<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 2000
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
CENDANT CORPORATION
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 8699 06-0918165
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
Incorporation or Organization) Classification Code Number)
</TABLE>
------------------------------
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 413-1800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
JAMES E. BUCKMAN, ESQ.
CENDANT CORPORATION
9 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 413-1800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C> <C> <C>
DAVID FOX, ESQ. ERIC J. BOCK, ESQ. MARCEL J. DUMENY, ESQ. MARK V. MINTON, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & CENDANT CORPORATION FAIRFIELD COMMUNITIES, INC. JONES, DAY, REAVIS &
FLOM LLP 9 WEST 57TH STREET 8669 COMMODITY CIRCLE, SUITE 200 POGUE
FOUR TIMES SQUARE NEW YORK, NEW YORK 10019 ORLANDO, FLORIDA 32819 2727 NORTH HARWOOD STREET
NEW YORK, NEW YORK 10036 (212) 413-1800 (407) 370-5200 DALLAS, TEXAS 75201
(212) 735-3000 (214) 220-3939
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As promptly as practicable after the effective date of the Registration
Statement and upon consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
CD Common Stock, Par Value $0.01 Per
Share..................................... 96,216,693 $6.5043 $625,826,098 $165,218
</TABLE>
(1) The maximum number of shares of common stock of Cendant Corporation issuable
to stockholders of Fairfield Communities, Inc. upon consummation of the
merger of a subsidiary of Cendant with and into Fairfield is based on the
exchange ratio of one share of Fairfield common stock to be exchanged for
2.1428 shares of Cendant common stock designated CD common stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1) under the
Securities Act, based on the aggregate market value on December 11, 2000 of
the shares of Fairfield common stock expected to be exchanged in connection
with the merger and computed by dividing (i) the product of (A) the average
of the high and low sale prices of Fairfield common stock as reported on the
New York Stock Exchange Composite Transaction Tape on December 11, 2000
($13 15/16) and (B) 44,902,321, representing the maximum number of shares of
Fairfield common stock expected to be exchanged in connection with the
merger by (ii) 96,216,693, representing the maximum number of shares of CD
common stock expected to be issued in connection with the merger.
(3) Calculated by multiplying the proposed maximum aggregate offering price for
all securities to be registered by .000264.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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--------------------------------------------------------------------------------
<PAGE>
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROXY STATEMENT-PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 12, 2000
[Fairfield Logo]
FAIRFIELD COMMUNITIES, INC.
8669 COMMODITY CIRCLE, SUITE 200
ORLANDO, FLORIDA 32819
(407) 370-5200
[ ], 2001
Dear Stockholder:
You are invited to attend a special meeting of stockholders of Fairfield
Communities, Inc. The meeting will be held at [ ]:00 [ ].m., Eastern Time, on
[ ], 2001, at [ ], [ ], [ ]. At the
meeting, you will be asked to consider and vote upon a proposal to adopt a
merger agreement. If the merger contemplated by the merger agreement is
completed, Fairfield will become a wholly owned subsidiary of Cendant
Corporation.
Upon successful completion of the merger, you will receive cash or shares or
a combination of cash and shares of Cendant common stock designated CD common
stock in exchange for your Fairfield common stock. The value of the merger
consideration you receive is expected to be $15.00 at the date of the special
meeting, but may be more or less as described in the proxy statement-prospectus.
CD common stock is quoted on the New York Stock Exchange under the symbol "CD."
The actual number of shares of CD common stock to be issued in exchange for each
share of Fairfield common stock will be determined as described in the proxy
statement-prospectus. Your ability to receive the entire merger consideration
payment in either cash or stock may be limited as described in the proxy
statement-prospectus.
The Fairfield board of directors has unanimously approved the merger
agreement and determined that the merger and the merger agreement are in the
best interests of Fairfield and its stockholders. ACCORDINGLY, THE FAIRFIELD
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT AT THE SPECIAL MEETING.
In light of the importance of the proposed merger, we urge you to attend the
special meeting in person or participate by proxy. Whether or not you plan to
attend, after carefully reading and considering the accompanying materials,
please vote your shares as soon as possible. Your voting materials contain
detailed information on how to vote.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS," BEGINNING ON
PAGE 18 OF THE PROXY STATEMENT-PROSPECTUS BEFORE VOTING.
The adoption of the merger agreement requires the approval of the holders of
a majority of the outstanding shares of Fairfield common stock. If you do not
vote by proxy or in person at the special meeting, it will count as a vote
against the merger agreement. Regardless of the number of shares you own, your
vote is important.
Sincerely,
James G. Berk
President and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE CD COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED THAT THIS PROXY STATEMENT-PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT-PROSPECTUS IS DATED [ ], 2001, AND IS FIRST
BEING MAILED TO STOCKHOLDERS ON OR ABOUT [ ], 2001.
<PAGE>
[FAIRFIELD LOGO]
FAIRFIELD COMMUNITIES, INC.
8669 COMMODITY CIRCLE, SUITE 200
ORLANDO, FLORIDA 32819
(407) 370-5200
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------
A special meeting of stockholders of Fairfield Communities, Inc. will be
held on [ ], [ ], 2001, starting at [ ]:00 [ ].m.,
Eastern Time, at [ ], [ ], [ ]. The purposes of
the special meeting are for you to consider and vote upon:
- A proposal to adopt the Agreement and Plan of Merger, dated as of
November 1, 2000, by and among Fairfield, Cendant Corporation and Grand
Slam Acquisition Corp., a subsidiary of Cendant, whereby Grand Slam will
merge into Fairfield. Following the merger, Fairfield will be a wholly
owned subsidiary of Cendant.
- Any other business that may properly be transacted at the special meeting
or any adjournments or postponements of the special meeting.
Only holders of record of Fairfield common stock at the close of business on
[ ], 2001, will be entitled to vote at the special meeting or any
adjournment or postponement of the special meeting.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Fairfield common stock vote to adopt the merger agreement.
For more information about the merger, please review the accompanying proxy
statement-prospectus and the merger agreement attached as Annex A.
Fairfield stockholders who do not vote in favor of adopting the merger
agreement and who otherwise comply with the requirements of Delaware law will be
entitled to appraisal rights. A summary of the applicable Delaware law
provision, including the requirements a Fairfield stockholder must follow in
order to exercise his or her appraisal rights, is contained in the accompanying
proxy statement-prospectus. A copy of the applicable Delaware law provision is
attached as Annex F to the proxy statement-prospectus.
A list of Fairfield stockholders entitled to vote at the special meeting
will be available during normal business hours at our executive offices in
Orlando, Florida, for at least 10 days prior to the special meeting for
examination by any stockholder for any purpose germane to the special meeting.
By Order of the Board of Directors,
Marcel J. Dumeny
Secretary
TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
POSTAGE PREPAID ENVELOPE.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement-prospectus incorporates important business and
financial information about Fairfield and Cendant from other documents that
are not included in or delivered with this proxy statement-prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain those documents incorporated by reference into this
proxy statement-prospectus by accessing the Securities and Exchange
Commission's website maintained at "http://www.sec.gov" or by requesting
copies in writing or by telephone from the appropriate company at the
following addresses:
<TABLE>
<S> <C>
Fairfield Communities, Inc. Cendant Corporation
8669 Commodity Circle, Suite 200 9 West 57th Street
Orlando, Florida 32819 New York, New York 10019
Attention: Investor Relations Attention: Investor Relations
(407) 370-5200 (212) 413-1845
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY [ ],
2001 IN ORDER TO RECEIVE THEM BEFORE FAIRFIELD'S SPECIAL MEETING. WE WILL
MAIL THE DOCUMENTS YOU REQUEST BY FIRST CLASS MAIL, OR ANOTHER EQUALLY
PROMPT MEANS, BY THE NEXT BUSINESS DAY AFTER WE RECEIVE YOUR REQUEST.
See "Where You Can Find More Information" on pages [ ] through [ ].
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL
MEETING................................................... 1
SUMMARY..................................................... 6
The Companies............................................. 6
The Merger Agreement...................................... 7
Fairfield's and Cendant's Reasons for the Merger.......... 8
Board of Directors Recommendation to Fairfield
Stockholders............................................ 9
Opinions of Fairfield's Financial Advisors................ 9
The Stock Option Agreement................................ 9
The Voting Agreement...................................... 9
Interests of Certain Persons in the Merger................ 10
Stock Exchange Listing.................................... 10
The Special Meeting....................................... 10
Vote Required to Approve the Merger Agreement............. 10
Material United States Federal Income Tax Consequences of
the Merger.............................................. 10
Accounting Treatment...................................... 10
Appraisal Rights.......................................... 10
FINANCIAL SUMMARY........................................... 11
Market Price Data......................................... 11
Historical Market Prices and Dividends.................... 11
Selected Historical Financial Data of Cendant............. 13
Selected Unaudited Pro Forma Financial Data of Cendant.... 15
Selected Historical Financial Data of Fairfield........... 16
Comparative Per Share Data................................ 17
RISK FACTORS................................................ 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 22
THE MERGER.................................................. 24
General................................................... 24
Background of the Merger.................................. 24
Rationale for the Merger; Recommendation of the Fairfield
Board of Directors...................................... 27
Opinions of Fairfield's Financial Advisors................ 31
Stock Exchange Listing.................................... 37
Federal Income Tax Consequences of the Merger............. 37
Accounting Treatment...................................... 38
Regulatory and Third-Party Approvals...................... 39
Appraisal Rights.......................................... 39
Interests of Certain Persons in the Merger................ 41
Existing Business Relationships between Cendant and
Fairfield............................................... 45
Delisting and Deregistration of Fairfield Common Stock.... 46
Restrictions on Resales by Affiliates of Fairfield........ 46
THE FAIRFIELD SPECIAL MEETING............................... 47
Purpose, Time and Place................................... 47
Record Date; Voting Power................................. 47
Votes Required............................................ 47
Share Ownership of Management and Certain Stockholders.... 48
Voting of Proxies......................................... 48
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Revocability of Proxies................................... 48
Solicitation of Proxies................................... 48
THE MERGER AGREEMENT........................................ 49
General................................................... 49
Form of the Merger........................................ 49
Timing of Closing......................................... 49
Merger Consideration...................................... 49
Conversion of Shares; Exchange Agent; Procedures for
Exchange of Certificates; Fractional Shares............. 50
Effect on Stock Based Awards.............................. 51
Board and Officers of Surviving Corporation............... 51
Representations and Warranties............................ 51
Covenants of Fairfield.................................... 52
No Solicitation........................................... 54
Transfer of the Real Estate Development Assets of
Fairfield to a Third Party.............................. 56
Indemnification and Insurance............................. 56
Conditions to the Completion of the Merger................ 56
Termination of the Merger Agreement....................... 57
Termination Fees.......................................... 58
THE STOCK OPTION AGREEMENT.................................. 59
Exercise of the Option.................................... 59
Termination of the Option................................. 59
Put Right................................................. 59
Registration Rights....................................... 60
Limitation on Profit...................................... 61
THE VOTING AGREEMENT........................................ 62
Restrictions on Transfer.................................. 62
Termination............................................... 62
Effect of the Stock Option Agreement and the Voting
Agreement............................................... 62
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF FAIRFIELD COMMON STOCK...................... 63
Certain Beneficial Owners................................. 63
Directors and Executive Officers.......................... 64
COMPARISON OF RIGHTS OF STOCKHOLDERS OF FAIRFIELD AND
CENDANT................................................... 66
Authorized Capital Stock.................................. 66
Board of Directors........................................ 66
Committees of the Board of Directors...................... 67
Newly Created Directorships and Vacancies................. 68
Removal of Directors...................................... 68
Officers.................................................. 68
Special Meetings of Stockholders.......................... 69
Quorum at Stockholder Meetings............................ 69
Stockholder Action by Written Consent..................... 69
Advance Notice of Stockholder-Proposed Business at Annual
Meetings................................................ 70
Amendment of Governing Documents.......................... 70
Effect of Interested Stockholder Transactions and Fair
Price Provision......................................... 71
Stockholder Rights Plan................................... 72
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
EXPERTS..................................................... 75
LEGAL MATTERS............................................... 75
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS.................. 75
WHERE YOU CAN FIND MORE INFORMATION......................... 75
</TABLE>
<TABLE>
<S> <C> <C> <C>
ANNEX A -- Agreement and Plan of Merger, dated as of November 1, 2000,
by and among Cendant Corporation, Grand Slam Acquisition
Corp. and Fairfield
Communities, Inc............................................ A-1
ANNEX B -- Stock Option Agreement, dated November 1, 2000, between
Cendant Corporation and Fairfield Communities, Inc.......... B-1
ANNEX C -- Voting Agreement, dated as of November 1, 2000, by and among
Cendant Corporation and various stockholders of Fairfield
listed on Schedule A to the Voting Agreement................ C-1
ANNEX D -- Opinion of Bear, Stearns & Co. Inc.......................... D-1
ANNEX E -- Opinion of Stephens Inc..................................... E-1
ANNEX F -- Delaware General Corporation Law--Section 262--Appraisal
Rights...................................................... F-1
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT
THE MERGER AND THE SPECIAL MEETING
Q: WHAT IS THE PROPOSED MERGER?
A: In the proposed merger, Fairfield will merge with a subsidiary of Cendant.
Fairfield will survive the merger as a wholly owned subsidiary of Cendant.
The merger agreement is attached to this proxy statement-prospectus as Annex
A. You are encouraged to read it carefully.
Q: WHAT IS CENDANT CORPORATION?
A: Cendant Corporation is one of the foremost providers of real estate, travel
and direct marketing-related consumer and business services in the world.
Cendant's core competencies include building franchise systems, providing
outsourcing solutions and direct marketing. As a franchiser, Cendant is
among the world's leading franchisers of real estate brokerage offices,
hotels, rental car agencies, and tax preparation services. As a provider of
outsourcing solutions, Cendant is a major provider of mortgage services to
consumers, the global leader in corporate and government employee
relocation, and the world's largest vacation exchange service. In direct
marketing, Cendant provides an array of value driven products and services.
Other business units include NCP, the United Kingdom's largest private car
park operator, and WizCom, an information technology services provider. From
a financial reporting standpoint, Cendant has separated its business into
two groups, Cendant Group, which includes all of Cendant's businesses (other
than Move.com Group) and a retained interest in Move.com Group that is
tracked by Cendant common stock designated CD common stock, and Move.com
Group, Cendant's online relocation, real estate and home related products
and services portal, MOVE.COM, that is tracked by Cendant common stock
designated Move.com common stock.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will have the right to elect to receive either Cendant common stock
designated CD common stock or cash in exchange for each of your shares of
Fairfield common stock. Based on your election but subject to other terms of
the merger agreement, you will receive one of the following:
- The "STOCK ELECTION," which consists of 1.2500 shares of CD common stock
for each share of Fairfield common stock, unless the average trading price
of CD common stock is more or less than $12.00. The "average trading
price" means the average of the 4:00 p.m. Eastern Time closing sales
prices of CD common stock reported on the New York Stock Exchange
Composite Tape for the 20 consecutive trading days ending on and including
the trading day immediately before the date of the special meeting of the
stockholders of Fairfield. The adjustments that may be made to the
exchange ratio are as follows:
<TABLE>
<CAPTION>
AVERAGE TRADING PRICE EXCHANGE RATIO
------------------------------------------ ------------------------------------------
<S> <C>
Equal to or greater than $13.5960 Equal to the quotient of $16.00 divided by
the average trading price
Greater than $12.00 but less than $13.5960 Equal to 0.6250 plus the quotient of $7.50
divided by the average trading price
Equal to $12.00 1.2500
Less than $12.00 but greater than $7.00 Equal to the quotient of $15.00 divided by
the average trading price
Equal to or less than $7.00 2.1428
</TABLE>
- The "CASH ELECTION," which consists of $15.00 in cash for each share of
Fairfield common stock plus, if the average trading price is greater than
$12.00, a fraction of a share of CD common stock that equals the excess of
the value of the stock election, based on the average trading price, over
$15.00. The maximum value of that fractional share will not exceed $1.00.
If you fail to return the election form/letter of transmittal to the
exchange agent in a timely manner, you will receive the stock election for
each of your shares of Fairfield common stock.
<PAGE>
Cendant will not issue fractional shares in the merger. Cendant will round
the total number of shares of CD common stock you receive down to the
nearest whole number of shares, and you will receive a cash payment based on
the average trading price for any remaining fraction instead of a fractional
share of CD common stock.
By way of example, on [ ], 2001, the last day for which this information
could be calculated before the date of this proxy statement-prospectus, the
average trading price of CD common stock as calculated above for the
20-trading day period ending on that date was $[ ]. If that were the final
average trading price of CD common stock for the 20-trading day period
before the special meeting, the exchange ratio would be equal to [ ] and
you would receive [ ] shares of CD common stock under the stock election or
$15.00 under the cash election in exchange for each share of Fairfield
common stock. Based on the last reported sale price of CD common stock of
$[ ] on [ ], 2001, the value of this exchange ratio would result in your
receiving stock under the stock election with a total value of $[ ] in
exchange for each share of Fairfield common stock. THIS CALCULATION IS
INTENDED SOLELY TO ILLUSTRATE THE CALCULATION OF THE EXCHANGE RATIO. THE
ACTUAL VALUE YOU RECEIVE UNDER THE STOCK ELECTION OR THE CASH ELECTION IN
THE MERGER MAY VARY SIGNIFICANTLY FROM THE AVERAGE TRADING VALUE OF THE CD
COMMON STOCK.
The value of the transaction will fluctuate between the date of this proxy
statement-prospectus and the completion of the merger, based upon the market
price for shares of CD common stock. The exchange ratio is calculated in a
manner designed to provide you with $15.00 in value, based on the final
average trading price, under the stock election or the cash election in
exchange for each share of Fairfield common stock so long as the average
trading price of a share of CD common stock during the 20-trading day period
before the special meeting is between $7.00 and $12.00 and the price of CD
common stock does not change between the special meeting date and the
closing date. The value under the stock election or the cash election will
be between $15.00 and $16.00 if the average trading price of a share of CD
common stock determined as described in the first paragraph of this answer
exceeds $12.00.
Q: WHEN WILL A FINAL EXCHANGE RATIO BE ANNOUNCED?
A: Cendant and Fairfield will determine the final exchange ratio on the day
before the special meeting of Fairfield stockholders. Cendant and Fairfield
intend to issue a joint press release announcing the final exchange ratio
promptly after it is determined.
Q: IF I CHOOSE THE CASH ELECTION, WILL I BE ASSURED OF RECEIVING ONLY CASH?
A: No. The total amount of cash Cendant is required to pay in the merger will
not exceed the product of $7.50 multiplied by the total number of
outstanding shares of Fairfield common stock immediately prior to the
effective time of the merger. However, the amount of cash available for
persons making the cash election is reduced by the product of the number of
shares held by Fairfield stockholders exercising their appraisal rights
multiplied by the value, based on the final average trading price, of the
stock election. If the total amount of cash to be paid to stockholders
choosing the cash election plus the amount attributable to stockholders
exercising their appraisal rights is greater than the total amount Cendant
is required to pay in cash, then the amount of cash a stockholder making the
cash election will receive may be reduced on a pro rata basis with the other
stockholders making the cash election. In lieu of cash, each of the
stockholders making the cash election will receive a number of shares of CD
common stock equal to the value, based on the final average trading price,
of the cash that was reduced. Fairfield stockholders electing cash may also
receive up to $1.00 of CD common stock if the average trading price for CD
common stock is greater than $12.00.
2
<PAGE>
Q: IF I CHOOSE THE STOCK ELECTION, OR IF I DO NOT MAKE ANY ELECTION, WILL I BE
ASSURED OF RECEIVING ONLY STOCK?
A: No. Cendant has the right, exercisable at any time at least two business days
prior to the closing of the merger, to pay cash for any shares of Fairfield
common stock instead of issuing CD common stock. Any increase in the amount
of cash to be paid by Cendant will first be paid to Fairfield stockholders
electing to receive cash who were subject to proration as described in the
preceding question, then paid on a pro rata basis to Fairfield stockholders
making the stock election.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We plan to complete the merger as soon as possible after the special meeting
and the satisfaction or waiver of other conditions to the merger, including
the receipt of any necessary regulatory approvals. We anticipate the merger
will be completed in the first quarter of 2001.
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to approve and adopt the merger agreement.
Q: WHAT DOES THE FAIRFIELD BOARD OF DIRECTORS RECOMMEND?
A: The Fairfield board of directors has unanimously approved the merger
agreement and recommends that Fairfield stockholders vote FOR the proposal
to approve and adopt the merger agreement.
Q: WHEN AND WHERE IS THE FAIRFIELD SPECIAL MEETING?
A: The special meeting of Fairfield stockholders to vote on the merger will be
at [ ], [ ], [ ] on [ ],
[ ], 2001 at [ ]:00 [ ].m., Eastern Time.
Q. WHO CAN VOTE ON THE MERGER?
A: Holders of Fairfield common stock at the close of business on [ ], 2001
can vote at the special meeting.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A: The merger must be approved by the holders of a majority of the total number
of outstanding shares of Fairfield common stock on [ ], 2001.
Q: WHO ELSE MUST APPROVE THE MERGER?
A: In addition to the approval of Fairfield stockholders, the merger agreement
requires that the parties obtain the consents, approvals or exemptions of
certain state timeshare regulators and third parties. Cendant is not
required to obtain the approval of its stockholders to complete the merger.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement-prospectus, please vote your shares as soon as possible. You
may vote your shares by signing and mailing the enclosed proxy card. If you
sign and send in your proxy but do not indicate how you want to vote, your
proxy will be counted as a vote in favor of the merger agreement. If you do
not vote in person or by proxy, it will count as a vote against the merger
agreement.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. Your broker can vote your shares only if you provide instructions on how
to vote. You should instruct your broker to vote your shares, using the
instructions provided by your broker.
3
<PAGE>
Q: CAN I CHANGE MY VOTE AFTER I MAIL MY PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this by:
- delivering, prior to the special meeting, to Secretary, Fairfield
Communities, Inc., 8669 Commodity Circle, Suite 200, Orlando, Florida
32819, a written notice of revocation bearing a later date or time than
the proxy,
- submitting another proxy that is later dated and, if applicable, that is
properly signed, or
- attending the special meeting and voting in person. However, your
attendance alone will not revoke your proxy--you must also vote in person.
If you instructed a broker to vote your shares, you must follow your
broker's directions for changing those instructions.
Q: IS MY VOTE IMPORTANT?
A: Yes. Your vote is important. Approval of the merger agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
Fairfield common stock. If you do not vote, it will have the same effect as
a vote against the merger.
Q: WHEN SHOULD I SEND IN MY STOCK CERTIFICATES?
A: In order to receive the merger consideration as promptly as possible
following the closing of the merger, the exchange agent must receive your
validly completed election form/letter of transmittal together with your
Fairfield stock certificates by 5:00 p.m., Eastern Time, on the date of the
effective time of the merger. AFTER THE EFFECTIVE TIME OF THE MERGER, YOU
MAY NOT MAKE ANY ELECTIONS WITH RESPECT TO THE CONSIDERATION YOU WISH TO
RECEIVE IN THE MERGER. CENDANT AND FAIRFIELD INTEND TO ISSUE A JOINT PRESS
RELEASE ANNOUNCING THE DATE OF THE EFFECTIVE TIME OF THE MERGER AFTER IT IS
DETERMINED.
The election form/letter of transmittal must be sent, together with your
Fairfield stock certificates, to the exchange agent at the addresses set
forth below:
By Mail:
Mellon Investor Services LLC
P.O. Box 3301
South Hackensack, New Jersey 07606
Attention: Reorganization Department
By Hand Delivery:
Mellon Investor Services LLC
85 Challenger Road
Mail Drop--Reorganization
Ridgefield Park, New Jersey 07660
Attention: Reorganization Department
Q: HOW DO I SPECIFY IF I WANT CASH OR SHARES OF CD COMMON STOCK?
A: You must complete the enclosed election form/letter of transmittal and
indicate the number of shares of Fairfield common for which you make the
cash election and the number of shares of Fairfield common stock for which
you make the stock election.
Q: CAN I REVOKE MY ELECTION?
A: Yes. You can revoke your election by giving written notice to the exchange
agent prior to 5:00 p.m., Eastern Time, on the date of the effective time of
the merger, or by withdrawing your shares of Fairfield common stock (or
withdrawing your guarantee of delivery of your shares) prior to the deadline
listed above. AFTER THE EFFECTIVE TIME OF THE MERGER, YOU MAY NOT REVOKE ANY
ELECTION YOU HAVE MADE WITH RESPECT TO THE CONSIDERATION YOU WISH TO RECEIVE
IN THE MERGER.
4
<PAGE>
Q: CAN I MAKE PARTIAL ELECTIONS?
A: Yes. The election form/letter of transmittal allows you to make an election
solely for cash or for CD common stock or for a combination of cash and CD
common stock. For example, you may elect to receive CD common stock for some
of your shares of Fairfield common stock and cash for the remainder.
Elections to receive cash and/or shares of CD common stock are subject to
proration among Fairfield stockholders in the event of oversubscription for
cash.
Q: WHAT IF I FAIL TO MAKE AN ELECTION?
A: If you fail to make an election, you will receive the stock election.
However, Cendant has the option to substitute cash for CD common stock as
previously described in these questions and answers.
Q: DO I HAVE APPRAISAL RIGHTS?
A: Yes. If you wish to exercise appraisal rights, you will have the right to
receive an appraisal of the value of your shares of Fairfield common stock
in connection with the merger. If you wish to exercise your appraisal rights
you must follow the requirements of Delaware law. For a summary describing
the requirements you must follow in order to exercise your appraisal rights
see "The Merger--Appraisal Rights" on pages [ ] through [ ].
Q: WHAT ARE THE MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER TO ME?
A: The exchange of Fairfield common stock for cash and/or CD common stock
pursuant to the merger will be a taxable transaction for United States
federal income tax purposes and possibly for state, local and foreign income
tax purposes as well. See "The Merger--Federal Income Tax Consequences of
the Merger" on pages [ ] through [ ]. FAIRFIELD STOCKHOLDERS SHOULD
CONSULT THEIR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES
TO THEM OF THE MERGER.
Q: HOW WILL THE MERGER BE TREATED FOR ACCOUNTING PURPOSES?
A: The merger will be accounted for under the purchase method of accounting in
accordance with accounting principles generally accepted in the United
States. Accordingly, the cost to acquire Fairfield will be allocated to the
tangible assets acquired and liabilities assumed based on their fair values,
with any excess being treated as goodwill and other intangible assets.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement-prospectus, the enclosed proxy card or the enclosed
election form/letter of transmittal you should contact:
Mellon Investor Services LLC
44 Wall Street
7th Floor
New York, New York 10005
(866) 892-5622 (toll free)
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: You can find more information about Fairfield and Cendant from various
sources described under "Where You Can Find More Information" on pages [ ]
through [ ] of this proxy statement-prospectus.
5
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE COMPLETE
UNDERSTANDING OF THE MERGER AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL
TERMS OF THE MERGER, YOU SHOULD READ THIS ENTIRE DOCUMENT CAREFULLY, AS WELL AS
THE ADDITIONAL DOCUMENTS TO WHICH WE REFER YOU. SEE "WHERE YOU CAN FIND MORE
INFORMATION" (PAGES [ ] THROUGH [ ]). REFERENCES IN THIS DOCUMENT TO "CENDANT"
AND "FAIRFIELD" INCLUDE THEIR RESPECTIVE SUBSIDIARIES UNLESS OTHERWISE
INDICATED.
THE COMPANIES
<TABLE>
<S> <C>
Cendant Corporation Fairfield Communities, Inc.
9 West 57th Street 8669 Commodity Circle, Suite 200
New York, New York 10019 Orlando, Florida 32819
(212) 413-1800 (407) 370-5200
</TABLE>
CENDANT
Cendant is one of the foremost providers of real estate, travel and direct
marketing-related consumer and business services in the world. Cendant's core
competencies include building franchise systems, providing outsourcing solutions
and direct marketing. As a franchiser, Cendant is among the world's leading
franchisers of real estate brokerage offices, hotels, rental car agencies, and
tax preparation services. As a provider of outsourcing solutions, Cendant is a
major provider of mortgage services to consumers, the global leader in corporate
and government employee relocation, and the world's largest vacation exchange
service. In direct marketing, Cendant provides an array of value driven products
and services. Other business units include NCP, the United Kingdom's largest
private car park operator, and WizCom, an information technology services
provider. From a financial reporting standpoint, Cendant has separated its
business into two groups, Cendant Group, which includes all of Cendant's
businesses (other than Move.com Group) and a retained interest in Move.com Group
that is tracked by Cendant common stock designated CD common stock, and Move.com
Group, Cendant's online relocation, real estate and home related products and
services portal, MOVE.COM, that is tracked by Cendant common stock designated
Move.com common stock.
On October 25, 2000, Cendant announced that it intends to distribute 100
percent of the stock of a new company incorporating its individual membership
segment and loyalty business to CD common stock holders in a tax free
distribution. Cendant expects the process, which includes formation of the
company, registration of its shares and distribution of the shares to
stockholders, to be completed by mid 2001.
On November 13, 2000, Cendant announced that it entered into a definitive
agreement to acquire all of the outstanding shares of Avis Group Holdings, Inc.
that are not already owned by Cendant. Avis is the largest Avis rental car
franchisee and is one of the world's leading service and information providers
for comprehensive automotive transportation and vehicle management solutions.
This transaction is expected to close in the first quarter of 2001.
FAIRFIELD
Fairfield is one of the largest vacation ownership companies in the United
States in terms of property owners, vacation units constructed and revenues from
sales of vacation ownership interests. Fairfield's business includes:
- sales and marketing of vacation ownership interests at its resorts and
off-site sales centers;
- acquiring, developing and operating vacation ownership resorts;
- providing consumer financing to individuals purchasing vacation ownership
interests; and
- providing property management services to property owners' associations at
its resorts and other resorts.
6
<PAGE>
Fairfield offers vacation ownership interests that consist of either
undivided fee simple interests or specified fixed week interval ownership in
fully furnished vacation units.
THE MERGER AGREEMENT (PAGES [ ] THROUGH [ ])
The merger agreement is attached as Annex A to this proxy
statement-prospectus. We encourage you to read the merger agreement. It is the
principal document governing the merger.
CONDITIONS TO THE COMPLETION OF THE MERGER (PAGES [ ] THROUGH [ ])
The completion of the merger depends upon satisfying a number of conditions,
including the following:
- approval and adoption of the merger agreement by Fairfield stockholders;
- receipt of all consents and approvals required to complete the merger;
- absence of any legal prohibition to complete the merger; and
- listing of shares of CD common stock issuable to Fairfield stockholders on
the New York Stock Exchange.
In addition, Cendant's obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made by
Fairfield in the merger agreement;
- the performance by Fairfield of its obligations set forth in the merger
agreement; and
- no condition having been imposed by any governmental entity in connection
with any regulatory approval being obtained from it, which requires
Fairfield or its subsidiaries to be operated in a manner that is
materially different from industry standards in effect on the date of the
merger agreement or that is different from the manner in which Fairfield
conducted its operations on the date of the merger agreement and which
materially adversely affects the business, financial condition, results of
operations or prospects of Fairfield and its subsidiaries taken as a
whole, or their businesses taken as a whole.
In addition, Fairfield's obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made by
Cendant in the merger agreement; and
- the performance by Cendant of its obligations set forth in the merger
agreement.
TERMINATION OF THE MERGER AGREEMENT (PAGES [ ] THROUGH [ ])
The merger agreement may be terminated at any time prior to the completion
of the merger:
- by mutual written consent of Cendant and Fairfield;
- by either Cendant or Fairfield if:
- the merger agreement is not approved by Fairfield's stockholders at the
special meeting;
- any government or court action prevents the merger or would have a
material adverse effect on Fairfield or Cendant; or
- the merger is not completed by March 31, 2001. However, neither party
may terminate for this reason if its failure to perform any obligation
is the reason the merger has not been completed. Either party can
extend this date up to April 30, 2001 if the merger has not been
completed because a regulatory approval has not been obtained and that
party expects the approval to be obtained within the extended period.
Cendant may extend the March 31, 2001 date up to 15 business days if
the transfer of Fairfield's real estate development assets is scheduled
to take place within that 15-day period;
7
<PAGE>
- by Cendant, if Fairfield changes its recommendation to Fairfield
stockholders as provided in the merger agreement or fails to convene a
meeting of Fairfield stockholders to vote on the merger; or
- by Fairfield, if its board of directors determines, consistent with its
fiduciary duties to Fairfield's stockholders, that Fairfield should enter
into an acquisition agreement with another party providing for a
transaction that the Fairfield board of directors deems superior to the
merger.
TERMINATION FEES (PAGE [ ])
Fairfield must pay to Cendant a termination fee of $32 million if any of the
following occurs:
- another proposal to acquire Fairfield is made and either Fairfield or
Cendant terminates the merger agreement because the merger was not
completed by March 31, 2001, as such date may be extended, and, within
12 months of the termination, Fairfield enters into a definitive agreement
to complete a takeover of Fairfield;
- another proposal to acquire Fairfield is made and either Fairfield or
Cendant terminates the merger agreement because Fairfield stockholders did
not approve the merger at the special meeting and the average trading
price of CD common stock is not below $6.00 and, within 12 months of the
termination, Fairfield enters into a definitive agreement to complete a
takeover of Fairfield;
- Fairfield terminates the merger agreement because Fairfield's board of
directors determines, consistent with its fiduciary duties to Fairfield's
stockholders, that Fairfield should enter into an acquisition agreement to
complete a transaction that the Fairfield board of directors deems
superior to the merger; or
- another proposal to acquire Fairfield is made, the Fairfield board of
directors changes its recommendation to Fairfield stockholders as provided
in the merger agreement and the merger agreement is terminated by either
party for any reason.
FAIRFIELD'S AND CENDANT'S REASONS FOR THE MERGER (PAGES [ ] THROUGH [ ])
FAIRFIELD'S REASONS FOR THE MERGER
Some of Fairfield's reasons for the merger include:
- that the merger consideration to be received by Fairfield stockholders was
46.3%, 73.1% and 76.9% higher than the average sale price of Fairfield
common stock over the 20-day, 60-day and 120-day period ended October 17,
2000, respectively, which was the day before Fairfield announced it was
engaged in preliminary discussions concerning a possible merger or other
transaction with an undisclosed company;
- the advice of Bear, Stearns & Co. Inc. and Stephens Inc. described under
"Opinions of Fairfield's Financial Advisors" (pages [ ] through [ ]) and
their opinions to the effect that, subject to the assumptions, condition
and limitations contained in their opinion letters, the merger
consideration is fair to the stockholders of Fairfield, other than the
stockholders who are parties to the voting agreement, from a financial
point of view;
- the value of the stock election would not fall below $15.00 unless the
average trading price of CD common stock fell below $7.00;
- the right of Fairfield's stockholders to elect to receive the merger
consideration in cash or CD common stock or a combination of cash and
stock, subject to Cendant's option to pay up to 100 percent of the merger
consideration in cash; and
- the financial condition of Cendant and the ability to complete the merger
in a timely manner.
8
<PAGE>
CENDANT'S REASONS FOR THE MERGER
Some of Cendant's reasons for the merger include:
- the merger will provide Cendant with a unique opportunity to expand the
scope of its involvement in the vacation ownership and travel industries;
- Fairfield's experienced senior managers average more than 20 years'
experience each in the vacation ownership industry and have developed
strong sales and marketing teams; and
- the fact that Cendant has the option of substituting cash for all of the
merger consideration.
BOARD OF DIRECTORS RECOMMENDATION TO FAIRFIELD STOCKHOLDERS (PAGE [ ])
The Fairfield board of directors has unanimously approved the merger
agreement, the merger and the other transactions contemplated by the merger
agreement. The Fairfield board of directors believes that the merger agreement
and the merger are in the best interests of Fairfield and its stockholders and
recommends that you vote FOR the adoption of the merger agreement at the special
meeting.
OPINIONS OF FAIRFIELD'S FINANCIAL ADVISORS (PAGES [ ] THROUGH [ ])
In deciding to approve the merger agreement, the merger and the other
transactions contemplated by the merger agreement, the Fairfield board of
directors considered the opinions, each dated November 1, 2000, of its financial
advisors, Bear Stearns and Stephens, as to the fairness, as of such date, from a
financial point of view to the holders of Fairfield common stock, other than the
stockholders who are parties to the voting agreement, of the merger
consideration. The written opinions of Bear Stearns and Stephens are attached as
Annexes D and E, respectively, to this proxy statement-prospectus. WE ENCOURAGE
YOU TO READ THESE OPINIONS CAREFULLY AND IN THEIR ENTIRETY AS THEY SET FORTH THE
ASSUMPTIONS, CONDITIONS AND LIMITATIONS ON WHICH SUCH OPINIONS ARE BASED.
THE STOCK OPTION AGREEMENT (PAGES [ ] THROUGH [ ])
In connection with the merger agreement, Fairfield entered into a stock
option agreement with Cendant. Under the stock option agreement, Fairfield
granted to Cendant an irrevocable option to purchase up to 8,448,027 shares of
Fairfield common stock, which is subject to customary adjustments. The exercise
price per share under the option is equal to the merger consideration. However,
if Cendant exercises its option and the special meeting has not occurred, then
the exercise price will be calculated using the average trading price of CD
common stock during the 20-trading day period ending on and including the
trading day immediately prior to the date that Cendant gives Fairfield notice
that it intends to exercise the option. Cendant can exercise its option in whole
or in part at any time or from time to time. As of the date of this proxy
statement-prospectus, Cendant has not exercised its option. If at any time prior
to the exercise of the option, Fairfield issues additional shares of its common
stock, then the number of shares of Fairfield common stock for which the option
is exercisable will automatically adjust not to exceed 19.9% of the total number
of shares of Fairfield common stock issued and outstanding. The stock option
agreement is attached hereto as Annex B and is incorporated by reference into
this proxy statement-prospectus.
THE VOTING AGREEMENT (PAGES [ ] THROUGH [ ])
In connection with the merger, Cendant entered into a voting agreement with
the Fairfield stockholders listed on Schedule A to the voting agreement. At
November 1, 2000, these stockholders beneficially owned 7,186,644 outstanding
shares of Fairfield common stock and 510,000 shares that were issuable upon the
exercise of outstanding options that were either vested or would vest within
60 days of November 1, 2000. These shares represented approximately 18.15% of
the total issued and outstanding shares at November 1, 2000. Under the voting
agreement, these stockholders will vote those shares which they continue to own
through the date of the special meeting of the stockholders of Fairfield and any
additional shares acquired by them prior to the date of such meeting in favor of
the merger agreement and against any proposals presented for a vote to prevent
or thwart the merger or
9
<PAGE>
any transaction contemplated by the merger agreement or the voting agreement.
The voting agreement is attached hereto as Annex C and is incorporated by
reference into this proxy statement-prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGES [ ] THROUGH [ ])
In addition to their interests as stockholders, the directors and executive
officers of Fairfield may have interests in the merger that are different from,
or in addition to, your interests. These interests exist because of rights they
may have under individual employment agreements, compensation, benefit and bonus
plans and a bonus payable to the President and Chief Executive Officer of
Fairfield. Cendant will also indemnify the executive officers and directors of
Fairfield for events occurring prior to, at, or after the effective time of the
merger. In addition, one director is a senior officer of one of Fairfield's
financial advisors.
The members of the Fairfield board of directors knew of these additional
interests, and considered them when they approved the merger.
STOCK EXCHANGE LISTING (PAGE [ ])
Cendant has begun preparation of a listing application to list the shares of
Cendant common stock designated CD common stock to be issued to Fairfield
stockholders in connection with the merger with the New York Stock Exchange.
THE SPECIAL MEETING (PAGES [ ] THROUGH [ ])
The special meeting of Fairfield stockholders to vote on the merger
agreement will be at [ ], [ ], [ ] on [ ],
[ ], 2001 at [ ]:00 [ ].m., Eastern Time.
VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT (PAGE [ ])
Fairfield stockholders will vote on a proposal to approve and adopt the
merger agreement. Approval of this proposal requires the affirmative vote of the
holders of at least a majority of all shares of Fairfield common stock that are
outstanding and entitled to vote at the special meeting.
At November 30, 2000, Fairfield directors and executive officers as a group
owned and were entitled to vote approximately 8.18% of the outstanding shares of
Fairfield common stock. Each of the directors and executive officers of
Fairfield that is entitled to vote at the Fairfield special meeting has
indicated that he intends to vote his shares in favor of the merger proposal
outlined above.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
(PAGES [ ] THROUGH [ ])
The exchange of Fairfield common stock for cash and/or CD common stock
pursuant to the merger will be a taxable transaction for United States federal
income tax purposes and possibly for state, local and foreign income tax
purposes. FAIRFIELD STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS FOR A FULL
UNDERSTANDING OF THE TAX CONSEQUENCES TO THEM OF THE MERGER.
ACCOUNTING TREATMENT (PAGE [ ])
The merger will be accounted for using the purchase method of accounting as
such term is used under generally accepted accounting principles in the United
States. The purchase method accounts for a merger as an acquisition of one
company by another.
APPRAISAL RIGHTS (PAGES [ ] THROUGH [ ])
Under Delaware law, Fairfield stockholders who comply with the applicable
requirements of Delaware law will have the right to receive an appraisal of the
value of their shares of Fairfield common stock in connection with the merger.
We have included a copy of Delaware General Corporation
Law--Section 262--Appraisal Rights as Annex F to this proxy
statement-prospectus.
10
<PAGE>
FINANCIAL SUMMARY
MARKET PRICE DATA
Fairfield common stock is traded on the New York Stock Exchange under the
symbol "FFD." CD common stock is traded on the New York Stock Exchange under the
symbol "CD." The following table presents trading information for CD common
stock and Fairfield common stock on the New York Stock Exchange on October 17,
2000, November 1, 2000 and [ ], 2001. October 17, 2000 was the last full
trading day prior to Fairfield's announcement that it was engaged in preliminary
discussions concerning a possible merger or other transaction with an
undisclosed company. November 1, 2000 was the last full trading day prior to the
public announcement of the merger. [ ], 2001 was the last full trading
day prior to the printing of this proxy statement-prospectus.
<TABLE>
<CAPTION>
CD FAIRFIELD
COMMON STOCK COMMON STOCK
------------------------------------ ----------------------------------
HIGH LOW CLOSE HIGH LOW CLOSE
---------- ---------- ---------- ---------- --------- ---------
(DOLLARS PER SHARE) (DOLLARS PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
October 17, 2000.... 9 5/8 8 7/8 8 15/16 11 7/8 10 3/4 11 5/8
November 1, 2000.... 12 7/16 11 5/8 12 1/16 13 3/16 12 1/4 13 1/8
[ ],
2001............... [] [] [] [] [] []
</TABLE>
On [ ], 2001, there were approximately [ ] holders of record
of Fairfield common stock.
HISTORICAL MARKET PRICES AND DIVIDENDS
The following table sets forth, for the periods indicated, the high and low
sale prices per share of CD common stock and Fairfield common stock on the New
York Stock Exchange, based on published financial sources.
<TABLE>
<CAPTION>
CD FAIRFIELD
COMMON STOCK COMMON STOCK(1)
------------------------------------------- -------------------------------------------
CALENDAR PERIOD HIGH LOW HIGH LOW
--------------- -------------------- -------------------- -------------------- --------------------
(DOLLARS PER SHARE)
<S> <C> <C> <C> <C>
Fiscal 1998 (ended
December 31, 1998)
First Quarter..... 41 1/2 32 1/8 23 3/8 16 15/32
Second Quarter.... 41 11/16 17 24 7/8 16 11/16
Third Quarter..... 22 7/8 10 1/16 19 9
Fourth Quarter.... 20 3/4 6 1/2 12 3/16 6 1/2
Fiscal 1999 (ended
December 31, 1999)
First Quarter..... 22 9/16 14 7/8 11 15/16 7
Second Quarter.... 21 1/16 15 3/8 17 1/8 8 5/8
Third Quarter..... 22 5/8 17 16 11/16 10 3/4
Fourth Quarter.... 26 15/16 13 5/8 13 1/8 9 5/8
Fiscal 2000 (ending
December 31, 2000)
First Quarter..... 26 5/16 15 5/8 12 15/16 7 1/2
Second Quarter.... 19 1/4 11 27/32 9 5/16 7 1/2
Third Quarter..... 14 13/16 10 1/2 10 3/4 6 7/8
Fourth Quarter
(through
December 11,
2000)........... 12 3/4 8 1/8 14 7/16 8 3/4
</TABLE>
------------------------
(1) The share prices have been adjusted for the Fairfield two-for-one stock
split effected January 30, 1998.
11
<PAGE>
DIVIDEND POLICY. Both Cendant and Fairfield have historically not paid
dividends on their common stock and do not expect to pay any dividends in the
foreseeable future. In addition, the terms of some of Fairfield's existing debt
agreements limit its ability to pay dividends on Fairfield common stock.
POST-MERGER DIVIDEND POLICY. Following the merger, the declaration of
dividends will be at the discretion of the Cendant board of directors and will
be determined after consideration of various factors, including, without
limitation, the earnings and financial condition of Cendant and its
subsidiaries. Cendant expects to retain its earnings for the development and
expansion of its business, including acquisitions, and the repayment of
indebtedness and does not anticipate paying dividends on CD common stock in the
foreseeable future.
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CENDANT
The selected historical consolidated statement of operations data for the
years ended December 31, 1999, 1998, and 1997 and the balance sheet data as of
December 31, 1999 and 1998 are derived from Cendant's audited consolidated
financial statements and accompanying notes. The selected historical
consolidated statement of operations data for the years ended December 31, 1996
and 1995 and the balance sheet data as of December 31, 1997, 1996 and 1995 are
derived from Cendant's unaudited consolidated financial data included in a
Current Report on Form 8-K dated November 28, 2000. The selected historical
consolidated financial data as of and for the nine months ended September 30,
2000 and 1999, are derived from Cendant's unaudited consolidated condensed
financial statements. You should read this table in conjunction with Cendant's
restated consolidated financial statements at December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 filed in a Current
Report on Form 8-K dated November 28, 2000 and Cendant's unaudited consolidated
condensed financial statements at September 30, 2000 and for the nine months
ended September 30, 2000 and 1999, which are incorporated by reference into this
proxy statement-prospectus. See "Where You Can Find More Information" on pages
[ ] through [ ].
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
(UNAUDITED) YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
NET REVENUES.......................... $ 2,962 $ 3,427 $ 4,521 $ 4,465 $ 3,553 $ 2,559 $ 1,998
------- ------- ------- ------- ------- ------- -------
Operating expense..................... 994 1,189 1,605 1,652 1,130 994 855
Marketing and reservation expense..... 451 471 596 622 623 522 391
General and administrative expense.... 353 429 537 544 537 269 212
Depreciation and amortization
expense............................. 244 259 347 303 222 134 78
Other charges......................... 83(1) 47(2) 2,947(3) 838(4) 701(5) -- --
Interest expense, net................. 85 153 196 112 51 12 16
Net gain (loss) on dispositions of
businesses.......................... (7) 799 967 -- -- -- --
Provision (benefit) for income
taxes............................... 234 386 (468) 135 207 262 181
Minority interest, net of tax......... 61 46 61 51 -- -- --
------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM CONTINUING
OPERATIONS.......................... $ 450 $ 1,246 $ (333) $ 208 $ 82 $ 366 $ 265
======= ======= ======= ======= ======= ======= =======
INCOME (LOSS) FROM CONTINUING
OPERATIONS PER SHARE OF CD COMMON
STOCK:
Basic............................... $ 0.63 $ 1.63 $ (0.44) $ 0.25 $ 0.10 $ 0.48 $ 0.38
Diluted............................. 0.61 1.53 (0.44) 0.24 0.10 0.45 0.36
FINANCIAL POSITION
Total assets.......................... $14,586 $14,281 $14,531 $19,421 $13,453 $12,152 $ 7,944
Long-term debt........................ 2,074 3,344 2,445 3,363 1,246 780 320
Assets under management and mortgage
programs............................ 3,018 3,326 2,726 7,512 6,444 5,729 4,956
Debt under management and mortgage
programs............................ 2,143 2,794 2,314 6,897 5,603 5,090 4,428
Mandatorily redeemable preferred
securities issued by subsidiary
holding solely senior debentures
issued by Cendant................... 1,681 1,476 1,478 1,472 -- -- --
Mandatorily redeemable preferred
interest in a subsidiary............ 375 -- -- -- -- -- --
Stockholders' equity.................. 2,690 3,849 2,206 4,836 3,921 3,956 1,898
</TABLE>
------------------------------
(1) Represents charges of (i) $86 million ($57 million, after tax, or $0.07 per
diluted share) in connection with restructuring and other initiatives,
(ii) $20 million ($12 million, after tax, or $0.02 per diluted share) in
connection with litigation asserting claims associated with accounting
irregularities in the former business units of CUC International and outside
of Cendant's principal common stockholder class action lawsuit,
(iii) $15 million ($9 million, after tax, or $0.01 per diluted share) for
investigation related costs, and (iv) $3 million ($2 million, after tax) in
connection with the postponement of the initial public offering of Move.com
common stock. Such charges were partially offset by a non-cash credit of
$41 million ($26 million,
13
<PAGE>
after tax, or $0.03 per diluted share) in connection with a change to the
original estimate of the number of Rights to be issued in connection with
Cendant's perpetual redeemable income debt ("PRIDES") settlement resulting
from unclaimed and uncontested Rights.
(2) Represent charges of (i) $23 million ($15 million, after tax, or $0.02 per
diluted share) in connection with the transition of Cendant's lodging
franchisees to a Cendant sponsored property management system,
(ii) $13 million ($8 million, after tax, or $0.01 per diluted share) for
investigation related costs, (iii) $7 million ($4 million, after tax)
related to the termination of a proposed acquisition, and (iv) $5 million
($4 million, after tax) principally related to the consolidation of European
call centers in Cork, Ireland. Such charges were partially offset by an
unusual credit of $1 million ($1 million, after tax) recorded in connection
with the sale of a Cendant subsidiary.
(3) Represents charges of (i) $2,894 million ($1,839 million, after tax, or
$2.45 per diluted share) associated with the preliminary agreement to settle
Cendant's principal shareholder securities class action suit,
(ii) $7 million ($4 million, after tax, or $0.01 per diluted share) in
connection with the termination of the proposed acquisition of RAC Motoring
Services, (iii) $21 million ($13 million, after tax, or $0.02 per diluted
share) of investigation-related costs, (iv) $23 million ($15 million, after
tax, or $0.02 per diluted share) of additional charges to fund an
irrevocable contribution to an independent technology trust responsible for
completing the transition of Cendant's lodging franchises to a Cendant
sponsored property management system, and (v) $2 million ($1 million, after
tax) of costs primarily resulting from the consolidation of European call
centers in Cork, Ireland.
(4) Represents charges of (i) $351 million ($228 million, after tax, or $0.26
per diluted share) associated with the agreement to settle Cendant's PRIDES
securities class action suit, (ii) $433 million ($282 million, after tax, or
$0.32 per diluted share) for the costs of terminating the proposed
acquisitions of American Bankers Insurance Group, Inc. and Providian Auto
and Home Insurance Company and (iii) $121 million ($79 million, after tax,
or $0.09 per diluted share) for investigation-related costs, including
incremental financing costs, and executive terminations. Such charges are
partially offset by a net credit of $67 million ($44 million, after tax, or
$0.05 per diluted share) associated with changes to the estimate of
previously recorded merger-related costs and other unusual charges.
(5) Represents merger-related costs and other unusual charges of $701 million
($503 million, after tax, or $0.59 per diluted share) primarily associated
with the merger of HFS Incorporated and CUC International Inc. and the
merger with PHH Corporation in April 1997.
14
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA OF CENDANT
The unaudited pro forma financial data of Cendant presented below as of and
for the nine months ended September 30, 2000 and for the year ended
December 31, 1999 gives effect to the planned acquisition of Avis and should be
read in conjunction with the pro forma information for Cendant filed in a
Current Report on Form 8-K dated November 17, 2000, incorporated by reference
into this proxy statement-prospectus. Cendant has completed or announced other
acquisitions (including the acquisition of Fairfield) and dispositions which are
not significant and, accordingly, have not been included in the accompanying pro
forma financial data. See "Where You Can Find More Information" on pages [ ]
through [ ].
