)
would in the aggregate represent an Outstanding Interest
Percentage of about 26%, calculated as follows:
30
-------
30 + 85
I-5
<PAGE>
The Retained Interest Percentage would accordingly be reduced to about 74%.
o In this case, in the event of any dividend or other
distribution paid on Move.com Stock (other than a dividend or
other distribution payable in shares of Move.com Stock),
Cendant Group would be credited, and Move.com Group would be
charged, with an amount equal to 283% (representing the ratio
of the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group (85) to the total
number of shares of Move.com Stock issued and outstanding
following the additional offering (30)) of the aggregate
amount of such dividend or distribution.
ISSUANCES OF CONVERTIBLE SECURITIES
If we were to issue any securities convertible into or exercisable for
shares of Move.com Stock, the Outstanding Interest Percentage and the Retained
Interest Percentage would be unchanged at the time of such issuance. If any
shares of Move.com Stock were issued upon conversion or exercise of such
securities, however, then the Outstanding Interest Percentage and the Retained
Interest Percentage would be affected as shown above under "Additional
Issuances for Account of Cendant Group," if such securities were attributed to
Cendant Group, or under "Additional Issuances for Account of Move.com Group," if
such securities were attributed to Move.com Group.
REPURCHASES OF MOVE.COM STOCK
The following illustrations reflect an assumed repurchase by Cendant of
5 shares of Move.com Stock after the assumed initial issuance of 15 shares of
Move.com Stock for the account of Cendant Group.
REPURCHASE FOR THE ACCOUNT OF CENDANT GROUP
Assume the repurchase is attributed to Cendant Group as an increase in
its Retained Interest in Move.com Group, with the cost charged solely against
Cendant Group.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares previously issued and outstanding.........................................15
Shares repurchased for account of Cendant Group...................................5
--
I-6
<PAGE>
Total issued and outstanding after repurchase................................10
==
</TABLE>
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would be increased by the
number of any shares of Move.com Stock repurchased for the
account of Cendant Group.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to repurchase......................85
Number of shares repurchased for the account of Cendant Group.....................5
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after repurchase.........................90
==
</TABLE>
o As a result, the total issued and outstanding shares (10)
would in the aggregate represent an Outstanding Interest
Percentage of 10%, calculated as follows:
10
-------
10 + 90
The Retained Interest Percentage would accordingly be increased to 90%.
REPURCHASE FOR ACCOUNT OF MOVE.COM GROUP WITHOUT PARTICIPATION BY CENDANT
GROUP
Assume the repurchase is attributed to Move.com Group, with the cost
being charged solely against Move.com Group. Further assume that the Board of
Directors does not determine to transfer assets from Move.com Group to Cendant
Group to hold constant the Outstanding Interest Percentage and Retained Interest
Percentage.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares previously issued and outstanding.........................................15
Shares repurchased for account of Move.com Group..................................5
--
Total issued and outstanding after repurchase................................10
==
</TABLE>
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group (85) would remain
unchanged.
I-7
<PAGE>
o As a result, the total issued and outstanding shares
(10) would in the aggregate represent an Outstanding Interest
Percentage of about 11%, calculated as follows:
10
-------
10 + 85
The Retained Interest Percentage would accordingly be increased to about 89%.
REPURCHASE FOR ACCOUNT OF MOVE.COM GROUP WITH PARTICIPATION BY CENDANT
GROUP
Assume the repurchase is attributed to Move.com Group, with the cost
being charged solely against Move.com Group. Further assume that the repurchase
is made in connection with a tender offer for 5, or 33%, of the then outstanding
shares at a price of $20 per share, and that the Board of Directors determines
to transfer cash or other assets from Move.com Group to Cendant Group to hold
constant the Outstanding Interest Percentage and Retained Interest Percentage.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Shares repurchased for account of Move.com Group..................................5
--
Total issued and outstanding after repurchase................................10
==
</TABLE>
o In order to hold constant the Outstanding Interest Percentage
and Retained Interest Percentage, the Board of Directors could
determine that the Market Value of a share of Move.com Stock
in this context is $20 and transfer from Move.com Group to
Cendant Group an amount of cash or other assets equal to 567%
(representing the ratio of the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in Move.com Group
(85) to the total number of shares of Move.com Stock issued
and outstanding (15), in each case immediately prior to the
repurchase) of the aggregate amount of the cash paid in the
tender offer to holders of outstanding shares of Move.com
Stock ($100), or a total of $567.
o In that case, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in Move.com Group (85) would
decrease by
I-8
<PAGE>
the amount of cash so transferred ($567) divided by the Market
Value per share of Move.com Stock ($20).
<TABLE>
<CAPTION>
<S> <C>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to transfer........................85
Adjustment in respect of Cendant Group's Retained Interest in
Move.com Group to reflect transfer to Cendant Group of
funds theretofore allocated to Move.com Group............................... 28
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after transfer...........................57
==
</TABLE>
o As a result, the total issued and outstanding shares (10)
would in the aggregate continue to represent an Outstanding
Interest Percentage of 15%, calculated as follows:
10
-------
10 + 57
The Retained Interest Percentage would accordingly continue to be 85%.
o Assuming that the Board of Directors transferred only half of
the $567 amount, or $283.50, from Move.com Group to Cendant
Group, the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group (85) would
decrease by the amount of cash so transferred ($283.50)
divided by the Market Value per share of Move.com Stock ($20).
<TABLE>
<CAPTION>
<S> <C>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to transfer........................85
Adjustment in respect of Cendant Group's Retained Interest in
Move.com Group to reflect transfer to Cendant Group of
cash theretofore allocated to Move.com Group.................................14
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after transfer...........................71
==
</TABLE>
I-9
<PAGE>
o In that case, as a result, the total issued and outstanding
shares (10) would in the aggregate represent an Outstanding
Interest Percentage of about 12%, calculated as follows:
10
-------
10 + 71
The Retained Interest Percentage would accordingly be increased to about 88%.
MOVE.COM STOCK DIVIDENDS
The following illustrations reflect assumed dividends of Move.com Stock
on outstanding shares of CD Stock and outstanding shares of Move.com Stock,
respectively, after the assumed initial issuance of 15 shares of Move.com Stock
for the account of Cendant Group.
Move.com Stock Dividend on CD Stock
Assume 1,000 shares of CD Stock are outstanding and Cendant declares a
dividend of 1/20 of a share of Move.com Stock on each outstanding share of CD
Stock.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares for account of Cendant Group.................................50
--
Total issued and outstanding after dividend..................................65
==
o Any dividend of shares of Move.com Stock to the holders of
shares of CD Stock would be treated as a reduction in the
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to dividend........................85
Number of shares distributed on outstanding shares of Cendant
Stock for account of Cendant Group...........................................50
--
I-10
<PAGE>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after dividend...........................35
==
o As a result, the total issued and outstanding shares (65)
would in the aggregate represent an Outstanding Interest
Percentage of 65%, calculated as follows:
</TABLE>
65
-------
65 + 35
The Retained Interest Percentage would accordingly be reduced to 35%. Note,
however, that after the dividend, the holders of CD Stock would also hold 50
shares of Move.com Stock, which would be intended to represent a 50% interest in
the value attributable to Move.com Group.
MOVE.COM STOCK DIVIDEND ON MOVE.COM STOCK
Assume Cendant declares a dividend of 1/5 of a share of Move.com Stock
on each outstanding share of Move.com Stock.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares for account of Move.com Group.................................3
--
Total issued and outstanding after dividend..................................18
==
</TABLE>
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would be increased
proportionately to reflect the stock dividend payable in
shares of Move.com Stock to holders of shares of Move.com
Stock. That is, the Number of Shares Issuable with Respect to
Cendant Group's Retained Interest in Move.com Group would be
increased by a number equal to 567% (representing the ratio of
the Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group (85) to the number of
shares of Move.com Stock issued and outstanding (15), in each
case immediately prior to such dividend) of the aggregate
number of shares issued in connection with such dividend (3),
or 17.
<TABLE>
<CAPTION>
<S> <C>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to dividend........................85
I-11
<PAGE>
Adjustment in respect of Cendant Group's Retained Interest to
reflect shares distributed on outstanding shares of Move.c
om Stock.....................................................................17
---
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after dividend..........................102
===
</TABLE>
o As a result, the total issued and outstanding shares
(18) would in the aggregate continue to represent an
Outstanding Interest Percentage of 15%, calculated as follows:
18
--------
18 + 102
The Retained Interest Percentage would accordingly continue to be 85%.
CAPITAL TRANSFERS OF CASH OR OTHER ASSETS BETWEEN CENDANT GROUP AND
MOVE.COM GROUP
Capital Contribution of Cash or Other Assets from Cendant Group to Move.com
Group
The following illustration reflects the assumed contribution by Cendant
Group to Move.com Group, after the assumed initial issuance of 15 shares of
Move.com Stock for the account of Cendant Group, of $40 of assets allocated to
Cendant Group at a time when the Market Value of the Move.com Stock is $20 per
share.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares...............................................................0
--
Total issued and outstanding after contribution..............................15
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would be increased to
reflect the contribution to Move.com Group of assets
theretofore allocated to Cendant Group by a number equal to
the value of the assets contributed ($40) divided by the
Market Value of Move.com Stock at that time ($20), or 2
shares.
I-12
<PAGE>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to contribution....................85
Increase to reflect contribution to Move.com Group of assets
allocated to Cendant Group....................................................2
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after contribution.......................87
==
</TABLE>
o As a result, the total issued and outstanding shares (15)
would in the aggregate represent an Outstanding Interest
Percentage of a little less than 15%, calculated as follows:
15
-------
15 + 87
The Retained Interest Percentage would accordingly be increased to a little more
than 85%.
Return of Capital Transfer of Cash or Other Assets from Move.com Group
to Cendant Group
The following illustration reflects the assumed transfer by Move.com
Group to Cendant Group, after the assumed initial issuance of 15 shares of
Move.com Stock for the account of Cendant Group, of $40 of assets allocated to
Move.com Group on a date on which the Market Value of Move.com Stock is $20 per
share.
<TABLE>
<CAPTION>
<S> <C>
Shares previously issued and outstanding.........................................15
Newly issued shares.............................................................. 0
--
Total issued and outstanding after contribution..............................15
==
o The Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group would be decreased to
reflect the transfer to Cendant Group of assets theretofore
allocated to Move.com Group by a number equal to the value of
the assets transferred ($40) divided by the Market Value of
Move.com Stock at that time ($20), or 2 shares.
I-13
<PAGE>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to contribution....................85
Decrease to reflect transfer to Cendant Group of assets allocated
to Move.com Group............................................................ 2
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after contribution.......................83
==
</TABLE>
o As a result, the total issued and outstanding shares (15)
would in the aggregate represent an Outstanding Interest
Percentage of a little more than 15%, calculated as follows:
15
-------
15 + 83
The Retained Interest Percentage would accordingly be decreased to a little less
than 85%.
I-14
<PAGE>
ANNEX II
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENDANT CORPORATION
The undersigned, James E. Buckman, certifies that he is the
Vice Chairman and General Counsel of Cendant Corporation, a corporation
organized and existing under the laws of the State of Delaware (the "Corpora-
tion"), and does hereby further certify as follows:
(1) The name of the Corporation is Cendant Corporation.
(2) The name under which the Corporation was originally
incorporated was Comp-U-Card of America, Inc. and the original
Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on August 1, 1974.
(3) This Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Sections 242 and 245
of the General Corporation Law of the State of Delaware.
(4) The text of the Amended and Restated Certificate of
Incorporation of the Corporation as amended hereby is restated to read
in its entirety, as follows:
1. The name of the Corporation is Cendant Corporation
(hereinafter, the "Corporation").
2. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is:
II - 1
<PAGE>
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. Capital Stock
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 2,510,000,000, consisting of (i)
2,500,000,000 shares of Common Stock, $0.01 par value per share ("Common
Stock"), and (ii) 10,000,000 shares of Preferred Stock, $0.01 par value per
share ("Preferred Stock"). No stockholder shall have any preemptive right to
subscribe to or purchase any additional shares of stock of the Corporation or
any securities convertible into any such shares or representing a right or
option to purchase any such shares.
A. Common Stock
1. Issuance of Common Stock in Series; Design- ation; Reclassification.
The Corporation shall have the authority to issue shares of Common
Stock in two series. One series of Common Stock shall be designated as Cendant
Corporation - CD Common Stock ("CD Stock"). The second series of Common Stock
shall be initially designated as Cendant Corporation - Move.com Common Stock or
such other name as the board of directors shall determine now or hereafter
("Move.com Stock"). When the filing of this Amended and Restated Certificate of
Incorporation becomes effective, each share of Common Stock outstanding
immediately prior thereto shall automatically be reclassified as one share of CD
Stock (and outstanding certificates that had theretofore represented shares of
Common Stock shall thereupon represent an equal number of shares of CD Stock
despite the absence of any indication thereon to that effect).
The total number of shares of CD Stock which the Corporation shall have
the authority to issue shall initially be 2,000,000,000, and the total number of
shares of Move.com Stock which the Corporation shall have the authority to issue
shall initially be 500,000,000. The Board of Directors shall have the authority
to increase or decrease from time to time the total number of shares of Common
Stock of either series which the Corpo-
II-2
<PAGE>
ration shall have the authority to issue, but not above the number which,
when added to the total number of shares of the other series of Common Stock
that the Corporation would have the authority to issue, would exceed the total
number of shares of Common Stock that the Corporation has the authority to
issue, and not below the number of shares of such series then outstanding. The
Board of Directors shall have the authority to designate, prior to the time of
the first issuance of the Move.com Stock, the number which, immediately prior to
such first issuance, will constitute the Number of Shares Issuable with Respect
to Cendant Group's Retained Interest in Move.com Group and any other terms which
are consistent with applicable law and the provisions of this Article 4. The
voting powers, preferences and relative, participating, optional or other
special rights of the CD Stock and Move.com Stock, and the qualifications and
restrictions thereon, shall be as set forth in this Section A.
2. Dividends
(a) Dividends. Subject to the preferences and other terms of any
outstanding series of Preferred Stock, the holders of either series of Common
Stock shall be entitled to receive dividends on their shares of Common Stock
if, as and when declared by the Board of Directors, out of legally available
funds, but (i) the Corporation will be permitted to pay dividends on CD Stock
out of the lesser of (x) the assets of the Corporation legally available for the
payment of dividends under Delaware law or (y) the Available Dividend Amount for
Cendant Group and (ii) the Corporation will be permitted to pay dividends on
Move.com Stock (and corresponding amounts to the Cendant Group with respect to
its Retained Interest in Move.com Group) out of the lesser of (x) the assets of
the Corporation legally available for the payment of dividends under Delaware
law or (y) the Available Dividend Amount for Move.com Group.
(b) Discrimination Between or Among Series of Common Stock. Subject to
paragraph (a) of this Section 2 and subject to the preferences and other terms
of any outstanding series of Preferred Stock, the Corporation shall have the
authority to declare and pay dividends on both, one or neither series of Common
Stock in equal or unequal amounts, notwithstanding the performance of either
Group, the amount of assets available for divi-
II-3
<PAGE>
dends on either series of Common Stock, the amount of prior dividends paid on
either series of Common Stock, the respective voting rights of each series of
Common Stock or any other factor.
3. Mandatory Dividend, Redemption or Exchange on Disposition of All or
Substantially All of the Assets of a Group; Exchange of One Series of Common
Stock for the Other Series or for Stock of a Subsidiary at the Corporation's
Option.
(a) Mandatory Dividend, Redemption or Exchange.
(i) In the event of a Disposition of All or Substantially All
of the Assets of a Group (other than an Exempt Disposition),
the Corporation shall, on or prior to the 85th Trading Day
after the consummation of such Disposition, either:
(x) declare and pay a dividend to holders of the
series of Common Stock that relates to that Group (in
cash, securities (other than Common Stock) or other
property, or a combination thereof), subject to the
limitations on dividends set forth under Section 2
of this Article 4(A), in an amount having a Fair
Value equal to their Proportionate Interest in the
Net Proceeds of such Disposition;
(y) redeem from holders of the series of Common Stock
that relates to that Group, for cash, securities
(other than Common Stock) or other property (or a
combination thereof) in an amount having a Fair Value
equal to their Proportionate Interest in the Net
Proceeds of such Disposition, all of the outstanding
shares of the relevant series of Common Stock (or, if
such Group continues after such Disposition to own
any material assets other than the proceeds of such
Disposition, a number of shares of such series of
Common Stock (rounded, if necessary, to the nearest
whole number) having an aggregate average Market
Value, during the 20 consecutive
II-4
<PAGE>
Trading Day period beginning on (and including) the
16th Trading Day immediately following the date on
which the Disposition is consummated, equal to such
Fair Value); or
(z) issue, in exchange for all of the outstanding
shares of the series of Common Stock that relates to
that Group, a number of shares of the series of
Common Stock that does not relate to that Group
(rounded, if necessary, to the nearest whole number)
having an aggregate value equal to 110% of the
aggregate value of all of the outstanding shares of
the se ries of Common Stock that relates to that
Group (with value in each case based on the average
Market Value of a share of the relevant series of
Common Stock during the 20 consecutive Trading Day
period begin ning on (and including) the 16th Trading
Day immediately following the date on which the
Disposition is consummated).
(ii) At any time within one year after com pleting any
dividend or partial redemption pursuant to (x) or (y) of the
preceding sen tence, the Corporation may issue, in exchange
for all of the remaining outstanding shares of the series of
Common Stock that relates to the Group that consummated the
applicable Disposition, a number of shares of the series of
Common Stock that does not relate to that Group (rounded, if
necessary, to the nearest whole number) having an aggregate
value equal to 110% of the aggregate value of all of the
outstanding shares of the series of Common Stock that relates
to that Group (with value in each case based on the average
Market Value of a share of the relevant series of Common Stock
during the 20 consecutive Trading Day period ending on (and
including) the 5th Trading Day immediately preceding the date
on which the Corporation mails the notice of exchange to
holders of the relevant series).
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(iii) For purposes of this Section 3, if a Group consummates a
Disposition in a series of related transactions, such
Disposition shall not be deemed to have been completed until
consummation of the last of such transactions.
(b) Optional Exchange of One Series of Common Stock for the Other
Series.
(i) Prior to the third anniversary of the earlier of (a) the
initial issuance of Move.com Stock in a public offering or (b)
the first anniversary of a private placement of Move.com
Stock, the Corporation will not have the right to cause the
exchange of CD Stock for Move.com Stock.
(ii) From and after the 18-month anniversary of the earlier of
(a) the initial issuance of Move.com Stock in a public
offering or (b) the first anniversary of a private placement
of Move.com Stock, the Corporation may issue, in exchange for
all of the outstanding shares of Move.com Stock, a number of
shares of CD Stock (rounded, if necessary, to the nearest
whole number) having an aggregate value equal to the
percentage of the aggregate value of all of the outstanding
shares of Move.com Stock (the "Ap plicable Percentage")
specified for the appli cable date of exchange below. (In each
case value is based on the average Market Value of a share of
the relevant series of Common Stock during the 20 consecutive
Trading Day period ending on (and including) the 5th Trading
Day immediately preceding the date on which the Corporation
mails the notice of exchange to holders of Move.com Stock).
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The Applicable
Percentage Will
be the Percentage
If the Exchange Date Falls During Specified for
the Period Indicated Below Such Period Below
--------------------------------- -----------------
Eighteenth Month................. 120%
Nineteenth Month................. 119.722222%
Twentieth Month.................. 119.444444%
Twenty-first Month............... 119.166667%
Twenty-second Month.............. 118.888889%
Twenty-third Month............... 118.611111%
Twenty-fourth Month.............. 118.333333%
Twenty-fifth Month............... 118.055556%
Twenty-sixth Month............... 117.777778%
Twenty-seventh Month............. 117.5%
Twenty-eighth Month.............. 117.222222%
Twenty-ninth Month............... 116.944444%
Thirtieth Month.................. 116.666667%
Thirty-first Month............... 116.388889%
Twenty-second Month.............. 116.111111%
Thirty-third Month............... 115.833333%
Thirty-fourth Month.............. 115.555556%
Thirty-fifth Month............... 115.277778%
Thirty-sixth Month and after..... 115%
For purposes of the foregoing chart, (x) the
eighteenth "Month" is the period from and including the date
which is the earlier of (1) the first issuance of shares of
Move.com Stock in a public offering or (2) the first anniver
sary of a private placement of Move.com Stock, to but
excluding the one month anniversary of such date (provided
that, if the date is the 29th, 30th or 31st day of any month,
the first "Month" will be the period from and including such
date to but excluding the one month anni versary of the first
day of the month immediately following the month in which
such date falls) and (y) each subsequent "Month" is the period
from and including the day after the end of the prior Month to
but excluding the one month anniversary of such day.
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(iii) From and after the third anniversary of the earlier of
(a) the initial issuance of Move.com Stock in a public
offering or (b) the first anniversary of a private placement
of Move.com Stock, the Corporation may, at any time after
outstanding Move.com Stock exceeds the 40% of Total Market
Capitalization Trigger but has not exceeded 60% of the Total
Market Capitalization Threshold, issue, in exchange for all of
the outstanding shares of either series of Common Stock (the
"Series of Common Stock Being Retired"), a number of shares of
the other series of Common Stock (rounded, if necessary, to
the nearest whole number) having an aggregate value equal to
the aggregate value of all of the outstanding shares of the
Series of Common Stock Being Retired (with value in each case
based on the average Market Value of a share of the relevant
series of Common Stock during the 20 consecutive Trading Day
period ending on (and including) the 5th Trading Day
immediately preceding the date on which the Corporation mails
the notice of exchange to holders of the Series of Common
Stock Being Retired). In the event that Move.com Stock exceeds
the 60% of Total Market Capitalization Threshold, the
Corporation will lose the right to effect an exchange on a
value for value basis during such period.
The Corporation will have the right, on or after the third
anniversary of the earlier of (a) the initial issuance of
Move.com Stock in a public offering or (b) the first
anniversary of a private placement of Move.com Stock, if out
standing Move.com Stock exceeds the 60% of Total Market
Capitalization Threshold, to issue a number of shares of
Move.com Stock, in ex change for all of the outstanding CD
Stock, having an aggregate value equal to 115% of the
aggregate value of all of the outstanding shares of CD Stock.
(In each case value is based on the average Market Value of a
share of relevant series of Common Stock during the 20
consecutive Trading Day period ending on (and including) the
5th Trading Day immediately preceding the date on which the
Corporation
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<PAGE>
mails the notice of exchange to holders of CD Stock). In the
event that Move.com Stock equals or falls below the 60% of
Total Market Capitalization Threshold, the Corporation will
lose the right to effect such an exchange during such period.
