<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
(Amendment No. 3)
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
February , 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 March 21, 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 relocation, real estate and home-related
services through a new Internet services portal which became 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.
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.
<PAGE>
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 MARCH 21, 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 March 21, 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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<PAGE>
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: February , 2000
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PROXY STATEMENT
----------------
CENDANT CORPORATION
-----------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 21, 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 March 21, 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 34 for material risks relating to the
Tracking Stock Proposal.
The date of this Proxy Statement is February __, 2000. We are first sending
this Proxy Statement to stockholders on or about that date.
<PAGE>
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERSABOUT THE SPECIAL MEETING...............................1
PROXY STATEMENT SUMMARY......................................................9
TRACKING STOCK............................................................9
CENDANT CORPORATION, CENDANT GROUPAND MOVE.COM GROUP.....................10
Cendant Corporation...................................................10
Cendant Group.........................................................11
Move.com Group........................................................12
Recent Developments...................................................13
SPECIAL MEETING..........................................................13
PROPOSAL 1-THE TRACKING STOCK PROPOSAL...................................15
General...............................................................15
Reasons for the Tracking Stock Proposal...............................16
Summary Comparison of Terms of Existing Common Stock
with Terms of CD Stock and Move.com Stock ..........................17
Cash Management and Allocation Policies...............................26
No Appraisal Rights...................................................26
Material Federal Income Tax Considerations............................26
PROPOSAL 2-STOCK OPTION PLAN PROPOSAL....................................28
PROPOSAL 3-BOARD DECLASSIFICATION PROPOSAL...............................28
PROPOSAL 4-ADJOURNMENT PROPOSAL..........................................28
i
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Page
CENDANT CORPORATION
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA..............29
MOVE.COM GROUP
SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA..................30
Recent Operating Results of Move.com Group............................31
THE SPECIAL MEETING.........................................................32
RISK FACTORS................................................................34
Risk Factors Relating to the Tracking Stock Proposal..................34
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS...................45
PROPOSAL 1-THE TRACKING STOCK PROPOSAL......................................46
General...............................................................46
Background and Reasons for the Tracking Stock Proposal................47
Description of CD Stock and Move.com Stock............................51
Cash Management and Allocation Policies...............................74
Intercompany Agreements...............................................79
Material Provisions of the Amended and Restated Certificate of
Incorporation, By-laws and Delaware Law ............................82
No Appraisal Rights...................................................86
Financial Advisors....................................................87
Stock Transfer Agent and Registrar....................................87
Material Federal Income Tax Considerations............................87
PROPOSAL 2-STOCK OPTION PLAN PROPOSAL.......................................91
Move.com, Inc. 1999 Stock Option Plan................................91
New Plan Benefits.....................................................94
PROPOSAL 3-BOARD DECLASSIFICATION PROPOSAL..................................96
PROPOSAL 4-ADJOURNMENT PROPOSAL.............................................99
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Page
EXECUTIVE COMPENSATION AND OTHER INFORMATION................................100
Aggregated Option Exercises in 1999 and Fiscal Year-End
Option Values..........................................................103
Director Compensation....................................................103
Employment Contracts and Termination, Severance and Change of
Control Arrangements...................................................106
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............111
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT...........................113
WHERE YOU CAN FIND MORE INFORMATION.........................................113
STOCKHOLDER PROPOSALS.......................................................116
ANNEX I Illustrations 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
iii
<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 represents an ownership
interest in the corporation that issues it but it is designed to reflect,
or track, the performance of a specified group of the corporation's 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
indefi-
<PAGE>
nite future, many 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 relocation, real estate and
home-related services through a new Internet services portal at
http://www.move.com. In addition to its main asset, the Move.com and
related websites, the Move.com Group includes Rent Net, Inc. and National
Home Connections, LLC. Other major assets of the Move.com Group are the
rights of Move.com, Inc., a part of the Move.com Group, under contracts
with Cendant and its subsidiaries and its rights under contracts with third
parties. These agreements give Move.com Group access to home listings from
CENTURY 21(Registered Trademark), COLDWELL BANKER(Registered Trademark) and
ERA(Registered Trademark) franchise systems, discount coupons from Welcome
Wagon's local merchant customers, mortgage products and services of Cendant
Mortgage and a variety of relocation services and information from 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)
6/12/99
-------------------
|
--------------------------------------------------------
| | | |
----------------- ---------------- ------------------ ----------------
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 relocation,
real estate and 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) and a retained interest in 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 relocation, real estate and 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 became 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,
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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. 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
becoming integrated into a new community.
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 mailing addresses online.
o Living. We will also offer a host of valuable resources to meet
consumers' furniture, child care and home improvement needs. Further,
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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
valued at $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
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?
5
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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 in Move.com Group. 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?
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.
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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 affect the correlation of
each Group's performance to the market price of their respective class of
stock.
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 AP-
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PROVE THE BOARD DECLASSIFICATION PROPOSAL? WHAT VOTE IS REQUIRED TO APPROVE
THE ADJOURNMENT PROPOSAL?
A: The Tracking Stock Proposal requires the affirmative vote of the holders of
a majority of the outstanding shares of Cendant common stock. The Stock
Option Plan Proposal requires the affirmative vote of the holders of a
majority of the shares of Cendant common stock present in person or
represented by proxy at the special meeting and entitled to vote at the
special meeting. In accordance with our amended and restated certificate of
incorporation, the Board Declassification Proposal requires the affirmative
vote of at least 80% of the voting power of all shares of Cendant entitled
to vote generally in the election of directors. The Adjournment Proposal
requires 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.
8
<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.
9
<PAGE>
The issuance of shares of Move.com Stock will dilute the vote of current
Cendant stockholders. In addition, Cendant Group's retained interest in Move.com
Group 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.
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, travel and direct
marketing-related 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. 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
10
<PAGE>
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.
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.
CENDANT GROUP
Cendant Group includes:
o All of the businesses currently operated by Cendant in our four
principal divisions: real estate related services; travel 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
11
<PAGE>
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
relocation, real estate and 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(Registered Trademark), COLDWELL BANKER(Registered Trademark) and
ERA(Registered Trademark) franchise systems 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 website 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.
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
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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 795 Folsom
Street, Sixth Floor, San Francisco, California 94107. Move.com Group's telephone
number 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 March 21,
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 Track- Proposal 1 requires the affirmative vote of
ing Stock Proposal the holders of a majority of the outstanding
shares of existing common stock.
o Proposal 2 - Stock Op- Proposal 2 requires the affirmative vote of
tion 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.
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<PAGE>
o Proposal 3 - Board Proposal 3 requires the affirmative vote of at
Declassification Proposal least 80% of the voting power of all shares of
Cendant entitled to vote generally in the
election of its directors.
o Proposal 4 -- Adjourn- Proposal 4 requires the affirmative vote of
ment 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.
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<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 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 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. 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%.
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<PAGE>
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.
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 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 Move.com Group,
and that Cendant Group's retained interest in the Move.com Group
should also reflect that valuation. We do not believe that the value of
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<PAGE>
Move.com Group is fully reflected in the current value of Cendant's
common stock. 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. Options for Move.com Stock will also be granted to
Cendant Group employees making direct contributions to Move.com Group
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.
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
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<PAGE>
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 Our existing common We intend CD Stock to reflect We intend Move.com Stock to
CHARACTERISTICS: stock reflects the the market value of Cendant reflect the market value of
performance of all of Group. Cendant Group includes Move.com Group, our new
our businesses. all the businesses currently Internet relocation, real
operated by Cendant in its four estate and home-related
principal divisions: travel services business. Move.com
services; real estate services; Group will offer consumers a
direct marketing services and variety of relocation, real
other consumer and business estate and home-related
services (other than Rent Net, products and services
Inc. and National Home providing consumers with a
Connections) and a retained one-stop solution for their
interest in Move.com Group. information, product and
service needs before, during
and after their move.
We can not assure you that the We can not assure you that
market value of CD Stock will the market value of Move.com
in fact reflect the performance Stock will in fact reflect
of Cendant Group as we intend. the performance of Move.com
Holders of CD Stock will Group as we intend. Holders
continue to be common of Move.com Stock will
stockholders of Cendant and, as continue to be common
such, will be subject to all stockholders of Cendant and,
risks associated with an as such, will be subject to
investment in Cendant and all all risks associated with an
of our businesses, assets and investment in Cendant and all
liabilities. of our businesses, assets and
liabilities.
ISSUANCE: Our existing common The amendment and restatement Upon approval of the Tracking
stock is already of the amended and restated Stock Proposal and the Stock
outstanding. certificate of incorporation Option Plan Proposal, the
will reclassify each options previously granted
outstanding share of existing under the Move.com, Inc. 1999
common stock into a share of CD Stock Option Plan to Move.com
Stock. 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.
</TABLE>
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
RETAINED N/A We would adjust the retained N/A
INTEREST: 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 We are currently Stockholder approval of the Stockholder approval of the
OUTSTANDING authorized to issue Tracking Stock Proposal will Tracking Stock Proposal will
STOCK: only one series of authorize us to issue two authorize us to issue two
common stock. series of common stock- CD series of common stock- CD
Stock and Move.com Stock. Stock and Move.com Stock.
We are currently The Tracking Stock Proposal The Tracking Stock Proposal
authorized to issue will authorize us to increase will authorize us to increase
up to 2,000,000,000 the number of authorized shares the number of authorized shares to
shares of common to to 2,500,000,000 2,500,000,000 shares of common
stock. shares of common stock, stock, initially comprised of
initially comprised of 2,000,000,000 shares of CD
2,000,000,000 shares of CD Stock and 500,000,000 shares
Stock and 500,000,000 shares of of Move.com Stock.
Move.com Stock.
_________ shares of Immediately following the After the Tracking Stock
existing common stock implementation of the Tracking Proposal is implemented, we
were outstanding on Stock Proposal, _______ expect to issue from time to
___________________, shares of CD Stock will be time shares of Move.com
2000. These shares outstanding, based on the Stock. These shares, and the
count against the number of shares of existing shares of CD Stock then
total number of common stock outstanding on outstanding, will count
shares of common , 2000. against the total number of
stock we are These shares, and any shares of shares of common stock we are
authorized to issue. Move.com Stock outstanding from authorized to issue.
time to time, will count
against the total number of
shares of common stock we are
authorized to issue.
DIVIDENDS: We currently intend We currently intend to retain We currently intend to retain
to retain all of our all of our earnings for use in all of our earnings for use
earnings for use in the operation and expansion of in the operation and
the operation and our business. We do not expect expansion of our business. We
expansion of our to pay any dividends on CD do not expect to pay any
business. We do not Stock for the foreseeable dividends on Move.com Stock
expect to pay any future. for the foreseeable future.
dividends on our
existing common stock
for the foreseeable
future.
</TABLE>
19
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
We are permitted to We will be permitted to pay We will be permitted to pay
pay dividends out of dividends on CD Stock out of dividends on Move.com Stock
the assets of Cendant the lesser of (1) the assets of (and corresponding amounts to
legally available for Cendant legally available for Cendant Group with respect to
the payment of the payment of dividends under its retained interest in
dividends under Delaware law and (2) the amount Move.com Group) out of the
Delaware law. that would be legally available lesser of (1) the assets of
for the payment of dividends Cendant legally available for
under Delaware law if Cendant the payment of dividends
Group were a separate Delaware under Delaware law and (2)
corporation and Cendant Group's the amount that would be
retained interest in Move.com legally available for the
Group were represented by payment of dividends under
outstanding shares. 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 Move.com
exclusively on the Move.com Stock, exclusively on the CD
Stock, or on both, in equal or Stock, or on both, in equal
unequal amounts. The Board of or unequal amounts. The
Directors will not be required Board of Directors will not
to consider the relative be required to consider the
available dividend amounts, the relative available dividend
amount of dividends previously amounts, the amount of
declared on either the CD Stock dividends previously declared
or the Move.com Stock, their on either the Move.com Stock
relative voting or liquidation or the CD Stock, their
rights or any other factor. 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 substantially all of the
REDEMPTION OR of Cendant Group and the assets of Move.com Group and
EXCHANGE ON disposition was not an exempt the disposition was not an
DISPOSITION disposition, we would be exempt disposition, we would
OF ASSETS: required to choose one of the be required to choose one of
following three alternatives: the following three
alternatives:
o pay a dividend to holders of o pay a dividend to holders
CD Stock in an amount equal of Move.com Stock in an
to their proportionate in amount equal to their
interest the net proceeds of proportionate interest in
such disposition, 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 an amount
their proportionate interest equal to their proportionate
in the net proceeds of such interest in the net proceeds
disposition, outstanding of such disposition,
shares of CD Stock or outstanding shares of
Move.com Stock or
o issue Move.com Stock in o issue CD Stock in exchange for
exchange for outstanding CD outstanding Move.com Stock at a
Stock at a 10% premium (based 10% premium (based on the
on the average market value average market value of
of CD Stock as compared to Move.com Stock as compared to
the average market value of the average market value of CD
Move.com Stock over a Stock over a specified 20
specified 20 trading Day trading day period prior to the
period prior to the exchange)
exchange).