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2000 1999
--------------- --------------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
OPERATIONS
Net Revenues................................................ $ 4,942 $ 6,778
------- -------
Direct operating expense.................................... 1,544 2,310
Vehicle depreciation and lease charges...................... 511 667
Selling, general and administrative expense................. 1,286 1,654
Depreciation and amortization expense....................... 304 396
Other charges............................................... 83 2,947
Interest expense, net....................................... 324 411
Net gain (loss) on dispositions of businesses............... (42) 86
Provision (benefit) for income taxes........................ 308 (423)
Minority interest, net of tax............................... 61 61
------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................... $ 479 $(1,159)
======= =======
INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE OF CD
COMMON STOCK:
Basic..................................................... $ 0.67 $ (1.54)
Diluted................................................... 0.64 (1.54)
FINANCIAL POSITION
Total assets................................................ $24,270
Long-term debt.............................................. 2,679
Assets under management and mortgage programs............... 6,032
Debt under management and mortgage programs................. 5,663
Mandatorily redeemable preferred securities issued by
subsidiary holding solely senior debentures issued by
Cendant................................................... 1,681
Mandatorily redeemable preferred interest in a subsidiary... 375
Stockholders' equity........................................ 2,690
</TABLE>
15
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF FAIRFIELD
The selected historical consolidated financial data of Fairfield presented
below as of and for the year ended December 31 for each of the fiscal years in
the five-year period ended December 31, 1999, are derived from Fairfield's
audited consolidated financial statements and accompanying notes. The selected
historical consolidated financial data as of and for the nine months ended
September 30, 2000, and 1999 are derived from Fairfield's unaudited consolidated
condensed financial statements. You should read this table in conjunction with
Fairfield's consolidated financial statements at December 31, 1999, and 1998,
and for each of the three years in the period ended December 31, 1999, and
Fairfield's unaudited consolidated condensed financial statements at
September 30, 2000, and for the nine months ended September 30, 2000, and 1999,
which are incorporated by reference into this proxy statement-prospectus. See
"Where You Can Find More Information" on pages [ ] through [ ].
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Vacation ownership interests, net.................... $ 336 $ 283 $ 371 $ 301 $ 256 $ 195 $ 126
Resort management.................................... 38 33 44 37 28 27 22
Interest............................................. 23 22 29 34 37 29 24
Net interest income and fees from qualifying special
purpose entities................................... 19 15 21 10 -- -- --
Other................................................ 24 19 27 26 25 23 28
----- ----- ----- ----- ----- ----- -----
$ 440 $ 372 $ 492 $ 408 $ 346 $ 274 $ 200
===== ===== ===== ===== ===== ===== =====
Net earnings......................................... $ 50 $ 43 $ 57 $ 44 $ 21 $ 22 $ 14
===== ===== ===== ===== ===== ===== =====
Earnings before merger costs and extraordinary
items.............................................. $ 47 $ 43 $ 57 $ 44 $ 34 $ 22 $ 14
===== ===== ===== ===== ===== ===== =====
Net earnings per share:
Basic.............................................. $1.19 $0.98 $1.29 $0.98 $0.48 $0.54 $0.37
===== ===== ===== ===== ===== ===== =====
Diluted............................................ $1.14 $0.95 $1.25 $0.93 $0.46 $0.51 $0.35
===== ===== ===== ===== ===== ===== =====
Earnings per share before merger costs and
extraordinary items:
Basic.............................................. $1.12 $0.98 $1.29 $0.98 $0.77 $0.54 $0.37
===== ===== ===== ===== ===== ===== =====
Diluted............................................ $1.07 $0.95 $1.25 $0.93 $0.73 $0.51 $0.35
===== ===== ===== ===== ===== ===== =====
Weighted average shares outstanding:
Basic.............................................. 42 44 44 45 44 41 38
===== ===== ===== ===== ===== ===== =====
Diluted............................................ 44 46 46 47 46 43 40
===== ===== ===== ===== ===== ===== =====
BALANCE SHEET DATA (AT PERIOD END):
Receivables, net..................................... $ 293 $ 233 $ 234 $ 203 $ 297 $ 228 $ 188
Total assets......................................... 619 482 499 431 464 386 320
Total financing arrangements......................... 106 56 54 79 170 113 118
Stockholders' equity................................. 308 268 283 223 187 162 100
</TABLE>
------------------------------
- In 1998, Fairfield incorporated two qualifying special purpose entities for
the specific purpose of purchasing contracts receivable from Fairfield. During
1999 and 1998, Fairfield sold $133.2 million and $212.7 million, respectively,
of contracts receivable to the qualifying special purpose entities. At
December 31, 1999 and 1998, the qualifying special purpose entities held
contracts receivable totaling $225.9 million and $172.1 million, respectively,
with related borrowings of $187.6 million and $142.9 million, respectively.
- In 1997, Fairfield consummated the merger with Vacation Break U.S.A., Inc.
which was accounted for as a pooling of interests and, accordingly, all prior
period consolidated financial information has been restated as if the merger
took place at the beginning of the earliest period presented. In conjunction
with the merger, Fairfield recorded merger costs of $16.9 million
($12.8 million after taxes), of which $3.6 million ($2.2 million after taxes)
related to the extraordinary loss resulting from the early extinguishment of
substantially all of Vacation Break's debt.
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical and pro forma per share
data of Cendant and certain historical and equivalent pro forma per share data
of Fairfield. The pro forma per share data is based on Cendant exchanging 50% of
the issued and outstanding shares of Fairfield common stock for cash and 50% of
the issued and outstanding shares of Fairfield common stock for CD common stock.
The pro forma per share data presented below for Cendant gives effect to both
the planned acquisition of Avis as well as the acquisition of Fairfield assuming
the acquisitions were consummated on January 1, 1999. The information set forth
below should be read in conjunction with the selected historical financial data
of Cendant and Fairfield included elsewhere in this proxy statement-prospectus
and the pro forma information of Cendant, which gives effect to the Avis
acquisition, filed in Cendant's Current Report on Form 8-K dated November 17,
2000, which is incorporated by reference into this proxy statement-prospectus.
See "Where You Can Find More Information" on pages [ ] through [ ].
<TABLE>
<CAPTION>
FAIRFIELD
CENDANT FAIRFIELD CENDANT EQUIVALENT
HISTORICAL HISTORICAL PRO FORMA PRO FORMA(2)
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
(ASSUMING AVERAGE TRADING PRICE OF CD COMMON STOCK OF
$7.00)
Diluted earnings per share from continuing operations:
For the year ended December 31, 1999................... $(0.44) $1.25 $(1.42) $(3.04)
For the nine months ended September 30, 2000........... $ 0.61 $1.14 $ 0.64 $ 1.37
Cash dividends per share:
For the year ended December 31, 1999................... -- -- -- --
For the nine months ended September 30, 2000........... -- -- -- --
Book value per share(1):
As of December 31, 1999................................ $ 3.12 $6.34 $ 3.36 $ 7.19
As of September 30, 2000............................... $ 3.69 $7.28 $ 3.88 $ 8.32
(ASSUMING AVERAGE TRADING PRICE OF CD COMMON STOCK OF
$12.00)
Diluted earnings per share from continuing operations:
For the year ended December 31, 1999................... $(0.44) $1.25 $(1.45) $(1.82)
For the nine months ended September 30, 2000........... $ 0.61 $1.14 $ 0.66 $ 0.82
Cash dividends per share:
For the year ended December 31, 1999................... -- -- -- --
For the nine months ended September 30, 2000........... -- -- -- --
Book value per share(1):
As of December 31, 1999................................ $ 3.12 $6.34 $ 3.44 $ 4.30
As of September 30, 2000............................... $ 3.69 $7.28 $ 3.98 $ 4.98
(ASSUMING AVERAGE TRADING PRICE OF CD COMMON STOCK OF
$13.5960)
Diluted earnings per share from continuing operations:
For the year ended December 31, 1999................... $(0.44) $1.25 $(1.46) $(1.72)
For the nine months ended September 30, 2000........... $ 0.61 $1.14 $ 0.66 $ 0.78
Cash dividends per share:
For the year ended December 31, 1999................... -- -- -- --
For the nine months ended September 30, 2000........... -- -- -- --
Book value per share(1):
As of December 31, 1999................................ $ 3.12 $6.34 $ 3.46 $ 4.07
As of September 30, 2000............................... $ 3.69 $7.28 $ 4.00 $ 4.70
</TABLE>
--------------------------
(1) Historical and pro forma book value per share for Cendant and the historical
book value per share for Fairfield is computed by dividing total
stockholders' equity by the number of shares issued and outstanding at the
end of each period.
(2) The Fairfield equivalent pro forma per share data is calculated based on
Cendant pro forma per share data, and an exchange ratio of 2.1428, 1.2500
and 1.1768 of shares of CD common stock for each share of Fairfield common
stock assuming an average trading price of CD common stock of $7.00, $12.00
and $13.5960, respectively.
17
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROXY
STATEMENT-PROSPECTUS (INCLUDING THE MATTERS ADDRESSED IN "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" ON PAGES [ ] THROUGH [ ]), YOU SHOULD CAREFULLY
CONSIDER THE MATTERS DESCRIBED BELOW IN DETERMINING WHETHER TO APPROVE THE
MERGER AGREEMENT.
YOU MAY RECEIVE A FORM OF CONSIDERATION DIFFERENT FROM WHAT YOU ELECT
If you make the cash election in exchange for your Fairfield common stock,
you may not receive the entire amount of the merger consideration in cash. Under
the merger agreement, Cendant is required to pay only a certain amount of the
merger consideration in cash. If too many Fairfield stockholders make the cash
election so that the available cash is oversubscribed, then you may receive a
portion of the merger consideration in CD common stock. Cendant also has the
right to elect to substitute cash for CD common stock under the terms of the
merger agreement. As a result, Fairfield stockholders who choose the stock
election may not receive the entire amount of the merger consideration in CD
common stock.
THE VALUE OF CD COMMON STOCK TO BE RECEIVED IN THE MERGER MAY DECLINE BELOW
$15.00
Upon completion of the merger, each share of Fairfield common stock may be
converted, at the holder's election, into the right to receive 1.2500 shares of
CD common stock. This exchange ratio is subject to adjustment as described in
the merger agreement. The exchange ratio will be adjusted up to 2.1428 shares of
CD common stock if the average trading price of CD common stock during the
applicable 20-trading day period drops below $12.00. However, if the final
average trading price drops below $7.00, the exchange ratio will remain at
2.1428 and the value of those shares of CD common stock will be less than
$15.00.
The market price of CD common stock when the merger takes place may vary
from the market price at the date of this proxy statement-prospectus and at the
date of the special meeting. For example, during the 12-month period ending on
[ ], 2001 (the most recent practicable date prior to the printing of this
proxy statement-prospectus), the closing sale price of CD common stock varied
from a low of $[ ] to a high of $[ ] and ended that period at $[ ].
Variations like these may occur as a result of changes in the business,
operations or prospects of Cendant or the combined company, market assessments
of the likelihood that the merger will be completed and the timing of the
merger's completion, regulatory considerations, general market and economic
conditions and other factors. At the time of the special meeting, you will not
know the exact value of the CD common stock that you will receive when the
merger is completed. However, you will know the exact exchange ratio for the CD
common stock at the time you are required to make the stock election or the cash
election.
MARKET RISK OF CD COMMON STOCK
The market prices of CD common stock and of securities of the publicly-held
companies in the industry in which Cendant operates have shown volatility and
sensitivity in response to many factors. These factors include general market
trends, public communications regarding litigation and judicial decisions,
legislative or regulatory actions, pricing trends, competition, earnings,
membership reports of particular industry participants and acquisition activity.
Cendant cannot assure the level or stability of the price of its securities at
any time or the impact of the foregoing or any other factors on such prices.
We urge you to obtain current market quotations for CD common stock.
18
<PAGE>
THE PRICE OF CD COMMON STOCK IS AFFECTED BY FACTORS DIFFERENT FROM THE FACTORS
AFFECTING THE PRICE OF FAIRFIELD COMMON STOCK
Cendant's business differs significantly from that of Fairfield, and
Cendant's results of operations, as well as the market price of CD common stock,
are affected by factors that differ from those that affect Fairfield's results
of operations and the price of Fairfield's common stock.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT THE MARKET PRICE AND
FUTURE BUSINESS AND OPERATIONS OF FAIRFIELD
If the merger is not completed, the market price of Fairfield common stock
may be affected negatively by the following:
- the price of Fairfield common stock may decline to the extent that the
current market price reflects a market assumption that the merger will be
completed;
- Fairfield may be required to pay Cendant a termination fee of
$32 million;
- the option granted to Cendant by Fairfield pursuant to the stock option
agreement may be exercised resulting in a substantial decrease in the
ownership percentage held by current Fairfield stockholders, which could
depress Fairfield's market price and may make another business combination
involving Fairfield more difficult;
- costs related to the merger, such as legal, accounting and financial
printing fees, as well as a portion of the financial advisory fees, must
be paid even if the merger is not completed;
- the diversion of management's attention from the day-to-day business
operations of Fairfield and the unavoidable disruption to its employees
and its relationships with its customers and suppliers during the period
before completion of the merger may make it difficult to regain financial
and market position if the merger does not occur; and
- if the merger is terminated and Fairfield's board of directors determines
to seek another merger or business combination, there can be no assurance
that it will be able to find a partner on terms similar to those provided
for in this merger agreement. In addition, while the merger agreement is
in effect, subject to very narrowly defined exceptions, Fairfield is
prohibited from soliciting, initiating, encouraging or entering into
certain extraordinary transactions, such as a merger, sale of assets or
other business combination, with any third party.
FAIRFIELD MUST OBTAIN ALL NECESSARY THIRD PARTY CONSENTS AND REGULATORY
APPROVALS FROM GOVERNMENTAL ENTITIES
The merger agreement requires that Fairfield obtain several consents from
third parties prior to completion of the merger. Cendant may waive this
requirement in its discretion with respect to one or more of such consents. If
Cendant waives Fairfield's requirement to obtain one or more of these third
party consents and they are not obtained, the third party entitled to give the
consent may have a claim against the surviving corporation, which may result in
adverse financial and legal consequences to the surviving corporation.
The marketing and sale of vacation ownership interests, the development of
real estate and other Fairfield operations are subject to extensive regulation
by the states in which the Fairfield resorts are located and in which the
vacation ownership interests are marketed and sold. Many states have adopted
specific laws and regulations regarding the sale of lots and vacation ownership
interests, telemarketing and other aspects of Fairfield's activities. Fairfield
and Cendant believe that they will receive the requisite timeshare regulatory
consents, approvals or exemptions for the merger. However, Fairfield cannot
guarantee that these consents, approvals or exemptions will be obtained on a
timely basis or on satisfactory terms or that litigation challenging such
consents, approvals or exemptions will not arise.
19
<PAGE>
The delay or denial of the requisite consents, approvals or exemptions could
affect the completion of the merger.
FAILURE TO INTEGRATE FAIRFIELD SUCCESSFULLY INTO CENDANT'S OPERATIONS COULD
REDUCE CENDANT'S PROFITABILITY
The integration of the operations of Fairfield will require significant
efforts from both Cendant and Fairfield. Cendant may find it difficult to
integrate the operations of Fairfield. Personnel may leave or be terminated
because of the merger. Such employee terminations or resignations may require
Cendant to make severance or other payments and may result in related
litigation. In addition, Cendant's management may have its attention diverted
while trying to integrate Fairfield and other acquisitions. Such diversion of
management's attention or difficulties in the transition process could have a
material adverse impact on Cendant. If Cendant is not able to integrate the
operations of Fairfield successfully, Cendant's expectations of future results
of operations may not be met.
THE MERGER MAY ADVERSELY AFFECT FAIRFIELD'S ABILITY TO ATTRACT AND RETAIN KEY
EMPLOYEES
Current and prospective Fairfield employees may experience uncertainty about
their future roles after the merger. This uncertainty may adversely affect
Fairfield's ability to attract and retain key management, sales, marketing and
technical personnel. In addition, current and prospective Fairfield employees
may determine that they do not desire to work for Cendant for a variety of
reasons.
DISCOVERY OF ACCOUNTING IRREGULARITIES AND RELATED LITIGATION AND GOVERNMENT
INVESTIGATIONS
Cendant was created in December 1997, through the merger of HFS Incorporated
into CUC International with CUC surviving and changing its name to Cendant
Corporation. On April 15, 1998, Cendant announced that in the course of
transferring responsibility for Cendant's accounting functions from Cendant
personnel associated with CUC prior to the merger to Cendant personnel
associated with HFS before the merger and preparing for the reporting of first
quarter 1998 financial results, Cendant discovered accounting irregularities in
some of the CUC business units. As a result, Cendant, together with its counsel
and assisted by auditors, immediately began an intensive investigation.
As a result of the findings of the investigations, Cendant restated its
previously reported financial results for 1997, 1996 and 1995 and the six months
ended June 30, 1998.
Since the April 15, 1998 announcement of the discovery of accounting
irregularities in the former business units of CUC, approximately 70 lawsuits
claiming to be class actions, three lawsuits claiming to be brought derivatively
on Cendant's behalf and several individual lawsuits and arbitration proceedings
have commenced in various courts and other forums against Cendant and other
defendants by or on behalf of persons claiming to be stockholders of Cendant and
persons claiming to have purchased or otherwise acquired securities or options
issued by CUC or Cendant between May 1995 and August 1998.
The Securities and Exchange Commission, or SEC, and the United States
Attorney for the District of New Jersey are also conducting investigations
relating to the matters referenced above. As a result of the findings from
Cendant's internal investigations, Cendant made all adjustments considered
necessary by Cendant, which are reflected in its previously filed restated
financial statements for the years ended December 31, 1997, 1996 and 1995 and
for the six months ended June 30, 1998. On June 14, 2000, pursuant to an offer
of settlement made by Cendant, the SEC issued an Order Instituting Public
Administrative Proceedings Pursuant to Section 21C of the Securities Exchange
Act of 1934, Making Findings and Imposing a Cease and Desist Order. In such
Order, the SEC found that Cendant had violated certain financial reporting
provisions of the Securities Exchange Act of 1934 and ordered Cendant to cease
and desist from committing any future violations of such provisions. No
financial penalties were imposed against Cendant.
20
<PAGE>
On December 7, 1999, Cendant announced that it reached a preliminary
agreement to settle the principal securities class action pending against
Cendant in the U.S. District Court in Newark, New Jersey, brought on behalf of
purchasers of all Cendant and CUC publicly traded securities, other than PRIDES,
between May 1995 and August 1998. Under the settlement agreement, Cendant would
pay the class members approximately $2.85 billion in cash. The definitive
settlement document was approved by the U.S. District Court by order dated
August 14, 2000. Certain persons who objected to various aspects of the
settlement have appealed the District Court's orders approving the settlement,
the plan of allocation of the settlement fund and awarding of attorneys' fees
and expenses to counsel for the lead plaintiffs. No appeals challenging the
fairness of the $2.85 billion settlement amount were filed. The U.S. Court of
Appeals for the Third Circuit recently issued a briefing schedule for the
appeals. No date for oral arguments of the appeals has been fixed. Accordingly,
Cendant will not be required to fund the settlement amount of $2.85 billion for
some time. However, the settlement agreement required Cendant to post collateral
in the form of credit facilities and/or surety bonds by November 13, 2000, which
it has done.
The settlement does not encompass all litigation asserting claims associated
with the accounting irregularities. Cendant does not believe that it is feasible
to predict or determine the final outcome or resolution of these unresolved
proceedings. An adverse outcome from such unresolved proceedings could be
material with respect to earnings in any given reporting period. However, as
Cendant has previously stated in its public filings, Cendant does not believe
that the impact of such unresolved proceedings should result in a material
liability to Cendant in relation to its financial position or liquidity.
21
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement-prospectus and the documents that are made part of this
proxy statement-prospectus by reference to other documents filed with the
Securities and Exchange Commission include various forward-looking statements
about Cendant and Fairfield that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future financial
performance, business strategy, projected plans and objectives of Cendant and
Fairfield set forth under:
- "Questions and Answers About the Merger and the Special Meeting;"
- "Summary;"
- "Financial Summary;" and
- "The Merger."
Statements preceded by, followed by or that otherwise include the words
"believes", "expects", "anticipates", "intends", "estimates", "plans", "may
increase", "may fluctuate" and similar expressions or future or conditional
verbs such as "will", "should", "would" and "could" are generally forward-
looking in nature and not historical facts. You should understand that the
following important factors, in addition to those discussed in Fairfield's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and
Cendant's Quarterly Report on Form 10-Q for the quarter ended September 30,
2000, which are incorporated by reference into this proxy statement-prospectus,
could affect the future results of Cendant following the merger, and could cause
results to differ materially from those expressed in such forward-looking
statements:
- the effect of economic conditions and interest rates on a national,
regional or international basis;
- the resolution or outcome of Cendant's unresolved pending litigation
relating to the previously announced accounting irregularities and other
related litigation;
- the performance of Cendant's businesses following the pending acquisition
of Fairfield and other acquisitions by Cendant;
- the timing of the implementation of changes in operations to achieve
enhanced earnings or effect cost savings;
- the ability of Cendant and Fairfield to integrate their operations
successfully, the compatibility of the operating systems of the combining
companies, and the degree to which existing administrative and back-office
functions and costs of Cendant and Fairfield are complementary or
redundant;
- the ability to satisfy all conditions precedent to Cendant's acquisition
of Fairfield (including stockholder and various regulatory approvals);
- competitive and pricing pressures in the vacation ownership and travel
industries;
- the financial resources of, and products available to, competitors;
- changes in laws and regulations, including changes in accounting
standards; and
- opportunities that may be presented to and pursued by the combined company
following the merger.
These forward-looking statements involve risks and uncertainties in addition to
the risk factors described under "Risk Factors" on pages [ ] through [ ].
Most of these factors are difficult to predict accurately and are generally
beyond the control of Cendant and Fairfield.
22
<PAGE>
You should consider the areas of risk described above in connection with any
forward-looking statements that may be made by Cendant or Fairfield or anyone
acting for either or both of them. Except for their ongoing obligations to
disclose material information under the federal securities laws, neither Cendant
nor Fairfield undertakes any obligation to release publicly any revisions to any
forward-looking statements, to report events or circumstances after the date of
this proxy statement-prospectus or to report the occurrence of unanticipated
events. For any forward-looking statements contained in this proxy
statement-prospectus, Cendant and Fairfield claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
23
<PAGE>
THE MERGER
THE DISCUSSION IN THIS PROXY STATEMENT-PROSPECTUS OF THE MERGER AND THE
PRINCIPAL TERMS OF THE MERGER AGREEMENT IS SUBJECT TO, AND QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED TO
THIS PROXY STATEMENT-PROSPECTUS AS ANNEX A AND IS INCORPORATED BY REFERENCE INTO
THIS PROXY STATEMENT-PROSPECTUS.
GENERAL
Fairfield is furnishing this proxy statement-prospectus to you in connection
with the solicitation of proxies by the Fairfield board of directors for use at
the special meeting of Fairfield stockholders to be held on [ ],
2001, and at any adjournments or postponements of the special meeting. Cendant
is furnishing this proxy statement-prospectus to you in connection with its
offer to issue shares of CD common stock in exchange for your shares of
Fairfield common stock.
At the special meeting, you will be asked to vote upon a proposal to approve
and adopt the Agreement and Plan of Merger, dated as of November 1, 2000, by and
among Fairfield, Cendant and Grand Slam Acquisition Corp., a subsidiary of
Cendant.
In the merger, other than shares owned by Fairfield, Cendant or Grand Slam
Acquisition Corp., each share of Fairfield common stock issued and outstanding
immediately prior to the effective date of the merger, will be converted,
without any action on the part of the holder of that share, into the right to
receive 1.2500 shares of CD common stock, with cash being paid in lieu of
fractional shares of CD common stock, or $15.00 in cash, in each case subject to
adjustments.
BACKGROUND OF THE MERGER
In the latter part of 1999, under the leadership of a new President and
Chief Executive Officer, Fairfield sought to explore project specific joint
ventures, strategic investments in Fairfield common stock, and various marketing
relationships and alliances with additional companies in the hospitality and
vacation ownership industry. During November 1999, Fairfield representatives met
with representatives of Carnival Corporation to discuss a potential marketing
alliance between the companies. These discussions ultimately led to discussions
concerning a possible business combination. On January 23, 2000, Fairfield and
Carnival entered into a letter of intent regarding a strategic merger of the
companies, which was publicly announced on January 24, 2000. The letter of
intent was terminated and the proposed merger was abandoned by mutual consent of
the parties in February 2000.
Promptly after that termination, Fairfield initiated an internal strategic
review to enhance stockholder value without engaging in a business combination.
As a result of that review, Fairfield expanded its marketing alliances with
Harrah's Entertainment, initiated a marketing alliance with Carnival, and sought
marketing alliances with other recognized companies. Fairfield adopted a stock
repurchase program and sought strategic minority investors.
In July 2000, Fairfield began discussing with Resort Condominiums
International, LLC ("RCI"), a subsidiary of Cendant, the terms of the ongoing
relationship between the two companies. RCI is one of the leading vacation
exchange companies, whose services are available to Fairfield's customers
through an annual membership. See "Existing Business Relationships between
Cendant and Fairfield" on page [ ]. The initial discussions focused on
Fairfield taking advantage of additional services offered by RCI and an
extension of the existing affiliation arrangement with RCI.
On August 4, 2000, James G. Berk, President and Chief Executive Officer, and
other senior members of the management of Fairfield met in Orlando, Florida,
with Ken May, President and Chief Executive Officer, and other representatives
of RCI, to discuss enhancing Fairfield's use of RCI's resources and services. At
the conclusion of that meeting, Mr. May indicated to Mr. Berk that it might
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be advantageous for Fairfield to meet with RCI's parent company, Cendant, to
discuss opportunities which might exist with Cendant's other businesses.
During the following week, Fairfield's management responded to numerous
questions from Cendant concerning Fairfield's business. On or about August 7,
2000, Mr. May contacted Mr. Berk to schedule a meeting between Fairfield and
Cendant executives. On August 9, 2000, Mr. Berk and other members of Fairfield's
management met with Stephen P. Holmes, Vice Chairman of Cendant, and other
members of Cendant's management to discuss a broader relationship between the
two companies. On August 11, 2000, Cendant and Fairfield entered into a
confidentiality and standstill agreement.
On August 13 and 14, 2000, in Orlando, Florida, Mr. Berk and other senior
management of Fairfield met with representatives of Cendant and RCI. The meeting
focused on the companies' goals and possible benefits of combining RCI's and
Fairfield's operations.
On August 23, 2000, Messrs. Holmes and May contacted Mr. Berk and indicated
Cendant's willingness to pursue discussions concerning a possible business
combination transaction in the $12.00 to $14.00 range for each share of
Fairfield common stock.
The Fairfield board of directors held its regularly scheduled meeting on
August 23-24, 2000 in Orlando. At that meeting, Fairfield's management reported
on the nature of the prior meetings with Cendant and RCI and the proposed
pricing range. The Fairfield board of directors rejected the proposed pricing
parameters, but authorized management to continue the discussions if more
favorable terms were proposed. Mr. Berk relayed the board's decision to Cendant.
On August 30, 2000, Henry R. Silverman, Chairman, Chief Executive Officer
and President of Cendant, Mr. Holmes and David M. Johnson, Senior Executive Vice
President and Chief Financial Officer of Cendant, contacted Mr. Berk by
telephone to pursue further discussions and indicated that the possible range of
values could be increased if appropriate due diligence was confirmed and the
transaction could be structured consistent with Cendant's business objectives.
Mr. Berk reported his conversation to the Fairfield board of directors at a
special meeting held that day. The Fairfield board of directors authorized
management to pursue further discussions with Cendant. Mr. Berk then contacted
Mr. Holmes and informed him that Fairfield was willing to explore further
discussions concerning a possible transaction.
During September 6 through 8, 2000 a series of meetings were held in Orlando
involving members of senior management and persons responsible for Fairfield's
operations and their counterparts at RCI and Cendant, representatives of
Deloitte & Touche LLP, independent auditors of Cendant, a representative of Banc
of America Securities, investment advisors of Cendant, and a representative of
Holland & Knight, special outside vacation ownership counsel of Cendant, to
conduct further due diligence on Fairfield's operations. During the following
two weeks, Fairfield's management responded to numerous requests for additional
information concerning its operations.
During the week of September 18, 2000, Messrs. Holmes and Berk discussed, by
telephone, issues relating to the price at which Cendant might acquire
Fairfield. During September 25 through 28, 2000, representatives of Fairfield
and Cendant participated in multiple meetings in Orlando, at which Fairfield's
management made further presentations concerning Fairfield's operations.
Following these meetings, Cendant and Fairfield agreed to meet on
October 3, 2000 to continue discussing the possible acquisition of Fairfield by
Cendant. The Fairfield board of directors met on September 28, 2000 in a special
telephonic meeting to discuss the October 3, 2000 meeting. Bryan Langton,
Chairman of the Board of Fairfield, Ilan Kaufthal, a Director of Fairfield, and
Mr. Berk were selected to attend the meeting on behalf of Fairfield.
On September 29, 2000, senior members of the management of Cendant met with
Mr. Silverman to review in detail the financial implications of a possible
acquisition of Fairfield.
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On October 3, 2000, senior members of the management of Cendant and
Fairfield met in New York City to discuss the parameters of a possible
transaction. Pricing was discussed in the range of $15.00 per share of Fairfield
common stock with half of the consideration payable in cash. Fairfield and
Cendant also discussed the potential for the price to increase up to $16.00 per
share, depending on Cendant's stock price, and that the price would not fall
below $15.00 per share, unless Cendant's stock price fell below $7.00. The
proposed price was subject to verification of Cendant's extensive due diligence,
which continued through the signing of the merger agreement. Alternative
structures were also identified and discussed at the meeting.
On October 3, 2000, the Fairfield board of directors held a special
telephonic meeting at which Messrs. Langton, Kaufthal and Berk reported on the
discussions with Cendant. The Fairfield board of directors, after numerous
questions and additional discussion, authorized management to continue
discussions with Cendant concerning a possible transaction with Cendant.
On October 5, 2000, representatives of Cendant, along with representatives
of its outside legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP, met in
New York City with Messrs. Berk and Kaufthal, other members of Fairfield's
management, representatives of Fairfield's financial advisors, Stephens and Bear
Stearns, and Fairfield's outside counsel, Jones, Day, Reavis & Pogue, to further
discuss the terms of the transaction, structural matters and possible timing.
Cendant's remaining due diligence was also discussed and Cendant provided an
expanded due diligence request to Fairfield. Additional negotiations regarding
price and structure occurred on October 11, 2000 at Skadden Arps' offices in New
York and throughout the next two weeks by telephone.
Drafts of the merger agreement and voting agreement were distributed by
Skadden, Arps to Fairfield's management and its legal counsel on October 8 and
during the week of October 9, respectively. During the following week, numerous
conferences were held to conduct additional due diligence reviews, to discuss
financial, structural, legal and other terms of the potential merger, and to
review the terms of the merger agreement and the voting agreement.
On October 16, 2000, the Fairfield board of directors held a special
telephonic meeting. At that meeting, Fairfield's management updated the board on
the primary issues in the draft agreements and the status of the discussions.
Bear Stearns and Stephens also presented a report on their preliminary financial
diligence concerning Cendant. The Fairfield board of directors discussed
extensively the scope of representations and warranties and their impact on the
conditions to closing, the timing of the transaction, and Cendant's request for
the voting agreement.
During the following two weeks, the management of each of Fairfield and
Cendant and their respective legal, financial and accounting advisors continued
through numerous conferences and meetings to complete their due diligence and
finalize the structure of the possible transaction. During this period, Cendant
informed Fairfield that it was unwilling to accept the revised terms of the
voting agreement as proposed by the stockholders without also obtaining the
option from Fairfield. Several drafts of the merger, voting and stock option
agreements were exchanged during this period.
On October 24 and 25, 2000, representatives of Cendant and Fairfield met
again at Skadden Arps' and Cendant's offices in New York City to discuss final
issues relating to the merger agreement and related documents.
At a special telephonic meeting of the Cendant board of directors, conducted
on October 25, 2000, Mr. Silverman outlined for the Cendant board of directors
the terms of the proposed merger transaction with Fairfield. Following
Mr. Silverman's presentation and a discussion of the terms and conditions of the
merger agreement and related documents, the Cendant board of directors approved
the merger agreement, the merger and the related documents. The reasons for the
Cendant board of directors' approval are summarized below.
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On October 29, 2000, the Fairfield board of directors held a special
telephonic meeting to obtain additional information concerning the resolution of
issues and to provide guidance concerning outstanding issues under negotiation.
The presentations and discussions at the meeting were wide ranging and detailed
and included discussions concerning (i) the effect of the spin-off to
stockholders of Fairfield or the transfer to a third party of Fairfield's real
estate development assets immediately prior to completion of the merger;
(ii) the conditions to completion of the merger; (iii) the termination fee and
the ability of the Fairfield board of directors to consider a superior proposal;
(iv) the scope and detail of the representations and warranties; (v) the taxable
nature of the transaction; (vi) the detailed disclosure schedules requested by
Cendant; (vii) the voting agreement; (viii) the stock option agreement and its
potential effects; and (ix) the timing to complete the agreements and all
related schedules. The Fairfield board of directors scheduled a follow up
meeting on October 30, 2000.
On October 30, 2000, the Fairfield board of directors held a special
telephonic meeting. At that meeting, Fairfield's litigation counsel, Dechert,
Price & Rhoads, made a presentation regarding certain class action litigation
against Cendant as described in "Risk Factors" on pages [ ] through [ ] and
Messrs. Holmes and James E. Buckman, Vice Chairman and General Counsel of
Cendant, made a presentation regarding the spin-off to Fairfield's stockholders
or the transfer to a third party of Fairfield's real estate development assets.
From October 30 through November 1, 2000, Fairfield's and Cendant's
financial and legal advisors sought to finalize the terms of the merger
agreement and related schedules and to resolve the terms of the voting agreement
and the stock option agreement.
On November 1, 2000, the Fairfield board of directors met by telephone to
consider the final merger agreement and stock option agreement and all related
transactions. At the meeting, Jones Day made a presentation concerning the
Fairfield board of directors' fiduciary duties and an update on the terms of the
merger agreement, the voting agreement and the stock option agreement. Stephens
and Bear Stearns made presentations concerning the fairness of the transaction
and orally delivered their fairness opinions, which were subsequently confirmed
in writing. After considerable discussion of many of the items discussed at the
October 29, 2000 meeting and the resolution of those matters, and after
opportunity for all questions to be addressed, the Fairfield board of directors
unanimously approved the merger. The independent members of the Fairfield board
of directors also unanimously approved the Compensation Committee's bonus
recommendation for Mr. Berk. The reasons for the Fairfield board of directors'
approval are summarized below.
On November 1, 2000, Cendant and Fairfield executed the merger agreement and
the stock option agreement. In addition, Cendant and certain stockholders of
Fairfield executed the voting agreement on the same day. On November 2, 2000,
prior to the opening of the New York Stock Exchange, Cendant and Fairfield
issued press releases relating to the proposed merger.
RATIONALE FOR THE MERGER; RECOMMENDATION OF THE FAIRFIELD BOARD OF DIRECTORS
FAIRFIELD
The Fairfield board of directors has, by unanimous vote of all of the
directors, determined that the merger is in the best interests of Fairfield and
its stockholders. Accordingly, the Fairfield board of directors approved the
merger agreement and recommends that the Fairfield stockholders approve and
adopt the merger agreement. Prior to approving the merger, the Fairfield board
of directors considered the following factors that it considered important to
the merger:
- Fairfield's business plan as an independent company in the context of its
assessment of Fairfield's business, operations, financial position,
personnel and prospects;
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- presentations by, and discussions with, senior management of Fairfield
regarding the terms of the merger agreement, the voting agreement and the
stock option agreement and the results of the due diligence review of
Cendant conducted by Fairfield's management;
- the advice of Bear Stearns and Stephens described below under "Opinions of
Fairfield's Financial Advisors" (pages [ ] through [ ]) and their
opinions to the effect that, subject to the assumptions, conditions and
limitations contained in their opinion letters, the merger consideration
is fair to the stockholders of Fairfield, other than the stockholders who
are parties to the voting agreement, from a financial point of view;
- that the merger consideration to be received by Fairfield stockholders is
(i) 29.0% higher than the closing sale price of Fairfield common stock at
the close of business on October 17, 2000, which was the day before
Fairfield announced it was engaged in preliminary discussions concerning a
possible merger or other transaction with an undisclosed company;
(ii) 18.2% higher than the closing sale price of Fairfield common stock at
the close of business on October 31, 2000, which was the day before the
Fairfield board of directors' approval of the merger; (iii) 46.3%, 73.1%
and 76.9% higher than the average sale price of Fairfield common stock
over the 20-day, 60-day and 120-day period ended October 17, 2000,
respectively, and (iv) 86.1% higher than the day after termination of the
Carnival letter of intent;
- the value of the stock election would not fall below $15.00 unless the
average trading price of CD common stock fell below $7.00;
- the right of Fairfield stockholders to elect to receive the merger
consideration in cash or CD common stock or a combination of cash and
stock, subject to Cendant's option to pay up to 100 percent of the merger
consideration in cash;
- that the merger will be a taxable transaction to the holders of Fairfield
common stock and that a holder has the right to receive cash in the merger
which could be used to satisfy all or some portion of any tax liability
resulting from the merger;
- that the merger agreement does not prohibit Fairfield from participating
in discussions or negotiations with, or furnishing information (pursuant
to a confidentiality agreement) to, any person or entity if the Fairfield
board of directors concludes (after consultation with Bear Stearns,
Stephens and outside counsel) that such person or entity has made an
unsolicited proposal for a transaction which it believes may be more
favorable than the merger from a financial, legal and regulatory point of
view (a "Superior Proposal") and that it is necessary to do so in order to
act in a manner consistent with its fiduciary duties to Fairfield's
stockholders;
- the ability of the Fairfield board of directors to terminate the merger
agreement upon payment of the termination fee if the Fairfield board of
directors decides to approve a Superior Proposal; and
- the financial condition of Cendant and the ability of Cendant to complete
the merger in a timely manner.
As Fairfield stockholders have the right to elect to receive the merger
consideration in CD common stock, the Fairfield board of directors considered
the following additional factors:
- the business, operations, financial position, personnel and prospects of
Cendant;
- the merger would enable a holder of Fairfield common stock to own shares
in Cendant, which is a company with more diverse businesses than those of
Fairfield with numerous recognizable brand names. At the same time,
ownership of CD common stock would afford holders of Fairfield common
stock the opportunity to continue to participate in the long-term growth
and appreciation of the vacation ownership businesses;
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- certain risks associated with Cendant and the merger described under "Risk
Factors," (pages
[ ] through [ ]), including the proposed settlement in the class action
lawsuit relating to accounting irregularities and its possible effect on
Cendant's future earnings; and
- the historical trading prices of CD common stock, which indicate that CD
common stock should be less volatile than Fairfield common stock were
Fairfield to remain a stand alone company.
In light of the Fairfield board of directors' knowledge of the business and
operations of Fairfield and its business judgment, the Fairfield board of
directors considered and evaluated each of the factors listed above during the
course of its deliberations prior to approving the merger agreement. In view of
the wide variety of factors considered in connection with its evaluation of the
merger, the Fairfield board of directors found it impracticable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific factors
considered in making its determinations.
The Fairfield board of directors also considered the following principal
detriments of the merger:
- as a result of the merger, the benefits of Fairfield's long-term prospects
would be shared by Fairfield and Cendant stockholders, rather than being
realized solely by Fairfield's existing stockholders;
- the limitations on Fairfield's ability to consider other acquisition
proposals and the requirement that Fairfield pay Cendant a $32 million
termination fee in certain circumstances, which make it more difficult for
another potential bidder to propose to acquire Fairfield on terms that
would be superior to those contemplated by the merger agreement;
- the grant of the stock option to Cendant under the stock option agreement,
which provides Cendant the ability to acquire the number of shares of
Fairfield common stock that represented as of that date a 19.9% interest
in Fairfield;
- the delay that may occur to complete the merger as a result of Cendant's
request that Fairfield transfer all of its real estate development assets
to a newly formed entity prior to the completion of the merger;
- the potential negative effect on Cendant's financial condition and other
potential risks that may result if the settlement terms of the class
action lawsuit involving accounting irregularities are modified or voided
upon appeal; and
- the potential negative effect on Cendant's financial condition that may
result from other litigation that is not the subject of the existing
settlement.
However, the Fairfield board of directors determined that the foregoing
detriments were outweighed by the potential benefits of the merger described
above. After considering all of the foregoing factors and detriments, the
Fairfield board of directors concluded that the merger is in the best interests
of Fairfield and its stockholders. THE FAIRFIELD BOARD OF DIRECTORS BELIEVES
THAT SUCH FACTORS SUPPORT ITS RECOMMENDATION THAT THE FAIRFIELD STOCKHOLDERS
VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
CENDANT
On October 25, 2000, the Cendant board of directors determined by a
unanimous vote that the merger is advisable and in the best interests of Cendant
and Cendant's stockholders. The Cendant board of directors approved the merger
agreement, the merger and the other transactions contemplated by the merger
agreement.
In connection with its approval of the merger, and its determination that
the merger is advisable and in the best interest of Cendant's stockholders, the
board of directors of Cendant consulted with its legal and financial advisors,
as well as with members of management. The Cendant board of directors
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also considered the following material information and factors in reaching its
determination to approve the merger agreement, the merger and the other
transactions contemplated by the merger agreement:
- the $15.00 base acquisition price represents (i) a premium of 86.0% to
Fairfield's closing sale price on September 6, 2000, the day when active
discussions between Cendant's senior management and Fairfield began,
(ii) a premium of 29.0% to Fairfield's closing sale price on October 17,
2000, the day before Fairfield announced that it was engaged in
preliminary discussions concerning a possible merger or other transaction
with an undisclosed company and (iii) a premium of 14.3% to Fairfield's
closing sale price on November 1, 2000, the last full trading day prior to
the public announcement of the merger;
- that Fairfield is one of the largest vacation ownership operators in the
United States, with 33 resort locations and more than 300,000 vacation
ownership owners/members;
- that the merger will provide Cendant with a unique opportunity to expand
the scope of its involvement in the vacation ownership industry beyond the
vacation ownership exchange business conducted by RCI, a subsidiary of
Cendant, to include vacation ownership marketing and sales;
- that Cendant hopes to leverage RCI's existing operations, assets and
marketing skills to produce more efficient and profitable sales through
Fairfield's sales organization;
- that Fairfield's FairShare Plus Program is one of the largest points-based
clubs in the vacation ownership industry and will complement the existing
RCI Points program;
- that Fairfield has experienced senior managers who average more than
20 years' experience each in the vacation ownership industry and have
developed strong sales and marketing teams;
- the fact that the cash portion of the merger consideration payable in the
merger is limited, at Cendant's option, to approximately $318 million,
subject to Cendant's right to substitute cash for any stock consideration;
- the terms and conditions of the merger agreement, including the fact that
in the event of certain terminations of the merger agreement, Fairfield
must pay to Cendant a $32 million termination fee and that Fairfield is
precluded from soliciting other offers or, except in limited situations,
negotiating or exchanging information with potential bidders;
- the terms and conditions of the stock option agreement, including the fact
that Cendant has the option to purchase the number of shares of Fairfield
common stock that represented as of that date a 19.9% interest in
Fairfield;
- that the real estate development assets of Fairfield will be transferred
to a third party immediately prior to completion of the merger; and
- the terms and condition of the voting agreement, including the fact that
the total number of shares of Fairfield common stock owned of record or
beneficially at November 1, 2000 by the stockholders that are party to the
voting agreement was approximately 18.15% of the issued and outstanding
shares of Fairfield common stock and that these stockholders have agreed
to vote those shares which they continue to own through the date of the
special meeting of the stockholders of Fairfield and any additional shares
they acquire prior to the date of such meeting, in favor of the merger
agreement.
In the course of deliberations, Cendant's board of directors reviewed with
Cendant's management and outside advisors a number of additional factors
relevant to the merger, including:
- historical information concerning Fairfield's business, financial
performance and condition, operations, management and competitive
position, including public reports concerning results of operations during
the most recent fiscal year filed with the SEC;
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- Cendant's management's view as to the financial condition, results of
operations and business of Fairfield before and after giving effect to the
merger based on management due diligence and publicly available earnings
estimates;
- current financial market conditions and historical market prices,
volatility and trading information with respect to shares of Fairfield
common stock and CD common stock;
- the impact of the merger on Fairfield's stockholders, customers and
employees; and
- the impact of the merger on RCI's business, its developer clients and its
timeshare interval-owning customers.
The Cendant board of directors also considered certain adverse factors in
its deliberations concerning the merger, including:
- the challenges of combining the businesses, assets and workforces of two
major companies and the risks of not achieving the expected operating
efficiencies or growth;
- uncertainty regarding employees' perceptions of the merger;
- the possible distraction of both companies' management from day-to-day
operations while working to implement the merger; and
- the substantial charges to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
arising from the merger.
In reaching its decision to approve the merger agreement, the merger and the
other transactions contemplated by the merger agreement, the Cendant board of
directors did not quantify or assign any relative weights to the factors
considered, and individual directors may have given different weights to
different factors. The Cendant board of directors considered these factors as a
whole, and overall considered them to be favorable to, and to support, its
determination.
OPINIONS OF FAIRFIELD'S FINANCIAL ADVISORS
OVERVIEW
Fairfield engaged Bear Stearns and Stephens to act as its financial advisors
in connection with the merger. At the November 1, 2000 meeting of the Fairfield
board of directors, Bear Stearns and Stephens jointly presented the analysis of
their opinions and then delivered their oral opinions, subsequently confirmed
separately by each in writing, that, as of November 1, 2000, and based upon and
subject to the assumptions, qualifications and limitations set forth in their
respective opinions, the merger consideration was fair, from a financial point
of view, to the stockholders of Fairfield (other than Stephens Group, Inc.,
Stephens (Stephens Group, Inc. and Stephens collectively referred to herein as
"Stephens Group"), Ralph P. Muller, R & A Limited Partnership and Gerald M.
Johnston, who are stockholders that are parties to the voting agreement).
THE FULL TEXT OF EACH FAIRNESS OPINION DATED NOVEMBER 1, 2000, WHICH SETS
FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY BEAR STEARNS AND STEPHENS IN RENDERING THEIR FAIRNESS OPINIONS,
ARE ATTACHED AS ANNEX D AND ANNEX E, RESPECTIVELY, TO THIS DOCUMENT.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE FAIRNESS OPINIONS CAREFULLY AND
IN THEIR ENTIRETY. THE FAIRNESS OPINIONS WERE DELIVERED TO THE FAIRFIELD BOARD
OF DIRECTORS FOR ITS USE IN CONNECTION WITH ITS CONSIDERATION OF THE MERGER AND
ADDRESS ONLY, AS OF THE DATE OF THE RESPECTIVE FAIRNESS OPINIONS, THE FAIRNESS
OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW, TO BE RECEIVED BY
THE STOCKHOLDERS OF FAIRFIELD, (OTHER THAN STEPHENS GROUP, RALPH P. MULLER,
R & A LIMITED PARTNERSHIP AND GERALD M. JOHNSTON). THE FAIRNESS OPINIONS ARE NOT
INTENDED TO BE, AND DO NOT CONSTITUTE, A RECOMMENDATION TO THE FAIRFIELD BOARD
OF DIRECTORS OR TO ANY STOCKHOLDER OF FAIRFIELD. THE FAIRNESS OPINIONS DO NOT
ADDRESS
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THE UNDERLYING BUSINESS DECISION OF THE FAIRFIELD BOARD OF DIRECTORS TO
RECOMMEND THE MERGER TO THE STOCKHOLDERS OF FAIRFIELD OR THE UNDERLYING BUSINESS
DECISION OF FAIRFIELD TO ENTER INTO THE MERGER AGREEMENT, THE RELATIVE MERITS OF
THE MERGER AS COMPARED TO ANY ALTERNATIVE BUSINESS STRATEGIES THAT MIGHT EXIST
FOR FAIRFIELD OR THE EFFECTS OF ANY OTHER TRANSACTION IN WHICH FAIRFIELD MIGHT
ENGAGE. THE SUMMARY OF THE FAIRNESS OPINIONS SET FORTH IN THIS DOCUMENT ARE
QUALIFIED BY REFERENCE TO THE FULL TEXT OF THE RESPECTIVE FAIRNESS OPINIONS.
The merger consideration, the form of the consideration and the terms of the
merger were determined by arm's-length negotiations between Fairfield and
Cendant and were not based on any recommendation by Bear Stearns or Stephens.
Fairfield did not provide specific instructions or impose any limitations on
Bear Stearns or Stephens with respect to the investigations made or the
procedures followed by Bear Stearns or Stephens in rendering their opinions.
BEAR STEARNS AND STEPHENS OPINIONS
In arriving at their opinions, Bear Stearns and Stephens each independently,
among other things:
- reviewed the merger agreement;
- reviewed each of Fairfield's and Cendant's Annual Reports on Form 10-K
for the years ended December 31, 1998 and 1999, their respective
Quarterly Reports on Form 10-Q for the periods ended March 31, 2000 and
June 30, 2000 and their respective Current Reports on Form 8-K for the
three years ended September 30, 2000;
- reviewed certain operating and financial information of Fairfield,
including projections for the five years ended December 31, 2004,
provided to them by management relating to Fairfield's business and
prospects;
- met with certain members of Fairfield's senior management to discuss
Fairfield's business, operations, historical and projected financial
results and future prospects;
- met with certain members of Cendant's senior management to discuss
Cendant's business, historical financial statements, expected financial
results for 2000 and 2001 and future prospects;
- reviewed the historical prices, trading multiples and trading volumes
of the common shares of Fairfield and Cendant;
- reviewed publicly available financial data, stock market performance
data and trading multiples of companies which they deemed generally
comparable to Fairfield;
- reviewed the terms of recent merger and acquisition transactions of
companies which they deemed generally comparable to Fairfield;
- performed discounted cash flow analyses based on the projections for
Fairfield furnished to them by the management of Fairfield; and
- conducted such other studies, analyses, inquiries and investigations as
they deemed appropriate.
In preparing their opinions, Bear Stearns and Stephens relied upon and
assumed, without independent verification, the accuracy and completeness of the
financial and other information, including, without limitation, the projections,
provided to them by Fairfield. With respect to projected financial results of
Fairfield, Bear Stearns and Stephens assumed that they were reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
senior management of Fairfield as to the expected future performance of
Fairfield. Bear Stearns and Stephens were informed by Cendant that no
projections exist for Cendant and, with Fairfield's consent, Bear Stearns' and
Stephens' analyses of Cendant's future prospects were limited to publicly
available information, Wall
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Street research reports and discussions with senior management of Cendant. Bear
Stearns and Stephens further relied upon the assurances of the senior management
of Fairfield and Cendant that they are unaware of any facts that would make the
information (or projections in the case of Fairfield) provided to them
incomplete or misleading.
In arriving at their opinions, Bear Stearns and Stephens did not perform or
obtain any independent appraisal of the assets or liabilities (contingent or
otherwise) of Fairfield and Cendant, nor was Bear Stearns or Stephens furnished
with any such appraisals. In connection with their engagement, Bear Stearns and
Stephens were not requested to, and Bear Stearns and Stephens did not, solicit
third party indications of interest in the acquisition of all or part of
Fairfield. Bear Stearns and Stephens assumed that the merger will be consummated
in accordance with the terms of the merger agreement without any regulatory
limitations, restrictions, conditions or modifications that collectively would
have a material adverse effect on Fairfield or Cendant.
Bear Stearns and Stephens did not express any opinion as to the price or
range of prices at which the shares of common stock of Fairfield and Cendant may
trade subsequent to the announcement of the merger or as to the price or range
of prices at which the shares of common stock of Cendant may trade subsequent to
the consummation of the merger.