Move.com Stock will exceed the "40% of Total Market
Capitalization Trigger" if the Market Capitalization of the
outstanding Move.com Stock exceeds 40% of the Total Market
Capital ization of both series of Common Stock for 30 Trading
Days during any 60 consecutive Trading Day period. Move.com
Stock will be equal to or below the "60% of Total Market
Capitalization Threshold" if the Market Capitalization of the
outstanding Move.com Stock is equal to or below 60% of the
Total Market Capitalization of both series of Common Stock for
30 Trading Days during any 60 consecutive Trading Day period.
If the Corporation has the right, on the date on which it
mails a notice of exchange as con templated above, to issue
shares of CD Stock or Move.com Stock in exchange for
outstanding shares of the other series of Common Stock as
described above, the Corporation will not lose that right if
Move.com Stock subsequently falls below the 40% of Total
Market Capitalization Trigger or exceeds the 60% of Total
Market Capitalization Threshold.
(iv) Notwithstanding the preceding paragraphs, if a Tax Event
has occurred, the Corporation may issue, in exchange for all
of the outstanding shares of Move.com Stock, a number of
shares of CD Stock (rounded, if necessary, to the nearest
whole number) having an aggregate value equal to 110% of the
aggregate value of all of the outstanding shares of Move.com
Stock (with value based on the average Market Value of a share
of the relevant series of Common Stock during the 20
consecutive Trading Day period ending on (and including) the
5th Trading Day immediately preceding the date on which the
Corporation mails the notice
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<PAGE>
of exchange to holders of Move.com Stock being retired). "Tax
Event" means the receipt by the Corporation of an opinion of
tax counsel of the Corporation's choice experienced in such
matters, who shall not be an officer or employee of the
Corporation or any of its affiliates, to the effect that, as
a result of any amendment to, or change in, the laws (or any
regulations there under) of the United States or any political
subdivision or taxing authority thereof or therein (including
any proposed change in such regulations announced by an
administrative agency), or as a result of any official or
administrative pronouncement or action or judi cial decision
interpreting or applying such laws or regulations, it is more
likely than not that for United States federal income tax pur
poses (1) the Corporation, its subsidiaries or affiliates or
any of its successors or its stockholders is, or at any time
in the future will be, subject to tax upon the issuance of
shares of either CD Stock or Move.com Stock or (2) either CD
Stock or Move.com Stock is not, or at any time in the future
will not be, treated solely as stock of the Corporation. For
purposes of rendering such opinion, the tax counsel shall
assume that any administrative proposals will be adopted as
proposed. However, in the event a change in law is proposed,
tax counsel shall render an opinion only in the event of
enactment.
(c) Optional Exchange for Stock of a Subsidiary.
(i) At any time at which all of the assets and liabilities of
a Group (and no other assets or liabilities of the Corporation
or any subsidiary thereof) are held directly or indirectly by
one or more wholly owned subsidiaries of the Corporation (the
"Group Subsidiaries"), the Corporation shall have the right to
issue to holders of the relevant series of Common Stock
(including Cendant Group in the case of Move.com Stock) their
Proportionate Interest in all of the outstanding shares of the
common stock of the Group Subsidiaries in exchange for all of
the
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<PAGE>
outstanding shares of such series of Common Stock.
(ii) If the series of Common Stock being exchanged pursuant
to Section 3(c)(i) above is CD Stock and the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in
Move.com Group is greater than zero, the Corporation shall
also issue a number of shares of Move.com Stock equal to the
then current Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group and issue those
shares to the holders of CD Stock or to one of the Group
Subsidiaries, at the option of the Corporation.
(iii) If the series of Common Stock being exchanged pursuant
to Section 3(c)(i) above is Move.com Stock and the Number of
Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group is greater than zero (so that less
than all of the shares of common stock of the Group
Subsidiaries are being delivered to the holders of Move.com
Stock), the Corporation may retain the remaining shares of
common stock of the Group Subsidiaries or distribute those
shares as a dividend on CD Stock.
(d) General Dividend, Exchange and Redemption Provisions.
(i) If the Corporation completes a Disposition of All or
Substantially All of the Assets of a Group (other than an
Exempt Disposition), the Corporation shall, not more than the
10 Trading Days after the consummation of such Disposition,
issue a press release specifying (w) the Net Proceeds of such
Disposition, (x) the number of shares of the series of Common
Stock related to such Group then outstanding, (y) the number
of shares of such series of Common Stock issuable upon
conversion, exchange or exercise of any convertible or
exchangeable securities, options or warrants and the
conversion, exchange or exercise prices thereof and (z) if
the Group is Move.com Group, the
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<PAGE>
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group. The Corporation shall,
not more than 30 Trading Days after such consummation,
announce by press release which of the actions specified in
Section 3(a)(i) of this Article 4(A) it has determined to
take, and upon making that announcement, that determination
will be irrevocable. In addition, the Corporation shall, not
later than 30 Trading Days after such consummation and not
earlier than 10 Trading Days before the applicable payment
date, redemption date or exchange date, send a notice by
first-class mail, postage prepaid, to holders of the rele vant
series of Common Stock at their addresses as they appear on
the transfer books of the Corporation, specifying:
(1) if the Corporation has determined to pay a special
dividend, (A) the record date for such dividend, (B) the
payment date of such dividend (which cannot be more than 85
Trading Days after such consummation) and (C) the aggregate
amount and type of property to be paid in such dividend (and
the approximate per share amount thereof);
(2) if the Corporation has determined to un dertake a
redemption, (A) the date of redemption (which cannot be more
than 85 Trading Days after such consummation), (B) the
aggregate amount and type of property to be paid as a
redemption price (and the approximate per share amount
thereof), (C) if less than all shares of the relevant series
of Common Stock are to be redeemed, the number of shares to be
redeemed and (D) the place or places where certificates for
shares of such series of Common Stock, properly endorsed or
assigned for transfer (unless the Corporation waives such
requirement), should be surrendered in return for delivery of
the cash, securities or other property to be paid by the
Corporation in such redemption; and
(3) if the Corporation has determined to un dertake an
exchange, (A) the date of exchange
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<PAGE>
(which cannot be more than 85 Trading Days after such
consummation), (B) the number of shares of the other series of
Common Stock to be issued in exchange for each outstanding
share of such series of Common Stock and (C) the place or
places where certificates for shares of such series of Common
Stock, properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), should be surrendered in
return for delivery of the other series of Common Stock to be
issued by the Corporation in such exchange.
(ii) If the Corporation has determined to complete any
exchange described in Section 3(b) or (c) of this Article
4(A), the Corporation shall, not less than 10 Trading Days
and not more than 30 Trading Days before the ex change date,
send a notice by first-class mail, postage prepaid, to holders
of the relevant series of Common Stock at their addresses as
they appear on the transfer books of the Corporation,
specifying (x) the exchange date and the other terms of the
exchange and (y) the place or places where certificates for
shares of such series of Common Stock, properly en dorsed or
assigned for transfer (unless the Corporation waives such
requirement), should be surrendered for delivery of the stock
to be issued or delivered by the Corporation in such exchange.
(iii) Neither the failure to mail any notice required by this
Section 3(d) to any particular holder nor any defect therein
would affect the sufficiency thereof with respect to any other
holder or the validity of any dividend, redemption or
exchange contemplated hereby.
(iv) If the Corporation is redeeming less than all of the
outstanding shares of a series of Common Stock pursuant to
Section 3(a)(i) of this Article 4(A), the Corporation shall
redeem such shares pro rata or by lot or by such other method
as the Board of Directors determines to be equitable.
II-13
<PAGE>
(v) No holder of shares of a series of Common Stock being
exchanged or redeemed shall be entitled to receive any cash,
securities or other property to be distributed in such ex
change or redemption until such holder surren ders
certificates for such shares, properly endorsed or assigned
for transfer, at such place as the Corporation shall specify
(unless the Corporation waives such requirement). As soon as
practicable after the Corporation's receipt of certificates
for such shares, the Corporation shall deliver to the person
for whose account such shares were so surrendered, or to the
nominee or nominees of such person, the cash, securities or
other property to which such person shall be entitled,
together with any fractional payment referred to below, in
each case without interest. If less than all of the shares of
Common Stock represented by any one certificate is exchanged
or redeemed, the Corporation shall also issue and deliver a
new certificate for the shares of such Common Stock not
exchanged or redeemed.
(vi) The Corporation shall not be required to issue or deliver
fractional shares of any capi tal stock or any other
fractional securities to any holder of Common Stock upon any
exchange, redemption, dividend or other distribution described
above. If more than one share of Common Stock shall be held at
the same time by the same holder, the Corporation may
aggregate the number of shares of any capital stock that would
be issuable or any other securities that would be
distributable to such holder upon any such exchange,
redemption, dividend or other distribution. If there are
fractional shares of any capital stock or any other fractional
securities remaining to be issued or distributed to any
holder, the Corporation shall, if such fractional shares or
securities are not issued or distributed to such holder, pay
cash in respect of such fractional shares or securities in an
amount equal to the Fair Value thereof (without interest).
II-14
<PAGE>
(vii) From and after the date set for any exchange or
redemption contemplated by this Section 3, all rights of a
holder of shares of Common Stock being exchanged or redeemed
shall cease except for the right, upon surrender of the
certificates theretofore representing such shares, to receive
the cash, securities or other property for which such shares
were ex changed or redeemed, together with any fractional
payment as provided above, in each case without interest (and,
if such holder was a holder of record as of the close of
Business on the record date for a dividend not yet paid, the
right to receive such dividend). A holder of shares of Common
Stock being exchanged shall not be entitled to receive any
dividend or other distribution with respect to shares of the
other series of Common Stock until after certificates
theretofore representing the shares being exchanged are
surrendered as con templated above. Upon such surrender, the
Corporation shall pay to the holder the amount of any
dividends or other distributions (without interest) which
theretofore became payable with respect to a record date
occurring after the exchange, but which were not paid by
reason of the foregoing, with respect to the number of whole
shares of the other series of Common Stock represented by the
certificate or certificates issued upon such surrender. From
and after the date set for any exchange, the Corporation
shall, however, be entitled to treat the certificates for
shares of a series of Common Stock being exchanged that were
not yet surren dered for exchange as evidencing the ownership
of the number of whole shares of the other series of Common
Stock for which the shares of such Common Stock should have
been exchanged, notwithstanding the failure to surrender such
certificates.
(viii) The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes that might be payable
in respect of the issue or delivery of any shares of capital
stock and/or other securities on any exchange
II-15
<PAGE>
or redemption contemplated by this Section 3; provided,
however, that the Corporation shall not be required to pay any
tax that might be payable in respect of any transfer involved
in the issue or delivery of any shares of capital stock and/or
other securities in a name other than that in which the shares
so exchanged or redeemed were registered, and no such issue or
delivery will be made unless and until the person requesting
such issue pays to the Corporation the amount of any such
tax, or establishes to the satisfaction of the Corporation
that such tax has been paid.
(ix) The Corporation may, subject to applica ble law,
establish such other rules, requirements and procedures to
facilitate any dividend, redemption or exchange contemplated
by this Section 3 as the Board of Directors may determine to
be appropriate under the circumstances.
4. Voting Rights.
At every meeting of stockholders, the holders of CD Stock and the
holders of Move.com Stock shall vote to gether as a single class on all matters
as to which common stockholders generally are entitled to vote, unless a
separate vote is required by applicable law. On all such matters for which no
separate vote is required, (a) holders of CD Stock shall be entitled to one vote
per share of CD Stock held and (b) holders of Move.com Stock shall be entitled
to a one vote per share of Move.com Stock held. Each share of CD Stock and each
share of Move.com Stock shall continue to have one vote following a stock split,
stock dividend or similar reclassification.