An exempt disposition means any An exempt disposition means
of the following: any of the following:
</TABLE>
20
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
o a disposition in connection o a disposition in connection
with the liquidation, with the liquidation,
dissolution or winding-up of dissolution or winding-up of
Cendant and the distribution Cendant and the distribution
of assets to stockholders of assets to stockholders,
o a disposition to any person o a disposition to any person
or entity controlled by or entity controlled by
Cendant (as determined by the Cendant (as determined by the
Board of Directors in its Board of Directors in its
sole discretion), sole discretion),
o a disposition by either Group o a disposition by either Group
for which Cendant receives for which Cendant receives
consideration primarily consideration primarily
consisting of equity consisting of equity
securities of an entity which securities of an entity which
is primarily engaged or is primarily engaged or
proposes to engage primarily proposes to engage primarily
in one or more businesses in one or more businesses
similar or complementary to similar or complementary to
businesses conducted by such businesses conducted by such
Group prior to the Group prior to the
disposition, as determined by disposition, as determined by
the Board of Directors in its the Board of Directors in its
sole discretion, 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) o any other disposition, if (1)
at the time of the at the time of the
disposition there is only one disposition there is only one
class of common stock class of common stock
outstanding, or (2) before outstanding, or (2) before
the 30th trading day the 30th trading day
following the disposition we following the disposition we
have mailed a notice stating have mailed a notice stating
that we are exercising our that we are exercising our
right to exchange all of the right to exchange all of the
outstanding shares of CD outstanding shares of CD
Stock or Move.com Stock for Stock or Move.com Stock for
newly issued shares of the newly issued shares of the
other series of common stock other series of common stock
as contemplated under as contemplated under
"-Optional Exchange of One "-Optional Exchange of One
Series of Common Stock For Series of Common Stock For
The Other Series." The Other Series."
Any exchange would impact Any exchange would impact
Move.com Stockholders at such current Cendant stockholders
time by diluting
</TABLE>
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<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
by diluting their economic their economic interests
interests because we would be because we would be
required to issue shares of required to issue shares of
Move.com Stock with a market CD Stock with a market
value in excess of the market value in excess of the
value of shares of CD Stock market value of shares of
so exchanged. Move.com Stock so
exchanged.
EXCHANGE FOR CD N/A N/A On and after the 18-month
STOCK OR anniversary of the earlier of
MOVE.COM STOCK (1) the initial issuance of
AT CENDANT'S Move.com Stock in a public
OPTION: 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 anniversary From and after the third
of the earlier of (1) the anniversary of the earlier of
initial issuance of Move.com (1) the initial issuance of
Stock in a public offering or Move.com Stock in a public
(2) the first anniversary of a offering or (2) the first
private placement of Move.com anniversary of a private
Stock, Cendant will not have placement of Move.com Stock,
the right to cause the exchange we will have the right, if
of CD Stock for Move.com outstanding Move.com Stock
Stock. From and after such exceeds 40% of total market
time, we will have the right, capitalization but has not
if outstanding Move.com Stock exceeded 60% of total market
exceeds 40% of total market capitalization, to issue
capitalization but has not either series of common stock
exceeded 60% of the total in exchange for the other
market capitalization, to issue without a premium. In the
either series of common stock event that Move.com Stock
in exchange for the other exceeds 60% of total market
without a premium. capitalization, we will lose
the 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
premium will be based on the a premium will be based on
average market value of the the average market value of
series of the common stock the series of the common
being exchanged as compared to stock being exchanged as
the average market value of the compared to the average
other series of common stock market value of the other
during the 20 consecutive series of common stock during
trading day period ending on, the 20 consecutive trading
and including, the fifth day period ending on, and
trading day immediately including, the fifth trading
preceding the date on which we day immediately preceding the
mail the notice of exchange to date on which we mail the
holders of the outstanding notice of exchange to holders
shares being exchanged. of the outstanding shares
being exchanged.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Notwithstanding the
exchange provisions
outlined above, if we
receive an opinion of tax
counsel to the effect that
as a result of changes in
tax law either (1) 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 (2)
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 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
will be calculated based on the premium will be calculated
average market value of CD based on the average market
Stock as compared to the value of CD Stock as compared
average market value of to the average market value
Move.com Stock during the 20 of Move.com Stock during the
consecutive trading day period 20 consecutive trading day
ending on, and including, the period ending on, and
fifth trading day immediately including, the fifth trading
preceding the date on which we day immediately preceding the
mail the notice of exchange to date on which we mail the
holders of the outstanding notice of exchange to holders
shares being exchanged. of the outstanding shares
being exchanged.
Move.com Stock will exceed 60% Move.com Stock will exceed
of total market capitalization 40% of total market
or 40% of total market capitalization if the market
capitalization if the market capitalization of the
capitalization of the outstanding Move.com Stock
outstanding Move.com Stock exceeds 40% of the total
exceeds 60% or 40%, as the case market capitalization of both
may be, of the total market series of common stock for 30
capitalization of both series trading days during any 60
of
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
common stock for 30 trading consecutive trading day
days during any 60 consecutive period.
Trading Day period.
Thereafter, Move.com Stock will N/A
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 time to transfer all of the
SUBSIDIARY AT assets and liabilities of assets and liabilities of
CENDANT'S OPTION: Cendant Group to a subsidiary Move.com Group to a
and issue all of the stock of subsidiary and issue all of
that subsidiary to the holders the stock of that subsidiary
of the CD Stock in exchange for to the holders of Move.com
all of the outstanding CD Stock. Stock and to the Cendant
Group in exchange for all
of the outstanding Move.com
Stock and the elimination
of the retained interest.
VOTING RIGHTS: One vote per share. One vote per share. One vote per share.
Holders of CD Stock and Holders of CD Stock and
Move.com Stock will vote Move.com Stock will vote
together as a single class, together as a single class,
except if any amendment to the except if any amendment to
charter would increase or the charter would increase or
decrease the par value of the decrease the par value of the
shares of either class or alter shares of either class or
or change the powers, alter or change the powers,
preferences or special rights preferences or special rights
of the shares of such class so of the shares of such class
as to affect them adversely. so as to affect them
Each share will continue to adversely. Each share will
have one vote per share continue to have one vote per
following a stock split, stock share following a stock
dividend or similar 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 stock Move.com Stock will be entitled Move.com Stock will be
are entitled to to receive the net assets of entitled to receive the net
receive the net Cendant, if any, remaining for assets of Cendant, if any,
assets of Cendant, if distribution to stockholders remaining for distribution to
any, remaining for (after payment or provision for stockholders (after payment
distribution to all liabilities of Cendant and or provision for all
stockholders (after payment of the liquidation liabilities of Cendant and
payment or provision preference payable to any payment of the liquidation
for all liabilities holders of preferred stock). preference payable to any
of Cendant and Amounts due upon liquidation in holders of preferred stock).
payment of the respect of shares of CD Stock Amounts due upon liquidation
liquidation and shares of Move.com Stock in respect of shares of CD
preference payable to will be distributed pro rata in Stock and shares of Move.com
any holders of proportion to the average Stock will be distributed pro
preferred stock). market value of CD Stock and rata in proportion to the
the average market value of average market value of CD
Move.com Stock over Stock and the average market
value
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
TRACKING STOCK PROPOSAL
----------------------------------------------------------------
EXISTING COMMON STOCK CD STOCK MOVE.COM STOCK
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
a specified 20-trading day of Move.com Stock over a
period prior to liquidation. specified 20-trading day
period prior to
liquidation.
STOCK EXCHANGE NYSE under the symbol NYSE under the symbol "CD." We currently intend to apply
LISTINGS: "CD." for listing of Move.com Stock
on the NYSE under the
symbol "MOV" concurrently
with the first public
offering of such
securities.
</TABLE>
25
<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.
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
26
<PAGE>
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.
27
<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.
28
<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)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Revenue, net ....................... $ 4,118.7 $ 3,865.1 $ 5,283.8 $ 4,240.0 $ 3,237.7
Depreciation and amortization ...... 277.0 241.3 322.7 237.7 145.5
Income from operations ............. 1,834.0 842.1 428.9 307.9 547.8
Interest expense, net .............. 153.8 72.9 113.9 50.6 14.3
Income from continuing operations
before income taxes and minority
interest(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.
29
<PAGE>
MOVE.COM GROUP
(WHOLLY OWNED BY 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 February 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 Group on July 1, 1999, the financial results
of Move.com Group 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 Move.com Group.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED PERIOD FROM
SEPTEMBER 30, DECEMBER 31, FEBRUARY 8, 1996
--------------------- --------------------- (THE ACQUISITION
DATE) THROUGH
1999 1998 1998 1997 DECEMBER 31, 1996
-------- -------- -------- -------- ------------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
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.
30
<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 was 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.
31
<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 effect as
negative votes on each of the proposals. With respect to shares held in "street
32
<PAGE>
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.
33
<PAGE>
RISK FACTORS
You should carefully consider the risk factors described below, as well as
the other information included or incorporated by reference 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 deter
minations 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 CD Stock) could adversely affect the trading price of one or
both series of stock
34
<PAGE>
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.
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 the Move.com Group.
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
35
<PAGE>
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 holders 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 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
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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
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,
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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 committee 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.
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
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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 Cendants' 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 stockholders
and members of the Board of Directors do not have any personal conflicts of
interest. If, for example, the Board of Directors were to make a decision which
it in good faith believed to be in the best interest of Cendant as a whole, and
such decision were to have a positive impact on Move.com Stock and negative
impact on CD Stock, holders of CD Stock may not be able to challenge the Board
of Directors' decision.
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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.
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
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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 stockholder approval. If we dispose of all or
substantially all of the assets of either Group, we would be required, if the
disposition is not an exempt disposition under the terms of our charter, to
choose one of the following three alternatives:
o declare and pay a dividend in an amount equal to their proportionate
interest in the net proceeds of such disposition,
o redeem shares of the relevant series of stock for an amount equal to
their proportionate interest in the net proceeds of such disposition,
or
o 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.
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,
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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 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.
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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 meet
ings 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."
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,
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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., Cendant's existing common stock, the CD Stock or
the Move.com Stock, as applicable). In addition, in such case, we might
recognize gain or loss equal to the difference between the fair market value of
the CD Stock or the Move.com Stock, as applicable, and our tax basis in such
stock (which will generally be zero.)
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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Some of the information in this Proxy Statement may constitute
forward-looking statements which are subject to various risks and uncertainties.
Such statements can be identified by the use of forward-looking terminology such
as "believes," "may," "will," "expect," "anticipate," "estimate," "continue,"
"plan" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other "forward-looking" information and we can not guarantee that we will
actually achieve such expectations, or projections or plans. When considering
such forward-looking statements, you should keep in mind the factors described
in "Risk Factors" and other cautionary statements appearing elsewhere in this
Proxy Statement. Such risk factors and statements describe circumstances which
could cause actual results to differ materially from those contained in any
forward-looking statement. The forward-looking statements do not reflect the
potential impact of any future acquisitions, merger or dispositions.
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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 relocation, real estate and home-related services
portal which became 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 Corporation.
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 offering, including the amount of Move.com Stock we issue, will
depend upon factors
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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 valued at $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 Move.com Group,
and that Cendant Group's retained interest in the Move.com Group
should also reflect that valuation. We do not believe that the value
of Move.com Group is fully reflected in the current value of Cendant's
common stock. 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, 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 for Move.com Stock will also be granted to Cendant
Group employees making direct contributions to Move.com Group 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 create the need to produce separate audited financial statements
with respect to Move.com Group.
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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' re
sponsibility 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(Registered Trademark), COLDWELL BANKER(Registered
Trademark) and ERA(Registered Trademark) 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.
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
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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 Group 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 by Goldman,
Sachs & Co. 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 PROVI
SIONS 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.
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:
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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 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
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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.