It should be noted that Bear Stearns' and Stephens' opinions did not address
the fact that Cendant could cause Fairfield to effect the distribution of shares
of common stock of Fairfield's real estate development assets to the
stockholders of Fairfield or to transfer Fairfield's real estate development
assets to a third party or the financial aspects of such distribution or
transfer. Furthermore, Bear Stearns and Stephens did not review any financial
information related to Fairfield's real estate development assets and therefore
their opinions do not address any potential consequences to Fairfield's
stockholders of a distribution, transfer, sale or other transaction with respect
to Fairfield's real estate development assets.
SUMMARY OF ANALYSIS
The following is a brief summary of the material valuation and financial and
comparative analyses considered by Bear Stearns and Stephens in connection with
the rendering of their opinions. This summary does not purport to be a complete
description of the analyses underlying the Bear Stearns and Stephens opinions
and is qualified in its entirety by reference to the full text of their
respective opinions.
In performing their analysis, Bear Stearns and Stephens made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Bear Stearns, Stephens, Fairfield and Cendant. Any estimates
contained in the analysis performed by Bear Stearns and Stephens are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analysis. In
addition, as described above, the Bear Stearns and Stephens opinions were among
several factors taken into consideration by the Fairfield board of directors in
making its determination to approve the merger and the merger agreement.
HISTORICAL STOCK PRICE PERFORMANCE OF FAIRFIELD. Bear Stearns and Stephens
reviewed the trading volume and price history of Fairfield's common stock on the
New York Stock Exchange for the period from January 1, 2000 through October 31,
2000 and for the period from November 1, 1995 through October 31, 2000. Bear
Stearns and Stephens also reviewed the relationship between movements in the
closing prices of Fairfield's common stock, the S&P 500 Index and an index of
other selected vacation ownership companies for the periods from October 31,
1995 through October 31, 2000 and from October 31, 1999 through October 31,
2000. Bear Stearns and Stephens noted that Fairfield's common stock had
outperformed the S&P 500 from October 31, 1995 through October 31, 2000 and from
October 31, 1999 through October 31, 2000. Bear Stearns and Stephens noted that
Fairfield's common
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stock had outperformed the index of other selected vacation ownership companies
for the period from October 31, 1995 through October 31, 2000 and for the period
from October 31, 1999 through October 31, 2000.
COMPARABLE COMPANY ANALYSIS. Using publicly available information, Bear
Stearns and Stephens analyzed the market values and trading multiples of the
following three publicly traded companies in the vacation ownership industry:
Bluegreen Corporation;
Silverleaf Resorts, Inc.; and
Trendwest Resorts, Inc.
Bear Stearns and Stephens compared, among other things, stock prices as a
multiple of last twelve months, commonly called "LTM", earnings per share,
commonly called "EPS," and enterprise values, calculated as equity value, plus
total debt and minority interests, less cash, as multiples of LTM earnings
before interest, taxes, depreciation and amortization, commonly called "EBITDA."
All multiples were based on closing stock prices for the comparable companies as
of October 31, 2000.
COMPARABLE TRADING MULTIPLES
<TABLE>
<CAPTION>
PRICE/ ENTERPRISE VALUE/
LTM EPS LTM EBITDA
-------- -----------------
<S> <C> <C>
Bluegreen Corporation....................................... 10.2x 8.8x
Silverleaf Resorts, Inc..................................... 2.6 6.8
Trendwest Resorts, Inc...................................... 8.6 6.0
</TABLE>
Applying a range of LTM EPS and EBITDA multiples derived from the selected
vacation ownership companies to corresponding financial data of Fairfield
resulted in an implied equity reference range for Fairfield of approximately
$4.25 to $18.50 per share as compared to a merger consideration of $15.00 per
share.
No company utilized in the peer group comparison is identical to Fairfield
or the merger, and accordingly, Bear Stearns' and Stephens' analyses of
comparable companies necessarily involved complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors which would necessarily affect the relative trading values of Fairfield
compared to the companies to which Fairfield was compared.
SELECTED PRECEDENT MERGERS AND ACQUISITION TRANSACTIONS ANALYSIS. Using
publicly available information, Bear Stearns and Stephens reviewed the purchase
prices and implied transaction value multiples paid or proposed to be paid in
the following eight selected transactions in the vacation ownership industry:
PRECEDENT MERGERS AND ACQUISITION TRANSACTIONS
- Peppertree Resorts, Ltd. -- Equivest Finance, Inc.
- Vistana, Inc. -- Starwood Hotels & Resorts
- Eastern Resorts Corporation -- Equivest Finance, Inc.
- The Success Companies and Points of Colorado, Inc. -- Vistana, Inc.
- Vacation Break U.S.A., Inc. -- Fairfield Communities, Inc.
- LSI Group Holdings, PLC -- Sunterra Corporation
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- Plantation Resorts Group, Inc. -- Sunterra Corporation
- AVCOM International, Inc. -- Sunterra Corporation
Bear Stearns and Stephens compared transaction values as a multiple of LTM
EPS to a selected vacation ownership company composite multiple of LTM EPS as of
the announcement date of each transaction. All multiples were based on publicly
available financial information for each transaction and for each company
comprising the composite. The LTM EPS multiple for the merger based on a merger
consideration of $15.00 was 10.8x, and the multiple premium to the selected
vacation ownership company composite LTM EPS multiple was 2.2x. The LTM EPS
multiples of the selected transactions ranged from 8.1x to 28.8x (excluding the
AVCOM International, Inc.--Sunterra Corporation transaction, which Bear Stearns
and Stephens viewed as not sufficiently similar to the merger). The range of
premiums of transaction LTM EPS multiples to the selected vacation ownership
company composite LTM EPS multiples was 0.3x to 2.4x with a mean of 1.1x.
Bear Stearns and Stephens noted that none of the subject transactions are
identical to the merger. Bear Stearns and Stephens further noted that the
analysis of precedent mergers and acquisition transactions necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that would necessarily affect the
acquisition value of Fairfield as compared to the acquisition value of any other
comparable company in general and the transactions above in particular.
THEORETICAL DISCOUNTED CASH FLOW ANALYSIS. Bear Stearns and Stephens
performed a discounted cash flow analysis for Fairfield in order to determine a
range of equity values per share for Fairfield. Projected financial data for
Fairfield were based on estimates provided to Bear Stearns and Stephens by
Fairfield's management. In performing their theoretical discounted cash flow
analysis, Bear Stearns and Stephens calculated after-tax cash flows for the
four-year period commencing January 1, 2001, and ending on December 31, 2004.
Fairfield's cash flows were discounted to present value using discount rates
ranging from 12.0% to 13.0%. Growth rates of 3.5% to 4.5% were applied to the
final year cash flow (the year 2004, as stated above). This analysis resulted in
an implied reference range for the equity value of approximately $11.44 to
$15.91 per share.
Bear Stearns and Stephens noted that the theoretical discounted cash flow
analyses were highly dependent on growth rates, discount rates and margin
assumptions relating to the underlying projections and that such projections
were difficult to forecast due to the rapidly changing nature of Fairfield's
business plan and capital markets climate. Consequently, Bear Stearns and
Stephens observed that the resulting discounted cash flow valuations are
inherently theoretical due to the difficulty in forecasting projected operating
results as well as assumptions relating to, among other factors, the
availability of sufficient capital, the cost of such capital and assessing
implied perpetual growth rates beyond the forecast period.
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<PAGE>
PREMIUM ANALYSIS. Bear Stearns and Stephens observed that, based on the
merger consideration to the stockholders of Fairfield's common stock of $15.00
per share, the following premiums were applicable:
MERGER PREMIUM BASED ON THE OFFER PRICE FOR THE
FOLLOWING PERIODS PRIOR TO TRANSACTION ANNOUNCEMENT
<TABLE>
<S> <C>
October 17, 2000(a)......................................... 29.0%
October 31, 2000(b)......................................... 18.2%
Trailing 20-day average ending October 17, 2000(c).......... 46.3%
Trailing 60-day average ending October 17, 2000(c).......... 73.1%
Trailing 120-day average ending October 17, 2000(c)......... 76.9%
Day of initial meeting of the Fairfield board of directors
concerning the merger(d).................................. 93.5%
One day after termination of the Carnival transaction(e).... 86.1%
</TABLE>
------------------------
(a) One day prior to Fairfield's announcement that it was in preliminary
discussions concerning a possible merger or transaction with an
undisclosed company.
(b) One day prior to the signing of the definitive merger agreement.
(c) Represents trailing 20-, 60- and 120-day average price, respectively,
prior to October 18, 2000, the announcement date that Fairfield was in
preliminary discussions concerning a possible merger.
(d) August 23, 2000.
(e) February 28, 2000.
OTHER FACTORS. In rendering their opinions, Bear Stearns and Stephens also
reviewed and considered, among other things:
- A business, financial and shareholder profile of Cendant;
- Selected analysts' reports on Cendant, including calendar years 2000
and 2001 EPS estimates of those analysts;
- The average trading volume and trading range for CD common stock from
January 1, 2000 through October 31, 2000 and from January 1, 1998
through October 31, 2000;
- The relationship between movements in CD common stock and movements in
the S&P 500 Index and the S&P Services Index over a one year period;
and
- The relationship between movements in Cendant's LTM price to earnings
multiple and the composite in the S&P 500 Index LTM price to earnings
multiple.
OTHER CONSIDERATIONS
The preparation of a fairness opinion is a complex process that involves
various judgments and determinations as to the most appropriate and relevant
methods of financial and valuation analysis and the application of those methods
to the particular circumstances. The opinion is, therefore, not necessarily
susceptible to partial analysis or summary description. Bear Stearns and
Stephens believe that their analyses must be considered as a whole and that
selecting portions of their analyses and the factors considered, without
considering all of the analyses and factors, would create a misleading and
incomplete view of the processes underlying their opinions. Bear Stearns and
Stephens did not form any opinions as to whether any individual analysis or
factor, whether positive or negative, considered in isolation, supported or
failed to support their opinions. In arriving at their opinions, Bear Stearns
and Stephens did not assign any particular weight to any analysis or factor
considered by them, but rather made qualitative judgments based upon their
experience in providing such opinions and on then-existing economic, monetary,
market and other conditions as to the significance of each analysis
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and factor. In performing their analyses, Bear Stearns and Stephens, at
Fairfield's direction and with Fairfield's consent, made numerous assumptions
with respect to industry performance, general business conditions and other
matters, many of which are beyond the control of Fairfield, Cendant, Bear
Stearns or Stephens. Any assumed estimates implicitly contained in Bear Stearns'
or Stephens' opinions or relied upon by Bear Stearns or Stephens in rendering
their opinions do not necessarily reflect actual values or predict future
results or values. Any estimates relating to the value of a business or
securities do not purport to be appraisals or to necessarily reflect the prices
at which companies or securities may actually be sold.
Bear Stearns and Stephens were retained by Fairfield based upon their
qualifications, experience and expertise. Bear Stearns and Stephens are
internationally recognized investment banking firms that regularly engage in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estates, corporate and other purposes. In the ordinary course of
their businesses, Bear Stearns and Stephens may actively trade the equity and/or
debt securities of Fairfield or Cendant for their own accounts and the accounts
of their customers and, accordingly, at any time may hold a long or short
position in such securities.
Pursuant to engagement letters, Fairfield agreed to pay Bear Stearns and
Stephens total advisory fees of $2.5 million each upon the completion of the
merger. Of this amount, $400,000 was payable to each of Bear Stearns and
Stephens upon their rendering of their fairness opinions to the Fairfield board
of directors. In addition, Fairfield agreed to reimburse Bear Stearns and
Stephens for all reasonable out-of-pocket expenses incurred by Bear Stearns and
Stephens in connection with the merger including the reasonable fees and
disbursements to their legal counsels. Fairfield has also agreed to indemnify
Bear Stearns and Stephens against specific liabilities in connection with their
engagements, including liabilities under the federal securities laws.
STOCK EXCHANGE LISTING
Cendant has begun preparation of a listing application to list the CD common
stock issuable pursuant to the merger in exchange for Fairfield common stock
with the NYSE. The trading symbol for the CD common stock is "CD." Following the
merger, Fairfield stockholders will no longer be able to trade shares of
Fairfield common stock on the NYSE or any other exchange because the existing
Fairfield common stock will have ceased to exist and therefore will no longer be
listed on any exchange.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary addresses the material federal income tax consequences
to holders of Fairfield common stock who exchange their Fairfield common stock
for cash and/or CD common stock in the merger and to holders of Fairfield common
stock who receive cash pursuant to the exercise of appraisal rights under
Delaware law. This summary does not address all aspects of federal income
taxation that may be relevant to particular holders of Fairfield common stock
and thus, for example, may not be applicable to holders of Fairfield common
stock who are employees and who acquired their Fairfield common stock pursuant
to the exercise of incentive stock options or otherwise as compensation, nor
does this summary address the effect of any applicable foreign, state, local or
other tax laws. The discussion assumes that each holder of Fairfield common
stock holds such stock as a capital asset within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). This discussion does
not apply to certain types of stockholders (such as insurance companies,
tax-exempt organizations, financial institutions and broker-dealers) who may be
subject to special rules. This discussion does not discuss the United States
federal income tax consequences to any holder of Fairfield common stock who, for
United States federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership or a foreign estate or trust.
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<PAGE>
TAX CONSEQUENCES OF THE RECEIPT OF CASH AND/OR CD COMMON STOCK
The exchange of Fairfield common stock for cash and/or CD common stock
pursuant to the merger will be a taxable transaction for United States federal
income tax purposes and possibly for state, local and foreign income tax
purposes as well. In general, a holder of Fairfield common stock will recognize
gain or loss for United States federal income tax purposes equal to the
difference, if any, between (i) the amount of any cash received by the holder in
the merger and/or the fair market value of any CD common stock received by the
holder in the merger and (ii) the holder's adjusted tax basis in the Fairfield
common stock which is exchanged for such cash and/or CD common stock pursuant to
the merger. Such gain or loss will be capital gain or loss, and will be
long-term capital gain or loss provided that a holder's holding period for the
Fairfield common stock is more than one year at the time of the completion of
the merger. Capital gain recognized by an individual upon a disposition of
Fairfield common stock that has been held for more than one year generally will
be subject to a maximum United States federal income tax rate of 20% or, in the
case of Fairfield common stock that has been held for one year or less, will be
subject to tax at ordinary income tax rates. Certain limitations apply to the
use of a holder's capital losses.
A holder of Fairfield common stock who receives CD common stock pursuant to
the merger will have an initial tax basis in such CD common stock which is equal
to the fair market value of the CD common stock on the date of the effective
time of the merger. The holder's holding period in such CD common stock will
begin on the day following the day of the effective time of the merger.
DISSENTERS
A holder of Fairfield common stock who receives cash pursuant to the
exercise of appraisal rights will recognize gain or loss equal to the difference
between the amount of cash received and such holder's adjusted tax basis in the
shares of Fairfield common stock surrendered. Such gain or loss will be capital
gain or loss and will be long-term capital gain or loss if such holder's holding
period for the Fairfield common stock at the effective time of the merger
exceeds one year. A portion of such payment may be characterized as interest
income.
BACKUP WITHHOLDING
Unless a holder of Fairfield common stock complies with certain reporting
and/or certification procedures or is an exempt recipient under applicable
provisions of the Code (and the regulations promulgated thereunder), the holder
may be subject to a "backup" withholding tax of 31% with respect to any payments
received in the Merger or as a result of the exercise of the holder's
dissenters' rights. Holders of Fairfield common stock should consult with their
brokers to ensure compliance with such procedures. Foreign stockholders should
consult with their tax advisors regarding withholding taxes in general.
THE FOREGOING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS INCLUDED HEREIN
FOR GENERAL INFORMATION PURPOSES ONLY. ACCORDINGLY, EACH HOLDER OF FAIRFIELD
COMMON STOCK IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE MERGER.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with accounting principles generally accepted in the
United States. For purposes of preparing Cendant's consolidated financial
statements, Cendant will establish a new accounting basis for Fairfield's assets
and liabilities based upon their fair values, the merger consideration and the
costs of the merger. Cendant believes that any excess of cost over the fair
value of the net assets of Fairfield will be recorded as goodwill and other
intangible assets. A final determination of the intangible asset values
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<PAGE>
and required purchase accounting adjustments, including the allocation of the
purchase price to the assets acquired and liabilities assumed based on their
respective fair values, has not yet been made. Cendant will determine the fair
value of Fairfield's assets and liabilities and will make appropriate purchase
accounting adjustments, including adjustments to the amortization period of the
intangible assets, upon completion of that determination.
REGULATORY AND THIRD-PARTY APPROVALS
REGULATORY APPROVALS.
Under the merger agreement, Cendant and Fairfield have agreed to use their
reasonable good faith efforts to obtain all necessary actions or nonactions,
waivers, consents and approvals from any governmental authority necessary to
complete the merger. The required regulatory approvals include approvals of
various state timeshare agencies, as described below. All other applications and
notices have been filed, or are in the process of being filed.
U.S. ANTITRUST FILING. If required, Fairfield and Cendant will seek
approval of the merger under the prenotification provisions of the federal
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
TIMESHARE REGULATORY APPROVALS. In connection with the merger, Fairfield is
required to file amendments to certain registration statements and to obtain
consents, approvals or exemptions for these amendments under state timeshare
registration laws or, in states that do not have specific timeshare laws,
related real estate or securities registration laws in states where Fairfield
develops real estate properties, holds vacation ownership interests and/or
markets or sells vacation ownership interests.
If the approval of the merger by any of the authorities mentioned above is
subject to compliance with certain conditions, there can be no assurance that
the parties or their subsidiaries will be able to comply with such conditions or
that compliance or non-compliance will not have adverse consequences for the
combined company after consummation of the merger.
While Fairfield and Cendant believe that they will receive the requisite
regulatory approvals for the merger, there can be no assurance regarding the
timing of the approvals or the ability of the companies to obtain the approvals
on satisfactory terms or the absence of litigation challenging such approvals or
otherwise. The merger is conditioned upon the receipt of all necessary consents,
approvals and actions of governmental authorities, and the filing of all other
notices with such authorities, which would reasonably be expected to have a
material adverse effect on Cendant and its subsidiaries and prospective
subsidiaries, taken as a whole, if they were not received or filed. See "The
Merger Agreement--Conditions to the Completion of the Merger" on pages [ ]
through [ ].
THIRD-PARTY APPROVALS.
Fairfield is a party to a number of loan agreements, lease agreements and
other agreements. The completion of the merger may require that Fairfield obtain
the consent of, or waiver from, the other parties to certain of those
agreements. Pursuant to the merger agreement, Fairfield has agreed to use its
reasonable good faith efforts to obtain all consents, approvals and waivers from
third parties necessary for completion of the merger. Cendant's obligation to
complete the merger is conditioned upon Fairfield obtaining such third party
consents, approvals or waivers.
APPRAISAL RIGHTS
Under Delaware law, Fairfield stockholders are entitled to appraisal rights
in connection with the merger. Any Fairfield stockholder of record who objects
to the merger may elect to have his or her shares of Fairfield common stock
appraised under the procedures of Delaware law and to be paid the
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<PAGE>
fair value of his or her shares. The appraised value will not include any value
arising from the merger, but may include a fair rate of interest. It is possible
that the fair value determined may be more or less than the merger
consideration.
Fairfield stockholders electing to exercise appraisal rights must comply
with the provisions of Section 262 of the Delaware General Corporation Law in
order to perfect their rights. Fairfield will require strict compliance with the
statutory procedures. A copy of Section 262 is attached to this proxy
statement-prospectus as Annex F.
The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a Fairfield
stockholder in order to dissent from the merger and perfect his or her appraisal
rights. This summary, however, is not a complete statement of all applicable
requirements and is qualified in its entirety by reference to Section 262 of the
Delaware General Corporation Law.
Under Section 262, Fairfield is required to notify stockholders not less
than 20 days before the special meeting to vote on the merger that appraisal
rights will be available. A copy of Section 262 must be included with that
notice. THIS PROXY STATEMENT-PROSPECTUS CONSTITUTES FAIRFIELD'S NOTICE TO ITS
STOCKHOLDERS OF THE AVAILABILITY OF APPRAISAL RIGHTS IN CONNECTION WITH THE
MERGER IN COMPLIANCE WITH THE REQUIREMENTS OF SECTION 262. If you wish to
consider exercising your appraisal rights, you should carefully review the text
of Section 262 contained in Annex F. If you fail to timely and properly comply
with the requirements of Section 262, your appraisal rights under Delaware law
may be lost.
If you elect to demand appraisal of your shares of Fairfield common stock,
you must satisfy each of the following conditions:
- You must deliver to Fairfield a written demand for appraisal of your
shares before the vote is taken on the merger agreement at the special
meeting. This written demand for appraisal must be in addition to and
separate from any proxy or vote abstaining from or voting against the
merger. Voting against or failing to vote for the merger by itself does
not constitute a demand for appraisal under Section 262;
- You must not vote in favor of the merger. A vote in favor of the merger,
by proxy or in person, will constitute a waiver of your appraisal rights
in respect of the shares so voted and will nullify any previously filed
written demands for appraisal; and
- You must continuously hold your Fairfield common stock through the
effective time of the merger.
If you fail to comply with any of these conditions and the merger is
completed, you will lose your appraisal rights with respect to your shares of
Fairfield common stock.
All demands for appraisal should be addressed to:
Fairfield Communities, Inc.
8669 Commodity Circle, Suite 200
Orlando, Florida 32819
Attention: Secretary
and should be executed by, or on behalf of, the record holder of the shares of
Fairfield common stock. The written demand must identify the Fairfield
stockholder and state that the stockholder intends to demand appraisal of his or
her shares of Fairfield common stock.
Within 10 days after the effective time of the merger, Fairfield must give
written notice that the merger has been completed to each Fairfield stockholder
who has properly sent a written demand for appraisal and who did not vote in
favor of the merger. Within 120 days after the effective time of the merger,
either Fairfield or any stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Court of Chancery demanding a
determination of the value of the shares held by all stockholders entitled to
appraisal. Fairfield has no obligation to file such a petition in the event
there are dissenting stockholders. If a petition is not filed within the 120-day
period, all appraisal rights relating to Fairfield common stock will terminate.
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At any time within 60 days after the effective time of the merger, any
dissenting stockholder may withdraw the demand for appraisal. If a Fairfield
stockholder withdraws his or her demand, the stockholder will only be entitled
to receive the merger consideration specified by the merger agreement for his or
her shares of Fairfield common stock. Any attempt to withdraw an appraisal
demand more than 60 days after the effective time of the merger will require the
written approval of the surviving corporation. Within 120 days after the
effective time of the merger, any stockholder who has complied with Section 262
will be entitled, upon written request, to receive a statement setting forth the
aggregate number of shares of Fairfield common stock with respect to which
demands for appraisal have been received. If a petition for appraisal is duly
filed by a dissenting stockholder and a copy of the petition is delivered to
Fairfield within 20 days after receiving this notice, Fairfield must file with
the Delaware Chancery Court a duly verified list containing the names and
addresses of all stockholders who have demanded an appraisal of their shares.
After notice to dissenting stockholders, the Delaware Chancery Court is
empowered to conduct a hearing upon the petition to determine those stockholders
who have complied with Section 262 and who are entitled to the appraisal rights.
The Delaware Chancery Court may require the stockholders who have demanded
payment for their shares to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings. If
any stockholder fails to comply with such direction, the Delaware Chancery Court
may dismiss the proceedings as to such stockholder.
After determination of the stockholders entitled to appraisal rights, the
Delaware Chancery Court will appraise the shares of Fairfield common stock and
determine a fair rate of interest, if any, to be paid. Once the fair value is
determined, Fairfield will pay all dissenting stockholders the appraised value
of their shares together, with interest accrued thereon during the pendency of
the proceeding, upon surrender by such holders of the certificates representing
such shares.
Costs of the appraisal proceeding may be determined by the Delaware Chancery
Court and charged to the parties as the Delaware Chancery Court deems equitable
under the circumstances. Upon application of a dissenting stockholder, the
Delaware Chancery Court may order all or a portion of the expenses incurred by
any stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts, to
be charged prorata against the value of all shares entitled to appraisal.
Any stockholder who has demanded appraisal rights will not, after the
effective time of the merger, be entitled to vote his or her shares for any
purpose or to receive payments of dividends or any other distribution with
respect to such shares (other than with respect to payment as of a record date
prior to the effective time of the merger).
In view of the complexity of Section 262, Fairfield stockholders who may
wish to dissent from the merger and pursue appraisal rights should consult their
legal advisors.
Failure to take any required step in connection with exercising appraisal
rights may result in the termination or waiver of such rights.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some of the members of Fairfield's board of directors and executive officers
have interests in the merger that are different from, or in addition to, the
interests of Fairfield stockholders generally. These additional interests relate
to, among other things:
- the effect of the merger on employment agreements for the executive
officers, including the availability of termination and retention
payments;
- certain actions to be taken in respect of employee benefit plans;
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- the treatment of outstanding stock options and warrants and other awards
to purchase Fairfield common stock;
- the payment of annual bonuses to executive officers under the 2000
Incentive Compensation Plan during calendar year 2000;
- the payment of a bonus to the President and Chief Executive Officer and
transition payments to other executive officers in connection with the
merger; and
- the indemnification of, and provision of director and officer liability
insurance for, the directors and officers of Fairfield.
These interests, to the extent they are material, are described below. The
Fairfield board of directors was aware of these interests and considered them,
among other things, prior to approving the merger agreement, the merger and the
other transactions contemplated by the merger agreement.
EMPLOYMENT AGREEMENTS
Fairfield has entered into employment agreements with each of its named
executive officers. James G. Berk is employed as President and Chief Executive
Officer pursuant to an employment agreement dated as of August 31, 1999, as
amended. Franz S. Hanning is employed as Executive Vice President and Chief
Operating Officer pursuant to an employment agreement dated as of October 23,
1998, as amended. Robert W. Howeth is employed as Executive Vice President and
Chief Financial Officer pursuant to an employment agreement dated as of
June 22, 2000. Marcel J. Dumeny is employed as Executive Vice President, General
Counsel and Secretary pursuant to an employment agreement dated as of
September 20, 1991, as amended. Robert Albertson is employed as Senior Vice
President, Sales pursuant to an employment agreement dated as of June 22, 2000.
Each of these employment agreements provides that if the named executive
officer's employment is terminated by Fairfield for any reason other than for
"cause" (as defined in the employment agreements), or by the named executive
officer due to "constructive discharge" (as defined in the employment agreement)
Fairfield will pay a severance payment equal to up to three times that named
executive officer's base salary as in effect at the time of termination. The
severance payment for each named executive officer will be made in one lump sum
payment on or immediately following the date of termination, except that the
severance payment to Messrs. Hanning and Albertson may be made in equal monthly
installments in accordance with Fairfield's payroll practices in Fairfield's
discretion.
In addition to the severance payment described above, if the named executive
officer is terminated without cause within one year of a change of control,
Fairfield will pay an additional amount equal to the named executive officer's
base salary as in effect at the time of the termination. This change of control
payment will be made in one lump sum payment within 10 days following the
termination date. The term "change of control" as defined in the employment
agreement means:
- a material change in the composition of the Fairfield board of directors
during any 24-month period;
- any person or entity or group of persons other than Fairfield or its
subsidiaries shall beneficially own, directly or indirectly, more than 50%
of the total voting power represented by the then outstanding securities
of Fairfield entitled to vote in the election of directors;
- a merger, combination, consolidation or reorganization of Fairfield, other
than a transaction in which at least 50% of voting power outstanding
immediately prior to the transaction continues to own at least such 50%
voting power following the transaction; or
- the sale of all or substantially all of Fairfield's assets to a third
party.
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The completion of the merger will be deemed a "change of control" under these
employment agreements.
Pursuant to the severance and change of control provisions contained in the
employment agreements of Fairfield's named executive officers, the estimated
severance and change of control payments that will become payable to Fairfield's
named executive officers if their employment is terminated without cause
immediately before or within one year after completion of the merger are as
follows, assuming that the merger is completed on or before March 31, 2001.
<TABLE>
<CAPTION>
ADDITIONAL AMOUNT PAYABLE
SEVERANCE AMOUNT PAYABLE IF TERMINATION WITHIN
UPON TERMINATION ONE YEAR OF
NAME WITHOUT CAUSE CHANGE OF CONTROL
---- ------------------------ -------------------------
<S> <C> <C>
James G. Berk.................... $1,695,000 $565,000
Franz S. Hanning................. 577,500 385,000
Robert W. Howeth................. 393,750 262,500
Marcel J. Dumeny................. 354,375 236,250
Robert Albertson................. 200,000 200,000
</TABLE>
Under the terms of each employment agreement, if the named executive officer
remains employed with Fairfield for a period of one year following a change of
control, then that named executive officer is entitled to a one time transition
payment in the amount of his current annual base salary to be paid within five
days of the first year anniversary date.
Each employment agreement also provides for a reduction in severance and
other benefits to the extent necessary to avoid any excise tax imposed by
Sections 280G and 4999 of the Code, if such reduction will, on an after-tax
basis, be advantageous to the executive officer.
ASSUMPTION OF STOCK OPTIONS AND EQUITY-BASED AWARDS
Under the terms of the merger agreement, Cendant has agreed to assume each
outstanding option, warrant and right to purchase Fairfield common stock granted
under the Fairfield stock plans. Each option and warrant to purchase Fairfield
common stock automatically will be converted into the right to receive a number
of shares CD common stock equal to the number of shares of Fairfield common
stock to which the option or warrant was exercisable multiplied by the exchange
ratio relating to the stock election in the merger. The exercise price for the
options and warrants will be equal to the exercise price subject to the option
or warrant immediately prior to the effective time of the merger divided by the
exchange ratio relating to the stock election in the merger. All other terms and
conditions of the converted options and warrants will remain the same.
Under the terms of the merger agreement, Cendant has agreed to assume each
outstanding award or entitlement granted under Fairfield's incentive
compensation plans. Each outstanding award and entitlement will be converted
into the same instrument of Cendant with such adjustments to the terms thereof
as are necessary to preserve the value of the award or entitlement with no
detrimental or beneficial effects on the holder. All other terms and conditions
of the converted awards and entitlements will remain the same.
EFFECTS OF THE MERGER ON GRANTS PURSUANT TO FAIRFIELD STOCK AND INCENTIVE
PLANS AND EMPLOYMENT ARRANGEMENTS
Stock options and warrants to purchase shares of Fairfield common stock have
been granted under Fairfield's 1992 Warrant Plan, 1997 Stock Option Plan and
2000 Incentive Stock Option Plan. Upon a change of control of Fairfield, which
would include completion of the merger, the unvested portion of certain stock
options, restricted stock and warrants granted to Fairfield's directors and
executive officers will become fully vested.
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<PAGE>
Pursuant to a restricted stock agreement dated as of October 1, 1999 between
Fairfield and James G. Berk and Mr. Berk's employment agreement, Fairfield
granted to Mr. Berk a restricted stock award covering 25,000 shares of Fairfield
common stock. Under the terms of the restricted stock agreement, if Mr. Berk is
terminated without cause as provided in his employment agreement or terminates
his employment for a constructive discharge, all risk of forfeiture on those
restricted shares will lapse and the shares will become fully vested without
restriction.
Pursuant to the 2000 Incentive Stock Plan, Fairfield granted to certain
executive officers and directors restricted stock awards covering shares of
Fairfield common stock. Under the terms of these restricted stock agreements,
upon a change of control, which includes completion of the merger, all risk of
forfeiture on those restricted shares will lapse and the shares will become
fully vested without restriction.
The following chart sets forth, as of November 30, 2000, the total number of
Fairfield stock options and warrants granted to Fairfield's directors and
executive officers under Fairfield's stock and incentive plans, the total number
of stock options and warrants that vest immediately upon a change of control of
Fairfield, the weighted average exercise price of the vested stock options and
warrants which vest as a result of a change of control, and the total number of
restricted stock awards that vest immediately upon a change of control of
Fairfield.
<TABLE>
<CAPTION>
NUMBER OF STOCK WEIGHTED AVERAGE EXERCISE
OPTIONS AND WARRANTS PRICE OF VESTED STOCK NUMBER OF RESTRICTED
TOTAL NUMBER OF VESTED AS A OPTIONS AND WARRANTS STOCK AWARDS VESTED
STOCK OPTION AND RESULT OF A WHICH VEST AS A RESULT OF AS A RESULT OF A
NAME WARRANT GRANTS CHANGE OF CONTROL A CHANGE OF CONTROL CHANGE OF CONTROL
---- ---------------- -------------------- ------------------------- --------------------
<S> <C> <C> <C> <C>
James G. Berk............ 900,000 900,000 $11.5875 50,000
Franz S. Hanning......... 431,092 188,092 8.1875 25,000
Robert W. Howeth......... 520,305 160,305 8.1875 25,000
Marcel J. Dumeny......... 475,420 115,420 8.1875 25,000
Robert Albertson......... 245,496 85,496 8.1875 15,000
Ernest D. Bennett, III... 54,000 12,000 8.6250 1,391
Philip A. Clement........ 12,000 12,000 8.6250 1,391
John D. Hayes............ 12,000 12,000 8.6250 1,391
Philip L. Herrington..... 54,000 12,000 8.6250 1,391
Gerald M. Johnston....... 12,000 12,000 8.6250 1,391
Ilan Kaufthal............ 12,000 12,000 8.6250 1,391
Bryan D. Langton......... 21,000 12,000 8.6250 10,585
William C. Scott......... 54,000 12,000 8.6250 1,391
</TABLE>
2000 INCENTIVE COMPENSATION PLAN; OTHER INCENTIVE COMPENSATION
Fairfield pays incentive compensation to its executive officers under the
2000 Incentive Compensation Plan. Under the terms of this plan, any incentive
compensation earned in calendar year 2000 would have been paid to the named
executive officer in 2001. However, under the merger agreement up to 75% of any
incentive compensation earned by any named executive officer will be paid on or
before December 31, 2000.
In connection with the merger, Fairfield has approved a one-time cash bonus
payable to certain Fairfield employees, including the executive officers (other
than Mr. Berk), to be paid after the 90th day following the effective time of
the merger. Each named executive officer must remain employed with Fairfield
through that date in order to receive the bonus. The named executive officers
have been granted the following bonuses: Mr. Hanning--$115,500,
Mr. Howeth--$78,750, Mr. Dumeny--$70,875 and Mr. Albertson--$60,000. In the
event that both the merger bonus and severance payments
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<PAGE>
discussed above become payable, then the total amount of severance payments to
be made will be offset by the amount of the merger bonus.
The Fairfield board of directors has approved a $2,500,000 bonus payment to
Mr. Berk in connection with the merger. Fairfield will pay this bonus at the
effective time of the merger unless Mr. Berk, Fairfield and Cendant agree
otherwise.
INDEMNIFICATION AND INSURANCE
Each of Fairfield's current directors and executive officers and certain of
Fairfield's former directors have executed indemnification agreements whereby
Fairfield has agreed to indemnify each of them for acts or omissions in their
capacities as directors or officers of Fairfield. Under the terms of the merger
agreement, the surviving corporation will assume all of Fairfield's obligations
to indemnify any current or former directors and any officers as required under
Fairfield's second amended and restated certificate of incorporation and fifth
amended and restated by-laws and under any indemnification agreements or
arrangements with Fairfield, for any acts or omissions occurring on or prior to
the effective time of the merger. The surviving corporation is required to
continue all indemnification agreements and arrangements in full force and
effect in accordance with their current terms for a period of six years after
completion of the merger. Any amendment or modification to, or repeal of, any
indemnification agreement or arrangement may only be made in a manner that would
not adversely affect the rights of the holder. In addition, the merger agreement
provides that directors and officers of Fairfield who become directors and
officers of the surviving corporation or any of its affiliates will be entitled
to the same indemnity rights and protections as are afforded to other directors
and officers of the surviving corporation.
Under the terms of the merger agreement, the surviving corporation has
agreed to maintain Fairfield's current directors' and officers' liability
insurance policy covering acts or omissions occurring prior to the effective
time of the merger for a period of six years following the closing date on terms
and in amounts no less favorable than those in effect prior to the effective
time of the merger.
OTHER
Mr. Ilan Kaufthal, a director of Fairfield, is a senior officer of Bear
Stearns. In connection with the merger, Bear Stearns will be entitled to receive
a fee for the financial advisory services it provided to Fairfield.
EXISTING BUSINESS RELATIONSHIPS BETWEEN CENDANT AND FAIRFIELD
Fairfield is a party to an affiliation agreement with RCI, a subsidiary of
Cendant and the world's largest vacation ownership exchange network with more
than 3,600 participating resort facilities in more than 90 countries and in
excess of 2 million individual members worldwide, and 2 million vacation
exchanges annually. Membership in RCI entitles Fairfield's customers to exchange
their occupancy rights in the unit or resort in which they own a vacation
ownership interest for occupancy rights at another participating resort, based
upon availability and the payment of a variable exchange fee to RCI.
FairShare Vacation Owners Association, the Use Management Trustee of the
FairShare Vacation Plan Reservation Program (known as "FairShare Plus" and of
which Fairfield is the Plan Manager) is also a party to an affiliation agreement
with RCI. Membership in RCI entitles Plan Members to exchange their occupancy
rights in their vacation ownership interest for occupancy rights at another
participating resort, based upon availability and the payment of a variable
exchange fee to RCI.
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<PAGE>
DELISTING AND DEREGISTRATION OF FAIRFIELD COMMON STOCK
If the merger is completed, the shares of Fairfield common stock will be
delisted from the NYSE, and will be deregistered under the Securities Exchange
Act of 1934. Consequently, following completion of the merger, Fairfield
stockholders will no longer be able to trade shares of Fairfield common stock on
any stock exchange.
RESTRICTIONS ON RESALES BY AFFILIATES OF FAIRFIELD
The shares of CD common stock to be issued to Fairfield stockholders in the
merger have been registered under the Securities Act of 1933. These shares may
be traded freely and without restriction by those stockholders not deemed to be
"affiliates" of Fairfield as that term is defined under the Securities Act. An
affiliate of a corporation, as defined by the rules promulgated under the
Securities Act, is a person who directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with that
corporation. Any subsequent transfer by an affiliate of Fairfield must be one
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act (or Rule 144 promulgated under the Securities Act, in the case of such
persons who become affiliates of Cendant) or as otherwise permitted under the
Securities Act. These restrictions are expected to apply to the directors and
executive officers of Fairfield (as well as to certain other related individuals
or entities).
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<PAGE>
THE FAIRFIELD SPECIAL MEETING
PURPOSE, TIME AND PLACE
The special meeting will be held at [ ], [ ], [ ] on
[ ], [ ], 2001, at [ ]:00 [ ].m., Eastern Time. The purpose of the
special meeting is for the Fairfield stockholders to consider and vote upon a
proposal to approve and adopt the merger agreement and such other matters as may
properly come before the special meeting. Under the merger agreement, Fairfield
has the right to postpone the special meeting for a period no later than 35
business days after this proxy statement-prospectus is first mailed to Fairfield
stockholders. Fairfield may postpone or adjourn the meeting within that time
period so that the amount of time between the meeting date and the closing date
is minimized.
THE FAIRFIELD BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST
INTEREST OF FAIRFIELD AND ITS STOCKHOLDERS AND RECOMMENDS THAT FAIRFIELD
STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE; VOTING POWER
The Fairfield board of directors has fixed the close of business
(5:00 p.m., Eastern Time) on [ ], 2001 as the record date for determining
the holders of Fairfield common stock entitled to notice of, and to vote at, the
special meeting. Only holders of record of Fairfield common stock at the close
of business on the record date will be entitled to notice of, and to vote at,
the special meeting.
On the record date, approximately [ ] shares of Fairfield common
stock were issued and outstanding and entitled to vote at the special meeting.
Holders of record of Fairfield common stock are entitled to one vote per share
on any matter which may properly come before the special meeting. If you are a
record holder of Fairfield common stock on the record date, you may vote your
shares of Fairfield common stock in person at the special meeting or by proxy by
completing, signing, dating and returning the enclosed proxy in the enclosed
self-addressed envelope.
If you hold your shares of Fairfield common stock in "street name", you must
follow the instructions provided by your broker regarding how to instruct your
broker to vote your shares. Most banks and brokers have provisions for telephone
and Internet voting. Check the material sent to you by them, or call your
account representative for more information.
A quorum is present at the special meeting if a majority of the outstanding
shares of Fairfield common stock is represented in person or by proxy. A quorum
is necessary to hold the special meeting. Any shares of Fairfield common stock
held in treasury by Fairfield or any of its subsidiaries are not considered to
be outstanding for purposes of determining a quorum. Once a share of Fairfield
common stock is represented at the special meeting, it will be counted for the
purpose of determining a quorum at the special meeting and any adjournment of
the special meeting unless the holder is present solely to object to the special
meeting. In the event that a quorum is not present at the special meeting, it is
expected that the special meeting will be adjourned or postponed to solicit
additional proxies. However, if a new record date is set for the adjourned
meeting, then a new quorum will have to be established.
VOTES REQUIRED
The affirmative vote of holders of a majority of the shares of Fairfield
common stock outstanding on the record date is required to approve and adopt the
merger agreement. Under applicable Delaware law, a Fairfield stockholder who
abstains from voting or does not vote will have the same effect as if the
stockholder had voted against the adoption of the merger agreement. Brokers who
hold shares of Fairfield common stock as nominees will not have discretionary
authority to vote such shares in the absence of instructions from the beneficial
owners of those shares. Any shares that are not voted because the nominee-broker
lacks such discretionary authority will be counted and have the same effect as a
vote against the adoption of the merger.
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<PAGE>
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
As of the record date, Fairfield's directors and executive officers and
their affiliates may be deemed to be the beneficial owners of approximately
[ ], or [ ]%, of the outstanding shares of Fairfield common stock.
These executive officers and directors have indicated that they will vote for
the adoption of the merger agreement. Stockholders who at November 1, 2000 were
deemed to be the record or beneficial owners of approximately 8,562,064, or
18.15%, of the outstanding shares of Fairfield common stock have entered into a
voting agreement with Cendant. Under the voting agreement, those stockholders
have agreed to vote those shares they continue to own through the date of the
special meeting of the stockholders of Fairfield and any additional shares
acquired by them prior to the date of such meeting for the adoption of the
merger agreement.
VOTING OF PROXIES
If you vote your shares of Fairfield common stock by signing a proxy and
returning it in time for the special meeting, your shares will be voted at the
special meeting in the manner specified in your proxy card. If your proxy is
properly executed but does not contain voting instructions, your proxy will be
voted FOR approval of the merger agreement. If other matters are properly
presented before the special meeting, the persons named in your proxy will have
authority to vote in accordance with their judgment on any other such matter,
including, without limitation, any proposal to adjourn or postpone the meeting
or otherwise concerning the conduct of the meeting. However, a proxy that has
been designated to vote against the approval of the merger agreement will not be
voted, either directly or through a separate proposal, to adjourn the meeting to
solicit additional votes. It is not expected that any matter other than as
described in this proxy statement-prospectus will be brought before the special
meeting.
REVOCABILITY OF PROXIES
If you complete and mail the enclosed proxy card, it will not preclude you
from voting in person at the special meeting. You may revoke a proxy at any time
prior to your proxy being voted at the special meeting by:
- delivering, prior to the special meeting, to Secretary, Fairfield
Communities, Inc., 8669 Commodity Circle, Suite 200, Orlando, Florida
32819, a written notice of revocation bearing a later date or time than
your proxy;
- submitting another proxy that is later dated and, if applicable, that is
properly signed; or
- attending the special meeting and voting in person.
Simply attending the special meeting will not constitute revocation of a
proxy. If you instructed a broker to vote your shares, you must follow your
broker's directions for changing those instructions. If an adjournment occurs,
it will have no effect on the ability of stockholders of record as of the record
date to exercise their voting rights or to revoke any previously delivered
proxies.
SOLICITATION OF PROXIES
Fairfield generally will bear the cost of solicitation of proxies. In
addition to solicitation by mail, certain directors, officers and employees of
Fairfield and its subsidiaries may solicit proxies from stockholders in person
by telephone, or by other electronic means. These persons will not be paid for
soliciting proxies. Fairfield may also have brokerage houses and other
custodians, nominees and fiduciaries forward solicitation materials to the
beneficial owners of Fairfield common stock held of record. Fairfield will
reimburse these persons for their reasonable out-of-pocket expenses in
connection with soliciting proxies.
In addition, Fairfield has retained Mellon Investor Services LLC to assist
Fairfield in the solicitation of proxies from stockholders in connection with
the special meeting. Mellon Investor Services LLC will receive a fee which
Fairfield expects will not exceed $[ ] as compensation for its services and
reimbursement of its out-of-pocket expenses. Fairfield has agreed to indemnify
Mellon Investor Services LLC against certain liabilities arising out of or in
connection with its engagement.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
INSTEAD, STOCK CERTIFICATES SHOULD BE SENT WITH YOUR ELECTION FORM/LETTER OF
TRANSMITTAL TO THE ADDRESS SPECIFIED THEREON.
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<PAGE>
THE MERGER AGREEMENT
GENERAL
The Cendant board of directors and the Fairfield board of directors have
each unanimously approved and adopted the merger agreement, the merger and the
other transactions contemplated by the merger agreement. The merger agreement
contemplates the merger of Grand Slam Acquisition Corp., a subsidiary of
Cendant, with and into Fairfield, with Fairfield continuing as the surviving
corporation. This section of the proxy statement-prospectus describes material
provisions of the merger agreement. This description is not a complete
description of the terms and conditions of the merger agreement and is qualified
in its entirety by reference to the full text of the merger agreement, a copy of
which is attached as Annex A to this proxy statement-prospectus and is
incorporated by reference into this proxy statement-prospectus. We urge you to
read the merger agreement carefully and in its entirety.
FORM OF THE MERGER
Under the terms of the merger agreement, Grand Slam Acquisition Corp. will
be merged with and into Fairfield. Fairfield will be the surviving corporation
in the merger and will continue its corporate existence under Delaware law. The
corporate existence of Grand Slam Acquisition Corp. will cease as a result of
the merger. Each of the Fairfield second amended and restated certificate of
incorporation and fifth amended and restated bylaws will be amended and restated
to read in its entirety like the certificate of incorporation and bylaws of
Grand Slam Acquisition Corp. The name of the surviving corporation will be
Fairfield Communities, Inc.
TIMING OF CLOSING
The merger will be completed no later than the second day after the
satisfaction or waiver of the conditions set forth in Article VI of the merger
agreement. If, however, the transfer of the real estate development assets of
Fairfield is scheduled to occur within 15 business days after the satisfaction
or waiver of the conditions set forth in Article VI (other than the special
meeting), then the closing will take place, upon written election by Cendant
sent to Fairfield, on the earlier of (i) the date of the transfer of the real
estate development assets of Fairfield or (ii) the 15th business day after the
date of such written election, unless another time or date is agreed to by the
parties to the merger agreement. A certificate of merger will be filed with the
Secretary of State of the State of Delaware as soon as practicable following the
closing, at which time the merger will be effective.
MERGER CONSIDERATION
Fairfield stockholders will have the right to elect to receive either CD
common stock or cash or a combination of CD common stock and cash in exchange
for their shares of Fairfield common stock. Based on their election, Fairfield
stockholders will receive one of the following in exchange for each share of
Fairfield common stock:
- The "STOCK ELECTION," which consists of 1.2500 shares of CD common stock
for each share of Fairfield common stock, unless the average trading price
of shares of CD common stock is greater or less than $12.00. The "average
trading price" means the average of the 4:00 p.m. Eastern Time closing
sale prices of CD common stock as reported on the New York Stock Exchange
Composite Tape for the 20 consecutive trading days ending on and including
the
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<PAGE>
trading day immediately before the date of the special meeting of the
stockholders of Fairfield. The adjustments that may be made to the
exchange ratio are as follows:
<TABLE>
<CAPTION>
AVERAGE TRADING PRICE EXCHANGE RATIO
--------------------------------------- ---------------------------------------
<S> <C>
Equal to or greater than $13.5960 Equal to the quotient of $16.00 divided
by the average trading price
Greater than $12.00 but less than Equal to 0.6250 plus the quotient of
$13.5960 $7.50 divided by the average trading
price
Equal to $12.00 1.2500
Less than $12.00 but greater than $7.00 Equal to the quotient of $15.00 divided
by the average trading price
Equal to or less than $7.00 2.1428
</TABLE>
- The "CASH ELECTION," which consists of $15.00 in cash for each Fairfield
common stock plus, if the average trading price is greater than $12.00, a
fraction of a share of CD common stock that equals the excess of the value
of the stock election, based on the average trading price, over $15.00.
The maximum value of that fractional share will not exceed $1.00.
Stockholders who do not make an election and who are not dissenting
stockholders will be deemed to have made a stock election. Cendant will not
issue fractional shares and will pay cash in lieu of any fractional shares.
As of the effective time of the merger, all shares of Fairfield common stock
will no longer be outstanding and will automatically be cancelled and cease to
exist. Following the effective time of the merger, each holder of shares of
Fairfield common stock will no longer have any rights in respect of shares of
Fairfield common stock, but instead will have the right to receive the merger
consideration described above.
Any shares of Fairfield common stock owned by Fairfield, Cendant, Grand Slam
Acquisition Corp. or any of their respective wholly owned subsidiaries will be
cancelled and retired and will cease to exist, and no merger consideration will
be delivered in exchange for those shares.
CONVERSION OF SHARES; EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES;
FRACTIONAL SHARES
At the effective time of the merger, Fairfield common stock will
automatically convert into the right to receive the merger consideration.
Promptly after the effective time of the merger, Cendant will deposit with the
exchange agent all of the merger consideration.
Under the merger agreement, Cendant will appoint a bank or trust company to
act as exchange agent for the merger. The exchange agent will receive the merger
consideration from Cendant and distribute it to Fairfield stockholders. Enclosed
you will find a letter and election form/letter of transmittal. That letter and
the election form/letter of transmittal will contain instructions on how to
surrender Fairfield stock certificates to the exchange agent and receive the
merger consideration. FAIRFIELD STOCKHOLDERS SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD.
After the effective time of the merger, each certificate that previously
represented shares of Fairfield common stock will represent only the right to
receive the merger consideration into which such shares of Fairfield common
stock were converted in the merger and any cash payable in lieu of fractional
shares of CD common stock and dividends on CD common stock with record dates
after the effective time of the merger.
A holder of certificates previously representing Fairfield common stock may
only be paid dividends or distributions payable on CD common stock after the
holder surrenders his or her certificates to the
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<PAGE>
exchange agent. After a holder's certificates are surrendered, any unpaid
dividends and any cash in lieu of fractional shares of CD common stock payable
as described below will be paid to the holder without interest.
In the event of a transfer of ownership of Fairfield common stock that is
not registered in the records of Fairfield's transfer agent, the merger
consideration will be paid to a person other than the person in whose name the
certificate so surrendered is registered if such certificate is properly
endorsed or otherwise is in proper form for transfer and the person requesting
such issuance agrees to pay any transfer or other taxes required as a result of
such payment to a person other than the registered holder of such Fairfield
common stock or establishes to the satisfaction of Cendant that such tax has
been paid or is not applicable.
Cendant will not issue any fractional shares of CD common stock to any
Fairfield stockholder upon surrender of certificates previously representing
Fairfield common stock. In lieu of fractional shares, Cendant will pay the
holder an amount in cash equal to the product obtained by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the average trading price of CD common stock.
EFFECT ON STOCK BASED AWARDS
At the effective time of the merger, each outstanding award or entitlement
under Fairfield's incentive compensation plans will be adjusted. Each
outstanding award or entitlement, other than outstanding options and warrants to
purchase Fairfield common stock, under the incentive compensation plans will be
converted into the same instrument of Cendant and will be assumed by Cendant,
with appropriate adjustments deemed necessary to preserve the value of each
award or entitlement without any detrimental or beneficial effects on the holder
of the award. Each outstanding option, warrant or right to purchase shares of
Fairfield common stock will be assumed by Cendant and will be converted into an
option, warrant or right to purchase CD common stock. The terms and conditions
of each converted option, warrant or right to purchase will remain the same and
will reflect the terms and conditions that were applicable to the option,
warrant or right immediately prior to the effective time of the merger. The
number of shares of CD common stock to which each converted option, warrant or
right to purchase will be exercisable will equal the number of shares of
Fairfield common stock subject to such option, warrant or right immediately
prior to the effective time of the merger multiplied by the exchange ratio in
effect for the stock election. The exercise price per share will equal the
exercise price for each such share of Fairfield common stock subject to such
option, warrant or right immediately prior to the effective time of the merger
divided by the exchange ratio in effect for the stock election.