5. Liquidation Rights.
In the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, holders of CD Stock and holders of Move.com
Stock shall be entitled to receive in respect of shares of CD Stock and shares
of Move.com Stock their proportionate interests in the net assets of the
Corporation, if any, re maining for distribution to
II-16
<PAGE>
stockholders (after payment of or provision for all liabilities, including
contingent liabilities, of the Corporation and payment of the liquidation
preference payable to any holders of Preferred Stock), in proportion to the
respective number of liquidation units per share of CD Stock and Move.com
Stock. Each share of CD Stock shall have one liquidation unit and each share of
Move.com Stock shall have a number of liquidation units (including a fraction of
one liquidation unit) equal to the quotient (rounded to the nearest five
decimal places) of the average Market Value of one share of Move.com Stock
during the 20 consecutive Trading Day period ending on, and including, the 5th
Trading Day before the date of the first public announcement of (1) a voluntary
liquidation, dissolution or winding-up of the Corporation or (2) the institution
of any proceeding for the involuntary liquidation, dissolution or winding-up of
the Corporation divided by the average Market Value of one share of CD Stock
during such 20 Trading Day period.
If the Corporation shall in any manner subdivide (by stock split,
reclassification or otherwise) or combine (by reverse stock split,
reclassification or otherwise) the outstanding shares of CD Stock or Move.com
Stock, or declare a dividend in shares of either series to holders of such
series, the per share liquidation units of such series of Common Stock specified
in the preceding paragraph, as adjusted from time to time, shall be appropri
ately adjusted as determined by the Board of Directors, so as to avoid dilution
in the aggregate, relative liquidation rights of the shares of any series of
Common Stock.
Neither the merger nor consolidation of the Corporation into or with
any other entity, nor a sale, transfer or lease of all or any part of the assets
of the Corporation, shall, alone, be deemed a liquidation or winding up of the
Corporation or cause the dissolution of the Corporation, for purposes of this
Section 5.
6. Adjustments to Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group.
The Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group, as
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<PAGE>
in effect from time to time, shall, automatically without action by the Board of
Directors or any other person, be:
(a) adjusted in proportion to any changes in the number of
outstanding shares of Move.com Stock caused by subdivisions
(by stock split, reclassification or otherwise) or
combinations (by reverse stock split, reclassification or
otherwise) of shares of Move.com Stock or by dividends or
other distributions of shares of Move.com Stock on shares of
Move.com Stock (and, in each such case, rounded, if necessary,
to the nearest whole number);
(b) decreased by (i) if the Corporation issues any shares of
Move.com Stock and the Board of Directors attributes that
issuance (and the proceeds thereof) to Cendant Group, the
number of shares of Move.com Stock so issued, and (ii) if the
Board of Directors reallocates to Cendant Group any cash or
other assets thereto fore allocated to Move.com Group in
connection with a redemption of shares of Move.com Stock (as
required pursuant to clause (ii) of the proviso to the
definition of Cendant Group below) or in return for a decrease
in the Num ber of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group, the number
(rounded, if necessary, to the nearest whole number) equal to
(x) the aggregate Fair Value of such cash or other assets
divided by (y) the Market Value of one share of Move.com Stock
as of the date of such reallocation; and
(c) increased by (i) if the Corporation repur chases any
shares of Move.com Stock and the Board of Directors attributes
that repurchase (and the consideration therefor) to Cendant
Group, the number of shares of Move.com Stock so repurchased
and (ii) if the Board of Directors re-allocates to Move.com
Group any cash or other assets theretofore allocated to
Cendant Group in return for an increase in the Number of
Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group, the number (rounded, if necessary,
to
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<PAGE>
the nearest whole number) equal to (x) the Fair Value of such
cash or other assets divided by (y) the Market Value of one
share of Move.com Stock as of the date of such re-allocation.
Neither the Corporation nor the Board of Directors shall take any
action that would, as a result of any of the foregoing adjustments, reduce the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest in
Move.com Group to below zero. Subject to the preceding sentence, the Board of
Directors may attribute the issuance of any shares of Move.com Stock (and the
proceeds here from) or the repurchase of Move.com Stock (and the consideration
therefor) to Cendant Group or to Move.com Group, as the Board of Directors
determines in its sole discretion; provided, however, that the Board of
Directors must attribute to Cendant Group the issuance of any shares of Move.com
Stock that are issued (1) as a dividend or other distribution on, or as
consideration for the repurchase of, shares of CD Stock or (2) as consideration
to acquire any assets or satisfy any lia bilities attributed to Cendant Group.
7. Additional Definitions.
As used in this Article 4, the following terms shall have the following
meanings (with terms defined in singu lar having comparable meaning when used in
the plural and vice versa), unless the context otherwise requires:
"All or Substantially All of the Assets" of either Group means a
portion of such assets that represents at least 80% of the then-current Fair
Value of the assets of such Group, which for Cendant Group includes the value of
its Retained Interest in Move.com Group.
"Available Dividend Amount" for Cendant Group, on any day on which
dividends are paid on shares of CD Stock, is the amount that would, immediately
prior to the payment of such dividends, be legally available for the payment of
dividends on shares of CD Stock under Delaware law if (a) Cendant Group and
Move.com Group were each a separate Delaware corporation, (b) Cendant Group had
outstanding (i) a number of shares of common stock, par value $0.01 per share,
equal to the number of shares of CD Stock that are then outstanding and (ii) a
number of
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shares of preferred stock, par value $0.01 per share, equal to the number of
shares of Preferred Stock that have been attributed to Cendant Group and are
then out standing, (c) the assumptions about Move.com Group set forth in the
next sentence were true and (d) Cendant Group owned a number of shares of
Move.com Stock equal to the Number of Shares Issuable with Respect to Cendant
Group's Retained Interest in Move.com Group.
"Available Dividend Amount" for Move.com Group, on any day on which
dividends are paid on shares of Move.com Stock, is the amount that would,
immediately prior to the payment of such dividends, be legally available for the
payment of dividends on shares of Move.com Group's common stock under Delaware
law if Move.com Group were a sepa rate Delaware corporation having outstanding
(a) a number of shares of common stock, par value $0.01 per share, equal to the
number of shares of Move.com Stock that are then outstanding plus the Number of
Shares Issuable with Respect to Cendant Group's Retained Interest in Move.com
Group and (b) a number of shares of preferred stock, par value $0.01 per share,
equal to the number of shares of Preferred Stock that have been attributed to
Move.com Group and are then outstanding.
"Cendant Group" means (a) all of the businesses, assets and liabilities
of the Corporation and its subsid iaries, other than the businesses, assets and
liabilities that are part of Move.com Group, (b) the rights and obligations of
Cendant Group under any inter-Group debt deemed to be owed to or by Cendant
Group (as such rights and obligations are defined in accordance with policies
established from time to time by the Board of Directors) and (c) a proportionate
interest in Move.com Group (after giving effect to any options, Preferred Stock,
other securities or debt issued or incurred by the Corporation and attributed to
Move.com Group) equal to the Retained Interest Percentage; provided, however,
that:
(i) the Corporation may re-allocate assets from one Group to
the other Group in return for other assets or services
rendered by that other Group in the ordinary course of
business or in accordance with policies established by the
Board of Directors, or a committee thereof, from time to time,
and
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<PAGE>
(ii) if the Corporation transfers cash, other assets or
securities to holders of shares of Move.com Stock as a
dividend or other distribution on shares of Move.com Stock
(other than a dividend or distribution payable in shares of
Move.com Stock), or as payment in a redemption of shares of
Move.com Stock required by Section 3(a) of this Article 4(A),
then the Board of Directors shall re-allocate from Move.com
Group to Cendant Group cash or other assets having a Fair
Value equal to the aggregate Fair Value of the cash, other
assets or securities so transferred multiplied by a fraction,
the numerator of which shall equal the Number of Shares Issu-
able with Respect to Cendant Group's Retained Interest in
Move.com Group on the record date for such dividend or
distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of
Move.com Stock outstanding on such date.
"Move.com Group" means (a) the internet real estate services portal
called Move.com, including all of the businesses, assets and liabilities of the
Corporation and its subsidiaries that the Board of Directors has, as of the
Effective Date, allocated to Move.com Group, (b) any assets or liabilities
acquired or incurred by the Corporation or any of its subsidiaries after the
Effective Date in the ordinary course of business and attributable to Move.com
Group, (c) any businesses, assets or liabili ties acquired or incurred by the
Corporation or any of its subsidiaries after the Effective Date that the Board
of Directors has specifically allocated to Move.com Group or that the
Corporation otherwise allocates to Move.com Group in accordance with policies
established from time to time by the Board of Directors and (d) the rights and
obligations of Move.com Group under any inter-Group debt deemed to be owed to or
by Move.com Group (as such rights and obligations are defined in accordance with
policies established from time to time by the Board of Directors); provided,
however, that:
(i) the Corporation may re-allocate assets from one Group to
the other Group in return for
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<PAGE>
other assets or services rendered by that other Group in the
ordinary course of business or in accordance with policies
established by the Board of Directors from time to time, and
(ii) if the Corporation transfers cash, other assets or
securities to holders of shares of Move.com Stock as a
dividend or other distribution on shares of Move.com Stock
(other than a dividend or distribution payable in shares of
Move.com Stock), or as payment in a redemption of shares of
Move.com Stock required by Section 3(a) of this Article 4(A),
then the Board of Directors shall re-allocate from Move.com
Group to Cendant Group cash or other assets having a Fair
Value equal to the aggregate Fair Value of the cash, other
assets or securities so transferred multiplied by a fraction,
the numerator of which shall equal the Number of Shares Issu-
able with Respect to Cendant Group's Retained Interest in
Move.com Group on the record date for such dividend or
distribution, or on the date of such redemption, and the
denominator of which shall equal the number of shares of
Move.com Stock outstanding on such date.
"Disposition" means a sale, transfer, assignment or other disposition
(whether by merger, consolidation, sale or otherwise) of All or Substantially
All of the Assets of a Group to one or more persons or entities, in one
transaction or a series of related transactions.
"Effective Date" means the date on which this Amended and Restated
Certificate of Incorporation becomes effective under Delaware law.
"Exempt Disposition" means any of the following:
(a) a Disposition in connection with the liquidation, dissolution or
winding-up of the Corporation and the distribution of assets to
stockholders,
(b) a Disposition to any person or entity con trolled by the
Corporation (as determined by the Board of Directors in its sole
discretion),
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(c) a Disposition by either Group for which the Corporation receives
consideration primarily con sisting of equity securities (including,
without limitation, capital stock of any kind, interests in a general
or limited partnership, interests in a limited liability company or
debt securities convertible into or exchangeable for, or options or
warrants to acquire, any of the foregoing, in each case without regard
to the voting power or other management or governance rights associated
there with) of an entity which is primarily engaged or proposes to
engage primarily in one or more busi nesses similar or complementary to
businesses con ducted by such Group prior to the Disposition, as
determined by the Board of Directors in its sole discretion,
(d) a dividend, out of Move.com Group's assets, to holders of Move.com
Stock and a re-allocation of a corresponding amount of Move.com Group's
assets to Cendant Group as required pursuant to clause (ii) of the
proviso to the definition of Cendant Group above,
(e) a dividend, out of Cendant Group's assets, to holders of CD Stock,
and
(f) any other Disposition, if (i) at the time of the Disposition there
are no shares of CD Stock outstanding, (ii) at the time of the
Disposition there are no shares of Move.com Stock outstanding or (iii)
before the 30th Trading Day following the Disposition the Corporation
has mailed a notice stating that it is exercising its right to exchange
all of the outstanding shares of CD Stock or Move.com Stock for newly
issued shares of the other series of Common Stock as contemplated under
Section 3(b) of this Article 4.
"Fair Value" means (a) in the case of cash, the amount thereof, (b) in
the case of capital stock that has been Publicly Traded for a period of at least
15 months, the Market Value thereof and (c) in the case of other assets or
securities, the fair market value thereof as the Board of Directors shall
determine in good faith
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(which determination shall be conclusive and binding on all stockholders).