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
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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 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
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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 Substan-
tially All of the Assets of a Group
If we dispose of all or substantially all of the assets of a Group to one
or more persons or entities, in one transaction or a series of related
transactions, and the disposition is not an exempt disposition as defined below,
we would be required, by the 85th trading day after the consummation of such
disposition, to choose one of the following three alternatives:
o declare and pay a dividend to holders of the series of common stock
that relates to that Group (in cash, securities (other than common
stock of Cendant) or other property, or a combination thereof), in an
amount having a fair value equal to their proportionate interest in the
net proceeds of such disposition,
o redeem from holders of the series of common stock that relates to that
Group, for cash, securities (other than common stock of Cendant) or
other property (or a combination thereof) in an amount having a fair
value equal to their proportionate interest in the net proceeds of such
disposition, all of the outstanding shares of the relevant series of
common stock (or, if such Group continues after such disposition to own
any material assets other than the proceeds of such disposition, a
number of shares of such series of common stock having an aggregate
average market value, during the 20 consecutive trading day period
beginning on the 16th trading day immediately following the date on
which the disposition is consummated, equal to such fair value), or
o issue shares of the series of common stock that does not relate to that
Group in exchange for all of the outstanding shares of the series of
common stock that relates to that Group at a 10% premium (based on the
average market value of the relevant series of common stock as compared
to the average market value of the other series of common stock during
the 20 consecutive trading day period beginning on the 16th trading day
immediately following the date on which the disposition is
consummated).
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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: (1) the amount and type of consideration that Cendant
receives in any such disposition, (2) Cendant's tax basis in the assets disposed
of, (3) the tax basis of the holders in their shares of stock and (4) 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 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
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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:
(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
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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 relocation, real estate and
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
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.
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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 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
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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.
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
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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 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
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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.
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
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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, 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
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than 85 trading days after such consummation), (2) the aggregate amount
and type of property to be paid as a redemption price (and the
approximate per share amount thereof), (3) if less than all shares of
the relevant series of common stock are to be redeemed, the number of
shares to be redeemed and (4) the place or places where certificates
for shares of such series of common stock, properly endorsed or
assigned for transfer (unless we waive such requirement), should be
surrendered in return for delivery of the cash, securities or other
property to be paid by Cendant in such redemption.
o If we determine to undertake an exchange, we would be required to
specify in the notice (1) the date of exchange (which can not be more
than 85 trading days after such consummation), (2) the number of shares
of the other series of common stock to be issued in exchange for each
outstanding share of such series of common stock and (3) the place or
places where certificates for shares of such series of common stock,
properly endorsed or assigned for transfer (unless we waive such
requirement), should be surrendered in return for delivery of the other
series of common stock to be issued by Cendant in such exchange.
If we determine to complete any exchange described under "-- Optional
Exchange of One Series of Common Stock for the Other Series" or "-- Optional
Exchange for Stock of a Subsidiary," we would be required, between 10 to 30
trading days before the exchange date, to send a notice by first-class mail,
postage prepaid, to holders of the relevant series of common stock at their
addresses as they appear on our transfer books, specifying (1) the exchange date
and the other terms of the exchange, and (2) the place or places where
certificates for shares of such series of common stock, properly endorsed or
assigned for transfer (unless we waive such requirement), should be surrendered
for delivery of the stock to be issued or delivered by Cendant in such exchange.
Neither the failure to mail any required notice to any particular holder
nor any defect therein would affect the sufficiency thereof with respect to any
other holder or the validity of any dividend, redemption or exchange.
If we are redeeming less than all of the outstanding shares of a series of
common stock as described above, we would redeem such shares pro rata or by lot
or by such other method as the Board of Directors determines to be equitable.
No holder of shares of a series of common stock being exchanged or redeemed
will be entitled to receive any cash, securities or other property to be
distributed in such
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exchange or redemption until such holder surrenders certificates for such
shares, properly endorsed or assigned for transfer, at such place as we specify
(unless we waive such requirement). As soon as practicable after our receipt of
certificates for such shares, we would deliver to the person for whose account
such shares were so surrendered, or to the nominee or nominees of such person,
the cash, securities or other property to which such person is entitled,
together with any fractional payment referred to below, in each case without
interest. If less than all of the shares of common stock represented by any one
certificate were to be exchanged or redeemed, we would also issue and deliver a
new certificate for the shares of such common stock not exchanged or redeemed.
We would not be required to issue or deliver fractional shares of any
capital stock or any other fractional securities to any holder of common stock
upon any exchange, redemption, dividend or other distribution described above.
If more than one share of common stock were held at the same time by the same
holder, we may aggregate the number of shares of any capital stock that would be
issuable or any other securities that would be distributable to such holder upon
any such exchange, redemption, dividend or other distribution. If there are
fractional shares of any capital stock or any other fractional securities
remaining to be issued or distributed to any holder, we would, if such
fractional shares or securities were not issued or distributed to such holder,
pay cash in respect of such fractional shares or securities in an amount equal
to the fair value thereof without interest.
From and after the date set for any exchange or redemption, all rights of a
holder of shares of common stock that were exchanged or redeemed would cease
except for the right, upon surrender of the certificates representing such
shares, to receive the cash, securities or other property for which such shares
were exchanged or redeemed, together with any fractional payment as provided
above, in each case without interest (and, if such holder was a holder of record
as of the close of business on the record date for a dividend not yet paid, the
right to receive such dividend). A holder of shares of common stock being
exchanged would not be entitled to receive any dividend or other distribution
with respect to shares of the other series of common stock until after the
shares being exchanged are surrendered as contemplated above. Upon such
surrender, we would pay to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable with respect
to a record date occurring after the exchange, but which were not paid by reason
of the foregoing, with respect to the number of whole shares of the other series
of common stock represented by the certificate or certificates issued upon such
surrender. From and after the date set for any exchange, we would, however, be
entitled to treat the certificates for shares of common stock being exchanged
that were not yet surrendered for exchange as evidencing the ownership of the
number of whole shares of the other
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series of common stock for which the shares of such common stock should have
been exchanged, notwithstanding the failure to surrender such certificates.
We would pay any and all documentary, stamp or similar issue or transfer
taxes that might be payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on any exchange or redemption described
herein. We would not, however, be required to pay any tax that might be payable
in respect of any transfer involved in the issue or delivery of any shares of
capital stock and/or other securities in a name other than that in which the
shares so exchanged or redeemed were registered, and no such issue or delivery
will be made unless and until the person requesting such issue pays to Cendant
the amount of any such tax or establishes to our satisfaction that such tax has
been paid.
We may, subject to applicable law, establish such other rules, requirements
and procedures to facilitate any dividend, redemption or exchange contemplated
as described above as the Board of Directors may determine to be appropriate
under the circumstances.
Voting Rights
Currently, holders of existing common stock have one vote per share on all
matters submitted to a vote of stockholders. Each share will continue to have
one vote following a stock split, stock dividend or similar reclassification.
Once the Tracking Stock Proposal is implemented, holders of CD Stock and
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.
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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 of 1934, 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 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
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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 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 outstanding (expressed as a percentage) and the retained interest
percentage equals the number of shares issuable with respect to Cendant Group's
retained interest in 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 percentage and the retained interest percentage always
equals 100%.
At the time that we file the amended and restated certificate of
incorporation, the retained interest percentage will be 100% and the outstanding
interest percentage will be 0%.
Number of Shares Issuable With Respect to Cendant Group's Retained Interest
in 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
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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 outstand ing
would be 22,500,000 but would increase to 28,500,000 if all such
options were granted and exercised,
o the outstanding interest percentage would be approximately 21% if all
such options were granted and exercised, and
o the retained interest percentage would be approximately 79% if all such
options were granted and exercised.
The outstanding interest percentage will increase 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
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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.
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
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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 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
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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 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.
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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.
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.
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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 the Move.com Group.
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. If the Board of Directors, in its discretion, were to materially change
its allocation policies, Cendant would disclose such change in the notes to the
financial statements and in Management's Discussion and Analysis of Results of
Operations for Move.com Group and Cendant Corporation. In addition, Cendant
would reflect the impact of such change in policy on such financial statements
prospectively, unless required to do otherwise in accordance with generally
accepted accounting principles.
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
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Cendant, and Cendant generally funds each Group's cash disbursements (other than
disbursements of foreign operations or operations that are not wholly owned) on
a daily basis.
In the historical financial statements of Cendant Corporation and 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. To date, the
operations of Move.com Group have been funded from available cash, and we have
not incurred any indebtedness to finance the operations of Move.com Group.
Accordingly, no interest expense has been or will be reflected in the financial
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 corre-
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sponding 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 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,
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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
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 proportionate 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 may 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. Although we currently do not intend to charge
interest on inter-Group revolving credit advances, if the Board determines
to charge interest, the financial statements of Move.com Group will not be
comparable for periods prior to and after charging interest on such credit
advances. If interest is charged on inter-Group revolving credit advances,
it will be at a rate which Cendant is required to pay to borrow funds at
that time. 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
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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.
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.
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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 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. All contracts entered into on behalf of the Move.com Group
have been entered into by Move.com, Inc., a subsidiary of Cendant Corporation,
which is a part of the Move.com 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
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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.
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
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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, Inc. 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 ther
customer through the mortgage process, taking any customer applications and
providing other standard mortgage 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, Inc. 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 (1) actual costs incurred by Cendant in providing such services and (2)
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, Inc.
on behalf of Move.com Group, entered into an Internet Cooperation Agreement with
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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
Group 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 term of the agreement, as Move.com, Inc., a part of
the Move.com Group and a wholly owned subsidiary of Cendant Corporation, and
Getko, a wholly owned subsidiary of Cendant Corporation, may agree to amend such
contract. The term of the Internet Cooperation Agreement began on September 30,
1999 and ends on December 31, 2039, subject to termination in the event of a
material breach of the agreement and in the event Getko is no longer a Cendant
affiliate.
MATERIAL PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION,
BY-LAWS AND DELAWARE LAW
Preferred Stock
The amended and restated certificate of incorporation, like the current
amended and restated certificate of incorporation, provides that the Board of
Directors may issue shares of preferred stock in one or more series from time to
time and the Board of Directors, without further approval of stockholders, has
the authority to fix by resolution or resolutions the designations and the
powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of each series of preferred stock, including
without limitation the dividend rights and terms, conversion rights, voting
rights, liquidation preference, sinking funds and any other rights, preferences,
privileges and restrictions.
The purpose of authorizing the Board of Directors to determine such rights
and preferences is to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of preferred stock, while providing flexibility
in connection with possible acquisitions and other corporate purposes, could,
among other things, adversely affect the voting power of holders of our common
stock and make it more difficult for a third party to gain control of Cendant.
There are no outstanding shares of preferred stock and no designated series of
preferred stock.
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Number of Directors; Removal; Filling Vacancies
The number of members of the Board of Directors will be fixed from time to
time pursuant to our by-laws but shall not be less than three. By-laws currently
provide that the directors may be removed without cause only by the affirmative
vote of the holders of 80% of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of Directors. Newly
created directorship and vacancies (whether arising through death, resignation,
disqualification, removal or other) may only be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors.
A director elected to fill a vacancy shall serve for the remainder of his
term of office of the class to which he/she is elected.
No Stockholder Action by Written Consent; Special Meetings
Any action required or permitted to be taken by the stockholders of Cendant
must be duly effected at a duly called annual or special meeting of such holders
and may not be taken by any consent in writing by such holders. Special meetings
of stockholders of Cendant may be called only by the Chairman of the Board of
Directors, the President or the Board of Directors pursuant to a resolution
stating the purpose or purposes of the special meeting. No business other than
that stated in the notice shall be transacted at any special meeting. These
provisions have the effect of delaying consideration of a stockholder proposal
until the next annual meeting unless a special meeting is called by the
Chairman, President or the Board of Directors for consideration of such
proposal.
Advance Notice for Stockholder Nominations and Proposals of New Business
Our by-laws establish an advance notice procedure. This procedure requires
stockholders to deliver to Cendant notice of any proposal to be presented or of
a candidate to be nominated for election as a director of Cendant not less than
60 nor more than 90 days prior to the date of the meeting. However, if the date
of the meeting is first publicly announced or disclosed (in a public filing or
otherwise) is less than 70 days prior to the date of the meeting, such advance
notice shall be given not later than 10 days after such date is first so
announced or disclosed. Accordingly, failure by a stockholder to act in
compliance with the notice provisions will mean that the stockholder will not be
able to nominate directors or propose new business.
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Amendments
The affirmative vote of holders of at least 80% of the stock entitled to
vote generally in the election of directors, voting together as a single class,
or a majority of the Board of Directors is required to amend provisions of our
by-laws relating to the advance notice provisions, stockholder action without a
meeting, the calling of special meetings, the number (or manner of determining
the number) of Cendant's directors, the election and term of Cendant's
directors, the filling of vacancies and the removal of directors.