BOARD AND OFFICERS OF SURVIVING CORPORATION
The directors and officers of Grand Slam Acquisition Corp. will, from and
after the effective time of the merger, become the directors and officers of the
surviving corporation in the merger until their successors are duly elected,
appointed or qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and the bylaws of the surviving
corporation in the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains certain customary mutual representations and
warranties by each of Fairfield and Cendant. Some of the most significant of
these include:
- organization, standing and corporate power;
- capital structure;
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<PAGE>
- authority to execute and deliver and to perform their obligations under
the merger agreement and compliance with laws and important documents and
agreements; and
- compliance of documents filed with the SEC by each of Cendant (since
January 1, 2000) and Fairfield (since January 1, 1997), and the accuracy
of information supplied by each party for inclusion in this proxy
statement-prospectus and the registration statement.
In addition, Fairfield made additional representations to Cendant. The most
significant of these additional representations include:
- Fairfield's ownership interest in its subsidiaries and the existence of
any restrictions that would prevent the operation of each such
subsidiary's business as currently conducted;
- existence of any undisclosed liabilities of Fairfield or any of its
subsidiaries;
- validity of any material contract, absence of any material breach or
default under those contracts and the absence of notice by the other party
to the contract of any material violation or default, as well as, absence
of agreement, commitment, judgment, injunction, order or decree that is
reasonably expected to prohibit or impair the business of Fairfield, any
of its subsidiaries or any of its affiliates;
- industry specific representations and warranties with respect to vacation
ownership interests, timeshare registrations, debt instruments, resorts,
condominium associations and Fairfield's FairShare Plus Program;
- absence of changes or events, other than in the ordinary course of
business, with respect to Fairfield and its subsidiaries since January 1,
2000;
- compliance with applicable laws and existence of any litigation;
- tax, labor and employee benefit matters;
- intellectual property matters;
- no environmental liability;
- insurance matters;
- inapplicability of Fairfield's rights agreement to the merger; and
- absence of any broker, investment banker, financial advisor or other
person entitled to any fee in connection with the merger other than Bear
Stearns and Stephens.
COVENANTS OF FAIRFIELD
CONDUCT OF BUSINESS. Subject to certain exceptions, including the written
consent of Cendant, Fairfield has agreed, prior to the earlier of the effective
time of the merger and the termination of the merger agreement, to do or refrain
from doing, and to cause its subsidiaries to do or refrain from doing, the
following:
- conduct their businesses in the usual, regular and ordinary course
consistent with past practice;
- conduct their businesses in compliance with applicable laws and
regulations and to pay debts and taxes when due;
- to use best reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with those persons having
business dealings with them;
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<PAGE>
- not declare or pay dividends other than as permitted in the merger
agreement; not split, combine or reclassify their capital stock; and not
purchase or redeem their capital stock;
- except under circumstances related to Fairfield's employee stock plans and
certain financing arrangements, not issue, encumber or subject to any lien
any shares of their capital stock, options, warrants or any rights to
acquire any shares of capital stock;
- not amend their certificates of incorporation, bylaws or other comparable
organizational documents;
- not acquire or agree to acquire any business or any assets for
consideration in excess of $500,000;
- not sell, lease or otherwise encumber or subject to any lien any of their
properties or assets other than in the ordinary course of business;
- not incur indebtedness other than under existing financing arrangements,
or make any loans, capital contributions to or investments in any person
other than their wholly owned subsidiaries;
- not change their accounting methods or methods of reporting income and
deductions for federal income tax purposes, or make any material tax
elections;
- not acquire or enter into a commitment to acquire or sell real estate for
development of vacation ownership interests in excess of $200,000;
- not enter into any agreement obligating Fairfield to spend more than
$250,000 unless it is in accordance with Fairfield's operating budget;
- not amend or modify, except in the ordinary course of business, or violate
the terms of, any material agreement or contract unless it is in
accordance with Fairfield's operating budget;
- not alter, or enter a commitment to alter, their interest in any
corporation, association, joint venture, partnership or business entity;
- not grant an increase in compensation, bonus or other benefit, increase in
severance or termination pay to, enter into or amend benefit agreements
with, in each case, current or former directors, executive officers or key
employees; not modify any existing equity-based compensation with any
director, employee, consultant or independent contractor to provide for
acceleration or vesting of the benefits thereunder;
- not enter into certain transactions with its officers, directors or their
immediate family members or associates, or any affiliates;
- not agree or consent to any material agreements or material modifications
of existing agreements with any governmental entity in respect of the
operations of their businesses other than as required by law or as may be
in the ordinary course of business;
- not pay, discharge, settle or satisfy any claim, liability or obligation
that is more than $20,000 or for which no reserve has been established in
Fairfield's June 30, 2000 unaudited balance sheet;
- not amend the rights agreement, dated as of September 1, 1992, between
Fairfield and First National Bank of Boston (as successor of Society
National Bank) or redeem the rights under the rights agreement;
- not cancel, materially amend or renew any insurance policy other than in
the ordinary course of business;
- not authorize or agree to take any of the foregoing actions that would
prevent Fairfield from performing or cause Fairfield not to perform its
covenants under the merger agreement;
- not issue any communication of a general nature to the employees of
Fairfield other than in the ordinary course of business; and
- take any action or fail to take any action which would result in any of
the representations and warranties of Fairfield failing to be true and
correct.
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AFFILIATE AGREEMENTS. Fairfield has delivered to Cendant for each of its
affiliates an agreement that such person will not dispose of any CD common stock
in violation of the Securities Act.
NO SOLICITATION
The merger agreement provides that neither Fairfield nor any of its
subsidiaries nor, in each case, their respective officers, directors,
stockholders, agents, representatives, or affiliates (including any investment
banker, attorney or accountant retained by Fairfield or any of its
subsidiaries), until the earlier of the effective time of the merger and the
termination of the merger agreement, shall:
- solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes a Company
Takeover Proposal;
- participate in any discussions or negotiations regarding any Company
Takeover Proposal,
- enter into any agreement regarding any Company Takeover Proposal; or
- make or authorize any statement, recommendation or solicitation in support
of any Company Takeover Proposal.
The merger agreement defines a "Company Takeover Proposal" as any inquiry,
proposal or offer from any person relating to any direct or indirect acquisition
or purchase of a business that constitutes 20% or more of the net revenues, net
income or assets of Fairfield and its subsidiaries, taken as a whole, or 20% or
more of any class of equity securities of Fairfield, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of any class of any equity securities of Fairfield, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Fairfield (or any subsidiary of
Fairfield whose business constitutes 20% or more of the net revenues, net income
or assets of Fairfield and its subsidiaries, taken as a whole), other than the
transactions contemplated by the merger agreement or any securitization or
financing transactions consistent with past practice.
Notwithstanding the foregoing, Fairfield will be permitted to pursue a
Company Takeover Proposal if and only to the extent that
- the special meeting shall not have occurred;
- the Fairfield board of directors determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order
to act in a manner consistent with its fiduciary duties to Fairfield's
stockholders under applicable law;
- the Fairfield board of directors concludes in good faith that a Company
Takeover Proposal constitutes a Company Superior Proposal;
- such Company Takeover Proposal was not solicited by it and did not
otherwise result from a breach of Fairfield's obligations under the "no
solicitation" covenant; and
- Fairfield provides prior written notice to Cendant of its decision to take
such action.
Specifically, Fairfield may (A) furnish information with respect to
Fairfield and any of its subsidiaries to the person making such Company Takeover
Proposal pursuant to a customary confidentiality agreement, (B) participate in
discussions and negotiations with such person, (C) subject to first complying
with the provisions of the "fees and expenses" section of the merger agreement,
enter into a letter of intent, agreement in principle, acquisition agreement or
other similar agreement (a "Company Acquisition Agreement") and (D) effect a
change in Fairfield's recommendation to its stockholders. At least three
business days prior to taking any actions set forth in clause (C) or (D) above,
the Fairfield board of directors is required to provide Cendant written notice
advising
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Cendant that the Fairfield board of directors is prepared to conclude that the
Company Takeover Proposal constitutes a Company Superior Proposal. During the
three business day period, Fairfield and its advisors are required to negotiate
in good faith with Cendant to make appropriate adjustments in the terms and
conditions of the merger agreement so that the Company Takeover Proposal no
longer constitutes a Company Superior Proposal. Following the three business day
period, if Fairfield's board of directors concludes in good faith that such
Company Takeover Proposal is reasonably likely to result in a Company Superior
Proposal then Fairfield may continue to pursue that proposal.
The merger agreement provides that a "Company Superior Proposal" means any
proposal made by a third party (A) to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, sale, lease, exchange, transfer or
other disposition (including a contribution to a joint venture), dissolution or
similar transaction, for consideration consisting of cash and/or securities,
100% of the combined voting power of the shares of Fairfield's capital stock
then outstanding or 100% of the net revenues, net income or assets of Fairfield
and its subsidiaries, taken as a whole, and (B) which is otherwise on terms that
the board of directors of Fairfield determines in its good faith judgment (after
consultation with either Bear Stearns, Stephens or another nationally recognized
investment banking firm and outside counsel), taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal, that the proposal, (i) if consummated, would
result in a transaction that is more favorable to Fairfield's stockholders from
a financial point of view than the merger and the other transactions
contemplated by the merger agreement and (ii) is reasonably capable of being
completed, including, to the extent required, financing that is then committed
or which, in the good faith judgment of the board of directors of Fairfield, is
reasonably capable of being obtained by such third party.
The merger agreement requires Fairfield, its subsidiaries and their
representatives to cease immediately and cause to be terminated any existing
activities, discussions or negotiations with any parties with respect to any
Company Takeover Proposal.
Except as expressly permitted by the "no solicitation" provision in the
merger agreement, neither the board of directors of Fairfield nor any committee
of Fairfield's board of directors will:
- withdraw, modify or qualify (or propose publicly to withdraw, modify or
qualify), in a manner adverse to Cendant, the approval of the merger
agreement and the merger or the Fairfield board recommendation or take any
action or make any statement in connection with the special meeting
inconsistent with such approval or Fairfield board of directors
recommendation;
- approve or recommend (or propose publicly to approve or recommend) any
Company Takeover Proposal; or
- cause Fairfield to enter into any Company Acquisition Agreement related to
any Company Takeover Proposal.
Notwithstanding the foregoing, the Fairfield board of directors, to the
extent that it determines in good faith, after consultation with outside
counsel, that in light of a Company Superior Proposal it is necessary to do so
in order to act in a manner consistent with its fiduciary duties to Fairfield's
stockholders under applicable law, may terminate the merger agreement solely in
order to concurrently enter into a Company Acquisition Agreement with respect to
any Company Superior Proposal, but only after the third business day following
Cendant's receipt of written notice advising Cendant that the board of directors
of Fairfield is prepared to accept a Company Superior Proposal, specifying the
material terms and conditions of such Company Superior Proposal and identifying
the person making such Company Superior Proposal.
In addition, Fairfield is required to immediately advise Cendant both orally
and in writing of any request for information or any Company Takeover Proposal,
the material terms and conditions of such
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request or Company Takeover Proposal and the identity of the person making such
request or Company Takeover Proposal.
TRANSFER OF THE REAL ESTATE DEVELOPMENT ASSETS OF FAIRFIELD TO A THIRD PARTY
Under the merger agreement, Cendant may cause Fairfield to transfer
Fairfield's real estate development assets to a third party or to effect a
distribution of shares of common stock of a newly formed subsidiary that would
hold Fairfield's real estate development assets to the stockholders of
Fairfield. On December 7, 2000, Cendant delivered to Fairfield the proposed
terms and forms of agreements proposed to be entered into by Fairfield in
connection with the transfer of Fairfield's real estate development assets to a
third party. No distribution will be made to Fairfield stockholders in
connection with that transfer.
Fairfield will use its reasonable efforts to complete the actions required
in order to effect the transfer before the completion of the merger as long as
those actions do not adversely affect the business of Fairfield and its wholly
owned subsidiaries before the transfer. The completion of these actions is not a
condition to the merger.
Fairfield will take all necessary actions to create the new entity and to
complete the transfer on terms satisfactory to Cendant and to execute all
necessary agreements that will govern the relationships between the surviving
corporation in the merger and the new entity following the transfer. The
transfer must occur immediately before the effective time of the merger unless
otherwise agreed to by Fairfield.
In addition, Fairfield will not take, or cause to be taken, any action that
would or might reasonably be expected to prevent or materially delay Cendant,
Fairfield or the new entity from completing the transfer.
INDEMNIFICATION AND INSURANCE
Under the merger agreement, Cendant has agreed to assume all of Fairfield's
indemnification and exculpation obligations to the current and former officers
and directors of Fairfield and its subsidiaries for acts or omissions occurring
at or prior to the effective time of the merger and existing as of the date of
the merger agreement under their respective certificates of incorporation or
bylaws (or comparable organizational documents), and any indemnification
agreements or arrangements of Fairfield and its subsidiaries. These agreements
and arrangements will continue under the same terms, and will not be amended,
repealed or otherwise modified for a period of six years after the effective
time of the merger in any manner that would adversely affect the rights
thereunder of such individuals.
The merger agreement also provides that, for six years after the effective
time of the merger, the surviving corporation will maintain Fairfield's current
liability insurance covering acts or omissions occurring prior to the effective
time of the merger for those persons who were covered by Fairfield's directors'
and officers' liability insurance policy. These policies will continue under the
same terms and in amounts no less favorable than those in effect on the date of
the merger agreement. The surviving corporation, however, will not be required
to pay more than 200% of the amount paid by Fairfield in 2000 to maintain such
insurance.
CONDITIONS TO THE COMPLETION OF THE MERGER
The completion of the merger depends upon meeting a number of conditions,
including the following:
- approval of the merger agreement by Fairfield's stockholders;
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<PAGE>
- receipt of all consents and approvals from governmental entities necessary
for the merger, which if not obtained would reasonably be expected to have
a material adverse effect on Cendant and its subsidiaries and prospective
subsidiaries, taken as a whole;
- receipt of certain consents, approvals or exemptions under state timeshare
registration laws, other than consents, approvals or exemptions which if
not obtained would not reasonably be expected to result in a material
business impact on Fairfield;
- the provision of satisfactory evidence to Cendant that Fairfield has
obtained all required third party consents in order not to result in any
representation and warranty given by Fairfield in the merger agreement
being untrue;
- no judgment, order, decree, statute, law, ordinance, rule or regulation,
entered, enacted, promulgated, enforced or issued by any court or other
governmental entity of competent jurisdiction, or other legal restraint or
prohibition shall be in effect (i) preventing completion of the merger or
(ii) that otherwise is reasonably likely to have a material adverse effect
on Fairfield or Cendant, as applicable;
- this registration statement having become effective under the Securities
Act and no stop order or proceedings seeking a stop order having been
entered by or pending before the SEC; and
- the shares of CD common stock having been approved for listing on the
NYSE.
In addition, Cendant's obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made by
Fairfield and the performance of obligations by Fairfield, in all material
respects, to the extent set forth in the merger agreement and in
connection with the transfer of the real estate development assets of
Fairfield;
- no condition or requirement being imposed by one or more governmental
entities in connection with any required approval by them of the merger or
relating to the transactions contemplated thereunder which, either alone
or together with all such other conditions or requirements, requires
Fairfield or its subsidiaries to be operated in a manner that is
materially different from industry standards in effect or different from
the manner in which Fairfield, as of the date of the merger agreement,
conducted its operations and which materially adversely affects the
business, financial condition or results of operations or prospects of
Fairfield and its subsidiaries, taken as a whole, or their businesses,
other than their commercial finance businesses, taken as a whole; and
- Fairfield having obtained the resignations of its representatives from the
board of directors of the trustee of the FairShare Vacation Plan Use
Management Trust and having appointed Cendant's representatives to such
board.
In addition, Fairfield's obligation to complete the merger is subject to,
among other things:
- the accuracy, as of closing, of the representations and warranties made by
Cendant and the performance of obligations by Cendant, in all material
respects, to the extent set forth in the merger agreement.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the completion
of the merger:
- by mutual written consent of Cendant and Fairfield;
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<PAGE>
- by either Cendant or Fairfield if:
- the merger is not consummated by March 31, 2001. However, neither party
may terminate for this reason if its failure to perform any obligation
is the reason the merger has not been completed. Either party can
extend this date up to April 30, 2001 if the merger has not been
completed because a regulatory approval has not been obtained and that
party reasonably believes the approval will be obtained within the
extended period. Cendant may extend the March 31, 2001 date by up to 15
business days if the transfer of Fairfield's real estate development
assets is scheduled to take place within that 15-day period.
- the merger is not approved by Fairfield's stockholders at the special
meeting; or
- any government or court action prevents completion of the merger or
would be reasonably likely to have a material adverse effect on
Fairfield or Cendant;
- by Cendant, if Fairfield failed to recommend the merger or changes its
recommendation as provided in the merger agreement, or fails to call or
convene the special meeting; or
- by Fairfield, if the Fairfield board of directors determines, consistent
with its fiduciary duties, that Fairfield should pursue a Company Superior
Proposal.
TERMINATION FEES
Fairfield must pay to Cendant a termination fee of $32 million if any of the
following occurs:
- a Company Takeover Proposal is made and either Fairfield or Cendant
terminates the merger agreement because the merger has not been
consummated by March 31, 2001 (as such date may be extended pursuant to
the merger agreement), and, within 12 months of the termination, Fairfield
enters into a Company Acquisition Agreement;
- a Company Takeover Proposal is made and either Fairfield or Cendant
terminates the merger agreement because Fairfield's stockholders have not
approved the merger at the special meeting and the average trading price
of CD common stock is not below $6.00 per share, and, within 12 months of
the termination, Fairfield enters into a Company Acquisition Agreement;
- Fairfield terminates the merger agreement because its board of directors
determines, consistent with its fiduciary duties to Fairfield's
stockholders, that Fairfield should enter into a Company Acquisition
Agreement providing for a transaction that the Fairfield board of
directors deems to be a Company Superior Proposal; or
- a Company Takeover Proposal is made, Fairfield changes its recommendation
to Fairfield's stockholders in connection with the merger, and the merger
agreement is terminated for any reason.
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THE STOCK OPTION AGREEMENT
The following is a summary of the material terms of the stock option
agreement and is qualified by reference to the complete text of the agreement
which is attached as Annex B and incorporated by reference into this proxy
statement-prospectus. You should read the stock option agreement in its
entirety.
In connection with the merger agreement, Fairfield entered into a stock
option agreement with Cendant. Under the stock option agreement, Fairfield
granted to Cendant an irrevocable option to purchase up to 8,448,027 shares of
Fairfield common stock, which includes the rights associated with those shares
under the Fairfield rights agreement. In no event will the number of shares of
Fairfield common stock for which the option is exercisable exceed 19.9% of the
total number of shares of Fairfield common stock issued and outstanding on the
date of the stock option agreement.
EXERCISE OF THE OPTION
The exercise price per share under the option is equal to the value of the
merger consideration. However, if Cendant exercises its option and the special
meeting has not occurred, then the exercise price will be calculated using the
average trading price of CD common stock during the 20 trading day period ending
on and including the trading day immediately prior to the date that Cendant
gives Fairfield notice that it intends to exercise the option. Cendant can
exercise its option in whole or in part at any time or from time to time. As of
the date of this proxy statement-prospectus, Cendant has not exercised its
option. If at any time prior to the exercise of the option Fairfield issues
additional shares of its common stock, then the number of shares of Fairfield
common stock for which the option is exercisable will automatically adjust not
to exceed 19.9% of the total number of shares of Fairfield common stock issued
and outstanding. The issuance of shares pursuant to the exercise of the option
is subject to necessary regulatory approvals if any, under the Hart-Scott-Rodino
Antitrust Improvements Act and the absence of any statute, rule or regulation in
effect, or any order, decree or injunction entered by any court of competent
jurisdiction or governmental entity that prohibits or restrains the exercise of
the option pursuant to the terms of the stock option agreement.
TERMINATION OF THE OPTION
The stock option agreement provides that the option will terminate upon the
earliest of:
- the effective time of the merger;
- the termination of the merger agreement, other than in the case where
Cendant may be entitled to a termination fee; or
- 5:00 p.m., New York City time, on the date that is the one-year
anniversary of the termination of the merger agreement in the case where
Cendant is or may be entitled to the payment of a termination fee under
the terms of the merger agreement or if, at the expiration of that
one-year period, the option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days
after such impediment shall have been removed or shall have become final
and not subject to appeal.
PUT RIGHT
At any time during the period the option is exercisable, upon demand by
Cendant, Cendant has the right to sell to Fairfield and Fairfield will be
obligated to repurchase from Cendant (the "Put Right") all or any portion of the
option.
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If Cendant exercises the Put Right, Fairfield is obligated to repurchase all
or any portion of the option at a price equal to the product of:
- the number of shares of Fairfield Common Stock under the option Cendant
has requested Fairfield to repurchase, multiplied by
- the difference between the "Market/Offer Price" per share of Fairfield
common stock as of the date (the "Notice Date") Cendant gives Fairfield a
notice of exercise of the Put Right and the exercise price under the
option. "Market/Offer Price" means the greater of:
- the highest price per share offered as of the Notice Date pursuant to
any tender or exchange offer or other takeover proposal as outlined in
the merger agreement that was made prior to the Notice Date and not
terminated or withdrawn as of the Notice Date; and
- the average of the closing prices of Fairfield common stock on the NYSE
for the five trading days immediately preceding the Notice Date.
If Cendant exercises the Put Right, and all or any portion of the option has
already been exercised, Fairfield is obligated to repurchase all or any portion
of the shares of Fairfield common stock held by Cendant that were issued
pursuant to the option at a price equal to the product of:
- the number of shares of Fairfield common stock Cendant has requested
Fairfield to repurchase, multiplied by
- the exercise price paid by Cendant under the option plus the excess of the
Market/Offer Price over the exercise price.
REGISTRATION RIGHTS
At any time within two years of exercise of the option, Cendant will have
certain registration rights with respect to the shares of Fairfield common stock
issued pursuant to the option. However, any demand registration request made by
Cendant must include at least 20% of the total number of shares of Fairfield
common stock issuable under the option (subject to exceptions). These
registration rights terminate at the time Cendant is able to sell its shares of
Fairfield common stock under Rule 144(k) under the Securities Act of 1933. In
connection with its registration rights obligations, Fairfield has agreed:
- to prepare and file a registration statement under the Securities Act to
cover the shares issued under the option; and
- to use reasonable efforts to cause the registration statement or
prospectus to remain effective for a period of up to 120 calendar days.
The obligation of Fairfield to file a registration statement or prospectus
and to maintain its effectiveness may be suspended for up to 90 days in the
aggregate during any 12-month period, if Fairfield's board of directors
determines that the registration would require premature disclosure of nonpublic
information which would have a material and adverse effect on Fairfield, would
otherwise interfere with or adversely affect any pending or proposed offering or
any other material transaction involving Fairfield, or if audited financial
statements are not yet available for inclusion in a registration statement.
Fairfield also granted to Cendant, for the same period of time as the above
demand registration rights, "piggyback rights." These allow Cendant to
participate in offerings on terms reasonably satisfactory to the managing
underwriters of such offerings.
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LIMITATION ON PROFIT
The maximum aggregate amount of profit that Cendant may receive with respect
to any termination fee that would be payable to Cendant under the merger
agreement and the option granted to it under the stock option agreement is
$32 million. The amount of profit is the sum of: (i) any amount received by
Cendant pursuant to its exercise of the Put Right, (ii) (x) the net cash amounts
received by Cendant pursuant to the sale, within twelve months following
exercise of the option, of Fairfield's common stock to any unaffiliated party,
less (y) the aggregate exercise price paid by Cendant for such shares,
(iii) any amounts received by Cendant upon transfer of the option (or any
portion thereof) to any unaffiliated party, and (iv) the amount actually
received by Cendant pursuant to the "fees and expenses" section in the merger
agreement.
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THE VOTING AGREEMENT
The following is a summary of the material terms of the voting agreement and
is qualified by reference to the complete text of the agreement, which is
incorporated by reference and attached to this proxy statement-prospectus as
Annex C.
In connection with the merger agreement, certain stockholders of Fairfield
entered into a voting agreement with Cendant. At November 1, 2000, these
stockholders beneficially owned 7,186,644 outstanding shares of Fairfield common
stock and 510,000 shares that were issuable upon the exercise of outstanding
options that were either vested or would vest within 60 days of November 1,
2000. These shares represented approximately 18.15% of the total issued and
outstanding shares of Fairfield common stock at November 1, 2000.
Under the voting agreement, these stockholders irrevocably and
unconditionally agreed to vote or cause to be voted at any meeting of the
stockholders of Fairfield, or in connection with any written consent of
Fairfield's stockholders, those shares which they continue to own through the
date of the special meeting of the stockholders of Fairfield and any additional
shares acquired by them prior to the date of such meeting as follows:
- in favor of the merger, the execution and delivery by Fairfield of the
merger agreement, the approval and adoption of the merger and its terms,
the approval of each of the other actions contemplated by the merger
agreement and the voting agreement, and any other actions that could be
required in furtherance of the merger agreement and the voting agreement;
and
- against any proposals presented for a vote which would prevent or thwart
the merger or any of the transactions contemplated by the merger agreement
or the voting agreement.
RESTRICTIONS ON TRANSFER
In addition, these stockholders agreed, severally but not jointly, that
during the term of the voting agreement, they would refrain:
- except in open market transactions conducted through an exchange, from
selling or transferring the securities of Fairfield that are owned of
record and/or beneficially owned by them; and
- other than to cause a nominee to vote the shares in accordance with the
voting agreement, from granting any proxies or powers of attorney, rights
or privileges (whether by law, preemptive or contractual), with respect to
shares of Fairfield common stock owned of record and/or beneficially owned
by them, depositing any such shares into a voting trust or entering into a
voting agreement, understanding or arrangement with respect to such
shares.
TERMINATION
The voting agreement will terminate on the earlier to occur of:
- the effective time of the merger;
- the termination of the merger agreement other than a termination where
Cendant may be entitled to a termination fee under the terms of the merger
agreement; and
- the date the average trading price of CD common stock is less than $6.00
per share.
EFFECT OF THE STOCK OPTION AGREEMENT AND THE VOTING AGREEMENT
The stock option agreement and the voting agreement are intended to make it
more likely that the merger will be completed on the agreed terms and, in the
case of the option, to compensate Cendant for its efforts and costs if the
merger is not completed. These agreements discourage proposals for alternative
business combinations. In particular, even if a third party were prepared to
offer Fairfield's stockholders consideration with a higher market value than the
value of the merger consideration to be exchanged for Fairfield common stock
under the merger agreement, the third party might be discouraged from doing so
due to the potential inability to obtain the necessary Fairfield stockholder
approval.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF FAIRFIELD COMMON STOCK
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of November 30, 2000,
with respect to any person known by Fairfield to be the beneficial owner of more
than five percent of the shares of Fairfield common stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(5)
------------------------------------ -------------------- ----------
<S> <C> <C>
Cendant Corporation ........................................ 16,144,671(1) 31.41%
9 West 57th Street
New York, New York 10019
Ralph P. Muller ............................................ 2,685,124(2) 6.33%
2435 South Ocean Boulevard
Highland Beach, Florida 33487
Stephens Group, Inc. ....................................... 2,786,264(3) 6.56%
111 Center Street
Suite 2300
Little Rock, Arkansas 72201
Reich & Tang Asset Management LP ........................... 2,316,900(4) 5.46%
600 Fifth Avenue
New York, New York 10020
</TABLE>
------------------------
(1) Includes (i) 8,448,027 shares that are issuable upon exercise of the option
under the stock option agreement between Cendant and Fairfield and
(ii) 7,186,644 shares beneficially owned by certain stockholders (including
Ralph P. Muller and Stephens Group, Inc.) and 510,000 shares that are
issuable upon the exercise of outstanding options held by certain executive
officers of Fairfield which are either vested or will vest within 60 days of
November 1, 2000, all of which are subject to the voting agreement between
Cendant and certain stockholders of Fairfield. Cendant has disclaimed
beneficial ownership of these shares pursuant to Rule 13d-4 under the
Securities Exchange Act of 1934.
(2) Includes 1,465,174 shares held by a limited partnership, the general partner
of which is 100% owned by Mr. Muller, and 13,000 shares held by
Mr. Muller's wife. Mr. Muller disclaims beneficial ownership of the shares
held by his wife. The foregoing information has been included in reliance
upon, and without independent verification of, disclosures contained in
Mr. Muller's Form 4 and 1998 Schedule 13D filings with the SEC, and certain
other information provided by Mr. Muller's financial advisor in connection
with entering into the voting agreement.
(3) Includes 1,020,000 shares owned on November 30, 2000 by principals of
Stephens Group, Inc. or a related company and their families; such shares
are not included in the reported holdings, and Stephens disclaims beneficial
ownership of such shares. The foregoing information has been included in
reliance upon information provided by Stephens.
(4) A report on Schedule 13G has been filed with the SEC by Reich & Tang Asset
Management LP indicating that R&T on December 31, 1999 had shared voting
power over 2,316,900 shares and shared dispositive power over 2,316,900
shares. The foregoing information has been included in reliance upon, and
without independent verification of, the disclosures contained in the above-
referenced report on Schedule 13G.
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(5) Calculated based on 42,442,703 shares outstanding as of November 30, 2000,
which includes 1,535,806 shares that the directors and executive officers of
Fairfield have the right to acquire through the exercise of warrants or
stock options within 60 days after November 30, 2000.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, as of November 30, 2000,
with respect to the beneficial ownership of shares of Fairfield common stock by
each of the non-management directors and director nominees and each of the named
executive officers and by all directors, director nominees and executive
officers as a group. Except as noted, each individual named has sole investment
and voting power with respect to his shares of Fairfield common stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(11)
------------------------------- -------------------- ----------
<S> <C> <C> <C>
Non-Management Directors and
Director Nominees Ernest D. Bennett, III......... 43,391(1)(8) *
Philip A. Clement.............. 1,391(8) *
John D. Hayes.................. 1,391(8) *
Philip L. Herrington........... 43,391(1)(8) *
Gerald M. Johnston............. 1,557,391(2)(8) 3.67%
Ilan Kaufthal.................. 1,391(8) *
Bryan D. Langton............... 48,085(3) *
William C. Scott............... 97,391(4)(8) *
Named Executive Officers James G. Berk.................. 228,565(5)(6) *
Franz S. Hanning............... 203,143(6)(9) *
Robert W. Howeth............... 468,577(7)(9) 1.09%
Marcel J. Dumeny............... 439,300(6)(9) 1.03%
Robert Albertson............... 96,949(6)(10) *
All Directors and Executive Officers as a Group................. 3,599,249 8.18%
</TABLE>
------------------------
* Beneficial ownership represents less than 1% of the outstanding shares.
(1) Includes 42,000 shares that each of Messrs. Bennett and Herrington has the
right to acquire through the exercise of warrants within 60 days after
November 30, 2000.
(2) Includes 1,516,000 shares owned by a limited partnership, of which
Mr. Johnston is the general partner.
(3) Includes 9,000 shares that Mr. Langton has the right to acquire through the
exercise of warrants within 60 days after November 30, 2000; 18,000 shares
held by Mr. Langton's wife, as to which Mr. Langton disclaims beneficial
ownership; 1,391 shares of restricted stock for which the risk of
forfeiture lapses on May 1, 2001; and 9,194 shares of restricted stock for
which the risk of forfeiture lapses on March 16, 2001.
(4) Includes 42,000 shares that Mr. Scott has the right to acquire through the
exercise of warrants within 60 days after November 30, 2000 and 54,000
shares held by Mr. Scott's wife, as to which Mr. Scott disclaims beneficial
ownership.
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(5) Includes 25,000 shares of restricted stock, for which the risk of
forfeiture lapses on September 30, 2003 and 50,000 shares of restricted
stock, for which the risk of forfeiture lapses on January 1, 2005.
(6) Includes shares that each of the indicated persons has the right to acquire
through the exercise of warrants or stock options within 60 days after
November 30, 2000, as follows: James G. Berk (150,000), Franz S. Hanning
(168,000), Marcel J. Dumeny (360,000) and Robert Albertson (80,000).
(7) Includes 360,000 shares that Mr. Howeth has the right to acquire through
the exercise of warrants within 60 days after November 30, 2000, 77,950
shares held by Mr. Howeth's wife and 2,700 shares held by Mr. Howeth's
minor son. Mr. Howeth disclaims beneficial ownership of the shares held by
his wife and minor son.
(8) Includes 1,391 shares of restricted stock for which the risk of forfeiture
lapses on May 1, 2001.
(9) Includes 25,000 shares of restricted stock for which the risk of forfeiture
lapses on January 1, 2005.
(10) Includes 15,000 shares of restricted stock for which the risk of
forfeiture lapses on January 1, 2005.
(11) Calculated based on 42,442,703 shares outstanding as of November 30, 2000,
which includes 1,535,806 shares that the directors and executive officers
have the right to acquire through the exercise of warrants or stock
options within 60 days after November 30, 2000.
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF FAIRFIELD AND CENDANT
Cendant and Fairfield are both organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of CD common
stock and Fairfield common stock will arise from differences in their
certificates of incorporation and bylaws and, in the case of Fairfield, from the
existence of a rights agreement. Under the terms of the merger agreement,
Fairfield stockholders have the right to receive the merger consideration in CD
common stock. At the effective time of the merger, the rights of Fairfield
stockholders who receive CD common stock in the merger will be governed by
Delaware law, Cendant's amended and restated certificate of incorporation and
Cendant's bylaws. The following is a summary of the material differences between
the current rights of Fairfield stockholders and the rights of Cendant
stockholders.
The following discussions are not intended to be complete and are qualified
by reference to Fairfield's second amended and restated certificate of
incorporation, Fairfield's fifth amended and restated bylaws, Cendant's amended
and restated certificate of incorporation and Cendant's bylaws. In addition, the
identification of some of the differences in the rights of these stockholders as
material is not intended to indicate that other differences that are equally
important do not exist. We urge you to read carefully the relevant provisions of
Delaware law, as well as the certificates of incorporation and bylaws of Cendant
and Fairfield. Copies of these documents are incorporated by reference into this
document and will be sent to you upon request. See "Where You Can Find More
Information" on pages [ ] through [ ].
AUTHORIZED CAPITAL STOCK
FAIRFIELD. The authorized capital stock of Fairfield consists of:
- 100,000,000 shares of Fairfield common stock, par value $0.01 per share,
of which there were, on October 29, 2000, 42,382,655 shares were issued
and outstanding, and 10,376,039 shares held by Fairfield in its treasury;
and
- 5,000,000 shares of preferred stock, par value $0.01 per share, of which
1,000,000 shares have been designated as series A junior participating
preferred stock, none of which were issued and outstanding on October 29,
2000.
CENDANT. The authorized capital stock of Cendant consists of:
- 2,500,000,000 shares of common stock, par value $0.01 per share, of which:
- 2,000,000,000 shares are designated as CD common stock, of which there
were, on September 30, 2000, 728,703,667 shares issued and outstanding
and 179,003,833 shares held by Cendant in its treasury; and
- 500,000,000 shares are designated as Move.com common stock, of which
there were, on September 30, 2000, 3,742,586 shares issued and
outstanding; and
- 10,000,000 shares of Cendant preferred stock, par value $.01 per share, of
which there were no shares issued and outstanding as of September 30,
2000.
BOARD OF DIRECTORS
FAIRFIELD. The board of directors of Fairfield has nine directors.
Fairfield's certificate of incorporation and bylaws provide that, subject to the
rights, if any, of the holders of any series of preferred stock to elect
directors, the number of the directors will be fixed from time to time by a
resolution adopted by the majority of the entire board of directors or by a vote
of the holders of record of at least a majority of the issued and outstanding
shares of common stock entitled to vote generally in an election of directors.
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Fairfield's board of directors is not divided into classes. Fairfield's
certificate of incorporation and bylaws provide that Fairfield's directors will
be elected for a period ending on the next annual election and until their
successors shall be duly elected and qualified. Fairfield's certificate of
incorporation and bylaws are silent as to the requisite vote of stockholders to
elect directors. Under Delaware law, directors are elected by a plurality of the
votes present, in person or represented by proxy, at a meeting of stockholders,
by the holders of shares entitled to vote in the election.
A quorum at any meeting of Fairfield's board of directors consists of a
majority of the whole board of directors. A majority of the directors present at
any meeting at which a quorum is present is required to approve an action of
Fairfield's board of directors.
CENDANT. The board of directors of Cendant has thirteen directors.
Cendant's certificate of incorporation and bylaws provide that the number of
directors shall be fixed from time to time by the board of directors but shall
not be less than three.
Cendant's certificate of incorporation and bylaws provide for three classes
of directors, with each class elected for a term of three years and consisting
as nearly as possible of one third of the total number of directors on Cendant's
board of directors. At each annual meeting of stockholders, one class of
directors is elected for a three-year term, with the members of each class to
hold office until their successors are elected and qualified. Classification of
directors has the effect of making it more difficult for stockholders to change
the composition of Cendant's board of directors.
Cendant's certificate of incorporation and bylaws are silent as to the
requisite vote of stockholders to elect directors. Under Delaware law, directors
are elected by a plurality of the votes present, in person or represented by
proxy, at a meeting of stockholders, by the holders of shares entitled to vote
in the election.
A quorum at any meeting of the Cendant board of directors consists of a
majority of the total number of Cendant directors and the act of a majority of
such quorum shall be deemed the act of the Board.
COMMITTEES OF THE BOARD OF DIRECTORS
FAIRFIELD. Fairfield's bylaws permit the Fairfield board of directors to
designate one or more committees, each committee to consist of one or more of
the Fairfield directors.
The Fairfield board of directors currently has the following committees:
- an audit committee;
- a compensation committee;
- an executive committee; and
- a nominating committee.
CENDANT. Cendant's certificate of incorporation and bylaws permit the
Cendant board of directors to designate one or more committees, each committee
to consist of one or more of the Cendant directors. In addition, Cendant's
bylaws require that the board of directors shall have the following committees:
- an executive committee;
- a compensation committee; and
- an audit committee.
In addition to the foregoing committees, Cendant's board of directors
currently has a nominating committee, a corporate policy committee and a
litigation committee.
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NEWLY CREATED DIRECTORSHIPS AND VACANCIES
FAIRFIELD. Fairfield's certificate of incorporation and bylaws provide
that, subject to the rights, if any, of holders of any series of preferred
stock, newly created directorships resulting from any increase in the authorized
number of directors or any vacancies resulting from death, resignation,
disqualification or other cause, other than vacancies resulting from removal of
a director with or without cause by a vote of the stockholders, will be filled
by the affirmative vote of a majority of the remaining directors, even if less
than a quorum, or by the sole remaining director or by the stockholders.
Directors appointed to fill newly created directorships or vacancies will hold
office until the next annual meeting of stockholders.
CENDANT. Cendant's certificate of incorporation and bylaws provide that
newly created directorships resulting from any increase in the number of
directors and any vacancies on the board of directors resulting from death,
resignation, disqualification, removal or other cause shall be filled solely by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the board of directors. Directors appointed to
fill newly created directorship and vacancies will hold office for the remainder
of the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified.
REMOVAL OF DIRECTORS
FAIRFIELD. Fairfield's certificate of incorporation and bylaws provide
that, subject to the rights, if any, of holders of any series of preferred
stock, any director or the entire Fairfield board of directors may be removed
from office with or without cause by the holders of a majority of all of the
outstanding shares of Fairfield entitled to vote generally in an election of
directors.
CENDANT. Cendant's certificate of incorporation and bylaws provide that any
director may be removed from office, without cause, only by the affirmative vote
of the holders of 80% of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class.
OFFICERS
FAIRFIELD. Fairfield's bylaws provide that Fairfield's senior officers will
include a chairman of the board of directors, one or more vice chairmen of the
board of directors, a president, one or more vice presidents, a secretary,
treasurer and such other senior officers as the board of directors may appoint.
Each senior officer is elected by the board of directors annually and will hold
office until his successor is duly elected or appointed. The Fairfield board of
directors will designate one of the senior officers as chief executive officer.
The chief executive officer may appoint:
- assistant secretaries;
- assistant treasurers;
- staff, sales or other vice presidents; and
- any other officers and agents as the chief executive officer shall deem
necessary or proper in the conduct of the affairs of Fairfield.
Fairfield's bylaws provide that any officer may be removed by the board of
directors whenever in its judgment the best interest of Fairfield would be
served thereby. Vacancies or new offices may be filled at any time.
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CENDANT. Pursuant to Cendant's bylaws, Cendant's officers consist of a
chairman of the board of directors, a president and chief executive officer, one
or more vice chairmen of the board of directors, a chief financial officer, a
general counsel, such number of vice presidents as the board of directors may
from time to time determine and a secretary, as may be elected or appointed by
Cendant's board of directors. In addition, the board of directors may appoint
such other officers, agents and employees as it shall deem appropriate.
Cendant's bylaws provide that all officers shall hold their respective
offices or positions at the pleasure of the board of directors and may be
removed at any time by the board of directors with or without cause.
SPECIAL MEETINGS OF STOCKHOLDERS
FAIRFIELD. Fairfield's bylaws provide that the chief executive officer, the
chairman of the board of directors, or the secretary of Fairfield may call
special meetings of the Fairfield stockholders. Further, upon written request of
the holders of at least 10% of the issued and outstanding capital stock entitled
to vote generally in an election of directors, the chief executive officer,
chairman of the board of directors or secretary of Fairfield must, within 10
calendar days of receipt of the request, call a special meeting of Fairfield
stockholders.
CENDANT. Cendant's bylaws provide that special meetings of the stockholders
may be called only by the chairman of the board of directors, the president or
the board of directors pursuant to a resolution approved by a majority of the
entire board of directors.
QUORUM AT STOCKHOLDER MEETINGS
FAIRFIELD. Fairfield's bylaws provide that at all meetings of stockholders,
a majority of the issued and outstanding shares entitled to vote which are
present in person or by proxy shall constitute a quorum.
If a quorum is not present, the stockholders present at that meeting may
adjourn the meeting from time to time without notice, other than an announcement
at that meeting stating the date, time and place of the adjourned meeting, until
a quorum is present. Any business may be transacted at the adjourned meeting
which might have been transacted at the meeting as originally called. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
CENDANT. Cendant's bylaws provide that, except as otherwise required by
law, the certificate of incorporation or the bylaws, the holders of not less
than one third of the shares entitled to vote at any meeting of the
stockholders, present in person or by proxy, shall constitute a quorum, and the
act of the majority of such quorum shall be deemed the act of the stockholders.
If a quorum shall fail to attend any meeting, the chairman of the meeting
may adjourn the meeting to another place, date or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then, except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of votes cast at such meeting.
STOCKHOLDER ACTION BY WRITTEN CONSENT
FAIRFIELD. Fairfield's bylaws provide that any action which is required to
be or may be taken at any annual or special meeting of Fairfield stockholders
may be taken without a meeting, without prior
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notice to stockholders and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall have been signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or to take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
CENDANT. Cendant's certificate of incorporation requires that any action
required or permitted to be taken by the stockholders of Cendant must be
effected at a duly called annual or special meeting of such holders and may not
be effected by any consent in writing.
ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL MEETINGS
FAIRFIELD. Fairfield's certificate of incorporation and bylaws are silent
on the matter of advance notice of stockholder-proposed business at annual
meetings.
CENDANT. Cendant's bylaws provide for an advance notice procedure for the
nomination of candidates for election as directors as well as for other
stockholder-proposed business to be considered at stockholder meetings.
Generally, notice must be received in writing by the secretary of Cendant,
not more than 90 days and not less than 60 days prior to the annual meeting. The
stockholder notice must contain:
- a brief description of the business desired to be brought before the
annual meeting;
- the name and address, as they appear on Cendant's books, of the
stockholder proposing such business;
- the class and number of shares of Cendant that are beneficially owned by
the stockholder; and
- any material interest of the stockholder in such business.
AMENDMENT OF GOVERNING DOCUMENTS
FAIRFIELD. Fairfield's certificate of incorporation and bylaws are silent
on the matter of amending the certificate of incorporation of Fairfield.
Under Delaware law, an amendment to a corporation's certificate of
incorporation requires:
- the recommendation of a corporation's board of directors;
- the approval of holders of a majority of all shares entitled to vote
thereon, voting together as a single class; and
- the approval of holders of a majority of the outstanding stock of each
class entitled to vote on the amendment,
unless a higher vote is required in the corporation's certificate of
incorporation.
Fairfield's certificate of incorporation provides that the Fairfield board
of directors may make, amend and repeal the bylaws of Fairfield unless otherwise
provided in the bylaws. Further, Fairfield's certificate of incorporation
provides that any bylaw made by the Fairfield board of directors may be amended
or repealed by the Fairfield board of directors or by the Fairfield stockholders
in the manner provided in Fairfield's bylaws. Fairfield's bylaws provide that
the Fairfield stockholders may exercise their power to alter, amend, repeal or
adopt Fairfield's bylaws by the affirmative vote of a majority of the
outstanding shares of capital stock entitled to vote for the election of
directors, provided proper notice is given in accordance with applicable law. In
addition, and subject to the laws of the State of Delaware, Fairfield's
certificate of incorporation and bylaws, the Fairfield board of directors may
amend the bylaws, or enact such other bylaws as in their judgment may be
advisable for the regulation of the conduct of the affairs of Fairfield.
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CENDANT. Cendant's certificate of incorporation requires the affirmative
vote of the holders of at least 80% of the voting power of all the shares
entitled to vote generally in the election of directors, voting together as a
single class, in order to alter, amend or adopt any provision inconsistent with
the provisions in the certificate of incorporation relating to the election,
number and terms of directors, filling of newly created directorship and
vacancies, removal of directors, stockholder nomination of director candidates,
bylaws amendment and the vote required for certain business combinations.
As to other provisions and matters, Cendant's certificate of incorporation
and bylaws are silent on the matter of amending the certificate of incorporation
of Cendant and, therefore, Delaware law applies.
Cendant's certificate of incorporation requires the affirmative vote of the
holders of at least 80% of the voting power of all the shares entitled to vote
generally in the election of directors, voting together as a single class, in
order to alter, amend or repeal the provisions in the bylaws relating to annual
meetings, special meetings, stockholders action, number, election and terms of
directors, newly created directorship and vacancies and removal of directors.
As to other provisions and matters, Cendant's bylaws provide that the bylaws
may be altered, amended or repealed at any regular meeting of the stockholders
(or at any special meeting duly called for that purpose) by the vote of a
majority of the shares outstanding and entitled to vote at such meeting,
provided, in the case of any special meeting, that in the notice of such special
meeting notice of such purpose shall be given. The board of directors may by
majority vote of those present at any meeting at which a quorum is present amend
the bylaws, or enact such other bylaws as in their judgment may be advisable for
the regulation of the conduct of the affairs of Cendant.
EFFECT OF INTERESTED STOCKHOLDER TRANSACTIONS AND FAIR PRICE PROVISION
FAIRFIELD. Delaware law generally prohibits a business combination between
a corporation and an "interested stockholder" within three years of the time
that person became an interested stockholder. An interested stockholder
generally includes a person who beneficially owns 15% or more of the outstanding
voting stock of the corporation. This provision does not apply if (i) the
corporation's board of directors approved the interested stockholder transaction
prior to the date the interested stockholder acquired his or her shares, (ii) as
a result of the interested stockholder transaction, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding shares owned by persons who are both
directors and officers and by employee stock plans), or (iii) the interested
stockholder transaction is approved by the board of directors and the
affirmative vote of 66 2/3% of the outstanding voting stock of the disinterested
stockholders at an annual or special meeting. These restrictions will not apply
to a corporation if, among other reasons, the corporation's certificate of
incorporation contains a provision expressly electing not to be governed by this
section of Delaware law. Fairfield's certificate of incorporation does not
contain a provision electing not to be governed by this section of Delaware law.
CENDANT. In addition to the approval requirements of business combinations
under Delaware law, the Cendant certificate of incorporation includes what
generally is referred to as a "fair price provision."
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In general, this provision of the Cendant certificate of incorporation
provides that a business combination, which is defined to include any of the
following:
- any merger or consolidation of Cendant or any majority-owned subsidiary
with (a) any interested stockholder or (b) any other corporation (whether
or not itself an interested stockholder) that is, or after such merger or
consolidation would be, an affiliate of an interested stockholder;
- any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions) to or with any interested
stockholder of any assets of Cendant or any majority-owned subsidiary
having an aggregate fair market value of $10 million or more;
- the issuance or transfer by Cendant or any majority-owned subsidiary (in
one transaction or series of transactions) of any securities of Cendant or
any majority-owned subsidiary to 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;
- the adoption of any plan or proposal for the liquidation or dissolution of
Cendant proposed by or on behalf of any interested stockholder or any
affiliate of any interested stockholder; or
- any reclassification of securities (including any reverse stock split) or
recapitalization of Cendant or any merger or consolidation of Cendant with
any of its majority-owned subsidiaries or any other transaction (whether
or not with or into or otherwise involving an interested stockholder)
which has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of equity
security of Cendant or any majority-owned subsidiary that is directly or
indirectly owned by any interested stockholder or any affiliate of any
interested stockholder:
requires approval by the affirmative vote of at least 80% of the voting power of
the then outstanding shares of capital stock of Cendant entitled to vote
generally in the election of directors, unless:
- the business combination is approved by a majority of the disinterested
directors; or
- minimum price criteria and procedural requirements that are intended to
assure an adequate and fair price under the circumstances are satisfied.
In general, under Cendant's certificate of incorporation, an interested
stockholder includes any person who is the beneficial owner of 5% or more of the
voting capital stock of Cendant or is an affiliate of Cendant and at any time
within the two-year period immediately prior to the date in question was the
beneficial owner of 5% or more of the voting capital stock of Cendant.
In general, a disinterested director means a director that is not affiliated
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.
STOCKHOLDER RIGHTS PLAN
FAIRFIELD. In 1992, Fairfield adopted a stockholder rights plan pursuant to
a rights agreement with First National Bank of Boston (as successor to Society
National Bank), as rights agent. A summary of the material provisions of the
rights agreement is set forth below. The summary does not include a complete
description of all of the terms of the rights agreement. We urge you to read
carefully the relevant provisions of Fairfield's rights plan, a copy of which
will be sent to you upon request. See "Where You Can Find More Information" on
pages [ ] through [ ].
Under the Fairfield rights agreement, each share of Fairfield common stock
is accompanied by one-third of one share purchase right, which upon exercise,
entitles the registered holder to purchase from Fairfield one one-hundredth of a
share of Fairfield's series A junior participating preferred stock at an initial
purchase price of $25.00, subject to customary antidilution adjustments.
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The Fairfield rights will not become exercisable until the earlier of:
- the close of business on the tenth business day following the first date
of public announcement by Fairfield that a person (other than Fairfield or
a subsidiary or employee benefit plan of Fairfield), together with its
affiliates and associates, has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of Fairfield's outstanding common
stock; and
- the close of business on the tenth business day (or such later date as the
Fairfield board of directors may determine) following the commencement of
a tender offer or exchange offer by a person (other than Fairfield or a
subsidiary or employee benefit plan of Fairfield), the consummation of
which would result in beneficial ownership by such person of 20% or more
of Fairfield's outstanding common stock.
In connection with the merger, the Fairfield rights agreement was amended to
provide that the Fairfield rights will not become exercisable solely by reason
of the merger agreement with Cendant and the completion of the transactions
contemplated by the merger agreement.
In the event a person becomes the beneficial owner of 20% or more of
Fairfield's common stock then issued and outstanding (except in the case of
certain redemptions), each holder of the Fairfield rights, except for such
person, will have the right to acquire, upon exercise of the Fairfield rights,
instead of one one-hundredth of a share of Fairfield series A junior
participating preferred stock, a number of shares of Fairfield common stock
having a market value equal to twice the current exercise price of the Fairfield
rights.