"Group" means either Cendant Group or Move.com Group.
"Market Capitalization" of either series of Common Stock on any date
means the Market Value of a share of such series on such date multiplied by the
number of shares of such series outstanding on such date.
"Market Value" of a share of any class or series of capital stock on
any Trading Day means the average of the high and low reported sales prices
regular way of a share of such class or series on such Trading Day or, in case
no such reported sale takes place on such Trading Day, the average of the
reported closing bid and asked prices regular way of a share of such class or
series on such Trading Day, in either case as reported on the New York Stock
Exchange ("NYSE") Composite Tape or, if the shares of such class or series are
not listed or admitted to trading on the NYSE on such Trading Day, on the
principal national securities exchange on which the shares of such class or
series are listed or admitted to trading or, if not listed or admitted to
trading on any national securi ties exchange on such Trading Day, on The Nasdaq
National Market of the Nasdaq Stock Market ("Nasdaq NMS") or, if the shares of
such class or series are not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq NMS on such Trading Day, the average
of the closing bid and asked prices of a share of such class or series in the
over-the-counter market on such Trading Day as furnished by any NYSE member firm
selected from time to time by the Corporation, or, if such closing bid and asked
prices are not made available by any such NYSE member firm on such Trading Day,
or if such class or series of stock is not listed on the NYSE, a national
securities exchange, or the Nasdaq NMS or quoted in the over-the-counter market,
the fair market value of a share of such class or series as the Board of
Directors shall determine in good faith (which determination shall be
conclusive and binding on all stockholders); provided, that, for purposes of
determining the average Market Value of a share of any class or series of
capital stock for any period, (a) the "Market Value" of a share of any class or
series of capital stock on any day prior to any "ex-dividend" date
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or any similar date occurring during such period for any dividend or distri
bution (other than any dividend or distribution contem plated by clause (b)(ii)
of this sentence) paid or to be paid with respect to such capital stock shall be
reduced by the Fair Value of the per share amount of such dividend or
distribution and (b) the "Market Value" of a share of any class or series of
capital stock on any day prior to (i) the effective date of any subdivision (by
stock split or otherwise) or combination (by reverse stock split or otherwise)
of outstanding shares of such class or series of capital stock occurring during
such period or (ii) any "ex-dividend" date or any similar date occurring during
such period for any dividend or distri bution with respect to such capital stock
to be made in shares of such class or series of capital stock, shall be
appropriately adjusted, as determined by the Board of Directors, to reflect such
subdivision, combination, dividend or distribution; and provided further, if (a)
the Corporation repurchases outstanding shares of Move.com Stock and the Board
of Directors attributes that repurchase (and the consideration therefor) to
Move.com Group and (b) the Board of Directors determines to real locate to
Cendant Group cash or other assets theretofore allocated to Move.com Group in
order to avoid a change in the Retained Interest Percentage, the "Market Value"
of a share Move.com Stock used to compute the corresponding reduction in the
Number of Shares Issuable with Respect to Cendant Group's Retained Interest in
Move.com Group shall equal the Fair Value of the consideration paid per share of
Move.com Stock so repurchased; and provided further, if the Corporation redeems
a portion of the outstanding shares of Move.com Stock (and the Board of
Directors reallocates to Cendant Group cash or other assets theretofore
allocated to Move.com Group in the manner required by clause (ii) of the proviso
to the definition of Cendant Group below), the "Market Value" of a share
Move.com Stock used to compute the corresponding reduction in the Number of
Shares Issuable with Respect to Cendant Group's Retained Interest in Move.com
Group shall equal the Fair Value of the consideration paid per share of Move.com
Stock so redeemed.
"Net Proceeds" of a Disposition of any of the assets of a Group means
the positive amount, if any, remaining from the gross proceeds of such
Disposition after any
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payment of, or reasonable provision (as determined in good faith by the Board of
Directors, which determination shall be conclusive and binding on all
stockholders) for, (a) any taxes payable by the Corporation in respect of such
Disposition, (b) any taxes payable by the Corporation in respect of any
resulting dividend or redemption, (c) any transaction costs, including, without
limitation, any legal, investment banking and accounting fees and expenses and
(d) any liabilities (contingent or other wise) of, attributed to or related to,
such Group, including, without limitation, any liabilities for deferred taxes,
any indemnity or guarantee obligations which are outstanding or incurred in
connection with the Disposition or otherwise, any liabilities for future
purchase price adjustments and any obligations with respect to outstanding
securities (other than Move.com Stock) at tributed to such Group.
"Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group" shall ini tially be a number the Board of Directors
designates prior to the time the Corporation first issues shares of Move.com
Stock, or options therefor, as the number of shares of Move.com Stock that could
be issued by the Corporation for the account of Cendant Group in respect of its
Retained Interest in Move.com Group; provided, however, that such number as in
effect from time to time shall automatically be adjusted as required by Section
6 of this Article 4(A).
"Proportionate Interest" of holders of Move.com Stock in the Net
Proceeds of a Move.com Group Disposition (or in the outstanding shares of common
stock of any subsidiaries holding Move.com Group's assets and liabili ties)
means the amount of such Net Proceeds (or the number of such shares) multiplied
by the number of shares of Move.com Stock outstanding divided by the Total
Number of Notional Move.com Shares Deemed Outstanding. "Proportionate Interest"
of holders of CD Stock in the Net Proceeds of a Cendant Group Disposition (or in
the out standing shares of common stock of any subsidiaries holding Cendant
Group's assets and liabilities) means the amount of such Net Proceeds (or the
number of such shares).
"Publicly Traded" with respect to any security means (a) registered
under Section 12 of the Securities
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Exchange Act of 1934, as amended (or any successor provi sion of law), and (b)
listed for trading on the NYSE (or any other national securities exchange
registered under Section 7 of the Securities Exchange Act of 1934, as amended
(or any successor provision of law)) or listed on the Nasdaq NMS (or any
successor market system).
"Retained Interest" means Cendant Group's interest in Move.com Group,
excluding the interest represented by outstanding shares of Move.com Stock.
"Retained Interest Percentage" means the Number of Shares Issuable with
Respect to Cendant Group's Retained Interest in Move.com Group divided by the
Total Number of Notional Move.com Shares Deemed Outstanding.
"Total Number of Notional Move.com Shares Deemed Outstanding" means the
number of shares of Move.com Stock outstanding plus the Number of Shares
Issuable with Respect to Cendant Group's Retained Interest in Move.com Group.
"Trading Day" means each weekday on which the rele vant security (or,
if there are two relevant securities, each relevant security) is traded on the
principal national securities exchange on which it is listed or admitted to
trading or on the Nasdaq NMS or, if such security is not listed or admitted to
trading on a national securities exchange or quoted on the Nasdaq NMS, traded
in the principal over-the-counter market in which it trades.
8. Effectiveness of Sections 2 Through 7 of this Article 4(A).
The terms of Sections 2 through 7, inclusive, of this Article 4(A)
shall apply only when there are shares of both series of Common Stock
outstanding.
9. Determinations by the Board of Directors.
Subject to applicable law, any determinations made by the Board of
Directors in good faith under the Certificate of Incorporation, as it may be
amended from time to time, including without limitation any such determinations
with respect to the businesses, assets and liabilities of either Group,
transactions between the
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<PAGE>
Groups or the rights of holders of any series of Common Stock or Preferred Stock
made pursuant to or in the furtherance hereof, shall be final and binding on all
stockholders of the Corporation. A record of all formal determinations of the
Board of Directors made as contemplated hereby shall be filed with the records
of the actions of the Board of Directors.
B. Preferred Stock
The Board of Directors is expressly authorized to adopt, from
time to time, a resolution or resolutions providing for the issuance of
Preferred Stock in one or more series, to fix the number of shares in each such
series (subject to the aggregate limitations thereon in this Article) and to fix
the designations and the powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions, of each such series. The authority of the Board of Directors with
respect to each such series shall include determination of the following (which
may vary as between the different series of Preferred Stock):
(a) The number of shares constituting the shares and the distinctive
designation of the series;
(b) The dividend rate on the shares of the series and the extent, if
any, to which dividends thereon shall be cumulative;
(c) Whether shares of the series shall be redeemable and, if
redeemable, the redemption price payable on redemption thereof, which
price may, but need not, vary according to the time or circumstances
of such redemption;
(d) The amount or amounts payable upon the shares of the series in the
event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation prior to any payment or distribution of the
assets of the Corporation to any class or classes of stock of the
Corporation ranking junior to the Preferred Stock;
(e) Whether the shares of the series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or
redemption of
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<PAGE>
shares of the series and, if so entitled, the amount of such fund and
the manner of its application, including the price or prices at which
the shares may be redeemed or purchased through the application of such
fund;
(f) Whether the shares of the series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, and, if so convertible or exchangeable, the conversion
price or prices, or the rates of exchange, and the adjustments thereof,
if any, at which such conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange;
(g) The extent, if any, to which the holders of shares of the series
shall be entitled to vote on any question or in any proceedings or to
be represented at or to receive notice of any meeting of stockholders
of the Corporation;
(h) Whether, and the extent to which, any of the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of any such series may be made dependent upon facts
ascertainable outside of the Amended and Restated Certificate of
Incorporation or of any amendment thereto, or outside the resolution or
resolutions providing for the issuance of such series adopted by the
Board of Directors, provided that the manner in which such facts shall
operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such series is clearly
and expressly set forth in the resolution or resolutions providing for
the issuance of such series adopted by the Board of Directors; and
(i) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors
may deem advisable, which shall not affect adversely any other class or
series of Preferred Stock at the time outstanding and which shall not
be
II-29
<PAGE>
inconsistent with the provisions of this Amended and Restated
Certificate of Incorporation.
Shares of Common Stock and of Preferred Stock may be issued
from time to time as the Board of Directors shall determine and on such terms
and for such consideration, not less than par value, as shall be fixed by the
Board of Directors. No consent by any series of Preferred Stock shall be
required for the issuance of any other series of Preferred Stock unless the
Board of Directors in the resolution providing for the issuance of any series of
Preferred Stock expressly provides that such consent shall be required.
Subject to the rights, if any, of holders of shares of
Preferred Stock from time to time outstanding, dividends may be paid upon the
Common Stock as and when declared by the Board of Directors out of any funds
legally available therefor.
Except as otherwise provided by law or as otherwise expressly
provided in the resolution or resolutions providing for the issuance of shares
of any series of the Preferred Stock, the holders of shares of the Common Stock
shall have the exclusive right to vote for the election of directors and for all
other purposes. Each holder of shares of Common Stock of the Corporation
entitled at any time to vote shall have one vote for each share thereof held.
Except as otherwise provided with respect to shares of Preferred Stock
authorized from time to time by the Board of Directors, the exclusive voting
power for all purposes shall be vested in the holders of shares of Common Stock.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
(a) To make, alter, or repeal the By-Laws of the Corporation.
(b) To authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation.
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<PAGE>
(c) To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created.
(d) Subject to the provisions of the By-Laws, to designate one
or more committees, each committee to consist of one or more of the
directors of the Corporation. Subject to the provisions of the ByLaws,
the Board of Directors may designate one or more directors as alternate
members of any committee, who shall replace any absent or disqualified
member at any meeting of the committee in the manner specified in such
designation. Any such committee, to the extent provided in the
resolution of the Board of Directors adopted in accordance with the
By-Laws of the Corporation, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of
the Corporation to be affixed to all papers which may require it; but
no such committee shall have the power or authority in reference to
amending the Amended and Restated Certificate of InCorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the By-Laws of the Corporation; and, unless
the resolution or By-Laws expressly so provide, no such committee shall
have the power or authority to declare a dividend or to authorize the
issuance of stock.