Fair Price Provisions
Under the Delaware General Corporation Law and the amended and restated
certificate of incorporation, an agreement of merger, sale, lease or exchange of
all or substantially all of Cendant's assets must be approved by the Board of
Directors and adopted by the holders of a majority of the outstanding shares of
stock entitled to vote thereon. However, the amended and restated certificate of
incorporation includes what generally is referred to as a "fair price
provision," which requires the affirmative vote of the holders of at least 80%
of the outstanding shares of capital stock entitled to vote generally in the
election of Cendant directors, voting together as a single class, to approve
business combination transactions (including mergers, recapitalization and the
issuance or transfer of securities of Cendant or a subsidiary having an
aggregate fair market value of $10 million or more) involving Cendant or a
subsidiary and an owner or any affiliate of an owner of 5% or more of the
outstanding shares of capital stock entitled to vote, unless either (1) such
business combination is approved by a majority of disinterested directors, or
(2) 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
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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 66b% of the outstanding voting
stock which is not owned by the interested stockholder. A "business combination"
is defined to include mergers, asset sales and other transactions resulting in
financial benefit to a stockholder. In general, an "interested stockholder" is a
person who, together with affiliates and associates, owns (or, within three
years, did own) 15% or more of a corporation's voting stock. The statute could
prohibit or delay mergers or other takeover or change in control attempts with
respect to Cendant and, accordingly, may discourage attempts to acquire Cendant.
Limitations on Liability and Indemnification of Officers and Directors
Section 102 of the Delaware General Corporation Law authorizes a Delaware
corporation to include a provision in its certificate of incorporation limiting
or eliminating the personal liability of its directors to the corporation or its
stockholders for monetary damages for breach of the directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
such provision, directors are accountable to corporations or their stockholders
for monetary damages for conduct constituting gross negligence in the exercise
of their duty of care. Although Section 102 of the Delaware General Corporation
Law does not change a director's duty of care, it enables corporations to limit
available relief to equitable remedies such as injunction or rescission. Our
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.
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Our by-laws provide that Cendant will indemnify to the full extent
permitted by law any person made or threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer or employee of
Cendant or serves or served at the request of Cendant any other enterprise as a
director, officer or employee. Our by-laws provide that expenses, including
attorneys' fees, incurred by any such person in defending any such action, suit
or proceeding will be paid or reimbursed by Cendant promptly upon receipt by it
of an undertaking of such person to repay such expenses if it shall ultimately
be determined that such person is not entitled to be indemnified by Cendant. The
inclusion of these indemnification provisions in our by-laws is intended to
enable Cendant to attract qualified persons to serve as directors and officers
who might otherwise be reluctant to do so.
The directors and officers of Cendant are insured under policies of
insurance maintained by Cendant, subject to the limits of such policies, against
losses arising from any claim made against them by reason of being or having
been such officers or directors.
In addition, the limited liability provisions in our amended and restated
certificate of incorporation and the indemnification provisions in our by-laws
may discourage stockholders from bringing a lawsuit against directors for breach
of their fiduciary duty (including breaches resulting from grossly negligent
conduct) and may have the effect of reducing the likelihood of derivative
litigation against directors and officers, even though such an action, if
successful, might otherwise have benefitted Cendant and our stockholders.
Furthermore, a stockholder's investment in Cendant 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.
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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 the Move.com Group and the formulation of the Tracking
Stock Proposal. Prior to electing to pursue the Tracking Stock Proposal,
Goldman, Sachs & Co. and Cendant reviewed other potential alternatives,
including the issuance of stock of a subsidiary which would own the assets and
liabilities of Move.com Group. In connection with its role as financial advisor,
Goldman, Sachs & Co. 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
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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 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
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o Your holding period for the CD Stock will include the holding period of
your existing common stock.
Tax Implications of a Conversion into Different Series of Tracking Stock
Skadden, Arps, Slate, Meagher & Flom LLP has advised us that, under current
law, if we exercise our option to 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,
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or TIN, which, for an individual, would be his or her social security number,
(2) furnishes an incorrect TIN, (3) is notified by the Internal Revenue Service
that it has failed to properly report payments of interest or dividends or (4)
under certain circumstances, fails to certify under penalties of perjury that it
has furnished a correct TIN and has been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report payments
of interest or dividends. Stockholders should consult their tax advisors
regarding their qualifications for exemption from backup withholding and the
procedures for obtaining such an exemption if applicable. The amount of any
backup withholding from a payment to a stockholder will be allowed as a credit
against such stockholder's federal income tax liability and may entitle such
holder to a refund, provided that the required information is furnished to the
Internal Revenue Service.
-----------------
Approval of Proposal 1 will require the affirmative vote of the holders of
a majority of the outstanding shares of existing common stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE TRACKING STOCK PROPOSAL.
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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 (1) the Option Plan
and the existing grants will be ratified and assumed by Cendant, (2) 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 (3) the remaining shares available to be issued in
connection with the grant of options under the Option Plan will be equitably
adjusted to become shares of 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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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. However, Cendant does not
currently intend to issue any options under the Option Plan to the Chairman of
the Board, President and Chief Executive Officer in accordance with such
person's request.
The following is a brief description of the material features of the Option
Plan, as modified as a result of its adoption by Cendant. Such description is
qualified in its entirety by reference to the full text of the Option Plan,
which is attached as Annex III to this Proxy Statement.
The Option Plan provides for grants of options to eligible employees of
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 interests of the stockholders of the
Move.com Stock. Subject to the terms and condi-
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tions 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 provides that in the event of a Change-of-Control
Transaction (as defined in the Option Plan), certain options granted thereunder
will become immediately exercisable with respect to 25% of the unvested portion
thereof on a pro rata basis according to the scheduled vesting dates.
The Option Plan will terminate by its terms on October 29, 2009, but may be
earlier terminated or amended at any time by the Board of Directors of Cendant
at its sole discretion, except that no such termination or amendment may impair
the rights of any optionee with respect to any then outstanding options.
Federal Income Tax Implications of the Option Plan
The following is a brief description of the federal income tax consequences
generally arising with respect to options under the Option Plan.
THE FOLLOWING DISCUSSION ADDRESSES ONLY THE GENERAL FEDERAL INCOME TAX
CONSEQUENCES OF OPTIONS. IT DOES NOT ADDRESS THE IMPACT OF STATE AND LOCAL
TAXES, THE FEDERAL ALTERNATIVE MINIMUM TAX, AND SECURITIES LAWS RESTRICTIONS,
AND IS NOT INTENDED AS TAX ADVICE TO PARTICIPANTS IN THE OPTION PLAN, WHO SHOULD
CONSULT THEIR OWN TAX ADVISORS.
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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
The following options have been granted under the Option Plan to date:
NEW PLAN BENEFITS
MOVE.COM, INC. 1999 STOCK OPTION PLAN
NUMBER OF OPTIONS GRANTED
Henry R. Silverman 0
Stephen P. Holmes 43,750
Michael P. Monaco 43,750
James E. Buckman 43,750
Samuel L. Katz 75,000
Executive Group 444,750
Non-Executive Director Group 437,500
Non-Executive Officer Employee Group 3,576,515
Grants of options under the Option Plan are subject to the discretion of the
Committee and therefore future grants are indeterminable.
-----------------
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Proposal 2 requires the affirmative vote of the holders of a majority of
the shares of common stock present in person or represented by proxy at the
special meeting and entitled to vote thereat.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOM MENDS 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 stockholders can be called only by the
Chairman, the President or a majority of Cendant's Board.
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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. We are not planning to adjourn the special meeting to allow
for additional time for the solicitation of additional votes to approve the
Board Declassification Proposal because we intend to resubmit such proposal to
stockholders at our Annual Meeting if such proposal does not receive the number
of votes required for passage.
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 PRESENTED 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.
(3) On September 23, 1998, the Compensation Committee approved the Senior
Management Program which
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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 $20 per share, and (c) 50% were exchanged for
similar options with an exercise price per share equal to the New Price.
With respect to approximately 1.0 million options held by Mr. Katz: (a) 10%
were cancelled, (b) 40% were exchanged for similar options with an exercise
price per share at 25% above the New Price and (c) 50% were exchanged for
similar options with an exercise price per share equal to the New Price. In
addition, to further align the Senior Management (including the Named
Executive Officers) interest with that of Cendant's stockholders, the
ability to obtain modified options was subject to such officers' agreement
to participate in an executive equity incentive program, requiring such
officers to acquire and hold Common Stock having an aggregate market value
based upon their base salary.
(4) As a result of the Senior Management Program, the following total number of
options granted in 1996, 1997 and 1998 were canceled: Mr. Silverman:
25,813,380; Mr. Holmes: 2,115,930; Mr. Monaco: 3,197,325; Mr. Katz:
970,465; and Mr. Buckman: 2,165,930.
(5) Payments included in these amounts for the fiscal year ended December 31,
1999 consist of (i) Cendant matching contributions to the Employee Savings
Plan, which is a defined contribution salary reduction 401(k) plan
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") and/or under a non-qualified deferred compensation
plan maintained by Cendant ("Defined Contribution Match"), (ii) insurance
premiums paid by Cendant for life insurance coverage, (iii) executive
medical benefits and (iv) auto allowance. Defined Contribution Match
includes estimated contributions relating to deferrals of fiscal year 1999
profit sharing bonuses, expected to be paid in February 2000. The foregoing
amounts were as follows:
<TABLE>
<CAPTION>
DEFINED LIFE EXECUTIVE AUTO
CONTRIBUTION INSURANCE MEDICAL ALLOWANCE
YEAR MATCH ($) 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 no board
meeting. Non-Employee Directors are reimbursed for expenses incurred in
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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 $1 million to one or
more charitable organizations designated by such Director from the proceeds of
such insurance policy. With the exception of such joint life insurance
contracts, members of the Board of Directors who are officers or employees of
Cendant or any of its subsidiaries do not receive compensation or reimbursement
of expenses for serving in such capacity.
Non-Employee Directors have also received grants of stock options under one
or more of the following plans: 1990 Directors Stock Option Plan, 1992 Directors
Stock Option Plan, 1994 Director Stock Option Plan, the 1997 Stock Incentive
Plan and the HFS Incorporated 1993 Stock Option Plan. Non-Employee Directors did
not receive any grants of stock options in 1999.
TEN YEAR OPTIONS/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of
Market Exercise Original
Number of Price of Price Option Term
Securities Stock at Time Remaining
Underlying at Time of at Date of
Options/ of Repricing Repricing New Repricing
SARs Repriced or or Exercise or
or Amended Amendment Amendment Price Amendment
Name Date ($)(1) ($) ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------
<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 Chief 10/14/98 1,007,940(2) 9.8125 23.88 20.0000 102 months
Executive Officer 10/14/98 7,596,520(2) 9.8125 31.375 20.0000 110 months
Stephen P. Holmes, 10/14/98 240,310(3) 9.8125 25.85 9.8125 91 months
Vice Chairman and Chairman 10/14/98 480,620(3) 9.8125 23.88 9.8125 102 months
and CEO, Travel 10/14/98 337,036(4) 9.8125 31.375 9.8125 110 months
Division 10/14/98 207,964(4) 9.8125 31.375 20.0000 110 months
10/14/98 321,018(5) 9.8125 34.3125 20.0000 111 months
Michael P. Monaco, 10/14/98 1,441,860(3) 9.8125 25.44 9.8125 99 months
Vice Chairman 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
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Length of
Market Exercise Original
Number of Price of Price Option Term
Securities Stock at Time Remaining
Underlying at Time of at Date of
Options/ of Repricing Repricing New Repricing
SARs Repriced or or Exercise or
or Amended Amendment Amendment Price Amendment
Name Date ($)(1) ($) ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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 Vice 10/14/98 240,310(3) 9.8125 23.88 9.8125 102 months
President, 10/14/98 119,768(4) 9.8125 31.375 9.8125 110 months
Strategic 10/14/98 180,232(4) 9.8125 31.375 12.2656 110 months
Development 10/14/98 203,954(4) 9.8125 34.3125 12.2656 111 months
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>
(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.
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<PAGE>
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.
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
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<PAGE>
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 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
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<PAGE>
provided to the Executive during the period of employment. The Monaco Employment
Agreement and the Holmes Employment Agreement provide that each Executive will
be paid an annual base salary of $650,000 and will be eligible for annual
bonuses based on a target bonus of $650,000. The Buckman Employment Agreement
provides that Mr. Buckman will be paid an annual base salary of $500,000, and
will be eligible for an annual bonus based on a target bonus of $500,000;
however, in connection with the January 11, 1999 amendment to the Buckman
Employment Agreement, such salary and target bonus amounts were increased to
$650,000. Each of Messrs. Monaco, Holmes and Buckman will be eligible to
participate in all of Cendant's other compensation and employee benefit plans or
programs and to receive officer perquisites.