In the event that, following the first date of public announcement by
Fairfield that a person has become the beneficial owner of 20% or more of the
Fairfield common stock then issued and outstanding:
- Fairfield merges into another entity and Fairfield does not survive;
- another entity merges into Fairfield and Fairfield survives but all or
part of Fairfield's common stock is changed or exchanged; or
- Fairfield sells more than 50% of its assets or earning power,
then each holder of a Fairfield right, except for such person that has become
the beneficial owner of 20% or more of the Fairfield common stock then issued
and outstanding, will have the right to receive, upon exercise of the Fairfield
right, the number of shares of the acquiring company's common stock having a
market value equal to two times the current exercise price of the Fairfield
right.
At any time prior to the earlier to occur of:
- the close of business on the tenth day following the first date of public
announcement that a person has become the beneficial owner of 20% or more
of the Fairfield common stock then issued and outstanding; and
- September 1, 2002,
the board of directors of Fairfield may redeem the Fairfield rights in whole,
but not in part, at a redemption price of $0.01 per right, subject to standard
adjustments. Immediately upon any redemption of the Fairfield rights, the right
to exercise the Fairfield rights will terminate and the only right of the holder
of such Fairfield rights will be to receive the redemption price. The redemption
price may be paid in cash, in Fairfield common stock or any other form of
consideration.
At any time prior to the time that the Fairfield rights become exercisable,
the rights agreement may be amended by Fairfield without the approval of the
holders of Fairfield common stock or of the holders of Fairfield rights.
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If not previously exercised, the Fairfield rights will expire on
September 1, 2002, unless Fairfield earlier redeems the Fairfield rights or
extends the expiration date.
The Fairfield rights have anti-takeover effects. Once the Fairfield rights
have become exercisable, they will cause, in most cases, substantial dilution to
a person that attempts to acquire or merge with Fairfield. Accordingly, the
existence of the Fairfield rights may deter potential acquirers from making a
takeover proposal or tender offer. The Fairfield rights should not interfere
with any merger or other business combination approved by the board of directors
of Fairfield because Fairfield may redeem the Fairfield rights and because the
Fairfield board of directors can amend the Fairfield rights agreement so that a
transaction approved by the Fairfield board of directors would not cause the
Fairfield rights to become exercisable.
In connection with the creation of the Fairfield rights, the board of
directors of Fairfield authorized the issuance of 1,000,000 shares of Fairfield
preferred stock designated as series A junior participating preferred stock.
Fairfield designed the dividend, liquidation, voting and redemption features
of the Fairfield series A junior participating preferred stock so that the value
of one third of one-hundredth of a share of Fairfield series A junior
participating preferred stock approximates the value of one share of Fairfield
common stock. Shares of Fairfield series A junior participating preferred stock
may only be purchased after the Fairfield rights have become exercisable.
The rights of the Fairfield series A junior participating preferred stock as
to dividends, liquidation and voting, and in the event of mergers or
consolidations, are protected by customary antidilution provisions.
CENDANT. Cendant has not adopted a stockholder rights plan.
74
<PAGE>
EXPERTS
The consolidated financial statements of Cendant and its subsidiaries as of
December 31, 1999 and 1998 and for the three years ended December 31, 1999,
incorporated by reference into this proxy statement-prospectus from Cendant's
Current Report on Form 8-K dated November 28, 2000, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report (which
expresses an unqualified opinion and includes explanatory paragraphs relating to
the change in the method of recognizing revenue and membership solicitation
costs as described in Note 1 and the presentation of the individual membership
segment as a discontinued operation as described in Notes 1 and 4), which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Fairfield incorporated by reference
into its Annual Report on Form 10-K for the year ended December 31, 1999, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the CD common stock offered hereby will be passed upon for
Cendant by Eric J. Bock, Senior Vice President--Law and Corporate Secretary of
Cendant.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
As a result of the merger, Fairfield does not currently expect to hold a
2001 annual meeting of stockholders because Fairfield will have become a wholly
owned subsidiary of Cendant in the merger. In the event that the merger is not
consummated and the 2001 annual meeting is held, Fairfield stockholders may
propose matters to be presented at the 2001 annual meeting of stockholders and
may also nominate persons to be directors of Fairfield. Any stockholder proposal
intended for inclusion in the proxy materials for the 2001 annual meeting of
stockholders must be received by Fairfield no later than December 29, 2000,
addressed to the Secretary of Fairfield at the address on the front cover of
this proxy statement-prospectus. Stockholders submitting proposals are urged to
submit their proposals by certified mail, return receipt requested.
If the 2001 annual meeting is not held or the 2001 annual meeting date is
not within 30 days of May 18, 2001 (the one-year anniversary of the 2000 annual
meeting), then, unless notice of a stockholder proposal is received within a
reasonable time before Fairfield mails its proxy materials for the 2001 annual
meeting of stockholders, the persons named in the proxies solicited on behalf of
the board of directors of Fairfield for the 2001 annual meeting will have
discretionary authority to vote on and may vote against any such stockholder
proposal. With respect to special meetings of Fairfield stockholders, unless
notice of a stockholder proposal is received a reasonable time before Fairfield
mails its proxy materials for the special meeting, the persons named in the
proxies solicited on behalf of the board of Fairfield for such meeting will have
discretionary authority to vote on and may vote against any such stockholder
proposal.
WHERE YOU CAN FIND MORE INFORMATION
Fairfield and Cendant file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that the companies file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Fairfield's and Cendant's public filings are also
available to the public from
75
<PAGE>
commercial document retrieval services and at the Internet World Wide Web site
maintained by the SEC at "http://www.sec.gov." Reports, proxy statements and
other information concerning Fairfield and Cendant also may be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
Cendant has filed a registration statement on Form S-4 to register with the
SEC the shares of CD common stock to be issued to Fairfield stockholders in the
merger. This proxy statement-prospectus is a part of that registration statement
and constitutes a prospectus of Cendant and a proxy statement of Fairfield for
purposes of the Fairfield special meeting.
As allowed by SEC rules, this proxy statement-prospectus omits certain
information contained in the registration statement or the exhibits to the
registration statement. Any statements contained in this proxy
statement-prospectus concerning the provisions of any other document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the registration statement or otherwise
filed with the SEC. Each statement is qualified in its entirety by such
reference.
The SEC allows Fairfield and Cendant to incorporate by reference information
into this proxy statement-prospectus, which means that the companies 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-prospectus, except for any information
superseded by information contained directly in the proxy statement-prospectus.
This proxy statement-prospectus incorporates by reference the documents set
forth below that Fairfield and Cendant have previously filed with the SEC. These
documents contain important information about the companies.
FAIRFIELD SEC FILINGS
<TABLE>
<CAPTION>
(FILE NO. 1-8096) PERIOD
----------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K................... Year ended December 31, 1999 (filed on
March 27, 2000)
Quarterly Reports on Form 10-Q............... Quarters ended March 31, 2000, June 30, 2000
and September 30, 2000 (filed on May 12,
2000, August 11, 2000, November 13, 2000,
respectively)
Current Report on Form 8-K................... Dated November 1, 2000 (filed on
November 15, 2000)
</TABLE>
CENDANT SEC FILINGS
<TABLE>
<CAPTION>
(FILE NO. 1-10308) PERIOD
------------------ ---------------------------------------------
<S> <C>
Annual Report on Form 10-K (excluding
Items 6, 7 and 8).......................... Year ended December 31, 1999 (filed on
March 1, 2000)
Quarterly Report on Form 10-Q/A.............. Quarter ended March 31, 2000 (filed on
July 28, 2000)
Quarterly Reports on Form 10-Q............... Quarters ended June 30, 2000 and
September 30, 2000 (filed on July 28, 2000
and November 14, 2000, respectively)
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
(FILE NO. 1-10308) PERIOD
------------------ ---------------------------------------------
<S> <C>
Current Reports on Form 8-K.................. Dated October 23, 2000, October 26, 2000,
October 26, 2000, November 17, 2000 and
November 28, 2000 (filed on October 23,
2000, October 26, 2000, November 3, 2000,
November 20, 2000 and November 29, 2000,
respectively)
Proxy Statement describing Cendant's common
stock, including any amendments or reports
filed for the purpose of updating such
description................................ February 10, 2000 (filed on March 28, 2000)
</TABLE>
Cendant's Current Report on Form 8-K, dated November 28, 2000, includes its
restated consolidated financial statements as of December 31, 1999 and 1998 and
for each of the three years in the period ending December 31, 1999.
Fairfield and Cendant incorporate by reference additional documents that
either company may file with the SEC under Sections 13(a), 13(c), 14 or 15(d)
between the date of this proxy statement-prospectus and the date of the special
meeting. These include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
Fairfield has supplied all information contained or incorporated by
reference into this proxy statement-prospectus relating to Fairfield, and
Cendant has supplied all such information relating to Cendant.
You can obtain a copy of any Cendant document or any Fairfield document
incorporated by reference except for the exhibits to those documents from the
appropriate company. You may also obtain these documents from the SEC or through
the SEC's Internet World Wide Web site described above. Documents incorporated
by reference are available from the companies without charge, excluding all
exhibits unless specifically incorporated by reference as an exhibit into this
proxy statement-prospectus. You may obtain documents incorporated by reference
into this proxy statement-prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
<TABLE>
<CAPTION>
<S> <C>
Fairfield Communities, Inc.
8669 Commodity Circle, Suite 200
Orlando, Florida 32819
Attention: Investor Relations
(407) 370-5200
Cendant Corporation
9 West 57th Street
New York, New York 10019
Attention: Investor Relations
(212) 413-1845
</TABLE>
If you would like to request documents from either company, please do so by
[ ], 2001 to receive them before the Fairfield special meeting. If
you request any of these documents from us we will mail them to you by
first-class mail, or similar means.
77
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE INTO THIS PROXY STATEMENT-PROSPECTUS IN VOTING YOUR SHARES AT THE
FAIRFIELD SPECIAL MEETING. FAIRFIELD AND CENDANT HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT-PROSPECTUS. THIS PROXY STATEMENT-PROSPECTUS IS DATED [ ],
2001. You should not assume that the information contained in the proxy
statement-prospectus is accurate as of any other date, and neither the mailing
of this proxy statement-prospectus to Fairfield's stockholders nor the issuance
of Cendant's securities in the merger will create any implication to the
contrary.
78
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CENDANT CORPORATION,
GRAND SLAM ACQUISITION CORP.
AND
FAIRFIELD COMMUNITIES, INC.
DATED AS OF NOVEMBER 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C> <C>
ARTICLE I THE MERGER............................................................ A-2
SECTION 1.1 The Merger.................................................... A-2
SECTION 1.2 Closing....................................................... A-2
SECTION 1.3 Effective Time................................................ A-2
SECTION 1.4 Effects of the Merger......................................... A-2
Certificate of Incorporation and By-laws of the Surviving
SECTION 1.5 Corporation................................................... A-2
SECTION 1.6 Directors and Officers........................................ A-2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES................................ A-3
SECTION 2.1 Effect on Capital Stock....................................... A-3
(a) Capital Stock of Merger Sub............................. A-3
(b) Cancellation of Treasury Stock.......................... A-3
(c) Conversion of Company Common Stock; Proration........... A-3
SECTION 2.2 Election Procedure............................................ A-5
SECTION 2.3 Certain Adjustments........................................... A-7
SECTION 2.4 Shares of Dissenting Stockholders............................. A-7
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................ A-8
SECTION 3.1 Representations and Warranties of the Company................. A-8
(a) Organization, Standing and Corporate Power.............. A-8
(b) Subsidiaries............................................ A-8
(c) Capital Structure....................................... A-9
(d) Authority; Noncontravention............................. A-10
(e) Company Documents; Undisclosed Liabilities.............. A-11
(f) Certain Contracts....................................... A-12
(g) VOIs.................................................... A-13
(h) Resorts................................................. A-14
(i) Condominium Associations................................ A-15
(j) FairShare Plus Program.................................. A-16
(k) Absence of Certain Changes or Events.................... A-17
(l) Compliance with Applicable Laws; Litigation............. A-18
(m) Taxes................................................... A-18
(n) Employee Benefit Plans.................................. A-19
(o) Labor Matters........................................... A-22
(p) Environmental Liability................................. A-22
(q) Intellectual Property................................... A-24
(r) Insurance Matters....................................... A-24
(s) Information Supplied.................................... A-24
(t) Rights Agreement........................................ A-25
(u) Transactions with Affiliates............................ A-25
(v) Voting Requirements..................................... A-25
(w) Opinions of Financial Advisor........................... A-25
(x) State Takeover Statutes................................. A-25
(y) Brokers................................................. A-25
(z) Takeover Laws........................................... A-25
(aa) No Other Agreement...................................... A-26
SECTION 3.2 Representations and Warranties of Parent...................... A-26
(a) Organization, Standing and Corporate Power.............. A-26
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C> <C>
(b) Capital Structure....................................... A-26
(c) Authority; Noncontravention............................. A-27
(d) Parent Documents........................................ A-28
(e) Information Supplied.................................... A-28
(f) Brokers................................................. A-29
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS............................. A-29
SECTION 4.1 Conduct of Business by the Company............................ A-29
SECTION 4.2 Advice of Changes............................................. A-31
SECTION 4.3 No Solicitation by the Company................................ A-31
ARTICLE V ADDITIONAL AGREEMENTS................................................. A-33
SECTION 5.1 Preparation of the Form S-4, Proxy Statement and Form 10;
Stockholders Meeting.......................................... A-33
SECTION 5.2 Letter of the Company's Accountants........................... A-35
SECTION 5.3 Letter of Parent's Accountants................................ A-35
SECTION 5.4 Access to Information; Confidentiality........................ A-35
SECTION 5.5 Reasonable Efforts............................................ A-36
SECTION 5.6 Company Equity-Based Incentives............................... A-37
SECTION 5.7 Indemnification, Exculpation and Insurance.................... A-38
SECTION 5.8 Fees and Expenses............................................. A-38
SECTION 5.9 Public Announcements.......................................... A-40
SECTION 5.10 Affiliates.................................................... A-40
SECTION 5.11 Stock Exchange Listing........................................ A-40
SECTION 5.12 Stockholder Litigation........................................ A-40
SECTION 5.13 DevCo. Distribution........................................... A-40
SECTION 5.14 Rights Agreement.............................................. A-41
SECTION 5.15 Standstill Agreements; Confidentiality Agreements............. A-41
SECTION 5.16 Conveyance Taxes.............................................. A-41
SECTION 5.17 Employee Benefits............................................. A-41
SECTION 5.18 Resignation and Appointment of the Directors of the Trustee... A-42
ARTICLE VI CONDITIONS PRECEDENT.................................................. A-42
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.... A-42
(a) Stockholder Approval.................................... A-42
(b) HSR Act................................................. A-42
(c) Governmental and Regulatory Approvals................... A-42
(d) Third Party Consents.................................... A-42
(e) No Injunctions or Restraints............................ A-43
(f) Form S-4................................................ A-43
(g) Stock Exchange Listing.................................. A-43
SECTION 6.2 Conditions to Obligations of Parent........................... A-43
(a) Representations and Warranties.......................... A-43
(b) Performance of Obligations of the Company............... A-43
(c) Regulatory Condition.................................... A-43
Resignation and Appointment of the Directors of the
(d) Trustee................................................. A-43
SECTION 6.3 Conditions to Obligations of the Company...................... A-43
(a) Representations and Warranties.......................... A-43
(b) Performance of Obligations of Parent.................... A-44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..................................... A-44
SECTION 7.1 Termination................................................... A-44
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C> <C>
SECTION 7.2 Effect of Termination......................................... A-44
SECTION 7.3 Amendment..................................................... A-45
SECTION 7.4 Extension; Waiver............................................. A-45
SECTION 7.5 Procedure for Termination..................................... A-45
ARTICLE VIII GENERAL PROVISIONS.................................................... A-45
SECTION 8.1 Nonsurvival of Representations and Warranties................. A-45
SECTION 8.2 Notices....................................................... A-45
SECTION 8.3 Definitions................................................... A-46
SECTION 8.4 Interpretation................................................ A-47
SECTION 8.5 Counterparts.................................................. A-47
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries................ A-47
SECTION 8.7 Governing Law................................................. A-47
SECTION 8.8 Assignment.................................................... A-47
SECTION 8.9 Consent to Jurisdiction....................................... A-48
SECTION 8.10 Headings...................................................... A-48
SECTION 8.11 Severability.................................................. A-48
SECTION 8.12 Enforcement................................................... A-48
</TABLE>
LIST OF EXHIBITS
Exhibit A--Terms and Provisions of the DevCo. Distribution
Exhibit B--Bonuses Arrangements and Plans
Exhibit 5.10(a)--Form of Affiliate Agreement
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November 1,
2000, by and among CENDANT CORPORATION, a Delaware corporation ("Parent"),
FAIRFIELD COMMUNITIES, INC., a Delaware corporation (the "Company"), and GRAND
SLAM ACQUISITION CORP., a Delaware corporation and a subsidiary of Parent
("Merger Sub").
WHEREAS, the respective Board of Directors of Parent and the Company have
determined that the Merger (as defined below) and the other transactions
contemplated under this Agreement are in the best interest of Parent and the
Company;
WHEREAS, each of Parent, Merger Sub and the Company desire to enter into a
transaction whereby Merger Sub will merge with and into the Company (the
"Merger"), with the Company being the surviving corporation, upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $0.01 per share, of the Company
(together with the rights associated with such shares issued pursuant to the
Rights Agreement, dated as of September 1, 1992, as amended, between the Company
and The First National Bank of Boston (as successor to Society National Bank),
as Rights Agent (the "Rights Agreement"), "Company Common Stock"), will be
converted into the right to receive the Merger Consideration (as defined in
Section 2.1(c));
WHEREAS, the respective Boards of Directors of Parent and the Company have
each approved the possible transfer of certain assets and liabilities related to
the resort and vacation ownership interest development business currently
operated by the Company to a newly formed corporation ("DevCo.") and the
distribution of DevCo. common stock, on a pro rata basis, to stockholders of the
Company or the transfer of such common stock to a third party immediately prior
to the Effective Time (as defined in Section 1.3), in accordance with the terms
and provisions set forth on Exhibit A attached hereto (each, a "DevCo.
Distribution");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have each approved and adopted this Agreement and approved the Merger in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), and Parent has approved this Agreement and the Merger as the parent of
Merger Sub;
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent and Merger Sub to enter into this Agreement, Parent and
certain stockholders of the Company have entered into a Voting Agreement, dated
as of the date hereof (the "Voting Agreement"), providing, among other things,
that such stockholders will vote, or cause to be voted, at the meeting of the
Company's stockholders for the purpose of voting on the adoption of this
Agreement (the "Company Stockholders Meeting") all of the shares of Company
Common Stock owned by them in favor of the Merger; and
WHEREAS, concurrently with the execution of this Agreement, Parent and the
Company have entered into a Stock Option Agreement, dated as of the date hereof,
providing, among other things, that the Company grants to Parent an option to
purchased shares of Company Common Stock (the "Stock Option Agreement").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Merger Sub shall be
merged with and into the Company at the Effective Time. Following the Effective
Time, the Company shall be the surviving corporation (the "Surviving
Corporation"), shall become a subsidiary of Parent and shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with the DGCL.
SECTION 1.2 CLOSING. Subject to the satisfaction or waiver of all the
conditions to closing contained in Article VI hereof, the closing of the Merger
(the "Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second day after
satisfaction or waiver of the conditions set forth in Article VI (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions; PROVIDED, that if the
DevCo. Distribution shall be scheduled to occur within 15 business days after
satisfaction or waiver of the conditions set forth in Article VI (other than the
Company Stockholders Meeting), the closing shall take place upon written
election of Parent, delivered to the Company prior to 5:00 p.m., New York City
time, on the date of such satisfaction or waiver (the "Closing Extension
Notice") on (subject to the satisfaction or waiver of all of the conditions set
forth in Article VI) the earlier of (i) the date of the DevCo. Distribution and
(ii) the 15th business day after the date of the Closing Extension Notice,
unless another time or date is agreed to by the parties hereto). The Closing
will be held at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four
Times Square, New York, New York 10036 or at such other location as is agreed to
by the parties hereto.
SECTION 1.3 EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable following the Closing, the parties shall cause the Merger
to be consummated by filing a certificate of merger (the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL to effectuate
the Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware, or at
such subsequent date or time as Parent and the Company shall agree and specify
in the Certificate of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. The certificate of incorporation and the by-laws of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the certificate of
incorporation and the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law, except that the
first article of the certificate of incorporation of the Merger Sub shall be
amended as of the Effective Time to read in its entirety as follows: "The name
of the corporation is Fairfield Communities, Inc."
SECTION 1.6 DIRECTORS AND OFFICERS. The directors of Merger Sub shall,
from and after the Effective Time, become the directors of the Surviving
Corporation until their successors shall have been duly elected, appointed or
qualified or until their earlier death, resignation or removal in accordance
with the certificate of incorporation and the by-laws of the Surviving
Corporation. The officers of Merger Sub shall, from and after the Effective
Time, become the officers of the Surviving Corporation until their successors
shall have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the certificate of
incorporation and the by-laws of the Surviving Corporation.
A-2
<PAGE>
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share of the
common stock, par value $.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK. Each share of Company Common Stock
that is owned by the Company, Parent, Merger Sub or any of their respective
wholly owned subsidiaries shall automatically be cancelled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK; PRORATION. Subject to Section 2.2
hereof, each issued and outstanding share of Company Common Stock, other than
shares to be cancelled and retired in accordance with Section 2.1(b) and
Dissenting Shares (as defined in Section 2.4), shall be converted, at the
election of the holder thereof, in accordance with the procedures set forth in
Section 2.2 below, into the following (the "Merger Consideration"):
(i) For each share of Company Common Stock with respect to which an
election to receive shares of common stock, par value $0.01 per share, of
Parent, designated as CD common stock ("Parent Common Stock"), has been
effectively made and not revoked pursuant to Section 2.2 ("Stock Election")
and for each Non-Electing Share (as defined in subsection (iv) below), the
right to receive 1.2500 (the "Initial Exchange Ratio" and as adjusted
pursuant to Section 2.3 and this subsection (i), the "Exchange Ratio") fully
paid and nonassessable shares of Parent Common Stock (as may be adjusted
pursuant to the remainder of this subsection (i), the "Stock Election
Consideration"); PROVIDED, HOWEVER, that (x) if the Average Trading Price
(as defined below) is between $12.0 and $13.5960, then the Exchange Ratio
shall be equal to the sum of (a) the Initial Exchange Ratio divided by two,
and (b) the quotient of $7.5 divided by the Average Trading Price, (y) if
the Average Trading Price is equal to, or greater than, $13.5960, then the
Exchange Ratio shall be equal to the quotient of $16 divided by the Average
Trading Price and (z) if the Average Trading Price is below $12.0, then the
Exchange Ratio shall be equal to the quotient of $15 divided by the Average
Trading Price; PROVIDED, FURTHER, that if the Average Trading Price of
Parent Common Stock is $7.00 or less, the Exchange Ratio will be 2.1428. As
used herein, the "Average Trading Price" shall mean the arithmetic average
of the 4:00 p.m. Eastern Time closing sales prices of Parent Common Stock
reported on the New York Stock Exchange ("NYSE") Composite Tape for the 20
consecutive NYSE trading days (each, a "Trading Day") ending on (and
including) the Trading Day immediately prior to the date of the Company
Stockholders Meeting (as defined herein).
(ii) For each share of Company Common Stock with respect to which an
election to receive cash has been effectively made and not revoked pursuant
to Section 2.2 ("Cash Election"), the right to receive $15 in cash, subject
to proration pursuant to subsection (iii) below (the "Cash Election
Consideration"); PROVIDED, HOWEVER, that in the event that the Average
Trading Price is greater than $12.0, for each share of Company Common Stock
with respect to which a Cash Election was made and not subject to proration,
in addition to the Cash Election Consideration received with respect to such
share, there shall be a right to receive a fraction of a share of Parent
Common Stock which shall equal the value, based on the Average Trading
Price, of the Stock
A-3
<PAGE>
Election Consideration minus $15 (the "Additional Stock Consideration");
PROVIDED, FURTHER, that the Additional Stock Consideration shall not exceed
$1.
(iii) The manner in which each share of Company Common Stock (other than
shares of Company Common Stock to be cancelled as set forth in
Section 2.1(b) and Dissenting Shares) for which a Cash Election has been
made shall be converted into the right to receive either the Cash Election
Consideration and Additional Stock Consideration, if any, or the Stock
Election Consideration on the Effective Date shall be as set forth in this
subsection (iii). All references to "outstanding" shares of Company Common
Stock in this subsection (iii) shall mean all shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time.
(A) As is more fully set forth below and except as provided in
Section 2.1(c)(v), the aggregate amount of cash which Parent shall be
obligated to pay in the Merger pursuant to this Agreement (other than in
respect of Dissenting Shares) shall not be more than the product of
multiplying $7.5 by the number of outstanding shares of the Company's
Common Stock (the "Total Cash Actual"). "Total Cash Potential" shall mean
the sum of (1) the aggregate Cash Election Consideration elected by
stockholders of the Company, and (2) a cash amount equal to the number of
Dissenting Shares multiplied by the value, based on the Average Trading
Price, of the Stock Election Consideration.
(B) If the Total Cash Potential is equal to or less than the Total
Cash Actual, each share of Company Common Stock covered by a Cash
Election shall be converted in the Merger into the right to receive the
Cash Election Consideration and the Additional Stock Consideration, if
any.
(C) If the Total Cash Potential is greater than the Total Cash
Actual, each share of Company Common Stock covered by a Cash Election
shall be converted in the Merger into the right to receive the Cash
Election Consideration and the Stock Election Consideration in the
following manner:
(a) The Exchange Agent (as defined in Section 2.2(d) below) will
distribute with respect to each share of Company Common Stock as to
which a Cash Election has been made the Cash Election Consideration
multiplied by a fraction, (x) the numerator of which shall be the
product of multiplying (A) $15 by (B) 50.0% of the number of
outstanding shares of Company Common Stock minus the product of
multiplying (C) the number of Dissenting Shares by (D) the value,
based on the Average Trading Price, of the Stock Election
Consideration, and (y) the denominator of which shall be the
aggregate Cash Election Consideration elected by stockholders of the
Company; and
(b) Each share of Company Common Stock covered by a Cash Election
and not fully converted into the right to receive the Cash Election
Consideration as set forth in clause (a) above shall be converted in
the Merger into the right to receive a fraction of a share of Parent
Common Stock which shall equal the value, based on the Average
Trading Price, of the sum of (x) the product of multiplying (A) the
Stock Election Consideration by (B) a fraction equal to 1.0 minus the
fraction set forth in clause (a) above plus (y) the product of
multiplying (A) the value, based on the Average Trading Price, of the
Additional Stock Consideration, if any, by (B) the fraction set forth
in clause (a) above, subject to subsection (v) below.
(iv) Each share of Company Common Stock for which a valid Stock Election
has been received and each share of Company Common Stock for which an
Election (as defined in Section 2.2 below) is not in effect at the Election
Deadline (a "Non-Electing Share"), shall be converted into the right to
receive the Stock Election Consideration in the Merger, subject to
subsection (v) below. If Parent and the Company shall determine that any
Election is not properly
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made with respect to any shares of Company Common Stock, such Election shall
be deemed to be not in effect, and the shares of Company Common Stock
covered by such Election shall, for purposes hereof, be deemed to be
Non-Electing Shares.
(v) Notwithstanding subsections (i) through (iv) above, Parent shall
have the right, exercisable at any time at least two business days prior to
the Closing, at Parent's sole discretion, to pay in cash for any shares for
which an Election (as defined below) was made and to substitute on a pro
rata basis a payment of cash in an amount equal to the Average Trading Price
multiplied by the Exchange Ratio for any or all shares of Company Common
Stock for which the Stock Election has been made or which would otherwise be
converted into Parent Common Stock pursuant to Section 2.1(c)(iii)(C);
PROVIDED, that prior to making such substitution, Parent shall first have
paid in cash for all shares for which a Cash Election has been made and
which were not fully converted into the right to receive the Cash Election
Consideration.
SECTION 2.2 ELECTION PROCEDURE. Each holder of shares of Company Common
Stock (other than Dissenting Shares) shall have the right, subject to the
limitations set forth in this Article II, to submit an Election (as defined
below) in accordance with the following procedures (as used in this
Section 2.2, "holder" shall mean "record holder"):
(a) Each holder of shares of Company Common Stock may specify in a request
made in accordance with the provisions of this Section (herein called an
"Election") (A) the number of shares of Company Common Stock owned by such
holder with respect to which such holder desires to make a Stock Election and
(B) the number of shares of Company Common Stock owned by such holder with
respect to which such holder desires to make a Cash Election.
(b) Parent shall prepare a form reasonably acceptable to the Company (the
"Form of Election") which shall be mailed to the Company's stockholders entitled
to vote at the Company Stockholders Meeting so as to permit the Company's
stockholders to exercise their right to make an Election prior to the Election
Deadline (as defined in subsection (d)).
(c) Parent shall use all reasonable efforts to make the Form of Election
initially available to all stockholders of the Company at least twenty business
days prior to the Election Deadline and shall use all reasonable efforts to make
available as promptly as possible a Form of Election to any stockholder of the
Company who requests such Form of Election following the initial mailing of the
Forms of Election and prior to the Election Deadline.
(d) Any Election shall have been made properly only if the person authorized
to receive Elections and to act as exchange agent under this Agreement, which
person shall be designated by Parent (the "Exchange Agent"), shall have
received, by 5:00 p.m. local time in the city in which the principal office of
such Exchange Agent is located, on the date of the Election Deadline, a Form of
Election properly completed and signed and accompanied by certificates of the
shares of Company Common Stock (the "Company Stock Certificates") to which such
Form of Election relates or by an appropriate guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of any
registered national securities exchange or a commercial bank or trust company in
the United States; PROVIDED, that such certificates are in fact delivered to the
Exchange Agent by the time required in such guarantee of delivery. Failure to
deliver shares of Company Common Stock covered by such a guarantee of delivery
within the time set forth on such guarantee shall be deemed to invalidate any
otherwise properly made Election. As used herein, "Election Deadline" means the
date on which the Effective Time occurs.
(e) Any Company stockholder may at any time prior to the Election Deadline
change his or her Election by written notice received by the Exchange Agent
prior to the Election Deadline accompanied by a properly completed and signed,
revised Form of Election.
(f) Any Company stockholder may, at any time prior to the Election Deadline,
revoke his or her Election by written notice received by the Exchange Agent
prior to the Election Deadline or by
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withdrawal prior to the Election Deadline of his or her Company Stock
Certificate, or of the guarantee of delivery of such certificates, previously
deposited with the Exchange Agent. All Elections shall be revoked automatically
if the Exchange Agent is notified in writing by Parent or the Company that this
Agreement has been terminated in accordance with Article VII.
(g) If any portion of the Merger Consideration is to be paid to a person
other than the person in whose name a Company Stock Certificate so surrendered
is registered, it shall be a condition to such payment that such Company Stock
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay to the Exchange Agent
any transfer or other Taxes (as defined in Section 3.1(m)) required as a result
of such payment to a person other than the registered holder of such Company
Stock Certificate, or establish to the satisfaction of the Exchange Agent that
such Tax has been paid or is not payable.
(h) After the Effective Time there shall be no further registration of
transfers of shares of Company Common Stock. If after the Effective Time,
Company Stock Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration in accordance with
the procedures set forth in this Article II.
(i) At any time following the first anniversary of the Effective Time, the
Surviving Corporation shall be entitled to require the Exchange Agent to deliver
to it any remaining portion of the Merger Consideration not distributed to
holders of shares of Company Common Stock that was deposited with the Exchange
Agent at the Effective Time (the "Exchange Fund") (including any interest
received with respect thereto and other income resulting from investments by the
Exchange Agent, as directed by Parent), and holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat or
other similar laws) with respect to the Merger Consideration, any cash in lieu
of fractional shares of Parent Common Stock and any dividends or other
distributions with respect to Parent Common Stock payable upon due surrender of
their Company Stock Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Exchange Agent shall be
liable to any holder of a Company Stock Certificate for Merger Consideration (or
dividends or distributions with respect thereto) or cash from the Exchange Fund
in each case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(j) In the event any Company Stock Certificates shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Stock Certificate(s) to be lost, stolen or destroyed and,
if required by Parent, the posting by such person of a bond in such sum as
Parent may reasonably direct as indemnity against any claim that may be made
against it or the Surviving Corporation with respect to such Company Stock
Certificate(s), the Exchange Agent will issue the Merger Consideration
deliverable in respect of the shares of Company Common Stock represented by such
lost, stolen or destroyed Company Stock Certificates.
(k) No dividends or other distributions with respect to Parent Common Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Company Stock Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to subsection (l) below, and
all such dividends, other distributions and cash in lieu of fractional shares of
Parent Common Stock shall be paid by Parent to the Exchange Agent and shall be
included in the Exchange Fund, in each case until the surrender of such Company
Stock Certificate in accordance with subsection (l) below. Subject to the effect
of applicable abandoned property, escheat or similar laws, following surrender
of any such Company Stock Certificate there shall be paid to the holder of a
certificate for Parent Common Stock (a "Parent Stock Certificate") representing
whole shares of Parent Common Stock issued in exchange therefore, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and the amount of any cash
payable in lieu of a fractional share of
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Parent Common Stock to which such holder is entitled pursuant to
subsection (l), and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to such surrender and with a payment date subsequent to such surrender
payable with respect to such whole shares of Parent Common Stock. Parent shall
make available to the Exchange Agent cash for these purposes, if necessary.
(l) No Parent Stock Certificates representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Company Stock
Certificates; no dividend or distribution by Parent shall relate to such
fractional share interests; and such fractional share interests will not entitle
the owner thereof to vote or to any rights as a shareholder of Parent. In lieu
of any such fractional shares, each holder of a Company Stock Certificate who
would otherwise have been entitled to receive a fractional share interest in
exchange for such Company Stock Certificate shall receive from the Exchange
Agent an amount in cash equal to the product obtained by multiplying (A) the
fractional share interest to which such holder (after taking into account all
shares of Company Common Stock held by such holder at the Effective Time) would
otherwise be entitled by (B) the Average Trading Price. Parent shall provide the
Exchange Agent the aggregate amount of cash payable pursuant to this
subsection (l) promptly following the Effective Time.
(m) Parent shall have the right to make rules, not inconsistent with the
terms of this Agreement, governing (A) the validity of the Forms of Election,
(B) the manner and extent to which Elections are to be taken into account in
making the determinations prescribed by Section 2.1, (C) the issuance and
delivery of Parent Stock Certificates into which shares of Company Common Stock
are converted in the Merger and (D) the method of payment of cash for shares of
Company Common Stock converted into the right to receive the Cash Election
Consideration.
(n) Promptly after the Effective Time, Parent will deposit with the Exchange
Agent an amount of cash and shares of Parent Common Stock sufficient to pay in a
timely manner, and the Parent shall instruct the Exchange Agent to timely pay,
the aggregate Cash Election Consideration and cash in lieu of fractional shares
of Parent Common Stock and the aggregate Additional Stock Consideration and
Stock Election Consideration. Upon surrender to the Exchange Agent of its
Company Stock Certificate or Company Stock Certificates, accompanied by a
properly completed Form of Election, a holder of Company Common Stock will be
entitled to receive promptly after the Election Deadline the Merger
Consideration (elected or deemed elected by it, subject to Sections 1.2 and 2.1)
in respect of the shares of Company Common Stock represented by its Company
Stock Certificate. Until so surrendered, each such Company Stock Certificate
shall represent after the Effective Time, for all purposes, only the right to
receive the Merger Consideration.
SECTION 2.3 CERTAIN ADJUSTMENTS. If after the date hereof and on or prior
to the Effective Time the outstanding shares of Parent Common Stock or Company
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, combination or any similar event shall occur
(including an extraordinary dividend, the record date for payment of which
occurs during the Election Period) (any such action, an "Adjustment Event"), the
Exchange Ratio shall be adjusted accordingly to provide to the holders of
Company Common Stock whose shares of Company Common Stock have been converted
into the right to receive either Stock Election Consideration or Additional
Stock Consideration the same economic effect as contemplated by this Agreement
prior to such reclassification, recapitalization, combination or similar event.
SECTION 2.4 SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding anything in
this Agreement to the contrary, any shares of Company Common Stock that are
issued and outstanding as of the Effective Time and that are held by a
stockholder who has properly exercised his appraisal rights under the DGCL (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration unless and until the holder shall have failed to perfect, or shall
have effectively withdrawn or lost, his right to dissent from the Merger under
the DGCL and to receive such
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consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to and subject to the requirements of the DGCL. If any such
holder shall have so failed to perfect or have effectively withdrawn or lost
such right, each share of such holder's Company Common Stock shall thereupon be
deemed to have been converted into and to have become, as of the Effective Time,
the right to receive, without any interest thereon, the Stock Election
Consideration or the Cash Election Consideration or a combination thereof as
determined by Parent in its sole discretion. The Company shall give Parent
(i) prompt notice of any notice or demands for appraisal or payment for shares
of Company Common Stock received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands or notices. The Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle, offer to settle
or otherwise negotiate, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth on the Disclosure Schedule delivered by the Company to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken (regardless of whether such subsection refers to the Company
Disclosure Schedule), the Company represents and warrants to Parent as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER.
(i) Each of the Company and its subsidiaries (as defined in
Section 8.3) is a corporation or other legal entity duly organized, validly
existing and in good standing (with respect to jurisdictions which recognize
such concept) under the laws of the jurisdiction in which it is organized
and has the requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted. Each of the
Company and its subsidiaries is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where
the failure to be so qualified or licensed or to be in good standing
individually or in the aggregate would not reasonably be expected to have a
material adverse effect on the Company or the applicable subsidiary.
(ii) The Company has delivered or provided to Parent prior to the
execution of this Agreement complete and correct copies of its certificate
of incorporation and by-laws, as amended to date.
(iii) In all material respects, the minute books of the Company contain
accurate records of all meetings and accurately reflect all other actions
taken by the stockholders, the Board of Directors and all committees of the
Board of Directors of the Company since January 1, 1997.
(b) SUBSIDIARIES. Section 3.1(b) of the Company Disclosure Schedule lists
all the subsidiaries of the Company, whether consolidated or unconsolidated as
of the end of the most recently completed fiscal year. All outstanding shares of
capital stock of, or other equity interests in, each such subsidiary (i) have
been validly issued and are fully paid and nonassessable; (ii) are owned
directly or indirectly by the Company, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"); and (iii) are free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests) that would prevent the
operation by the Surviving Corporation of such subsidiary's business as
currently conducted.
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(c) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $.01 per share, of the Company ("Company Authorized
Preferred Stock"), of which 1,000,000 shares have been designated as Company
Series A Junior Participating Preferred Stock ("Company Preferred Stock") and no
other shares of Company Authorized Preferred Stock have been designated. At the
close of business on October 29, 2000: (i) 42,382,655 shares of Company Common
Stock were issued and outstanding; (ii) 10,376,039 shares of Company Common
Stock were held by the Company in its treasury (such shares, "Company Treasury
Stock") and no shares of Company Common Stock were held by subsidiaries of the
Company; (iii) no shares of Company Preferred Stock were issued and outstanding
and 1,000,000 shares of Company Preferred Stock were reserved for issuance
pursuant to the Rights Agreement; (iv) no shares of Company Preferred Stock were
held by the Company in its treasury or were held by any subsidiary of the
Company; and (v) 5,987,587 shares of Company Common Stock were reserved for
issuance pursuant to the Company's 1992 Warrant Plan, Vacation Break
U.S.A., Inc. 1995 Stock Option Plan, 1997 Stock Option Plan, 2000 Incentive
Stock Plan, Vacation Break U.S.A. Inc. Directors' Plan, as amended, Warrant
Agreements dated December 27, 1995, Warrant Agreements dated May 22, 1997 and
Employee Stock Purchase Plan (the "Company Stock Plans"), of which 3,628,956
shares are subject to outstanding employee and non-employee director stock
options (the "Company Stock Options"), 1,745,510 shares are subject to employee
warrants (the "Company Warrants"), 230,322 shares are subject to awards of
restricted Company Common Stock (collectively with Company Stock Options,
Company Warrants and the awards described in Section 5.6(b), the "Company
Awards"). All outstanding shares of capital stock of the Company are, and all
shares thereof which may be issued prior to the Closing will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth in this Section 3.1(c) and except for
changes since October 31, 2000 resulting from the issuance of shares of Company
Common Stock pursuant to and in accordance with Company Awards and other rights
referred to above in this Section 3.1(c), outstanding prior to October 31, 2000
(x) there are not issued, reserved for issuance or outstanding (A) any shares of
capital stock or voting securities or other ownership interests of the Company,
(B) any securities of the Company or any Company subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting securities or
other ownership interests of the Company, or (C) any warrants, calls, options or
other rights to acquire from the Company or any Company subsidiary, or any
obligation of the Company or any of its subsidiaries to issue, any capital
stock, voting securities or other ownership interests in, or securities
convertible into or exchangeable or exercisable for, capital stock or voting
securities or other ownership interests of the Company, and (y) there are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. There are no
outstanding (A) securities of the Company or any of its subsidiaries convertible
into or exchangeable or exercisable for shares of capital stock or voting
securities or other ownership interests in any subsidiary of the Company,
(B) warrants, calls, options or other rights to acquire from the Company or any
of its subsidiaries, or any obligation of the Company or any of its subsidiaries
to issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable or exercisable for, any
capital stock, voting securities or other ownership interests in, any subsidiary
of the Company or (C) obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any such outstanding securities of
subsidiaries of the Company or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. To the Company's knowledge, neither the
Company nor any of its subsidiaries is a party to any agreement restricting the
transfer of, relating to the voting of, requiring registration of, or granting
any preemptive or antidilutive rights with respect to any of the securities of
the Company or any of its subsidiaries. To the knowledge of the Company, there
are no voting trusts or other agreements or understandings to which the Company
or any of its subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of the subsidiaries.
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(d) AUTHORITY; NONCONTRAVENTION. The Company has all requisite corporate
power and authority to enter into this Agreement, the Stock Option Agreement
and, subject, in the case of the Merger, to the Company Stockholder Approval (as
defined in Section 3.1(v)) to consummate the transactions contemplated hereby
and thereby, including with respect to the "spin-off" of DevCo., the requisite
corporate power to declare the DevCo. Distribution as presently described in
Exhibit A. The execution and delivery of this Agreement and the Stock Option
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (other than the DevCo. Distribution) have been
duly authorized by all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the Company Stockholder Approval. This
Agreement and the Stock Option Agreement have been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except that (i) such enforceability may be subject to applicable bankruptcy,
insolvency or other similar laws now or hereafter in effect affecting creditors'
rights generally and (ii) the availability of the remedy of specific performance
or injunction or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this Agreement
and the Stock Option Agreement do not, and the consummation of the transactions
contemplated hereby and thereby (other than the DevCo. Distribution) and
compliance with the provisions of this Agreement and the Stock Option Agreement
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its subsidiaries under, (i) the certificate of
incorporation or by-laws of the Company, (ii) the certificate of incorporation
or by-laws or the comparable organizational documents of any of its
subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license or similar authorization applicable to the Company or any of its
subsidiaries or their respective properties or assets or (iv) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (iii) and (iv), any
such conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate would not reasonably be expected to have a material business
impact on the Company or that relate to or arise as a result of the DevCo.
Distribution, PROVIDED, HOWEVER, that the failure to list on Section 3.1(d) of
the Company Disclosure Schedule a conflict, violation, default, right, loss or
Lien with respect to an agreement, instrument, permit, concession, franchise,
license or similar authorization specified in clause (iii) that is cured by the
time of the Closing by obtaining the consent of the other party to such
agreement, instrument, permit, concession, franchise, license or similar
authorization shall not be considered a violation of the representation in
Section 3.1(d)(iii). No consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any federal,
state, local or foreign government, any court, administrative, regulatory or
other governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority (a "Governmental Entity") is
required by or with respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement and the Stock
Option Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (1) the filing of a pre-merger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (2) the filings
with the Securities and Exchange Commission (the "SEC") of (A) a proxy statement
relating to the Company Stockholders Meeting (such proxy statement, as amended
or supplemented from time to time, the "Proxy Statement") and a registration
statement on Form S-4 to be prepared and filed in connection with the issuance
of Parent Common Stock in the Merger (the "Form S-4"), and (B) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in
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connection with this Agreement and the transactions contemplated by this
Agreement; (3) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and such filings with Governmental Entities to
satisfy the applicable requirements of the laws of states in which the Company
and its subsidiaries are qualified or licensed to do business or state
securities or "blue sky" laws; (4) such registrations and amendments thereto set
forth on Section 3.1(d) of the Company Disclosure Schedule and the related
consents, approvals or exemptions under state timeshare registration laws or, in
states that do not have specific timeshare laws, related real estate or
securities registration laws (the "VOI Registrations"); and (5) such other
filings and consents as may be required to effect the DevCo. Distribution.
(e) COMPANY DOCUMENTS; UNDISCLOSED LIABILITIES.
(i) Since January 1, 1997, the Company and its subsidiaries have filed
all required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein) with the
SEC (the "Company SEC Documents"). As of their respective filing dates,
(i) the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents, and (ii) no Company SEC Document when filed (or when amended and
restated or as supplemented by a subsequently filed Company SEC Document)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company and its
subsidiaries included in Company SEC Documents complied as to form, as of
their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles in the United States ("GAAP")
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and its
subsidiaries, as the case may be, as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments and to other adjustments described in the notes to such
unaudited statements). Except (A) as reflected in the Company's unaudited
balance sheet as of June 30, 2000, (B) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby,
(C) for liabilities incurred in the ordinary course of business consistent
with past practice since June 30, 2000 or (D) for liabilities incurred after
the date hereof that would not reasonably be expected to have a material
adverse effect on the Company, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature other than
liabilities or obligations that are immaterial and that were incurred in the
ordinary course of business consistent with past practice.
(ii) Neither the Company nor any of its subsidiaries has any continuing
obligations (other than obligations of confidentiality under the Letter
Agreement dated December 21, 1999, between the Company and Carnival
Corporation ("Carnival")) incurred in connection with the Letter of Intent,
dated as of January 23, 2000, between the Company and Carnival or the
transactions contemplated thereby or pursuant to any other agreements with
Carnival.
(iii) The Company has provided or made available to Parent true and
complete copies of the audited financial statements for the years ended
December 31, 1998 and 1999 and the unaudited financial statements for the
quarter ended June 30, 2000 for Fairfield Receivable Corporation and
Fairfield Funding Corporation, II (the "Company Unconsolidated
Subsidiaries") (collectively, the "Unconsolidated Subsidiaries Statements").
The Unconsolidated Subsidiaries Statements were prepared in conformity with
GAAP for the periods covered thereby, except as may be noted
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therein, and present in all material respects the financial position of the
Company Unconsolidated Subsidiaries as at the respective dates thereof and
the results of operations of such subsidiaries for the respective periods
then ended. The Company Unconsolidated Subsidiaries are not required to be
consolidated with the Company's financial statements under GAAP.
(iv) The Company has provided to Parent true and complete copies of the
audited financial statements for the years ended December 31, 1998 and 1999
for The FairShare Vacation Plan Use Management Trust (the "Trust") (the
"Trust Financial Statements"). The Trust Financial Statements were prepared
in conformity with GAAP for the periods covered thereby and present in all
material respects the financial position of the Trust as at the respective
dates thereof and the results of operations of the Trust for the respective
periods then ended.
(f) CERTAIN CONTRACTS.
(i) Neither the Company nor any of its subsidiaries is a party to or
bound by (i) any agreement relating to the incurring of indebtedness,
(ii) any "material contract" (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC), (iii) any non-competition
agreement or any other agreement or obligation which purports to limit in
any material respect the manner in which, or the localities in which, all or
any substantial portion of the business of the Company and its subsidiaries,
taken as a whole, is or would be conducted, (iv) any agreement providing for
the indemnification by the Company or a subsidiary of the Company of any
person, except an agreement entered into in the ordinary course of business,
(v) any joint venture, partnership or similar document or agreement,
(vi) any agreement that limits or purports to limit the ability of the
Company or any of its subsidiaries to own, operate, sell, transfer, pledge
or otherwise dispose of any assets having an aggregate value in excess of
$1,000,000 (other than in connection with securitization or financing
transactions), (vii) any contract or agreement providing for future payments
that are conditioned, in whole or in part, on a change of control of the
Company or any of its subsidiaries, (viii) any collective bargaining
agreement, (ix) employment agreement or any agreement or arrangement that
contains any severance pay or post-employment liabilities or obligations to
a Key Employee (as defined herein), other than as required under law,
(x) any resort affiliation agreement, (xi) any agreement that contains a
"most favored nation" clause, (xii) any management agreement between the
Company and each Association (as defined in Section 3.1(i) herein),
(xiii) any marketing alliance agreement involving a strategic corporate
relationship that requires payment of at least $1,000,000 thereunder by the
Company or any of its subsidiaries or which is not cancellable by either
party thereto on 30 days' notice or (xiv) any contract or other agreement
not made in the ordinary course of business which is material to the Company
and its subsidiaries taken as a whole or which would prohibit or delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement and the Stock Option Agreement (the agreements, contracts and
obligations of the type described in clauses (i) through (xiii) being
referred to herein as "Company Material Contracts"). Each Company Material
Contract is valid and binding on the Company (or, to the extent a subsidiary
of the Company is a party, such subsidiary) and is in full force and effect.
Neither the Company nor any of its subsidiaries is in a material breach or
default under any Company Material Contract. Neither the Company nor any
subsidiary of the Company knows of, or has received notice of, any material
violation or default under (nor, to the knowledge of the Company, does there
exist any condition which with the passage of time or the giving of notice
or both would result in such a violation or default under) any Company
Material Contract by the other party thereto.
(ii) There is no agreement (noncompete or otherwise), commitment,
judgment, injunction, order or decree to which the Company or any of its
subsidiaries or affiliates is a party or which is otherwise binding upon the
Company or any of its subsidiaries or affiliates which has or reasonably
would be expected to have the effect of prohibiting or impairing any
business practice of the
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Company or any of its subsidiaries or affiliates, any acquisition of
property (tangible or intangible) by the Company or any of its subsidiaries.
(g) VOIS.
(I) ACCOUNTS RECEIVABLE.
(A) The VOI Receivables (as defined below) owned by each of the
Company and its subsidiaries reflected in the unaudited financial
statements of the Company for the quarter ended June 30, 2000 included in
the Company SEC Documents and in the Unconsolidated Subsidiaries
Statements, are (except to the extent reserved against in such financial
statements, which reserves have been determined based upon actual prior
and current experience and are consistent with prior practices) valid,
genuine and subsisting, arise out of bona fide sales of VOIs, goods,
performance of services or other business transactions relating to the
sale of VOIs and are not subject to defenses, setoffs, counterclaims or
rights of rescission that would reasonably be expected to have a material
business impact on the Company. All VOI Receivables owned by the Company
and its subsidiaries are owned free and clear of all Liens for funded
indebtedness. "VOI Receivables" shall mean, with respect to the Company
and its subsidiaries, any contracts for deed, deeds of trust, promissory
notes, installment notes, mortgages or similar security instruments and
all related documents and instruments (including, without limitation, any
security agreements entered into in connection with or a part of any
purchase agreement or any installment sales contract relating to the sale
of a VOI) creating a first and prior lien on a VOI and securing a
purchase money loan to acquire a VOI (collectively, the "Mortgages") or
any installment sales contract creating a purchaser's beneficial or
equitable interest in a VOI (collectively with the Mortgages, the "Debt
Instruments"). For purposes of this Agreement, "VOI" shall mean a fee
simple or leasehold ownership interest in a condominium unit or an entire
timeshare resort developed or acquired by the Company or a subsidiary of
the Company, coupled with the right to use and occupy one or more
residential accommodations at such timeshare resort in accordance with
the terms, provisions, and conditions of the applicable declaration of
condominium, master deed and all other documents and instruments that
govern the use and occupancy of such resort's accommodations and
facilities. The term "VOI" shall further include all rights, benefits,
privileges, obligations and liabilities granted to or imposed upon the
owner of a VOI with respect to the Company's FairShare Plus Program (the
"Program"), pursuant to the Amended and Restated FairShare Vacation Plan
Use Management Trust Agreement dated as of January 1, 1996, as amended
(the "Trust Agreement") or under applicable VOI Laws.