(e) When and as authorized by the stockholders in accordance
with statute, to sell, lease, or exchange all or substantially all of
the property and assets of the Corporation, including its good will and
its corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or
property, including shares of stock in, and/or other securi ties of,
any other corporation or corporations, as its Board of Directors shall
deem expedient and for the best interests of the Corporation.
7. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or
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any class of them and/or between this Corporation and its stockholders or any
class of them, any court of equitable jurisdiction within the State of Delaware
may, on the application in a summary way of this Corporation or of any creditor
or stockholder thereof, or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of Title 8 of
the Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of stock
holders of this Corporation, as the case may be, agree to any compromise or
arrangement to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders of this Corporation, as the case
may be, and also on this Corporation.
8. Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statues) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation. Elections of directors
need not be by written ballot unless the By-Laws of the Corporation shall so
provide.
9. For the management of the business and for the conduct of
the affairs of the Corporation, and in further creation, definition, limitation
and regulation of the power of the Corporation and of its directors and of its
stockholders, it is further provided:
(a) Election of Directors. Elections of Directors need not be
by written ballot unless the By-Laws of the Corporation shall so
provide.
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(b) Number, Election and Terms of Directors. The number of
Directors of the Corporation shall be fixed from time to time by or
pursuant to the ByLaws. From and after the annual meeting of
stockholders to be held in 2000, the Directors shall hold office for a
term expiring at the annual meeting of stockholders to be held in the
year following the year of their election with the members to hold
office until their successors are elected and qualified; provided that
the term of any Director appointed prior to the annual meeting of
stockholders held in 2000 shall be unaffected. At each annual meeting
of the stockholders of the Corporation, the Directors shall be elected
to office for a term expiring at the annual meeting of stockholders
held in the year following the year of their election.
(c) Stockholder Nomination of Director Candidates. Advance
notice of nominations for the election of Directors, other than by the
Board of Directors or a Committee thereof, shall be given in the
manner provided in the By-Laws.
(d) Newly Created Directorships and Vacancies. Newly created
directorships resulting from any increase in the number of Directors
and any vacancies on the Board of Directors resulting from the
death, resignation, disqualification, or removal of a Director
shall be filled solely by the affirmative vote of a majority of the
remaining Directors then in office, even though less than a quorum of
the Board of Directors. Any Director elected (a) to fill any vacancy
resulting from the death, resignation, disqualification or removal of
a Director shall hold office for the remainder of the full term of the
Director whose death, resignation, disqualification or removal created
such vacancy and (b) to fill any vacancy resulting from a newly created
directorship shall hold office until the next annual meeting of
stockholders and, in each case, until such Director's successor
shall have become elected and qualified. No decrease in the number of
Directors constituting the Board of Directors shall shorten the term
of any incumbent Director.
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<PAGE>
(e) Removal of Directors. Any Director may be removed from
office with or without cause only by the affirmative vote of the
holders of a majority of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election
of Directors voting together as a single class.
(f) Stockholder Action. Any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a duly
called annual or special meeting of such holders and may not be
effected by any consent in writing by such holders. Except as otherwise
required by law, special meetings of stockholders of the Corporation
may be called only by the Chairman of the Board, the President or the
Board of Directors pursuant to a resolution approved by a majority of
the entire Board or Directors.
(g) By-Law Amendments. The Board of Directors shall have power
to make, alter, amend and repeal the By-Laws (except so far as the
By-Laws adopted by the stockholders shall otherwise provide). Any
By-Laws made by the Directors under the powers conferred hereby may be
altered, amended or repealed by the Directors or by the stockholders.
Notwithstanding the foregoing and anything contained in this Amended
and Restated Certificate of Incorporation to the contrary, Sections 1,
2 and 3 of Article II of the By-Laws shall not be altered, amended or
repealed and no provision inconsistent therewith shall be adopted
without the affirmative vote of the holders of at least 80% of the
voting power of all the shares of the Corporation entitled to vote
generally in the election of Directors, voting together as a single
class and Sections 1, 2 and 3 of Article III of the By-Laws shall not
be altered, amended or repealed and no provision inconsistent therewith
shall be adopted without the affirmative vote of the holders of at
least a majority of the voting power of all shares of the Corporation
entitled to vote generally in the election of Directors, voting
together as a single class.
(h) Amendment, Repeal. Notwithstanding anything contained in
this Amended and Restated
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Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least 80% of the voting power of all shares of the
Corporation entitled to vote generally in the election of Directors,
voting together as a single class, shall be required to alter, amend,
or adopt any provision inconsistent with, or repeal, Article 9 a., c.,
d., f., g., or h.
10. (a) Vote Required for Certain Business Combinations.
A. Higher Vote for Certain Business Combinations. In addition
to any affirmative vote required by law or this Amended and Restated
Certificate of Incorporation, and except as otherwise expressly
provided herein:
(1) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (a) any
Interested Stockholder (as hereinafter defined) or (b) any
other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value of $10 million or more; or
(3) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or series of transactions)
of any securities of the Corporation or any subsidiary to any
Interested Stockholder or to any Affiliate of any Interested
Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market
Value of $10 million or more; or
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(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or
on behalf of any Interested Stockholder or any Affiliate of
any Interested Stockholder; or
(5) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any other transaction (whether or not with
or into or otherwise involving an Interested Stockholder)
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class
of Equity Security (as hereinafter defined) of the Corporation
or any Subsidiary which is directly or indirectly owned by any
Interested Stockholder or any Affiliate of any Interested
Stockholder;
shall require the affirmative vote of the holders of at least
80% of the voting power of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in
the election of directors (the "Voting Stock"), voting
together as a single class (it being understood that for the
purposes of Article 10, each share of the Voting Stock shall
have one vote). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. Definition of "Business Combination". The term "Business
Combination" used in this Article 10 shall mean any transaction which
is referred to in any one or more of clauses (1) through (5) of
Paragraph A hereof.
(b) When Higher Vote is Not Required. The provisions
of Article 10(a) shall not be appli cable to any particular Business
Combination, and such Business Combination shall require only such
affirmative vote as is required by law and any other provision of this
Amended and Restated
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Certificate of Incorporation, if all of the conditions specified in
either of the following Paragraphs A and B are met:
A. Approval by Disinterested Directors. The Business Combination shall
have been approved by majority of the Disinterested Directors (as
hereinafter defined).
B. Price and Procedure Requirements. All of the following conditions
shall have been met:
(i) The aggregate amount of the cash and the
Fair Market Value (as hereinafter defined) as of the date of
the consummation of the Business Combination of consideration
other than cash to be received per share by holders of Common
Stock in such Business Combination shall be at least equal to
the higher of the following:
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Stockholder
for any shares of Common Stock acquired by it (1) within the
two-year period immediately prior to the first public
announcement of the terms of the proposed Business Combination
(the "Announcement Date") or (2) in the transaction in which
it became an Interested Stockholder, whichever is higher; and
(b) the Fair Market Value per share of Common Stock
on the Announcement Date or on the date on which the
Interested Stockholder became an Interested Stockholder (such
latter date is referred to in this Paragraph 10 as the
"Determination Date"), whichever is higher.
(ii) The aggregate amount of the cash and
the Fair Market Value as of the date of the consummation of
the Business Combination of consideration other than cash to
be received per share by holders of shares of any other class
of outstanding Voting Stock shall be at least equal to the
higher of the following:
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(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Stockholder
for any shares of Common Stock acquired by it (1) within the
two-year period immediately prior to the Announcement Date or
(2) in the transaction in which it became an Interested
Stockholder, whichever is higher; and
(b) the Fair Market Value per share of such class of
Voting Stock on the Announcement Date or on the Determination
Date, whichever is higher.
(iii) The consideration to be received
by holders of Voting Stock shall be in cash or in the same
form as the Interested Stockholder has previously paid for
shares of such class of Voting Stock. If the Interested
Stockholder has paid for any Voting Stock with varying forms
of consideration, the form of consideration for such Voting
Stock shall be either cash or the form used to acquire the
largest number of shares of such Voting Stock previously
acquired by it. The price determined in accordance with
paragraphs B(i) and B(ii) of this Article 10(b) shall be
subject to appropriate adjustment in the event of any stock
dividend, stock split, combination of shares or similar event.
(iv) After such Interested Stockholder has
become an Interested Stockholder and prior to the consummation
of such Business Combinations: (a) there shall have been (1)
no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision
of the Common Stock), except as approved by a majority of the
Disinterested Directors, and (2) an increase in such annual
rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure
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so to increase such annual rate is approved by a majority of
the Disinterested Directors; and (b) such Interested
Stockholder shall have not become the beneficial owner of any
additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder
becoming an Interested Stockholder.
(c) Certain Definitions. For the purpose of this
Article 10:
A. A "person" shall mean any individual, firm, corporation or
other entity.
B. "Interested Stockholder" shall mean any person (other than
the Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or
indirectly, of 5% or more of the voting power of the
outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and
at any time within the two-year period immediately prior to
the date in question was the beneficial owner, directly or
indirectly, of 5% or more of the voting power of the then
outstanding Voting Stock; or
(iii) is an assignee of or has otherwise
succeeded to any shares of Voting Stock which were at any time
within the two-year period immediately prior to the date in
question beneficially owned by any Interested Stockholder, if
such assignment or succession shall have occurred in the
course of a transaction or series of transactions not
involving a public offering within the meaning of the
Securities Act of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its
Affiliates or Associates (as hereinafter defined)
beneficially owns directly or indirectly; or
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(ii) which such person or any of its
Affiliates or Associates has (a) the right to acquire (whether
such right is exercisable immediately or only after the
passage of time), pursuant to any agreement, arrangement or un
derstanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b) the
right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly
or indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
D. For the purpose of determining whether a person is an
Interested Stockholder pursuant to paragraph B of this Article 10(c),
the number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of paragraph C of the
Article 10(c) but shall not include any other shares of Voting Stock
which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conver sion rights, warrants or
options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1985.
F. "Subsidiary" means any corporation of which a majority of
any class of Equity Security is owned, directly or indirectly, by the
Corporation, provided, however, that for the purposes of the definition
of Interested Stockholder set forth in paragraph B of this Article
10(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of Equity Security is owned, directly or
indirectly, by the Corporation.
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G. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a
Disinterested Director who is unaffiliated with the Interested
Stockholder and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of Directors.
H. "Fair Market Value" means: (i) in the case of stock, the
highest closing bid quotation with respect to a share of such stock
during the 30- day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotation
System or any system then in use, or, if such stock is then listed on
an ex change, the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such stock on
the Composition Tape for New York Stock Exchange -- Listed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange or quoted as aforesaid,
the fair market value on the date in question of a share of such stock
as determined by the Board of Directors in good faith; and (ii) in the
case of property other than cash or stock, the fair market value of
such property on the date in question as determined by the Board of
Directors, in good faith.
I. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in paragraphs B(i) and (ii) of Article 10(b) shall
include the shares of Common Stock retained by the holders of such
shares.
J. "Equity Security" shall have the meaning ascribed to such
term in Section 3(a)(11) of the Securities Exchange Act of 1934, as in
effect on January 1, 1985.
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<PAGE>
(d) Powers of the Board of Directors. A majority of
the Directors shall have the power and duty to determine for the
purposes of this Article 10 on the basis of information known to them
after reasonable inquiry, (A) whether a person is an Interested
Stockholder, (B) the number of shares of Common Stock beneficially
owned by any person, (C) whether a person is an Affiliate or Associate
of another (D) whether the assets which are the subject of any Business
Combination have, or the consider ation to be received for an issuance
of transfer of securities by the Corporation or any Subsidiary in any
Business Combination has, or an issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of $10 million or more. A majority of the
Directors shall have the further power to interpret all of the terms
and provisions of this Article 10.