Each of the 1997 Employment Agreements provides for certain payments in the
event of termination of the Executive's employment under various circumstances.
The Holmes Employment Agreement and the Monaco Employment Agreement each provide
that if, before January 1, 2000, the Executive's employment is terminated by
Cendant other than for Cause (as defined therein) or by the Executive for
Constructive Discharge (as defined therein), Cendant will pay the Executive a
lump sum cash payment equal to 300% of the sum of (i) his annual base salary and
(ii) the highest annual bonus he has received for any of the three preceding
years (or $520,000, if higher) ("Salary plus Bonus"). Each such agreement also
provides that if, after December 31, 1999, the Executive's employment is
terminated by Cendant other than for Cause or by the Executive for Constructive
Discharge, Cendant will pay the Executive a lump sum cash payment equal to 500%
of Salary plus Bonus. In any of the foregoing situations, the Executive would
also receive any earned but unpaid base salary and incentive compensation, his
benefits and perquisites would continue for 36 months and any stock options and
restricted stock would vest (and such options would remain outstanding for the
remainder of their terms without regard to such termination). Each such
agreement also provides that, in certain circumstances, the Executive's
employment would be deemed terminated for Constructive Discharge in the event
that Mr. Silverman's employment with Cendant terminates or his responsibilities
are reduced. In such event, the Executive would receive substantially similar
payments and benefits as described above; however, his cash payment would range
from 200% to 400% of Salary plus Bonus, depending on the date of such
termination.
The Buckman Employment Agreement provides that if, before January 1, 2000,
Mr. Buckman's employment is terminated by Cendant other than for Cause (as
defined therein) or by Mr. Buckman for Constructive Discharge (as defined
therein), Cendant will pay Mr. Buckman a lump sum cash payment equal to 300% of
the sum of (i) his annual base salary and (ii) the highest annual bonus he has
received for any of the three preceding years (or $500,000, if higher) ("Buckman
Salary plus Bonus"). The Buckman Employment Agreement also provides that if,
after December 31, 1999, Mr. Buckman's employment is terminated by Cendant other
than for Cause or by Mr. Buckman for Constructive
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<PAGE>
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 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
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<PAGE>
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
TOTAL AMOUNT BENEFICIALLY OWNED,
OF SHARES SHARES WHICH MAY BE
BENEFICIALLY PERCENT OF COMMON ACQUIRED WITHIN 60
NAME OWNED (1) STOCK OWNED (2) 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>
111
<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 Cendant 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/A 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
FEBRUARY , 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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STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the special meeting
should be directed to the Senior 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 Senior 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 Senior 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 Senior
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
The sum of the Outstanding Interest Percentage and the Retained Interest
Percentage would always equal 100%. In the examples below, before the first
issuance
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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.
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
==
o As a result, the issued and outstanding shares (15) would represent an
Outstanding Interest Percentage of 15%, calculated as follows:
15
---------
15 + 85
The Retained Interest Percentage would accordingly be 85%.
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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.
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:
15
----------
15 + 100
The Retained Interest Percentage would accordingly be about 87%.
o In this case, in the event of any dividend or other distribution paid
on the outstanding shares of 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
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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.
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
==
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
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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.
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
==
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
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
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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.
Shares previously issued and outstanding ........................ 15
Shares repurchased for account of Cendant Group ................. 5
--
Total issued and outstanding after repurchase ................ 10
==
o The Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group would be increased by the number of any
shares of Move.com Stock repurchased for the account of Cendant Group.
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
--
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Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after repurchase ......... 90
==
o As a result, the total issued and outstanding shares (10) would in the
aggregate represent an Outstanding Interest Percentage of 10%,
calculated as follows:
10
---------
10 + 90
The Retained Interest Percentage would accordingly be increased to 90%.
REPURCHASE FOR ACCOUNT OF 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.
Shares previously issued and outstanding .................. 15
Shares repurchased for account of Move.com Group .......... 5
--
Total issued and outstanding after repurchase ......... 10
==
o The Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group (85) would remain unchanged.
o As a result, the total issued and outstanding shares (10) would in the
aggregate represent an Outstanding Interest Percentage of about 11%,
calculated as follows:
10
---------
10 + 85
The Retained Interest Percentage would accordingly be increased to about 89%.
REPURCHASE FOR ACCOUNT OF MOVE.COM GROUP WITH PARTICIPATION BY CENDANT GROUP
Assume the repurchase is attributed to Move.com Group, with the cost being
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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.
Shares previously issued and outstanding ........................ 15
Shares repurchased for account of Move.com Group ................ 5
--
Total issued and outstanding after repurchase ................ 10
==
o In order to hold constant the Outstanding Interest Percentage and
Retained Interest Percentage, the Board of Directors could determine
that the Market Value of a share of 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 the
amount of cash so transferred ($567) divided by the Market Value per
share of Move.com Stock ($20).
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
==
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:
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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).
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
==
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
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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.
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 sharesof Cendant
Stock for account of Cendant Group ............................ 50
--
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:
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.
Shares previously issued and outstanding ........................ 15
Newly issued shares for account of Move.com Group ............... 3
--
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Total issued and outstanding after dividend ................... 18
==
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.
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group prior to dividend ........ 85
Adjustment in respect of Cendant Group's Retained Interest to
reflect shares distributed on outstanding shares of
Move.com Stock ................................................ 17
--
Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group after dividend ........... 102
===
o As a result, the total issued and outstanding shares (18) would in the
aggregate continue to represent an Outstanding Interest Percentage of
15%, calculated as follows:
18
----------
18 + 102
The Retained Interest Percentage would accordingly continue to be 85%.
CAPITAL TRANSFERS OF CASH OR OTHER ASSETS BETWEEN CENDANT GROUP AND 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
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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.
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.
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
==
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
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which the Market Value of Move.com Stock is $20 per share.
Shares previously issued and outstanding ........................ 15
Newly issued shares ............................................. 0
--
Total issued and outstanding after contribution .............. 15
==
o The Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in 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.
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
==
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%.
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ANNEX II
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENDANT CORPORATION
The undersigned, James E. Buckman, certifies that he is the Vice
Chairman and General Counsel of Cendant Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), and does
hereby further certify as follows:
(1) The name of the Corporation is Cendant Corporation.
(2) The name under which the Corporation was originally incorporated
was Comp-U-Card of America, Inc. and the original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of
the State of Delaware on August 1, 1974.
(3) This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware.
(4) The text of the Amended and Restated Certificate of Incorporation
of the Corporation as amended hereby is restated to read in its entirety, as
follows:
1. The name of the Corporation is Cendant Corporation (hereinafter, the
"Corporation").
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is:
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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-
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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-
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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
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Trading Day period beginning on (and including) the 16th Trading
Day immediately following the date on which the Disposition is
consummated, equal to such Fair Value); or
(z) issue, in exchange for all of the outstanding shares of the
series of Common Stock that relates to that Group, a number of
shares of the series of Common Stock that does not relate to that
Group (rounded, if necessary, to the nearest whole number) having
an aggregate value equal to 110% of the aggregate value of all of
the outstanding shares of the series of Common Stock that relates
to that Group (with value in each case based on the average Market
Value of a share of the relevant series of Common Stock during the
20 consecutive Trading Day period beginning on (and including) the
16th Trading Day immediately following the date on which the
Disposition is consummated).
(ii) At any time within one year after completing any dividend or
partial redemption pursuant to (x) or (y) of the preceding sentence,
the Corporation may issue, in exchange for all of the remaining
outstanding shares of the series of Common Stock that relates to the
Group that consummated the applicable Disposition, a number of shares
of the series of Common Stock that does not relate to that Group
(rounded, if necessary, to the nearest whole number) having an
aggregate value equal to 110% of the aggregate value of all of the
outstanding shares of the series of Common Stock that relates to that
Group (with value in each case based on the average Market Value of a
share of the relevant series of Common Stock during the 20 consecutive
Trading Day period ending on (and including) the 5th Trading Day
immediately preceding the date on which the Corporation mails the
notice of exchange to holders of the relevant series).
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<PAGE>
(iii) For purposes of this Section 3, if a Group consummates a
Disposition in a series of related transactions, such Disposition shall
not be deemed to have been completed until consummation of the last of
such transactions.
(b) Optional Exchange of One Series of Common Stock for the Other Series.
(i) Prior to the third anniversary of the earlier of (a) the initial
issuance of 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 "Applicable Percentage") specified for the
applicable date of exchange below. (In each case value is based on the
average Market Value of a share of the relevant series of Common Stock
during the 20 consecutive Trading Day period ending on (and including)
the 5th Trading Day immediately preceding the date on which the
Corporation mails the notice of exchange to holders of Move.com Stock).
II-6
<PAGE>
The Applicable
Percentage Will
be the Percentage
If the Exchange Date Falls During Specified for
the Period Indicated Below Such Period Below
-------------------------- -----------------
Eighteenth Month.................................... 120%
Nineteenth Month.................................... 119.722222%
Twentieth Month..................................... 119.444444%
Twenty-first Month.................................. 119.166667%
Twenty-second Month................................. 118.888889%
Twenty-third Month.................................. 118.611111%
Twenty-fourth Month................................. 118.333333%
Twenty-fifth Month.................................. 118.055556%
Twenty-sixth Month.................................. 117.777778%
Twenty-seventh Month................................ 117.5%
Twenty-eighth Month................................. 117.222222%
Twenty-ninth Month.................................. 116.944444%
Thirtieth Month..................................... 116.666667%
Thirty-first Month.................................. 116.388889%
Twenty-second Month................................. 116.111111%
Thirty-third Month.................................. 115.833333%
Thirty-fourth Month................................. 115.555556%
Thirty-fifth Month.................................. 115.277778%
Thirty-sixth Month and after........................ 115%
For purposes of the foregoing chart, (x) the eighteenth "Month" is
the period from and including the date which is the earlier of (1) the
first issuance of shares of Move.com Stock in a public offering or (2)
the first anniversary 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 anniversary of the first day of the month immediately following
the month in which such date falls) and (y) each subsequent "Month" is
the period from and including the day after the end of the prior Month
to but excluding the one month anniversary of such day.
(iii) From and after the third anniversary of the earlier of (a) the
initial issuance of
II-7
<PAGE>
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 outstanding Move.com Stock exceeds the 60% of Total
Market Capitalization Threshold, to issue a number of shares of
Move.com Stock, in exchange for all of the outstanding CD Stock, having
an aggregate value equal to 115% of the aggregate value of all of the
outstanding shares of CD Stock. (In each case value is based on the
average Market Value of a share of relevant series of Common Stock
during the 20 consecutive Trading Day period ending on (and including)
the 5th Trading Day immediately preceding the date on which the
Corporation mails the notice of exchange to holders of CD Stock). In
the event that Move.com Stock
II-8
<PAGE>
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 Capitalization 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 contemplated 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 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
II-9
<PAGE>
choice experienced in such matters, who shall not be an officer or
employee of the Corporation or any of its affiliates, to the effect
that, as a result of any amendment to, or change in, the laws (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein (including any
proposed change in such regulations announced by an administrative
agency), or as a result of any official or administrative pronouncement
or action or judicial decision interpreting or applying such laws or
regulations, it is more likely than not that for United States federal
income tax purposes (1) the Corporation, its subsidiaries or affiliates
or any of its successors or its stockholders is, or at any time in the
future will be, subject to tax upon the issuance of shares of either CD
Stock or 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 outstanding shares of such series of Common
Stock.