(B) Section 3.1(g) of the Company Disclosure Schedule sets forth
certain reports (the "Reports") routinely prepared by the Company or any
of its subsidiaries that identify, as of the date indicated in the
Reports, (i) the aggregate amount of VOI Receivables owned or pledged as
security by each of the Company or its subsidiaries identified in the
Reports and (ii) the weighted average maturity of such VOI Receivables.
The Reports are true, accurate and complete in all material respects.
(ii) REGISTRATIONS. Set forth on Section 3.1(g) of the Company
Disclosure Schedule are all the resorts where each of the Company or any of
its subsidiaries owns VOIs and each jurisdiction in which each of those
resorts is registered, other than an inadvertent omission of a jurisdiction,
for (i) the ownership of any VOI or real estate or (ii) the advertising,
marketing or selling of VOIs by the Company or its subsidiaries or the
soliciting of consumers to visit a resort or a sales office by the Company
or its subsidiaries.
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(iii) DEBT INSTRUMENTS.
(A) Each form that is underlying or related to a Debt Instrument
securing or creating an equitable interest in a VOI Receivable reflected
in the financial statements described in subsection (i)(A) above and that
is routinely used by the Company and its subsidiaries or is permitted by
the Company or its subsidiaries to be used by others in connection with
the sale of VOIs, meets all material requirements of applicable VOI Laws.
(B) The Debt Instruments contain customary and enforceable provisions
such as to render the rights and remedies of the holders thereof adequate
for the practical realization against the related property of the
principal benefits of the security or property interest intended to be
provided thereby.
(C) Each Mortgage which requires recordation to perfect the related
VOI interest has been properly recorded or is in the process of being
recorded in the appropriate jurisdiction and is in material compliance
with all applicable laws of the jurisdiction in which the related VOI is
located, and all costs, fees, and expenses, including where applicable,
recording fees, documentary stamps and intangible taxes, due in
connection with the filing of each Mortgage that has been filed have been
paid, except for any failures to pay costs, fees and expenses that would
not reasonably be expected to have a material business impact on the
Company.
(h) RESORTS.
(i) Section 3.1(h) of the Company Disclosure Schedule contains a list of
each resort where (A) the VOIs owned or otherwise controlled by the Company
or its subsidiaries consist of more than 5% of the total VOI inventory at
such resort and (B) the Company or any of its subsidiaries owns, has an
option or contract for or otherwise controls the real estate that is
intended to accommodate the development of VOIs in the future (the
"Resorts"), indicating whether each Resort is owned, under option or
contract or otherwise controlled by the Company or any of its subsidiaries.
(ii) The Company or one of its subsidiaries, as the case may be, has
good and marketable title in fee simple or a leasehold interest to all VOIs
and other real estate owned by the Company free and clear of all Liens,
except for Permitted Encumbrances. As used in this Agreement, "Permitted
Encumbrances" means (i) Liens imposed by law for Taxes, assessments or
charges of any Governmental Entity that are not yet due and payable or are
being contested in good faith by proper proceedings (and in each case as to
which adequate reserves or other appropriate provisions are being maintained
in accordance with GAAP); (ii) carriers', warehousemen's, mechanics,
landlords', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business in respect of obligations that are not yet due
or that are bonded or that are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained in accordance with GAAP; (iii) Liens incurred in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, leases, contracts, statutory obligations and
other similar obligations; (iv) easements (including, without limitation,
reciprocal easement agreements and utility agreements), rights-of-way,
covenants, consents, reservations, encroachments, variations and zoning and
other restrictions, charges, or encumbrances (whether or not recorded) which
do not interfere materially with the ordinary conduct of the business of the
Company and which do not detract materially from the property to which they
attach or impair materially the use thereof by the Company; (v) the
encumbrances set forth on title policies or title commitments provided to or
made available to Parent; and (vi) extensions, renewals or replacements of
any Lien referred to in clauses (i) through (v) above.
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(iii) The current use of the Resorts by the Company and its subsidiaries
does not violate any instrument or agreement of record affecting the Resorts
or any applicable local zoning or similar land use laws, except for
violations that would not have a material business impact on the Company. To
the knowledge of the Company, none of the occupiable structures on the
Resorts encroaches upon real property of another person and no occupiable
structure of any other person encroaches upon any part of a Resort, except
for encroachments that would not have a material business impact on the
Company.
(iv) To the knowledge of the Company, each Resort has sufficient
vehicular access for its purposes.
(v) There are no leases, subleases, licenses, concessions or other
agreements between the Company or any of its subsidiaries to a third party
that grants the right of use or occupancy of any material portion of the
real estate, accommodations or facilities owned by the Company or any of its
subsidiaries at the Resorts and there are no outstanding options or rights
of first refusal to purchase any material portion of the real estate,
accommodations or facilities owned by the Company or any of its subsidiaries
at the Resorts other than rights held by the related property owners
associations at the Resorts, and except for agreements with VOI owners or
for such leases, subleases, licenses, concessions or other agreements
entered into by the Company or any of its subsidiaries in the ordinary
course of business.
(vi) Each timeshare plan related to a Resort that is required to be
filed in the real estate records of the county in which the Resort is
located has been properly filed and recorded with the appropriate county
office in which the respective Resort is located, except for a failure to
file or record a timeshare plan that would not have a material business
impact on the Company.
(vii) Each of the Company and its subsidiaries has delivered or made
available to Parent complete and correct copies of all surveys, engineering
reports, appraisals, certificates of occupancy and recorded plats relating
to a Resort in the possession of the Company and its subsidiaries. The
Company has delivered or made available to Parent complete and correct
copies of the title insurance policies that are in the possession of the
Company and its subsidiaries which insure the Company or a subsidiary of the
Company of good and marketable title, or as otherwise described therein, at
the time of the acquisition of the properties described therein.
(i) CONDOMINIUM ASSOCIATIONS.
(i) Each condominium, timeshare or other form of owner's association
organized by the Company or any of its subsidiaries has been duly organized.
Each condominium, timeshare or other form of owner's association managed by
the Company or any of its subsidiaries in existence with respect to a Resort
(each, an "Association"), is duly organized, legally existing, and in good
standing under the laws of the state of its incorporation, except where the
failure to be so qualified would not have a material adverse effect on an
Association. The books and records of each Association are correct and
complete in all material respects and all funds collected from VOI owners
and others on behalf of the Associations have been properly accounted for in
all material respects and expended in all material respects for such
purposes as are authorized under the articles of incorporation or by-laws of
the applicable Association. For purposes of this Agreement, an Association
is managed by the Company or any of its subsidiaries if (i) it has the
statutory right to elect or appoint a majority of the members of the
Association's board of directors or other governing body and (ii) it is
party to a management contract with the Association.
(ii) Correct and complete copies of the most recent audited financial
statements and interim unaudited financial statements of each Association
have been delivered or made available to Parent. Such financial statements
adequately reflect in all material respects the financial condition of each
Association as of the dates indicated, and there have been no changes to the
Association's
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financial conditions since the date of its most recent financial statements
which would have a material adverse effect on the Association.
(iii) Each Association maintains adequate reserves for deferred
maintenance and capital improvements as set forth in the budget approved by
such Association, in accordance with the articles of incorporation or
by-laws of each Association and applicable VOI Laws.
(iv) The Tax Returns of each Association have been timely filed (giving
effect to all extensions) and are true, correct and complete in all material
respects, and copies of such Tax Returns for the most recent tax year have
been delivered or will be delivered, as promptly as practicable following
the date hereof to Parent.
(j) FAIRSHARE PLUS PROGRAM.
(i) The Trust is in compliance in all material respects with all
applicable VOI Laws. The Program, the Program Manager (as defined in the
Trust Agreement) and FairShare Vacation Owners Association, Inc. (the
"Trustee") are in compliance in all material respects with all applicable
VOI Laws.
(ii) The Trustee is a nonprofit corporation duly organized, validly
existing and in good standing under the laws of the State of Arkansas. The
Trustee is duly qualified as a foreign corporation in each jurisdiction in
which its assets or the conduct of its business require such qualification,
except where the failure to qualify would not reasonably be expected to have
a material adverse effect on the Trustee. The Trustee has the full power and
authority to perform all duties and obligations imposed upon it by the Trust
Agreement and, to the Company's knowledge, has acted in good faith and used
commercially reasonable efforts with respect to the performance of such
duties and obligations. The fees paid and payable to the Trustee and to the
Program Manager for services rendered during the fiscal year ended
December 31, 1999 and the eight month period ended August 31, 2000 in
connection with the Program are set forth on Section 3.1(j) of the Company
Disclosure Schedule.
(iii) The consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
benefit (i) of the Trustee under the certificate of incorporation or by-laws
of the Trustee and (ii) of the Trustee or the Trust under any material
contracts or agreements to which either the Trustee or the Trust is a party,
as applicable, other than any conflict, violation, default or termination,
cancellation or acceleration that would not reasonably be expected to have a
material adverse effect on the Trust or the Trustee. All contracts or
agreements material to the operation of the Trust to which either the
Trustee or the Trust is a party have been delivered or made available to
Parent.
(iv) All VOIs and the use and occupancy rights that correspond to the
VOIs that have been subjected to the terms, provisions, and conditions of
the Trust Agreement have been so subjected in compliance in all material
respects with the requirements of the Trust Agreement and all applicable VOI
Laws.
(v) All of the Accommodations (as such term is defined in the Trust
Agreement) are substantially furnished and ready for occupancy, and all
furnishings are substantially paid for. None of the VOIs subjected to the
Program (and/or beneficial use rights appertaining thereto) consist of a
limited duration contractual right, lease, license or right-to-use timeshare
interest in a Program Resort (as defined in the Trust Agreement).
(vi) The Trust conducts and operates its business in material
compliance with Section 4.02 of the Trust Agreement and all applicable VOI
Laws.
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(vii) The marketing and sales by the Company and its subsidiaries of
VOIs in the Program have been conducted in material compliance with all
applicable VOI Laws.
(viii) The Program's reservation system is fully operational for its
intended purpose subject to normal maintenance. Such reservation system,
including all related computer hardware and software, is owned, leased or
licensed by the Company, free and clear of any Liens, except for Liens
arising in the ordinary course of business of the Trust or the acquisition
of such hardware and software.
(ix) The Company has delivered or made available to Parent complete and
correct copies of (A) the Trust Agreement, including all exhibits,
attachments or amendments thereto and (B) the forms of (1) the FairShare
Plus Program Summary and Acknowledgment of Receipt; (2) the Ernst & Young
Report dated May 30, 2000 and (3) the Destinations FairShare Plus Exchange
Program Summary used in connection with the sale of VOIs, together with such
other documents executed ancillary thereto and all such documents meet in
all material respects the requirements of applicable VOI Laws.
(x) The Trust Agreement does not violate Arkansas' Rule Against
Perpetuities.
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, since January 1, 2000, the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been (i) the occurrence of an event that could
reasonably be expected to result in any material adverse effect on the
Company, except for an effect due to changes affecting the economy or
financial markets generally other than such changes which affect the Company
in a manner which is not proportionate with the effect of such changes on
similarly situated companies, (ii) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to any of the Company's capital stock, (iii) any split,
combination or reclassification of any of the Company's capital stock or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of the Company's
capital stock, except for issuances of Company Common Stock upon the
exercise of Company Stock Options or Company Warrants, in each case awarded
prior to the date hereof in accordance with their present terms, (iv) prior
to the date hereof (A) any granting by the Company or any of its
subsidiaries to any current or former director, executive officer or other
Key Employee of the Company or its subsidiaries of any increase in
compensation, bonus or other benefits, except for increases in the ordinary
course of business, (B) any granting by the Company or any of its
subsidiaries to any such current or former director, executive officer or
Key Employee of any increase in severance or termination pay, or (C) any
entry by the Company or any of its subsidiaries into, or any amendment of,
any employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director,
executive officer or Key Employee, (v) except insofar as may have been
disclosed in Company SEC Documents or required by a change in GAAP, any
material change in accounting methods (or underlying assumptions),
principles or practices by the Company affecting its assets, liabilities or
business, including, without limitation, any reserving, renewal or residual
method, or estimate of practice or policy, (vi) any tax election by the
Company or its subsidiaries or any settlement or compromise of any income
tax liability by the Company or its subsidiaries, except as would not be
required to be disclosed in the Company SEC Documents, (vii) any material
insurance transaction other than in the ordinary course of business
consistent with past practice, (viii) any transaction or commitment, or
series of related transactions or commitments, to acquire real estate for
VOI development in excess of $1,000,000 (ix) any material labor trouble or
claim of wrongful discharge or other unlawful labor practice or action,
(x) any improper subjection of VOI inventory by the Company to the FairShare
Program or (xi) any agreement or commitment (contingent or otherwise) to do
any of the foregoing.
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(l) COMPLIANCE WITH APPLICABLE LAWS; LITIGATION.
(i) The Company, its subsidiaries and employees hold all permits,
licenses, variances, exemptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the businesses
of the Company and its subsidiaries (the "Company Permits") as presently
conducted, except for any failure that would not reasonably be expected to
result in a material business impact on the Company. The Company and its
subsidiaries are in compliance in all respects with the terms of the Company
Permits and all applicable statutes, laws, ordinances, rules and regulations
(including the VOI Laws (as defined in Section 8.3)), except for a failure
to comply that does not have individually or in the aggregate a material
business impact on the Company. Except as set forth in Section 3.1(l) of the
Company Disclosure Schedule, which contains a true, complete and current
description of any pending and, to the Company's knowledge, threatened
litigation, action, suit, proceeding or investigation, the forum, the
parties thereto, the subject matter thereof and the amount of damages
claimed or other remedies requested as of September 30, 2000, no action,
demand, charge, requirement or investigation by any Governmental Entity and
no litigation, suit, action, proceeding or arbitration by any person or
Governmental Entity, in each case with respect to the Company or any of its
subsidiaries or any of their respective properties, is pending or, to the
knowledge of the Company, threatened, except for any litigation, suit,
action, demand, charge, requirement, investigation, proceeding or
arbitration that would not reasonably be expected to have a material
business impact on the Company.
(ii) No Company Permit issued in connection with any construction of any
accommodations and facilities, other improvements and the purchase of any
fixtures or equipment, inventory, furnishings or other personalty located
in, at, or on accommodations or facilities developed by the Company and its
subsidiaries has been suspended or canceled (or is threatened to be
canceled, suspended or materially modified) or has expired, except where the
failure to hold such Company Permit would not individually or in the
aggregate, reasonably be expected to have a material business impact on the
Company, and, with respect to any such Company Permit expiring prior to
March 31, 2001, the Company has no reason to believe that such Company
Permits will not be renewed or extended.
(m) TAXES.
(i) Each of the Company and its subsidiaries has (A) duly filed (or
there have been filed on its behalf) with the appropriate Governmental
Entities all material Tax Returns (as defined below) required to be filed by
it (giving effect to all extensions) and such Tax Returns are true, correct
and complete in all material respects; (B) duly paid in full (or there has
been paid on its behalf) all material Taxes required to be paid by it; and
(C) made provision in accordance with GAAP (or provision has been made on
its behalf) for all accrued Taxes not yet due; and
(ii) There are no material Liens for Taxes upon any property or assets
of the Company or any subsidiary of the Company, except for Liens for Taxes
not yet due or for Taxes which are being contested in good faith, which are
set forth in Section 3.1(m) of the Company Disclosure Schedule.
(iii) Each of the Company and its subsidiaries has complied in all
material respects with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes (or similar provisions under any
foreign laws) and has, within the time and the manner prescribed by law,
withheld and paid over to the proper Governmental Entities all material
amounts required to be so withheld and paid over under applicable laws.
(iv) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Returns of the Company or any of its subsidiaries, and neither
the Company nor any subsidiary of the Company has received a written notice
of any pending audits or proceedings.
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(v) Neither the Company nor any of its subsidiaries has granted in
writing any power of attorney which is currently in force with respect to
any Taxes or Tax Returns.
(vi) Neither the Company nor any of its subsidiaries has requested an
extension of time within which to file any Tax Return in respect of a
taxable year which has not since been filed and no outstanding waivers or
comparable consents regarding the application of the statute of limitations
with respect to Taxes or Tax Returns has been given by or on behalf of the
Company or any of its subsidiaries.
(vii) Neither the Company nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes.
(viii) The federal income Tax Returns of the Company and of its
subsidiaries have been examined by the applicable taxing authorities (or the
applicable statutes of limitation for the assessment of Taxes for such
periods have expired) for all periods through and including 1996, and no
material deficiencies were asserted as a result of such examinations which
have not been resolved and fully paid.
(ix) Neither the Company nor any of its subsidiaries has been included
in any "consolidated," "unitary" or "combined" Tax Return (other than Tax
Returns which include only the Company and any of its subsidiaries) provided
for under the laws of the United States, any foreign jurisdiction or any
state or locality with respect to Taxes.
(x) No election under Section 341(f) of the Code has been made to treat
the Company or any of its subsidiaries as a consenting corporation, as
defined in Section 341 of the Code.
(xi) To the knowledge of the Company, no claim has been made by any
Governmental Entities in a jurisdiction where the Company or any of its
subsidiaries does not file Tax Returns that any such entity is, or may be,
subject to taxation by that jurisdiction.
(xii) Each of the Company and its subsidiaries have made available to
Parent correct and complete copies of (i) all of their Tax Returns,
(ii) all audit reports, letter rulings, technical advice memoranda and
similar documents issued by a governmental authority relating to the United
States federal, state, local or foreign Taxes due from or with respect to
the Company and each of its subsidiaries, and (iii) any closing agreements
entered into by the Company and each of its subsidiaries with any
Governmental Entities with respect to Taxes, in each case from 1995.
(xiii) For purposes of this Agreement (A) "Taxes" shall mean any and all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, real or personal property,
sales, withholding, social security, occupation, use, service, service use,
license, net worth, payroll, franchise, transfer and recording taxes, fees
and charges, imposed by the IRS or any taxing authority (whether domestic or
foreign including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest,
fines, penalties or additional amounts attributable to, or imposed upon, or
with respect to, any such amounts, and (B) "Tax Return" shall mean any
report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time
in which to file any such report, return, document, declaration or other
information.
(n) EMPLOYEE BENEFIT PLANS.
(i) Section 3.1(n) of the Company Disclosure Schedule contains a true
and complete list of each deferred compensation and each bonus or other
incentive compensation, stock purchase,
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stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); each profit-sharing, stock
bonus or other "pension" plan, fund or program (within the meaning of
Section 3(2) of ERISA); each employment, termination or severance agreement
or arrangement with any director or executive officer and any other employee
whose base salary is $100,000 or more, excluding site sales vice presidents
(the "Key Employees"); and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by the Company or by any
trade or business, whether or not incorporated, that together with the
Company would be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA (an "ERISA Affiliate"), or to which the Company or
an ERISA Affiliate is party, whether written or oral, for the benefit of any
director, employee or former employee of the Company or any of its
subsidiaries (the "Plans"). Section 3.1(n) of the Company Disclosure
Schedule identifies each of the Plans that is subject to Section 302 or
Title IV of ERISA or Section 412 of the Code (the "Title IV Plans"). Neither
the Company, any subsidiary of the Company nor any ERISA Affiliate has any
commitment or formal plan, whether legally binding or not, to create any
additional employee benefit plan or modify or change any existing Plan other
than as may be required by the terms of such Plan.
(ii) With respect to each Plan, the Company has heretofore delivered or
made available to Parent true and complete copies of each of the following
documents:
(A) a copy of the Plan and any amendments thereto (or if the Plan is
not a written Plan, a description thereof);
(B) a copy of the two most recent annual reports and actuarial
reports, if required under ERISA, and the most recent report prepared
with respect thereto in accordance with Statement of Financial Accounting
Standards No. 87;
(C) a copy of the most recent Summary Plan Description required under
ERISA with respect thereto;
(D) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement and the latest
financial statements thereof; and
(E) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under
section 401 of the Code.
(iii) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied
in full or accrued on the Company's financial statements in accordance with
GAAP, and no condition exists that presents a material risk to the Company
or any ERISA Affiliate of incurring any such liability, other than liability
for premiums due the Pension Benefit Guaranty Corporation ("PBGC") (which
premiums have been paid when due). Insofar as the representation made in
this Section 3.1(n) applies to Sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which the Company
or any ERISA Affiliate made, or was required to make, contributions during
the five (5)-year period ending on the last day of the most recent plan year
ended prior to the Closing Date.
(iv) The PBGC has not instituted proceedings to terminate any Title IV
Plan and no condition exists that presents a material risk that such
proceedings will be instituted.
(v) No Plan is, or ever has been, a Title IV Plan.
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(vi) No Title IV Plan or any trust established thereunder has incurred
any "accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of each Title IV Plan ended prior to the Closing
Date.
(vii) All contributions required to be made with respect to any Plan on
or prior to the Closing Date have been timely made or are reflected on the
balance sheet of the Company filed with the Company SEC Documents. There has
been no amendment to, written interpretation of or announcement (whether or
not written) by the Company or any affiliate or the Company or any
subsidiary of the Company relating to, or change in employee participation
or coverage under, any Plan that would increase materially the expense of
maintaining such Plan above the level or expense incurred in respect thereof
for the most recent fiscal year ended prior to the date hereof.
(viii) Neither the Company nor any ERISA Affiliate contributes to, or is
obligated, or has ever been obligated, to contribute to a "multiemployer
pension plan," as defined in Section 3(37) of ERISA, nor is any Title IV
Plan a plan described in Section 4063(a) of ERISA.
(ix) Neither the Company or any subsidiary of the Company, any Plan, any
trust created thereunder, nor, to the knowledge of the Company, any trustee
or administrator thereof has engaged in a transaction in connection with
which the Company or any subsidiary of the Company, any Plan, any such
trust, or any trustee or administrator thereof, or any party dealing with
any Plan or any such trust could be subject to either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code.
(x) Each Plan has been operated and administered in accordance with its
terms and applicable law in all material respects, including but not limited
to ERISA and the Code.
(xi) Each Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code. Each
Plan intended to satisfy the requirements of Section 501(c)(9) of the Code
has satisfied such requirements in all material respects.
(xii) No Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for employees or former employees
of the Company or any subsidiary of the Company for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former
employee (or his beneficiary).
(xiii) No amounts payable under the Plans will fail to be deductible for
federal income tax purposes by virtue of Section 162(m) of the Code.
(xiv) No condition exists that would prevent the Company or any
subsidiaries of the Company from amending or terminating any Plan providing
health or medical benefits in respect of any active employee of the Company
or any subsidiary of the Company without material liability.
(xv) The consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
current or former employee or officer of the Company or any ERISA Affiliate
to severance pay, except as expressly provided in this Agreement, or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
(xvi) There has been no material failure of a Plan that is a group
health plan (as defined in Section 5000(b)(1) of the Code) to meet the
requirements of Section 4980B(f) of the Code with respect to a qualified
beneficiary (as defined in Section 4980B(g) of the Code). Neither the
Company nor any subsidiary of the Company has contributed to a nonconforming
group health plan (as defined in Section 5000(a) of the Code) and no ERISA
Affiliate of the Company or any subsidiary of the Company has incurred a tax
under Section 5000(a) of the Code which is or could become a material
liability of the Company or a subsidiary of the Company.
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(xvii) None of the Company or any subsidiary of the Company is a party
to any employment, consulting, non-competition, severance, or
indemnification agreement still in effect with any current or former Key
Employee or director of the Company or any subsidiary of the Company.
(xviii) There are no pending or, to the knowledge of the Company,
threatened or anticipated claims by or on behalf of any Plan by any employee
or beneficiary covered under any such Plan, or otherwise involving any such
Plan (other than routine claims for benefits).
(xix) Neither the Company nor any of its subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(o) LABOR MATTERS. There are no labor or collective bargaining agreements
to which the Company or any subsidiary of the Company is a party. There is no
union organizing effort pending or, to the knowledge of the Company, threatened
against the Company or any subsidiary of the Company. There is no labor strike,
labor dispute (other than routine employee grievances that are not related to
union employees), work slowdown, stoppage or lockout pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
subsidiary of the Company. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened
against the Company or any subsidiary of the Company (other than routine
employee grievances). The Company and its subsidiaries are in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice.
(p) ENVIRONMENTAL LIABILITY.
(i) Each of the Company and its subsidiaries is in compliance with all
applicable Environmntal Laws (as defined below), which compliance includes
the possession by the Company and its subsidiaries of all Permits and other
governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof, except for such
noncompliance that would not reasonably be expected to have, individually or
in the aggregate, a material business impact on the Company. Neither the
Company nor any of its subsidiaries has received any communication or
written notice, whether from a Governmental Entity, citizens group, employee
or otherwise, that alleges that the Company or any of its subsidiaries is
not in compliance in all material respects. All Permits and other
governmental authorizations currently held by the Company or any of its
subsidiaries pursuant to the Environmental Laws that are material to the
business of the Company are identified in Section 3.1(p) of the Company
Disclosure Schedule.
(ii) There are no Environmental Claims (as defined below) pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim has or may have retained or assumed either contractually
or by operation of law.
(iii) There are no present or past actions, activities, circumstances,
conditions, events or incidents taken or caused by the Company or, to the
knowledge of the Company, there are no present or past actions, activities,
circumstances, conditions, events or incidents taken or caused by a third
party, including the Release (as defined below) of any Hazardous Materials
(as defined below) that could reasonably be expected to form the basis of
any Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries has or may have retained or assumed
either contractually or by operation of law that would reasonably be
expected to result in a material adverse effect on the Company.
(iv) Without in any way limiting the generality of the foregoing,
(i) all on-site and, to the knowledge of the Company, off-site locations,
where the Company or any of its subsidiaries has
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stored, disposed or arranged for the disposal of Hazardous Materials, are in
accordance with applicable Environmental Laws, (ii) all underground storage
tanks, and the capacity and contents of such tanks, located on property
owned, operated, or leased by the Company or any of its subsidiaries are
identified in Section 3.1(p) of the Company Disclosure Schedule,
(iii) there is no asbestos contained in or forming part of any building,
building component, structure or office space owned or leased by the Company
or any of its subsidiaries, (iv) no polychlorinated biphenyls (PCB's) are
used or stored at any property owned or leased by the Company or any of its
subsidiaries and (v) all underground storage tanks owned, operated, or
leased by the Company or any of its subsidiaries and which are subject to
regulation under the federal Resource Conservation and Recovery Act (or
equivalent state or local law regulating underground storage tanks) meet the
technical standards prescribed at Title 40 Code of Federal Regulations
Part 280 which became effective December 22, 1998 (or any applicable state
or local law requirements which are more stringent than such technical
standards or which became effective before such date).
(v) The Company has provided or made available to Parent true and
correct copies of all assessments, reports and investigations or audits in
the possession of the Company or its subsidiaries regarding environmental
matters pertaining to, or the environmental condition of, the Company Real
Properties (as defined below) and the businesses of the Company and its
subsidiaries, or the compliance (or noncompliance) by the Company or any of
its subsidiaries with any Environmental Laws.
(vi) For purposes of this Agreement:
(A) "Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity
alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or Release
into the environment, of any Hazardous Materials at any location, whether
or not owned or operated by the Company or any of its subsidiaries or
(b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(B) "Environmental Laws" means all federal, interstate, state, local
and foreign laws and regulations relating to pollution or protection of
human health (excluding the federal Occupational Safety and Health Act
and similar laws affecting workers safety) or the environment (including
ambient air, surface water, ground water, land surface or subsurface
strata) and all laws and regulations relating to emissions, discharges,
releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
(C) "Hazardous Materials" means (1) those materials, pollutants
and/or substances defined in or regulated under the following federal
statutes and their state counterparts, as each may be amended from time
to time, and all regulations thereunder: the Hazardous Materials
Transportation Act of 1980, the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act,
the Federal Insecticide, Fungicide and Rodenticide Act, the Toxic
Substances Control Act and the Clean Air Act; (2) petroleum and petroleum
products including crude oil and any fractions thereof; (3) natural gas,
synthetic gas and any mixtures thereof; (4) radon; (5) any other
contaminant; and (6) any materials, pollutants and/or substance with
respect to which any Governmental Entity requires environmental
investigation, monitoring, reporting or remediation.
(D) "Release" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, escaping, leaching, disposing
or dumping.
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(q) INTELLECTUAL PROPERTY.
(i) The Company and its subsidiaries own or have a valid and enforceable
license to use all trademarks, service marks, trade names, patents, Internet
domains and copyrights (including any registrations or applications for
registration of any of the foregoing) (collectively, "Company Intellectual
Property"), in each case, free and clear of any material Liens or other
material limitations or restrictions (including any settlements, agreements,
consents or judgments), necessary to carry on its business substantially as
currently conducted, and the consummation of the Merger and the other
transactions contemplated hereby will not result in the loss of any such
rights (or require the payment of any material additional fees or royalties
in order to maintain such rights). Section 3.1(q) of the Company Disclosure
Schedule sets forth a true and correct list of all of the material Company
Intellectual Property and indicates those items which the Company owns
(distinguishing between exclusive and non-exclusive ownership and indicating
any licenses granted to other persons) or has the exclusive right to use or
license. Neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with and, to the knowledge of the
Company, there are no infringements of or conflicts with the rights of
others with respect to the use of, or the rights by others with respect to,
any Company Intellectual Property. To the knowledge of the Company, no third
party is infringing or otherwise violating any Intellectual Property owned
by the Company or by any of its subsidiaries.
(ii) The Company and its subsidiaries own or have a valid and
enforceable license to use all computer and telecommunication software
including source and object code and documentation and any other media
(including, without limitation, manuals, journals and reference books) (in
each case, free and clear of any material Liens or other material
limitations or restrictions) (collectively, "Company Software") necessary to
carry on its business substantially as currently conducted and the other
transactions contemplated hereby will not result in the loss of any such
rights (or require the payment of any material additional fees or royalties
in order to maintain such rights). Neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with
and, to the Company's knowledge, there are no infringements of or conflicts
with the rights of others with respect to the use of, or the rights by
others with respect to, any Company Software.
(r) INSURANCE MATTERS. Section 3.1(r) of the Company Disclosure Schedule
describes all material primary, excess and umbrella policies of general
liability, fire, workers' compensation, products liability, completed
operations, employers, liability, health, bonds and other forms of insurance
providing insurance coverage to the Company or any of its subsidiaries. The
Company has heretofore made available to Parent true, complete and correct
copies of all such policies. All such policies are sufficient for compliance in
all material respects with all requirements of law and of all contracts or
leases to which the Company is a party. The Company has not failed to give any
notice or to present any material claim under any such policy in a due and
timely fashion. There are no outstanding unpaid claims under any such policies
or binders for which adequate reserves have not been established. Such policies
provide insurance coverage that is customary in amount and scope for other
companies in the industry in which the Company operates, are in full force and
effect on the date hereof and shall be kept in full force and effect by the
Company through the Effective Time. With respect to all such policies, all
premiums currently payable or previously due and payable with respect to all
periods up to and including the Effective Time have been paid and no notice of
cancellation or termination has been received with respect to such policy.
(s) INFORMATION SUPPLIED. The Form S-4, the Proxy Statement and a
registration statement on Form 10, under the Exchange Act, relating to the
equity securities of DevCo. (the "Form 10") to be filed with the SEC will not,
at the time the Form S-4 becomes effective under the Securities Act, at the date
the Proxy Statement is first mailed to the Company's stockholders or at the time
of the Company Stockholders Meeting, and at the time the Form 10 becomes
effective under the Securities Act, respectively, contain any untrue statement
of a material fact or omit to state any material fact required
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to be stated therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that no representation is made by the Company with respect to
statements made therein based on information concerning, supplied or
incorporated by reference by Parent or Merger Sub for inclusion in the
Form S-4, the Proxy Statement and the Form 10. None of the information supplied
by the Company for inclusion or incorporation by reference in the Form S-4 will,
at the date it becomes effective and at the time of the Company Stockholders
Meeting, contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. Subject to the provisions set forth in the
second preceding sentence, the Form S-4, the Proxy Statement and the Form 10
will comply as to form in all material respects with the requirements of the
Exchange Act and the Securities Act, as appropriate, and the rules and
regulations thereunder.
(t) RIGHTS AGREEMENT. As of the date of this Agreement, the Company or the
Board of Directors of the Company, as the case may be, (i) has taken all
necessary actions so that the execution and delivery of this Agreement, the
Stock Option Agreement and the consummation of the transactions contemplated
hereby and thereby will not result in a "Distribution Date" (as defined in the
Rights Agreement) and (ii) has amended the Rights Agreement to render it
inapplicable to this Agreement, the Stock Option Agreement and the Voting
Agreement and the transactions contemplated hereby and thereby.
(u) TRANSACTIONS WITH AFFILIATES. As of the date hereof, (i) there are no
outstanding amounts payable to or receivable from, or advances by the Company or
any of its subsidiaries to, and neither the Company nor any of its subsidiaries
is otherwise a creditor or debtor to, any stockholder, officer, director,
employee or affiliate of the Company or any of its subsidiaries, other than as
part of the normal and customary terms of such persons' employment with the
Company or any of its subsidiaries, and (ii) neither the Company nor any
subsidiary of the Company whose board is controlled by the Company is a party to
any transaction agreement, arrangement or understanding with any stockholder,
officer, director or employee of the Company or any of its subsidiaries.
(v) VOTING REQUIREMENTS. The affirmative vote at the Company Stockholders
Meeting (the "Company Stockholder Approval") of a majority of the number of
outstanding shares of Company Common Stock to approve and adopt this Agreement
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve and adopt this Agreement and the transactions
contemplated hereby, including the Merger.
(w) OPINIONS OF FINANCIAL ADVISOR. The Company has received the opinion of
Stephens Inc. and Bear, Stearns & Co. Inc., dated the date hereof, to the effect
that, as of such dates, the Merger Consideration is fair from a financial point
of view to the stockholders of the Company.
(x) STATE TAKEOVER STATUTES. To the knowledge of the Company, no state
takeover statute is applicable to the Merger or the other transactions
contemplated hereby.
(y) BROKERS. Except for Stephens Inc. and Bear, Stearns & Co. Inc., no
broker, investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has delivered to
Parent complete and correct copies of such arrangements which are set forth as
part of the Company Disclosure Schedule.
(z) TAKEOVER LAWS. The approval of this Agreement and the Merger and the
Stock Option Agreement by the Board of Directors of the Company constitutes
approval of this Agreement and the Merger and the Stock Option Agreement and the
transactions contemplated hereby and thereby for purposes of Section 203 of the
DGCL. Except for Section 203 of the DGCL (which has been rendered inapplicable),
no "moratorium," "control share," "fair price" or other antitakeover laws and
regulations of any state are applicable to the Merger or other transactions
contemplated by this Agreement and the Stock Option Agreement.
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(aa) NO OTHER AGREEMENT. Except as contemplated hereby, the Company has no
legal obligation, absolute or contingent, as the date hereof, to any other
person or entity to sell any material portion of the assets of the Company, to
sell the capital stock of the Company, to effect any merger, consolidation or
reorganization of the Company, or to enter into any agreement with respect
thereto.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Except as set forth
on the Disclosure Schedule delivered by Parent to the Company prior to the
execution of this Agreement (the "Parent Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken (regardless of whether such subsection refers to the Parent
Disclosure Schedule), Parent represents and warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER.
(i) Each of Parent, its subsidiaries (as defined in Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act by the SEC
("significant subsidiaries")) and Merger Sub is a corporation or other legal
entity duly organized, validly existing and in good standing (with respect
to jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is organized and has the requisite corporate or
other power, as the case may be, and authority to carry on its business as
now being conducted. Each of Parent and its subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership, leasing or operation of
its properties makes such qualification or licensing necessary, except for
those jurisdictions where the failure to be so qualified or licensed or to
be in good standing, individually or in the aggregate, would not have a
material adverse effect on Parent.
(ii) Parent has delivered or provided to the Company prior to the
execution of this Agreement complete and correct copies of the certificate
of incorporation and by-laws of Parent and Merger Sub, each as amended to
date.
(iii) Merger Sub is a newly formed corporation with no assets or
liabilities, except for liabilities arising under this Agreement. Merger Sub
will not conduct any business or activities other than the issuance of its
stock to Parent prior to the Merger.
(b) CAPITAL STRUCTURE. As of September 30, 2000, the authorized capital
stock of Parent consists of 2,500,000,000 shares of common stock, par value
$0.01 per share, of which 2,000,000,000 shares are Parent Common Stock and
500,000,000 shares are designated as move.com common stock ("move.com Common
Stock"), 10,000,000 shares of preferred stock, par value $.01 per share, of
Parent ("Parent Authorized Preferred Stock"). At the close of business on
September 30, 2000: (i) 728,703,667 shares of Parent common stock and 3,742,286
shares of move.com Common Stock were issued and outstanding; (ii) 179,003,833
shares of Parent Common Stock were held by Parent in its treasury; (iii) no
shares of Parent Authorized Preferred Stock were issued and outstanding;
(iv) 238,428,979 shares of Parent Common Stock and 10,993,642 shares of move.com
Common Stock were reserved for issuance pursuant to the stock-based plans
identified in Section 3.2(b) of the Parent Disclosure Schedule (such plans,
collectively, the "Parent Stock Plans"), of which approximately 188,175,715
shares of Parent Common Stock and 6,282,196 shares of move.com Common Stock are
subject to outstanding employee stock options or other rights to purchase or
receive Parent Common Stock granted under the Parent Stock Plans (collectively,
"Parent Employee Stock Options"); and (vi) 30,997,000 shares of Parent Common
Stock and 1,586,000 shares of move.com Common Stock are subject to warrants
(collectively, "Parent Warrants"). All outstanding shares of capital stock of
Parent are, and all shares thereof which may be issued pursuant to this
Agreement or otherwise will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. Except
(i) as set forth in this Section 3.2(b), (ii) for the 3% Convertible
Subordinated Notes, (iii) for the 34,000,000 PRIDES, of which 32,000,000 have
been designated as Income PRIDES and 2,000,000 have been designated as Growth
PRIDES, and (iv) for changes since September 30, 2000 resulting from the
issuance of shares of Parent Common Stock pursuant to the Parent Stock Plans or
Parent Employee Stock Options or
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Parent Warrants and other rights referred to in this Section 3.2(b), as of the
date hereof, (x) there are not issued, reserved for issuance or outstanding
(A) any shares of capital stock or other voting securities of Parent, (B) any
securities of Parent or any Parent subsidiary convertible into or exchangeable
or exercisable for shares of capital stock or voting securities of Parent,
(C) any warrants, calls, options or other rights to acquire from Parent or any
Parent subsidiary, and any obligation of Parent or any Parent subsidiary to
issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of Parent or
other ownership interests of Parent, and (y) there are no outstanding
obligations of Parent or any Parent subsidiary to repurchase, redeem or
otherwise acquire any such securities or to issue, deliver or sell, or cause to
be issued, delivered or sold, any such securities. As of the date hereof, there
are no outstanding (A) securities of Parent or any Parent subsidiary convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities or other ownership interests in any Parent subsidiary, (B) warrants,
calls, options or other rights to acquire from Parent or any Parent subsidiary,
and any obligation of Parent or any Parent subsidiary to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital stock, voting
securities or ownership interests in, any Parent subsidiary or (C) obligations
of Parent or any Parent subsidiary to repurchase, redeem or otherwise acquire
any such outstanding securities of Parent subsidiaries or to issue, deliver or
sell, or cause to be issued, delivered or sold, any such securities. To Parent's
knowledge, neither Parent nor any Parent subsidiary is a party to any agreement
restricting the transfer of, relating to the voting of, requiring registration
of, or granting any preemptive or, except as provided by the terms of Parent
Stock Plans, antidilutive rights with respect to, any securities of the type
referred to in the two preceding sentences.
(c) AUTHORITY; NONCONTRAVENTION. Each of Parent and Merger Sub has all
requisite corporate power and authority to enter into this Agreement, the Stock
Option Agreement (to which is a party) and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement by
Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate and shareholder action on the part of Parent and Merger Sub,
respectively. This Agreement and the Stock Option Agreement have been duly
executed and delivered by each of Parent and Merger Sub, and, assuming the due
authorization, execution and delivery by the Company, constitutes the legal,
valid and binding obligations of Parent and Merger Sub, respectively,
enforceable against Parent and Merger Sub, respectively, in accordance with
their terms except that (i) such enforceability may be subject to applicable
bankruptcy, insolvency or other similar laws now or hereafter in effect
affecting creditors' rights generally and (ii) the availability of the remedy of
specific performance or injunction or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
courts for which any proceeding therefor may be brought. The execution and
delivery of this Agreement and the Stock Option Agreement do not, and the
consummation of the transactions contemplated hereby and thereby (other than the
DevCo. Distribution) and compliance with the provisions of this Agreement and
the Stock Option Agreement will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent, (ii) the certificate of
incorporation or by-laws of the comparable organizational documents of any of
its significant subsidiaries or Merger Sub, (iii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to Parent or
any of its subsidiaries or their respective properties or assets or
(iv) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii),
(iii) and (iv), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on Parent or
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(y) reasonably be expected to impair or delay the ability of Parent or Merger
Sub to perform its obligations under this Agreement. To the knowledge of Parent,
no consent, approval, order or authorization of, action by, or in respect of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or any of its subsidiaries in connection with the
execution and delivery of this Agreement by Parent and Merger Sub or the
consummation by Parent and Merger Sub of the transactions contemplated by this
Agreement, except for (1) the filing of a pre-merger notification and report
form by Parent under the HSR Act; (2) the filing with the SEC of (A) the
Form S-4 and the Proxy Statement and (B) such reports under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby; (3) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and such filings with Governmental
Entities to satisfy the applicable requirements of the laws of states in which
Parent and its subsidiaries are qualified or licensed to do business or state
securities or "blue sky" laws; (4) such VOI Registrations; (5) such filings with
and approvals of the NYSE to permit the shares of Parent Common Stock to be
issued in the Merger and under the Company Stock Plan to be listed on the NYSE;
and (6) such other filings and consents as may be required to effect the DevCo.
Distribution.
(d) PARENT DOCUMENTS. Since January 1, 2000, Parent has filed all required
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) with the SEC (the "Parent SEC
Documents"). As of their respective filing dates, (i) the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and (ii) none of
the Parent SEC Documents when filed (or when amended and restated and as
supplemented by subsequently filed Parent SEC Document) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents complied as to form,
as of their respective dates of filing with the SEC, in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments and to other adjustments described in the
notes to such unaudited statements).
(e) INFORMATION SUPPLIED. The Form S-4, the Proxy Statement and the
Form 10 to be filed with the SEC will not, at the time the Form S-4 becomes
effective under the Securities Act, at the date the Proxy Statement is first
mailed to the Company's stockholders or at the time of the Company Stockholders
Meeting, and at the time the Form 10 becomes effective under the Securities Act,
respectively, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; PROVIDED, HOWEVER, that no representation is
made by Parent with respect to statements made therein based on information
supplied or incorporated by reference by the Company for inclusion in the
Form S-4, the Proxy Statement and the Form 10. None of the information supplied
by Parent for inclusion or incorporation by reference in the Proxy Statement and
Form 10 will, at the date mailed to the Company's stockholders and at the time
of the Company Stockholders Meeting, and at the date it becomes effective,
respectively, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statement therein not misleading. Subject to the provisions set forth in the
second preceding sentence, the Form S-4 will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act, as
appropriate, and the rules and regulations thereunder.
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(f) BROKERS. Except for Banc of America Securities, no broker, investment
broker, financial advisor or other person is entitled to a broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY. Except as consented to by
Parent in writing, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, the Company shall and shall cause its subsidiaries to carry on
their respective business in the usual, regular and ordinary course consistent
with past practice and in compliance in all material respects with all
applicable laws and regulations and to pay its debts and Taxes when due, to pay
or perform other obligations when due, and, to use best reasonable efforts to
preserve intact their current business organizations, to keep available the
services of their current officers and employees and preserve their
relationships with those persons having business dealings with them, all with
the goal of preserving unimpaired its goodwill and ongoing businesses at the
Effective Time. Without limiting the generality of the foregoing, senior
officers of Parent and the Company shall meet on a regular basis to review the
financial and operational affairs of the Company and its subsidiaries, in
accordance with applicable law, and the Company shall promptly notify Parent of
any event or occurrence or emergency not in the ordinary course of its business,
and any material event involving or adversely affecting the Company or its
business. Except as expressly contemplated by this Agreement, the Company shall
not, and shall not permit any of its subsidiaries to:
(i) other than between subsidiaries or as between the Company and any
wholly owned subsidiary, declare, set aside or pay any dividends on, make
any other distributions in respect of, or enter into any agreement with
respect to its capital stock, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its capital stock,
except upon the exercise of Company Stock Options or Company Warrants that
are, in each case, outstanding as of the date hereof in accordance with
their present terms, or which are issued prior to the Effective Time in the
ordinary course, pursuant to the Company's Second Amended and Restated
Employee Stock Purchase Plan ("ESPP") or (z) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
subsidiaries, other securities thereof or any rights, warrants or options to
acquire any such shares or other securities (other than the issuance of
Company Common Stock upon the exercise of Company Stock Options and Company
Warrants that are, in each case, outstanding as of the date hereof in
accordance with their present terms);
(ii) issue, deliver, sell, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible securities (other than the
issuance of Company Common Stock upon the exercise of Company Stock Options
and Company Warrants that are, in each case, outstanding as of the date
hereof in accordance with their present terms or which are issued in the
ordinary course prior to the Effective Time, pursuant to the ESPP, or in
connection with financing arrangements permitted under Section 4.1(vi));
(iii) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing any assets or any equity securities of, or by any other manner,
any business or any person, or otherwise acquire or agree to acquire any
assets for consideration in excess of $500,000 (other than financing
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transactions involving transfers of assets solely among subsidiaries and
other than for construction in the ordinary course of business, consistent
with past practice);
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets other than
in the ordinary course of business and consistent with past practices,
including but not limited to the performance of obligations under
contractual arrangements listed on the Company Disclosure Schedule existing
as of the date hereof, or create any security interest in such assets or
properties;
(vi) except for borrowings under existing credit facilities or lines of
credit or refinancing of indebtedness outstanding on the date hereof, incur
any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for the obligations of
any person, or make any loans, advances or capital contributions to, or
investments in, any person other than its wholly owned subsidiaries and as a
result of ordinary advances and reimbursements to employees and endorsements
of banking instruments;
(vii) change its accounting methods (or underlying assumptions),
principles or practices affecting its assets, liabilities or business,
including without limitation, any reserving, renewal or residual method,
practice or policy, in each case, in effect at December 31, 1999, except as
required by changes in GAAP, or change any of its methods of reporting
income and deductions for federal income tax purposes from those employed in
the preparation of the federal income tax returns of the Company for the
taxable year ending December 31, 1999, except as required by material
changes in law or regulation;
(viii) make any tax elections, or settle or compromise any liability with
respect to Taxes or agree to any adjustment of any Tax attribute, unless
required by applicable law or made in the ordinary course of business
consistent with past practices;
(ix) enter into any agreement, commitment or transaction to acquire or
sell real estate for VOI development in excess of $200,000 (other than
pursuant to previously existing agreements set forth in the Company
Disclosure Schedule);
(x) other than in accordance with the Company's operating budget for
fiscal year 2000 which is attached to the Company Disclosure Schedule, enter
into any agreement obligating the Company to spend more than $250,000 or any
commitment or transaction of the type described in Section 3.1(f) of the
Company Disclosure Schedule hereof not in the ordinary course of business;
(xi) other than as set forth in the Company's operating budget for
fiscal year 2000, amend or otherwise modify, except in the ordinary course
of business, or violate the terms of, any of the material agreements or
contracts or other binding obligations of the Company or its subsidiaries;
(xii) alter, or enter into any commitment to alter, its interest in any
corporation, association, joint venture, partnership or business entity in
which the Company directly or indirectly holds any interest on the date
hereof;
(xiii) (A) grant to any current or former director, executive officer or
other Key Employee of the Company or its subsidiaries any increase in
compensation, bonus or other benefits, except for (i) salary, wage or
benefit increases in the ordinary course of business and (ii) bonuses under
the arrangements specifically set forth on Exhibit B hereto, and payable to
the persons and in the amounts specifically set forth on such Exhibit B
hereto; (B) grant to any such current or former director, executive officer
or other Key Employee of the Company any increase in severance or
termination pay, (C) enter into, or amend, any employment, deferred
compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, executive officer or Key
Employee or (D) modify any existing equity-based compensation
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agreement or arrangement with any director, employee, consultant or
independent contractor to provide for acceleration of the vesting or
payments of benefits thereunder;
(xiv) except pursuant to agreements or arrangements in effect on the date
hereof and disclosed in writing and provided or made available to Parent,
pay, loan or advance any amount to, or sell, transfer or lease any
properties or assets (real, personal or mixed, tangible or intangible) to,
or enter into any agreement or arrangement with, any of its officers or
directors or any affiliate or the immediate family members or associates of
any of its officers or directors other than compensation in the ordinary
course of business consistent with past practice;
(xv) agree or consent to any material agreements or material
modifications of existing agreements with any Governmental Entity in respect
of the operations of its business, except (i) as required by law to renew
Permits or agreements in the ordinary course consistent with past practice,
or (ii) to effect the consummation of the transactions contemplated hereby;
(xvi) pay, discharge, settle, compromise or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), including taking any action to settle or
compromise any litigation; other than any such payment, discharge,
settlement, compromise or satisfaction in the ordinary course of business in
an amount not to exceed $20,000 or any reserve established in respect of a
claim as set forth in the Company's unaudited balance sheet dated June 30,
2000;
(xvii) amend the Rights Agreement or redeem the Rights (as defined in the
Rights Agreement);
(xviii) cancel, materially amend or renew any insurance policy other than
in the ordinary course of business;
(xix) authorize, or commit or agree to take, any of the foregoing actions
or any other action that would prevent the Company from performing or cause
the Company not to perform its covenants hereunder;
(xx) issue any communication of a general nature to the employees of the
Company without the prior written approval of Parent (which will not be
unreasonably delayed or withheld), except for communications in the ordinary
course of business that do not relate to the Merger or other transactions
contemplated hereby; or
(xxi) take any action or fail to take any action which would result in
any of the representations and warranties set forth in Section 3.1 failing
to be true and correct.
SECTION 4.2 ADVICE OF CHANGES. Except to the extent prohibited by
applicable law or regulation, the Company, Parent and Merger Sub shall promptly
advise the other party orally and in writing to the extent it has knowledge of
(i) any representation or warranty made by it contained in this Agreement that
is qualified as to materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could reasonably be expected to have a material adverse effect on such
party or on the truth of their respective representations and warranties or the
ability of the conditions set forth in Article VI to be satisfied; PROVIDED,
HOWEVER, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
SECTION 4.3 NO SOLICITATION BY THE COMPANY. Except as otherwise provided
in this Section 4.3, until the earlier of the Effective Time and the date of
termination of this Agreement, neither the
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Company, nor any of its subsidiaries or any of the officers, directors,
stockholders, agents, representatives or affiliates of it or its subsidiaries
(including any investment banker, attorney or accountant retained by it or any
of its subsidiaries) shall (i) solicit, initiate or encourage (including by way
of furnishing information), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes a Company Takeover
Proposal (as defined below), (ii) participate in any discussions or negotiations
regarding any Company Takeover Proposal, (iii) enter into any agreement
regarding any Company Takeover Proposal or (iv) make or authorize any statement,
recommendation or solicitation in support of any Company Takeover Proposal. If
and only to the extent that (i) the Company Stockholders Meeting shall not have
occurred, (ii) the Board of Directors of the Company determines in good faith,
after consultation with outside counsel, that it is necessary to do so in order
to act in a manner consistent with its fiduciary duties to the Company's
stockholders under applicable law, (iii) the Company's Board of Directors
concludes in good faith that such Company Takeover Proposal constitutes a
Company Superior Proposal (as defined below), (iv) such Company Takeover
Proposal was not solicited by it and did not otherwise result from a breach of
this Section 4.3(a), and (v) the Company provides prior written notice to Parent
of its decision to take such action, the Company shall be permitted to
(A) furnish information with respect to the Company and any of its subsidiaries
to such person pursuant to a customary confidentiality agreement,
(B) participate in discussions and negotiations with such person, (C) subject to
first complying with the provisions of Section 5.8(b) hereof, enter into a
Company Acquisition Agreement and (D) effect a Change in the Company
Recommendation (as defined below); provided, that at least three business days
prior to taking any actions set forth in clause (C) or (D) above, the Company's
Board of Directors provides Parent written notice advising Parent that the
Company's Board of Directors is prepared to conclude that such Company Takeover
Proposal constitutes a Company Superior Proposal and during such three business
day period the Company and its advisors shall have negotiated in good faith with
Parent to make adjustments in the terms and conditions of this Agreement such
that such Company Takeover Proposal would no longer constitute a Company
Superior Proposal and the Company's Board of Directors concludes in good faith
that such Company Takeover Proposal is reasonably likely to result in a Company
Superior Proposal. The Company, its subsidiaries and their representatives
immediately shall cease and cause to be terminated any existing activities,
discussions or negotiations with any parties with respect to any Company
Takeover Proposal.