(e) No Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article 10 shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
(f) Amendment, Repeal, etc. Notwith standing any
other provisions of this Amended and Restated Certificate of
Incorporation or the By-Laws (and notwithstanding the fact that a
lesser percent age may be specified by law, this Amended and Re stated
Certificate of Incorporation or the By-Laws) the affirmative vote of
the holders of 80% or more of the outstanding Voting Stock, voting
together as a single class, shall be required to amend or re peal, or
adopt any provisions inconsistent with this Article 10.
11. No director of the Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however, that this
Article 11 shall not eliminate or limit the liability of a director to the
extent provided by applicable law (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omis sions not
in good faith or which involve intentional
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misconduct or a knowing violation of law, (iii) under section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit. No amendment to or repeal of
this Article 11 shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended
and Restated Certificate of Incorporation to be executed this __ day of _____,
_____.
CENDANT CORPORATION
By:
--------------------------------
Name: James E. Buckman
Title: Vice Chairman and
General Counsel
<PAGE>
ANNEX III
CENDANT CORPORATION
MOVE.COM GROUP
1999 STOCK OPTION PLAN
AS ASSUMED BY CENDANT CORPORATION FROM MOVE.COM, INC. AND
AMENDED AND RESTATED EFFECTIVE AS OF JANUARY __, 2000.
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give Cendant Corporation (the
"Corporation") a competitive advantage in attracting, retaining and motivating
its employees, including employees of Move.Com Group, and to provide the
Corporation and its Affiliates with a stock plan providing incentives to plan
participants directly linked to the performance of the Move.Com Group businesses
and increases in Move.Com Group shareholder value. The Plan was formerly an
obligation of Move.com, Inc. and has been assumed by Cendant Corporation and
equitably adjusted such that, among other things, existing and future grants of
options hereunder shall be options to purchase shares of that class of common
stock of the Corporation identified as "Move.com Stock".
For purposes of the Plan, the following terms are defined as set forth
below:
(a) "Affiliate" means a corporation or other entity controlled by,
controlling or under common control with the Corporation.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Cause" means an optionee's (1) failure to substantially perform
his or her duties as an employee of the Corporation or any Affiliate (other than
any such failure resulting from incapacity due to physical or mental illness);
(2) any act of fraud, misappropriation, dishonesty, embezzlement or similar
conduct against the Corporation or any Affiliate; (3) conviction of a felony or
any crime involving moral turpitude (which conviction, due to the passage of
time or otherwise, is not subject to further appeal) or (4) negligence in the
performance of his or her duties. Notwith standing the foregoing, if an optionee
is a party to an employment agreement with the Corporation or any Affiliate that
contains a definition of "Cause," such definition shall apply to such Stock
Options granted to such optionee under the Plan except to the extent otherwise
provided by the Committee in the agreement relating to any
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Stock Option. Any determination regarding the existence of "Cause" shall be made
by the Committee in its sole discretion and any such determination shall be
binding on the optionee, the Corporation and any Affiliate.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Commission" means the Securities and Exchange Commission or any
successor agency.
(f) "Committee" means the Committee referred to in Section 2.
(g) "Common Stock" means Move.com Stock, a series of common stock of
the Corporation, par value $0.01 per share, intended to track the performance of
Move.com
(h) "Move.com" means the Move.Com Group.
(i) "Corporation" means Cendant Corporation, a Delaware corporation.
(j) "Disability" means permanent and total disability as determined
under procedures established by the Committee for purposes of the Plan.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(l) "Fair Market Value" means, as of any given date, the fair market
value of the Common Stock as determined by the Committee in good faith and in
its sole discretion, taking into account, to the extent applicable, the trading
price of the Common Stock on the New York Stock Exchange, or, if not listed on
such exchange, on any other national securities exchange on which the Common
Stock is listed, or on NASDAQ, or in any other regular public trading market for
the Common Stock which may exist as of such date, or, if not publicly-traded,
taking into account such other financial and valuation considerations which it
deems appropriate. The determination of the Committee shall be conclusive in
determining the fair market value of the Common Stock and shall be final and
binding on all parties.
(m) "Plan" means this Cendant Corporation Move.Com Group 1999 Stock
Option Plan, as set forth herein and as hereinafter amended from time to time.
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(n) "Retirement" means retirement from active employment with the
Corporation or an Affiliate at or after age 65.
(o) "Stock Option" means any option granted under Section 5.
(p) "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Corporation, if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
(q) "Termination of Employment" means the termination of the optionee's
active employment with the Corporation and its Affiliates. An optionee employed
by an Affiliate shall also be deemed to incur a Termination of Employment if
such Affiliate ceases to be an Affiliate and the optionee does not immediately
thereafter become an employee of the Corporation or another Affiliate. Temporary
absences from employment because of illness, vacation or leave of absence and
transfers among the Corporation and its Affiliates shall not be considered
Terminations of Employment.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee or such
other committee of the Board as the Board may from time to time designate or, if
no such committee is designated, the Board (the "Committee").
The Committee shall have plenary authority to grant Stock Options
pursuant to the terms of the Plan to employees of the Corporation and its
Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) To select the employees to whom Stock Options may from time to
time be granted;
(b) To determine the number of shares of Common Stock to be covered by
each Stock Option granted hereunder;
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(c) To determine the terms and conditions of any Stock Option granted
hereunder (including, but not limited to, the option price (subject to Section
5(a) hereof), any vesting condition, restriction or limitation (which may be
related to the performance of the optionee, the Corporation or any Affiliate)
and any vesting acceleration or forfeiture waiver regarding any Stock Option and
the shares of Common Stock relating thereto), based on such factors as the
Committee shall determine;
(d) To modify, amend or adjust the terms and conditions of any Stock
Option, at any time or from time to time, including extending the expiration
date of options during any period in which exercises are not permitted either by
law or pursuant to a corporate policy;
(e) To determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to a Stock Option may be deferred;
and
(f) To determine under what circumstances a Stock Option may be settled
in cash or Common Stock under Section 5(d).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Stock Option issued under the Plan (and any agreement relating
thereto) and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Corporation to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee or pursuant to authority
delegated as contemplated by the provisions of the Plan with respect to any
Stock Option shall be made in the sole discretion of the Committee or such
delegate at the time of the grant of the Stock Option or, unless in
contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Committee or any appropriately delegated officer pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Corporation and optionees.
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Any authority granted to the Committee may also be exercised by the
full Board. To the extent that any permitted action taken by the Board conflicts
with action taken by the Committee, the Board action shall control.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
(a) Stock Authorized. The total number of shares of Common Stock
initially reserved and available for grant under the Plan shall be six million
(6,000,000). No optionee may be granted Stock Options under the Plan covering in
the aggregate more than 50% of the total number of shares of Common Stock
authorized for issuance under the Plan over any consecutive two (2) year period.
Shares subject to a Stock Option under the Plan may be authorized and unissued
shares or may be treasury shares.
If any Stock Option terminates without being exercised, shares of
Common Stock subject to such Stock Options shall again be available for
distribution in connection with Stock Options under the Plan.
(b) Adjustment of Shares. In the event of any change in corporate
capitalization, such as a stock split or a corporate transaction, or any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or property of the Corporation, any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code), any partial or com plete liquidation of the Corporation or any exchange
of the Corporation's common securities for securities to be issued by the
Corporation's parent corporation, including but not limited to securities
commonly referred to as a "tracking stock", the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, the limit on options that may be granted to an
individual optionee under paragraph (a) above in the number, the kind and option
price of shares subject to outstanding Stock Options granted under the Plan
and/or such other equitable substitution or adjustments as it may determine to
be appropriate in its sole discretion, taking into account the application of
generally accepted accounting principles and any resultant accounting charge as
a result of such substitution or adjustments; provided, however, that the number
of shares subject to any Stock Option shall always be a whole number.
SECTION 4. ELIGIBILITY
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All active employees of the Corporation and its subsidiaries employed
primarily in the Move.com business, and those other active employees of the
Corporation designated from time to time by the Committee in its sole discretion
are eligible to be granted Stock Options under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. The grant of a Stock Option shall occur on the
date the Committee by resolution selects an individual to be a participant in
any grant of a Stock Option, determines the number of shares of Common Stock to
be subject to such Stock Option to be granted to such individual and specifies
the terms and provisions of the Stock Option (or such later date as is specified
in such resolution). The Corporation shall notify an optionee of any grant of a
Stock Option, and a written option agreement or agreements shall be duly
executed and delivered by the Corporation to the optionee. Such agreement or
agreements shall become effective upon execution by the Corporation.
Except as otherwise provided by direction of the Committee in the
letter or agreement documenting such Stock Options, Stock Options granted under
the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions as the Committee shall deem
desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee
and set forth in the option agreement, and shall not be less than the
Fair Market Value of the Common Stock subject to the Stock Option on
the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee.
(c) Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment
exercise provisions, in whole or in part, based on such factors as the
Committee may determine. In
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addition, the Committee may at any time accelerate the exercisability
of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this
Section 5, Stock Options may be exercised, in whole or in part, at any
time during the option term by giving written notice of exercise to the
Corporation specifying the number of shares of Common Stock subject to
the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the
purchase price by certified or bank check or such other instrument as
the Corporation may accept. If approved by the Committee, payment, in
full or in part, may also be made in the form of unrestricted Common
Stock already owned by the optionee of the same class as the Common
Stock subject to the Stock Option (based on the Fair Market Value of
the Common Stock on the date the Stock Option is exercised); provided,
however, that such already owned shares have been held by the optionee
for at least six (6) months at the time of exercise.
In the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by delivering a properly
executed exercise notice to the Corporation, together with a copy of
the irrevocable instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds necessary to pay the
purchase price, and, if requested, the amount of any federal, state,
local or foreign withholding taxes. To facilitate the foregoing, the
Corporation may enter into agreements for coordinated procedures with
one or more brokerage firms.
In addition, in the discretion of the Committee, payment for
any shares subject to a Stock Option may also be made by instructing
the Com mittee to withhold a number of such shares having a Fair Market
Value on the date of exercise equal to the aggregate exercise price of
such Stock Option.
No shares of Common Stock shall be issued until full payment
therefor has been made. An optionee shall have no rights as a
shareholder of the Corporation solely by virtue of the issuance of a
Stock Option as contem plated by this Plan; provided, however, that,
except with respect to (i) any deferral option shares pursuant to
Section 5(j) below and (ii) any option shares for which share
certificates have not been issued or delivered as contemplated under
Section 8(a) below, an optionee shall have all of the
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rights of a shareholder of the Corporation holding the class or series
of Common Stock that is subject to such Stock Option (including, if
applicable, the right to vote the shares and the right to receive
dividends), when and if the optionee has given written notice of
exercise, has paid in full for such shares.
(e) Transferability of Stock Options. Stock Options shall be
transferable by the optionee only pursuant to the following methods:
(i) by will or the laws of descent and distribution; (ii) pursuant to a
domestic relations order, as defined in the Code or Title I of the
Employee Retirement Income Security Act, as amended, or the regulations
thereunder; or (iii) subject to such conditions as the Committee may
prescribe from time to time, and upon written approval of the Secretary
of the Corporation, as a gift to family members of the optionee or
trusts for the benefit of family members of the optionee. Except to the
extent provided in this Section 5(e), Stock Options may not be
assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise), shall not be subject to
execution, attachment or similar process, and may be exercised during
the lifetime of the holder thereof only by such holder.