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<PAGE>
(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
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
II-11
<PAGE>
release which of the actions specified in Section 3(a)(i) of this
Article 4(A) it has determined to take, and upon making that
announcement, that determination will be irrevocable. In addition, the
Corporation shall, not later than 30 Trading Days after such
consummation and not earlier than 10 Trading Days before the applicable
payment date, redemption date or exchange date, send a notice by
first-class mail, postage prepaid, to holders of the relevant series of
Common Stock at their addresses as they appear on the transfer books of
the Corporation, specifying:
(1) if the Corporation has determined to pay a special dividend, (A)
the record date for such dividend, (B) the payment date of such
dividend (which cannot be more than 85 Trading Days after such
consummation) and (C) the aggregate amount and type of property to be
paid in such dividend (and the approximate per share amount thereof);
(2) if the Corporation has determined to undertake a redemption, (A)
the date of redemption (which cannot be more than 85 Trading Days after
such consummation), (B) the aggregate amount and type of property to be
paid as a redemption price (and the approximate per share amount
thereof), (C) if less than all shares of the relevant series of Common
Stock are to be redeemed, the number of shares to be redeemed and (D)
the place or places where certificates for shares of such series of
Common Stock, properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), should be surrendered in return
for delivery of the cash, securities or other property to be paid by
the Corporation in such redemption; and
(3) if the Corporation has determined to undertake an exchange, (A) the
date of exchange (which cannot be more than 85 Trading Days after such
consummation), (B) the number of shares of the other series of Common
Stock to be issued in exchange for each outstanding
II-12
<PAGE>
share of such series of Common Stock and (C) the place or places where
certificates for shares of such series of Common Stock, properly
endorsed or assigned for transfer (unless the Corporation waives such
requirement), should be surrendered in return for delivery of the other
series of Common Stock to be issued by the Corporation in such
exchange.
(ii) If the Corporation has determined to complete any exchange
described in Section 3(b) or (c) of this Article 4(A), the Corporation
shall, not less than 10 Trading Days and not more than 30 Trading Days
before the exchange date, send a notice by first-class mail, postage
prepaid, to holders of the relevant series of Common Stock at their
addresses as they appear on the transfer books of the Corporation,
specifying (x) the exchange date and the other terms of the exchange
and (y) the place or places where certificates for shares of such
series of Common Stock, properly endorsed or assigned for transfer
(unless the Corporation waives such requirement), should be surrendered
for delivery of the stock to be issued or delivered by the Corporation
in such exchange.
(iii) Neither the failure to mail any notice required by this Section
3(d) to any particular holder nor any defect therein would affect the
sufficiency thereof with respect to any other holder or the validity of
any dividend, redemption or exchange contemplated hereby.
(iv) If the Corporation is redeeming less than all of the outstanding
shares of a series of Common Stock pursuant to Section 3(a)(i) of this
Article 4(A), the Corporation shall redeem such shares pro rata or by
lot or by such other method as the Board of Directors determines to be
equitable.
(v) No holder of shares of a series of Common Stock being exchanged or
redeemed shall be entitled to receive any cash, securities or
II-13
<PAGE>
other property to be distributed in such exchange or redemption until
such holder surrenders certificates for such shares, properly endorsed
or assigned for transfer, at such place as the Corporation shall
specify (unless the Corporation waives such requirement). As soon as
practicable after the Corporation's receipt of certificates for such
shares, the Corporation shall deliver to the person for whose account
such shares were so surrendered, or to the nominee or nominees of such
person, the cash, securities or other property to which such person
shall be entitled, together with any fractional payment referred to
below, in each case without interest. If less than all of the shares of
Common Stock represented by any one certificate is exchanged or
redeemed, the Corporation shall also issue and deliver a new
certificate for the shares of such Common Stock not exchanged or
redeemed.
(vi) The Corporation shall not be required to issue or deliver
fractional shares of any capital stock or any other fractional
securities to any holder of Common Stock upon any exchange, redemption,
dividend or other distribution described above. If more than one share
of Common Stock shall be held at the same time by the same holder, the
Corporation may aggregate the number of shares of any capital stock
that would be issuable or any other securities that would be
distributable to such holder upon any such exchange, redemption,
dividend or other distribution. If there are fractional shares of any
capital stock or any other fractional securities remaining to be issued
or distributed to any holder, the Corporation shall, if such fractional
shares or securities are not issued or distributed to such holder, pay
cash in respect of such fractional shares or securities in an amount
equal to the Fair Value thereof (without interest).
(vii) From and after the date set for any exchange or redemption
contemplated by this Section 3, all rights of a holder of shares of
Common Stock being exchanged or redeemed shall
II-14
<PAGE>
cease except for the right, upon surrender of the certificates
theretofore representing such shares, to receive the cash, securities
or other property for which such shares were exchanged or redeemed,
together with any fractional payment as provided above, in each case
without interest (and, if such holder was a holder of record as of the
close of Business on the record date for a dividend not yet paid, the
right to receive such dividend). A holder of shares of Common Stock
being exchanged shall not be entitled to receive any dividend or other
distribution with respect to shares of the other series of Common Stock
until after certificates theretofore representing the shares being
exchanged are surrendered as contemplated above. Upon such surrender,
the Corporation shall pay to the holder the amount of any dividends or
other distributions (without interest) which theretofore became payable
with respect to a record date occurring after the exchange, but which
were not paid by reason of the foregoing, with respect to the number of
whole shares of the other series of Common Stock represented by the
certificate or certificates issued upon such surrender. From and after
the date set for any exchange, the Corporation shall, however, be
entitled to treat the certificates for shares of a series of Common
Stock being exchanged that were not yet surrendered for exchange as
evidencing the ownership of the number of whole shares of the other
series of Common Stock for which the shares of such Common Stock should
have been exchanged, notwithstanding the failure to surrender such
certificates.
(viii) The Corporation shall pay any and all documentary, stamp or
similar issue or transfer taxes that might be payable in respect of the
issue or delivery of any shares of capital stock and/or other
securities on any exchange or redemption contemplated by this
Section 3; provided, however, that the Corporation shall not be
required to pay any tax that might be payable in respect of any
transfer involved in the issue or delivery of any shares of capital
II-15
<PAGE>
stock and/or other securities in a name other than that in which the
shares so exchanged or redeemed were registered, and no such issue or
delivery will be made unless and until the person requesting such issue
pays to the Corporation the amount of any such tax, or establishes to
the satisfaction of the Corporation that such tax has been paid.
(ix) The Corporation may, subject to applicable law, establish such
other rules, requirements and procedures to facilitate any dividend,
redemption or exchange contemplated by this Section 3 as the Board of
Directors may determine to be appropriate under the circumstances.
4. Voting Rights.
At every meeting of stockholders, the holders of CD Stock and the holders of
Move.com Stock shall vote together as a single class on all matters as to which
common stockholders generally are entitled to vote, unless a separate vote is
required by applicable law. On all such matters for which no separate vote is
required, (a) holders of CD Stock shall be entitled to one vote per share of CD
Stock held and (b) holders of 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, remaining for distribution to stockholders (after payment
of or provision for all liabilities, including contingent liabilities, of the
Corporation and payment of the liquidation preference payable to any holders of
Preferred Stock), in proportion to the respective number of liquidation units
per share of CD Stock and Move.com Stock.
II-16
<PAGE>
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
appropriately adjusted as determined by the Board of Directors, so as to avoid
dilution in the aggregate, relative liquidation rights of the shares of any
series of Common Stock.
Neither the merger nor consolidation of the Corporation into or with any
other entity, nor a sale, transfer or lease of all or any part of the assets of
the Corporation, shall, alone, be deemed a liquidation or winding up of the
Corporation or cause the dissolution of the Corporation, for purposes of this
Section 5.
6. Adjustments to Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in Move.com Group.
The Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group, as in effect from time to time, shall, automatically
without action by the Board of Directors or any other person, be:
(a) adjusted in proportion to any changes in the number of outstanding
shares of Move.com Stock caused by subdivisions (by stock split,
reclassification or otherwise) or combinations
II-17
<PAGE>
(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 theretofore 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
Number 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 repurchases 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 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
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<PAGE>
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 liabilities
attributed to Cendant Group.
7. Additional Definitions.
As used in this Article 4, the following terms shall have the following
meanings (with terms defined in singular having comparable meaning when used in
the plural and vice versa), unless the context otherwise requires:
"All or Substantially All of the Assets" of either Group means a portion of
such assets that represents at least 80% of the then-current Fair Value of the
assets of such Group, which for Cendant Group includes the value of its Retained
Interest in 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 shares of preferred stock, par value $0.01 per share, equal to the
number of shares of Preferred Stock that have been attributed to Cendant Group
and are then outstanding, (c) the assumptions about 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.
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"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 separate Delaware corporation having outstanding
(a) a number of shares of common stock, par value $0.01 per share, equal to the
number of shares of 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 subsidiaries, 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
(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
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to Cendant Group cash or other assets having a Fair Value equal to the
aggregate Fair Value of the cash, other assets or securities so
transferred multiplied by a fraction, the numerator of which shall
equal the Number of Shares Issuable with Respect to Cendant Group's
Retained Interest in 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 controlled by the Corporation
(as determined by the Board of Directors in its sole discretion),
(c) a Disposition by either Group for which the Corporation receives
consideration primarily consisting of equity securities (including,
without limitation, capital stock of any kind, interests in a general
or limited partnership, interests in a limited liability company or
debt securities convertible into or exchangeable for, or options or
warrants to acquire, any of the foregoing, in each case without regard
to the voting power or other management or governance rights associated
therewith) of an entity which is primarily engaged or proposes to
engage primarily in one or more businesses similar or complementary to
businesses con-
II-21
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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 (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
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no such reported sale takes place on such Trading Day, the average of the
reported closing bid and asked prices regular way of a share of such class or
series on such Trading Day, in either case as reported on the New York Stock
Exchange ("NYSE") Composite Tape or, if the shares of such class or series are
not listed or admitted to trading on the NYSE on such Trading Day, on the
principal national securities exchange on which the shares of such class or
series are listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange on such Trading Day, on The Nasdaq
National Market of the Nasdaq Stock Market ("Nasdaq NMS") or, if the shares of
such class or series are not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq NMS on such Trading Day, the average
of the closing bid and asked prices of a share of such class or series in the
over-the-counter market on such Trading Day as furnished by any NYSE member firm
selected from time to time by the Corporation, or, if such closing bid and asked
prices are not made available by any such NYSE member firm on such Trading Day,
or if such class or series of stock is not listed on the NYSE, a national
securities exchange, or the Nasdaq NMS or quoted in the over-the-counter market,
the fair market value of a share of such class or series as the Board of
Directors shall determine in good faith (which determination shall be conclusive
and binding on all stockholders); provided, that, for purposes of determining
the average Market Value of a share of any class or series of capital stock for
any period, (a) the "Market Value" of a share of any class or series of capital
stock on any day prior to any "ex-dividend" date or any similar date occurring
during such period for any dividend or distribution (other than any dividend or
distribution contemplated by clause (b)(ii) of this sentence) paid or to be paid
with respect to such capital stock shall be reduced by the Fair Value of the per
share amount of such dividend or distribution and (b) the "Market Value" of a
share of any class or series of capital stock on any day prior to (i) the
effective date of any subdivision (by stock split or otherwise) or combination
(by reverse stock split or otherwise) of outstanding shares of such class or
series of capital stock occurring during such period or (ii) any "ex-dividend"
date or any similar date occurring during such period for any dividend or
distribution with respect to such capital stock to be made in shares of such
class or series of capital stock, shall be
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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 reallocate 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.
"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 liabilities acquired or incurred by the
Corporation or any of its subsidiaries after the Effective Date that the Board
of Directors has specifically allocated to 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:
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(i) the Corporation may re-allocate assets from one Group to the other
Group in return for other assets or services rendered by that other
Group in the ordinary course of business or in accordance with policies
established by the Board of Directors from time to time, and
(ii) if the Corporation transfers cash, other assets or securities to
holders of shares of 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 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.
"Net Proceeds" of a Disposition of any of the assets of a Group means the
positive amount, if any, remaining from the gross proceeds of such Disposition
after any payment of, or reasonable provision (as determined in good faith by
the Board of Directors, which determination shall be conclusive and binding on
all stockholders) for, (a) any taxes payable by the Corporation in respect of
such Disposition, (b) any taxes payable by the Corporation in respect of any
resulting dividend or redemption, (c) any transaction costs, including, without
limitation, any legal, investment banking and accounting fees and expenses and
(d) any liabilities (contingent or otherwise) of, attributed to or related to,
such Group, including, without limitation, any liabilities for deferred taxes,
any indemnity or guarantee obligations which are outstanding or incurred in
connection with the Disposition or otherwise, any liabilities for future
purchase price adjustments and any obligations with respect to outstanding
securities (other than Move.com Stock) attributed to such Group.
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"Number of Shares Issuable with Respect to Cendant Group's Retained
Interest in Move.com Group" shall initially 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 liabilities) 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
outstanding shares of common stock of any subsidiaries holding Cendant Group's
assets and liabilities) means the amount of such Net Proceeds (or the number of
such shares) multiplied by 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.
"Publicly Traded" with respect to any security means (a) registered under
Section 12 of the Securities Exchange Act of 1934, as amended (or any successor
provision of law), and (b) listed for trading on the NYSE (or any other national
securities exchange registered under Section 7 of the Securities Exchange Act of
1934, as amended (or any successor provision of law)) or listed on the Nasdaq
NMS (or any successor market system).