For purposes of this Agreement, "Company Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of a business that constitutes 20% or more of the net
revenues, net income or assets of the Company and its subsidiaries, taken as a
whole, or 20% or more of any class of equity securities of the Company, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of any equity securities of the
Company, or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company (or any
subsidiary of the Company whose business constitutes 20% or more of the net
revenues, net income or assets of the Company and its subsidiaries, taken as a
whole), other than the transactions contemplated by this Agreement or any
securitization or financing transactions consistent with past practice. For
purposes of this Agreement, a "Company Superior Proposal" means any proposal
made by a third party (A) to acquire, directly or indirectly, including pursuant
to a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, sale, lease, exchange, transfer or other
disposition (including a contribution to a joint venture), dissolution or
similar transaction, for consideration consisting of cash and/or securities,
100% of the combined voting power of the shares of the Company's capital stock
then outstanding or 100% of the net revenues, net income or assets of the
Company and its subsidiaries, taken as a whole and (B) which is otherwise on
terms which the Board of Directors of the Company determines in its good faith
judgment (after consultation with (i) either Stephens Inc., Bear, Stearns &
Co. Inc. or another nationally recognized investment banking firm and
(ii) outside counsel), taking into account, among other things, all legal,
financial, regulatory and other
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aspects of the proposal and the person making the proposal, that the proposal,
(i) if consummated would result in a transaction that is more favorable to the
Company's stockholders from a financial point of view than the Merger and the
other transactions contemplated hereby and (ii) is reasonably capable of being
completed, including to the extent required, financing which is then committed
or which, in the good faith judgment of the Board of Directors of the Company,
is reasonably capable of being obtained by such third party.
(b) Except as expressly permitted by this Section 4.3, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw, modify or
qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse
to Parent, the approval of the Agreement, the Merger or the Company
Recommendation (as defined in Section 5.1(d)) or take any action or make any
statement in connection with the Company Stockholders Meeting inconsistent with
such approval or Company Recommendation (collectively, a "Change in the Company
Recommendation"), (ii) approve or recommend, or propose publicly to approve or
recommend, any Company Takeover Proposal, or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "Company Acquisition Agreement") related to any
Company Takeover Proposal. For purposes of this Agreement, a Change in the
Company Recommendation shall include any approval or recommendation (or public
proposal to approve or recommend), by the Company Board of a Company Takeover
Proposal, or any failure by the Company Board to recommend against a Company
Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of the
Company, to the extent that it determines in good faith, after consultation with
outside counsel, that in light of a Company Superior Proposal it is necessary to
do so in order to act in a manner consistent with its fiduciary duties to the
Company's stockholders under applicable law, may terminate this Agreement solely
in order to concurrently enter into a Company Acquisition Agreement with respect
to any Company Superior Proposal, but only at a time that is after the third
business day following Parent's receipt of written notice advising Parent that
the Board of Directors of the Company is prepared to accept a Company Superior
Proposal, specifying the material terms and conditions of such Company Superior
Proposal and identifying the person making such Company Superior Proposal, all
of which information will be kept confidential by Parent in accordance with the
terms of the Confidentiality Agreement (as defined in Section 5.4).
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.3, the Company shall immediately advise Parent
orally and in writing of any request for information or of any Company Takeover
Proposal, the material terms and conditions of such request or Company Takeover
Proposal and the identity of the person making such request or Company Takeover
Proposal. The Company will keep Parent informed of the status and details
(including amendments or proposed amendments) of any such request or Company
Takeover Proposal.
(d) Nothing contained in this Section 4.3 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
if, in the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, failure so to disclose would be inconsistent
with its obligations under applicable law; PROVIDED, HOWEVER, any such
disclosure relating to a Company Takeover Proposal shall be deemed to be a
Change in the Company Recommendation unless the Board of Directors of the
Company reaffirms the Company Recommendation in such disclosure.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 PREPARATION OF THE FORM S-4, PROXY STATEMENT AND FORM 10;
STOCKHOLDERS MEETING.
(a) As promptly as practicable following the date of this Agreement, Parent
and the Company shall prepare and file with the SEC the Form S-4, the Proxy
Statement and the Form 10. Each of
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Parent and the Company shall use all reasonable efforts to have the Form S-4, in
which the Proxy Statement shall be included, declared effective under the
Securities Act and the Form 10 declared effective under the Exchange Act as
promptly as practicable after such filing. The Company shall use its reasonable
best efforts to cause the Proxy Statement to be mailed to its stockholders as
promptly as practicable after the Form S-4 is declared effective; PROVIDED, that
the Company may elect to postpone the mailing of the Proxy Statement to a date
that is no later than at least 20 business days prior to the date Parent informs
the Company that the DevCo. Distribution is reasonably capable of being
completed.
(b) Each of the Company and Parent covenants that none of the information
supplied or to be supplied by it for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy Statement will, at the date
it is first mailed to the stockholders of the Company, or at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement and the Form S-4 will comply
as to form in all material respects with the requirements of the Exchange Act
and the Securities Act, as applicable. Notwithstanding the foregoing, (i) no
representation or covenant is made by the Company with respect to statements
made or incorporated by reference based on information supplied in writing by
Parent specifically for inclusion or incorporation by reference in the Form S-4
or Proxy Statement and (ii) no representation or covenant is made by Parent with
respect to statements made or incorporated by reference based on information
supplied in writing by the Company for inclusion or incorporation by reference
in the Form S-4 or the Proxy Statement. If at any time prior to the Effective
Time there shall occur (i) any event with respect to the Company or any of its
subsidiaries, or with respect to other information supplied by Company for
inclusion in the Form S-4 or the Proxy Statement or (ii) any event with respect
to Parent, or with respect to information supplied by Parent for inclusion in
the Form S-4 or the Proxy Statement, in either case, which event is required to
be described in an amendment of, or a supplement, to the Form S-4 or the Proxy
Statement, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of Company.
(c) Each of the Company and Parent shall promptly notify the other of the
receipt of any comments from the SEC or its staff or any other appropriate
government official and of any requests by the SEC or its staff or any other
appropriate government official for amendments or supplements to any of the
filings with the SEC in connection with the Merger and other transactions
contemplated hereby or for additional information and shall supply the other
with copies of all correspondence between the Company or any of its
representatives, or Parent or any of its representatives, as the case may be, on
the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. The Company and Parent shall
use their respective reasonable efforts to respond to any comments of the SEC
with respect to the Form S-4 and the Proxy Statement as promptly as practicable.
The Company and Parent shall cooperate with each other and provide to each other
all information necessary in order to prepare the Form S-4, the Proxy Statement
and the Form 10, and shall provide promptly to the other party any information
such party may obtain that could necessitate amending any such document.
(d) The Company shall, as promptly as practicable after the Form S-4 is
declared effective under the Securities Act, duly call, give notice of, convene
and hold the Company Stockholders Meeting in accordance with the DGCL for the
purpose of obtaining the Company Stockholder Approval; PROVIDED, that the
Company may elect to postpone the Company Stockholders Meeting to a date that is
no later than 35 business days after the date of mailing of the Proxy Statement
in accordance with
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Section 5.1(a). Subject to Section 4.3, the Board of Directors of the Company
shall recommend to the Company's stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby (the
"Company Recommendation"). Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to the first sentence of this
Section 5.1(d) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any Company Takeover
Proposal. Notwithstanding any Change in the Company Recommendation, this
Agreement and the Merger shall be submitted to the stockholders of the Company
at the Company Stockholders Meeting for the purpose of approving the Agreement
and the Merger and nothing contained herein shall be deemed to relieve the
Company of such obligation unless this Agreement has been terminated.
(e) The Company shall coordinate and cooperate with Parent with respect to
the timing of the Company Stockholders Meeting.
SECTION 5.2 LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall cause
to be delivered to Parent a letter from the Company's independent accountants
dated a date within two business days before the Closing Date addressed to
Parent, in form and substance reasonably satisfactory to Parent and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
SECTION 5.3 LETTER OF PARENT'S ACCOUNTANTS. Parent shall cause to be
delivered to the Company a letter from Parent's independent accountants dated a
date within two business days before the Closing Date addressed to the Company,
in form and substance reasonably satisfactory to the Company and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
SECTION 5.4 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to the Secrecy Agreement, dated as of August 11, 2000, as
amended, between Parent and the Company (the "Confidentiality Agreement"), and
subject to the restrictions contained in confidentiality agreements to which the
Company is subject (which the Company will use its reasonable best efforts to
have waived) and applicable law, the Company shall, and shall cause its
subsidiaries to, afford Parent and to the officers, employees, accountants,
counsel, financial advisors and other representatives of Parent, reasonable
access during normal business hours during the period prior to the Effective
Time to all its respective properties, books, contracts, commitments, personnel
and records and, during such period, the Company shall, and shall cause each of
its subsidiaries to, furnish promptly to Parent (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and
(b) all other information concerning its business, properties and personnel as
such other party may reasonably request. In addition, the Company will deliver,
or cause to be delivered, to Parent the internal or external reports reasonably
required by Parent promptly after such reports are made available to the
Company's personnel. No review pursuant to this Section 5.4 shall affect any
representation or warranty given by the Company to Parent. Parent will hold, and
will cause its officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information in
accordance with the terms of the Confidentiality Agreement.
(b) As soon as practicable after the execution of this Agreement, the
Company shall permit Parent to electronically link the Company's financial
reporting system to Parent's financial reporting system ("Hyperion"). The link
to Hyperion will be completed by Parent's financial reporting staff, with
assistance from the Company's accounting staff, at no incremental cost to the
Company and provided that such installment will not interfere with or disrupt
the normal operation of the Company's financial reporting system or violate any
applicable software licenses. Parent will provide the necessary Hyperion
software to be installed on a computer in the Company's accounting department;
PROVIDED, HOWEVER, that the information retrieved from the Company's financial
reporting system will not be made available to persons who are directly involved
in pricing or any other competitive activity at Parent; PROVIDED, FURTHER,
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that such persons shall not use such information other than for purposes of
assessing the financial condition of the Company for purposes of the
transactions contemplated by this Agreement, and shall not share, provide or
sell the information to any third party or use the information in any manner
that could reasonably be considered a restraint on competition or result in a
violation of any applicable laws. Any information provided under this
Section 5.4(b) shall be subject to the terms of the Confidentiality Agreement.
SECTION 5.5 REASONABLE EFFORTS. (a) Subject to the terms and conditions
set forth in this Agreement, each of the parties hereto shall use its reasonable
good faith efforts (subject to, and in accordance with, applicable law) to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings and the taking of all steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, including, without limitation, the VOI
Registrations (ii) the obtaining of all necessary consents, approvals or waivers
from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement, including
seeking to have any stay, temporary restraining order or injunctions entered by
any court or other Governmental Entity vacated or reversed and (iv) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement, subject to the limitations on divestiture set forth in
subsection (c) below.
(b) In connection with and without limiting the foregoing, the Company and
Parent shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to this
Agreement, the Stock Option Agreement or the Merger or any of the other
transactions contemplated hereby and thereby, and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to this Agreement,
the Stock Option Agreement or the Merger or any other transaction contemplated
hereby and thereby, take all action necessary to ensure that the Merger and the
other transactions contemplated by this Agreement and the Stock Option Agreement
may be consummated as promptly as practicable on the terms contemplated hereby
and thereby and otherwise to minimize the effect of such statute or regulation
on the Merger, the DevCo. Distribution and the other transactions contemplated
hereby and thereby.
(c) Each party agrees to provide the other party with copies of any
documentation or written materials provided to or by Governmental Entities with
respect to the HSR approval process. Parent shall not be required to agree to
any divestiture by Parent or any of Parent's subsidiaries or affiliates of
shares of capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or of the Company, its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
(d) The Company shall use its reasonable good faith efforts to assist Parent
and certain of its subsidiaries that are subject to the reporting requirements
of the Exchange Act (the "Reporting Subs") in the preparation and filing, on the
earliest practicable date after the date of this Agreement, of Current Reports
on Form 8-K for each of Parent and the Reporting Subs containing the information
required by Item 512(a)(1)(ii) of Regulation S-K of the SEC, including the
historical financial statements of the Company required by Rule 3-05 of
Regulation S-X of the SEC and the pro forma financial information with respect
to the business combination contemplated by this Agreement required by
Article 11 of Regulation S-X of the SEC, and the Company shall take all other
action necessary to allow Parent and the Reporting Subs to issue and sell
securities on a continuous or delayed basis in one or more public offerings
registered under the Securities Act.
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SECTION 5.6 COMPANY EQUITY-BASED INCENTIVES. (a) As of the Effective Time,
(i) each outstanding Company Stock Option and Company Warrant shall be converted
into an option or warrant, as the case may be (as applicable, an "Adjusted
Option" or "Adjusted Warrant") to purchase the number of shares of Parent Common
Stock (rounded down to the nearest whole number of shares of Parent Common
Stock) equal to the number of shares of Company Common Stock subject to such
Company Stock Option or Company Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, at an exercise price per share (rounded up to
the nearest whole cent) equal to the exercise price for each such share of
Company Common Stock subject to such Company Stock Option or Company Warrant
divided by the Exchange Ratio, and all references in each such option or warrant
to the Company shall be deemed to refer to Parent, where appropriate; PROVIDED,
HOWEVER, Parent shall assume the obligations of the Company under the applicable
Company Stock Plan and agreements under which the Adjusted Option or Adjusted
Warrant was originally granted, subject to the adjustments required by this
Section 5.6(a). The other terms of each such Adjusted Option and Adjusted
Warrant, and the plans under which they were issued, shall continue to apply in
accordance with their terms.
(b) As of the Effective Time, (i) each outstanding Company Award other than
Company Stock Options and Company Warrants (including restricted stock, stock
appreciation rights, performance shares, deferred stock, phantom stock, stock
equivalents and stock units) under the Company Stock Plans shall be converted
into the same instrument of Parent, in each case with such adjustments (and no
other adjustments) to the terms of such Company Awards as are necessary to
preserve the value inherent in such Company Awards with no detrimental or
beneficial effects on the holder thereof and (ii) Parent shall assume the
obligations of the Company under the Company Awards, subject to the adjustments
required by this Section 5.6(b). The other terms of each such Company Award, and
the plans or agreements under which they were issued, shall continue to apply in
accordance with their terms.
(c) The Company and Parent agree that the Company Stock Plans and Parent
equity-based incentive plans shall be amended, to the extent necessary, to
reflect the transactions contemplated by this Agreement, including, but not
limited to the conversion of shares of Company Common Stock held or to be
awarded or paid pursuant to such benefit plans, programs or arrangements into
shares of Parent Common Stock on a basis consistent with the transactions
contemplated by this Agreement. After the Effective Time, Parent shall promptly
issue new agreements reflecting each holder's Adjusted Options, Adjusted
Warrants or adjusted Company Awards.
(d) Parent shall (i) reserve for issuance the number of shares of Parent
Common Stock that will become subject to the benefit plans, programs and
arrangements referred to in this Section 5.6 and (ii) issue or cause to be
issued the appropriate number of shares of Parent Common Stock pursuant to
applicable plans, programs and arrangements, upon the exercise or maturation of
rights existing thereunder on the Effective Time or thereafter granted or
awarded. As soon as practicable following the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or other
appropriate form) registering a number of shares of Parent Common Stock
necessary to fulfill Parent's obligations under this Section 5.6. Such
registration statement shall be kept effective (and the current status of the
prospectus required thereby shall be maintained) for at least as long as
Adjusted Options, Adjusted Warrants or adjusted Company Awards remain
outstanding.
(e) Parent and the Company shall each approve the conversion of the
outstanding Company Stock Options, Company Warrants and Company Awards pursuant
to this Section 5.6 in a manner sufficient to comply with the exemptions
provided by Rule 16b-3 of the Exchange Act.
(f) The Company shall take all actions necessary to effect, as of
immediately prior to the Effective Time, the termination of the ESPP and of any
offering period then in effect under the ESPP, in a manner approved by Parent.
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SECTION 5.7 INDEMNIFICATION, EXCULPATION AND INSURANCE. (a) All rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or former
directors or officers of the Company and its subsidiaries as provided in their
respective certificates of incorporation or by-laws (or comparable
organizational documents) and any indemnification agreements or arrangements of
the Company and its subsidiaries shall survive the Merger and shall continue in
full force and effect in accordance with their terms, and shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of such
individuals.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision will be made so
that the successors and assigns of the Surviving Corporation will assume the
obligations thereof set forth in this Section 5.7.
(c) The provisions of this Section 5.7 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
(d) For six years after the Effective Time, the Surviving Corporation shall
maintain in effect the Company's current directors' and officers' liability
insurance covering acts or omissions occurring prior to the Effective Time with
respect to those persons who are currently covered by the Company's directors'
and officers' liability insurance policy on terms with respect to such coverage
and amount no less favorable to the Company's directors and officers currently
covered by such insurance than those of such policy in effect on the date
hereof; provided, that the Surviving Corporation may substitute therefor
policies of Parent or its subsidiaries containing terms with respect to coverage
and amount no less favorable to such directors or officers; PROVIDED, FURTHER,
that in no event shall the Surviving Corporation be required to pay aggregate
premiums for insurance under this Section 5.7(d) in excess of 200% of the
aggregate premiums paid by the Company in 2000 on an annualized basis for such
purpose and, if the annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
Notwithstanding the foregoing, the Company may obtain directors' and officers'
liability insurance covering all acts or omissions prior to the Effective Time
at a cost not to exceed 125% of the cost of the current directors' and officers'
liability insurance maintained by the Company.
(e) Parent shall cause the Surviving Corporation or any successor thereto to
comply with its obligations under this Section 5.7.
SECTION 5.8 FEES AND EXPENSES. (a) Except as provided in this
Section 5.8, all fees and expenses incurred in connection with the Merger, this
Agreement, and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
(b) (i) In the event that this Agreement is terminated by Parent pursuant to
Section 7.1(c), then, upon such termination, the Company shall pay Parent a fee
equal to $32,000,000 by wire transfer of same day funds.
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(ii) In the event that (A) a Pre-Termination Takeover Proposal Event (as
defined below) shall occur after the date of this Agreement and thereafter
this Agreement is terminated by either Parent or the Company pursuant to
Section 7.1(b)(i) and (B) prior to the date that is 12 months after the date
of such termination the Company enters into a Company Acquisition Agreement,
then the Company shall promptly, but in no event later than two business
days after the date such Company Acquisition Agreement is entered into, pay
Parent a fee equal to $32,000,000 by wire transfer of same day funds.
(iii) In the event that (A) a Pre-Termination Takeover Proposal Event
shall occur after the date of this Agreement, (B) this Agreement is
terminated by either Parent or the Company pursuant to Section 7.1(b)(ii),
(C) the Average Trading Price shall not be below $6.00 per share, and
(D) prior to the date that is 12 months after the date of such termination
the Company enters into a Company Acquisition Agreement, then the Company
shall promptly, but in no event later than two business days after the date
such Company Acquisition Agreement is entered into, pay Parent a fee equal
to $32,000,000 by wire transfer of the same day funds.
(iv) In the event that this Agreement is terminated by the Company
pursuant to Section 7.1(d), then concurrently with such termination, the
Company shall pay to Parent a fee equal to $32,000,000 by wire transfer of
same day funds.
(v) In the event that (A) a Pre-Termination Takeover Proposal Event
shall occur after the date of this Agreement, (B) the Company Board of
Directors has effected a Change in the Company Recommendation, and (C) this
Agreement is terminated by either Parent or Company for any reason provided
for under Section 7.1, then, promptly, but in no event later than two
business days after such termination, the Company shall pay Parent a fee
equal to $32,000,000 by wire transfer of same day funds.
(vi) For purposes of this Section 5.8(b), a "Pre-Termination Takeover
Proposal Event" shall be deemed to occur if a Company Takeover Proposal
shall have been made known to the Company or any of its subsidiaries or has
been made directly to its stockholders generally or any person shall have
publicly announced an intention (whether or not conditional) to make a
Company Takeover Proposal. The Company acknowledges that the agreements
contained in this Section 5.8(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent
would not enter into this Agreement; accordingly, if the Company fails
promptly to pay the amount due pursuant to this Section 5.8(b), and, in
order to obtain such payment, Parent commences a suit which results in a
judgment against the Company for the fee set forth in this Section 5.8(b),
the Company shall pay to Parent its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on
the amount of the fee at the rate on six-month U.S. Treasury obligations
plus 300 basis points in effect on the date such payment was required to be
made.
(c) The Company shall in no event be required to pay more than one fee
pursuant to Section 5.8(b). In the event that an amount is payable by the
Company pursuant to this Section 5.8, then, not withstanding anything in this
Agreement or the Voting Agreement to the contrary, (i) such amount shall be full
compensation and liquidated damages for the loss suffered by Parent as a result
of the failure of the transactions contemplated by this Agreement and the Voting
Agreement to be consummated and to avoid the difficulty of determining the
damages under the circumstances and (ii) such amount shall be in lieu of any
other entitlement of Parent, and shall be the sole and exclusive liability of
the Company and the Company's stockholders, with respect to all matters arising
under or relating to this Agreement and the Voting Agreement, unless there has
been a willful or material breach of this Agreement or the Voting Agreement by
the Company or a stockholder of the Company, respectively.
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SECTION 5.9 PUBLIC ANNOUNCEMENTS. Parent and the Company will consult with
each other before issuing, and provide each other the opportunity to review,
comment upon and concur with and use reasonable efforts to agree on, any press
release or other public statements and any internal communications with respect
to the transactions contemplated by this Agreement and the Stock Option
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as either
party may determine is required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
SECTION 5.10 AFFILIATES. To the extent practicable, concurrently with the
execution of this Agreement (or to the extent not practicable, as soon as
practicable and in any event within 10 business days after the date hereof), the
Company shall deliver to Parent a written agreement substantially in the form
attached as Exhibit 5.10(a) hereto of all of the persons who are "affiliates" of
the Company for purposes of Rule 145 under the Securities Act; all of such
affiliates, who are affiliates as of the date of this Agreement, are identified
in Section 5.10 of the Company Disclosure Schedule. Section 5.10 of the Company
Disclosure Schedule shall be updated by the Company as necessary to reflect
changes from the date hereof and the Company shall use reasonable best efforts
to cause each person added to such schedule after the date hereof to deliver a
similar agreement.
SECTION 5.11 STOCK EXCHANGE LISTING. Parent shall use best efforts to
cause the Parent Common Stock issuable (i) under Article II or (ii) upon
exercise of the Adjusted Options pursuant to Section 5.6 to be approved for
issuance on the NYSE, in each case subject to official notice of issuance, as
promptly as practicable after the date hereof, and in any event prior to the
Closing Date.
SECTION 5.12 STOCKHOLDER LITIGATION. Each of the Company and Parent shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against the Company or Parent, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
SECTION 5.13 DEVCO. DISTRIBUTION.
(a) Unless Parent shall determine that the Company shall not effect the
DevCo. Distribution, it shall prepare and deliver to the Company the proposed
terms of the DevCo. Distribution and forms of the agreements proposed to be
entered into by the Company and DevCo. in connection with the DevCo.
Distribution on or prior to December 7, 2000.
(b) Prior to the Closing, the Company shall use its reasonable efforts to
complete the actions specified in Exhibit A as long as those actions do not
adversely affect the business of the Company and its wholly owned subsidiaries
before the DevCo. Distribution; provided, however, that the completion of
actions under this Section 5.13 shall not be a condition to the Merger. The
Company shall take all necessary action to create DevCo. and transfer to DevCo.
such assets and liabilities from the Company and its subsidiaries and execute
all necessary agreements that shall govern the relationships between the
Surviving Corporation and DevCo. following the DevCo. Distribution, all in
accordance with Parent's instructions set forth on Exhibit A. The DevCo.
Distribution must occur immediately before the Effective Time unless otherwise
agreed to by the Company.
(c) The Company shall not take, or cause to be taken, any action that would
or might reasonably be expected to prevent or materially delay Parent, the
Company or DevCo. from consummating the transactions contemplated in Exhibit A,
including any action which may materially limit the ability of Parent, the
Company or DevCo. to consummate the transactions contemplated thereby as a
result of any regulatory concerns.
(d) As promptly as practicable following the date of this Agreement, the
Company shall prepare and file with the SEC the Form 10. The Company shall use
its best reasonable efforts to have the Form 10 declared effective under the
Exchange Act as promptly as practicable after such filing and to
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cause the Form 10 to be mailed to its stockholders as promptly as practicable
after the Form 10 is declared effective.
(e) The Company shall pay all expenses arising from or incidental to the
DevCo. Distribution (the "DevCo. Expenses"); PROVIDED, HOWEVER, that Parent
shall pay the DevCo. Expenses if this Agreement is terminated by Parent and the
Company pursuant to Section 7.1(a) or by either Parent or the Company pursuant
to Section 7.1(b).
SECTION 5.14 RIGHTS AGREEMENT. The Company shall enter into an amendment
to the Rights Agreement, which will provide, among other things, for
purposes:(i) of the definitions of "Acquiring Person" and "Beneficial Owner" and
(ii) of the definitions of "Affiliate" of an "Acquiring Person":
(i) as a result of entering into this Agreement and the Voting
Agreement, that Parent, its subsidiaries (including Merger Sub) and its
affiliates shall not be deemed to be an "Affiliate" under the Rights
Agreement;
(ii) as a result of entering into this Agreement and the Voting
Agreement, that Parent and Merger Sub shall not be deemed to be "Beneficial
Owners" (as such term is used in the Rights Agreement) of shares of Company
Common Stock owned by Parent, its subsidiaries and its affiliates; and
(iii) as a result of entering into this Agreement and the Voting
Agreement, that Parent and Merger Sub shall not be deemed to be an
"Acquiring Person" (as such term is used in the Rights Agreement).
Such amendment shall provide that such amended provisions of the Rights
Agreement cannot be further amended and the Rights cannot be redeemed without
the prior written consent of Parent.
SECTION 5.15 STANDSTILL AGREEMENTS; Confidentiality Agreements. During the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which it or any of its respective subsidiaries is a
party. During such period, the Company shall enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreement, including
by obtaining injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any court of the United
States of America or of any state having jurisdiction.
SECTION 5.16 CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes which become payable
in connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time. The Company
shall pay on behalf of its stockholders, without deduction or withholding from
any amount payable to the holders of Company Common Stock, any such taxes or
fees imposed by any Governmental Entity which become payable in connection with
the transactions contemplated by this Agreement for which such stockholders are
primarily liable and in no event shall Parent pay such amounts.
SECTION 5.17 EMPLOYEE BENEFITS.
(a) Parent shall, or shall cause the Surviving Corporation and its
subsidiaries to, give those employees who are, as of the Closing, employed by
the Company and its subsidiaries (the "Continuing Employees") full credit for
purposes of eligibility and vesting under any employee benefit plans or
arrangements maintained by Parent, the Surviving Corporation or any subsidiary
of Parent or the Surviving Corporation for such Continuing Employees' service
with the Company or any subsidiary of the Company to the same extent recognized
by the Company for similar purposes immediately prior to the Effective Time.
Parent shall, or shall cause the Surviving Corporation and its subsidiaries to,
waive
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all limitations as to preexisting conditions, exclusions and waiting periods
with respect to participation and coverage requirements applicable to the
Continuing Employees under any welfare plan that such employees may be eligible
to participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan maintained
for the Continuing Employees immediately prior to the Effective Time, and
provide credit under any such welfare plan for any copayments, deductibles and
out-of-pocket expenditures for the remainder of the coverage period during which
any transfer of coverage occurs.
(b) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, honor in accordance with the terms thereof, without
offset, deduction, counterclaim, interruption or deferment (other than
withholdings under applicable tax law) under all Plans and administrative
practices adopted thereunder, including all employment, change in control,
severance, termination, consulting and unfunded retirement or benefit agreements
or arrangements that have been provided or made available to Parent.
SECTION 5.18 RESIGNATION AND APPOINTMENT OF THE DIRECTORS OF THE
TRUSTEE. The Company shall take action to obtain the resignations of Brian
Keller and Michael Hug (the "Company Directors") from the board of directors of
the Trustee (the "Trustee Board") and to have persons chosen by Parent (the
"Parent Directors") appointed to the Trustee Board immediately prior to the
Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver by each of Parent and the Company on or prior to
the Closing Date of the following conditions:
(a) STOCKHOLDER APPROVAL. The Company Stockholder Approval shall have
been obtained.
(b) HSR ACT. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) GOVERNMENTAL AND REGULATORY APPROVALS. Other than the filing
provided for under Section 1.3 and the waiting period pursuant to the HSR
Act (which is addressed in Section 6.1(b)), (i) all consents, approvals and
actions of, filings with and notices to any Governmental Entity required by
the Company, Parent or any of their subsidiaries to consummate the Merger
and the other transactions contemplated hereby, the failure of which to be
obtained or made is reasonably expected to have a material adverse effect on
Parent and its subsidiaries and prospective subsidiaries, taken as a whole,
shall have been obtained or made and (ii) all the registrations and
amendments thereto set forth on Section 6.1(c) of the Company Disclosure
Schedule shall have been made and the related consents, approvals or
exemptions under state timeshare registration laws or, in states that do not
have specific timeshare laws, related real estate or securities registration
laws, shall have been obtained, other than the registrations and amendments
thereto set forth on Section 6.1(c) of the Company Disclosure Schedule that
are (A) marked with an asterisk and (B) which the failure to obtain the
related consent, approval or exemption would not be reasonably expected to
result in a material business impact on the Company.
(d) THIRD PARTY CONSENTS. Parent shall have been furnished with evidence
satisfactory to it that the Company has obtained the consents of third
parties to any agreement or instrument the absence of which would result in
the representations set forth in Section 3.1(d) hereof being untrue
(disregarding any disclosure relating thereto in the Company Disclosure
Schedule).
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(e) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated, enforced
or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) preventing the consummation of the
Merger, or (ii) which otherwise is reasonably likely to have a material
adverse effect on the Company or Parent, as applicable; PROVIDED, HOWEVER,
that each of the parties shall have used its best efforts to prevent the
entry of any such Restraints and to appeal as promptly as possible any such
Restraints that may be entered.
(f) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and no stop order or proceedings seeking a stop order shall
have been entered or be pending by the SEC.
(g) STOCK EXCHANGE LISTING. The shares of Parent Common Stock issuable
to the Company's stockholders (i) as contemplated by Article II or
(ii) upon exercise of the Adjusted Options pursuant to Section 5.6 shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PARENT. The obligation of Parent to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES.The representations and warranties of
the Company set forth herein (i) that are qualified as to materiality shall
be true and correct at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in
which case as of such date), and (ii) that are not qualified as to
materiality shall be true and correct at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date) in all material respects.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed
by it at or prior to the Closing Date under this Agreement and in connection
with the DevCo. Distribution.
(c) REGULATORY CONDITION. No condition or requirement has been imposed
by one or more Governmental Entities in connection with any required
approval by them of the Merger relating to the transactions contemplated
hereunder which, either alone or together with all such other conditions or
requirements requires the Company or its subsidiaries to be operated in a
manner which is materially different from industry standards in effect or
which is different from the manner in which the Company currently conducts
its operations on the date hereof and which materially adversely affects the
business, financial condition or results of operations or prospects of the
Company and its subsidiaries, taken as a whole, or their businesses, other
than their commercial finance businesses, taken as a whole.
(d) RESIGNATION AND APPOINTMENT OF THE DIRECTORS OF THE TRUSTEE. The
Company shall have obtained the resignations of the Company Directors from
the Trustee Board and shall have appointed the Parent Directors to the
Trustee Board, subject to consummation of the Merger and acceptance of such
appointment.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent set forth herein (i) that are qualified as to materiality shall be
true and correct at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in which
case as of such date), and (ii) that are not qualified as to materiality
shall be true and correct at and as of the Closing Date, as if made at and
as of such time (except to the extent expressly made as of an earlier date,
in which case as of such date) in all material respects.
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(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have performed in
all material respects all obligations required to be performed by it at or
prior to the Closing Date under this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, and whether before or after the Company Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by March 31, 2001,
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to
this Section 7.1(b) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the failure
of the Merger to be consummated by such time; PROVIDED, FURTHER, that such a
date may be extended for not more than 30 days, by either party, by written
notice to the (x) other party if the Merger shall not have been consummated
solely as a result of the condition set forth in Section 6.1(c) failing to
have been satisfied and the extending party reasonably believes that the
relevant approvals will be obtained during such extension period or (y) the
delivery by Parent of the Closing Extension Notice;
(ii) if the Company Stockholder Approval shall not have been obtained at
the Company Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth in
Section 6.1(d) shall be in effect and shall have become final and
nonappealable; PROVIDED, that the party seeking to terminate this Agreement
pursuant to this Section 7.1(b)(iii) shall have used best efforts to prevent
the entry of and to remove such Restraint;
(c) by Parent, if the Company shall have failed to make the Company
Recommendation in the Proxy Statement or effected a Change in the Company
Recommendation (or resolved to take any such action), whether or not permitted
by the terms hereof, or shall have breached its obligations under this Agreement
by reason of a failure to call or convene the Company Stockholders Meeting in
accordance with Section 5.1(d);
(d) by the Company in accordance with Section 4.3(b); PROVIDED, that in
order for the termination of this Agreement pursuant to this paragraph (d) to be
deemed effective, the Company shall have complied with all provisions of
Section 4.3, including the notice provisions therein, and with applicable
requirements, including the payment of the fee referred to in
paragraph (b)(iv) of Section 5.8; or
The party desiring to terminate this Agreement pursuant to clause (b),
(c) or (d) of this Section 7.1 shall give written notice of such termination to
the other party in accordance with Section 8.2, specifying the provision hereof
pursuant to which such termination is effected.
SECTION 7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company, other than the provisions of
Section 3.1(z), Section 3.2(f), the last sentence of Section 5.4(a),
Section 5.8, this Section 7.2 and Article VIII, which provisions survive such
termination, PROVIDED, HOWEVER, that nothing herein (including the payment of
any amounts pursuant to Section 5.8 hereof) shall relieve any party from any
liability for any willful or material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
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SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties at any
time before or after the Company Stockholder Approval; PROVIDED, HOWEVER, that
after such approval, there shall not be made any amendment that by law requires
further approval by the stockholders of the Company without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of all of the parties.
SECTION 7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.3, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.5 PROCEDURE FOR TERMINATION. A termination of this Agreement
pursuant to Section 7.1 shall, in order to be effective, require, in the case of
Parent or the Company, action by its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to
Cendant Corporation
Six Sylvan Way
Parsippany, NJ 07054
Telecopy No.: (973) 496-5335
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
Attention: David Fox
(b) if to the Company, to
Fairfield Communities, Inc.
8669 Commodity Circle
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<PAGE>
#200
Orlando, Florida 32819
Telecopy No.: (407) 370-5222
Attention: General Counsel
with a copy to:
Jones, Day, Reavis & Pogue
2727 North Harwood Street
Dallas, Texas 75201
Telecopy No.: (214) 969-5100
Attention: Mark V. Minton
SECTION 8.3 DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person, where "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise; provided, that in the case of the Company, the Trust shall be
deemed an affiliate.
(b) "material adverse change" or "material adverse effect" means, when
used in connection with the Company, Parent, an Association, the Trust or
the Trustee, any change, effect, event, occurrence or state of facts that
is, or would reasonably be expected to be, materially adverse to the
business, financial condition or results of operations or prospects of such
party and its subsidiaries taken as a whole.
(c) "material business impact" means any change, effect, event,
occurrence or state of facts that, individually or in the aggregate with any
other change, effect, event, occurrence or state of facts, is, or is
reasonably likely to constitute or result in (i) loss (including a loss of a
benefit or right) or damage that is material to the Company and its
subsidiaries taken as a whole, (ii) impairment of or interference in the
ability of the Company or any of its subsidiaries to conduct or operate
their businesses as conducted or operated prior to the date hereof, other
than an impairment or interference which is not significant to the Company
and its subsidiaries taken as a whole, (iii) detriment to the Company's good
standing or reputation, (iv) an increase in payments due to any employee in
violation of Section 4.1(xiii) or Section 4.1(xiv) or (v) a material delay
in the transactions contemplated hereby.
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors
or other governing body (or, if there are no such voting interests, 50% or
more of the equity interests of which) is owned directly or indirectly by
such first person.
(f) "knowledge" of any person which is not an individual means the
actual knowledge of such person's executive officers or directors, after due
reasonable investigation.
(g) "VOI Laws" means the applicable provisions of (i) the Consumer
Credit Protection Act; (ii) Regulation Z of the Federal Reserve Board;
(iii) the Equal Credit Opportunity Act; (iv) Regulation B of the Federal
Reserve Board; (v) the Federal Trade Commission's 3-day cooling-off
Rule for Door-to-Door Sales; (vi) Section 5 of the Federal Trade Commission
Act;
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(vii) the Interstate Land Sales Full Disclosure Act; (viii) the federal
postal laws; (ix) usury laws; (x) trade practices, home and telephone
solicitation, sweepstakes, anti-lottery and consumer credit and protection
laws; (xi) real estate sales licensing, disclosure, reporting condominium
and timeshare and escrow laws; (xii) the Americans With Disabilities Act and
related accessibility guidelines; (xiii) the Real Estate Settlement
Procedures Act; (xiv) the Truth-in-Lending Act; (xv) the Fair Housing Act;
(xvi) Regulation X; (xvii) Civil Rights Act of 1964 and 1968; (xviii) state
condominium timeshare, and seller of travel laws, (xix) Federal Fair Debt
Collection Practices Act and applicable state debt collection laws and
(xx) any state laws concerning construction, escrow or surety bonds.
SECTION 8.4 INTERPRETATION. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means, in the case of any agreement or instrument, such agreement or
instrument as from time to time amended, modified or supplemented, including by
waiver or consent and, in the case of statutes, such statutes as in effect on
the date of this Agreement. References to a person are also to its permitted
successors and assigns. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed to also refer to any amendments thereto
and all rules and regulations promulgated thereunder, unless the context
requires otherwise.
SECTION 8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. A facsimile copy of a signature
page shall be deemed to be an original signature page.
SECTION 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Section 5.7, are not intended to confer upon any person other than
the parties any rights or remedies.
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
SECTION 8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, PROVIDED, HOWEVER, that Parent may
assign Merger Sub's rights and obligations, in whole or in part, under this
Agreement to any other
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newly-formed subsidiary of Parent with no assets or liabilities, which is wholly
owned by Parent or by Parent's wholly-owned subsidiary, as the case may be, in
which event the assignee shall be considered Merger Sub for purposes of this
Agreement. Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 8.9 CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably agrees that any action, suit, claim or other legal proceeding with
respect to this Agreement or in respect of the transactions contemplated hereby
brought by any other party hereto or its successors or assigns shall be brought
and determined in any state or federal court located in the State of Delaware or
any appeals courts thereof (the "Delaware Courts"), and each of the parties
hereto irrevocably submits with regard to any such proceeding for itself and in
respect to its property, generally and unconditionally, to the exclusive
jurisdiction of the Delaware Courts. Each of the parties hereto irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement,
(a) any claim that it is not personally subject to the jurisdiction of the
Delaware Courts for any reason, (b) that it or its property is exempt or immune
from jurisdiction of any Delaware Court or from any legal process commenced in
any Delaware Court (whether through service of notice, attachment before
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise) and (c) to the fullest extent permitted by applicable law, that
(i) the proceeding in any Delaware Court is brought in an inconvenient forum,
(ii) the venue of such proceeding is improper or (iii) this Agreement, or the
subject matter hereof, may not be enforced in or by a Delaware Court.
Notwithstanding the foregoing, each of the parties hereto agrees that the other
party shall have the right to bring any action or proceeding for enforcement of
a judgment entered by the Delaware Courts in any other court or jurisdiction.
SECTION 8.10 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.12 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
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<PAGE>
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
<TABLE>
<S> <C> <C>
CENDANT CORPORATION.
By: /s/ JAMES E. BUCKMAN
-----------------------------------------
Name: James E. Buckman
Title: Vice Chairman, General Counsel and
Assistant Secretary
FAIRFIELD COMMUNITIES, INC.
By: /s/ JAMES G. BERK
-----------------------------------------
Name: James G. Berk
Title: President and CEO
GRAND SLAM ACQUISITION CORP.
By: /s/ JAMES E. BUCKMAN
-----------------------------------------
Name: James E. Buckman
Title: Executive Vice President and
Assistant Secretary
</TABLE>
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<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated November 1, 2000, between
Fairfield Communities, Inc., a Delaware corporation (the "Company"), and Cendant
Corporation, a Delaware corporation ("Cendant").
WHEREAS, the Company, Cendant and Grand Slam Acquisition Corp., a Delaware
corporation and a subsidiary of the Company ("Merger Sub"), are entering into a
Merger Agreement of even date herewith (the "Merger Agreement", terms defined
therein and not otherwise defined herein having the same meanings when used
herein), which provides, among other things, that upon the terms and subject to
the conditions contained therein, Merger Sub will be merged (the "Merger") with
and into the Company; and
WHEREAS, the Company has agreed, in order to induce Cendant to enter into
the Merger Agreement, to grant the Option (as hereinafter defined).
NOW THEREFORE, in consideration of the premises and the representations,
warranties, mutual covenants and agreements set forth herein and in the Merger
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. GRANT OF OPTION. The Company hereby grants Cendant an irrevocable
option (the "Option") to purchase, subject to the terms and conditions set forth
herein, up to 8,448,027 shares (the "Company Shares") of common stock of the
Company, par value $0.01 per share (the "Company Common Stock"), together with
the rights (the "Rights") associated with such shares issued pursuant to the
Rights Agreement, dated as of September 1, 1992, as amended, between the Company
and The First National Bank of Boston (as successor of Society National Bank),
as Rights Agent (the "Rights Agreement"), in the manner set forth below at a
price equal to the value, based on the Average Trading Price, of the Merger
Consideration per share (the "Exercise Price"); PROVIDED, HOWEVER, that if the
Company Stockholders Meeting shall not have occurred, the Exercise Price shall
be calculated using an Average Trading Price equal to the arithmetic average of
the 4:00 p.m. Eastern Time closing sales prices of Parent Common Stock reported
on the NYSE Composite Tape for the 20 consecutive Trading Days ending on (and
including) the Trading Day immediately prior to the date of the Exercise Notice
(as defined herein); PROVIDED, FURTHER, that in no event shall the number of
shares of the Company Common Stock for which the Option is exercisable exceed
19.9% of the Company's issued and outstanding shares of the Company Common
Stock. References herein to the Company Shares shall also be deemed to include
the associated Rights.
2. EXERCISE OF OPTION. The Option may be exercised by Cendant, in whole or
in part, at any time or from time to time. In the event Cendant wishes to
exercise the Option, Cendant shall deliver to the Company a written notice (an
"Exercise Notice") specifying the total number of the Company Shares it wishes
to purchase and a date and time for the closing of such purchase (a "Closing"),
which date shall not be less than two nor more than thirty days after the later
of (x) the date such Exercise Notice is given and (y) the expiration or
termination of any applicable waiting period under the HSR Act. The Option shall
terminate upon the earliest of: (i) the Effective Time; (ii) the termination of
the Merger Agreement pursuant to Section 7.1 thereof (other than a termination
in connection with which Cendant is or may be entitled to the payment specified
in Section 5.8 thereof); and (iii) 5:00 p.m., New York City time, on the date
that is the one year anniversary of the termination of the Merger Agreement in
connection with which Cendant is or may be entitled to the payment specified in
Section 5.8 thereof or if, at the expiration of such one year period, the Option
cannot be exercised by reason of any
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applicable judgment, decree, order, law or regulation, ten business days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal.
3. CONDITIONS TO CLOSING. The obligation of the Company to issue the
Company Shares to Cendant hereunder is subject to the conditions that (i) all
waiting periods, if any, under the HSR Act applicable to the issuance of the
Company Shares hereunder shall have expired or have been terminated and (ii) no
statute, rule or regulation shall be in effect, and no order, decree or
injunction entered by any court of competent jurisdiction or governmental entity
in the United States shall be in effect, that prohibits or restrains the
exercise of the Option pursuant to the terms of this Agreement.
4. CLOSING. At any Closing, (a) upon receipt of the payment provided for
by this Section 4, the Company will deliver to Cendant a single certificate in
definitive form representing the number of the Company Shares designated by
Cendant in its Exercise Notice, such certificate to be registered in the name of
Cendant and to bear the legend set forth in Section 12 of this Agreement, and
(b) Cendant will deliver to the Company the aggregate price for the Company
Shares so designated in an amount equal to the product obtained by multiplying
the Exercise Price by the number of Company Shares to be purchased by wire
transfer of immediately available funds payable to the Company pursuant to the
Company's instructions. At any Closing at which Cendant is exercising the Option
in part, Cendant shall present and surrender this Agreement to the Company, and
the Company shall deliver to Cendant an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the balance of the
shares of the Company Common Stock purchasable hereunder.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Cendant that (a) the Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
the Company, constitutes a valid and binding obligation of the Company and,
assuming this Agreement constitutes a valid and binding obligation of Cendant,
is enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally,
the availability of injunctive relief and other equitable remedies, and
limitations imposed by law on indemnification for liability under securities
laws, (d) the Company has taken all necessary corporate action to authorize and
reserve for issuance and to permit it to issue, upon exercise of the Option, and
at all times from the date hereof through the expiration of the Option will have
reserved, 8,448,027 unissued Company Shares and such other shares of the Company
Common Stock or other securities which may be issued pursuant to Section 10 of
this Agreement, all of which, upon their issuance, payment and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable, and free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever (other than those
(i) created by or through Cendant, or any of its affiliates, (ii) which arise
under this Agreement, or (iii) which arise under the Securities Act of 1933, as
amended (the "Securities Act") or any applicable state securities laws),
(e) the execution and delivery of this Agreement by the Company does not, and
the performance of this Agreement by the Company will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest or other encumbrance on assets
pursuant to (any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation"), (A) any
provision of the Certificate of
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Incorporation or By-laws of the Company, (B) any provisions of any loan or
credit agreement, note, mortgage, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise, license of or
applicable to the Company, or (C) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets, which Violation, in the case of each of clauses (B) and (C),
individually or in the aggregate would prevent or materially delay the exercise
by Cendant of the Option or any other right of Cendant under this Agreement, or
(f) the execution and delivery of this Agreement by the Company does not, and
the performance of this Agreement by the Company will not result in a
"Triggering Event" under the Rights Agreement, and (g) except as described in
Section 3.1(d) of the Merger Agreement or this Agreement, and other than the HSR
Act and, with respect to Section 9 hereof, compliance with the provisions of the
Securities Act and any applicable state securities laws, the execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any governmental or regulatory
authority.
6. REPRESENTATIONS AND WARRANTIES OF CENDANT. Cendant represents and
warrants to the Company that (a) Cendant is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by Cendant and the consummation by Cendant of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Cendant and no other corporate proceedings on the part of Cendant
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Cendant and constitutes a valid and binding obligation of Cendant, and, assuming
this Agreement constitutes a valid and binding obligation of the Company, is
enforceable against Cendant in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and the
availability of injunctive relief and other equitable remedies and limitations
imposed by law on indemnification for liability under applicable securities
laws, (d) the execution and delivery of this Agreement by Cendant does not, and
the performance of this Agreement by Cendant will not, result in any Violation
pursuant to (A) any provision of the charter documents of Cendant, (B) any
provisions of any loan or credit agreement, note, mortgage, indenture, lease, or
other agreement, obligation, instrument, permit, concession, franchise, license
of or applicable to it or (C) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Cendant or its properties or assets,
which Violation, in the case of each of clauses (B) and (C), would, individually
or in the aggregate have a material adverse effect on Cendant's ability to
consummate the transactions contemplated by this Agreement, (e) except as
described in Section 3.2(c) of the Merger Agreement, and other than the HSR Act
and, with respect to Section 9 hereof, compliance with the provisions of the
Securities Act and any applicable state securities laws, the execution and
delivery of this Agreement by Cendant does not, and the performance of this
Agreement by Cendant will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority and (f) any Company Shares acquired upon exercise of the Option will
not be, and the Option is not being, acquired by Cendant with a view to public
distribution or resale in any manner which would be in violation of federal or
state securities laws.
7. PUT RIGHT.
(a) Exercise of Put. At any time during which the Option is exercisable
pursuant to Section 2 or would be exercisable but for the circumstances referred
to in Section 2(iii) of this Agreement (the "Repurchase Period"), upon demand by
Cendant, Cendant shall have the right to sell to the Company (or any successor
entity thereof) and the Company (or such successor entity) shall be obligated to
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repurchase from Cendant (the "Put"), all or any portion of the Option, at the
price set forth in clause (i) below, or all or any portion of the Company Shares
purchased by Cendant pursuant hereto, at a price set forth in
clause (ii) below:
(i) the product of multiplying (A) the difference between the
"Market/Offer Price" for shares of the Company Common Stock as of the date
(the "Notice Date") the notice of exercise of the Put is given to the
Company (defined as the higher of (x) the highest price per share offered as
of the Notice Date pursuant to any tender or exchange offer or other Company
Takeover Proposal which was made prior to the Notice Date and not terminated
or withdrawn as of the Notice Date (the "Offer Price") and (y) the average
of the closing prices of shares of the Company Common Stock on the New York
Stock Exchange for the five trading days immediately preceding the Notice
Date (the "Market Price")), and the Exercise Price, by (B) the number of
Company Shares purchasable pursuant to the Option (or portion thereof with
respect to which Cendant is exercising its rights under this Section 7). In
determining the Market/Offer Price, the value of consideration other than
cash or stock as provided above shall be determined by a nationally
recognized investment banking firm selected by Cendant and reasonably
acceptable to the Company.
(ii) the product of multiplying (A) the Exercise Price paid by Cendant
for the Company Shares acquired pursuant to the Option plus, assuming the
Market/Offer Price is greater than the Exercise Price, the difference
between the Market/Offer Price and the Exercise Price, by (B) the number of
Company Shares so purchased.
(b) Payment and Redelivery of Option or Shares. In the event Cendant
exercises its rights under this Section 7, the Company shall, within two
business days of the Notice Date, pay the required amount to Cendant by wire
transfer in immediately available funds to an account specified by Cendant two
business days prior to the date that payment is due and Cendant shall surrender
to the Company the Option or the certificates evidencing the Company Shares
purchased by Cendant pursuant hereto, and Cendant shall warrant that it owns
such shares and that such shares are then free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever.
8. RESTRICTIONS ON CERTAIN ACTIONS. Until the termination of the option
pursuant to Section 2, the Company shall not adopt any Rights Agreement or
shareholder rights plan or any amendment thereto in any manner which would cause
Cendant, if Cendant has complied with its obligations under this Agreement and
the Merger Agreement, to become an "Acquiring Person" under such Rights
Agreement or shareholder rights plan solely by reason of the beneficial
ownership of the Company Shares acquired pursuant to this Agreement.