(f) Termination by Death or Disability. Unless otherwise
determined by the Committee in its sole discretion, if an optionee's
employment terminates by reason of death or Disability, any Stock
Option held by such optionee may thereafter be exercised, whether or
not it was exercisable at the time of such termination, for a period of
twelve (12) months (or such other period as the Committee may specify
in the option agreement) from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is
the shorter.
(g) Termination by Reason of Retirement. Unless otherwise
determined by the Committee in its sole discretion, if an optionee's
employment terminates by reason of Retirement, any Stock Option held
by such optionee may thereafter be exercised by the optionee, to the
extent it was exercisable at the time of such Retirement, or on such
accelerated basis as the Committee may determine, for a period of
twelve (12) months (or such other period as the Committee may specify
in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. Any Stock Option not vested as
of the date of such Retirement and not accelerated by action of the
Committee shall be cancelled as of the date of such Retirement.
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(h) Cause. If an optionee incurs a Termination of Employment
for Cause, any Stock Option held by such optionee, whether or not then
exercisable, shall be immediately and automatically canceled as of the
date of such Termination of Employment and shall then be of no further
force or effect.
(i) Other Termination. Unless otherwise determined by the
Committee in its sole discretion, if an optionee incurs a Termination
of Employment for any reason other than death, Disability or
Retirement, any Stock Option held by such optionee, to the extent then
exercisable, or on such accelerated basis as the Committee may
determine, may be exercised for the lesser of thirty (30) days from the
date of such Termination of Employment or the balance of such Stock
Option's term. Any Stock Option not vested as of the date of such
Termination of Employment and not accelerated by action of the
Committee shall be cancelled as of the date of such Termination of
Employment.
(j) Deferral of Option Shares. The Committee may from time to
time establish procedures pursuant to which an optionee may elect to
defer, until a time or times later than the exercise of an Option,
receipt of all or a portion of the shares subject to such Option and/or
to receive cash at such later time or times in lieu of such deferred
shares, all on such terms and conditions as the Committee shall
determine. If any such deferrals are permitted, then notwithstanding
Section 5(d) above, an optionee who elects such deferral shall not have
any rights as a stockholder with respect to such deferred shares unless
and until certificates representing such shares are actually delivered
to the optionee with respect thereto, except to the extent otherwise
determined by the Committee.
No Stock Option granted hereunder shall be an "incentive stock option"
as defined in Section 422 of the Code.
SECTION 6. TERM, AMENDMENT AND TERMINATION
The Plan will terminate ten (10) years after the effective date of the
Plan. Under the Plan, Stock Options outstanding as of such date shall not be
affected or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
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optionee under a Stock Option theretofore granted without the optionee's or
recipient's consent.
The Committee may amend the terms of any Stock Option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any holder without the holder's consent.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting rules
as well as other developments, and to grant Stock Options which qualify for
beneficial treatment under such rules without stockholder approval.
SECTION 7. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation.
SECTION 8. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving
shares pursuant to a Stock Option to represent to and agree with the Corporation
in writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made
pursu ant thereto, the Corporation shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under the Plan prior to
fulfillment of all of the following conditions:
(1) Listing or approval for listing upon notice of issuance of
such shares on the New York Stock Exchange, Inc., or such other
securities exchange as may at the time be the principal market for the
Common Stock;
(2) Any registration or other qualification of such shares of
the Corporation under any state or federal law or regulation, or the
maintaining in effect of any such registration or other qualification
which the Committee shall, in its absolute discretion upon the advice
of counsel, deem necessary or advisable; and
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(3) Obtaining any other consent, approval, or permit from any
state or federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to
be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
Affiliate from adopting other or additional compensation arrangements for its
employees.
(c) Adoption of the Plan shall not confer upon any employee any right
to continued employment, nor shall it interfere in any way with the right of the
Corporation or any Affiliate to terminate the employment of any employee at any
time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of an optionee for federal income tax purposes
with respect to any Stock Option under the Plan, the optionee shall pay to the
Corporation, or make arrangements satisfactory to the Corporation regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Corporation, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Stock Option that gives rise to the
withholding requirement. The obligations of the Corporation under the Plan shall
be conditional on such payment or arrangements, and the Corporation and its
Affiliates shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the optionee. The Committee may
establish such procedures as it deems appropriate, including making irrevocable
elections, for the settlement of withholding obligations with Common Stock.
(e) The Committee shall establish such procedures as it deems appropri
ate for an optionee to designate a beneficiary to whom any amounts payable in
the event of the optionee's death are to be paid or by whom any rights of the
optionee, after the optionee's death, may be exercised.
(f) In the case of a grant of a Stock Option to any employee of an
Affiliate of the Corporation, the Corporation may, if the Committee so directs,
issue or transfer the shares of Common Stock, if any, covered by the Stock
Option to the Affiliate, for such lawful consideration as the Committee may
specify, upon the condition or understanding that the Affiliate will transfer
the shares of Common
III-11
<PAGE>
Stock to the employee in accordance with the terms of the Stock Option specified
by the Committee pursuant to the provisions of the Plan.
(g) The Plan and all Stock Options made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware, without reference to principles of conflict of laws.
(h) Anything in this Plan to the contrary notwithstanding, the Board
may, without further approval by the shareholders, substitute new options for,
or assume, prior options of any corporation which engages with the Corporation
or any of its Affiliates in a transaction to which Section 424(a) of the Code
would apply (assuming for such purpose that the option assumed or substituted
were an incentive stock option), or any parent or any subsidiary of such
corporation.
SECTION 9. EFFECTIVE DATE OF PLAN
The Plan became effective on October 29, 1999, the date upon which the
Plan was approved by the Board of Directors of Move.com, Inc.
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<PAGE>
ANNEX IV
BY-LAW AMENDMENT
ARTICLE I
DIRECTORS
SECTION 1. Number, Election and Terms.
The number of Directors shall be fixed from time to time by the Board
of Directors but shall not be less than three. From and after the annual meeting
of stockholders to be held in 2000, the Directors shall hold office for a term
expiring at the annual meeting of stockholders to be held in the year following
their election, with each member to hold office until their successors are
elected and qualified ; provided that the term of any Director appointed prior
to the annual meeting of stockholders to be held in 2000 shall be unaffected. At
each annual meeting of stockholders, the successors of the Directors whose term
expires at that meeting shall be elected to hold office for a term expiring at
the annual meeting of stockholders held in the year following the year of their
election.
The term "entire Board" as used in these By-Laws means the total number
of Directors which the Corporation would have if there were no vacancies.
Nominations for the election of Directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors generally. However,
any stockholder entitled to vote in the election of Directors generally may
nominate one or more persons for election as Directors at a meeting only if
written notice of such stockholders intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of stockholders,
ninety days prior to the anniversary date of the immediately preceding annual
meeting, and (ii) with respect to an election to be held at a special meeting of
stockholders for the election of Directors, the close of business on the tenth
day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be
<PAGE>
nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (e) the consent of each nominee to serve as a Director of the
Corporation of so elected. The presiding officer of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
SECTION 2. Newly Created Directorships and Vacancies.
Newly created directorships resulting from any increase in the number
of Directors and any vacancies on the Board of Directors resulting from the
death, resignation, disqualification, or removal of a director shall be filled
solely by the affirmative vote of a majority of the remaining Directors then in
office, even though less than a quorum of the Board of Directors. Any Directors
elected (a) to fill any vacancy resulting from the death, resignation,
disqualification or removal of a Director shall hold office for the remainder of
the full term of the Director whose death, resignation, disqualification or
removal created such vacancy and (b) to fill any vacancy resulting from a newly
created directorship shall hold office until the next annual meeting of
stockholders and, in each case, until such Directors successor shall have been
elected and qualified. No decrease in the number of Directors constituting the
Board of Directors shall shorten the term of any incumbent Director.
SECTION 3. Removal
Any Director may be removed from office, with or without cause, only by
the affirmative vote of the holders of a majority of the combined voting power
of the then outstanding shares of stock entitled to vote generally in the
election of Directors, voting together as a single class.
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<PAGE>
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
Whether or not you plan to attend the special meeting of Stockholders,
you can ensure your shares are represented in the meeting by promptly
completing, signing and returning your proxy (attached below) to ChaseMellon
Shareholder Services, L.L.C., in the enclosed postage-paid envelope. We urge you
to return your proxy as soon as possible. AS AN ALTERNATIVE TO COMPLETING THIS
FORM, YOU MAY ENTER YOUR VOTE INSTRUCTIONS BY TELEPHONE. CALL TOLL FREE
1-800-840-1208 AND FOLLOW THE SIMPLE INSTRUCTIONS. Thank you for your attention
to this important matter.
CENDANT CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
ON FEBRUARY __, 2000
The undersigned, having received the Notice of Special Meeting of
Stockholders and Proxy Statement, dated January __, 2000 (the "Proxy
Statement") of Cendant Corporation, hereby appoints Henry R. Silverman, James E.
Buckman and Stephen P. Holmes, and each of them, proxies of the undersigned,
with full power of substitution, to represent the undersigned at the special
meeting of Stockholders of Cendant Corporation to be held at the Ramada Inn and
Conference Center, 130 Route 10 West, East Hanover, New Jersey 07936 on February
__, 2000 at 10:00 a.m. New York time and at any adjournments or postponements
thereof and to vote all shares of Common Stock which the undersigned would be
entitled to vote if personally present at the special meeting in the manner the
undersigned specifies in this Proxy Card (or, if the undersigned does not
specify how to vote, to vote all such shares FOR all Proposals referred to in
this Proxy Card and to vote in the discretion of the proxies as to any other
matters coming before the special meeting).
Please promptly mark this Proxy Card to specify how you would like your
shares voted and date, sign and mail it in the enclosed envelope. No postage is
required. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE
PROPOSALS REFERRED TO IN THIS PROXY CARD.
IF YOU EXECUTE AND RETURN THIS PROXY CARD BUT DO NOT SPECIFY THE MANNER
IN WHICH THE PROXIES SHOULD VOTE YOUR SHARES, THE PROXIES WILL VOTE YOUR SHARES
FOR ALL OF THE
<PAGE>
PROPOSALS AND IN THEIR DISCRETION AS TO ANY OTHER MATTERS COMING
BEFORE THE MEETING.
Proposal 1. Proposal to amend and restate Cendant's Amended and Restated
Certificate of Incorporation in the manner described in the
Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 1.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 2. Proposal to approve the Move.com 1999 Stock Option Plan as
described in the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 2.
[_] FOR [_] AGAINST [_] ABSTAIN
Comment Rider Proxy Card
Proposal 3. Proposal to amend and restate Cendant's Amended and Restated
Certificate of Incorporation to eliminate the provisions for
the classification of the Board of Directors effective as of
the annual meeting in 2000.
[__] FOR [__] AGAINST [__] ABSTAIN
Proposal 4. Proposal to adjourn or postpone the special meeting in order
to, among other things, solicit additional votes.
[__] FOR [__] AGAINST [__] ABSTAIN
In addition, the undersigned authorizes such proxies to vote such
shares in their discretion as to any other matters coming before the special
meeting.
I PLAN TO ATTEND THE MEETING
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<PAGE>
MARK HERE [_]
I HAVE NOTED AN ADDRESS CHANGE AND/OR COMMENT ON THE
REVERSE SIDE OF THE CARD
MARK HERE [_]
Please date this Proxy Card and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or trustee, please add your title as
such. If executed by a corporation, this Proxy Card should be signed by a duly
authorized officer. If executed by a partnership, please sign in partnership
name by authorized persons.
--------------------------------
(Signature)
--------------------------------
(Signature if held jointly)
Dated:____________________, 2000
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