"Retained Interest" means Cendant Group's interest in 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
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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 relevant security (or, if
there are two relevant securities, each relevant security) is traded on the
principal national securities exchange on which it is listed or admitted to
trading or on the Nasdaq NMS or, if such security is not listed or admitted to
trading on a national securities exchange or quoted on the Nasdaq NMS, traded in
the principal over-the-counter market in which it trades.
8. Effectiveness of Sections 2 Through 7 of this Article 4(A).
The terms of Sections 2 through 7, inclusive, of this Article 4(A) shall
apply only when there are shares of both series of Common Stock outstanding.
9. Determinations by the Board of Directors.
Subject to applicable law, any determinations made by the Board of
Directors in good faith under the Certificate of Incorporation, as it may be
amended from time to time, including without limitation any such determinations
with respect to the businesses, assets and liabilities of either Group,
transactions between the Groups or the rights of holders of any series of Common
Stock or Preferred Stock made pursuant to or in the furtherance hereof, shall be
final and binding on all stockholders of the Corporation. A record of all formal
determinations of the Board of Directors made as contemplated hereby shall be
filed with the records of the actions of the Board of Directors.
B. Preferred Stock
The Board of Directors is expressly authorized to adopt, from time to time,
a resolution or resolutions providing for the issuance of Preferred Stock in one
or
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more series, to fix the number of shares in each such series (subject to the
aggregate limitations thereon in this Article) and to fix the designations and
the powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations and restrictions, of each such
series. The authority of the Board of Directors with respect to each such series
shall include determination of the following (which may vary as between the
different series of Preferred Stock):
(a) The number of shares constituting the shares and the distinctive
designation of the series;
(b) The dividend rate on the shares of the series and the extent, if
any, to which dividends thereon shall be cumulative;
(c) Whether shares of the series shall be redeemable and, if
redeemable, the redemption price payable on redemption thereof, which
price may, but need not, vary according to the time or circumstances of
such redemption;
(d) The amount or amounts payable upon the shares of the series in the
event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation prior to any payment or distribution of the
assets of the Corporation to any class or classes of stock of the
Corporation ranking junior to the Preferred Stock;
(e) Whether the shares of the series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or
redemption of shares of the series and, if so entitled, the amount of
such fund and the manner of its application, including the price or
prices at which the shares may be redeemed or purchased through the
application of such fund;
(f) Whether the shares of the series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, and, if so convertible or exchangeable, the conversion
price or prices, or the rates of exchange, and the adjustments thereof,
if any, at
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which such conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(g) The extent, if any, to which the holders of shares of the series
shall be entitled to vote on any question or in any proceedings or to
be represented at or to receive notice of any meeting of stockholders
of the Corporation;
(h) Whether, and the extent to which, any of the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of any such series may be made dependent upon facts
ascertainable outside of the Amended and Restated Certificate of
Incorporation or of any amendment thereto, or outside the resolution or
resolutions providing for the issuance of such series adopted by the
Board of Directors, provided that the manner in which such facts shall
operate upon the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such series is clearly
and expressly set forth in the resolution or resolutions providing for
the issuance of such series adopted by the Board of Directors; and
(i) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors
may deem advisable, which shall not affect adversely any other class or
series of Preferred Stock at the time outstanding and which shall not
be inconsistent with the provisions of this Amended and Restated
Certificate of Incorporation.
Shares of Common Stock and of Preferred Stock may be issued from time to
time as the Board of Directors shall determine and on such terms and for such
consideration, not less than par value, as shall be fixed by the Board of
Directors. No consent by any series of Preferred Stock shall be required for the
issuance of any other series of Preferred Stock unless the Board of Directors in
the resolution providing for the issuance of any series of Preferred Stock
expressly provides that such consent shall be required.
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Subject to the rights, if any, of holders of shares of Preferred Stock from
time to time outstanding, dividends may be paid upon the Common Stock as and
when declared by the Board of Directors out of any funds legally available
therefor.
Except as otherwise provided by law or as otherwise expressly provided in
the resolution or resolutions providing for the issuance of shares of any series
of the Preferred Stock, the holders of shares of the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes. Each holder of shares of Common Stock of the Corporation entitled at
any time to vote shall have one vote for each share thereof held. Except as
otherwise provided with respect to shares of Preferred Stock authorized from
time to time by the Board of Directors, the exclusive voting power for all
purposes shall be vested in the holders of shares of Common Stock.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
(a) To make, alter, or repeal the By-Laws of the Corporation.
(b) To authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation.
(c) To set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
(d) Subject to the provisions of the By-Laws, to designate one or more
committees, each committee to consist of one or more of the directors
of the Corporation. Subject to the provisions of the By-Laws, the Board
of Directors may designate one or more directors as alternate members
of any committee, who shall replace any absent or disqualified member
at any meeting of the committee in the manner
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specified in such designation. Any such committee, to the extent
provided in the resolution of the Board of Directors adopted in
accordance with the By-Laws of the Corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority
in reference to amending the Amended and Restated Certificate of
Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the
Corporation; and, unless the resolution or By-Laws expressly so
provide, no such committee shall have the power or authority to declare
a dividend or to authorize the issuance of stock.
(e) When and as authorized by the stockholders in accordance with
statute, to sell, lease, or exchange all or substantially all of the
property and assets of the Corporation, including its goodwill and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or
property, including shares of stock in, and/or other securities of, any
other corporation or corporations, as its Board of Directors shall deem
expedient and for the best interests of the Corporation.
7. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the
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case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement to any
reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
8. Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statues) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation. Elections of directors
need not be by written ballot unless the By-Laws of the Corporation shall so
provide.
9. For the management of the business and for the conduct of the affairs of
the Corporation, and in further creation, definition, limitation and regulation
of the power of the Corporation and of its directors and of its stockholders, it
is further provided:
(a) Election of Directors. Elections of Directors need not be by
written ballot unless the By-Laws of the Corporation shall so provide.
(b) Number, Election and Terms of Directors. The number of Directors of
the Corporation shall be fixed from time to time by or pursuant to the
By-Laws. 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
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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.
(e) Removal of Directors. Any Director may be removed from office with
or without cause only by the affirmative vote of the holders of a
majority of the combined voting power of the then outstanding shares of
stock entitled to vote generally in the election of Directors voting
together as a single class.
(f) Stockholder Action. Any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected by
any consent in writing by such holders. Except as otherwise required by
law, special meetings of stockholders of the Corporation may be
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called only by the Chairman of the Board, the President or the Board of
Directors pursuant to a resolution approved by a majority of the entire
Board or Directors.
(g) By-Law Amendments. The Board of Directors shall have power to make,
alter, amend and repeal the By-Laws (except so far as the By-Laws
adopted by the stockholders shall otherwise provide). Any 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 Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80% of the voting power of
all shares of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class, shall be
required to alter, amend, or adopt any provision inconsistent with, or
repeal, Article 9 a., c., d., f., g., or h.
10. (a) Vote Required for Certain Business Combinations.
A. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or this Amended and Restated Certificate of
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Incorporation, and except as otherwise expressly provided herein:
(1) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (a) any Interested Stockholder (as
hereinafter defined) or (b) any other corporation (whether or not
itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an
Interested Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having
an aggregate Fair Market Value of $10 million or more; or
(3) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or series of transactions) of any securities of the
Corporation or any subsidiary to any Interested Stockholder or to any
Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $10 million or more; or
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any
Interested Stockholder or any Affiliate of any Interested Stockholder;
or
(5) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an Interested Stockholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
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shares of any class of Equity Security (as hereinafter defined) of the
Corporation or any Subsidiary which is directly or indirectly owned by
any Interested Stockholder or any Affiliate of any Interested
Stockholder;
shall require the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(the "Voting Stock"), voting together as a single class (it being
understood that for the purposes of Article 10, each share of the
Voting Stock shall have one vote). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
B. Definition of "Business Combination". The term "Business Combination"
used in this Article 10 shall mean any transaction which is referred to in any
one or more of clauses (1) through (5) of Paragraph A hereof.
(b) When Higher Vote is Not Required. The provisions of Article 10(a) shall
not be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by law and
any other provision of this Amended and Restated Certificate of Incorporation,
if all of the conditions specified in either of the following Paragraphs A and B
are met:
A. Approval by Disinterested Directors. The Business Combination shall have been
approved by majority of the Disinterested Directors (as hereinafter defined).
B. Price and Procedure Requirements. All of the following conditions shall have
been met:
(i) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of
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the Business Combination of consideration other than cash to be received
per share by holders of Common Stock in such Business Combination shall be
at least equal to the higher of the following:
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder for any shares of Common Stock acquired by it
(1) within the two-year period immediately prior to the first public
announcement of the terms of the proposed Business Combination (the
"Announcement Date") or (2) in the transaction in which it became an
Interested Stockholder, whichever is higher; and
(b) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder became
an Interested Stockholder (such latter date is referred to in this
Paragraph 10 as the "Determination Date"), whichever is higher.
(ii) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of shares
of any other class of outstanding Voting Stock shall be at least equal to
the higher of the following:
(a) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder for any shares of Common Stock acquired by it
(1) within the two-year period immediately prior to the Announcement Date
or (2) in the transaction in which it became an Interested Stockholder,
whichever is higher; and
(b) the Fair Market Value per share of such class of Voting Stock on
the Announcement Date or on the Determination Date, whichever is higher.
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(iii) The consideration to be received by holders of Voting
Stock shall be in cash or in the same form as the Interested Stockholder
has previously paid for shares of such class of Voting Stock. If the
Interested Stockholder has paid for any Voting Stock with varying forms of
consideration, the form of consideration for such Voting Stock shall be
either cash or the form used to acquire the largest number of shares of
such Voting Stock previously acquired by it. The price determined in
accordance with paragraphs B(i) and B(ii) of this Article 10(b) shall be
subject to appropriate adjustment in the event of any stock dividend, stock
split, combination of shares or similar event.
(iv) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such Business
Combinations: (a) there shall have been (1) no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to reflect any
subdivision of the Common Stock), except as approved by a majority of the
Disinterested Directors, and (2) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to increase such annual
rate is approved by a majority of the Disinterested Directors; and (b) such
Interested Stockholder shall have not become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested Stockholder.
(c) Certain Definitions. For the purpose of this Article 10:
A. A "person" shall mean any individual, firm, corporation or other entity.
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B. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of 5% or more
of the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 5% or more of the voting power
of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable immediately or
only after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other person
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with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
D. For the purpose of determining whether a person is an Interested
Stockholder pursuant to paragraph B of this Article 10(c), the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph C of the Article 10(c) but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1, 1985.
F. "Subsidiary" means any corporation of which a majority of any class of
Equity Security is owned, directly or indirectly, by the Corporation, provided,
however, that for the purposes of the definition of Interested Stockholder set
forth in paragraph B of this Article 10(c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of Equity Security is
owned, directly or indirectly, by the Corporation.
G. "Disinterested Director" means any member of the Board of Directors who
is unaffiliated with the Interested Stockholder and was a member of the Board of
Directors prior to the time that the Interested Stockholder became an Interested
Stockholder, and any successor of a Disinterested Director who is unaffiliated
with the Interested Stockholder and is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
H. "Fair Market Value" means: (i) in the case of stock, the highest closing
bid quotation with respect to a share of such stock during the 30-
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day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotation System or any system then in use,
or, if such stock is then listed on an exchange, the highest closing sale price
during the 30- day period immediately preceding the date in question of a share
of such stock on the Composition Tape for New York Stock Exchange -- Listed
Stocks, or, if such stock is not quoted on the Composite Tape, on the New York
Stock Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is not
listed on any such exchange or quoted as aforesaid, the fair market value on the
date in question of a share of such stock as determined by the Board of
Directors in good faith; and (ii) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined by the Board of Directors, in good faith.
I. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
paragraphs B(i) and (ii) of Article 10(b) shall include the shares of Common
Stock retained by the holders of such shares.
J. "Equity Security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on January
1, 1985.
(d) Powers of the Board of Directors. A majority of the Directors
shall have the power and duty to determine for the purposes of this Article
10 on the basis of information known to them after reasonable inquiry, (A)
whether a person is an Interested Stockholder, (B) the number of shares of
Common Stock beneficially owned by any person, (C) whether a person is an
Affiliate or Associate of another (D) whether the assets which are the
subject of any Business Combination have, or the consideration to be
received for an issuance of transfer of securities by the Corporation or
any Subsidiary in any Business Combination has, or an issuance or
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transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $10 million or more. A
majority of the Directors shall have the further power to interpret all of
the terms and provisions of this Article 10.