9. REGISTRATION RIGHTS.
(a) Demand. The Company will, if requested in writing (a "Registration
Notice") by Cendant at any time and from time to time within two years of the
exercise of the Option, as expeditiously as possible prepare and file
registration statements under the Securities Act if such registration or the
obtaining of a receipt for a prospectus is necessary in order to permit the sale
or other disposition of any or all shares or other securities that have been
acquired by or are issuable to Cendant upon exercise of the Option ("Registrable
Securities") in accordance with the intended method of sale or other disposition
stated by Cendant. Any such Registration Notice must relate to a number of
Registrable Securities equal to at least twenty percent (20%) of Company Shares,
unless the remaining number of Registrable Securities is less than such amount,
in which case Cendant shall be entitled to exercise its rights hereunder but
only for all of the remaining Registrable Securities (a "Permitted Offering").
Cendant's rights hereunder shall terminate at such time as Cendant shall be
entitled to sell all of the remaining Registrable Securities pursuant to
Rule 144(k) under the Act. The Company will
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use its reasonable best efforts to qualify such shares or other securities under
any applicable state securities laws; PROVIDED, HOWEVER, that the Company shall
not be required to qualify to do business, consent to general service of process
or submit to taxation in any jurisdiction by reason of this provision. The
Company will use reasonable efforts to cause each such registration statement to
become effective and to obtain a (final) receipt for each such prospectus, to
obtain all consents or waivers of other parties which are required therefor, and
to keep such registration statement or prospectus effective for such period not
in excess of 120 calendar days from the day such registration statement first
becomes effective or the date of the (final) receipt for such prospectus as may
be reasonably necessary to effect such sale or other disposition. The
obligations of the Company hereunder to file a registration statement or
prospectus and to maintain its effectiveness may be suspended for up to 90
calendar days in the aggregate during any 12-month period if the board of
directors of the Company shall have determined that the filing of such
registration statement or prospectus or the maintenance of its effectiveness
would require premature disclosure of nonpublic information that would
materially and adversely affect the Company or otherwise interfere with or
adversely affect any pending or proposed offering of securities of the Company
or any other material transaction involving the Company, or the Company would be
required under the Securities Act to include audited financial statements for
any period in such registration statement or prospectus and such financial
statements are not yet available for inclusion in such registration statement or
prospectus. Subject to applicable law, the expenses associated with the
preparation and filing any registration statement or prospectus prepared and
filed under this Section 9, and any sale covered thereby ("Registration
Expenses"), will be paid by the Company except for underwriting discounts or
commissions, brokers' fees and the reasonable fees and disbursements of one law
firm acting as Cendant's counsel related thereto. In connection with any
registration statement or prospectus pursuant to this Section 9, Cendant shall
furnish, or cause any holder of the Option or Company Shares (a "Holder") to
furnish, the Company with such information concerning itself and the proposed
sale or distribution as shall reasonably be required in order to ensure
compliance with the requirements of the Securities Act and to provide
representations and warranties customary for selling stockholders who are
unaffiliated with the Company. In addition, Cendant shall, and Cendant shall
cause each Holder to contractually agree to, indemnify and hold the Company, its
underwriters and each of their respective affiliates harmless against any and
all losses, claims, damages, liabilities and expenses (including, without
limitation, investigation expenses and fees and disbursement of counsel and
accountants), joint or several, to which the Company, its underwriters and each
of their respective affiliates may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in written information
furnished by any Holder to the Company expressly for use in such registration
statement.
(b) Piggyback. If, during the time periods referred to in the first
sentence of subsection (a), the Company effects a registration under the
Securities Act of the Company Common Stock for its own account or for any other
stockholders of the Company pursuant to a firm commitment underwriting (other
than on Form S-4 or Form S-8, or any successor form), it will allow Cendant the
right to participate in such registration or qualification as long as Cendant
participates in such underwriting on terms reasonably satisfactory to the
managing underwriters of such offering, and such participation will not affect
the obligation of the Company to effect demand registration statements or
prospectuses for Cendant under this Section 9; provided, that, if the managing
underwriters of such offering advise the Company in writing that in their
opinion the number of shares of the Company Common Stock requested to be
included in such registration or qualification exceeds the number that it would
be in the best interests of the Company to sell in such offering, the Company
will, after fully including therein all shares of Company Common Stock to be
sold by the Company, include the shares of Company Common Stock requested to be
included therein by Cendant pro rata (based on the number
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of shares of Company Common Stock requested to be included therein) with the
shares of Company Common Stock requested to be included therein by persons other
than the Company and persons to whom the Company owes a contractual obligation
(other than any director, officer or employee of the Company to the extent any
such person is not currently owed such contractual obligation).
(c) In connection with any registration or qualification pursuant to this
Section 9, the Company and Cendant will provide each other and any underwriter
of the offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration or
qualification. The Company shall provide to any underwriters such documentation
(including certificates, opinions of counsel and "comfort" letters from
auditors) as are customary in connection with underwritten public offerings as
such underwriters may reasonably require.
(d) If the Company's securities of the same type as the Company Common Stock
beneficially owned by Cendant are then authorized for quotation or trading or
listing on The New York Stock Exchange (the "NYSE") or any other securities
exchange or automated quotations system, the Company, upon the request of
Cendant, shall promptly file an application, if required, to authorize for
quotation, trading or listing such shares of the Company Common Stock on such
exchange or system and will use its reasonable efforts to obtain approval, if
required, of such quotation, trading or listing as soon as practicable.
10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of any change in the Company Common Stock by reason of
stock dividends, split-ups, mergers, recapitalizations, combinations, exchange
of shares or the like, the type and number of shares or securities subject to
the Option, and the purchase price per share provided in Section 1 of this
Agreement, shall be adjusted appropriately, and proper provision shall be made
in the agreements governing such transaction so that Cendant shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Cendant would have received in respect of the Company Common Stock
if the Option had been exercised immediately prior to such event or the record
date therefor, as applicable. In the event that any additional shares of Company
Common Stock otherwise become outstanding after the date of this Agreement
(other than pursuant hereto), the number of shares of Company Common Stock
subject to the Option shall be increased to equal 19.9% of the number of shares
of Company Common Stock then issued and outstanding.
(b) In the event that the Company shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Cendant or another direct
or indirect wholly-owned subsidiary of Cendant, and shall not be the continuing
or surviving corporation of such consolidation or merger; (ii) to permit any
person, other than Cendant or another direct or indirect wholly-owned subsidiary
of Cendant, to merge into the Company and the Company shall be the continuing or
surviving corporation, but, in connection with such merger, the then-outstanding
shares of Company Common Stock shall be changed into or exchanged for stock or
other securities of the Company or any other person or cash or any other
property or the outstanding shares of Company Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company; or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Cendant or another direct or indirect wholly-owned subsidiary of Cendant,
then, and in each such case, the Company shall immediately so notify Cendant,
and the agreement governing such transaction shall make proper provisions so
that upon the consummation of any such transaction and upon the terms and
conditions set forth herein. Cendant shall, upon exercise of the Option, receive
for each Company Share with respect to which the Option has not been exercised
an amount of consideration in the form of and equal to the per share amount of
consideration that would be received by the holder of one share of Company
Common Stock less the Exercise Price (and, in the event of an election or
similar arrangement with respect to the type of consideration to be received by
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the holders of Company Common Stock, subject to the foregoing, proper provision
shall be made so that the holder of the Option would have the same election or
similar rights as would the holder of the number of shares of Company Common
Stock for which the Option is then exercisable).
11. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement, in no event shall
the Total Payment (as hereinafter defined) received by Cendant and its
affiliates exceed $32,000,000 and, if it otherwise would exceed such amount,
Cendant, at its sole election, shall either (i) reduce the number of shares of
Company Common Stock subject to the Option, (ii) deliver to the Company for
cancellation Company Shares previously purchased by Cendant (valued, for the
purposes of this Section 11(a) at the average closing sales price per share of
Company Common Stock (or if there is no sale on such date then the average
between the closing bid and ask prices on any such date) as reported by the NYSE
for the twenty consecutive trading days preceding the day on which the Total
Payment exceeds $32,000,000, (iii) pay cash to the Company, or (iv) any
combination thereof, so that the actually realized Total Payment shall not
exceed $32,000,000 after taking into account the foregoing actions.
(b) As used herein, the term "Total Payment" shall mean the sum (before
taxes) of the following: (i) any amount received by Cendant pursuant to
Section 7 hereof, (ii) (x) the net cash amounts received by Cendant pursuant to
the sale, within twelve months following exercise of the Option, of Company
Shares (or any other securities into which such Company Shares shall be
converted or exchanged) to any unaffiliated party, less (y) the aggregate
Exercise Price for such shares, (iii) any amounts received by Cendant upon
transfer of the Option (or any portion thereof) to any unaffiliated party, and
(iv) the amount actually received by Cendant pursuant to Section 5.8 of the
Merger Agreement.
(c) Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall affect the ability of Cendant to receive or relieve the
Company's obligation to pay a fee pursuant to Section 5.8 of the Merger
Agreement.
12. RESTRICTIVE LEGENDS. Each certificate representing shares of the
Company Common Stock issued to Cendant hereunder shall include a legend in
substantially the following form:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE
REGISTERED HOLDER HEREOF AND THE COMPANY AND TO RESALE
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR."
The Company shall, upon written request of the holder thereof, issue such holder
a new certificate evidencing such Company Shares without such legend in the
event (i) the sale of such Company Shares has been registered pursuant to the
Securities Act, or (ii) such holder shall have delivered to the Company an
opinion of counsel to the effect that subsequent transfers of such Company
Shares may be effected without registration under the Securities Act.
13. LISTING AND HSR FILING. The Company, upon request of Cendant, shall as
promptly as practicable file an application to list Company Shares to be
acquired upon exercise of the Option for listing or quotation on the NYSE and
shall use its reasonable efforts to obtain approval for such quotation as
promptly as practicable. Promptly after the date hereof, each of the parties
hereto shall promptly file all required pre-merger notification and report forms
and other documents and exhibits
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required to be filed under the HSR Act to permit the acquisition of the Cendant
Shares subject to the Option at the earliest practicable date.
14. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Except as expressly provided for in this Agreement and
except for any assignment by Cendant, in whole or in part, to a wholly-owned,
direct or indirect, subsidiary of Cendant (provided that any such subsidiary
agrees in writing to be bound by and liable for all of the terms, conditions and
provisions contained herein that would otherwise be applicable to Cendant and
provided further that Cendant shall remain liable for all of its duties and
obligations hereunder in the event such subsidiary shall fail to perform
hereunder), neither this Agreement nor the rights or the obligations of either
party hereto are assignable in whole or in part (whether by operation of law or
otherwise), without the written consent of the other party and any attempt to do
so in contravention of this Section 14 will be void. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective permitted assigns any rights or remedies
of any nature whatsoever by reason of this Agreement.
15. SPECIFIC PERFORMANCE. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction or injunctions restraining any
violation or threatened violation of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in the Courts of the State
of Delaware located in the County of New Castle (or, if such court lacks subject
matter jurisdiction, any appropriate federal court in the State of Delaware
(collectively, the "Courts") any of the appeals courts thereof. In the event
that any action should be brought in equity to enforce the provisions of this
Agreement, neither party will allege, and each party hereby waives the defense
that there is adequate remedy at law.
16. ENTIRE AGREEMENT. This Agreement and the Merger Agreement (including
the Exhibits and Schedules thereto) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all other prior
discussions, representations and warranties, agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof. No prior drafts of this Agreement and no words or phrases from
any such prior drafts shall be admissible into evidence in any action, suit or
other proceeding involving this Agreement.
17. FURTHER ASSURANCES. Subject to the terms and conditions hereof, if
Cendant exercises the Option, or any portion thereof, in accordance with the
terms of this Agreement, each party will execute and deliver all such further
documents and instruments and take all such further action including obtaining
necessary regulatory approvals and making necessary filings (including, without
limitation, filings under the HSR Act and filings with the NYSE) as may be
necessary in order to consummate the transactions contemplated hereby (including
the issuance, registration and listing of the Company Shares). To the extent
that the Option becomes exercisable, the Company will not take any actions which
would frustrate the exercise of the Option.
18. INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The words "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meaning contained herein
when used in any certificate or other document made or delivered pursuant
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hereto unless otherwise defined therein. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the gender and neuter genders of such
term. Any agreement or instrument defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented and
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns. The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute or law shall be deemed to also to refer
to any amendments thereto and all rules and regulations promulgated thereunder,
unless the context requires otherwise.
19. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, under any present or future law,
public policy or order, and if the rights or obligations of any party hereto
under this Agreement or the Merger Agreement, and the economic or legal
substance of the transactions contemplated hereby and thereby, will not be
materially and adversely affected thereby, (i) such provision will be fully
severable and (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Agreement in order to the
maximum extent possible to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
20. NOTICES. Any notice, request, claim, demand or communication required
or permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received (a) on the date of
delivery if delivered personally, including by courier, (b) upon receipt if
delivered by registered or certified mail, return receipt requested, postage
prepaid or (c) upon receipt if sent by facsimile transmission, provided that any
notice received by telecopy or otherwise at the addressee's location on any
business day after 5:00 p.m. (addressee's local time) shall be deemed to have
been received at 9:00 a.m. (addressee's local time) on the next business day.
Any party to this Agreement may notify any other party of any changes to the
address or any of the other details specified in this paragraph, provided that
such notification shall only be effective on the date specified in such notice
or five business days after the notice is given, whichever is later. Rejection
or other refusal to accept or the inability to deliver because of changed
address of which no notice was given shall be deemed to be receipt of the notice
as of the date of such rejection, refusal or inability to deliver. All notices
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hereunder shall be delivered to the parties to the addresses or facsimile
numbers set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
If to the Company to:
Fairfield Communities, Inc.
8669 Commodity Circle
#200
Orlando, Florida 32819
Facsimile No.: (407) 370-5222
Attention: General Counsel
with a copy to (which shall not constitute notice):
Jones, Day, Reavis & Pogue
2727 North Harwood Street
Dallas, Texas 75201
Facsimile No.: (214) 969-5100
Attention: Mark V. Minton
If to Cendant:
Cendant Corporation
Six Sylvan Way
Parsippany, NJ 07054
Facsimile No.: (973) 496-5335
Attention: General Counsel
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Facsimile No.: (212) 735-2000
Attention: David Fox
21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed and to be performed fully within such State, without giving effect to
the principles of conflicts or choice of law thereof or any other jurisdiction.
22. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
23. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. A facsimile copy of a signature
page shall be deemed to be an original signature page.
24. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred by a party in connection with
the transactions contemplated by this Agreement, including fees and expenses of
its own financial consultants, investment bankers, accountants and counsel,
shall be paid by the party incurring such expenses.
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25. AMENDMENTS; WAIVER. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument in writing signed on behalf of the party waiving
compliance.
26. CONSENT TO JURISDICTION. Each of the parties hereto irrevocably agrees
that any action, suit, claim or other legal proceeding with respect to this
Agreement or in respect of the transactions contemplated hereby brought by any
other party hereto or its successors or assigns shall be brought and determined
in any state or federal court located in the State of Delaware or any appeals
courts thereof (the "Delaware Courts"), and each of the parties hereto
irrevocably submits with regard to any such proceeding for itself and in respect
to its property, generally and unconditionally, to the exclusive jurisdiction of
the Delaware Courts. Each of the parties hereto irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Agreement, (a) any claim that it is
not personally subject to the jurisdiction of the Delaware Courts for any
reason, (b) that it or its property is exempt or immune from jurisdiction of any
Delaware Court or from any legal process commenced in any Delaware Court
(whether through service of notice, attachment before judgment, attachment in
aid of execution of judgment, execution of judgment or otherwise) and (c) to the
fullest extent permitted by applicable law, that (i) the proceeding in any
Delaware Court is brought in an inconvenient forum, (ii) the venue of such
proceeding is improper or (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by a Delaware Court. Notwithstanding the foregoing,
each of the parties hereto agrees that the other party shall have the right to
bring any action or proceeding for enforcement of a judgment entered by the
Delaware Courts in any other court or jurisdiction.
27. REMEDIES CUMULATIVE. Except as otherwise herein provided, the rights
and remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by applicable law.
28. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and except as otherwise expressly provided for
herein, it is not the intention of the parties to confer third-party beneficiary
rights upon any other person.
29. LIMITATIONS ON WARRANTIES.
(a) Except for the representations and warranties contained in this
Agreement and the Merger Agreement, the Company makes no other express or
implied representation or warranty to Cendant. Cendant acknowledges that, in
entering into this Agreement, it has not relied on any representations or
warranties of the Company or any other person other than the representations and
warranties of the Company set forth in this Agreement or the Merger Agreement.
(b) Except for the representations and warranties contained in this
Agreement and the Merger Agreement, Cendant makes no other express or implied
representation or warranty to the Company. The Company acknowledges that, in
entering into this Agreement, it has not relied on any representations or
warranties of Cendant or any other person other than the representations and
warranties of Cendant set forth in this Agreement and the Merger Agreement.
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30. DATE FOR ANY ACTION. In the event that any date on which any action is
required to be taken hereunder by any of the parties hereto is not a business
day, such action shall be required to be taken on the next succeeding day which
is a business day.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
<TABLE>
<S> <C> <C>
CENDANT CORPORATION
By: /s/ JAMES E. BUCKMAN
----------------------------------------
Name: James E. Buckman
Title: Vice Chairman, General Counsel
and Assistant Secretary
FAIRFIELD COMMUNITIES, INC.
By: /s/ JAMES G. BERK
----------------------------------------
Name: James G. Berk
Title: President and CEO
</TABLE>
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ANNEX C
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") dated as of November 1, 2000, by
and among CENDANT CORPORATION, a Delaware corporation ("Cendant"), and the
individuals and other parties listed on Schedule A attached hereto (each, a
"Stockholder" and, collectively the "Stockholders").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, Cendant, Grand
Slam Acquisition Corp., a Delaware corporation and a subsidiary of Cendant
("Merger Sub"), and Fairfield Communities, Inc., a Delaware corporation (the
"Company"), have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Merger Sub with and into the Company upon the terms and subject to the
conditions set forth therein;
WHEREAS, Each Stockholder is the record and/or beneficial owner of, and has
the sole right to vote and dispose of that number of shares of the Company's
common stock, par value $.01 per share ("Company Common Stock"), listed opposite
such Stockholder's name on Schedule A hereto; and
WHEREAS, as an inducement and a condition to its entering into and
delivering the Merger Agreement and incurring the obligations set forth therein,
including the Merger, Cendant has required that Stockholders enter into this
Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, respective covenants and agreements of the parties
contained herein and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto), the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. CAPITALIZED TERMS. Capitalized terms used in this Agreement
and not defined herein shall have the respective meanings ascribed to such terms
in the Merger Agreement.
Section 1.2. OTHER DEFINITIONS. For the purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, any Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. For
purposes of this Agreement, with respect to Stockholders, "Affiliate" shall
not include the Company and the Persons that directly, or indirectly through
one or more intermediaries, are controlled by the Company.
"Beneficial Owner" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all Affiliates of such Person and all other Person
with whom such Person would constitute a "group" within the meaning of
Section 13(d) of the Exchange Act and the rules promulgated thereunder.
"Company Common Stock" shall include all shares or other voting
securities into which shares of Company Common Stock may be reclassified,
sub-divided, consolidated or converted and any
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rights and benefits arising therefrom including any extraordinary
distributions of securities which may be declared in respect of the shares
of Company Common Stock and entitled to vote in respect of the matters
contemplated by Article II of this Agreement.
"Owned Shares" means the shares of Company Common Stock owned by a
Stockholder on the date hereof as shown on Schedule A hereto, together with
any other shares of Company Common Stock or any other securities of the
Company hereafter acquired by such stockholder entitled to vote for or
against the Merger.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, association, trust, estate, unincorporated organization or
other entity, including any governmental entity.
"Representative" means, with respect to any particular Person, any
officer, director, employee, agent, consultant, advisor or other
representative of such Person (including legal counsel, accountants, and
financial advisors).
"Transfer" means, with respect to a security, the sale, transfer,
pledge, hypothecation, encumbrance, assignment or disposition of such
security or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing.
ARTICLE II
VOTING
Section 2.1 AGREEMENT TO VOTE. Subject to the terms and conditions hereof,
each Stockholder irrevocably and unconditionally agrees that until this
Agreement is terminated pursuant to Section 5.1, at any meeting (whether annual
or special, and whether or not an adjourned or postponed meeting) of the
Company's stockholders, however called, or in connection with any written
consent of the Company's stockholders, Stockholders shall vote, or cause to be
voted (including by written consent, if applicable) all of its Owned Shares
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement, the approval and adoption of the Merger and the terms thereof,
the approval of each of the other actions contemplated by the Merger Agreement
and this Agreement and any other actions that could be required in furtherance
thereof and hereof, and (ii) against any proposals presented for a vote to
prevent or thwart the Merger or any of the transactions contemplated by the
Merger Agreement or this Agreement, unless such meetings or consents do not
involve any such matter. Each Stockholder agrees not to enter into any agreement
or understanding with any Person the effect of which would be inconsistent or
violative of the provisions and agreements contained in this Section 2.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each
Stockholder, severally and not jointly, represents and warrants to Cendant that
the following statements are as of the date of this Agreement, and will be, as
of the date of the Company Stockholders Meeting, true and correct:
(a) Such Stockholder has all necessary power and authority to enter
into, execute and deliver this Agreement and to perform all of his
obligations hereunder.
(b) This Agreement has been duly and validly executed and delivered by
such Stockholder and constitutes a legal, valid and binding agreement of
such Stockholder enforceable by Cendant against such Stockholder in
accordance with its terms, except as enforceability may be limited by
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bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(c) As of the date of this Agreement, such Stockholder is the record
and/or beneficial owner of the Owned Shares which, as of the date hereof,
are set forth on the signature page hereto, and except as provided in this
Agreement or by applicable law, has full and unrestricted power to dispose
of and vote all the Owned Shares. Such Stockholder has good and marketable
title thereto. The Owned Shares constitute all of the capital stock of the
Company that is owned of record or Beneficially Owned by the Stockholder and
which the Stockholder is permitted to subject to this Agreement as of this
date.
(d) None of the execution and delivery of this Agreement by such
Stockholders, the consummation by such Stockholder of the transactions
contemplated hereby or compliance by such Stockholder with any of the
provisions hereof shall (A) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Stockholder is a party or
by which such Stockholder or any of such Stockholder's properties or assets
(including the Owned Shares) may be bound, or (B) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation existing as of the
date of this Agreement applicable to such Stockholder or any of its
respective properties or assets.
(e) No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial adviser's or other similar fee
or commission solely as a result of entering into this Agreement based upon
arrangements made by or on behalf of any Stockholder.
(f) Such Stockholder understands and acknowledges that Cendant is
entering into the Merger Agreement and is incurring the obligations set
forth therein, in reliance upon Stockholders' execution and delivery of this
Agreement.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF CENDANT. Cendant represents
and warrants to Stockholders that the following statements are as of the date of
this Agreement, and will be, as of the date of the Company Stockholders Meeting
true and correct:
(a) Cendant is a corporation duly incorporated and validly existing
under the laws of its jurisdiction of incorporation.
(b) Cendant has all necessary corporate power and authority to enter
into this Agreement and to perform all of its obligations hereunder. The
execution, delivery and performance of this Agreement and the Merger
Agreement by Cendant and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the board of
directors of Cendant and no other corporate proceedings on the part of
Cendant or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement or the Merger Agreement or the
consummation of the transactions contemplated hereby or thereby.
(c) This Agreement has been duly and validly executed and delivered by
Cendant and constitutes a legal, valid and binding agreement of Cendant
enforceable against Cendant in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
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(d) None of the execution and delivery of this Agreement by Cendant, the
consummation by Cendant of the transactions contemplated hereby or
compliance by Cendant with any of the provisions hereof shall (A) result in
a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Cendant is a party or by which Cendant or any of its properties or
assets may be bound, or (B) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Cendant or any of its
properties or assets.
ARTICLE IV
COVENANTS OF STOCKHOLDERS
Section 4.1 GENERAL. Each Stockholder, severally and not jointly,
covenants and agrees with Cendant that, during the period commencing the date
hereof and ending on the date this Agreement is terminated under Article V
hereof, such Stockholder will comply with the provisions of Section 4.3 of the
Merger Agreement to the extent applicable to such Stockholder in his capacity as
a stockholder of the Company.
(a) Except as provided in this Agreement or the Merger Agreement such
Stockholder shall not, directly or indirectly: (i) Transfer to any Person
any or all Owned Shares except in open market transactions conducted through
an exchange; or (ii) other than to cause a nominee to vote the shares in
accordance with Section 2.1, grant any proxies or powers of attorney, rights
or privileges (whether by law, preemptive or contractual), with respect to
Owned Shares, deposit any Owned Shares into a voting trust or enter into a
voting agreement, understanding or arrangement with respect to Owned Shares.
Notwithstanding anything to the contrary provided in this Agreement, each
Stockholder shall have the right to Transfer Owned Shares to (i) any Family
Member (as defined below), (ii) the trustee or trustees of a trust solely
(except for remote contingent interests) for the benefit of Stockholder
and/or one or more Family Members, (iii) a foundation created or established
by Stockholder, (iv) a charitable remainder trust for the benefit of
Stockholder and/or one or more Family Members and/or designated charities,
(v) a partnership of which Stockholder or a Family Member owns all of the
partnership interests, (vi) the executor, administrator personal
representative of the estate of Stockholder, or (vii) any guardian, trustee
or conservator appointed with respect to the assets of Stockholder;
PROVIDED, that in the case of any Transfer described in this sentence, the
transferee shall execute an agreement to be bound by the terms of this
Agreement. "Family Member" shall mean (i) a Stockholder's spouse, (ii) any
other natural person who is a lineal descendant of a Stockholder or a
Stockholder's spouse or is related to a Stockholder or a Stockholder's
spouse within the second degree and (iii) any other natural person who
resides with a Stockholder.
(b) Such Stockholder will promptly notify Cendant in writing upon any
representation or warranty of such Stockholder contained in this Agreement
becoming untrue or incorrect in any respect during the term of this
Agreement and for the purposes of this provision, each representation and
warranty shall be deemed to be given at and as of all times during such term
(irrespective of any language which suggests that it is only being given as
at a particular date).
Section 4.2 AMENDMENT TO THIS AGREEMENT. In the event that the Company and
Cendant enter into an amendment to the Merger Agreement that does not alter or
modify the economic terms or form of consideration, Stockholders covenant and
agree with Cendant to enter into an amendment to this Agreement in accordance
with Section 6.8 that shall reflect, to the extent appropriate, the terms of
such amended Merger Agreement.
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ARTICLE V
TERMINATION
Section 5.1 TERMINATION. This Agreement shall be terminated upon the
earlier of (i) the Effective Time; (ii) the termination of the Merger Agreement
pursuant to Section 7.1 thereof (other than a termination in connection with
which Cendant is or may be entitled to the payment specified in Section 5.8
thereof) and (iii) the Average Trading Price being less than $6.00 per share.
Section 5.2 EFFECT OF TERMINATION. Upon termination of this Agreement, the
covenants, representations, warranties, agreements and obligations of all the
parties shall terminate and become void without further action by any party
except for the provisions of this Section 5.2 and Article VI, which shall
survive such termination.
ARTICLE VI
GENERAL
Section 6.1 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) on the date of delivery if delivered personally, (b) on the first
business day following the date of dispatch if delivered by a nationally
recognized next-day courier service, (c) on the fifth business day following the
date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid or (d) if sent by facsimile transmission, with a copy
mailed on the same day in the manner provided in (a) or (b) above, when
transmitted and receipt is confirmed by telephone; PROVIDED, that any notice
received by telecopy or otherwise at the addressee's location on any business
day after 5:00 p.m. (addressee's local time) shall be deemed to have been
received at 9:00 a.m. (addressee's local time) on the next business day. Any
party to this Agreement may notify any other party of any changes to the address
or any of the other details specified in this paragraph, provided that such
notification shall only be effective on the date specified in such notice or
five (5) business days after the notice is given, whichever is later. Rejection
or other refusal to accept or the inability to deliver because of changed
address of which no notice was given shall be deemed to be receipt of the notice
as of the date of such rejection, refusal or inability to deliver. All notices
hereunder shall be delivered to the parties as set forth below, or pursuant to
such other instructions as may be designated in writing by the party to receive
such notice:
if to Stockholders:
at the address set forth on Schedule A for such Stockholder;
with a copy to (which shall not constitute notice):
Jones, Day, Reavis & Pogue
2727 North Harwood
Dallas, Texas 75201
Attention: Mark V. Minton
Facsimile No. (214) 969-5100;
if to Cendant:
Cendant Corporation
Six Sylvan Way
Parsippany, NJ 07054
Attention: General Counsel
Facsimile No.: (973) 496-5335
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with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom, LLP
Four Times Square
New York, New York 10036-6522
Attention: David Fox
Facsimile No.: (212) 735-2000
Section 6.2 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended
to confer third-party beneficiary rights upon any Person.
Section 6.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts executed and to be performed fully within such State, without giving
effect to the principles of conflicts or choice of law thereof or any other
jurisdiction.
Section 6.4 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held to be invalid, illegal or unenforceable in any respect for any reason under
any present or future law, public policy or order, (i) such provision will be
fully severable and (ii) this Agreement will be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith with a view to the substitution therefor of a suitable and equitable
solution in order to carry out to the maximum extent possible, so far as may be
valid and enforceable, the intent and purpose of such invalid provision,
PROVIDED, HOWEVER that the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended that all of
the rights and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
Section 6.5 ASSIGNMENT. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned by any party hereto, in whole or in part
(whether by operation of law or otherwise), without the prior written consent of
the other party hereto and any attempt to do so will be void.
Section 6.6 SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors, permitted
assigns, heirs, administrators, executors and legal or personal representatives.
Section 6.7 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The words "hereof," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Except for the Merger Agreement, any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as from
time to time amended, modified or supplemented and attachments thereto and
instruments incorporated therein. References to a Person are also to its
successors and permitted assigns. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed to also to refer to
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<PAGE>
any amendments thereto and all rules and regulations promulgated thereunder,
unless the context requires otherwise.
Section 6.8 AMENDMENTS. This Agreement may not be amended except by
written agreement signed by all of the parties to this Agreement.
Section 6.9 FEES AND EXPENSES. Except as expressly provided in this
Agreement, each of the parties shall be responsible for his or its own fees and
expenses (including, without limitation, the fees and expenses of financial
consultants, investment bankers, accountants and counsel) in connection with the
entry into of this Agreement and the consummation of the transactions
contemplated hereby.
Section 6.10 SCHEDULES. Schedule A and Schedule B hereto shall for all
purposes form an integral part of this Agreement.
Section 6.11 ENTIRE AGREEMENT. This Agreement, including the Schedule
hereto, constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations, representations and warranties, and discussions, whether oral or
written, among the parties hereto, with respect to the subject matter hereof.
There are no conditions, covenants, agreements, representations, warranties or
other provisions, express or implied, collateral, statutory or otherwise,
relating to the subject matter of this Agreement. No prior drafts of this
Agreement and no words or phrases from any such prior drafts shall be admissible
into evidence in any action, suit or other proceeding involving this Agreement.
Section 6.12 TIME OF ESSENCE. Time shall be of the essence in this
Agreement.
Section 6.13 REMEDIES CUMULATIVE. Except as otherwise herein provided, the
rights and remedies provided herein shall be cumulative and not exclusive of any
rights or remedies provided by applicable law.
Section 6.14 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
Section 6.15 EXECUTION. This Agreement may be executed by facsimile
signatures by any party and such signature shall be deemed binding for all
purposes hereof, without delivery of an original signature being thereafter
required.
Section 6.16 JURISDICTION. Each of the parties hereto irrevocably agrees
that any action, suit, claim or other legal proceeding with respect to this
Agreement or in respect of the transactions contemplated hereby brought by any
other party hereto or its successors or assigns shall be brought and determined
in any state or federal court located in the State of Delaware or any appeals
courts thereof (the "Delaware Courts"), and each of the parties hereto
irrevocably submits with regard to any such proceeding for itself and in respect
to its property, generally and unconditionally, to the exclusive jurisdiction of
the Delaware Courts. Each of the parties hereto irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Agreement, (a) any claim that it is
not personally subject to the jurisdiction of the Delaware Courts for any
reason, (b) that it or its property is exempt or immune from jurisdiction of any
Delaware Court or from any legal process commenced in any Delaware Court
(whether through service of notice, attachment before judgment, attachment in
aid of execution of judgment, execution of judgment or otherwise) and (c) to the
fullest extent permitted by applicable law, that (i) the proceeding in any
Delaware Court is brought in an inconvenient forum, (ii) the venue of such
proceeding is improper or (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by a Delaware Court. Notwithstanding the foregoing,
each of the parties hereto agrees that the other party
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<PAGE>
shall have the right to bring any action or proceeding for enforcement of a
judgment entered by the Delaware Courts in any other court or jurisdiction.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be signed
as of the date first above written.
CENDANT CORPORATION
By: /s/ James E. Buckman
----------------------------------------------------------------------
/s/ Ralph P. Muller
----------------------------------------------------------------------
RALPH P. MULLER
R&A PARTNERSHIP LTD.
BY: RPM INVESTMENTS, INC.,
ITS GENERAL PARTNER
By: /s/ Ralph P. Muller
----------------------------------------------------------------------
GM JOHNSTON FAMILY LIMITED
PARTNERSHIP
By: /s/ Gerald M. Johnston
----------------------------------------------------------------------
/s/ Gerald M. Johnston
----------------------------------------------------------------------
GERALD M. JOHNSTON
/s/ James G. Berk
----------------------------------------------------------------------
JAMES G. BERK
/s/ Marcel J. Dumeny
----------------------------------------------------------------------
MARCEL J. DUMENY
STEPHENS GROUP, INC.
By: /s/ Curt Bradbury
----------------------------------------------------------------------
STEPHENS INC.
By: /s/ Curt Bradbury
----------------------------------------------------------------------
VARIOUS STEPHENS FAMILY TRUSTS
By: /s/ Curt Bradbury
----------------------------------------------------------------------
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<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
SHARES OF
COMPANY COMPANY STOCK
STOCKHOLDER ADDRESS COMMON STOCK OPTIONS
-------------------------------- -------------------------------- ---------------- ----------------
<S> <C> <C> <C>
STEPHENS GROUP, INC............. [Intentionally Omitted] 300,000 --
STEPHENS INC.................... 1,466,264 --
VARIOUS STEPHENS
FAMILY TRUSTS
J.T. STEPHENS TRUST ONE......... 65,000 --
JACKSON T. STEPHENS............. 540,000 --
WARREN A. STEPHENS IRA.......... 35,000 --
WARREN A. STEPHENS 325,000 --
TRUST.........................
HARRIET CALHOUN 55,000 --
STEPHENS TRUST................
RALPH P. MULLER................. 1,219,950 --
R&A PARTNERSHIP LTD............. 1,465,174 --
GM JOHNSTON FAMILY LIMITED 1,516,000 --
PARTNERSHIP...................
GERALD M. JOHNSTON.............. 41,391 --
JAMES G. BERK................... 78,565 900,000
MARCEL J. DUMENY................ 79,300 475,420
</TABLE>
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<PAGE>
[LOGO]
November 1, 2000
The Board of Directors
Fairfield Communities, Inc.
8669 Commodity Circle, Suite 200
Orlando, FL 32819
Gentlemen:
We understand that Fairfield Communities, Inc. ("Fairfield") and Cendant
Corporation ("Cendant") have entered into an Agreement and Plan of Merger (the
"Agreement") dated November 1, 2000, pursuant to which a wholly-owned subsidiary
of Cendant will be merged with and into Fairfield (the "Transaction"). In
connection with the Transaction, and as more fully described in the Agreement,
each issued and outstanding share of Fairfield common stock with respect to
which an election to receive common stock of Cendant has been made (the "Stock
Election") shall have the right to receive 1.2500 shares of Cendant common
stock, subject to adjustment pursuant to Section 2.1(c)(i) and Section 2.3 of
the Agreement (the "Stock Election Consideration"). Each issued and outstanding
share of Fairfield common stock with respect to which an election to receive
cash has been made (the "Cash Election") shall have the right to receive $15.00
in cash (the "Cash Election Consideration") plus, in the event that the Average
Trading Price (as defined in the Agreement) is greater than $12.00, a fraction
of a share of Cendant common stock as determined pursuant to
Section 2.1(c)(ii) of the Agreement (the "Additional Stock Consideration");
provided, that the value of the Additional Stock Consideration shall not exceed
$1.00. The Stock Election Consideration, the Cash Election Consideration and the
Additional Stock Consideration is referred to hereinafter as the
"Consideration." You have provided us with a copy of the Agreement. We
understand that immediately prior to consummation of the Transaction, Cendant
may elect to have Fairfield transfer certain assets and liabilities related to
the real estate and vacation ownership interest inventory business currently
operated by Fairfield to a newly formed corporation ("DevCo") and distribute
shares of DevCo common stock to the shareholders of Fairfield. We further
understand that such election will not affect the Consideration to be received
in the Transaction.
You have asked us to render our opinion as to whether the Consideration to
be received in the Transaction is fair, from a financial point of view, to the
shareholders of Fairfield other than Stephens Group, Inc., Stephens, Inc.
(Stephens Group, Inc. and Stephens, Inc. are collectively referred to herein as
"Stephens"), Ralph P. Muller, R&A Limited Partnership, and Gerald M. Johnston.
In the course of performing our review and analyses for rendering this
opinion, we have:
- reviewed the Agreement;
- reviewed each of Fairfield's and Cendant's Annual Reports on Form 10-K for
the years ended December 31, 1998 through 1999, their respective Quarterly
Reports on Form 10-Q for the periods ended March 31, 2000 and June 30,
2000 and their respective Reports on Form 8-K for the three years ended
September 30, 2000;
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<PAGE>
- reviewed certain operating and financial information of Fairfield,
including projections for the five years ended December 31, 2004, provided
to us by management relating to Fairfield's business and prospects;
- met with certain members of Fairfield's senior management to discuss
Fairfield's business, operations, historical and projected financial
results and future prospects;
- met with certain members of Cendant's senior management to discuss
Cendant's business, historical financial statements, expected financial
results for 2000 and 2001 and future prospects;
- reviewed the historical prices, trading multiples and trading volumes of
the common shares of Fairfield and Cendant;
- reviewed publicly available financial data, stock market performance data
and trading multiples of companies which we deemed generally comparable to
Fairfield;
- reviewed the terms of recent merger and acquisition transactions of
companies which we deemed generally comparable to Fairfield;
- performed discounted cash flow analyses based on the projections for
Fairfield furnished to us by the management of Fairfield; and
- conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information, including
without limitation the projections, provided to us by Fairfield. With respect to
projected financial results of Fairfield, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the senior management of Fairfield as to the expected future
performance of Fairfield. We have been informed by Cendant that no projections
exist for Cendant and, with your consent, our analysis of Cendant's future
prospects has been limited to publicly available information, Wall Street
research reports and discussions with senior management of Cendant. We have not
assumed any responsibility for the independent verification of any such
information or of the projections provided to us, and we have further relied
upon the assurances of the senior management of Fairfield and Cendant that they
are unaware of any facts that would make the information (or projections in the
case of Fairfield) provided to us incomplete or misleading.
In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities (contingent or otherwise) of
Fairfield and Cendant, nor have we been furnished with any such appraisals. In
connection with our engagement, we were not requested to, and we did not,
solicit third party indications of interest in the acquisition of all or part of
Fairfield. We have assumed that the Transaction will be consummated in
accordance with the terms of the Agreement without any regulatory limitations,
restrictions, conditions, amendments or modifications that collectively would
have a material effect on Fairfield or Cendant.
We do not express any opinion as to the price or range of prices at which
the shares of common stock of Fairfield and Cendant may trade subsequent to the
announcement of the Transaction or as to the price or range of prices at which
the shares of common stock of Cendant may trade subsequent to the consummation
of the Transaction.
It should be noted that our opinion does not address the business decision
to effect the distribution of shares of common stock of DevCo to the
shareholders of Fairfield or the financial aspects of such distribution.
Further, we have not reviewed any financial information related to DevCo and
therefore our opinion does not address the distribution or receipt of shares of
DevCo by the shareholders of Fairfield or any potential consequences of such
receipt. In addition, we do not express
D-2
<PAGE>
any opinion as to the price or range of prices at which the shares of common
stock of DevCo may trade subsequent to their distribution.
We have acted as a financial advisor to Fairfield in connection with the
Transaction and will receive a customary fee for such services, a substantial
portion of which is contingent on successful consummation of the Transaction. In
the ordinary course of business, Bear Stearns may actively trade the equity and
debt securities of Fairfield and/or Cendant for our own account and for the
account of our customers and, accordingly, may at any time hold a long or short
position in such securities.
It is understood that this letter is intended for the use of the Board of
Directors of Fairfield in connection with their consideration of the
Transaction, and does not constitute a recommendation to the Board of Directors
of Fairfield or any holders of Fairfield common stock as to how to vote in
connection with the Transaction. This opinion does not address Fairfield's
underlying business decision to pursue the Transaction, the relative merits of
the Transaction as compared to any alternative business strategies that might
exist for Fairfield or the effects of any other transaction in which Fairfield
might engage. This letter is not to be used for any other purpose, or be
reproduced, disseminated, quoted from or referred to at any time, in whole or in
part, without our prior written consent; provided, however, that this letter may
be included in its entirety in any proxy statement/prospectus to be distributed
to the holders of Fairfield common stock in connection with the Transaction. Our
opinion is subject to the assumptions and conditions contained herein and is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof. We assume no responsibility for
updating or revising our opinion based on circumstances or events occurring
after the date hereof.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received in the Transaction is fair, from a
financial point of view, to the shareholders of Fairfield other than Stephens,
Ralph P. Muller, R&A Limited Partnership and Gerald M. Johnston.
Very truly yours,
BEAR, STEARNS & CO. INC.
<TABLE>
<S> <C> <C>
By: /s/ CHARLES EDELMAN
------------------------------------------
Senior Managing Director
</TABLE>
D-3
<PAGE>
ANNEX E
[LOGO]
November 1, 2000
Board of Directors
Fairfield Communities, Inc.
8669 Commodity Circle, #200
Orlando, FL 32819
Gentlemen:
We have acted as your financial advisor in connection with the proposed
merger (the "Transaction") by and among Cendant Corporation, ("Cendant"),
Fairfield Communities, Inc. (the "Company"), and Fairfield Acquisition
Corporation, a subsidiary of Cendant Corporation, pursuant to the terms and
conditions set forth in the Agreement and Plan of Merger.
You have requested our opinion as to the fairness to the disinterested
shareholders of the Company from a financial point of view of the consideration
to be received by such shareholders in the Transaction. For purposes of this
opinion, the term "disinterested shareholders" means holders of the Company's
one class of publicly traded common stock (the "Common Stock") other than
(1) directors, officers and employees of the Company, and (2) any holder of
5 percent or more of the outstanding shares of Common Stock, including Ralph
Muller and Stephens Group, Inc., and affiliates.
In connection with rendering our opinion we have:
(i) analyzed certain publicly available financial statements and reports
regarding the Company;
(ii) analyzed certain internal financial statements and other financial and
operating data (including financial projections) concerning the Company
prepared by management of the Company;
(iii) reviewed the reported prices and trading activity for the Common stock;
(iv) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(v) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(vi) reviewed the Agreement and Plan of Merger and related documents;
(vii) discussed with management of the Company the operations of and future
business prospects for the Company;
(viii) assisted in your deliberations regarding the material terms of the
Transaction;
(ix) performed such other analyses and provided such other services as we
have deemed appropriate.
We have relied on the accuracy and completeness of the information and
financial data provided to us by the Company, and our opinion is based upon such
information. We have inquired into the reliability of such information and
financial data only to the limited extent necessary to provide a
Investment Bankers
111 Center Street Post Office Box 3507 Little Rock, Arkansas
72203-3507 501-374-4361 Fax 501-377-2674
E-1
<PAGE>
reasonable basis for our opinion, recognizing that we are rendering only an
informed opinion and not an appraisal or certification of value. With respect to
the financial projections prepared by management of the Company, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. With your permission, we have excluded from any analysis the effects of
a potential spin-off of the Company's real estate development business and are
not opining on the value or the fairness to shareholders of any such spin-off
transaction.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. We are familiar with the Company and regularly
provide investment banking services to it and issue periodic research reports
regarding its business activities and prospects. In the ordinary course of
business, Stephens Inc. and its affiliates at any time may hold long or short
positions, and may trade or otherwise effect transactions as principal or for
the accounts of customers, in debt or equity securities or options on securities
of the Company. Stephens Inc. and certain of its affiliates currently hold a
long position in the common stock of the Company and have entered into a Voting
Agreement with Cendant Corporation to vote their shares in favor of the
Transaction in accordance with the terms of such Voting Agreement.
Stephens Inc. is receiving a fee, and reimbursement of its expenses, in
connection with the issuance of this fairness opinion. In addition,
Stephens Inc. is receiving an advisory fee upon the consummation of the
Transaction.
Based on the foregoing and our general experience as investment bankers, and
subject to the qualifications stated herein, we are of the opinion on the date
hereof that the consideration to be received by the disinterested shareholders
of the Company in the Transaction is fair to them from a financial point of
view.
Neither this opinion nor its substance may be disclosed by you to anyone
other than your advisors without our written permission.
This opinion and a summary discussion of our underlying analyses and role as
your financial advisor may be included in communications to the Company's
shareholders provided that we approve of the content of such disclosures prior
to publication.
Very truly yours,
/s/ Stephens Inc.
STEPHENS INC.
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ANNEX F
DELAWARE GENERAL CORPORATION LAW
SECTION 262
Section262 APPRAISAL RIGHTS.- (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean: and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251 (g) of this title), Section252, Section254, Section257,
Section258, Section263 or Section264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
Section251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
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d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger
or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section228 or
Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after
the date of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the
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effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent
more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled to receive
either notice; each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective
date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior
to the effective date, the record date shall be the close of business on
the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after his written request for such
a statement is received by the surviving or resulting corporation or within
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall
be accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also by given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by
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certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings,
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate
fully in all proceedings until it is finally determined that he is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation
of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this
section or thereafter with the written approval of the corporation, then the
right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be
dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 120,
L. "97, eff. 7-1-97.)
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware, or DGCL, empowers a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interest of the corporation, and with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
Subsection (d) of Section 145 of the DGCL provides that any indemnification
under subsections (a) and (b) of Section 145 (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of
Section 145. Such determination shall be made, with respect to a person who is a
director or officer at the time of such determination, (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated by
the majority vote of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
Section 145 of the DGCL further provides that to the extent a present or
former director or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith and that such expenses may be
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paid by the corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized in
Section 145 of the DGCL; that any indemnification and advancement of expenses
provided by, or granted pursuant to, Section 145 shall not be deemed exclusive
of any other rights to which the indemnified party may be entitled; that
indemnification provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized and ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liabilities under Section 145.
Cendant also provides liability insurance for its directors and officers
which provides for coverage against loss from claims made against directors and
officers in their capacity as such, including, subject to certain exceptions,
liabilities under the federal securities laws.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (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 DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article 11 of Cendant's amended and restated certificate of incorporation
contains similar provisions.
The directors and officers of Cendant are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in such
capacities and against which they cannot be indemnified by Cendant. Any agents,
dealers or underwriters who execute any underwriting or distribution agreement
relating to securities offered pursuant to this Registration Statement will
agree to indemnify Cendant's directors and their officers who signed the
Registration Statement against certain liabilities that may arise under the
Securities Act of 1933 with respect to information furnished to Cendant by or on
behalf of such indemnifying party.
For the undertaking with respect to indemnification, see Item 22 herein.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not Applicable.
(c) Opinions of Bear, Stearns & Co. Inc. and Stephens Inc. (attached as
Annexes D and E, respectively, to this proxy statement-prospectus which is a
part of this registration statement).
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ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to the information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time will be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference into the
registration statement will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415,
will be filed as part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment will be deemed to
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be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time will be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes to deliver or cause to be
delivered the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference into the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference into
the prospectus to provide such interim financial information.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Cendant Inc. has
duly caused this registration statement or amendment thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on December 12, 2000.
<TABLE>
<S> <C> <C>
CENDANT CORPORATION
By: /s/ JAMES E. BUCKMAN
------------------------------------------------
Name: James E. Buckman
Title: Vice Chairman, General Counsel
and Director
</TABLE>
Each person whose signature appears below hereby constitutes and appoints
James E. Buckman and Eric J. Bock, and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without limitation,
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agents, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed as of December 12, 2000 by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ HENRY R. SILVERMAN Chairman of the Board, President, Chief
-------------------------------------------- Executive Officer and Director
Henry R. Silverman
/s/ JAMES E. BUCKMAN Vice Chairman, General Counsel and Director
--------------------------------------------
James E. Buckman
/s/ STEPHEN P. HOLMES Vice Chairman and Director
--------------------------------------------
Stephen P. Holmes
/s/ DAVID M. JOHNSON Senior Executive Vice President and Chief
-------------------------------------------- Financial Officer (Principal Financial
David M. Johnson Officer)
/s/ JOHN MCCLAIN Senior Vice President and Controller
-------------------------------------------- (Principal Accounting Officer)
John McClain
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ MYRA J. BIBLOWIT Director
-------------------------------------------
Myra J. Biblowit
/s/ DR. JOHN C. MALONE Director
-------------------------------------------
Dr. John C. Malone
/s/ CHERYL D. MILLS Director
-------------------------------------------
Cheryl D. Mills
/s/ LEONARD S. COLEMAN Director
-------------------------------------------
Leonard S. Coleman
/s/ MARTIN L. EDELMAN Director
-------------------------------------------
Martin L. Edelman
/s/ SHELI Z. ROSENBERG Director
-------------------------------------------
Sheli Z. Rosenberg
/s/ BRIAN MULRONY Director
-------------------------------------------
The Rt. Hon. Brian Mulrony P.C., LL.D.
/s/ ROBERT W. PITTMAN Director
-------------------------------------------
Robert W. Pittman
/s/ ROBERT F. SMITH Director
-------------------------------------------
Robert F. Smith
/s/ ROBERT E. NEDERLANDER Director
-------------------------------------------
Robert E. Nederlander
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 1, 2000
by and among Cendant Corporation, Grand Slam Acquisition
Corp. and Fairfield Communities, Inc. (attached as Annex A
to the proxy statement-prospectus).
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q/A filed by the
Registrant on July 28, 2000 for the quarterly period ended
March 31, 2000).
3.2 Amended and Restated Bylaws of the Registrant (incorporated
by reference to Exhibit 3.2 to the Registrant's Quarterly
Report on Form 10-Q/A filed by the Registrant on July 28,
2000 for the quarterly period ended March 31, 2000).
5.1 Opinion of Eric J. Bock, Esq., Senior Vice President--Law of
Cendant Corporation, as to the validity of the shares of
Cendant Corporation common stock designated CD common stock
being registered hereby.
10.1 Stock Option Agreement, dated November 1, 2000, between
Cendant Corporation and Fairfield Communities, Inc.
(attached as Annex B to the proxy statement-prospectus).
10.2 Voting Agreement, dated as of November 1, 2000, by and among
Cendant Corporation and certain stockholders of Fairfield
Communities, Inc. (attached as Annex C to the proxy
statement-prospectus).
21.1 Subsidiaries of Cendant Corporation (incorporated by
reference to Exhibit 21 to the Registrant's Annual Report on
Form 10-K filed by the Registrant on March 1, 2000 for the
fiscal year ended December 31, 1999).
23.1 Consent of Deloitte & Touche LLP, relating to Cendant
Corporation.
23.2 Consent of Ernst & Young LLP, relating to Fairfield
Communities, Inc.
23.3 Consent of Deloitte & Touche LLP, relating to Avis Group
Holdings, Inc.
23.4 Consent of Attorney (included in Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature page).
99.1 Form of Proxy Card of Fairfield Communities, Inc.
99.2 Opinion of Bear, Stearns & Co. Inc. (attached as Annex D to
the proxy statement-prospectus).
99.3 Opinion of Stephens Inc. (attached as Annex E to the proxy
statement-prospectus).
99.4 Election Form/Letter of Transmittal.*
</TABLE>
------------------------
* To be filed by amendment.