(e) No Effect on Fiduciary Obligations of Interested Shareholders.
Nothing contained in this Article 10 shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
(f) Amendment, Repeal, etc. Notwithstanding any other provisions of
this Amended and Restated Certificate of Incorporation or the By-Laws (and
notwithstanding the fact that a lesser percentage may be specified by law,
this Amended and Restated Certificate of Incorporation or the By-Laws) the
affirmative vote of the holders of 80% or more of the outstanding Voting
Stock, voting together as a single class, shall be required to amend or
repeal, or adopt any provisions inconsistent with this Article 10.
11. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article 11
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
section 174 of the General Corporation Law of the State of Delaware, or (iv) for
any transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article 11 shall apply to or have any effect on
the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be executed this __ day of _____, _____.
CENDANT CORPORATION
By:
----------------------------
Name: James E. Buckman
Title: Vice Chairman and
General Counsel
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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 FEBRUARY _ , 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,
includ ing 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) "Cendant" means Cendant Corporation, a Delaware corporation.
(e) "Change-of-Control Transaction" means any transaction or series of
transactions consummated in any twelve (12) month period pursuant to or as a
result of which (i) any person or entity other than Cendant is or becomes,
directly or indirectly, the beneficial owner of 50% or more of the Common Stock
(or other securities of the Corporation having generally the right to vote for
election of the Board), (ii) the Corporation or any Subsidiary shall sell,
assign or otherwise transfer, directly or indirectly, assets (including stock or
other securities of Subsidiaries) having a fair market or book value or earning
power of 50% or more of the assets or earning power of the Corporation and its
Subsidiaries (taken as a whole) to any third party, other than Cendant, the
Corporation or a wholly-owned Subsidiary thereof, (iii) control of 50% or more
of the business of the Corporation shall be sold, assigned or otherwise
transferred directly or indirectly to any third party other than Cendant, (iv)
there is consummated a merger or consolidation of the Corporation with any other
corporation other than Cendant, other than (A) a merger or consolidation which
would result in the voting securities of the Corporation outstanding immediately
prior to such event continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or any parent
thereof) at least 50% of the combined voting power of the securities of the
Corporation or such surviving entity or any parent thereof outstanding
immediately after such event or (B) a merger or consolidation effected to
implement a recapitalization of the Corpo ration (or similar transaction) in
which no person or entity becomes the beneficial owner or more than 50% or more
of the combined voting power of the Corporation's then outstanding securities or
(vi) the shareholders of the Corporation approve a plan of liquidation or
dissolution. Notwithstanding anything to the contrary contained herein, an
exchange of the Corporation's equity securities for an equity security issued by
the parent corporation of the Corporation commonly referred to as a "tracking
stock" shall not be a Change of Control Transaction as contemplated hereby, nor
shall any changes of ownership of such "tracking stock."
After an exchange of Common Stock for "tracking stock" the term "Change-
of-Control Transaction" shall be deemed to mean: any transaction or series of
transactions consummated within any twelve (12) month period pursuant to or as a
result of which (i) Cendant or any Subsidiary of Cendant shall sell, assign or
other wise transfer, directly or indirectly, assets (including stock or other
securities of
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Subsidiaries) having a fair market or book value or earning power of 50% or more
of the assets or earning power of the Move.com Group (the "Group") as such group
is defined in the Cendant Certificate of Incorporation from time to time (taken
as a whole) to any third party, other than Cendant, the Corporation or a
wholly-owned Subsidiary thereof, (ii) control of 50% or more of the business of
the Group shall be sold, assigned or otherwise transferred directly or
indirectly to any third party other than Cendant or (iii) there is consummated a
merger or consolidation of the Group with any other corporation other than
Cendant, other than (A) a merger or consolida tion which would result in the
voting securities of the parent corporation of the Group outstanding immediately
prior to such event continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity or any parent
thereof) at least 50% of the combined voting power of the securities of the
parent corporation of the Group or such surviving entity or any parent thereof
outstanding immediately after such event or (B) a merger or consolida tion
effected to implement a recapitalization of Cendant or the Group (or similar
transaction) in which no person or entity becomes the beneficial owner or more
than 50% or more of the combined voting power of Cendant's then outstanding
securities or (iv) the shareholders of Cendant approve a plan of liquidation or
dissolution of Cendant or of the Group (except for a liquidation of the Group
resulting in more than 50% of the assets of the Group remaining under the
ownership or control of Cendant).
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(g) "Commission" means the Securities and Exchange Commission or any
successor agency.
(h) "Committee" means the Committee referred to in Section 2.
(i) "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.
(j) "Corporation" means Cendant Corporation, a Delaware corporation.
(k) "Disability" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
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(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
(m) "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.
(n) "Move.com" means the Move.com Group.
(o) "Plan" means this Cendant Corporation Move.com Group 1999 Stock Option
Plan, as set forth herein and as hereinafter amended from time to time.
(p) "Retirement" means retirement from active employment with the
Corporation or an Affiliate at or after age 65.
(q) "Stock Option" means any option granted under Section 5.
(r) "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.
(s) "Termination of Employment" means the termination of the optionee's
active employment with the Corporation and its Affiliates. An optionee employed
by an Affiliate shall also be deemed to incur a Termination of Employ ment if
such Affiliate ceases to be an Affiliate and the optionee does not immediately
thereafter become an employee of the Corporation or another Affiliate. Temporary
absences from employment because of illness, vacation or leave of absence and
transfers among the Corporation and its Affiliates shall not be considered
Termina tions of Employment.
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In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee or such other
committee of the Board as the Board may from time to time designate or, if no
such committee is designated, the Board (the "Committee").
The Committee shall have plenary authority to grant Stock Options pursuant
to the terms of the Plan to employees of the Corporation and its Affiliates.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) To select the employees to whom Stock Options may from time to time be
granted;
(b) To determine the number of shares of Common Stock to be covered by each
Stock Option granted hereunder;
(c) To determine the terms and conditions of any Stock Option granted
hereunder (including, but not limited to, the option price (subject to Section
5(a) hereof), any vesting condition, restriction or limitation (which may be
related to the performance of the optionee, the Corporation or any Affiliate)
and any vesting acceleration or forfeiture waiver regarding any Stock Option and
the shares of Common Stock relating thereto), based on such factors as the
Committee shall determine;
(d) To modify, amend or adjust the terms and conditions of any Stock
Option, at any time or from time to time, including extending the expiration
date of options during any period in which exercises are not permitted either by
law or pursuant to a corporate policy;
(e) To determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to a Stock Option may be deferred; and
(f) To determine under what circumstances a Stock Option may be settled in
cash or Common Stock under Section 5(e).
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The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Stock Option issued under the Plan (and any agreement relating
thereto) and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Corporation to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee or pursuant to authority delegated
as contemplated by the provisions of the Plan with respect to any Stock Option
shall be made in the sole discretion of the Committee or such delegate at the
time of the grant of the Stock Option or, unless in contravention of any express
term of the Plan, at any time thereafter. All decisions made by the Committee or
any appropriately delegated officer pursuant to the provisions of the Plan shall
be final and binding on all persons, including the Corporation and optionees.
Any authority granted to the Committee may also be exercised by the full
Board. To the extent that any permitted action taken by the Board conflicts with
action taken by the Committee, the Board action shall control.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
(a) Stock Authorized. The total number of shares of Common Stock initially
reserved and available for grant under the Plan shall be six million
(6,000,000). No optionee may be granted Stock Options under the Plan covering in
the aggregate more than 50% of the total number of shares of Common Stock
authorized for issuance under the Plan over any consecutive two (2) year period.
Shares subject to a Stock Option under the Plan may be authorized and unissued
shares or may be treasury shares.
If any Stock Option terminates without being exercised, shares of Common
Stock subject to such Stock Options shall again be available for distribution in
connection with Stock Options under the Plan.
(b) Adjustment of Shares. In the event of any change in corporate
capitalization, such as a stock split or a corporate transaction, or any merger,
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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, includ ing but not limited to securities
commonly referred to as a "tracking stock", the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, the limit on options that may be granted to an
individual optionee under paragraph (a) above in the number, the kind and option
price of shares subject to outstanding Stock Options granted under the Plan
and/or such other equitable substitution or adjustments as it may determine to
be appropriate in its sole discretion, taking into account the application of
generally accepted accounting principles and any resultant accounting charge as
a result of such substitution or adjustments; provided, however, that the number
of shares subject to any Stock Option shall always be a whole number.
SECTION 4. ELIGIBILITY
All active employees of the Corporation and its subsidiaries employed
primarily in the 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.
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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
addi tional terms and conditions as the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee and
set forth in the option agreement, and shall not be less than the Fair
Market Value of the Common Stock subject to the Stock Option on the date of
grant.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee.
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee
provides that any Stock Option is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions, in
whole or in part, based on such factors as the Committee may determine. In
addition, the Committee may at any time accelerate the exercisability of
any Stock Option.
(d) Accelerated Exercisability. Notwithstanding the provisions of
subsection (c) above, upon the consummation of a Change-of-Control
Transaction, each Stock Option granted shall become immediately exercis
able with respect to 25% of the unvested portion thereof (rounded down to
the nearest whole share), on a pro rata basis according the the scheduled
vesting dates. For example, if a Stock Option to purchase 1,000 shares has
been granted with a vesting schedule providing for one-third of such Stock
Option to be vested on each of the first three anniversaries of the date of
grant of such Stock Option, and a Change-of-Control Transaction is finally
con summated between the first and the second vesting date (i.e., 334
shares are then vested and 666 shares are unvested), 166 of the next shares
to vest will be vested immediately, 583 shares will vest on the second
anniversary of the date of grant and 583 shares will vest on the third
anniversary of the date of grant.
(e) 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
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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 forego ing, 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(k) below and (ii) any
option shares for which share certificates have not been issued or
delivered as contemplated under Section 8(a) below, an optionee shall have
all of the rights of a shareholder of the Corporation holding the class or
series of Common Stock that is subject to such Stock Option (including, if
applicable, the right to vote the shares and the right to receive
dividends), when and if the optionee has given written notice of exercise,
has paid in full for such shares.
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(f) 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(f), 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.
(g) Termination by Death or Disability. Unless otherwise deter mined 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.
(h) Termination by Reason of Retirement. Unless otherwise determined by
the Committee in its sole discretion, if an optionee's employ ment
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.
(i) 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.
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(j) 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.
(k) 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(e) above, an optionee who elects
such deferral shall not have any rights as a stockholder with respect to
such deferred shares unless and until certificates representing such shares
are actually delivered to the optionee with respect thereto, except to the
extent otherwise determined by the Committee.
No Stock Option granted hereunder shall be an "incentive stock option" as
defined in Section 422 of the Code.
SECTION 6. TERM, AMENDMENT AND TERMINATION
The Plan will terminate ten (10) years after the effective date of the
Plan. Under the Plan, Stock Options outstanding as of such date shall not be
affected or impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option theretofore granted without the optionee's or
recipi ent'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.
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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 Commit tee 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
(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.
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(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
Corpo ration 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 obliga tions 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 arrange ments, 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 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.
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(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 (assum ing 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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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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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 MARCH 21, 2000
The undersigned, having received the Notice of Special Meeting of
Stockholders and Proxy Statement, dated February __, 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
March 21, 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
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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, Inc. 1999 Stock Option Plan as
described in the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
[_] FOR [_] AGAINST [_] ABSTAIN
Comment Rider Proxy Card
Proposal 3. Proposal to amend and restate Cendant's Amended and Restated
Certificate of Incorporation to eliminate the provisions for the
classification of the Board of Directors effective as of the annual
meeting in 2000.
[__] FOR [__] AGAINST [__] ABSTAIN
Proposal 4. Proposal to adjourn or postpone the special meeting in order to,
among other things, solicit additional votes.
[__] FOR [__] AGAINST [__] ABSTAIN
In addition, the undersigned authorizes such proxies to vote such shares
in their discretion as to any other matters coming before the special meeting.
I PLAN TO ATTEND THE MEETING
MARK HERE [_]
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I HAVE NOTED AN ADDRESS CHANGE AND/OR COMMENT ON THE REVERSE
SIDE OF THE CARD
MARK HERE [_]
Please date this Proxy Card and sign your name exactly as it appears hereon.
Where there is more than one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or trustee, please add your title
as such. If executed by a corporation, this Proxy Card should be signed by a
duly authorized officer. If executed by a partnership, please sign in
partnership name by authorized persons.
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(Signature)
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(Signature if held jointly)
Dated: , 2000
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